Good morning. And welcome to ODDITY’s Fourth Quarter and Full Year 2023 Earnings Conference Call. Today’s call is being recorded and we have allocated time for prepared remarks and Q&A. Please note the prepared remarks for this morning’s call have been posted to ODDITY’s Investor Relations website for reference. At this time, I’d like to turn the conference over to Maria Lycouris, Investor Relations for ODDITY. Thank you. You may begin.

Thank you, Operator. I’m joined by Oran Holtzman, ODDITY Co-Founder and CEO; Dr. Evan Zhao, ODDITY’s Chief Science Officer; and Lindsay Drucker Mann, ODDITY’s Global CFO. As a reminder, management’s remarks on this call that do not concern past events are forward-looking statements. These may include predictions, expectations or estimates, including statements about ODDITY’s business strategy, market opportunity, future financial performance and potential long-term success. Forward-looking statements involve risks and uncertainties and actual results could differ materially due to a variety of factors. These factors are described under forward-looking statements in our earnings press release issued yesterday and in our Annual Report on Form 20-F filed with the Securities and Exchange Commission on March 5, 2024. We do not undertake any obligation to update forward-looking statements which speak only as of today. Finally, during this call we will discuss certain non-GAAP financial measures, which we believe are useful, supplemental measures for understanding the business. Additional information about these non-GAAP financial measures, including their definitions, are included in our earnings press release, which we issued yesterday. I will now hand the call over to Oran.

Thanks, Operator, and thanks everyone for joining us today. Our fourth quarter was another record-breaking quarter to cap off a record year. We continue to deliver very strong financial results that are ahead of what we promised. In 2023 we reached two important milestones; one, surpassing $500 million of revenue; and two, generating over $100 million of adjusted EBITDA. We did it via our online platform that was launched only five years ago in a category that everyone told me doesn’t and cannot work online. The ODDITY platform has today over 50 million users and over 2 billion data points that fuel our business and are responsible for the strong financial results. Our financial results for 2023 were outstanding. We grew net revenue 57% to $509 million and adjusted EBITDA 173% to $107 million, achieving 21% adjusted EBITDA margins. Once again beating our guidance across revenue, profit and earnings per share. Not just for the full year, but every single quarter. We basically grew way more than I wanted us to grow. In my view, there is no good reason to grow 50% at our scale, but due to both SpoiledChild’s ability to blitzscale and IL MAKIAGE’s stronger than expected repeat rate, we landed at a 57% growth rate in 2023 full year. Drilling down to the brands. IL MAKIAGE delivered a very strong year in both color and skin. Skin grew to around 20% of IL MAKIAGE’s sales in 2023, which is very high rate of category expansion for any beauty brand. It is a testament to our data-driven platform, to the strength of the brand, its enormous potential reach and the quality of its products. IL MAKIAGE is well on its way to achieving my target of $1 billion of sales within the next five years. SpoiledChild scaled…

Thanks, Oran. I’m Dr. Evan Zhao, Chief Science Officer of ODDITY and I lead the team at ODDITY LABS. I joined ODDITY with the acquisition of Revela, which is a biotech that my co-founders and I started while doing research at Harvard. At the time, we were pioneering digital biology for therapeutic development at the Wyss Institute. We saw what we thought was a once in a generation opportunity, to close a huge technology gap, really a gaping deficiency of science in the beauty and wellness industry. We are living in the golden age of science, where new technology has allowed pharma and biotech to innovate at an unprecedented pace. Yet, the beauty and wellness industry is still living in the dark ages. No molecule innovation, totally commoditized, just old ingredients repackaged and not addressing consumer problems. It doesn’t make sense given the size of the beauty industry, a huge TAM with zero real science. So this is the massive opportunity we are running at with LABS. Unleashing the full power of technology and digital biology to discover ground-breaking ingredients that really perform, that really solve consumer pain points and can power the next generation of category killers. This is what consumers want. Based on data we see in ODDITY’s massive user base, the consumer is way smarter than before, cares less about brands and more about efficacy. But we are still in early days, the shift will be enormous over the next decade. Few words about the field so it will be easier to understand what we do at ODDITY LABS. Digital biology is the marriage of breakthrough technologies, including AI and synthetic biology. It is widely used across pharma today, but not in our industry. And these technologies allow us to do three things there were never before…

Thanks, Evan. Let’s turn to our 2023 results which I will refer to on an adjusted basis. You can find the full reconciliation to GAAP in our press release. ODDITY delivered a record-breaking year on all accounts. We grew net revenue by 57% to $509 million. This strength was driven by both IL MAKIAGE and SpoiledChild across a wide range of product categories. We grew net revenue 44% in the fourth quarter driven similarly by growth across products and brands. For the full year, revenue growth was driven mostly by increased orders, although we continue to see improvements in average order value driven by order size and product mix. More than half of ODDITY full year revenue was driven by repeat sales, which is remarkable when considering our scale and the speed at which we’re growing. Our revenue mix continues to evolve with the addition of new brands, categories and products. In 2023, new categories like skin and hair increased materially as a percentage of our overall revenue mix and we continued to see excellent growth and have enormous runway in color, even as we push to scale new categories at a faster pace. Expansion into new products and categories makes us even stronger. It allows us to understand our users better. We now know not just their makeup routines, but also we have a holistic skin, hair, makeup and wellness 360-degree view. We are gaining share of user wallets and doing it for very attractive incremental costs. This allows our financial model to deliver the kind of outsized returns you see in other land-and-expand models like software. In addition, we are bringing new users and converting new customers, who are now finding the products they want but couldn’t before get them from our brands. It is a flywheel that…

Thank you. [Operator Instructions] Thank you. Our first question comes from the line of Lorraine Hutchinson with Bank of America. Please proceed with your question.

Thank you. Good morning, everyone. I wanted to ask about some of the newness that you were planning to roll out this year. I think you had talked about 10 new molecules or products. How many of those are out there already and is there any initial commentary on how those are performing?

Hi. Thanks for the question. So I think that you’re referring to LABS. In general, just for better understanding, each brand, aside from LAB, each brand has its own NPD department and they work constantly on developing new products and new categories for the existing brands. So they have way more than 10 products launching this year. Aside from that, we have what we have built in LABS, which are new molecules that we are starting to call. LABS and -- in the development-wise on track and will be ready for this year. It doesn’t mean we launch them this year. We always have engines we keep ready to be launched based on revenue growth needs. If we see that we need more revenue power, then we launch them. This was always my approach with products, with categories and with other growth engines. Two or three products are going to be launched shortly. And again, we launch them, we test, we see their satisfaction and then we go back and decide at what scale we want to see from this product in the quarter or for the rest of the year. So, yes, all the 10 products will be ready to be launched. If we launch them, it’s up to us.

Okay and thank you. Lindsay, I wanted to clarify a point that you made, talking about entering January with incredible strength. I think you said you doubled the 4Q pace. So can you square that commentary with the revenue guidance, which implies slower growth than that? I guess, how much did you pull back on acquisition spending, and yeah, any other color you could give on the rest of the quarter after that strong start to January?

Sure. Happy too. So I think one important differentiator between our model and many of the sort of legacy consumer models or beauty models that you’re familiar with is this sort of requirement as having stores or being brick-and-mortar to have a constant flow of inventory onto the shelves, which is really matched up to where customer traffic and demand is. For us, because we’re direct-to-consumer and because we have full control over our pace of acquisition, we set that pace, we pulse that spend. And so what you’ve seen us do in the past is come out really swinging in the first quarter and then significantly dialing down and really shutting off all new user acquisition into the back half of the year and that’s why our first half has been so front loaded relative to our second half. It’s not because beauty is big in the first quarter. In fact, the opposite if you look at all of our competitors, it’s the opposite, 4Q is the biggest. And so for us to, what I was referring to is in the third quarter we delivered $97 million of, sorry, in the fourth quarter, $97 million of net revenue and what our 1Q guidance is, we’re significantly, we basically on a dime turned the business back on, which is not easy to do, and again, something that we have particular strength. And so that we really, really ramped up and we saw demand explode, which was amazing. We had been preparing for it and expected it, but it’s always fun to watch the business really rip. And we were so pleased with, Jan and Feb, and what we’ve seen in early March, because of all the repeat in our business, we have very high visibility into achieving our full year objective now. It’s basically, 2024 is basically in the bag, which is great. And so I wouldn’t -- I’m not -- yeah, I think, you may be referring to the year-over-year growth rates, which is not the right way to think about it, since we’re really managing this in terms of demand pulse, so we increased 44% on a year-over-year basis for Q4. It’s a much smaller quarter for us that’s almost entirely repeat sales for us in Q4 and now we really turned the business on, and we’re managing to try to get much closer to that kind of, our 20% long-term target for 2024, although we’re slightly ahead of that at 2022 to 2024, that’s the type of growth rate we think is appropriate for the business to sustain and we plan to deliver in that range every quarter of this year.

I would just add one more thing that, again, in Q1, the beginning of every Q1, we start again opening user acquisition and despite the high scale that we had in the past two months, we have seen an improvement in our marketing efficiency KPIs in terms of ROAS in Q1 of 2024 compared to 2023. So, though we, like, we pushed and we started again, and to acquire new users, the results are very strong and we don’t do it just because we need, we do it when the market allows and we’ve seen massive demand out.

Thank you.

Our next question comes from the line of Scott Schoenhaus with KeyBanc Capital Markets. Please proceed with your question.

Hi, team. Thanks for taking my question. I wanted to focus on ODDITY LABS and the expansion of team and the expansion of scope in the projects that you mentioned that was in the release. Are these expansions more related to products within current brands, IL MAKIAGE, SpoiledChild? Are they for the new Brand 3 launch related to acute skin and Brand 4? Just kind of understanding where these investments, accelerated investments are going to? Thanks.

Hi. So it’s important to understand for IL MAKIAGE and SpoiledChild, a lot of the work that is being done through LABS now is for Brand 3 [ph], which is a medical skin and body, which we are planning to launch many products from LABS for Brand 3. And in overall, LABS, is built in full power, and as a reminder, like what we do there is exactly, as Evan mentioned, [Technical Difficulty] and I am absolutely number one focus now. I’m literally trying to bust today after we finish the call. In terms of investment, we say investment is about people and I want to double the PhDs, the number of PhDs that we have done this year. We are now around 30 people and the target is to be more than 60 people by end of the year. We are putting a lot of investment in LABS today, both people in the way that in protocol, in building the LAB to make sure that we have enough, that the pipeline will be efficient for both end users. And we will have products ready this year to be launched and [Technical Difficulty] more case impacts, so development-wise everything has to be built. And by the way, like any other growth engine that we build, it doesn’t mean that we launch them as we did before. We always keep engines ready to be launched based on where they are needed. So if we see that I need more power, I already have a few products out there ready to be launched within IL MAKIAGE and SpoiledChild both coming from the LAB, but it’s going to be our decision. And [Technical Difficulty] Every product that we are working on takes time. It’s a long and deep process, and it takes around two years to develop a product in this LAB from idea to molecule discovery, all the way through incorporation into the high-efficiency product that exists in the market. We are using the best molecule discovery methods for bioengineering, synthetic biology, computational chemistry and artificial intelligence, and it starts all the way from the idea, from where we see in the user base, we see a segment that is craving for something better. Then we go back to LAB, we ask them if something can be done to create something better in terms of efficacy and then we start developing it and do that and use the power of LABS. So, again, multiple projects, more than 20 projects that LABS are now working on and not all of them will be successful, but we don’t need all of them, because each and every one of them can be a category killer.

Thanks, Oren. And just a follow-up there. Can you remind us, on average, how long it takes from the initial idea and molecule discovery through any kind of regulatory process and then full commercialization on the molecule side? Thanks.

Sure. So it’s around two years and I can give a bit more background, so maybe it’s going to help you understand what we do in LABS for the future. It starts by developing advanced biological models for specific use of pain points, replicating the underlying cause in a cell-based assay and evaluating specific physiological cell response. We then use a computational screening to search for molecules that will drive the desired cell response. We use deep learning models to predict which molecules have the highest chances of working with our target and we then perform a series of in-vehicle cell enzyme-based assays to provide that computational predictive molecule and then we go to safety. And then all identified cell molecules are evaluated in human trials to ensure our findings in LAB transfer to results on the people and outperform all existing authorities in the market and we have -- that’s the way that we do it. It sometimes takes 18 months. It can take two and a half years. But in average, it’s two years from the moment that we task -- we give them the task and to -- and go-to-market.

Thank you.

Our next question comes from the line of Youssef Squali with Truist Securities. Please proceed with your question.

Great. Thank you very much. Lindsay, can you help us think through your market expense cadence in 2024, overall and across both brands? And then Oren, SpoiledChild at $110 million in its first calendar year is really impressive and I believe it’s actually tracking ahead of where IL MAKIAGE was back in 2019. It was launched in 2018, I think. So do you think that kind of ramp for SpoiledChild in particular can continue at a kind of a faster rate than what you’ve seen with IL MAKIAGE, considering the much more developed platform now that you’re running? Thank you both.

Okay. I’ll start with the marketing question. So we have market -- we started the year with a significant ramp up in our acquisition spend -- our user acquisition spend versus the fourth quarter and generated very, very effective returns on that marketing spend. And as Oren said, our ROAS in the first quarter of 2024 improved versus the first quarter of 2023. In general, for the year, we expect marketing will grow generally in line with sales. And in terms of pacing, what I would say is, we typically have more repeat in the back of the year than in the early part of the year, and as a result, that is sort of how the cadence of marketing spend across the year flows. I won’t comment by brand, but very big expectations for both brands this year. I expect a very strong performance, driven in part by the excellent execution on marketing, among other things.

Sure. I will touch the cadence and then we’ll connect you to SpoiledChild. In Q1 2023, I did a mistake and grew too much. We grew 83%, which led to an insane growth of 57% for the full year and we decided not to do it again, although I strongly believe we could. The goal for the long-term is, again, as we mentioned before, 20% plus and 20% EBITDA margin and by pacing the growth, I’m ensuring it will happen and will continue to be in way. For Q1, we built the model and managed the growth to support 22% to 24% year-over-year, and I will say it again, pacing growth is my decision. But even when we are pacing the growth to 20% plus, we are going way more than my legacy competitors, which are in single digits and we are still securing the business early in the year, age one, it’s still the most important period for us. In 2023, 60% of our revenue was captured in age one, and in 2024, we expect age one to represent a very similar number to 60%. And with -- but we don’t need to increase Q1 or the first half of the percentage of total in a year to do so. And as for SpoiledChild, I blitzscale SpoiledChild in 2023 to see what the brand potential was. It’s a new brand, you don’t know, like, what are the limits and we wanted to get more data. So I allowed the reason for the blitzscaling from all the 300% growth, it was purely my decision. So I let them grow. And no plan -- no need to blitzscale again in 2024. So if you ask about the comparison between IL MAKIAGE and SpoiledChild, yes, it grew faster than IL MAKIAGE, because I allowed it to grow faster. Back then in IL MAKIAGE, early days, I limited their growth and -- but that -- for that reason, it was very consistent for $25 million revenue to $400 million, around $400 million of revenue this year. And the plan is to continue to do the same with SpoiledChild. So after blitzscaling now, we go back to a normal growth rate with a brand to make sure that everything is supporting their growth level.

Okay. Thank you both.

Our next question comes from the line of Andrew Boone with JMP Securities. Please proceed with your question.

Good morning. Thanks so much for taking my questions. International grew 13% year-over-year in 2023. This is below IL MAKIAGE’s total growth of 33%. Is there anything to call out there or is that one example of you guys holding back on growth initiatives? And then, Lindsay, stepping back, you guys have beaten the guidance by about $10 million each quarter. Is there something unique in 2023 or is there a way that we should be thinking about the conservatism that you’re setting out in the guide and how we set expectations for 2024? Thanks so much.

Sure. I will start with international and then, Lindsay, you can refer to the guidance. We see a massive opportunity in international, as I said before, for other competitors. It is two-thirds of their business. But we have not finished growing in North America yet, either. We are building out very strong localized experience for each market we enter, which gives us strong and profitable performance from day one when we launch new markets and this is a big level for us and we want to continue to use it. Again, it’s my decision on how quickly we want to pace growth and prioritize it. Due to the fact that we are a fully direct consumer, I can decide at any given moment where I want to spend the next dollar, meaning under which brand, in which brand -- and under which brand, against which category, product and geography. All is being measured daily and we allocate based on that. We have more than 10, I want to say more than 10 countries that are already tested that we know as a fact that we have very strong results, very strong unit economics, very strong scale and we pause to ensure that we have a significant runway ahead and that’s it. When we need those markets, we’re going to open them.

Great. I’ll continue on the question about our guidance. You’re right, as a public company and every time we’ve spoken to you, we’ve over performed on every metric, achieved or mostly exceeded on every single metric that we committed to delivering. This is one of the favorite things about when I first met Oran, I’ve never missed a budget and I never planned to, and obviously, as a CFO and for us and our team, that’s really important in terms of building confidence with our investors that we do what we say we’re going to do and that’s 100% how we think about the business. We set out very, very big goals internally and we ensure everything possible that we achieve them. And then we also make sure that we’re delivering to our investors a framework that we know we can make good on and that’s why we have so much conviction in our guidance for 2024 and our long-term guidance, because on an underlying basis, if we wanted to, we could be delivering faster topline growth. We can see it. I mean, it’s very obvious just based on how the first quarter has come together that we could do nicely ahead of the numbers that we’re laying out for you today. We could also be a lot more profitable, but that’s not the right way for us to approach if we want many, many years of steady, durable compounding. As it relates to 2023, we did over-deliver by a pretty wide margin. Some of that is because we ramped so much in the first quarter and the first half of last year. We had a sort of a big wave of first orders that came in and we got a big wave of repeat in the back half of the year, and we always try to take a conservative approach to modeling, but we were overly conservative in modeling repeat, and so ultimately that, and repeat is quite profitable, so we ended up delivering ahead of plan. Our objective for 2024 and our second year as a public company, is to try to land the plane much more closely to our targets. And so, as you guys think about your models, number one, from a revenue perspective, we plan to land the plane much more in line with the guidance that we set out. In addition, every incremental dollar of revenue upside, we plan to reinvest in the business as I talked about in my prepared remarks. We think that’s the amazing use of our capital for future value creation.

Thank you.

Our next question comes from the line of Dara Mohsenian with Morgan Stanley. Please proceed with your question.

Hey, guys. Good morning. So we spent a lot of time on ODDITY LABS, but obviously you guys are very excited about it. Can you just give us an update on how much of a revenue driver you expect that to be along with vision technology in 2024 and just what’s embedded in the revenue guidance? And then as you think about the commercial development of the business over time, looking out beyond 2024, how important each of those areas might be conceptually? I know you probably won’t want to give us exact numbers, but how do you think about it looking out over the next few years, each of those areas?

Yeah. I can start and maybe Evan or Lindsey, you can join me. Look, we can deliver the results or the guidance for this year without any product from ODDITY LABS. And we are -- the teams are ready, the product is great, the market, everything’s ready to deliver everything without LABS. Having said that, we will go to test LABS, products from LABS, and it means that probably some of the revenue will come from [Technical Difficulty]

Yeah. Hi. I just wanted to reemphasize one point, which is all of the projects that LABS is working on, we think are very high impact. We have an amazing commercial team that works with the LAB crew to decide what projects we want to work on and we really only target the markets we think could be huge revenue drivers. So think about things that could replace entire sections of the business and so it gives you an idea of what we expect the impact we’re working on to be.

Great. And then can you touch on vision technology a bit? Sorry, my phone cut out for a second, but just cover how important that might be as you look out over the next few years?

Great. I’ll take this one, because I think, Oran’s having trouble with his line. So vision technology is the capability that we established with the acquisition of Voyage81 in 2021. There are so many applications for this technology. We really have the team prioritizing two objectives. The first is to make our existing matching capabilities stronger and the second is to build really new diagnostic tools. As it relates to making our existing matching capabilities stronger, right now, for example, in our PowerMatch engine, we’re making product recommendations based on data alone, what the user tells us about themselves. But of course, there’s information that we can glean above and beyond that. Sometimes things that they don’t know about using vision. And so incorporating vision into PowerMatch was something that we really have been working on from the beginning. Last year, we had some more implementation. This year, we’re going to take it even further. We’re still in pretty early days as far as how much vision we can use for -- to do better matching, but we’re already seeing the benefits for sure. And even though we’ve got 90% accuracy already in shade matching, every incremental 50 basis points, 100 basis points effectively flows through for us to the bottomline. So that’s already in process. You’re already seeing it in our products today. You’re already seeing it in our results for existing brands, but we expect more of that in the future. The next really big and transformational innovation for vision is how we implement it in Brand 3. And as Oran talked about it, with Brand 3, we’re really creating a first-of-its-kind mobile platform that will number one, support full diagnostics. So what are your skin issues and concerns, using machine models, data and AI and computer vision to do it. Number two, what’s the right treatment protocol, so what do you use to fix the issue? And again, using our machine learning models for those product recommendations. And then finally, coaching and upkeep, which will support compliance. So oftentimes, for example, with an issue like acne, your problem might get worse before it gets better and so that coaching component is really important for churn, and vision is, of course, an integral part in helping people understand how they’re progressing and their improvement. So those are three applications for Brand 3 and vision that we think are truly groundbreaking, and you’ll hear us talk a lot more about that when we launch Brand 3 and have it on the ground running.

Guys, can you hear me?

Yes.

Yes. Cool. I would just add to that that we have around 30 people on the computer vision side and around 20 out of the 30 are working on Brand 3 for diagnosis and for the mobile application that we are building there, and the rest of the people are working for Brand 1, Brand 2, which is in my case, in SpoiledChild, and we already see results, better matching and better unit economics just based on the addition that we had with the computer vision.

Great. And then if I can slip one more in, you talked about managing the pace of revenue growth to a bit more manageable level this upcoming year versus 2023 when you’re obviously a very outsized growth. Can you just talk about sort of how you think about that conceptually in terms of what level of growth is healthy for the business from a topline standpoint and how that impacts the long-term revenue opportunity of the company and how you think about that relative to profitability?

Yeah. So the way that we measure everything is based on contribution, meaning EBITDA level based on the brand and we don’t spend media dollars against products that we don’t see. Very strong results in terms of 12 months and 24 months direct contribution margin. So every dollar that you spend is more or less equal, otherwise you will spend against something else. In terms of visibility and managing the growth, again, last year was something unique, was the first year of full scale or full scale that I allowed for SpoiledChild. And again, it’s something that we didn’t have because we didn’t know the repeat numbers that we were going to see from this brand and the results were very, very strong. That’s the main reason for the additional dollars that we had against our guidance and we hope that we are modeling this now better. Again, it’s a good problem to have and -- but the repeat rates are the main driver for the -- for our business and it’s less about new acquisition, because in Q4, even in Q3 last year, we almost, like, we cut and spent way less than what we are going to spend. So it’s purely about repeat.

Great. Thank you.

Thank you. Our next question comes from the line of Lauren Lieberman with Barclays. Please proceed with your question.

Great. Thanks. Hey. Good morning. So I know in the prepared remarks and through the conversation since, you talked a lot about where you’re reinvesting and proactive reinvestment and then the incremental dollar goes back into reinvesting for future growth. But we have gotten asked by people prior to the call just about sort of cost of growth and thinking back, Lindsay, to your mention earlier of the high return model of a software business. So if we look out over, let’s call it, the next five years, maybe you guys tell me what the right time frame is. When should we think about that sort of high incremental returns business model being more apparent externally? Again, I understand the notion of investing for future growth, but just putting together the high return model and that being completely visible externally versus the continuing to invest for future growth.

Yeah. I could just say that, look, we -- even now for this year, if you ask me a few months back, I would say that, I want to guide for 20% EBITDA margin, but we thought that the business is very more profitable and there is a limit of how much we can invest in future initiatives this year, and therefore, we got it for around 22%. So the business is already, even with all the investments that we are doing, is already way more profitable and -- but again, if you ask me what I want to do, I want to stick with this number. I want to continue to invest in the future. There is so much to be done. Again, there are two massive transformations in the industry that we see. One of them is online, which is technology. That’s all we need to continue to invest in our tech team to ensure that we are way ahead in terms of our competitors. And the second is ODDITY LAB. I believe that the opportunity there is massive. Adding to that Brand 3, Brand 4, every new brand that we launch, the first year or two, we need to invest. And therefore, as we continue to invest around tech, as we continue to invest around ODDITY LAB, as we continue to build more brands, this is the future of the company and this is why I’m still here. This is like, we are here to build something. Otherwise, I would sell the business. So the plan is 100% to continue to invest and there is no reason in my view to deliver more than 20%. The business is already generating so much cash. We have zero debt. And I don’t see a reason to deliver 30% of the margin.

Okay. Great.

Let me just add, I’ll just add one thing, Lauren, to that.

Yeah. Go ahead.

So as you think about, again, the returns on our business, one important differentiator versus any big duty or consumer conglomerate is our ability to build brands organically. And as I mentioned, we launched Spoiled with $20 million of upfront investment. Spoiled is over $100 million of net revenue. Today for us, if you were to apply a beauty M&A multiple of 5 times to 10 times revenue, you’d have to pay $500 million to $1 billion to acquire that. And so, without opining specifically on Spoiled, but just to kind of measure the return on capital for us, building brands organically versus a big legacy conglomerate, you can see there’s just this sort of step function change on the type of ROI you can deliver with our model as a land-and-expand type model, as we’re gaining a new share of existing wallets at very, very high incremental margins. So sort of at maturity, we believe our model lends itself to higher return profile versus the legacy model. That being said, we are a fraction of market share of a massive global market and there are so many ways for us to grow. I -- we could be growing like this for many, many, many years before we’re even close to hitting a wall. So it’s really hard to say at any point in the forecast horizon, you’re going to see us actually deliver those types of returns, because we -- the higher margin profile specifically, because we have so many ways to grow that just -- I don’t see anywhere in the forecast horizon where we’re going to actually be delivering that because we have so many ways to invest for growth.

I just want to add…

Okay.

… one more thing…

Yeah.

… regarding margins. When we launched SpoiledChild, although it was an amazing success, the first year, 2022, it had single-digit EBITDA margin and second year was already double-digit, but it was less than IL MAKIAGE. Now they’re running very strong EBITDA margin, but again, it takes time. So when we launch Band 3, for example, like it will be -- it will cost us in terms of margins, and therefore, every brand that we launch, it damages short-term our margins, but long-term it supports high growth and with very healthy margin, otherwise we will not spend against it.

Okay. That’s really helpful. One more quick thing on Brand 3, on the acne. I think at one point you talked about having sort of a pharmacy element to this and now you’re saying medical grade. So I just wanted to check in on that. Is there still sort of an online or a pharmacy function that’s going to be part of this or is it medical grade, something different?

Yeah. Yeah, it’s going to be both OTC and Rx, and we are not going to start with our own pharmacy, we’ll start with third-party, just because of the regulation, because we want to see what works and what doesn’t before we invest so much against it, but it’s going to be both.

Okay. And then when can we expect to hear more about Brand 4, just that we’re beginning of March 2024? Just curious how to think about when you’ll give us an update on what category or anything more specific about what Brand 4 will look like?

First I need to tell my team, my team don’t know yet. But, again, there is a reason why we are working on those things quietly and three brands now, Brand 4 is in the making, both my sister and I are involved, there is already a team there and once we have something to share, we will.

Okay. Sounds good. Thank you.

Thank you. There are no further questions at this time. I would like to turn the floor back over to Oran Holtzman for closing comments.

Thank you very much guys for joining. We’ll talk with you when we report the first quarter. Have a great day. Bye-bye.

This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.