Il Makiage creator Oddity has filed for an IPO

Beauty and tech company Oddity, which operates brands Il Makiage and Spoiled Child, filed for its IPO on Friday as the once-frozen IPO market warms up.

The Israel-based company plans to trade on the Nasdaq under the ticker symbol ODD. The company did not immediately disclose what the price of the offering would be in the regulatory filings and declined to comment when asked when the numbers would be released.

“The number of shares to be offered and the price range for the planned offering have not yet been determined. The offering is subject to market conditions and there can be no guarantee as to whether or when the offering may be completed, the actual size or terms of the offering,” Oddity said in a press release.

Launched in 2018 by siblings Oran Holtzman and Shiran Holtzman-Erel, Oddity uses data and AI to build brands and tailor product recommendations for customers.

The company wants to revolutionize a market long dominated by traditional retailers by replacing the in-store shopping experience with product recommendations powered by AI and data. At the heart of its business model is its proprietary technology — including technology developed by a former Israeli defense official — and the billions of data points it’s collected from its millions of users.

For the three months ended March 31, the company had revenue of $165.65 million, compared to $90.41 million for the same period last year. The company reported net income of $19.59 million, or $5.34 per share, compared to $3.01 million, or 82 cents per share, a year ago.

Figures released in the regulatory filings show that the direct seller has been profitable on an annual basis since at least 2020.

In fiscal 2022, Oddity had sales of $324.52 million and net income of $21.73 million, or $5.94 per share. The year before, the retailer had sales of $222.56 million and net income of $13.92 million, or $4.01 per share.

In 2020, the company had revenues of $110.64 million and net income of $11.71 million, or $3.45 per share.

In comparison: when ELEVEN beauty The company filed for an IPO in August 2016, but its earnings and sales lagged behind Oddity. ELF, a multi-brand beauty company, reported revenue of $144.94 million and a net loss of $2.88 million in fiscal 2014. The following year, the company had sales of $191.41 million and net income of $4.36 million.

In fiscal 2016, the company had revenue of $229.57 million and net income of $5.31 million.

Since the IPO, ELF’s sales and profits have increased. For the fiscal year ended March 31, the company had revenues of $578.84 million and net income of $61.53 million.

As a direct-to-consumer retailer, Oddity recognizes the high margins that come with this strategy. For the three months ended March 31, gross margins were 71%, up 4 percentage points from 67% in the prior-year period. Its annual margins have fallen every year since 2020 as the company has made acquisitions and invested in the company’s growth.

In 2020, Oddity had an annual gross margin of 70%, and in 2021 it fell 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 single customer account that has made at least one purchase in the prior 12 months.

“We bring visitors to our website, convert visitors into users by asking questions and learning more about them, and then use the data we have across the platform to convert them into paying customers,” reads a regulatory filing .

Oddity launched internationally, and sales in those markets accounted for approximately 26% and 27% of its net sales in fiscal 2022 and 2021, respectively. As of Friday, Oddity is available in the US, Canada, UK, continental Europe and Australia. It was indicated that there are plans to further expand this presence.

The company plans to use the proceeds from the IPO to develop and launch new brands. It will also use the funds for working capital, other general corporate purposes and potentially for acquisitions and other investments.

In an interview earlier this year, the company’s global chief financial officer, Lindsay Drucker Mann, a former Goldman Sachs executive, told CNBC that Oddity is making money and growing — even in a tough macro environment that is proving to be increasing for digital-only retailers has proven risky.

On average, Oddity’s gross sales have doubled every year since 2018, the company said.

In Spoiled Child’s first year on the market, the new brand grossed $48 million, excluding returns.

In a regulatory filing, Holtzman, the company’s CEO and co-founder, said the company recruits from the Israel Defense Forces’ best technology units. Over 40% of the global workforce are technologists.

“As industry outsiders, we saw many flaws in the status quo approach. The empires that the incumbents had built over decades hadn’t evolved with the times, resulting in a significant delay in bringing them online,” Holtzman wrote in a founder’s letter accompanying a security filing.

“Their underinvestment in technology has left the category behind the digital curve, despite the inherent predisposition of a consumer to shop online – spending a lot of time on social media for beauty content and quickly moving their money online to other categories.”

In addition to developing new products and brands, Oddity is also trying to make beauty products more effective, the company said.

In late April, the company announced that it would invest more than $100 million to acquire biotech startup Revela and open a laboratory in the United States.

The merger gave Oddity a team of scientists tasked with using artificial intelligence to develop brand new molecules to use in its cosmetics brands and future lines.

In 2021, Oddity acquired Voyage81, an AI-based deep-tech computational imaging startup founded in 2019 by Niv Price, the former head of research and development of one of the Israel Defense Forces’ elite technological units, along with Dr. Boaz Arad, Dr. Rafi Gidron and Omer Shwartz.

The technology is able to map and analyze skin and hair features, detect facial blood flow, and create melanin and hemoglobin maps using a standard smartphone camera.

The filing comes after a year and a half of drought in the IPO market, which is just beginning to open up and show signs of recovery.

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 want to go anywhere near IPOs, but now that they’re making money again and issuers are seeing they can get anywhere near decent valuations, I think that’s bringing people back into the market,” said Matt Kennedy, A Senior IPO Market Strategist for Renaissance Capital.

“The consumer sector lends itself to these phases where investors can see a business model they understand, a business they may be familiar with, and also one that is typically profitable or near profitable, preferably with growth.”

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