Beauty and tech company Oddity, which runs the Il Makiage and Spoiled Child brands, filed to go public Friday because the once-frozen IPO market warms up.
The Israel-based company plans to trade on the Nasdaq using the ticker ODD. The corporate didn’t immediately disclose how the offering can be priced in regulatory filings and declined comment when asked when the numbers can be released.
“The variety of shares to be offered and the value range for the proposed offering haven’t yet been determined. The offering is subject to market conditions, and there could be no assurance as as to if or when the offering could also be accomplished, or as to the actual size or terms of the offering,” Oddity said in a press release.
Launched in 2018 by brother and sister duo Oran Holtzman and Shiran Holtzman-Erel, Oddity uses data and AI to develop brands and make tailored product recommendations for purchasers.
The business is looking for to disrupt a market long dominated by legacy retailers by replacing the in-store experience with product recommendations driven by AI and data. At the guts of its business model is its proprietary technology — including tech developed by a former Israeli defense official — and the billions of knowledge points it has collected from its hundreds of thousands of users.
Within the three months that ended March 31, the corporate saw $165.65 million in revenue, up from $90.41 million within the year-ago period. It reported a net income of $19.59 million, or $5.34 a share, compared with $3.01 million, or 82 cents a share, a 12 months earlier.
Numbers revealed in its regulatory filing show the direct-to-consumer retailer has been profitable on an annual basis since not less than 2020.
In fiscal 2022, Oddity brought in $324.52 million in sales and saw a net income of $21.73 million, or $5.94 a share. Within the 12 months prior, the retailer saw $222.56 million in revenue and a net income of $13.92 million, or $4.01 a share.
In 2020, it saw $110.64 million in sales and a net income of $11.71 million, or $3.45 a share.
By comparison, when E.L.F. Beauty filed to go public in August 2016, its profits and sales were lower than Oddity’s. E.L.F., a multibrand beauty company, saw $144.94 million in sales in fiscal 2014 and a net lack of $2.88 million. The next 12 months, it saw $191.41 million in sales and a net income of $4.36 million.
In fiscal 2016, it brought in $229.57 million in sales and a net income of $5.31 million.
Since going public, E.L.F.’s sales and profits have climbed. During its most up-to-date fiscal 12 months, which ended March 31, it saw $578.84 million in sales and a net income of $61.53 million.
As a direct-to-consumer retailer, Oddity is seeing the high margins that come together with the strategy. Within the three months that ended March 31, its gross margins were 71%, up 4 percentage points from 67% within the year-ago period. Its annual margins have slipped every year since 2020 as the corporate has made acquisitions and invested in growing the business.
In 2020, Oddity had an annual gross margin of 70%, and in 2021, it dropped 1 percentage point to 69%. In 2022, the retailer’s annual gross margin was 67%, down 2 percentage points from the year-ago period.
As of March 31, the corporate had greater than 4 million lively customers, which it defines as a singular customer account that made not less than one purchase within the preceding 12-month period.
“We bring visitors to our website, turn visitors into users by asking questions and learning about them, after which leverage the information we’ve got across the platform to convert them into paying customers,” a regulatory filing says.
Oddity has launched internationally, and sales from those markets accounted for about 26% and 27% of its net revenue in fiscal 2022 and 2021, respectively. As of Friday, Oddity has launched within the U.S., Canada, U.K., continental Europe and Australia. It noted it has plans to continue to grow that footprint.
The corporate plans to make use of proceeds from the IPO to develop and launch latest brands. It’s going to also use the funds for working capital, other general corporate purposes and potentially for acquisitions and other investments.
During an interview earlier this 12 months, the corporate’s global chief financial officer, Lindsay Drucker Mann, a former Goldman Sachs executive, told CNBC that Oddity is earning profits and growing — even against a troublesome macroeconomic environment that has proven increasingly dangerous for purely digital retailers.
On average, Oddity’s gross sales have doubled every year since 2018, the corporate has said.
In Spoiled Child’s first 12 months in the marketplace, the brand new brand brought in $48 million in gross sales, which doesn’t include returns.
In a regulatory filing, Holtzman, the corporate’s CEO and co-founder, said the corporate recruits from the Israeli Defense Forces’ best technology units. Technologists comprise over 40% of its global head count.
“As industry outsiders, we saw many shortcomings within the establishment approach. The empires that incumbents had built over many years had not evolved with the times, leading to a big lag in online adoption,” Holtzman wrote in a founder’s letter enclosed in a securities filing.
“Their underinvestment in technology left the category behind the digital curve, despite a consumer who’s inherently primed to purchase online — spending significant time on social media for beauty content and rapidly shifting dollars online in other categories.”
Beyond developing latest products and types, Oddity can be attempting to make beauty products simpler, the corporate has said.
In late April, it announced it was investing greater than $100 million to accumulate biotech startup Revela and open a U.S.-based lab.
The merger delivered to Oddity a team of scientists tasked with creating brand-new molecules, using artificial intelligence, that could be utilized in its cosmetics brands and future lines.
In 2021, Oddity acquired Voyage81, a deep tech AI-based computational imaging startup founded in 2019 by Niv Price, the previous head of research and development for one in all the Israeli Defense Forces’ elite technological units, together with Dr. Boaz Arad, Dr. Rafi Gidron and Omer Shwartz.
The technology is able to mapping and analyzing skin and hair features, detecting facial blood flows, and creating melanin and hemoglobin maps using an everyday smartphone camera.
The filing comes after a 12 months and a half of a drought within the initial public offering market, which is just starting to open up and show signs of green shoots.
Earlier this month, Mediterranean restaurant chain Cava went public, and its shares soared as much as 117% in its market debut.
“[In 2022] investors didn’t wish to go anywhere near IPOs but now that they are earning profits again, and with issuers seeing that they’ll achieve near decent valuations, I feel that is bringing the people back into the market,” said Matt Kennedy, a senior IPO market strategist for Renaissance Capital.
“The patron sector does lend itself to those periods where investors can see a business model that they understand, a business that they could be acquainted with and in addition one which is often profitable or near profitable, preferably that has growth.”