ODDITY Tech Ltd.

Good morning, and welcome to Oddity's first quarter 2024 earnings conference call. Today's call is being recorded, and we have allocated time for prepared remarks and Q&A. At this time, I'd like to turn the conference over to Maria Licoris, Investor Relations for Oddity. Thank you. You may begin.

Thank you, Operator. I'm joined by Aron Holtzman, Oddity's co-founder and CEO, Lindsay Druckerman, Oddity's global CFO, and Dr. Evan Zhao, Oddity's chief science officer. As a reminder, management's remarks on this call that do not concern past events are forward-looking statements. These may include predictions, expectations, or estimates, including statements about Audity's business strategy, market opportunity, future financial performance, and potential long-term success. Forward-looking statements involve risks and uncertainties, and actual results could differ materially due to a variety of factors. These factors are described under forward-looking statements in our earnings press release issued yesterday, and in our annual report on Form 20-F filed with the Securities and Exchange Commission on March 6, 2024. We do not undertake any obligation to update forward-looking statements which speak only as of today. Finally, during this call, we will discuss certain non-GAAP financial measures which we believe are useful supplemental measures for understanding our business. Additional information about these non-GAAP financial measures, including their definitions, are included in our earnings press release which we issued yesterday. I'll now hand the call over to Aran.

Thanks, everyone, for joining us today. The first quarter was once again another record-breaking quarter for us. We achieved massive scale online, growing revenue 28% to $212 million, and we did it very profitably with 23% adjusted EBITDA margin, generating $79 million of free cash flow. A massive record cash generation quarter. We continue to deliver above our plan, bidding our guidance for the first quarter on every metric. This is what we have done every single quarter since we went public and every single quarter even before that as a private company. During our IPO last summer, many investors told us that they had concerns that we would not be able to lap our enormous revenue performance in Q1 2023, where we grew more than 80%. And we try to explain why we had full confidence in our ability to continue to grow on top of it. Now we are here today after growing 28% against that quarter and we achieved it with record profit margin. It is another proof that the demand online for beauty is very high and that our platform allow us to capture this demand and enable profitable growth. I will provide a few data points that shows the demand and the strength of our platform. Q1 2024 revenue is more than double our revenue for the first quarter two years ago. In Q1 2024, with $212 million revenue, we delivered almost the same amount of revenue that we delivered for the full year of 2021. And Q1 2024 is more than double our revenue for Q4 2023, just a quarter before it. We have shown once again that we can power our business up and down on a dime, a huge advantage for us and something almost no other business can do. We are in full control of our growth space. This efficiency is what makes our model so attractive and profitable. And even with this growth, we don't see a ceiling. In my view, we didn't even come close to reaching our limits. And this is our strategy to ensure very strong, profitable cash flow growth for many years to come. With the huge success of Q1 and the great results we have already seen in Q2 so far, we are even more confident in our outlook for the full year and raising guidance on revenue, profit, and earnings per share for 2024. I would like to take a moment to touch on our industry. Over the last couple months, we have had some of our competitors talk about their business slowing. I want to be clear, we don't see any signs of slowing down in our platform, not in new users and not in existing users' behavior. What we do see is that the industry is transforming, moving online and moving to science-backed products. This is a transformation that Audity is leading and investing a lot behind it. To win in both, we believe our investment will allow us to continue winning for the long term. Our data and massive investments in our future gives us high confidence in our long-term financial targets of more than 20% revenue growth and 20% adjusted EBITDA margins. Our results in 2024 will be even stronger than this, and Lindsay will explain soon. This makes ODT a real outlier in our industry, growing three to four times faster than our main competitors, which means we are taking market share and strengthening our competitive advantage every day. Our rule of 40 growth algorithm is among the best that exist in consumer and tech businesses, and it's a function of three powerful drivers. First, we are competing in a massive global term with great new economics that work online while still being dominated by offline incumbents. Second, our huge technology advantage over incumbents who are behind the curve allow us to win in the online arena, which we believe is the most important channel of the future and will make up at least 50% of the market. Third, we have proven again and again that our platform is a scaling machine. It's the power of our more than 50 million users and over 2 billion data points that we already acquired in the past five years. This combination of data, technology, and category with high online demand has enabled us to consistently win across the board. It only took us a few years to scale Il Makiash to be what we believe is the largest online beauty brand in all of America. We scaled our second brand, Spoiled Child, to be the most successful D2C brand launch of all time, crossing $100 million in revenue. profitably in less than two years. Also, in just two years, we scaled Il Makiage's skin to be 20% of the brand revenue in 2023, and we expect it to scale further to be 25% of the brand revenue in 2024. It is 25% of a massive base due to our existing color business. Our powerhouse brands, Il Makiage and Spoiled Child, both had very strong results in the first quarter, and both are on track to my goal, which is $1 billion for each brand. We will scale new brands and new categories in our future. Brands three and four are being built in two large categories in beauty and wellness. We believe the opportunity is massive for each of them, and we are spending a lot of time and focus to make sure we'll capture this massive opportunity. After addressing the current trends in beauty, I want to touch on a point that many people are worried about, which is the viability of the D2C model. As we all have seen, for most D2C businesses, The more they scale, the harder and more expensive it is for them to grow. But for us, it's the opposite. The more we scale, the easier growth becomes for us. This is for two main reasons. One, because we are going with so much repeat and that repeat compounds. Repeat was over half of ourselves last year, and it will be even a greater portion of ourselves this year. Two, because we know so much about our users, we are able to build brands and products that we know they want. and build the machine learning models to put those new brands and products in front of those users. Higher scales means more data, means better conversion, and greater share of wallet. Let me give you one example of this with Ilmakiyaj. Our customers who started with us in color, but then they try skin, shop more than twice as frequently, and spend more than twice as much with us over the next 12 months. This is the magic offering multiple products into the same user base while leveraging the data and a clear example of how our platform allows us to gain share of quality. This is why we deliver one of the best margin profiles across all D2C, even as we continue to scale and invest in future growth. So while many other D2C businesses rely on external capital to grow, we do the opposite. We have a cash balance of $252 million, which we generated, zero debt. We did 23% of EBITDA margin and generated almost $80 million of free cash flow in Q1 alone. So to summarize, we are very pleased with how we delivered in Q1 and have total confidence in achieving our plans for the full year. But as I've said many times previously, what is most important is our future. We do not rest and enjoy the massive margin and high growth. We are executing a long-term plan with huge investments across current and new brands, technology, vision, and of course, Audity Lab, where we are growing the teams massively as we speak, and other domains to ensure we continue to win and build a large-cap company. With that, I will hand it to Lindsay.