If you haven't read my original deep dive on Oddity, I recommend doing so before reviewing this update. It's essential reading for a thorough understanding of the company.
The CEO of Oddity, Oran Holtzman, made a significant statement about the company's future:
With Brand 3, again, we are building more than just a brand. We are building a telehealth platform…
He further elaborated on the vision,
we start with medical-grade skin and body issues like acne, eczema, and hyperpigmentation. It's a huge pain point and impacts a massive part of our users. And the reason that we do it, we realised the satisfaction with current solutions is terrible. Either inconvenient business to the doctor's office or picking ineffective treatments and drug stores. And that's a huge opportunity for us developing a line of OTC and Rx products and discovering multiple face and body as a start.
Holtzman also discussed the key technology that will drive this disruption:
“We have also made progress in vision machines…we now can identify acne lesions, track them, and model progress over time. To the best of my knowledge, no one in our industry has something that is even close to what we are building here technology wise, and it will be the core technology for Brand 3”
Quoting myself from my ODD Deep Dive,
“Long-term, if the company continues to execute on its vision, the potential exists for multibagger returns, especially if it leverages its technology to expand into other markets like healthcare.”,
It appears Oddity is moving in this direction, and if they can execute their vision as effectively as they have so far, they could be competing with companies like HIMS in a few years, significantly expanding their TAM. While this validates the potential upside of the thesis, it’s important to note that we are still in the early stages, so the focus should remain on the results achieved this quarter.
27% YoY revenue growth, above the 20% long term goal, driven primarily by an increase in orders, while average order value increased 6% year-over-year.
Improved efficiency, leading to an adjusted EBITDA margin of 32,3%, expanded 470 basis points from the prior year, driven partly by gross margin expansion and a higher mix of repeat.
Labs leadership change. Oran explained the leadership change at ODDITY LABS, emphasising the strategic importance of the division and the reasons for the transition. He announced that Dr. Ido Bachelet has joined as the new Chief Science Officer, highlighting Bachelet's extensive experience in building and scaling biotech labs. Holtzman described Bachelet as a highly creative and accomplished scientist who aligns well with Oddity's culture of innovation and disruption. Bachelet's decision to move from therapeutics to Oddity was driven by his desire to transform an entire industry through science rather than just developing another drug.
He then acknowledged that ODDITY LABS is a complex and evolving part of the company, a platform meant to expand Oddity beyond its current product offerings, while maintaining strong profitability.
Holtzman stressed that while LABS is a long-term investment, it is not expected to drive near-term growth, even though some products from LABS will be ready for the future brands 3 and 4.
Overall, the quarter was strong, exceeding Q2 guidance and leading to an increased outlook for Q3 and the full year, reflecting strong demand and confidence in ODDITY’s management to deliver financial results.
Holtzman reaffirmed his commitment to long-term growth, noting that
Brand 3 and Brand 4 are on track to be launched in the second half of 2025
with early projections for 2025:
We expect to deliver net revenue growth of 20% and adjusted EBITDA margin of 20%, consistent with our long-term algorithm. We plan to incur significant investments in Brand 3, Brand 4, and ODDITY LABS, and we do not expect to benefit from any material revenue contribution from these initiatives in 2025.
This aligns with my previous expectations of increased SGA costs as Brand 3 and 4 are launched in the coming months, as I highlighted in my Deep Dive.
Finally, despite the skepticism I have already highlighted due to the lack of disclosed metrics, the company shows a clear path toward strong growth and high profitability, driven by a successful flywheel. This should lead to a significantly higher valuation for Oddity over the long term, and I remain confident in its prospects.
See you in the next update!
Should I give a sneak peek of the upcoming deep dives? Just a little hint: it involves a space company and an insurance company.
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