Oddity Tech Ltd. — FY2023 Form 20-F
Reporting period: Fiscal year ended December 31, 2023. This is an annual report, not a quarterly filing; the supplied filing text does not provide standalone Q4 results. Amounts are in U.S. dollars unless stated otherwise.
Business context
Oddity operates online, direct-to-consumer beauty and wellness brands, principally IL MAKIAGE and SpoiledChild, using proprietary data, machine learning and computer vision. It reported approximately 50 million users at year-end. In 2023, it acquired biotechnology company Revela and established ODDITY LABS to support product and ingredient development.
Key financial metrics
| Metric | FY2023 | FY2022 | Change |
|---|---|---|---|
| Net revenue | $508.7 million | $324.5 million | +56.7% |
| Gross profit / margin | $358.2 million / 70.4% | $218.1 million / 67.2% | Margin +3.2 percentage points |
| Operating income / margin | $74.3 million / 14.6% | $27.7 million / 8.5% | Improved |
| Net income / margin | $58.5 million / 11.5% | $21.7 million / 6.7% | Improved |
| Adjusted EBITDA / margin | $107.3 million / 21.1% | $39.5 million / 12.2% | Improved |
| Order billings | $595.8 million | $395.5 million | +50.6% |
| Cash provided by operating activities | $87.5 million | $39.0 million | Increased |
Revenue growth was primarily driven by a 40.2% increase in orders. The reported product return rate declined to 12.0% from 14.8%. U.S. revenue was $414.1 million; revenue from other geographies was $94.6 million, or approximately 19% of total revenue. Advertising expense was $125.6 million, up from $92.0 million.
At December 31, 2023, cash and cash equivalents were $36.5 million, short-term deposits $78.0 million, and marketable securities $51.6 million; together with restricted cash, these totaled $168.4 million. Inventory was $84.1 million, versus $70.2 million. Total liabilities were $121.8 million and shareholders’ equity was $283.1 million. The company reported no outstanding borrowings under its credit facilities at year-end. Operating lease liabilities totaled $12.5 million.
Cash used in investing activities was $140.0 million, including $60.0 million net investment in short-term deposits, $50.0 million in marketable securities and $23.2 million for the Revela acquisition. Financing activities provided $48.8 million, primarily from approximately $53.0 million in net IPO proceeds. The filing reports capital expenditures of $2.1 million.
Material changes versus prior periods
- Revenue growth accelerated to 56.7% in 2023 from 45.8% in 2022. Gross margin rose from 67.2% to 70.4%, which management attributed largely to supply-chain efficiencies and cost improvements.
- SG&A increased 49.1% to $283.9 million, including $33.6 million more advertising expense, growth investments, public-company and IPO costs, and higher share-based compensation.
- Share-based compensation was $24.1 million, compared with $6.7 million in 2022. The company also recorded $17.4 million of SpoiledChild incentive-plan expense for its co-founders in 2023; no further amounts are payable under that plan.
- Revela was acquired for total purchase consideration of $67.4 million, comprising cash and shares, including contingent shares subject to performance milestones. The acquisition added $48.7 million of goodwill.
- The company completed its IPO in July 2023, issuing 1,754,385 Class A shares at $35 per share and raising approximately $50.3 million net. It stated that none of the IPO proceeds had been used through December 31, 2023.
Outlook, risks and other notable items
The filing does not provide a clear numeric revenue or earnings guidance range. Management describes continued growth plans through customer acquisition and retention, international expansion, new products and brands, and investment in technology and ODDITY LABS. It cautions that recent growth may not be sustainable and expects growth rates to slow over time. Revenue is seasonal, typically strongest in the first half of the year.
Management said existing cash and positive operating cash flow were expected to fund working capital and capital expenditure needs for at least 12 months. In January 2024, after year-end, the company entered into credit facilities allowing up to $100 million of aggregate borrowing, subject to interest, fees, guarantees and financial covenants.
- Key business risks include dependence on brand reputation, customer acquisition and repeat purchases; competition and changing preferences; forecasting, inventory and product-return risk; and reliance on third-party suppliers, manufacturers, fulfillment and shipping.
- Other material exposures include data privacy, cybersecurity and AI regulation; product safety, labeling and advertising claims; foreign-exchange and investment risks; and potential tax, intellectual-property and other legal matters.
- The filing states that the Israel-Hamas war had not materially affected day-to-day operations as of the report date, but that the conflict could disrupt operations. The company also used approximately 100 Ukrainian independent contractors for software development at year-end 2023.
- Management concluded disclosure controls were effective at December 31, 2023. The filing includes no management assessment or auditor attestation of internal control over financial reporting, citing the transition period for newly public companies. The independent auditor issued an unqualified opinion on the financial statements.
- Founder and CEO Oran Holtzman held all Class B shares, representing approximately 76.1% of voting power at year-end. The company does not expect to pay dividends in the foreseeable future.
Most important facts for investors to verify
- Whether order growth, lower returns and improved gross margins persist, and how much revenue and profit depend on the largest brands and markets.
- Whether advertising and other growth spending can sustain customer acquisition and repeat purchases without reducing profitability.
- How much of Adjusted EBITDA growth reflects recurring performance versus exclusions such as share-based compensation; FY2023 Adjusted EBITDA was $107.3 million compared with GAAP net income of $58.5 million.
- The use and liquidity of the $168.4 million in cash, deposits, marketable securities and restricted cash, and the terms, utilization and covenant headroom of the post-year-end credit facilities.
- Revela’s integration and performance, the returns from ODDITY LABS investment, and the potential dilution or expense associated with contingent shares and equity awards.
- Any subsequent developments in Israel, supplier or shipping disruptions, cybersecurity or privacy incidents, product claims or regulatory matters, and tax exposures.