Oddity Tech (ODD) Q1 2026 Earnings Transcript

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DATE

Tuesday, June 2, 2026 at 8:30 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Oran Holtzman
• Chief Financial Officer — Lindsay Mann

TAKEAWAYS

• Net Revenue -- Decreased by 26%, coming in slightly better than internal guidance for an approximate 30% decline.
• Gross Margin -- Reported at 69.7%, compressing by approximately 520 basis points year over year, attributed to product mix and lower average order value.
• First Orders -- Declined by about 50%, primarily due to significantly reduced acquisition efficiency from abnormal cost-per-acquisition (CPA) levels.
• Repeat Orders -- Fell approximately 15%, attributed mainly to the significant decrease in first orders and changes in repeat sales sensitivity to acquisition spend.
• Repeat Sales Contribution -- Accounted for around 66% of net revenue, up from approximately 56% in the prior year period.
• Average Order Value (AOV) -- Declined in the low single digits, affected by a higher mix of SpoiledChild sales and overall product mix.
• Adjusted EBITDA -- Came in at negative $7 million, reflecting year-over-year deterioration driven by abnormal CPA levels and ongoing investments to recalibrate advertising algorithms.
• Adjusted Diluted EPS -- Reported at negative $0.17.
• Free Cash Flow -- Registered at negative $21 million, primarily resulting from the net loss in the quarter.
• Cash, Cash Equivalents, and Investments -- Ended the quarter at $667 million.
• Credit Facilities -- $350 million of amended facilities secured in January remain undrawn as of quarter-end.
• Share Buyback -- Approximately 6 million ordinary shares repurchased for $82 million, representing a 10% reduction in shares outstanding; $167 million remains available under the updated $200 million authorization.
• IL MAKIAGE Cost-Per-Acquisition (CPA) -- May CPA dropped an estimated 28% sequentially from April, marking a break in the preceding negative trend.
• IL MAKIAGE Revenue -- Decline attributed to a sudden technical issue with the largest advertising partner, which caused CPA levels in some cases to double compared to expectations and peer benchmarks.
• Recovery Estimate by Ad Partner -- The advertising partner forecasts a possible 40%-60% CPA recovery using adjustments on their end, independent of macro conditions.
• Remediation Actions -- 40% of acquisition revenue was shifted from Try Before You Buy to standard Buy model by quarter-end, with no negative impact on unit economics.
• SpoiledChild Update -- Also navigating higher CPA, but impacts are less severe than IL MAKIAGE; brand continues to grow with further remediation to follow results in IL MAKIAGE.
• METHODIQ Revenue Guidance -- Expected to generate $25 million in annual revenue, performing in line with prior successful new brand launches in year one.
• Full-Year Profitability Outlook -- Management reiterated the target for a positive adjusted EBITDA for the full year, with $8 million to $10 million expected in Q2, despite ongoing CPA challenges.
• Q2 Guidance -- Net revenue projected to decline 25% to 30% year over year, with adjusted EBITDA between $8 million and $10 million.
• Inventory Position -- Ended the quarter with slightly elevated inventory, resulting from revenue shortfall versus previous purchase plans, with intent to work down inventory through the year.

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RISKS

• Sales performance was materially affected by a sudden, technical disruption in CPA with the largest advertising partner, causing 2026 revenue to decline by 26% and adjusted EBITDA to turn negative, a situation explicitly called "anomaly" and non-representative of brand or market saturation.
• "it will be very, very difficult for us to make this up in the back half just based on seasonality," indicating lost first orders in H1 will pressure revenues and repeats across the remainder of the year.
• Gross margin compressed by 520 basis points, with management citing "temporary negative impact" from remediation tests and product mix shifts.
• Management acknowledged ongoing "Media uncertainty" makes "visibility to full year financials challenging," which could continue to create volatility in results and forecasts.

SUMMARY

Oddity Tech Ltd. (NASDAQ:ODD) reported a sharper-than-expected year-over-year revenue contraction and negative adjusted EBITDA, citing a technical CPA issue with its largest advertising partner as the principal cause. Management detailed that the CPA anomaly was sudden, widespread across key geographies, and amplified by algorithmic changes outside Oddity’s direct control. The company initiated immediate remediation—including shifting 40% of acquisition revenue from Try Before You Buy to standard Buy—without compromising unit economics. Despite these pressures, repeat sales composition increased and gross margin, while compressed, stayed above 69%. Management continues to maintain significant liquidity, implement cost offsets, and expects profitability for the full year as algorithmic performance normalizes in H2.

• Initial sequential CPA improvement was observed in May, representing the first positive inflection since Q4 2025, but management warns this may not be sustained without further progress.
• Shareholder returns were prioritized through the repurchase of 10% of outstanding shares for $82 million, authorized under a new $200 million buyback program.
• METHODIQ, the newly launched telehealth brand, is expected to contribute $25 million in first-year revenue, mirroring the ramp profile of SpoiledChild, and expands the company’s product mix to medical-grade solutions.
• SpoiledChild remains less impacted by CPA volatility, enabling continued growth while awaiting the transfer of remediation learnings from IL MAKIAGE.
• Management explicitly described the CPA breakdown as technical and not brand or saturation issue. supporting the possibility of revenue and margin recovery upon resolution.

INDUSTRY GLOSSARY

• CPA (Cost-Per-Acquisition): A performance marketing metric measuring the average cost incurred to acquire a new customer or completed transaction, directly impacting margins and marketing efficacy.
• Try Before You Buy: A model permitting customers to try products before purchasing, mimicking in-store experiences and affecting user acquisition approaches and unit economics.
• Adjusted EBITDA: Earnings before interest, taxes, depreciation, and amortization, excluding certain items such as stock-based compensation and one-time charges, used by Oddity as a key profitability measure.
• METHODIQ: Oddity’s medical telehealth brand focused on dermatological care, featuring prescription, nonprescription, and proprietary molecule-based products.
• ODDITY Labs: The company’s internal research organization developing new molecules and formulations for beauty and wellness applications, including product innovation beyond standard cosmetics.

Full Conference Call Transcript

Oran Holtzman: Thanks, everyone, for joining our call today. While we continue to navigate account dislocation 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 IL MAKIAGE 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 and 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 and context for the anomaly we experienced.

We provide detail on historic IL MAKIAGE 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 in the table provided steady and consistent mid-teen CPA increases every year with gradual yearly increases correlated with our industry. While we did not build our business on favorable user acquisition cost, 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 unit 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 deterioration over time, but clear and definitive months of collapse. Two, a breakdown occurred in different IL MAKIAGE 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 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 a 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 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 nonobvious interaction with the platform new dynamics. Towards the end of Q1, we already successfully shifted 40% of our acquisition revenue out of Try 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 forecasted in our Q4 earnings, it had material impact to Q1.

Sales declined 26% versus the prior year, slightly better than our outlook for sales decline of approximately 30%. I noted the 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 a 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 IL MAKIAGE, SpoiledChild is navigating higher CPA costs, but with less severity.

We plan to implement similar remediation steps in SpoiledChild once we finish identifying the technical initiatives that will resolve the algorithms and CPA problems in IL MAKIAGE. Moving on to METHODIQ, which is off to a strong start following its launch late last year. We expect it to deliver $25 million in revenue this year, in line with SpoiledChild's strong success in year 1. As a reminder, METHODIQ is a medical telehealth platform designed to deliver high efficacy treatments at scale. Our goal is to help transform a broader medical care system starting in dermatology using our best treatments and the highest standards of care available to everyone.

We are proud of METHODIQ product line, which spans 28 prescriptions and nonprescription products, including oral topical supplements and medical grade makeup, all designed to maximize efficacy, minimize side effects, and give an unparalleled 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 are delivered continuous care throughout the combination of our vision technology and care team engagement. App download 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.

ODDITY Labs continue to push the frontier of ingredient innovation in beauty and wellness, focusing on pain points with large commercial opportunities like hyperpigmentation and aging. We added 2 additional products made with Labs molecule in our METHODIQ product lineup this quarter. First, Neurexa, a topical eczema treatment formulated with our proprietary ODDL1669 molecule and other inactives engineered with the goal of achieving superior efficacy to traditional eczema treatment with minimal side effects. Second is Zeralaq, a first of its kind acne scalp prevention treatment powered by our ODDL103 molecule, which reduces inflammation and promotes the healing of active breakouts. Looking ahead, we are working on several novel molecules targeting different indications.

One, in our anti-aging program, our novel molecule have demonstrated robust in vitro efficacy in increasing collagen synthesis and reducing aging markers. We are now conducting human-focused group testing to ensure clinical translation. Two, to optimize hypopigmentation 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 breakout by reducing sebum production and preventing clogged pores. Our leading candidate molecule is 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.

Lindsay Mann: Thanks, Oran. Let's turn to our Q1 results, which I will refer to on an adjusted basis. You can find the full reconciliation to GAAP in our press release. Net revenue declined 26%, slightly less negative than our expectation of an approximate 30% decline. The decline was driven largely by first orders, which declined by around 50%, driven by the significant reduction in our acquisition efficiency due to the abnormal higher CPA. Repeat orders declined by around 15%, mainly attributed to a decline in Q1 first orders and a decline in the proportion of our repeat that is more sensitive to acquisition spend. Repeat sales represented approximately 2/3 of our net revenue this quarter versus approximately 56% in Q1 '25.

AOV declined low single digits driven by higher mix of SpoiledChild versus IL MAKIAGE and product mix. Gross margin was 69.7%, compressing approximately 520 basis points year-over-year. The compression was driven in part by product mix and lower AOV. Our remediation activity during the quarter created some temporary noise in the P&L. We ran many tests to try and isolate the technical problem, and this included turning off different tech products, funnel offerings and testing different TBYB return policies. These changes had a temporary negative impact on our Q1 margins. We delivered adjusted EBITDA of negative $7 million.

The year-over-year decline reflects the abnormal CPA levels and our decision to continue spending in order to accelerate a recalibration of the algorithm. Margins were also impacted by operating deleverage from lower revenue and our continued planned investments in core growth initiatives. We are managing costs across the business to offset some of the EBITDA pressure while protecting these forward investments. Adjusted diluted EPS was negative $0.17. Q1 free cash flow was negative $21 million, driven by the net loss. We exited the quarter with a slightly elevated inventory position due to the revenue shortfall relative to our purchase plans late last year, and we plan to work through this inventory going forward.

We exited the quarter with $667 million of cash, cash equivalents and investments on our balance sheet. Our $350 million of amended credit facilities secured in January of 2026 remain undrawn. Turning to capital return. In March of 2026, ODDITY's Board of Directors approved a new share buyback program authorizing the repurchase of up to $200 million of the company's Class A ordinary shares, which replaced and superseded the previously announced $150 million share buyback plan. ODDITY repurchased approximately 6 million ordinary shares during the quarter for approximately $82 million, reducing ordinary shares outstanding by around 10%. We exited the quarter with approximately $167 million remaining on our authorization. Turning to our outlook.

Media uncertainty continues to make visibility to full year financials challenging, although we're hopeful we're moving in the right direction. We expect adjusted EBITDA for the full year will be positive. We hope to deliver a clearer picture of other key P&L items in coming months. For the second quarter, we expect net revenue to decline between 25% and 30% year-over-year, and we expect adjusted EBITDA will be between $8 million and $10 million, impacted by higher CPA and deleverage on our reduced revenue. A few things to keep in mind for your models. We continue to spend acquisition dollars despite higher CPA in order to feed the algorithm signals they need to reset and normalize.

In addition, the reduced user acquisition activity in the first half will continue to weigh on repeat sales for the remainder of the year even as CPAs normalize. With that, I'll hand it back to the operator for questions.

Operator: [Operator Instructions] Our first question comes from the line of Brian Tanquilut with Jefferies.

Brian Tanquilut: Lindsay, maybe just on the earnings trajectory, you stated positive EBITDA for the year and $8 million to $10 million positive EBITDA in Q2. If you don't mind just talking about the cadence of EBITDA margins that you expect throughout the year? And do you still plan to have most of the acquired customer reps to come in the first half? Or is there a shift happening to the back half?

Lindsay Mann: Thanks, Brian. So unfortunately, based on the technical issue we had, first orders were down, as I mentioned in my script, around 50%. And it will be very, very difficult for us to make this up in the back half just based on seasonality. That being said, the leading indicator we look for is the improvement in CPA, which should allow us to drive some improvement at least in the sequential trend of declines across the year. And once we get first orders going, that's when we can start to drive the repeat and that's where the profitability flows through. We didn't give EBITDA guidance by quarter for the back half by design.

We just don't have enough visibility right now, but we do have confidence that we will be profitable for the full year based on everything that we see today, the exact specifics of it, we just don't have enough visibility to yet.

Brian Tanquilut: Totally understand. And a follow-up, can you go back just to the comments about maintaining a reduced level of acquisition spend. So we're thinking how much have you reduced your run rate by compared to last year? And then was this evenly spread across Q1? Or was there something you did in May, which helped bring CPAs down?

Lindsay Mann: Yes. So we are still spending. And so media spend for the quarter was down a little bit relative to the prior year. It's just that our efficiency on that media is a lot worse. So we talked about you can see in the table that we provided the 80-plus percent increase year-over-year in the first half. And that rate of increase did get worse Jan, Feb, March to April, and May was our first month of sequential improvement. So we are still spending. We want to...

Oran Holtzman: And the reason that we're still spending is to fix the problem. Without spending, we will not be able to identify the problem, and we will not be able to test all the things that we have done in the past quarter. And without that, we will not see any recovery. So we need to continue to spend, but we do it in -- we obviously cannot increase spend because the efficiency of that spend, but we are hopeful after what we saw in May.

Operator: Our next question comes from the line of Youssef Squali with Truist Securities.

Youssef Squali: Excellent. Maybe a quick question for Oran, one for Lindsay. So Oran, can you delve a little deeper into the drivers of the decline in the CPA for IL MAKIAGE? I think you talked about the 28% sequential between April and May. And just like practically, what has been working and how much of that is like sustainable and can actually compound on itself over time? And Lindsay, just as I look at that improvement in CPA and I look at the guide you're providing for Q2, there seems to be a bit of a disconnect because if you look at the overall revenue growth, you're still talking about negative 25% to 30%. You put up 26% negative in Q1.

Maybe just talk to us about the assumptions that are baked into that revenue decline maybe from a CPA trend and anything else you want to share on that guide?

Oran Holtzman: Youssef, so needless to say that we do many, many tests in order to fix it. On the other side, it's an algorithm and those things are most of the time very hard to move the needle and exit those type of spirals. By the way, we navigated, as I mentioned, many algorithm changes in the past, and we always -- we're able to solve it. The fixes that we are doing are primarily structural and technical auditing signals, adjusting our infrastructure, shifting audience strategies and, of course, campaign setup, but that's only on our end. Of course, in parallel, our ad partner is doing analysis on their end, and we work with them closely for the past few months.

We have also made some budget allocation, reducing the overall spend for IL MAKIAGE given the elevated spend, but continue to spend just to make sure that we can continue to have tests running. And again, for many months, we saw only a negative trend, like almost every month was worse than the previous months other than May. May, we had lower spend, but still, we had also very low spend in other months and the trend was opposite. That's for that question, Lindsay?

Lindsay Mann: Sure. Youssef, so our guidance for the second quarter is for revenue to be down between 25% and 30%. The challenge for us in part is that acquisition is still very difficult. We talked about the sequential improvement in May versus April, but remember that Feb was worse than Jan, March was worse than Feb and April was worse than March. So on balance, the overall CPA in May versus Q1 is not materially different yet, but we noted the encouraging thing for us is the positive inflection that we saw in May overall. We did lose a lot of first orders in the first quarter that would have translated into repeat orders in the second quarter.

And so that's a continued overhang for us. So again, like we're -- we hope to see more sequential improvement is in the second half of the year. And like I said and what we said in our outlook, we do expect for full year adjusted EBITDA to be profitable.

Operator: Our next question comes from the line of Andrew Boone with Citizens.

Andrew Boone: You guys have historically run your marketing in-house. Can you guys talk about the changes that have either taken place within that organization or maybe the thought about using third parties? Basically, what's changed in terms of the marketing strategy given this speed bump?

Oran Holtzman: Yes. Historically, we've done everything in-house very successfully for many, many years. For the first time, we shared with the market how stable our results are. And despite the fact that we were growing massively. But that just for acquisition, of course, our repeat and other metrics and compounding repeat continue to grow. That's why despite the small change every year, we were able to continue to present such strong results. What we have now is something that we never saw before. We are evaluating it with the ad partner. And we also brought in another team recently to take a look.

But again, we don't believe that the problem sits on our end, but we continue to do everything in our power to exit this spiral as soon as possible.

Lindsay Mann: I would just add on to that, Andrew, that it was -- it's been very encouraging as we worked very closely with this advertising partner to hear their view that all other things equal, and as we said in our prepared remarks, not related to other things like market dynamics, just in their systems alone, they estimate that we can recover 40% to 60% of CPA. And if we get to those levels, we'll be back in a position to resume healthy profitable growth.

Operator: Our next question comes from the line of Ryan MacDonald with Needham & Company.

Ryan MacDonald: Maybe one for Oran and one for Lindsay. Oran, I'm curious to think about -- as you're thinking about product development and I understand, obviously, I think probably the algo change is taking most of your time. But as we think about product development throughout the remainder of this year, we're obviously getting some updates or should get some updates in July from the FDA around peptides and potentially some moving from certain peptides from Category 2 to Category 1 with applications in skincare like GHK-Cu, copper peptides, BPC 157.

Just curious what sort of opportunity and maybe what research or investments you're doing in this area and what sort of opportunity this could open up for your brands over time? And then, Lindsay, for you, just on the guidance, if we think about the adjusted EBITDA guidance of $8 million to $10 million, are you assuming -- is that based on assumptions that the improvements in CPA you saw in May continue? Or do they revert back to April levels, first quarter levels?

Oran Holtzman: Yes. On your first question, needless to say that the majority -- the vast majority of our time is handling the problem that we currently have with media for both me and Shiran, that's what we do 24/7. I will say that despite what we have in media, we continue to heavily invest in product across IL MAKIAGE, SpoiledChild, and METHODIQ, but more importantly, ODDITY Labs, we continue to see massive opportunity there. And once we have more to inform regarding the peptides and the new changes, we'll update the market.

Lindsay Mann: And as it relates to our assumptions, we -- our assumptions assume that CPA remains similarly difficult.

Operator: Our next question comes from the line of Dara Mohsenian with Morgan Stanley.

Dara Mohsenian: So first, just a clarification. You highlighted CPA move back down sequentially versus recently. You remain hopeful you're on track for normalization in the second half of the year. Is that normalization more around CPA itself? Or is there some hope perhaps you could get back to revenue growth at some point by the end of the calendar year? And just any thoughts on how much of this 2026 revenue pressure might extend longer term as you look out to 2027. I understand 2026 is still a moving target this year. But just looking for your conceptual thoughts on what this means for the business longer term, the issues around CPA here in 2026.

Oran Holtzman: Yes. I'll start just once we fix this problem, of course, like the most important part of our end is to fix it, but then to go back to growth. So my plan as soon as we fix it is to go full power back to growth. As for the implications of '26, obviously, we lost a big chunk of new users that we were not able to acquire in '26, which will impact '27. But again, all depends when we fix it, if we are able to fix it -- as soon as we are able to fix it, we'll go back to growth to compensate some of these new users loss. Lindsay?

Lindsay Mann: Yes. The leading indicator for us is the CPA. We have this overhang on revenue that will continue across the year, but the sequencing is better CPA allows us to drive first orders. We do see that our repeat rates remain very strong. And so when you pull those pieces together, once the CPA is at an improved level, we can drive first orders, which will drive repeat and healthy profitability, and that's kind of the sequencing of how you'll see the business improve.

Operator: Our next question comes from the line of Scott Schoenhaus with KeyBanc Capital Markets.

Scott Schoenhaus: I wanted to focus on METHODIQ. You said it's performing in line with expectations. Do you see any ability to drive that revenue growth algorithm faster by investing more in the business? Are you pulling resources away from the other 2 brands, especially IL MAKIAGE in order to divert more attention to METHODIQ? And then on the hiring front, the biotech environment has strengthened here over the last 12 months. Are you seeing any issues with retention or hiring in that department?

Oran Holtzman: First of all, we don't see an issue with them hiring in Boston ODDITY Labs. Second question, as we believe the problem with IL MAKIAGE is technical, and we believe we'll be able to solve it. We continue to invest in IL MAKIAGE and we are not shifting or allocating resources from that brand to other brands. Lastly, for METHODIQ, very excited and bullish about what it can be, seeing strong initial demand and still early days, but we believe that it will be a great brand. We spent many years on building it.

As for your question to accelerate it, it's a new brand, many things that you want to test, you don't want to accelerate it before you optimize the exact funnels and products. And therefore, it's already extremely substantial for a new brand, and we think that's the right pace.

Operator: Our next question comes from the line of Lauren Lieberman with Barclays.

Lauren Lieberman: Two questions. First was just around -- you've emphasized a couple of times, this is an issue with one particular advertising partner. I was just curious about efforts or thoughts around diversifying your partners, right? There's more than one platform out there. So I wanted to just get some understanding of how you're thinking about the range of opportunities on other platforms and other ad partners. And then secondly was just to clarify whether or not SpoiledChild is sort of undisturbed. We've been very focused on IL MAKIAGE, and it may just be my memory, but I wasn't sure if SpoiledChild was seeing the same issues or not. And if it's not, why not?

And is there anything you can do or are doing to future-proof it to avoid the same kind of signal breakage that's happened with IL MAKIAGE?

Oran Holtzman: Sure. As to other platforms, of course, we advertise also on other platforms. But based on the data that we have, just in 2025, our largest ad partner was by far the largest ad partner in beauty in the U.S., way more than 50% of the market. So there is a limit of how much we can revenue or acquisition we can drive in the other platform. This platform is by far the biggest one and more the majority of the spend in beauty in the U.S. for new user acquisition. Second question about SpoiledChild. SpoiledChild, we see also increasing CPA less severe than IL MAKIAGE. The main difference SpoiledChild continues to grow.

And despite the fact that it continued to grow, the CPA is way less severe than what we've seen in IL MAKIAGE. So it's a good indication, but we are still like, once we identify the right solution for IL MAKIAGE, we'll implement the same in SpoiledChild, we believe that we will have like a tailwind for that brand also.

Operator: Our next question comes from the line of Mark Mahaney with Evercore ISI.

Mark Stephen Mahaney: I want to get back to the question on somebody asked earlier about METHODIQ. And it looks like this product is ramping reasonably well in line with what SpoiledChild did earlier on. That sounds promising. Talk about the customers that you've gotten for the product so far. Are these customers that are brand new to ODDITY as a whole? Are they customers that have come from other areas? Something that -- can you give us some sense about the sustainability of growth of those customers and whether they -- how much they expand your market? Or is it largely just a resell to existing customers? Anything on that and the type of customers coming in for METHODIQ would be helpful.

Oran Holtzman: Yes. I'll start and maybe Lindsay will continue. With any new brand that we launch, we try to see the strength and the potential by itself, meaning it starts by its own with less marketing to our other -- to our existing user base. Otherwise, we will never see or understand the potential of that brand. So to your question, it's an addition to our customer base in IL MAKIAGE. Of course, when those brands operate by themselves, some of the customer base is going after the same audiences just because IL MAKIAGE and SpoiledChild customer base is huge.

But it's completely separate brand with its own efforts to acquire new users just to understand the scale and the potential and to optimize the funnels in the hard way and not with quick wins just due to our major customer base of IL MAKIAGE and SpoiledChild.

Operator: Our next question comes from the line of Cory Carpenter with JPMorgan.

Cory Carpenter: I had 2 questions. Building on an earlier question, could you talk about the CPA trends that you are seeing at your other advertisers? That's the first question. And second question, last time we talked, I think you were hopeful that you could maintain the Try Before You Buy program. I think on this call, you said about 40% has shifted away from that. Maybe just could you give us your latest thoughts on the role that you think Try Before You Buy can play based on your learnings with the technical changes thus far?

Oran Holtzman: Yes. Try Before You Buy remains part of our model. We have no plan to eliminate it as we strongly believe it's great for consumer, and it's the closest way of bringing physical store experience to the online world. Toward the end of Q1, we successfully shifted 40% of our acquisition revenue from Try Before You Buy to standard Buy. This process was expensive in terms of margin as it required many, many tests until we successfully landed on a solution with no impact on unit economics, which is very encouraging.

At least in my view. there is no -- Try Before You Buy today based on the last numbers that I saw, we tend to be a tiny number -- tiny percentage out of our total revenue or total orders, but we intend to continue to use this program as we really believe it's right for consumers, but more balanced with standard Buy.

Lindsay Mann: Question was on CPA at other platforms.

Oran Holtzman: Yes. Other platforms, obviously, the CPA of other platforms is taking the overall CPA of IL MAKIAGE materially down. But since this is our largest platform, we work really hard to solve it so we can go back to growth and go back to full power spend also with the largest platform in the U.S.

Operator: Our final question comes from the line of Anna Lizzul with Bank of America.

Anna Lizzul: I wanted to follow up on Lauren's question here. Now that we've heard from several beauty companies and watch the trends over the past few months, I guess we haven't really heard of the algorithm adjustment as much impacting other beauty companies. They are less exposed to the channels, but they say maybe sees 20% of sales on e-commerce channels. So I was wondering if this will make you reconsider in a broader way your marketing and user acquisition, just given the impact to what seems to be to your brand specifically? And then how do you ensure this doesn't happen with any other platforms in the future?

Oran Holtzman: I can't refer to other brands, but I don't know anyone that is on our scale and most of them are omnichannel and are less sensitive to algorithm changes. By the way, as I mentioned, we had many of them in the past years. The most notable one is iOS 14. And I think that also then it was harder for us than others just due to the fact that we are 100% D2C. And If we think about diversifying our channels, yes, we think about it. And when we have what to tell the market, we will.

Operator: Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Mr. Holtzman for final comments.

Oran Holtzman: Thank you very much, guys, for joining. We'll see you next quarter.

Operator: Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.

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