Beauty and technology company Oddity, which runs Il Makiage and Spoiled Child brands, filed to go public Friday as the once-frozen IPO market boomed.
The Israel-based company plans to trade on the NASDAQ stock exchange using the ticker ODD. The company did not immediately disclose how the offering would be priced in regulatory filings and declined to comment when asked when the figures would be released.
“The number of shares to be offered and the price range for the proposed offering have not yet been determined. The offer is subject to market conditions, and there can be no guarantee as to whether or when the offer may be completed, or the actual size or terms of the offer,” Oddity said. In a press release.
Launched in 2018 by brother and sister duo Oran Holtzman and Shiran Holtzman-Erel, Oddity uses data and artificial intelligence to develop brands and provide personalized product recommendations to customers.
The company seeks to disrupt a market long dominated by legacy retailers by replacing the in-store experience with product recommendations driven by artificial intelligence and data. At the heart of its business model are its proprietary technology — including technology developed by a former Israeli defense official — and the billions of data points it has collected from millions of users.
In the three months ended March 31, the company generated $165.65 million in revenue, up from $90.41 million in the year-ago period. It reported net income of $19.59 million, or $5.34 per share, compared to $3.01 million, or 82 cents per share, a year earlier.
Numbers disclosed in its regulatory filing show that the direct-to-consumer retailer has been profitable year-over-year since at least 2020.
In fiscal 2022, Oddity brought in $324.52 million in sales and saw net income of $21.73 million, or $5.94 per share. In the prior year, the retailer had revenue of $222.56 million and net income of $13.92 million, or $4.01 per share.
In 2020, it had $110.64 million in sales and $11.71 million in net income, or $3.45 per share.
By comparison, when ELF Beauty It went public in August 2016, and its earnings and sales have been lower than its earnings and sales. ELF, a multi-brand beauty company, saw $144.94 million in sales in fiscal 2014 and a net loss of $2.88 million. The following year, it saw sales of $191.41 million and net income of $4.36 million.
In the 2016 fiscal year, it generated sales of $229.57 million and net income of $5.31 million.
Since going public, ELF sales and profits have skyrocketed. During its most recent fiscal year, which ended March 31, it saw sales of $578.84 million and net income of $61.53 million.
As a direct-to-consumer retailer, Oddity is seeing high margins that come with the strategy. In the three months ended March 31, its gross margins were 71%, up 4 percentage points from 67% in the year-ago period. Its annual margins have declined each year since 2020 as the company has made acquisitions and invested in growing the business.
In 2020, Oddity had an annual gross margin of 70%, and in 2021, it’s down 1 percentage point, to 69%. In 2022, the retailer’s annual gross margin was 67%, down 2 percentage points from the same period last year.
As of March 31, the company had more than 4 million active customers, which it defines as a unique customer account that has made at least one purchase in the previous 12-month period.
“We bring visitors to our website, convert visitors into users by asking and learning about questions, and then leveraging the data we have across the platform to turn them into paying customers,” says a regulatory filing.
Oddity launched internationally, and sales from those markets accounted for about 26% and 27% of its net revenue in 2022 and 2021, respectively. As of Friday, Oddity has launched in the United States, Canada, the United Kingdom, continental Europe, and Australia. She indicated that she has plans to continue to grow that footprint.
The company plans to use the proceeds from the IPO to develop and launch new brands. The funds will also be used for working capital and other general corporate purposes and possibly for acquisitions and other investments.
During an interview earlier this year, the company’s global chief financial officer, Lindsay Drucker Mann, a former CEO of Goldman Sachs, told CNBC that Oddity is making money and growing — even as a challenging macroeconomic environment is proving to be increasingly risky for retailers. Pure digital.
The company said Oddity’s total sales have, on average, doubled every year since 2018.
In Spoiled Child’s first year on the market, the brand new album brought in $48 million in gross sales, which doesn’t include royalties.
In an organizational filing, Holtzman, the company’s CEO and co-founder, said the company recruits from the IDF’s best technology units. Technicians make up more than 40% of the global workforce.
Holtzmann wrote in a letter to its founder, accompanied by the Depository Securities.
“Their lack of investment in technology has left this category behind the digital curve, even though the consumer is inherently willing to buy online — spending significant time on social media for beauty content and dollars quickly shifting online in other categories.”
The company said that in addition to developing new products and brands, Oddity is also trying to make beauty products more effective.
In late April, it announced it was investing more than $100 million to acquire biotech startup Revela and open a lab in the US.
The merger brought to Oddity a team of scientists tasked with creating entirely new molecules, using artificial intelligence, that could be used in its cosmetic brands and future lines.
In 2021, Oddity acquired Voyage81, a computational imaging startup based on AI deep technology founded in 2019 by Niv Price, former head of research and development for one of the IDF’s premium technology units, along with Dr. Boaz Arad, Dr. Rafi Gidron and Omar Schwartz.
The technology is capable of mapping and analyzing skin and hair features, detecting facial blood flow, and creating melanin and hemoglobin maps using a regular smartphone camera.
The filing comes after a year-and-a-half drought in the IPO market, which is just beginning to open up and show signs of green shoots.
Earlier this month, Mediterranean restaurant chain Cava went public, and its shares rose as much as 117% on its market debut.
“[In 2022] Investors didn’t want to go anywhere near IPOs but now they’re making money again, and with issuers seeing they can achieve valuations close to decent, I think that puts people back into the market,” said Matt Kennedy, chief IPO market strategist at Renaissance Capital Company.
“The consumer sector lends itself to these periods where investors can see a business model that they understand, a business that they may be familiar with and also that is usually profitable or close to profitable, preferably one that has growth.”