ODD Q1 2025: Record 74.9% Gross Margin, 20% EBITDA Goal
- Accelerating International Expansion: Management emphasized pushing international markets harder in 2025, with existing tests already delivering strong revenue in markets like France, Italy, and Spain. This localized, scalable approach suggests robust future growth potential beyond the domestic market.
- Strong Brand Development & Telehealth Opportunity: The upcoming launch of Brand 3, a telehealth platform with an extensive product range and integrated technology, should tap into a vast market need, positioning ODD with the tools to capture significant market share.
- Manageable Operational Headwinds: Despite tariff-related challenges, management highlighted a limited impact (50 to 100 basis points) due to high gross margins and efficiency initiatives. This operational resilience supports sustained profitability.
- International expansion risks: International revenue currently represents less than 20% of the business, indicating that scaling into new markets could face execution challenges and may not provide the anticipated growth upside [doc 6][doc 9].
- Tariff headwinds uncertainty: Although management expects 50 to 100 basis points of gross margin impact from tariffs in 2025, any significant increase (e.g., a doubling of European tariffs) or ineffective mitigation could further pressure profitability [doc 5][doc 8].
- Execution risks on new brands and telehealth: The success of new initiatives, especially Brand 3 and the telehealth platform, depends on complex product launches, robust technology performance, and effective market adoption, which are not guaranteed and could delay revenue contributions [doc 8][doc 10].
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Revenue Growth | FY 2025 | 20% | 22%-23% | raised |
Gross Margin | FY 2025 | 70% | 71% | raised |
Adjusted EPS | FY 2025 | $1.94-$1.98 | $1.99-$2.04 | raised |
Adjusted EBITDA | FY 2025 | no prior guidance | $157M-$161M | no prior guidance |
Tariff Impact | FY 2025 | no prior guidance | 50-100 basis points | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
International Expansion | Q4: Focused on accelerating growth through localized experiences and strategic decisions, with plans to scale in existing markets like the U.K., Germany, and Australia. Q3: Emphasized current market success and future potential through live testing and localized launches, while noting a cautious approach in expanding further. Q2: No detailed discussion on international strategy. | Extensive discussion on boosting international growth with a strategic plan to scale in both existing and new markets (e.g. France, Italy, Spain and testing in developing markets), aiming to support a $1 billion revenue target. | Increased emphasis on scaling internationally with stronger localized approaches and broader market tests, highlighting revenue target alignment. |
Telehealth and New Brand Initiatives | Q4: Detailed discussion of Brand 3 (telehealth platform for skin and body issues) with a planned soft launch in Q3 2025 and official launch in Q4 2025, plus significant investments in both Brand 3 and Brand 4. Q3: Focused on developing Brand 3 and Brand 4 with investments in teams, infrastructure, and technology; minimal expected revenue contribution in 2025. Q2: Highlighted heavy investments in product development, technology, and ODDITY LABS for brand creation. | Deepened update on Brand 3 with specifics on the telehealth platform powered by advanced technology (including generative AI elements), a comprehensive product range, and continued strategic investment; Brand 4 now planned for 2026. | Consistent prioritization of new brand launches with increased detail on technology integration and clear launch timelines while sustaining heavy investment focus. |
Customer Loyalty and Repeat Sales Growth | Q4: Emphasized best-in-class repeat rates with a 12‑month revenue repeat rate over 100% and strong profitability from repeat customers. Q3: Highlighted improvement in repeat sales (over 50% of revenue) and increased average order value due to strong customer cohorts. Q2: Stressed that repeat sales drive the majority of revenue and underpin a highly efficient direct-to-consumer model. | Reinforced that repeat revenue remains the largest part of the business (over 60% of total revenue in 2024) and stressed that strong customer satisfaction and high lifetime value are key to long-term growth. | Consistent strength in customer loyalty with an enhanced focus on long‑term customer value, underpinning repeat sales growth across periods. |
Operational and Margin Pressures | Q4: Discussed manageable tariff headwinds with minimal impact, heavy investments in growth initiatives (Brand 3, Brand 4, ODDITY LABS), and rising acquisition costs leading to margin compression, yet maintained commitment to 20% adjusted EBITDA margins. Q3: Addressed margin compression due to heavy investments without specific mention of tariffs or acquisitions. Q2: Focused on limited tariff exposure, significant investments, and rising acquisition costs while maintaining efficient margins. | Detailed discussion on tariff headwinds (50-100 bps impact), heavy investments in future growth (including Brand 3, Brand 4, and Oddity Labs) and rising acquisition costs, all while committing to disciplined EBITDA margins. | Persistent pressures that are managed through disciplined investments and operational efficiencies, with a consistent focus on maintaining margin targets. |
Execution Risks and Launch Timing Uncertainties | Q4: Indirectly touched on launch timing by noting that Brand 4 was postponed to early 2026 to focus on Brand 3, and highlighted extensive testing and preparation. Q2: Discussed disciplined launch timelines for Brand 3 and Brand 4 as part of its growth strategy, addressing potential execution challenges. Q3: Minimal specific discussion on these risks. | No specific mention of execution risks or launch timing uncertainties during Q1 2025; the focus remained away from discussing these details. | Decreased focus on execution risks, suggesting increased confidence in launch schedules and execution processes compared to indirect mentions in previous periods. |
Generative AI for Personalization | Q4: Elaborated on the use of generative AI models for personalization in Brand 3, including severity assessments, lesion classification, and predictive views using foundation models enhanced with proprietary data. Q3: Mentioned early testing and potential of generative AI for enhancing personalization, with less detail than later calls. Q2: No mention of generative AI [N/A]. | Detailed usage of generative AI in the predictive view algorithm to visualize skin improvements and boost customer motivation and trust, enhancing the personalization of treatment journeys. | Continued focus on leveraging AI for personalization with increased operational detail and integration into customer-facing technology in Q1 2025. |
Customer Acquisition Cost Dynamics | Q4: Noted Q1 as the largest acquisition quarter with rising media costs offset by strong repeat sales and maintained attractive ROAS, affirming a disciplined spending approach. Q2: Detailed discussion on efficient acquisition efforts, improved ROAS despite higher media spend, and strategic focus on long-term profitability. Q3: No specific discussion on CAC dynamics [N/A]. | Emphasized maintaining a strong 12‑month LTV to CAC ratio (around 3x at IPO) along with strategic reinvestment in growth areas, underpinning a commitment to sustained margin targets. | Consistent discipline in managing acquisition costs; continued strategic focus with a slight shift towards reinvestment for long‑term profitability without major changes in the cost structure. |
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Gross Margins
Q: What’s fueling improved margins?
A: Management emphasized that robust execution in supply chain, logistics, and favorable product mix pushed gross margins to 74.9%, while they now target a long-term run rate in the high 60%s and maintain a 20% adjusted EBITDA margin—all reflecting disciplined cost efficiencies. -
Tariff Impact
Q: What tariff costs are in your guidance?
A: They assumed a tariff drag of 50 to 100 basis points on gross margins for 2025, considering current China and European impacts, and view these costs as manageable given their strong margin base. -
International & M&A Strategy
Q: How are international markets and acquisitions evolving?
A: Management noted that international operations contribute less than 20% of the business and are scaling mainly through market testing and localized launches. They are also open to M&A, particularly where biotech and AI can accelerate growth. -
Telehealth & SG&A Efficiency
Q: How efficient is advertising and what about telehealth?
A: They clarified that while early LTV/CAC ratios were around 3x, the priority remains on reinvesting for a 20% EBITDA margin. Their telehealth platform, built as a shared capability, underpins future brand launches and broad expansion. -
International Lift & Click-to-Cancel
Q: How did international and click-to-cancel perform?
A: Management reported both U.S. and international channels grew double-digits, with international currently making up less than 20%. The new click-to-cancel rule has had negligible impact due to their self-serve, opt-in cancellation process.
Research analysts covering Oddity Tech.