ODDITY Tech Ltd.

Good morning, and welcome to Audity's fourth quarter 2025 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 Licuris, Investor Relations for Audity. Thank you. You may begin.

Thank you, Operator. I'm joined by Aron Holtzman, Audity's co-founder and CEO, and Lindsay Druckerman, Audity's global CFO. Niv Price, Audity's CTO, will also be available for the question and answer session. 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 made about Auditee's business strategy, market opportunity, future financial performance, customer acquisition costs, 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 earlier today, And our most recent annual report on Form 20F follows the Securities and Exchange Commission on February 25, 2025. 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 today. I'll now hand the call over to Iran.

Thanks, everyone, for joining our call today. 2025 was a strong year for auditing. We delivered record financial results with revenue, adjusted EBITDA, and adjusted EPS all ahead of our plan. Revenue increased 25% to a record $810 million. We delivered record adjusted EBITDA of $163 million, representing 20.2% adjusted EBITDA margin. Across the year, we were able to once again raise our financial outlook every quarter on revenue and profit. And this is despite experiencing challenging in-user acquisition costs in H2 that drove an increase in advertising spend. Our strong and profitable repeat rates allowed us to once again deliver results ahead of our plan. And we accomplished all of this while investing heavily in our future. Notably, this year we successfully launched our third brand, Methodic, which expands our reach into the medical-grade space where we see enormous potential. In addition, we continued our ongoing investments in OET Labs, in our tech infrastructure, as well as new products and new brands. We believe that our powerful platform, brand, and technology, combined with our growth investments, create a long runway for us to grow in a big, attractive, and profitable category, where we are well-positioned to outrun our competition. We finished the year with strong balance sheet position with $776 million in cash and cash equivalents. Even as we worked tirelessly to address what we believe is a near-term dislocation in our user acquisition cost, there is no change to our long-term vision strategy or our commitment to growth. First, the consumer immigration online where our brands maintain leading positions. One of the best indicators of our business health is our very strong repeat sales. In 2025, approximately 70% of Audity's revenue came from repeat sales. Customer cohort's repeat behavior remained very strong and continues to increase. 12 months net revenue repeat rates for our 2024 cohort of first purchases increased from the 2023 cohort and remained over 100%. We believe these are outstanding repeat metrics compared with other direct-to-consumer companies and reflect the health of our brands, the quality of our products, and the high satisfaction from our customers. Moving to our brands, Il Makyash grew revenue low double digits in 2025 to approximately $560 million. Il Makyash Skin was a highlight as planned and finished the year at approximately 40% of Il Makyash brand revenue, expanding from around 30% of brand revenue in 2024. The rapid success of Il Makyash Skin since its launch in 2022 demonstrates the power of our platform and our ability to leverage our user base and technology to quickly scale new products and categories. International markets were also a key driver for Ilmakiyaj. Auditing international revenue, the majority of which is from Ilmakiyaj, grew 42% for the year. International markets represent 17.5% of overall auditing net revenue for 2025, compared with many of our competitors that generate more than 65% of net sales from international markets. Spoiled Child also had a strong year, increasing revenue double digits to approximately $250 million, This is an incredible accomplishment for an online-only brand that just launched four years ago and once again shows the power of our platform and ability to scale. We remain excited about SpoilChart's long-term potential, including new product expansion in beauty and wellness. The launch of Methodic, our third brand, was a highlight accomplishment in 2025. Methodic is a medical telehealth platform that aims to deliver high-efficacy treatments at scale, starting in dermatology, addressing concerns like acne, hypopigmentation, and eczema. It is off to a great start, and we are very pleased to see its initial success. Our early focus on acne hyperpigmentation and color products is showing good traction, and we believe this will be big categories for us. We are seeing good metrics and continuous improvement in our KPIs, even as our customer codes increase in size. What we see in Methodix app engagement reinforces our view that Methodix can uniquely deliver high standards of care for a broad audience, and do it with great convenience. When we look at the app download rates, onboard completion, weekly check-in rates, and care team engagement, we can see the demand, and we are bullish about how our app technology will drive user compliance, satisfaction, and success. Moving on to the second focus area of our long-term growth strategy, the consumer adoption of high-performance products that better address their pain points. Our product development pipeline for all three brands are focused on bringing the market top performance that we believe beat the competition on efficacy. Quality Labs continue to push the frontier of ingredient innovation in beauty and wellness. Over the past 18 months, we have made major strides in our capabilities and infrastructure to improve our work with the goal of shrinking our timelines and improving the probability of success in identifying game-changing molecules. Our efforts in process and infrastructure have given significant improvements in our productivity, increasing the number of targets we can tackle, and allowing us to push projects along faster with greater accuracy. One highlight area is our work in transitional biology, which expands on our strong in silico and in vitro foundations. This work helps us to get stronger reads on the most relevant biomarkers for our products, increases our predictive power of success, and does it in a way that is scalable, representative, and with rigorous science. Another highlight is our ability to identify biological targets that can influence a desired effect. We are focused on pain points with large commercial opportunities, including acne, pigmentation, and aging. And our target list includes pathways like reducing melanin production and boosting collagen and LSD. We are leveraging AI agents to map targets and structures and also applying our work in traditional biology to identify novel targets. We recently expanded our capabilities into peptides to add to our small molecule foundations and are working on peptide solutions in areas like acne and aging. This expansion into peptides give us flexibility to identify the right modality to address an individual biological target. At the same time, we are working in parallel to improve topical delivery of different activities to ensure they reach the relevant areas in skin and maximize the biological effect. We expect to have eight products in market in 2026 made with OET Labs molecules. The innovation for Methodic is especially exciting, including molecules that cover key categories, including acne, eczema, and hyperpigmentation. And more to come in the future that we are bullish about. Turning to our acquisition costs. We experienced an unprecedented dislocation in our account with our largest advertising partner, which we believe is due to recent changes in their algorithms that likely diverted us to less desirable auctions and traffic at abnormally high costs. These changes resulted in significant abnormal increases in our new user acquisition costs for ODT that are not correlated with the market or our historical experience. We have never seen anything close to those acquisition costs, not in ODT and also not in other beauty advertisers. This elevated acquisition cost is severely hurting our ability to acquire new users efficiently at high scale, as we normally do in the first half of each year and have done consistently for the past eight years very successfully. Both in-makeup and spoiled child appear to be impacted by these algorithm changes, although the impact on in-makeup was more severe, probably due to its higher scale. After identifying the root cause in late January, we quickly moved to implement strong remediation actions primarily around the model infrastructure that we hope will get us back to the right auctions and ultimately drive improvement in our new user acquisition with significant progress in Q2 and normalization in Q3 or Q4. These types of algorithm updates are not new and have been ongoing through the years, and we've historically adapted to them. In this case, it was harder than before to identify how these updates were impacting our business, and therefore it was harder to identify the root cause. We believe we got hit by the algorithm change due to our user acquisition strategy that includes a try-before-you-buy offering, which is a raring beauty and therefore may be an edge case within the new algorithm changes. We believe the algorithm updates impact on how this platform interprets and weights the signals associated with try-before-you-buy model, primarily due to its inherent higher return rates, and they averted us to lower quality auctions at abnormally high costs, disconnected from the market. For more context about the model, Try Before You Buy is designed for the benefit of the consumer by reducing the risk of trying our products online. It is a pro-consumer model that allows us to replicate online the experience of physical stores like Sephora, where consumers can try products in real life and materially reduce the risk of purchase. This model is very new due to its complex execution. We believe it's an edge case and a non-obvious interaction within the platform's new auction dynamics. After assessing the driver, what we believe is hitting us, we quickly move to fix it. Our remediation actions are designed to reduce try-before-you-buy down weighting while preserving the ability for new customers to purchase products on trial basis with minimal risk. Important to note, try-before-you-buy isn't a dependency for us. We offer it as a better alternative for consumer, but our agile model allows us to rebalance towards the standard by offering if we see it is needed. Unfortunately, because we only recently identified the root cause, and despite working tirelessly to fix it, we have not had much time to take action, and it takes time to recover. Therefore, we expect negative impact on our 2026 financial results with the most significant impact expected in H1. But I want to be very clear, despite the dislocation in our news acquisition we are currently facing, we are not changing our model, our strategy, or our long-term focus on growth. The main objective of the company right now is correcting this issue and being in a position to immediately pivot back to growth. I want to close with some perspective on this moment in time. Over the past eight years, we grew from $25 million of revenue to $800 million of revenue, despite multiple changes on ad tech side. A prominent one was iOS 14. We have navigated algorithm adjustments by our ad partners in the past, and we believe we will be able to also address the current dislocations. Most importantly, we believe we understand the problem, and in a world of complex online auctions, understanding the problem is always the hardest part. We don't see this as a structural issue or a secular disruption, as you are seeing in other sectors, or a negative macro trend for our category. It is a technical issue, and from here, we believe it is a matter of time and execution to deliver the strong outcomes we have constantly delivered over the past eight years. And as I said, we believe we have a strong plan in place, and I hope to see normalization in H2. With that, I will turn it over to Lindsay.