Oddity Tech Q1 FY26 earnings call ODD

ODDITY continues to grapple with significant CPA increases from its largest advertising partner, which led to a 26% decline in Q1 net revenue. The company is working closely with the partner's product and engineering teams, who estimate a potential recovery of 40% to 60% of CPA based on their system alone. Remediation efforts include structural and technical auditing, adjusting infrastructure, and shifting audience strategies, alongside a deliberate decision to maintain reduced acquisition spend to feed algorithm signals.

To mitigate exposure to the advertising algorithm issues, ODDITY successfully shifted 40% of its acquisition revenue from the "Try Before You Buy" (TBYB) model to a standard "Buy" model by the end of Q1. This transition was achieved with no negative impact on unit economics, demonstrating the company's ability to adapt its acquisition strategy while maintaining profitability. TBYB remains a part of the model, but with a more balanced approach.

The newly launched medical telehealth platform, METHODIQ, is performing strongly, with an expected $25 million in revenue for its first year, mirroring SpoiledChild's initial success. The platform offers 28 prescription and nonprescription products for dermatology, supported by a progress tracking app showing strong user engagement and compliance. ODDITY Labs continues to integrate novel molecules into METHODIQ's product lineup, including treatments for eczema and acne.

ODDITY Labs is actively developing several novel molecules targeting significant pain points in beauty and wellness. Key areas of focus include anti-aging, with a molecule showing robust in vitro efficacy in collagen synthesis; optimizing hyperpigmentation treatment by targeting novel pathways with existing molecules; and acne prevention, with a leading candidate molecule in the final laboratory validation phase designed to reduce sebum production.

ODDITY's Board approved a new $200 million share buyback program in March 2026, replacing the previous $150 million plan. During Q1, the company repurchased approximately 6 million ordinary shares for $82 million, reducing outstanding shares by around 10%. Approximately $167 million remains on the current authorization, reflecting a commitment to capital return despite current operational headwinds.

Despite the acquisition challenges, ODDITY emphasizes that its fundamental brand health remains strong, confirmed by existing customer behavior. Net revenue repeat on a 12-month basis cohorts are robust, supporting contribution margins. Repeat sales represented approximately two-thirds of net revenue in Q1, up from 56% in Q1 2025, indicating resilience in its established customer base.