Oddity Tech’s stock surged more than 35% on the first day of trading, closing at $47.53 after closing at $35 per share. Oddity Tech Global CFO Lindsay Drucker Mann tells Yahoo Finance Live’s Julie Hyman why the company sees 50% of its beauty sales coming online in the near future, and how the company uses AI and other technologies He talked about how he is using ‘to take advantage of the model that has been liberated online’. first time. “
video transcript
Julie Hyman: Oddity is probably best known for many brands such as Il Makiage and Spoiled Child. We are also using AI to discover new brands and new opportunities.
Lindsay, thank you so much for joining us–
Lindsay Drucker Mann: Thank you for inviting me.
Julie Hyman: –to talk about this. It has been a long and exciting day.
Lindsay Drucker Mann: Very exciting.
Julie Hyman: I’m fascinated by your journey here, so I’d like to start with a little personal question. You were at Goldman Sachs for many years. You were involved in the capital markets business there. On the other hand, we support many companies’ IPOs and fundraising.
Lindsay Drucker Mann: yes.
What convinced you that this was your chance to jump?
Lindsay Drucker Mann: I wasn’t planning on quitting my job, so that’s a great question. I was at the height of a career that I really loved. I’ve always loved stocks, and maybe, like you, I love markets. I loved where I work. But when I met our co-founder and CEO, Oran Holzmann, and saw the financials of his business, I knew right away that I had never seen anything like this before.
And this, you know, was in the midst of a lot of other direct-to-consumer companies that were struggling and already turning around, and had a common theme of unit economics just not working. Maybe the Internet is much smaller than we think. And real saturation is coming.
But when I saw something built in such a short time with the little money his team had raised for it, I had never seen anything scale so quickly or profitably. And after spending some more time, I was amazed at how hard and fast the team was running. In short, the global beauty and wellness market is huge. I always thought it was a very high level place. That means you have a great business that consistently trades at huge multiples, is truly loved by investors, and dominates its category.
But when I found something with a technology engine built into it, it created a mess and I was really, really amazed at how fast the team ran towards those opportunities. It was a difficult decision, but I had no intention of quitting. Ultimately, the decision was easy.
Julie Hyman: yes. So when I was looking at the company’s financials, I should mention that it’s profitable, which is obviously a bit unusual for an IPO. And the profit margins are roughly on par with the big, more mature beauty and wellness brands. Tell us a little bit about your business model. Because I know you invest heavily in technology, especially in new product development.
Lindsay Drucker Mann: yes. So let’s unleash one of what we believe to be one of the most engaging and profitable TAMs on the planet: this huge global beauty and wellness market online. I’m doing it. There are many attractive categories. It has a very large and attractive demand pool, but has lagged far behind in online adoption and technology investment.
And it was an opportunity to recognize that our founders were early and aggressive investors in transformative technologies like AI and computer vision. And by harnessing the power of these technology tools and data from our users, we’ve been able to really take advantage of models that have been unleashed online for the first time.
And I think the incumbents assumed that the lack of online penetration in this category was because consumers didn’t want it. And consumers love stores. Ultimately, what we were able to prove was not that she didn’t want it, but that she didn’t have the ability, the means, or the platform to make online adoption possible.
And now that we’ve got this out there, we’ve seen the pent-up demand from consumers, how fast they’re adopting our product and platform, how fast Il Makiage is growing, how fast Spoiled Child is growing, and it’s still a little over a year away. , it’s only been a little over a year. The incredible pace of growth shows that it was not really an aspiration, but an obstacle that made it possible.
And we’ve leveraged that so we can grow very quickly and be very profitable at the same time. Our margins and cash generation were also mentioned. Last year, we converted well over 106% of our earnings into free cash flow. At the end of the second quarter, he had over $100 million in cash on his balance sheet. It’s cash we earn from earnings, not externally sourced. The result is a very powerful model.
Julie Hyman: Speaking of online penetration, you said in your prospectus that if I read correctly, the entire beauty industry is looking to go 50% online in the near term.
Lindsay Drucker Mann: yes.
Julie Hyman: This is higher than any other estimate I’ve seen so far. For example, McKinsey expects it to be his 26% of the total market by 2027. What would fill that gap for me? I mean, what do you guys think?
Lindsay Drucker Mann: We are clearly in the early stages of online adoption. However, if we look at other international markets, such as China, we find that the penetration is much higher, in fact already approaching that 50% level.
Now, with the emergence of our type of models and others that may be developed in the future with the help of further technologies, in our case AI and computer vision, all barriers, all friction It’s just breaking. Factors that prevent someone from trading online. You are really breaking down those barriers. As such, the pace of online adoption is likely to be much higher than preliminary projections.
Lastly, the speed at which people are coming to our site and into our brand is a very strong reflection of the pent-up demand that makes us optimistic about its adoption. about it. future.
Julie Hyman: So now that it’s public, where’s the focus? Do you plan to expand the number of Ile Maquillage and Spoiled Child products in the future? Are you planning to launch a completely new brand? where are you going to focus?
Lindsay Drucker Mann: Well, there are so many different ways to grow for a business like ours that competes in what we believe is the most compelling channel online for a growing global marketplace. One of the key areas for getting things right is prioritization.
For us, first of all, we have been talking about the opportunities set in the portfolio of existing brands, whether it is Ile Maquillage or Spoiled Child, whether it is just growing the core of the current brands. But on top of that there are new product categories, new markets that we know we can expand into. We have made great strides in computer vision, deploying, for example, Il Makiage. So it’s one area.
Julie Hyman: It helps people diagnose and tell what looks good on them.
Lindsay Drucker Mann: So one of the main reasons why this category hasn’t gained enough traction online is that consumers need help. She doesn’t know what she wants. I don’t know what she needs. She enters Sephora. She goes into a beauty shop. There are so many different shades, tones, undertones, skin conditions, and more for her to choose from.
There are sales people and sales people there to support her. There is a clerk there who will teach you how to use her. Online, that doesn’t happen when it’s just dropped in a website’s catalog. Her one of our core innovations is a product matching, recommendation engine that helps users understand exactly how to use a product to make it right for them.
And so far, we’ve built it with products like Power Match. Perhaps this is recognized as one of the AI engine and shade recommendations for consumers. For example, Power Match, which gives you the perfect shade. We did it based solely on data and AI. We are currently rolling out these vision capabilities to make the match even better than it is today.
Coming back to the question of where are the priorities for growth, I think this is one. There’s a lot more you can do with core. But on top of that, we’re building even more engines for the future. So, I wrote a little while ago about Oddity Labs and what we built using AI-based molecular discovery to find high-performance, science-backed next-generation products to solve consumer pain points. I talked about what you are doing.
We have a new brand that bolts onto our existing platform. We know these brands meet their real needs because they told us so. I have a skin disease. I got pimples. I have other concerns. So Brand 3 and Brand 4 are independent teams, but with a shared technology stack and shared information they know about their users to deliver great results.
Julie Hyman: Thank you Lindsay and congratulations on your IPO. Lindsay Drucker Mann is his CFO of Oddity. thanks again.
Lindsay Drucker Mann: thank you. Thank you for inviting me.
