Cuộc họp công bố kết quả kinh doanh Quý 2/2026 của ODDITY (ODD): Doanh thu giảm 25% khi tình trạng xáo trộn quảng cáo vẫn tiếp diễn

Thông tin chính

• ODDITY (NASDAQ: ODD) đã báo cáo doanh thu thuần quý 2 năm 2026 đạt 181 triệu USD, giảm 25% so với cùng kỳ năm ngoái, do IL MAKIAGE tiếp tục đối mặt với chi phí thu hút khách hàng tăng cao do sự sai lệch thuật toán tài khoản quảng cáo.
• EBITDA điều chỉnh đạt 13 triệu USD, cao hơn mức triển vọng từ 8 triệu đến 10 triệu USD do công ty đưa ra trước đó. EPS pha loãng điều chỉnh đạt 0,20 USD.
• Doanh thu thuần từ đơn hàng đầu tiên giảm khoảng 40%, trong khi doanh thu thuần từ đơn hàng lặp lại giảm khoảng 20%. Giá trị đơn hàng trung bình giảm khoảng 8%.
• Theo ban lãnh đạo, SpoiledChild vẫn đang đi đúng hướng để đạt mức tăng trưởng ít nhất 35% và tiệm cận mức doanh thu thuần 350 triệu USD vào năm 2026. METHODIQ dự kiến sẽ tạo ra doanh thu năm đầu tiên cao hơn SpoiledChild.
• Ban lãnh đạo kỳ vọng mức giảm doanh thu thuần so với cùng kỳ năm ngoái sẽ cải thiện lên khoảng 5% trong quý 3 năm 2026, với EBITDA điều chỉnh đạt từ 18 triệu đến 20 triệu USD.
• Dự báo cho cả năm 2026 cho thấy doanh thu thuần giảm khoảng 19% và EBITDA điều chỉnh đạt từ 30 triệu đến 32 triệu USD.

Dữ liệu tài chính cốt lõi

Sự sụt giảm biên lợi nhuận gộp phản ánh giá trị đơn hàng trung bình thấp hơn và sự thay đổi cơ cấu sản phẩm, bao gồm việc dịch chuyển khỏi các sản phẩm chăm sóc da của IL MAKIAGE. EBITDA điều chỉnh cũng chịu ảnh hưởng bởi chi phí thu hút khách hàng cao hơn, sự giảm đòn bẩy chi phí cố định và chi tiêu gia tăng cho việc thu hút khách hàng của SpoiledChild.

ODDITY đã mua lại 5,6 triệu cổ phiếu với giá 80 triệu USD trong quý. Tổng số cổ phiếu mua lại từ đầu năm đến nay đạt 11,7 triệu cổ phiếu với giá 163 triệu USD, làm giảm khoảng 20% số lượng cổ phiếu phổ thông đang lưu hành. Công ty còn khoảng 87 triệu USD trong hạn mức mua lại cổ phiếu 200 triệu USD được phê duyệt.

ODDITY cũng đã mua lại 50 triệu USD mệnh giá trái phiếu chuyển đổi lãi suất 0% đáo hạn tháng 6 năm 2030 với giá 35 triệu USD.

Kết quả kinh doanh và hoạt động

IL MAKIAGE

IL MAKIAGE tiếp tục là nguồn áp lực doanh thu chính. Ban lãnh đạo cho rằng sự gián đoạn này bắt nguồn từ sự lệch hướng tệp khán giả trong thuật toán của đối tác quảng cáo lớn nhất, điều này đã làm giảm khả năng tiếp cận khách hàng phù hợp của thương hiệu và làm chi phí trên mỗi lượt thu hút tăng mạnh.

Tác động không chỉ dừng lại ở các đơn hàng đầu tiên. Mức độ thu hút khách hàng thấp hơn ở thời điểm đầu năm đã làm giảm doanh thu lặp lại thường thấy sau đó, trong khi một số hành vi mua lại cũng phụ thuộc vào tần suất tiếp cận quảng cáo.

ODDITY và đối tác quảng cáo vẫn đang trong quá trình thử nghiệm tích cực. Ban lãnh đạo cho biết họ tin rằng đây là vấn đề kỹ thuật có thể giải quyết được, nhưng xác nhận vấn đề vẫn chưa được xử lý dứt điểm. Mục tiêu của công ty là đưa IL MAKIAGE trở lại đà tăng trưởng vào năm 2027, nhờ sự hỗ trợ từ danh mục các sản phẩm bị hoãn ra mắt trong thời gian diễn ra sự gián đoạn.

SpoiledChild

SpoiledChild duy trì đà tăng trưởng liên tục và vẫn đi đúng hướng để mở rộng ít nhất 35% vào năm 2026, tiến tới mức doanh thu thuần 350 triệu USD. Ban lãnh đạo cho biết tỷ lệ mua lặp lại tính theo doanh thu thuần trong 12 tháng của thương hiệu vẫn duy trì ở mức trên 100%.

Dù SpoiledChild cũng chịu một số ảnh hưởng từ sự sai lệch quảng cáo, tác động này bớt nghiêm trọng hơn so với IL MAKIAGE. ODDITY đã tăng chi tiêu thu hút khách hàng vì ban lãnh đạo đánh giá biên lợi nhuận đóng góp 12 tháng của thương hiệu này rất hấp dẫn.

Công ty có kế hoạch mở rộng quốc tế sâu rộng hơn và đang phát triển hơn tám sản phẩm cũng như danh mục cho năm 2027.

METHODIQ và ODDITY Labs

Ban lãnh đạo cho biết doanh thu năm đầu tiên của METHODIQ dự kiến sẽ vượt kết quả năm đầu tiên của SpoiledChild. Thương hiệu chuẩn y khoa này được ra mắt với 30 sản phẩm bao gồm trang điểm, sản phẩm không kê đơn và phác đồ kê đơn cá nhân hóa.

Tăng sắc tố da đã trở thành dòng sản phẩm chủ lực. METHODIQ kết hợp các đánh giá bằng thị giác máy tính, liệu trình điều trị do chuyên gia y tế chỉ định cùng các sản phẩm kê đơn hoặc không kê đơn. Một sản phẩm nổi bật là Mellan-X 509, được ứng dụng tổ hợp phân tử từ ODDITY Labs.

Ban lãnh đạo có kế hoạch mở rộng METHODIQ sang các danh mục bổ sung vào năm 2027, bao gồm sự trường thọ và sức khỏe chuyển hóa. Danh mục sản phẩm ban đầu dự kiến sẽ bao gồm các thuốc tiêm kê đơn và liệu pháp peptide được phép lưu hành hợp pháp.

ODDITY tiếp tục đầu tư vào việc khám phá phân tử nhờ sự hỗ trợ của AI tại ODDITY Labs. Ban lãnh đạo cho biết AI có thể đẩy nhanh các quá trình nghiên cứu, trong khi các thử nghiệm in-vitro ban đầu về lão hóa đã cho thấy tiềm năng tăng cường tổng hợp collagen và làm giảm các dấu hiệu lão hóa.

Công ty cũng dự định ra mắt Thương hiệu Thứ tư vào năm 2027.

Dự báo của ban lãnh đạo

Ban lãnh đạo kỳ vọng tốc độ sụt giảm so với cùng kỳ trong quý 3 sẽ cải thiện đáng kể so với quý 2 do tin rằng giai đoạn áp lực thu hút khách hàng tồi tệ nhất đã qua. Doanh thu lặp lại và sự tăng trưởng của SpoiledChild dự kiến sẽ hỗ trợ đà cải thiện này.

Công ty vẫn thận trọng về quý 4 do việc phân bổ chi tiêu quảng cáo vẫn chưa được quyết định. Tỷ trọng chi tiêu lớn hơn dành cho thử nghiệm sẽ kém hiệu quả hơn trong việc tạo ra doanh thu trong ngắn hạn.

Rủi ro và các yếu tố cần theo dõi

• Sự sai lệch thuật toán quảng cáo của IL MAKIAGE vẫn chưa được giải quyết, dù đã tiến hành thử nghiệm tích cực với đối tác quảng cáo lớn nhất của ODDITY.
• Chi phí thu hút khách hàng cao hơn tiếp tục gây áp lực lên doanh thu, EBITDA điều chỉnh và hiệu quả kinh tế biên đóng góp.
• Hoạt động từ các đơn hàng đầu tiên sụt giảm tạo ra tác động cộng dồn lên doanh thu mua lặp lại trong tương lai.
• Mức độ nhìn nhận rõ ràng trong quý 4 vẫn còn hạn chế do ban lãnh đạo chưa chốt ngân sách quảng cáo sẽ được phân bổ cho việc thử nghiệm so với việc tạo ra doanh thu.
• IL MAKIAGE đang xử lý lượng hàng tồn kho dư thừa đã mua nhằm chuẩn bị cho mức doanh thu cao hơn trước đó. Ban lãnh đạo kỳ vọng hàng tồn kho sẽ cân bằng tốt hơn vào năm 2027.
• Doanh thu tại Israel và hệ thống cửa hàng nội địa của công ty vẫn đối mặt với rủi ro biến động liên quan đến chiến tranh.

Các điểm chính trong phiên Q&A với chuyên gia phân tích

Ban lãnh đạo cho biết IL MAKIAGE có thể trở lại đà tăng trưởng sau khi sự cố quảng cáo được khắc phục, nhưng nhấn mạnh rằng quá trình xử lý vẫn đang diễn ra. ODDITY cũng đang nghiên cứu việc mở rộng kênh phân phối và các kênh tiếp thị bổ sung, đồng thời vẫn duy trì mô hình bán hàng trực tiếp tới người tiêu dùng (D2C) làm nguồn dữ liệu khách hàng cốt lõi.

Về hoạt động mua lặp lại, công ty cho biết tỷ lệ mua lặp lại tính theo doanh thu thuần hợp nhất trong 12 tháng vẫn duy trì ở mức trên 100%, nhờ sự đóng góp từ cả tệp khách hàng hiện tại của IL MAKIAGE lẫn SpoiledChild.

ODDITY đã chuyển một phần hoạt động thu hút khách hàng của IL MAKIAGE từ mô hình Dùng thử trước khi Mua (Try Before You Buy) sang Mua trực tiếp để giảm sự nhiễu tín hiệu. Ban lãnh đạo tin rằng có thể chuyển ít nhất 50% lượng thu hút khách hàng sang mô hình Mua trực tiếp mà không ảnh hưởng đáng kể đến hiệu quả kinh tế trên mỗi đơn vị, dù công ty không có kế hoạch loại bỏ hoàn toàn mô hình Dùng thử trước khi Mua.

Ban lãnh đạo tiếp tục xem mức biên lợi nhuận gộp khoảng gần 70% (high-60%) là khoảng mục tiêu trong dài hạn. Họ không coi áp lực trong quý 2 là mang tính cơ cấu, giải thích rằng tiềm năng cải thiện giá trị đơn hàng trung bình sau khi giải quyết sự gián đoạn trong thu hút khách hàng cũng như tối ưu hóa hơn nữa biên lợi nhuận gộp của METHODIQ vẫn còn.

Toàn văn Biên bản Cuộc họp Báo cáo Kết quả Kinh doanh

Toàn văn cuộc gọi công bố kết quả kinh doanh

Phần trình bày của ban lãnh đạo

Operator

Good morning and welcome to ODDITY's Second Quarter 2026 Earnings Call. Today's call is being recorded and we have allotted time for prepared remarks and Q&A. At this time, I would like to turn the conference over to Maria Lycouris, Investor Relations for ODDITY. Thank you. You may begin.

Maria Lycouris

Thank you, Operator. I am joined by Oran Holtzman, ODDITY's Co-founder and CEO, and Lindsay Drucker Mann, ODDITY's Global CFO. Niv Price, ODDITY's CTO, will also be available for the question and answer session. 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, customer acquisition costs, 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 earlier today and in our most recent annual report on Form 20-F filed with the Securities and Exchange Commission on March 17, 2026. We do not undertake any obligation to provide any information on the form and 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 our business. Additional information about these non-GAAP financial measures, including their definitions, are included in our earnings press release, which we issued today. I will now hand the call over to Oran.

Oran Holtzman

Thank you, everyone, for joining our call today. While we continue to work through the ad account dislocation at IL MAKIAGE, I am pleased to report progress in our business that hopefully positions us for recovery in 2027 and beyond. SpoiledChild had a good quarter and a strong year to date, 2026 overall, and it is on track to grow at least 35 percent this year and approach $350 million of net revenue in 2026. METHODIQ is showing great promise after launching only several months ago. We expect the brand to deliver first-year revenue ahead of SpoiledChild's first year and with huge potential for the future. Both SpoiledChild and METHODIQ are building ambitious plans for 2027, and we will update you in coming months. For IL MAKIAGE, we continue to work extremely hard with our main ad partner to solve the algorithm dislocation and remain hopeful that we are on path to normalization. We worked day and night to solve the algorithm dislocation, and we continue to believe, based on data that we see, that it is technical in nature, solvable, and has nothing to do with the brand runway. Big picture, we remain bullish on ODDITY's future despite our recent customer acquisition cost challenges. We are working tirelessly to strengthen our business, move past the dislocation, and return to playing offense in what we see is one of the most attractive markets in the world. Beauty and wellness has long been a large, resilient, and highly profitable growth market. We see the category in an exciting period of transformation today, with consumer demand for channel and product creating major shifts. Putting the current technical problem we face aside, we believe we are positioning our business to win in this moment and lead the next phase of growth. With over 70 million users on our direct consumer platform, we believe we have a clearer view than others on where the demand is and how to best serve the customer. Consumers are smarter than ever before. They have more information ready at their fingertips, and they demand more from their products, more efficacy, more personalization. The appetite for beauty and medicine is converging as a result. Consumers want real solutions to their pain points from the inside out. They are taking control into their own hands. A lot of that is happening online outside of regional channels like store or medical office. ODDITY's portfolio of trusted brands today is built to serve consumers across a full range of needs, spanning categories, and product types. From beauty to wellness to medical grade, from cosmetics to OTC to prescription products, the goal is to reduce friction and deliver unmatched experience, best-in-class products, and precise treatment protocols that truly solve consumer problems and pain points. Let us look at hyperpigmentation as an example of how our integrated platform works and how we are building a moat with vision technology, personalized treatment regimens, and ODDITY Labs. Hyperpigmentation is a big success story for METHODIQ, showing higher customer satisfaction and retention signals, which is the best indicator for us that we are onto something great. Our plans for this market began with ODDITY's user data which showed us how much demand our user had for addressing dark spots and uneven skin tone, and also how unhappy they were with the current solution. With this insight, we made a deliberate push into app implementation and delivered something better. We built one of a kind user experience at METHODIQ, which includes computer vision assessment that identifies dark spots on the skin, the relevant data analysis are then passed to a METHODIQ provider who issues a personalized treatment plan aimed at maximizing efficacy and minimizing side effects. It might be prescription or non-prescription or both and can involve sequencing different products across several months to optimize for the best outcome. The entire experience is designed to mimic and improve upon a high-touch experience at the doctor's office, but with incredible convenience. One of METHODIQ's hyperpigmentation hero products is Mellan-X 509 powered by an ODDITY 1007 ODDITY Labs spotted molecule combination. It targets visible discoloration of the skin with reduced side effects. This is just the beginning of what we think ODDITY Labs can do in hyperpigmentation. We have additional molecules in development, and we are making good progress finding new pathways that we believe will help us tackle hyperpigmentation from multiple angles at once. This is just an example of how ODDITY's integrated platform is meeting unmet demand, and we are just at the beginning. The strong start of METHODIQ has increased our conviction in the medical-grade space. We are acquiring a more determined customer with attractive LTVs and good cross-sector characteristics. Acquisition costs are higher as compared to makeup, but we believe the AOV retention, as a result, expected paybacks justify the cost. Consumers are increasingly comfortable getting medical care online and looking to brands like METHODIQ for innovation and upgrading offerings to meet their needs. We are positioning METHODIQ to be a leader in this backdrop and launching new categories and products across 2027. This will build on our infrastructure of prescription and pharmacy fulfillment to better serve existing customers and also reach new audiences. The opportunity set is large and we are moving quickly. We plan to have more updates on this expansion in the coming months. Turning to SpoiledChild, we launched SpoiledChild around 4.5 years ago as a multi-category wellness brand. It has scaled faster than our expectation and is on track to approach $350 million of net revenue in 2026, which will put it more than a year ahead of the time it took IL MAKIAGE to hit that milestone. SpoiledChild continues to deliver very strong customer service cohorts metrics like AOV and repeated scale. 12 months net revenue repeat rates for the brand are well in excess of 100 percent today. As we said in prior calls, we believe SpoiledChild is being impacted by the algorithm dislocation issues IL MAKIAGE is facing, but to a lesser degree, and this has allowed us to continue scaling the brand. We are hopeful that as we work through the acquisition cost challenges with IL MAKIAGE, we will then be able to deliver efficiencies also for SpoiledChild. The strong consumer metrics we see in SpoiledChild give us confidence in the brand's future potential. We plan to continue to invest in the base direct-to-consumer business while heading new growth levers in 2027. Moving to IL MAKIAGE, where we continue to work on resolving our account dislocation with our largest advertising partner and returning to normalized audience and CPA. We continue to work very closely with this ad partner to fix the problem, and while we are not there yet, every day that passes is helping us get to fixing the issue. We and the ad partner are in intensive testing mode, and those tests are very important for solving the algorithm dislocation. Looking ahead on ODDITY level, we are hopeful the worst is behind us. As our guidance indicates, we have seen sequential improvement in the rate of the year-over-year revenue decline at ODDITY, and we expect third quarter net revenue will decline approximately 5 percent year-over-year. While ODDITY's revenue decline was severely impacted by the algorithm's dislocation, we are seeing relatively stable trends in other parts of the business that are less correlated to the acquisition spend. We continue to work hard on other advertising channels as well. Our goal for 2027 is for IL MAKIAGE to return to growth. We have an amazing pipeline of new products ready to support the brand once acquisition costs recover. We continue to work 24/7 until this technical problem is fixed. We remain hopeful that the amount of resources and time we spend on it will lead to a resolution like any other big problem we faced since I started the business 14 years ago. Full power, non-stop hard work until fixing the problem, no other way. With that, I will hand it over to Lindsay. Thank you.

Unknown Speaker

Thanks, Oran. Let us turn to our second quarter results, which I will refer to on an adjusted basis. You can find the full reconciliation to GAAP in our press release. Net revenue declined 25 percent versus the prior year to $181 million at the favorable end of our guidance for net revenue to decline between 25 percent and 30 percent. The decline was driven by a year-over-year reduction in sales of IL MAKIAGE, which continues to be adversely impacted by a dislocation in its ad account with its largest advertising partner. This dislocation continues to impact IL MAKIAGE's ability to reach the right audience and is driving sharply higher CPA, impacting acquisition revenue, most notably in first orders, but also in the portion of repeat orders that are sensitive to acquisition spend. For example, existing customers that see an ad and are motivated to buy again. We are also now seeing the compounding impact of lost repeat sales that would have naturally flowed through from customers making first order purchases early in the year. Specifically, ODDITY net revenue from first orders declined approximately 40 percent in the second quarter versus the prior year, driven by IL MAKIAGE. Net revenue from repeat orders declined approximately 20 percent in the quarter from the prior year period. AOV declined by approximately 8 percent in the second quarter versus the prior year, largely driven by a decline in IL MAKIAGE AOV. The decline in IL MAKIAGE AOV was driven by the above-mentioned reduction in first orders, which carry higher AOV than repeat. It was additionally impacted by product mix shift away from IL MAKIAGE skin. Gross margin was 68.7 percent in the quarter compared to 72.3 percent in the prior year. Gross margin compressed approximately 360 basis points year over year, driven in part by the decline in AOV. We delivered adjusted EBITDA of $13 million ahead of our outlook for adjusted EBITDA of $8 million to $10 million. The year over year decline versus the prior year was largely driven by the IL MAKIAGE algorithm dislocation, which has two primary impacts on our P&L. First, significantly higher CPA versus the prior year. Second, the decline in revenue and resulting deleverage on our fixed costs. Adjusted EBITDA was also negatively impacted by our decision to ramp acquisition spend for SpoiledChild in support of faster revenue growth, where our upfront investments support attractive 12-month contribution margins. Operating expense as discussed on prior calls, our approach is to balance sustained growth investments with finding cost efficiencies to support the bottom line. This has translated into continued investments in areas like ODDITY Labs and our technology infrastructure, with some greater filtering and prioritization around projects where we see nearer-term payback potential. We remain bullish about the potential for ODDITY Labs to provide real differentiation in product efficacy and experience with many applications in our portfolio, and the hyperpigmentation example from Oran is just one area. We also continue to invest in areas like aging, where our molecules have shown early in vitro promise in increasing collagen synthesis and reducing aging markers. Moving down the P&L, adjusted diluted earnings per share was $0.20 for the quarter. Free cash flow increased by $14 million in the quarter and decreased by $8 million in the first half of the year. Our inventory investments year-to-date include purchase commitments made last year in anticipation of much stronger revenue results for IL MAKIAGE, as well as inventory purchase to support growth in SpoiledChild and METHODIQ. IL MAKIAGE today continues to work through excess inventory, and we plan to be in better balance in 2027. We exited the quarter in a strong liquidity position with $561 million of cash, cash equivalents, and investments on our balance sheet. Our $350 million in credit facilities remain undrawn. During the quarter, we continued to act on what we believe is an attractive price for our shares. We repurchased 5.6 million shares in the period for $80 million. This brings our total year-to-date repurchase amount to 11.7 million shares for $163 million, which reduced our ordinary shares outstanding by approximately 20 percent. Approximately $87 million remains outstanding on our $200 million buyback authorization. Separately, in March, 857,000 shares were removed from our public float to Oran Holtzman's open market purchases. In June, we repurchased $50 million face value of our 0 percent June 2030 exchangeable notes at a discounted price of $35 million. We will continue to be opportunistic in managing our capital structure in order to drive shareholder value. Turning to our outlook, for the third quarter, we expect net revenue to decline approximately 5 percent year-over-year, a meaningful sequential improvement versus the first half as we believe the worst of the acquisition-driven revenue pressure is behind us. We expect adjusted EBITDA to be between $18 million and $20 million. For the full year, we expect net revenue to decline approximately 19 percent year-over-year, driven by the decline in net revenue in first half and we expect adjusted EBITDA will be between $30 million and $32 million. And with that, I will turn the call back to the Operator for questions.

Operator

[Operator Instructions] Our first question is from Dara Mohsenian with Morgan Stanley. Please proceed.

Phần hỏi đáp

Dara Mohsenian

Oran, it sounds like you feel comfortable we are moving towards solving the ad dislocation issue here in 2026. Just if we assume the problems are resolved by year end, any thoughts around ability to grow the IL MAKIAGE brand in 2027? Should we anticipate a more normalized environment, typical revenue growth year based on the normalized factors behind the brand, or does some of this issue potentially linger, compound in '27? And then second, just SpoiledChild continues to grow at a strong pace. You mentioned you are ramping up spending for the brand. Can you just touch on international plans for that brand over time, line of sight to making a broader international push in your decision process there now that the brand has scaled so nicely?

Oran Holtzman

Yes, good morning. We believe that once we solve the problem, we plan to continue to go back to growth with IL MAKIAGE. We have amazing products in the pipeline. We are not there yet. We did not solve it yet. But we believe that we are closer than before because from all the data that we see so far in terms of the root cause of what happened, it looks like there is an audience drift from the algorithm, and we are trying to retrain it. Once it is behind us, we are back to growth. As I mentioned, we have an amazing plan that we did not execute because of this problem and they are ready to play. As for SpoiledChild, SpoiledChild showed great demand, and as you can see by the numbers, we continue to expand it internationally. And that is it. We have amazing more than 8 products and categories for next year for SpoiledChild, so we are very bullish.

Operator

Our next question is from Brian Tanquilut with Jefferies. Please proceed.

Brian Tanquilut

Lindsay, as I think about the EBITDA guidance, how do we think about your assumptions on number one, the seasonality? Because typically I think fourth quarter is up sequentially in revenue versus third quarter. So curious what is driving that. And then when we think about repeat revenue rates versus historical trend, I mean, what is that assumption? Or maybe even versus what we saw in the first half of the year, what is that assumption embedded in the balance sheet?

Unknown Speaker

Thanks. As we think about the sequential dynamic and the seasonality of the business, there is really no broad strokes change to how we think about the business. The first half of the year tends to be stronger for us for acquisition, and then we allow revenue to flow through in the second half. Obviously, this is a unique year because so much of our acquisition activity was, you know, that moment of time was spent towards testing. So the seasonality for this year will be a little bit different, and it is too soon for us to tell you what seasonality will look like on a go-forward basis. As it relates to repeat trends, continue to be very strong as a company level. We remain well in excess of 100 percent net revenue repeat rate over 12 months. And despite some of the challenges with IL MAKIAGE, we do continue to see strong repeat flow through, which is, you know, part of why we are expecting the sequential improvement in the second half of the year relative to the first half of the year. And in addition, we get very strong repeat from SpoiledChild.

Operator

Our next question is from Anna Lizzul with Bank of America. Please proceed.

Anna Lizzul

I was wondering if you could elaborate a little bit more on any learnings that you had from this process as you went through the remediation and anything where you have learned about your business model a bit more, about how much more resilient, flexible, anything that might need to change going forward now that you went through this process. Thanks.

Oran Holtzman

Yes, first of all, we learned a lot. The past few months were very intense in terms of media buying world. I must say that we thought that we know a lot, but now after those months, we are very deep in the details and learning every day better how those algorithms work. We increased our efforts both to fix the problem, but to make the business more resilient moving forward, including more distribution and more channels. We have nothing yet to announce, but once we have, we will. We believe that the key of the business is data, and in order to continue to have that ability, we need to remain focused. A big portion of the business must remain D2C. That is our strength, and we need to continue to work with those ad partners. By the way, the way that we work now with the ad partner and their commitment and like it is unbelievable. We are very happy for that, and we trust their team to help us navigate and solve this problem. And that is it. So we continue to work on both fixing the problem and distribution and channels.

Unknown Speaker

I will just add one more thing. You can see the resiliency of our model today in the fact that we have a lot of great things to talk about with respect to SpoiledChild and METHODIQ, even though we do navigate these challenges with IL MAKIAGE. So relative to when we first came public or even started building the business, we have way more brands, categories, and products for the business to rely on than in the past, and that will continue to grow.

Operator

Our next question is from Youssef Squali with Truist Securities. Please proceed.

Youssef Squali

Lindsay, your annual revenue growth guide for negative 19 percent implies fourth quarter growth, I think, of negative 10 percent to 11 percent, which is quite a deterioration from the negative 5 percent you are guiding to for third quarter. So what accounts for that deterioration? Is it just conservatism and lack of visibility, or are you seeing something in third quarter that is not sustainable necessarily? Thank you. And then on the other revenue line, it was up 8 percent. That was a bit of a surprise. I know it is small, but what were the drivers for that and how sustainable is it?

Unknown Speaker

Thanks, Youssef. So on revenue, we are for third quarter guiding to a 20-percentage-point sequential improvement relative to where we were in second quarter in the first half of the year, and that is because we believe the worst of the acquisition-driven dislocation is behind us. We are seeing the benefit of more repeat in our base business in the first half of the year, and also SpoiledChild has been strong. As it relates to the fourth quarter, we want to be conservative since we do not know yet how we want to allocate our spending budget, how much goes towards testing, for example, which is inefficient for revenue generation, so we are leaving some room for the fourth quarter pace to slow, third quarter. I would note this is a real outlook for us. There is a lot of unknowns still, as opposed to a sandbagging story, but that is generally the approach here. Other is Israel, and that market has been volatile, as you know, given some of the dynamics with the war there and our store base there.

Youssef Squali

Okay. Got it. Thank you.

Operator

Our next question is from Scott Schoenhaus with KeyBank Capital Markets. Please proceed.

Scott Schoenhaus

Traditionally, I thought of your business model as IL MAKIAGE funneling in new customers to support growth in SpoiledChild. But clearly, you are seeing a lot of growth without that. Can you talk to us about your marketing strategy here in customer acquisitions? How that is changed since the disruption with SpoiledChild. And then on METHODIQ, could you talk more about the investments needed here and maybe what you are planning on for the 2027 selling season here with these new products you talked about, pigmenting hyperpigmentation, but also clearly going into more acute areas. Maybe talk to us what kind of investments you need and what kind of growth you are targeting. Thanks.

Oran Holtzman

Sure, I will start with SpoiledChild. We see and we saw great demand, despite the fact that we believe that this dislocation is having some impact but less a degree than IL MAKIAGE. Even so, we are still generating nice returns on the spend and have been able to scale materially. As for METHODIQ, we launched it less than 1 year ago. We are very happy from the beginning of the brand, from how it started. We expect the brand to deliver higher revenue than SpoiledChild did in its first year, although SpoiledChild was unbelievably strong in its first year. We launched with 30 products with a great range of products for medical-grade makeup to specialized prescription protocols. One thing that surprised us out of the gate is our ability to drive demand for both personalized prescription and non-prescription products and treatment plans. For example, METHODIQ's hero product is hyperpigmentation with a series of prescription and non-prescription products. And the non-prescription product is ODDITY Labs, which is very encouraging for us. Looking forward, we have a consistent framework for the category expansion, big markets where we see meaningful demand, and where we can see that we can win. One category we are particularly excited about for next year is longevity and metabolic health. As a first step, we plan to deliver legally available prescription injectable and peptide therapies, and we are very bullish about that. That is it. We spent more than 3 years on building that growth engine, and we are very bullish about its potential.

Operator

Our next question is from Andrew Boone with Citizens. Please proceed.

Andrew Boone

Guys. Thanks so much for taking the question. It sounds like you have SpoiledChild and METHODIQ that are both doing well. Can we just step back and think about the progression of the business beyond this near-term marketing hiccup? How do we think about what you guys are doing for Brand Four? And then can you just talk about AI's progress within ODDITY Labs? Understood that is a step function change in terms of molecule development. What are you guys seeing there and how do we think about the benefits of just new technology and the evolution of molecules and how that is related to the business? Thank you.

Oran Holtzman

Brand Four. So we continue to grow both.

Unknown Speaker

The first one was on the evolution of our growth trajectory post, as we go forward, now that SpoiledChild and the --.

Oran Holtzman

SpoiledChild and METHODIQ. SpoiledChild, as I mentioned, has an amazing pipeline ready to launch for next year in new categories. And Brand Four, we plan to launch in 2027, also next year. As for ODDITY Labs, we continue to have great progress there. It is also an area that we invested a lot in the past 3 years. And as you mentioned, as you think about AI, of course, we can leverage it materially. It can speed up our processes and our molecule discovery there. We have a team that this is what they do in labs, and we are very bullish about the potential and the speed that it can bring to the business.

Operator

Our next question is from Ryan MacDonald with Needham and Company. Please proceed.

Ryan MacDonald

Oran, I think in the past, if I recall correctly, when you went from year 1 to year 2 on SpoiledChild, there was quite the large revenue jump in the business. And I think you talked about that it was a little bit faster of a pace than what you wanted initially when you were thinking about the scaling of that. And we are getting in towards the end of year 1 with METHODIQ here and heading into year 2. I guess, what did you learn from SpoiledChild's ramping and how is that informing your view for METHODIQ and the strategy there? And I guess, is it too early to see how you see trends in repeat rates for METHODIQ and, or what are you seeing there and how is that kind of building into informing that view for year 2? Thanks.

Oran Holtzman

For us, always the first few months is testing and trying to find the right audience and then fixing unit economics and then scaling. That is what we did with SpoiledChild, and that is what we are planning to do with METHODIQ. Basically, there are less constraints from a growth angle in the first 2 years. Let me remind you that in SpoiledChild in year 3, we decided to spend less and to have constraint on revenue. We are not planning to have constraint for METHODIQ in next year. But keep in mind that the first few years of any brand, there is a cost, and we need to take it into consideration while we are building a budget, and that is what we are planning to do.

Operator

Our next question is from Georgia Anderson with Evercore ISI. Please proceed.

Georgia Anderson

Thanks for the question. I guess thinking about the business model of Try Before You Buy, I think you shifted kind of around 40 percent of acquisition revenue out of Try Before You Buy in first quarter. Wondering kind of where that mix is today. And if the kind of gross margin compression we saw in second quarter, you know, is that kind of a structural or recoverable, yes, so any clarity that would be great.

Unknown Speaker

Sure. As you know, a focus area for us has been remediating some of the signal distortion. And as part of that, we have shifted part of our acquisition away from Try and towards Buy. And we were able to do this without any notable impact on our unit economics. We believe in our current state we can move 50 percent or more of our acquisition to Buy from Try at a minimum. That said, we love the model. We have no plans to eliminate it. We think it offers a great value to consumers. So our focus is really on remediation and rebalancing as needed. On the gross margin question, we have always talked about our long-term gross margin expectations to be in sort of the high 60s. With all gross margin being a real target KPI for us. The target KPI for us is DC margin, contribution margin, gross margin after media spend. But just based on the range of products and brands, high 60s is kind of how we have pointed everyone to. That said, this year we did get a lot of deleverage based on the lower AOV, and we do not see that as structural. Once we have improvement in our in-app acquisition dislocation, we will be able to go back to optimizing for AOV, remember, we have removed all of those efforts and so we will be able to optimize better for AOV which supports our gross margin on a like-for-like basis.

Oran Holtzman

We have optimized METHODIQ's gross margin since it is early, so we expect to have meaningful improvement also there.

Operator

Thank you. This will now conclude our question and answer session. I would like to turn the floor back over to Mr. Holtzman for closing remarks.

Oran Holtzman

Thank you very much, guys. See you next quarter.

Operator

Thank you. This will conclude today's conference. You may disconnect at this time, and thank you for your participation.

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