Initial response to the short seller report published on May 21st 2024

Rhea-AI Summary

ODDITY Tech (NASDAQ: ODD) has responded to a short seller report by NINGI Research, published on May 21, 2024. The company disputes the report's allegations, particularly the assertion that its Israeli brick-and-mortar business significantly contributes to its revenue and EBITDA. ODDITY clarified that this segment represents less than 5% of its Net Revenue and EBITDA in FY2023 and Q1 2024. The company also highlighted that its Israeli operations are fully audited by Ernst & Young, and any small-claims lawsuits mentioned in the report are minor, totaling less than $100,000. ODDITY emphasized its commitment to using technology to enhance customer experience and drive profitability, with the majority of its revenue coming from online sales. The company serves around 50 million users through its AI-driven platform.

Positive

• ODDITY's Israeli brick-and-mortar business accounts for less than 5% of Net Revenue and EBITDA.
• All ODDITY's Israeli subsidiaries are fully audited by Ernst & Young.
• Investment in technology drives high profitability and massive scale for ODDITY's online business.
• Strong customer satisfaction with tens of thousands of 4 and 5-star reviews on independent sites.
• Serves approximately 50 million users with its AI-driven platform.

Negative

• Short seller report by NINGI Research contains allegations about ODDITY's business practices.
• Mentions of 'hundreds of lawsuits,' although these are small-claims suits totaling less than $100,000.
• Potential investor concern over misinformation and negative publicity from the short seller report.

Insights

Financial Analyst

ODDITY’s contention against the short seller report primarily hinges on its argument that the Israeli brick-and-mortar operations are insignificant to its overall financial health. The company states that these operations account for less than 5% of both Net Revenue and EBITDA for FY2023 and Q1 2024. Given that these figures are minor, the short seller's assumption that the Israeli business is a major revenue source seems unfounded. Financially, this statement should alleviate concerns about revenue concentration risks tied to physical stores. Investors might find reassurance in ODDITY’s assertion that its financial disclosures have always accurately represented the Israeli operations. Additionally, the mention of Ernst & Young auditing adds a layer of credibility to their financial reporting. This strong rebuttal could help restore investor confidence and stabilize the stock price. The point about technology driving profitability supports ODDITY's business model, especially in an increasingly digital world.

Legal Expert

The company also addresses the issue of 'hundreds of lawsuits,' clarifying that most are small-claims suits related to its stores in Israel and collectively amount to less than $100,000. In legal terms, this is not significant, especially for a company of ODDITY's scale. The clarification that all subsidiaries are fully audited and results are consolidated as required by law is crucial. This transparency adds validity to their financial statements. Moreover, the company’s resolve to tackle consumer claims and maintain customer satisfaction is a positive sign, mitigating potential legal risks. From a legal perspective, the short seller’s allegations appear to lack substantive grounding, likely defusing some of the legal concerns investors might have.

Market Research Analyst

ODDITY emphasizes its use of technology for delivering personalized customer experiences, which is pivotal in the beauty and wellness industry. This focus on data science to drive customer loyalty and high repeat purchase rates aligns well with current market trends favoring digital-first approaches. Their claim of having tens of thousands of positive reviews indicates strong customer satisfaction, which can be a good indicator of brand strength and market position. This suggests that the company's core strategy is sound and likely to continue attracting and retaining customers. The market's shift towards online sales, especially post-pandemic, favors ODDITY's business model, potentially offering robust long-term growth prospects.

NEW YORK, May 21, 2024 (GLOBE NEWSWIRE) -- ODDITY Tech Ltd. (NASDAQ: ODD)

While ODDITY doesn’t engage with self-interested short sellers and hostile interests, the level of deep misinformation in this report cannot go unanswered.

ODDITY fundamentally rejects the short seller report. The allegations contained in the report by NINGI Research are based on demonstrable factual inaccuracies, incorrect assumptions, and unfounded and malicious speculation. The short seller report was published without any involvement by ODDITY.

1. The main allegation in the report that the Israeli brick-and-mortar business is a significant portion of ODDITY’s revenue and EBITDA is a complete falsehood. ODDITY’s parent company is an Israeli entity, a fact that could have led to the fundamental misunderstanding in the report regarding the source of our group revenue. The brick-and-mortar business in Israel (43 retail stores and 6 beauty schools) represents an immaterial part of our business, accounting for less than 5% of ODDITY’s Net Revenue and less than 5% of ODDITY’s EBITDA in both FY2023 and Q1 2024. The Israeli business operations have always been reflected in our financial disclosures. All of ODDITY’s revenue outside of Israel is exclusively from online sales.
   
   
2. All of ODDITY’s Israeli subsidiaries are fully audited by Ernst & Young, our auditors on record, and the financial statements are filed with the Israeli authorities. Their results are consolidated with the group, as required, hence there are no standalone reports.
   
   
3. The overwhelming majority of the “hundreds of lawsuits” mentioned in the report are small-claims suits related to our stores’ business in Israel. In the aggregate these total less than $100,000.
   
   
4. ODDITY firmly stands behind its use of technology to deliver a personalized beauty experience to consumers to drive conversion, customer loyalty, repeat purchase rates, and business results. Any other claim is purely false. Our investment in technology is the main driver behind the company’s massive scale and high profitability as an online business.
   
   
5. ODDITY firmly stands behind its strong and positive customer experience, as evident by the tens of thousands of 4 and 5 star reviews on many independent review websites, such as Trustpilot.com, Google, etc. As ODDITY stated on its earnings call – it is important to understand that the consumer claims represent a fraction of a percent of our sale volume. ODDITY will always continue to address incidents of dissatisfaction and keep its customers satisfied and loyal.
   

Short sellers and competitors will not deter us from continuing to deliver the best online customer experience and to take significant market share of the beauty industry.

About ODDITY:

ODDITY is a consumer tech company that builds and scales digital-first brands to disrupt the offline-dominated beauty and wellness industries. The company serves approximately 50 million users with its AI-driven online platform, deploying data science to identify consumer needs, and developing solutions in the form of beauty and wellness products. ODDITY owns IL MAKIAGE and SpoiledChild. The company operates with business headquarters in New York City, an R&D center in Tel Aviv, Israel, and a biotechnology lab in Boston.

Contacts:

Press:
Michael Braun
michaelb@oddity.com

Investor:
investors@oddity.com

 

FAQ

What is the main allegation in the short seller report against ODDITY?

The report alleges that the Israeli brick-and-mortar business contributes significantly to ODDITY's revenue and EBITDA, which ODDITY refutes.

How much of ODDITY's revenue and EBITDA comes from its Israeli brick-and-mortar business?

Less than 5% of ODDITY's Net Revenue and EBITDA in FY2023 and Q1 2024 come from its Israeli brick-and-mortar business.

Are ODDITY's Israeli operations audited?

Yes, ODDITY's Israeli subsidiaries are fully audited by Ernst & Young.

What is the total value of the small-claims suits mentioned in the short seller report?

The small-claims suits total less than $100,000.

How significant is ODDITY's online sales business?

All of ODDITY's revenue outside of Israel comes exclusively from online sales.

What drives ODDITY's profitability?

ODDITY's investment in technology to deliver a personalized beauty experience is a main driver behind its profitability.

How many users does ODDITY serve?

ODDITY serves approximately 50 million users with its AI-driven platform.

What brands does ODDITY own?

ODDITY owns IL MAKIAGE and SpoiledChild.