ODDITY Tech (NASDAQ:ODD) executives said the company remains focused on resolving a sharp increase in customer acquisition costs tied to its largest advertising partner, even as the beauty and wellness technology company reported a steep first-quarter revenue decline and negative adjusted EBITDA.
On the company’s first-quarter 2026 earnings call, Co-Founder and CEO Oran Holtzman said ODDITY is still navigating what management described as an advertising account dislocation, particularly affecting its IL MAKIAGE brand. Holtzman said the company continues to expect a potential normalization in the second half of the year, consistent with its prior commentary.
Advertising Costs Remain Central Issue
Holtzman said ODDITY has been working closely with the advertising partner’s product and engineering teams to address the issue. He said the partner has told ODDITY that it estimates the company can recover 40% to 60% of CPA based on its system alone, excluding macro or other factors.
Management characterized the issue as technical rather than a sign of brand weakness or market saturation. Holtzman pointed to the sudden nature of the change, simultaneous deterioration across multiple IL MAKIAGE ad accounts and markets, and higher bounce rates that ODDITY believes indicate lower-quality audiences being served ads by the algorithm.
Holtzman also said the company has shifted 40% of acquisition revenue away from its Try Before You Buy model into a standard purchase model. He described Try Before You Buy as a pro-consumer offering intended to replicate the experience of trying beauty products in stores, but said the company is now using it in a more balanced way alongside standard purchases.
“Try Before You Buy remains part of our model,” Holtzman said during the Q&A session. “We have no plan to eliminate it.”
First-Quarter Revenue Falls 26%
Global CFO Lindsay Drucker Mann said first-quarter net revenue declined 26% year over year, slightly better than the company’s expectation for an approximately 30% decline. She said the decline was driven largely by first orders, which fell around 50% due to reduced acquisition efficiency from abnormally high CPA levels.
Repeat orders declined around 15%, which Drucker Mann attributed mainly to fewer first orders in the quarter and a decline in the portion of repeat business more sensitive to acquisition spending. Repeat sales represented about two-thirds of net revenue in the quarter, compared with approximately 56% in the first quarter of 2025.
Other first-quarter metrics included:
- Gross margin: 69.7%, down approximately 520 basis points year over year.
- Adjusted EBITDA: Negative $7 million.
- Adjusted diluted EPS: Negative $0.17.
- Free cash flow: Negative $21 million.
- Cash, cash equivalents and investments: $667 million at quarter-end.
Drucker Mann said margin pressure reflected higher acquisition costs, operating deleverage from lower revenue, product mix, lower average order value and temporary effects from testing related to the company’s remediation efforts.
Guidance Reflects Continued Uncertainty
ODDITY did not provide a full-year revenue outlook, citing continued uncertainty in media efficiency. However, Drucker Mann said the company expects full-year adjusted EBITDA to be positive.
For the second quarter, ODDITY expects net revenue to decline 25% to 30% year over year and adjusted EBITDA of $8 million to $10 million. Drucker Mann said the guidance assumes CPA remains “similarly difficult.”
She also cautioned that reduced user acquisition activity in the first half of the year will weigh on repeat sales later in 2026, even if CPAs normalize. “Once we get first orders going, that’s when we can start to drive the repeat, and that’s where the profitability flows through,” she said.
Holtzman said the company is continuing to spend on customer acquisition despite weaker efficiency because it needs advertising data to help recalibrate the algorithm and test fixes. “Without spending, we will not be able to identify the problem,” he said.
Methodiq and ODDITY LABS Continue to Advance
Management also discussed Methodiq, ODDITY’s medical telehealth platform launched late last year. Holtzman said the brand is off to a strong start and is expected to generate $25 million of revenue this year, which he said is in line with SpoiledChild’s first-year performance.
Methodiq’s product lineup includes 28 prescription and non-prescription products spanning oral treatments, topicals, supplements and medical-grade makeup. Holtzman said the company is seeing encouraging signals from the platform’s progress tracking app, including app downloads, weekly check-ins and care team engagement.
ODDITY LABS added two products to the Methodiq lineup during the quarter: DuraxSynd, a topical eczema treatment formulated with the company’s proprietary ODD-L1669 molecule, and XariLac, an active scalp prevention treatment powered by the ODD-L103 molecule.
Holtzman said ODDITY LABS is also working on programs targeting anti-aging, hyperpigmentation and acne prevention, including molecules in testing or laboratory validation phases.
Share Repurchases and Balance Sheet
Drucker Mann said ODDITY repurchased approximately 6 million ordinary shares during the quarter for about $82 million, reducing ordinary shares outstanding by around 10%. In March, the board approved a new share buyback program authorizing up to $200 million of Class A ordinary share repurchases, replacing a prior $150 million plan.
The company ended the quarter with about $167 million remaining under the authorization. Drucker Mann also said ODDITY’s $350 million amended credit facilities, secured in January 2026, remain undrawn.
Holtzman closed by reiterating management’s confidence in the beauty category and ODDITY’s long-term positioning, while acknowledging the immediate challenge caused by advertising efficiency. “We have seen no reason that we couldn’t solve what we believe is a technical problem as we have in the past,” he said.
About ODDITY Tech (NASDAQ:ODD)
Oddity Tech Ltd. operates as a consumer tech company that builds digital-first brands for the beauty and wellness industries in the United States and internationally. It serves consumers worldwide through its AI-driven online platform, which uses data science, machine learning, and computer vision capabilities to identify consumer needs, and develop solutions in the form of beauty and wellness products. The company sells beauty, hair, and skin products under the IL MAKIAGE and SpoiledChild brands.
