Oddity's Q3 2025 Earnings Call: Contradictions in Methodic's Growth Contribution, International Strategy Shifts, and User Acquisition Plans

Date of Call: None provided

Financials Results

• Revenue: $148.0M, up 24% YOY, above guidance of 21%-23%
• EPS: Adjusted diluted EPS $0.40, up ~24% YOY, above guidance $0.33-$0.36; excludes ~$9M share-based comp
• Gross Margin: 71.6%, expanded 170 bps vs prior year, above guidance of 68%

Guidance:

• Full-year 2025 net revenue expected $806M-$809M (24%-25% YOY).
• Full-year gross margin expected ~72.5%.
• Full-year adjusted EBITDA expected $161M-$163M.
• Full-year adjusted diluted EPS expected $2.10-$2.12 (assumes no buybacks).
• Q4 revenue expected to increase 21%-23% YOY.

Business Commentary:

* Financial Performance and Growth: - Oddity reported revenue growth of 24% in Q3, exceeding guidance, with adjusted diluted earnings per share growth of 24% year-over-year. - The growth was driven by strong performance across all brands, international expansion, and methodical execution of strategic initiatives.

• Methodic Brand Launch:
• Methodic, Oddity's third brand, was launched in Q3, addressing chronic skin conditions with a telehealth platform.
• Initial signs indicate strong early demand, with over 20,000 real user trials and a significant market opportunity.

• International Market Expansion:
• International revenue increased by 40% year-over-year in the first nine months of 2025, contributing significantly to overall growth.
• Expansion in France, Italy, Spain, and others reflects strategic focus on scaling existing markets and testing new regions.

• Oddity Labs and Product Innovation:
• Oddity Labs is expected to have at least eight products with proprietary molecules in 2026, contributing to brand growth.
• This is a result of strategic investments in R&D for high-efficacy treatments and a focus on long-term product development.

Sentiment Analysis:

Overall Tone: Positive

• Management described an "outstanding third quarter," reported revenue +24% and 71.6% gross margin (up 170 bps), beat EPS guidance ($0.40 vs $0.33-$0.36), raised full-year guidance and highlighted a major Methodic brand launch and $793M cash balance.

Q&A:

• Question from Dara Warren Mohsenian (Morgan Stanley): Can you unpack the 40% year-to-date international growth and key country drivers, and how will you scale international in 2026?
  Response: International grew 40% but is still only ~17% of revenue; growth mainly from existing markets (Canada, U.K., Germany, Australia, Israel, France) and the company will continue measured, economics-driven geographic expansion.

• Question from Dara Warren Mohsenian (Morgan Stanley): Early read on Methodic — how much will it bring new customers vs. draw from existing Il Makiage/SpoiledChild users?
  Response: Methodic will have a mixed user source: a meaningful share from existing Il Makiage/SpoiledChild customers but also active new-user acquisition as the brand scales.

• Question from Anna Jeanne Lizzul (BofA Securities): How should we think about Methodic for 2026, customer acquisition, and the SG&A outlook into early 2026?
  Response: Management expects Methodic to scale faster than SpoiledChild but remain small initially; they are bullish but early and not providing 2026 specifics, and will continue investments while guiding primarily to revenue and EBITDA (not gross margin).

• Question from Youssef Houssaini Squali (Truist Securities): Thoughts on U.S. consumer health and whether the 2026 growth algorithm changes?
  Response: Despite industry softness, higher repeat offsets acquisition cost increases; no change to medium-term algorithm—20% revenue growth and ~20% adjusted EBITDA margin remain the target.

• Question from Andrew M. Boone (Citizens JMP Securities): How should we model Methodic's financial profile (AOV/margins) and the path for ODDITY Labs proprietary molecules?
  Response: Long-term Methodic economics are expected to mirror company-level targets; prescription elements may have lower gross margins early due to physician/pharmacy costs, while ODDITY Labs will deliver eight OTC/cosmetic products in 2026 with more in the pipeline.

• Question from Corey Carpenter (JPMorgan): Can you expand on the media/search environment and capital allocation priorities given the strong cash position?
  Response: Media costs rose but have improved into Q4 and are offset by strong repeat and conversion; cash ~ $793M plus $200M undrawn facility and convertible provides flexible, patient capital for buybacks, M&A or other uses.

• Question from Ryan McDonald (Needham & Company): How replicable is the international targeting/data model and will Methodic launch internationally immediately?
  Response: Methodic will launch in the U.S. first; international expansion remains a market-by-market test approach with localized sites and spend, scaling only when unit economics and repeat prove attractive.

• Question from Scott Schoenhaus (KeyBanc Capital Markets): Are the four lab molecules prescription or non-prescription and how will you scale the physician network with limited dermatologists?
  Response: The four highlighted ODDITY Labs products are OTC/cosmetic (not prescription); the physician network is currently third-party board-certified physicians (can expand to NPs later) and technology (vision, intake, app) is used to improve clinician decisions, compliance and scale.

• Question from Bonnie Herzog (Goldman Sachs): U.S. growth for Il Makiage and SpoiledChild has moderated—should we expect continued slowdown and are repeat rates moderating?
  Response: Management manages growth across the portfolio to achieve sustained 20% company-level growth; U.S. moderation reflects portfolio allocation and international scale, and repeat rates remain very strong.

• Question from Georgia Anderson (Evercore ISI): How do you define Methodic's TAM and what KPIs will indicate the brand is scaling?
  Response: TAM framed as patient counts (e.g., ~50M acne, ~30M hyperpigmentation, ~30M eczema in the U.S.); success will be measured by acquisition, repeat, app downloads, engagement and weekly check-ins—early signals are strong but it's early-stage.

• Question from Lauren Rae Lieberman (Barclays): How did you decide on offline elements (billboards) and how long will the large TikTok activation run?
  Response: Methodic launch mirrors prior brand playbooks with offline OOH and its largest-ever TikTok campaign, with the TikTok activation running through the end of Q1.

• Question from Brian Tim Quilla (Jefferies): What drove the quarter's growth—volume vs pricing vs mix?
  Response: Revenue growth was primarily driven by order/volume growth; average order value was essentially flat, down ~1%.

• Question from Brian Tim Quilla (Jefferies): For Methodic, will offerings be compounded drug products or non-compounded, and how to think about margin differentials?
  Response: Methodic's business mix is primarily non-prescription with prescription a smaller component; prescription may include compounded products today and would carry different (lower) gross margin dynamics.

Contradiction Point 1

Methodic's Contribution to Oddity's Growth

It involves expectations related to the contribution of Methodic to Oddity's overall growth, which directly impacts financial performance and strategic planning.

What are your plans for new customer acquisition in 2026? What investments are you making for the Q4 2026 brand launch? - Anna Jeanne Lizzul (BofA Securities)

2025Q3: The expectation for Methodic brand three is to scale faster than Spoiled Child. - Oran Holtzman(CEO)

Will you grow 20% next year excluding Brand 3? - Youssef Houssaini Squali (Truist Securities)

2025Q2: The outlook for 2025 and '26 does not include any assumption for Brand 3 to contribute to the 20% revenue growth. - Lindsay Drucker Mann(CFO)

Contradiction Point 2

International Growth Strategy

It highlights a shift in the company's strategy for international growth, which could impact market penetration and expansion plans.

What drove the 40% YTD growth in international markets? Which countries were the key growth drivers? For 2026, will you expand the international business through new country penetration or Spoiled Child growth? - Dara Warren Mohsenian (Morgan Stanley)

2025Q3: International growth is significant, but the focus is on responsible expansion and not just unit acquisition. - Oran Holtzman(CEO)

What are the international growth drivers, and how are repeat rates and cohorts performing? - Andrew M. Boone (Citizens)

2025Q2: International growth is driven by expanding in already established markets and testing new markets. - Lindsay Drucker Mann(CFO)

Contradiction Point 3

International Market Growth Strategy

It involves the company's strategic approach to international expansion, which is crucial for future growth potential and market penetration.

Can you explain the 40% year-to-date growth in international markets? - Dara Warren Mohsenian (Morgan Stanley)

2025Q3: International growth is significant, but the focus is on responsible expansion and not just unit acquisition. - Oran Holtzman(CEO)

What was the contribution of international expansion to this quarter's results, given the recent acceleration in international growth? - Youssef Squali (Truist Securities)

2025Q1: We're very bullish on international, and we will continue to push our international growth. - Oran Holtzman(CEO)

Contradiction Point 4

Methodic Platform and User Acquisition

It involves expectations for the Methodic platform's impact on customer acquisition and user base expansion, which are vital for future revenue growth and market competitiveness.

How will you approach new customer acquisition for Methodic in 2026? - Anna Jeanne Lizzul (BofA Securities)

2025Q3: Expectations for Methodic to scale faster than Spoiled Child. Initial contributions from Methodic will be small, but the long-term potential is significant. - Oran Holtzman(CEO)

What aspects of Brand 3 excite you most? - Cory Carpenter (JPMorgan)

2025Q1: Brand 3 have taken a lot of our internal resources in terms of the engineering team, the product team, the data science team. - Oran Holtzman(CEO)

Contradiction Point 5

International Expansion Strategy

It shows a shift in the company's strategy for international expansion, which could impact growth projections and market expectations.

What drove the 40% international market growth year-to-date? Which countries were key growth drivers? Will 2026 plans include scaling international operations or expanding Spoiled Child? - Dara Warren Mohsenian (Morgan Stanley)

2025Q3: International growth is significant, but the focus is on responsible expansion and not just unit acquisition. Key markets include Canada, U.K., Germany, Australia, Israel, France, Italy, Spain, Netherlands, Ireland, Sweden, and Denmark. Growth is primarily from existing markets, with only 2% from new countries. The strategy involves scaling when opportunities arise. - Oran Holtzman(CEO)

What are your international expansion plans for Q1? How are customer acquisition and ad spend returns performing this quarter? - Cory Carpenter (JPMorgan)

2024Q4: The teams have been working on accelerating international growth for several years. In Q1, we began expanding the scale in existing markets, such as the UK, Germany, and Australia, and also tested in new markets. The growth is driven by the need to show control over international expansion rather than being affected by US market conditions. - Oran Holtzman(CEO)