ODDITY Tech Ltd.

Good morning, and welcome to Oddity's first quarter 2026 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 call over to Maria Licoris, Investor Relations for Oddity. Thank you. You may begin.

Thank you, Operator. I'm joined by Ron 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 Audity'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 in our most recent annual report on Form 20F filed with the Securities and Exchange Commission on March 17, 2026. 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 Aran.

Thanks everyone for joining our call today. While we continue to navigate the country's location with our largest advertising partner, we remain hopeful that we will return to normalization in the second half of this year, as we communicated in Q4 earnings. We saw a meaningful improvement in Ilmakiai CPA this May, which declined an estimated 28% from April, breaking a negative trend of multiple months of CPA increases with this advertising partner. And while we cannot guarantee that this positive trend will continue, it is a good indication after months of a negative trend. We plan to continue to aggressively implement improvements until the problem is completely solved. We have been working closely with this advertising partner, including top product engineering team, to fix the issue. We have heard from them directly that they estimate that we can recover 40% to 60% of CPA based on their system alone without considering macro or other factors. If we get there, it would signal that the business is healthy and positioned to go back to growth and profitability as it was for many years. And if we had planned for that level of CPA in 2026, we believe we would have guided to a normal earnings year of 20% revenue growth and 20% adjusted EBITDA margin. We want to share more data in context for the anomaly we experienced. We provide detailed index CPA levels with this advertising partner based on our internal attribution system in our press release, which I will refer to now. For many years, our CPA was very stable. As you can see, the table provided steady and consistent mid-team CPA increases every year, with gradual yearly increases correlated with our industry. While we did not build our business on favorable user acquisition costs, rather on strong over 100% 12-month repeat rate, in 2026 we saw levels of CPA that in some cases were 2x higher than what we were expecting and what we see in other competitors. At this level, the earned economics get much difficult as expected for off-market costs. The data indicates in our view how the issue is technical and not brand or saturation issue. One, the change was sudden, indicating a dramatic break, not steady duration over time, but clear and definitive months of collapse. Two, a breakdown occurred in different in-makeup accounts, different markets with the same pattern simultaneously, U.S., Canada, U.K., Australia, and Israel, which suggests it has nothing to do with the brand. There is nothing that can happen in our offering or business that can explain it at the same time in multiple geographies. Three, we believe a significant driver of the break comes from spiking the bounce rates. In our view, it suggests the issue is with lower quality audiences being served with our ads by this algorithm. Furthermore, our fundamental brand health is confirmed by behavior we see among existing customers. Net revenue repeat on 12-month basis cohorts are strong, which support our 12-month contribution margins. A focus area for us in the last few months has been successful in remediation in our Try Before You Buy model. As a reminder, Try Before You Buy is a pro-consumer model that allows to replicate the online experience of physical stores like Sephora, where consumers can try products in real life and materially reduce the risk of purchase. This model is rare in beauty due to the complex execution, which we believe makes it an edge case and non-obvious interaction with the platform's new dynamics. Towards the end of Q1, we already successfully shifted 40% of our acquisition revenue out of prior before you buy into standard buy model, reducing our exposure to this model with no impact on our unit economics, which is very encouraging. Unfortunately, because it takes time for algorithms to recalibrate, as expected, this dislocation will have meaningful negative impact on our 2026 financial results, especially in H1. As focused in our Q4 earning, it had material impact to Q1. Sales declined 26% versus the prior year, slightly better than our outlook for sales decline at approximately 30%. I noted a strong improvement in May from April. This is our first month of sequential recovery since Q4 25, and we believe it's a positive sign. It's also supported by our deliberate decision to maintain reduced level of acquisition spend as we work towards recovery. All things taken together, we remain hopeful that we will achieve normalization as planned in the second half of this year as we continue to implement recovery initiatives to recalibrate the algorithm. Moving to our other brands and growth drivers. Similar to Ilmakiage, Spoichard is navigating higher CPA costs but with less severity. We plan to implement similar remediation steps in Spoichard once we finish identifying the technical initiatives that can resolve the algorithms and CPA problems in Ilmakiage. Moving on to Methodic, which is off to a strong start following its launch late last year. We expected to deliver $25 million in revenue this year, in line with Spoilshell's strong success in year one. As a reminder, Methodic is a medical telehealth platform designed to deliver high-efficacy treatments at scale. Our goal is to help transform a broken medical care system, starting in dermatology, using our best treatments and the highest standards of care available to everyone. We are proud of Methodic product line, which spans 28 prescriptions and non-prescription products, including oral topical supplements and medical-grade makeup, all designed to maximize efficacy, minimize side effects, and give an unplugged experience. We believe it's a game-changing innovation for the benefit of large, underserved customer base. We are also seeing good signs from our progress tracking app, where users of our vision technology and care team engagement. Updown rates, weekly check-in rates, and care team engagement are strong signals of demand and our ability to use this technology to drive compliance, satisfaction, and success. OT Labs continues to push the frontier of ingredient innovation in beauty and wellness, focusing on pain points with large commercial opportunities like acne, hyperpigmentation, and aging. We added two additional products made with Labs Bolicool in our metodic product line up this quarter. First, Neurexa, a topical eczema treatment formulated with our proprietary ODDL-1669 molecule and others in ACTIV, engineered with the goal of achieving superior efficacy to traditional eczema treatment with minimal side effects. Second is Zarrelac, a first-of-its-kind acne scar prevention treatment powered by our ODDL-103 molecule, which reduces inflammation and promotes the healing of ACTIV breakouts. Looking ahead, we are working on several novel molecules targeting different indications. One, in our anti-aging program, our novel molecules have demonstrated robust in vitro efficacy in increasing collagen synthesis and reducing aging markers. We are now conducting human focus group testing to ensure clinical translation. Two, to optimize hyperpigmentation treatment, we are targeting novel pathways designed to work with our existing ODDL1007 molecule Focus groups are currently underway to evaluate the enhanced therapeutic efficacy and performance of this combined treatment. Three, in our acne prevention pipeline, we are developing novel topical approach designed to prevent acne breakouts by reducing sebum production and preventing clogged pores. Our leading candidates are currently in final laboratory validation phase. Before I hand it over to Lindsay, I want to reiterate our view on this moment in time. We continue to be bullish on the structural dynamics in our industry. Beauty is a large category with attractive secular characteristics. Consumers continue to migrate online and towards the high-efficacy products. We believe incumbents are a disadvantage to meet this demand while we are set up for well-gained share. We are working tirelessly to get back to our historical strong position. As a company, we have navigated algorithmic adjustments by our ad partners in the past with success. We are hopeful based on the improvements we see today that we will resolve this dislocation and get back to our long track record of consistent strong growth and attractive profitability. We have seen no reason that we couldn't solve what we believe is a technical problem as we have in the past. With that, I will turn it over to Lindsay.