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Earnings call · Jun 2026 (Q2 FY26)

Oddity Tech Q2 FY26 earnings call ODD

Sep 9, 2026 Source

Executive summary

Oddity Tech Ltd. Q2 FY26 — SpoiledChild and METHODIQ Drive Growth Amidst IL MAKIAGE Ad Dislocation

Oddity Tech navigated Q2 FY26 with strong performance from SpoiledChild and the promising launch of METHODIQ, which are offsetting significant revenue pressure from the ongoing IL MAKIAGE ad account dislocation. The company is intensely focused on resolving the technical algorithm issue for IL MAKIAGE, while strategically investing in new brands and ODDITY Labs to diversify growth and enhance product efficacy. Management remains optimistic about a return to growth for IL MAKIAGE in 2027 and continues to manage capital effectively through share repurchases.

Highlights

5

  • SpoiledChild is on track to grow at least 35% in 2026 and approach $350 million in net revenue.

  • METHODIQ is expected to deliver higher first-year revenue than SpoiledChild's first year.

  • Adjusted EBITDA of $13 million exceeded the outlook of $8 million to $10 million.

  • Repurchased 5.6 million shares for $80 million in Q2, reducing ordinary shares outstanding by approximately 20% year-to-date.

  • Net revenue declined 25% to $181 million, at the favorable end of guidance (25%-30% decline).

Concerns

5

  • Net revenue declined 25% year-over-year to $181 million, primarily due to IL MAKIAGE's ad account dislocation.

  • IL MAKIAGE's net revenue from first orders declined approximately 40% year-over-year in Q2.

  • Gross margin compressed approximately 360 basis points year-over-year to 68.7%, driven by lower AOV and product mix shift.

  • Adjusted EBITDA declined year-over-year due to significantly higher CPA for IL MAKIAGE and revenue deleverage on fixed costs.

  • Excess inventory for IL MAKIAGE due to prior purchase commitments, with plans to rebalance in 2027.

Guidance & targets

CategoryTargetConfidence
SpoiledChild Net Revenue Growth
at least 35% growth
medium materiality
High
SpoiledChild Net Revenue
approach $350 million
medium materiality
High
METHODIQ First-Year Revenue
ahead of SpoiledChild's first year
medium materiality
High
Q3 FY26 Net Revenue Growth
decline approximately 5 percent year-over-year
high materiality
High
Q3 FY26 Adjusted EBITDA
between $18 million and $20 million
high materiality
High
Full Year FY26 Net Revenue Growth
decline approximately 19 percent year-over-year
high materiality
High
Full Year FY26 Adjusted EBITDA
between $30 million and $32 million
high materiality
High
IL MAKIAGE Growth
return to growth
high materiality
Medium
Brand Four Launch
launch in 2027
medium materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
IL MAKIAGE
Adversely impacted by ad account dislocation, leading to sharply higher CPA and reduced first orders. Also seeing compounding impact of lost repeat sales. Working through excess inventory.
Net revenue from first orders: declined approximately 40% in Q2 vs prior yearAOV: declined by approximately 8% in Q2 vs prior yearProduct mix shift: away from IL MAKIAGE skin
—declined, driving 25% total company decline—negatively impacted by higher CPA and fixed cost deleverage
SpoiledChild
Scaled faster than expected, showing strong customer service cohorts metrics. Impacted by algorithm dislocation to a lesser degree than IL MAKIAGE. Strong consumer metrics give confidence in future potential.
12 months net revenue repeat rates: well in excess of 100%
approach $350 millionat least 35% growth——
METHODIQ
Showing great promise after launching several months ago. Focus on medical-grade space, acquiring determined customers with attractive LTVs. Optimizing gross margin since it's early.
Customer satisfaction: higherRetention signals: higherAcquisition costs: higher compared to makeupAOV, retention, paybacks: justify acquisition cost
first-year revenue ahead of SpoiledChild's first year———

Product announcements

ProductTypeDetails
Mellan-X 509launch
METHODIQ New Categories (Longevity & Metabolic Health)roadmap
Brand Fourlaunch

Risks & headwinds

IL MAKIAGE Ad Account Dislocation Ongoing, impacting Q2 FY26 and FY26, with hopes for resolution in 2027.

Net revenue declined 25% YoY; IL MAKIAGE first orders declined ~40% YoY; Gross margin compressed 360 bps YoY; Adjusted EBITDA declined YoY due to significantly higher CPA.

Mitigation:Intensive collaboration and testing with main ad partner; increasing efforts on other advertising channels; diversifying with SpoiledChild and METHODIQ; making business more resilient through distribution and channels.

Excess Inventory for IL MAKIAGE Current, plans to be in better balance in 2027.

IL MAKIAGE is working through excess inventory.

Mitigation:Plans to rebalance inventory in 2027.

Uncertainty in Q4 Spending Allocation and Revenue Pace Q4 FY26

Q4 FY26 revenue growth implies -10% to -11% YoY decline, compared to Q3's -5% YoY decline.

Mitigation:Conservative guidance provided due to unknowns regarding how spending budget will be allocated (e.g., towards testing vs. revenue generation).

Volatility in Israeli Market Ongoing

Impacted 'other revenue' line (which was up 8%).

Mitigation:Acknowledged as a factor, no specific mitigation stated.

What to watch in Q3 FY26

Resolution of IL MAKIAGE ad dislocation

Next quarter (Q3 FY26) and beyond, with goal for 2027 growth
Current Ongoing, intensive testing
Target Normalization of audience and CPA, return to growth

Why it matters

Essential for IL MAKIAGE to return to growth and for overall company profitability.

For IL MAKIAGE, we continue to work extremely hard with our main ad partner to solve the algorithm dislocation and remain hopeful that we are on path to normalization.

Q&A highlights

Will IL MAKIAGE return to normalized growth in 2027 if the ad issue is resolved? What are the international plans for SpoiledChild?

Oran believes IL MAKIAGE will return to growth in 2027 with a strong product pipeline once the ad issue is fixed, which he believes is a solvable audience drift problem. SpoiledChild continues to expand internationally due to strong demand and has many new products for next year.

“We believe that once we solve the problem, we plan to continue to go back to growth with IL MAKIAGE. We have amazing products in the pipeline.”

asked by Dara Mohsenian · answered by Oran Holtzman

2 min read 6 chapters

Detailed narrative

IL MAKIAGE Ad Account Dislocation

The company is working intensively with its main ad partner to resolve a technical algorithm dislocation impacting IL MAKIAGE. This issue has led to sharply higher customer acquisition costs (CPA) and a significant decline in first orders, affecting overall revenue and profitability. Management believes the problem is technical, solvable, and not related to brand runway, with hopes for normalization and a return to growth in 2027.

SpoiledChild Performance & Strategy

SpoiledChild continues to demonstrate strong growth, on track to grow at least 35% and approach $350 million in net revenue in 2026, outpacing IL MAKIAGE's timeline to reach this milestone. The brand exhibits robust customer metrics, including 12-month net revenue repeat rates well in excess of 100%. The company plans to continue investing in its direct-to-consumer business and explore new growth levers in 2027, including international expansion and new product categories.

METHODIQ Launch & Medical-Grade Expansion

Launched less than a year ago, METHODIQ is showing significant promise, expected to exceed SpoiledChild's first-year revenue. The brand focuses on medical-grade solutions, exemplified by its hyperpigmentation hero product, Mellan-X 509, which leverages ODDITY Labs' molecule combinations. METHODIQ targets a determined customer base with attractive LTVs, and the company plans to launch new categories and products in 2027, including prescription injectable and peptide therapies for longevity and metabolic health.

ODDITY Labs & AI in Product Development

ODDITY Labs is a key investment area, providing differentiation in product efficacy and experience, with applications across the portfolio. The hyperpigmentation solution is a prime example. The company is also exploring molecules for aging, showing early promise in increasing collagen synthesis. AI is being leveraged to speed up molecule discovery and development processes, enhancing the potential and efficiency of ODDITY Labs.

Capital Allocation & Financial Strength

Oddity maintains a strong liquidity position with $561 million in cash, cash equivalents, and investments, and undrawn credit facilities of $350 million. The company actively manages its capital structure, repurchasing 5.6 million shares for $80 million in Q2, bringing year-to-date repurchases to $163 million and reducing outstanding shares by approximately 20%. Additionally, $50 million face value of 0% June 2030 exchangeable notes were repurchased at a discounted price of $35 million.

Business Model Resiliency & Learnings

The ad dislocation has provided significant learnings in media buying and algorithm mechanics. The company is increasing efforts to fix the problem and enhance business resilience through more distribution and channels. The strong performance of SpoiledChild and METHODIQ demonstrates the model's resilience, with a growing portfolio of brands and categories reducing reliance on a single brand. The company also shifted acquisition strategy from 'Try Before You Buy' to 'Buy' for 50% or more of acquisitions without impacting unit economics, while still valuing the Try model.

AI-generated summary of the company's earnings call. Not investment advice.