Oddity, a beauty and tech company that operates the Il Makiage and Spoiled Child brands, has filed for an IPO as the IPO market begins to thaw. The Israel-based company intends to trade on the Nasdaq under the ticker symbol ODD. While the pricing details have not been disclosed yet, Oddity stated that the offering is contingent on market conditions.
Founded in 2018 by siblings Oran Holtzman and Shiran Holtzman-Erel, Oddity utilizes data and AI to develop brands and provide personalized product recommendations to its customers. The company aims to disrupt the traditional retail market by leveraging AI and data-driven recommendations instead of in-store experiences. Key to its business model is its proprietary technology, including tech developed by a former Israeli defense official, and the vast amount of data it has gathered from its millions of users.
In the first quarter of 2022, Oddity achieved revenues of $165.65 million, up from $90.41 million in the same period last year. The company reported a net income of $19.59 million, or $5.34 per share, compared to $3.01 million, or 82 cents per share, in the previous year. Notably, the regulatory filing reveals that Oddity has been profitable on an annual basis since at least 2020.
As a direct-to-consumer retailer, Oddity benefits from high margins. In the first quarter of 2022, its gross margins reached 71%, a 4 percentage point increase from the previous year. However, the company has observed a gradual decline in its margins since 2020 due to strategic acquisitions and investments to fuel growth. In fiscal 2022, Oddity achieved $324.52 million in sales with a net income of $21.73 million, or $5.94 per share, compared to $222.56 million in revenue and a net income of $13.92 million, or $4.01 per share, in the previous year.
Oddity boasts over 4 million active customers as of March 31, defined as unique customer accounts that made at least one purchase in the past 12 months. The company stated in its regulatory filing that it attracts visitors to its website, converts them into users through data collection, and ultimately converts them into paying customers.
While originally based in Israel, Oddity has expanded globally, with international sales contributing to approximately 26% and 27% of its net revenue in fiscal 2022 and 2021, respectively. The company has already launched in the U.S., Canada, U.K., continental Europe, and Australia, with plans for further expansion.
Proceeds from the IPO will be utilized by Oddity to develop and launch new brands, as well as for working capital, general corporate purposes, and potential acquisitions and investments. Despite the challenging macroeconomic environment for digital retailers, the company is experiencing growth and profitability, with its gross sales doubling each year since its inception in 2018.
In its first year, Spoiled Child, one of Oddity’s brands, generated $48 million in gross sales. The CEO and co-founder, Holtzman, highlighted that the company recruits heavily from elite technology units within the Israeli Defense Forces, with technologists comprising over 40% of its global headcount.
Oddity is not only focused on developing new products and brands but is also committed to enhancing the effectiveness of beauty products. Recently, the company invested over $100 million to acquire biotech startup Revela and establish a U.S.-based lab. This merger introduced a team of scientists who utilize AI to create innovative molecules for use in Oddity’s cosmetics brands and future product lines.
In 2021, Oddity made another significant acquisition by acquiring Voyage81, a deep tech AI-based computational imaging startup. This technology has the capability to analyze skin and hair features, measure facial blood flows, and create detailed maps of melanin and hemoglobin using a regular smartphone camera.
The filing of the IPO by Oddity comes after a prolonged drought in the IPO market, which is starting to show signs of revival. The recent successful IPO of Mediterranean restaurant chain Cava, whose shares soared as much as 117% on its market debut, indicates a resurgence in investor appetite for IPOs. Matt Kennedy, a senior IPO market strategist, believes that investors are once again attracted to consumer-oriented businesses that demonstrate understandable business models, profitability or growth potential.
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