Earnings Call Transcript - ODD Q2 2025

Operator, Operator

Good morning, and welcome to ODDITY's Second Quarter 2025 Earnings Conference Call. Today's call is being recorded, and we have allocated time for prepared remarks and Q&A. At this time, I'd like to turn the conference over to Maria Lycouris, Investor Relations for ODDITY. Thank you. You may begin.

Maria Lycouris, Investor Relations

Thank you, operator. I'm 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 do not concern past events or 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 most recent annual report on Form 20-F filed with the Securities and Exchange Commission on February 25, 2025. 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 our business. Additional information about these non-GAAP financial measures, including their definitions, are included in our earnings press release, which we issued yesterday. I'll now hand the call over to Oran.

Oran Holtzman, CEO

Thanks, everyone, for joining us today. ODDITY's momentum in 2025 continues with another strong result this quarter and great progress on our long-term growth initiatives. Our financial performance year-to-date is another proof point of our success. For the first half of 2025, we grew revenue 26% to $509 million, generated adjusted EBITDA of $122 million and free cash flow of $99 million. This is more EBITDA and more free cash flow in the first half of the year than we delivered for the entire full year of 2023, the year of our IPO. In Q2, we once again beat our financial targets on revenue, profit and earnings per share as we have every quarter for the ninth quarter since our IPO. We have ambitions at ODDITY to become one of the biggest beauty companies in the world and to lead this huge profitable and underserved market. And we are moving at high speed towards this goal. In just 7 years since launching our first beauty brand in the U.S., ODDITY has transformed into a platform of soon-to-be 3 brands, spanning 4 categories and 6-plus markets. We have gone from pure makeup to then skin and hair and now offering medical-grade prescription and OTC products with our upcoming launch of Brand 3. And just as we unlock beauty online, we are now turning our sights to health care, another huge market where the consumer is unhappy and the opportunity is massive. I will share more on our plans for Brand 3 in a moment. Every year, we push our teams to innovate to expand our capabilities and grow the reach of our business. And you can see based on the results that we are doing a good job so far. It starts with the fact that we operate in a healthy, attractive market, huge in size where technology can drive big improvements for consumer and where the unit economics are strong. And it continues with our deliberate focus on the most attractive and durable vectors of growth. First, the expansion of online, which we expect will grow to be the largest channel in our industry. The investments we made years ago in data and technology allow us to be a leading direct-to-consumer company in beauty today, and we continue to invest in technology to strengthen our future. Second, consumer demand for high efficacy products. On that front, we are making big investments in pharma-grade technology at ODDITY Labs to discover breakthrough molecules and delivery systems. Beyond the sheer magnitude of our growth this year is the quality of that growth. It comes alongside strong profitability and cash flow and is fueled by each of our growth pillars. This includes double-digit online growth in both IL MAKIAGE and SpoiledChild, generating growth both in the U.S. and international and scaling our skin portfolio, which remains on track to approach 40% of IL MAKIAGE's revenue this year. These drivers taken altogether allow us to sustain market share gains and outperform our competitors. The excellent first half financial performance we delivered this year sets the stage for a strong finish to 2025. As we have discussed, the second half of the year is highly driven by our large backlog of repeat where we have good visibility. Therefore, as is customary for us at this time of the year, our teams have pivoted their focus into 2026, where we are once again preparing, testing and iterating our incremental growth drivers for another strong year. While many of our teams work hard on 2026, the biggest focus for me is long-term initiatives that will allow us to continue compounding for the decades to come. This includes investments in technology, new brands, and ODDITY Labs. So let's dive deeper into our multiyear growth drivers. The first is growing our existing brands. IL MAKIAGE remains on track to reach $1 billion revenue in 2028. International continues to be a highlight for us as we put increased focus on scaling this big opportunity even as we continue to grow in the U.S. International represented 15% of ODDITY business in 2024, driven by IL MAKIAGE, but for our competitors, it is closer to 70% of their business. In addition, we continue to win with IL MAKIAGE SKIN, which, as I mentioned, is expected to approach 40% of IL MAKIAGE revenue this year with more growth ahead. SpoiledChild is also having a great year so far in 2025 with more runway ahead. The brand remains on track to cross $200 million of revenue this year after launching only 3 years ago in 2022. Our second key growth driver is new brand launches, and we are on schedule to launch Brand 3 this year and Brand 4 next year. Brand 3 will mark our first entrance into the medical grade space, starting in dermatology and giving our users access to OTC and prescription products. This unlocks an entirely new market for ODDITY. The third growth driver is ODDITY Labs, where we are working to create the world's highest efficacy products by bringing real science at high scale to our industry and discover game-changing molecules, ingredients and delivery systems. We continue to make progress building the team, the processes and the partnerships to achieve our goals. We have some proprietary molecules in development for Brands 3 and 4 for near-term rollout, while we are developing molecules and delivery systems for the long term with big potential. Turning now to more details on Brand 3, we remain on track for our formal launch in Q4 of this year. Just as we use technology and the direct-to-consumer model to transform beauty, we are turning our sights with Brand 3 on health care. Our goal is to help users solve their medical problems with minimal hassle and treatment iterations. Diagnosis, treatment matching and tracking will all occur online without visiting a doctor’s office or pharmacy. We are starting with dermatology and planning new expansion categories for the future. Dermatology is an attractive starting point for us. First, it's large with huge reach. Around 50 million Americans are impacted by acne, approximately 30 million from eczema. These consumers are unhappy and underserved with attractive potential lifetime values. Many of these consumers are already in our user base, which makes it a natural place for us to start. Around 50% of our 60 million-plus users report suffering from skin issues like acne, eczema and dark spots. And second, dermatology is an area where we believe our technology can provide value. Our data shows that consumers are unhappy with current solutions. Drug stores offer generalized low-efficacy products that don't solve their issues. Dermatologists present a challenging and high-friction experience that costs $300 for a visit before the treatment itself. And the entire process is inconvenient, requiring about 2 hours of a person's time on average. Over 2/3 of American counties don't have a practicing dermatologist at all. Online is a huge opportunity, yet no one has approached it in the right way, in our view. So we are taking on the category with an online model and an entirely new playbook. When determining our strategy, we always start from first principles on how to win the category rather than copying others. Our direct relationship with consumers gives us better understanding of the problems they face and an edge in finding solutions. As one example, we are investing in personalization to make it a big differentiator between us and our competitors. I will walk you through how it comes together in the acne category. It starts with the product offering itself. Each consumer has unique problems and preferences. Some have mild acne, others struggle with inflammatory papules and pustules, deep cystic acne, hormonal breakouts or persistent truncal acne on their chest or back. Many of our competitors get this wrong and offer most customers the same treatment. By contrast, we have 20-plus user cohorts with unique treatment recommendations. These customized offerings show a 50% improvement in the satisfaction rates compared to tretinoin alone based on internal work we have done. Next is our online experience, where we pair advanced computer vision technology with doctor-developed protocols to deliver highly efficacious tailored treatments. And finally, in coaching to ensure high compliance through our mobile progress tracking app, where users stay consistently supported and on track with personalized guidance, photo-based progress monitoring and dynamic treatment adjustments tailored to their evolving needs. Overall, we are introducing innovation and access that we believe dermatology hasn't seen in decades. It is a huge benefit to consumers, and we believe it will transform the category. We will have more to report on Brand 3 after we officially launch later this year. Before handing over to Lindsay, I want to take a moment to reflect on our 2-year anniversary as a public company. We are proud of the long-term partnerships we have made with investors since our IPO. They are built on the trust that comes with consistently executing our plans, no matter the market backdrop. As the founder, CEO and the largest shareholder of the company, the single most important thing for me is delivering on our promises to our shareholders. With that, I will turn it over to Lindsay.

Lindsay Drucker Mann, CFO

Thanks, Oran. Let's turn to our second quarter results, which I'll refer to on an adjusted basis. You can find the full reconciliation to GAAP in our press release. Q2 was another strong quarter for us, capping off a great first half of the year, which is our most critical moment for user acquisition. These results set us up for another record-breaking year in 2025. We grew net revenue by 25% in the second quarter to $241 million. This exceeded our guidance for revenue growth of between 22% and 24%. The strength was driven by double-digit online growth at both IL MAKIAGE and SpoiledChild. Net revenue growth was driven by an increase in orders, while average order value was down around 1%. Average order value was impacted by mix, including faster growth in international markets and an increase in the mix of repeat sales, both of which carry lower AOV. A bit more color on international. As Oran mentioned, our sales outside the United States represented around 15% of ODDITY's 2024 net revenue. This is driven by IL MAKIAGE, where we have operations in the U.K., Germany, Canada, Australia and Israel. We also conduct tests in prospective new countries and the revenue from these test markets flows through our P&L. On our Q4 '24 call, we discussed our plans to increase focus on IL MAKIAGE International. This has meant greater prioritization from our teams as well as increased acquisition spend. The strategic rationale for our increased focus is straightforward. International is a meaningful revenue opportunity for us with great unit economics and a key driver in building IL MAKIAGE into a $1 billion revenue brand. The demand drivers for beauty online are similar overseas to what we see in the U.S. market today. Our technology platform works well in these countries. In fact, for markets like the U.K. and Australia, where we're already operating, we believe IL MAKIAGE is already the #1 or #2 largest online beauty brand. And we can see from incumbents that there is a huge potential for us. As Oran mentioned, they generate around 70% of revenue internationally versus our 15%. Results from our international push have been very strong, both in existing markets and prospective markets like France, more from us in international to come. Back in the U.S., IL MAKIAGE remains strong, continues to grow, and we expect more growth in the future. Moving down the P&L. Gross margin of 72.3% expanded 10 basis points year-over-year and exceeded our guidance of 70.5%. The delta versus our outlook was driven in part by better mix. We did see some initial flow-through of tariffs this quarter, which, as expected, were small. Based on the information we have today, we continue to expect that tariffs will be less than 100 basis point headwind to our gross margin this year and will be a similarly manageable headwind in 2026. We delivered adjusted EBITDA of $70 million in the quarter, above our guidance of $65 million to $68 million. Adjusted EBITDA margin of 28.8% compressed by around 350 basis points, driven by planned growth investments. We remain focused on reinvesting in our business to support our long-term growth initiatives, including Brand 3, Brand 4, ODDITY Labs and our technology innovation. We delivered adjusted diluted earnings per share of $0.92 compared to our guidance of between $0.85 and $0.89. Our adjusted EBITDA and EPS excludes approximately $10 million of share-based compensation. We continue to deliver very strong free cash flow and free cash conversion, a clear reflection of the strength and quality of our business model. We generated $99 million of free cash flow in the first 6 months of 2025, converting more than 80% of our adjusted EBITDA into free cash. During the quarter, we issued our first ever convert as an exchangeable note through a U.S. subsidiary. The transaction was upsized on strong demand to $600 million, inclusive of the green shoe. The note is 0 coupon with a 5-year maturity, and we purchased a cap call at a cost of 10.5% of the offering size that limits dilution until the stock price approximately doubles. This offering allowed us to significantly increase our cash position, and we finished the quarter with $815 million of cash, cash equivalents and investments on our balance sheet with an additional $200 million available on our undrawn credit facilities. Our capital allocation strategy continues to be patient and opportunistic. As a reminder, our capital priorities are: number one, reinvesting in the business; number two, M&A; and number three, opportunistic buybacks. On that front, we have $103 million remaining on our buyback authorization with no share repurchases year-to-date. Turning to our outlook for 2025. With our strong first half behind us and the high visibility we have to our backlog of repeat sales for the rest of 2025, we are on track for another outstanding year, better than our long-term algorithm of 20% revenue growth with 20% adjusted EBITDA margin. We now expect full year 2025 net revenue will be between $799 million and $804 million, representing around 23% to 24% year-over-year growth. We expect gross margin will be 71%, which includes the full impact of tariffs expected in 2025 based on the information we have today. Adjusted EBITDA is expected to be between $160 million and $162 million, and we expect adjusted diluted EPS of between $2.06 and $2.09, assuming no share buybacks in 2025. For Brand 3, we're focused on a successful launch and are on track to hit our Q4 official timing. As a reminder, there is no revenue contribution from Brand 3 baked into our 2025 outlook, and we are not reliant on the brand to achieve our revenue objectives this year or next year for that matter. Turning to 2026. It's too early to issue formal guidance at this stage. But based on what we know today, we expect 2026 financial performance will be in line with our long-term earnings algorithm of 20% revenue growth with a 20% adjusted EBITDA margin. A note for your models, we plan to front load our investments in the first half of 2026, which could equate to a 700 basis point drag on first half EBITDA margin next year, with most of the impact weighted to the first quarter. This planned spending should be offset by a margin benefit from lower relative spending in the second half of the year. All of this results in neutral impact to adjusted EBITDA margin in 2026, which again is expected to land at 20%, consistent with our long-term algorithm. Turning to the third quarter outlook. We're off to a good start with momentum following through from the second quarter. We expect year-over-year net revenue growth in the quarter to be between 21% and 23%. You can find more details on our Q3 outlook in our press release. And with that, I'll turn the call back to the operator for questions.

Operator, Operator

Our first question comes from Youssef Squali of Truist Securities.

Youssef Squali, Analyst

Congratulations on a strong quarter. At a high level, could you discuss the gross margin for Q3? The guide came in slightly below consensus expectations, so can you explain what is causing the sequential compression? Is it related to volume, mix, or investments associated with Brand 3? Also, in your prepared remarks, you mentioned that you believe you can achieve 20% growth next year even without contributions from Brand 3. Could you confirm that?

Lindsay Drucker Mann, CFO

Thank you for the question, Youssef. Regarding gross margin, it's important to note that our teams focus on contribution margin, which is gross margin after media spend, rather than gross margin itself. We have a diverse range of gross margins across our products, but the teams primarily manage contribution margin. Consequently, when we provide guidance, we aim to offer the teams the flexibility to pursue opportunities that align with customer lifetime value. As you know, since our IPO, we've consistently exceeded expectations in this area while maintaining a conservative approach to prevent disappointing investors. In the latter half of the year, we do experience some seasonality in our gross margin due to our repeat business model, which results in a slightly lower gross margin profile. Additionally, since the revenue in the third and fourth quarters is typically smaller, we don't gain as much leverage on the fixed components of our cost of goods sold. This results in some sequential compression during this period. In Q2, our gross margin remained stable year-over-year due to some fluctuations, including higher supply chain costs that were balanced by reductions in other areas, leading to an overall flat outcome that exceeded our quarter's guidance. Regarding Brand 3, we don't rely on it for our outlooks for 2025 or 2026. We are fully committed to ensuring Brand 3's success, which we believe is achievable. However, we still have ample growth potential in our existing brands, IL MAKIAGE and SpoiledChild. IL MAKIAGE is projected to reach $1 billion in revenue by 2028, and SpoiledChild is on track to surpass $200 million this year. Therefore, any contributions from Brand 3 would be incremental to our already significant growth. Our commitment remains to achieve 20% revenue growth and maintain a 20% adjusted EBITDA margin; if we were to gain more from Brand 3, we would not alter our guidance.

Operator, Operator

The next question comes from Lauren Lieberman of Barclays.

Lauren Lieberman, Analyst

Two questions. One was just a follow up, Lindsay, on the end of your answer to that last question that you wouldn't up your guidance or commitments if Brand 3 comes through strongly and will be incremental. Should we take that as to mean that you'll kind of pull back and constrain the growth on IL MAKIAGE and SpoiledChild to try to manage the business in '26 and beyond to something as close to that 20% as possible? Because I know that, to some extent, the way Oran has talked about the business is we want long-term predictable, very strong growth. And some of that is about managing the pace of growth. So I just want to understand how to think about that for '26 and beyond as Brand 3 comes in as incremental. And then the other thing, which is a shorter term, I think previously, you talked about a soft launch for Brand 3 in the third quarter, and now it's just full committed launch in Q4. Is there any soft launch activity in Q3? And if that's a shift in the launch plan, how come?

Oran Holtzman, CEO

Yes, I'll take that, Lindsay, and feel free to add anything. To start, regarding Brand 3 and why we mentioned it's not fully incorporated into our plans for 2026, even if Brand 3 achieves success similar to SpoiledChild, which was the best launch we have experienced with $25 million in D2C sales, it remains inconsequential for our projections. Therefore, we did not factor it into our algorithm for next year. However, we remain very optimistic about Brand 3, as we have been developing it for nearly four years. The soft launch for us entails conducting numerous trial runs on a smaller scale with limited acquisition spending to generate traffic for testing purposes. This process allows us to identify any issues that need to be addressed through thorough testing. We plan to start running some tests in Q3, with the official launch marked by substantial investments in both brand and user acquisition. We are preparing to make a significant push in Q4 and in the first quarter of next year, which involves increased investments, contributing to the margin considerations Lindsay mentioned for the first half of next year.

Lindsay Drucker Mann, CFO

Lauren, to address your question about constraints, yes, we impose constraints regularly. We have the capacity to grow faster than our current figures indicate. Our strategy is to ensure that every year, we achieve a compounded revenue growth of 20% along with adjusted EBITDA margins of 20% for many years ahead, instead of advancing that growth when it isn't necessary. As you develop your models for future years, consider that we will have numerous growth opportunities and will consistently meet our performance targets. You can trust in our ability to maintain and compound this growth moving forward.

Operator, Operator

Our next question comes from Anna Lizzul of Bank of America.

Anna Lizzul, Analyst

I was wondering if you could just elaborate a bit more on your investment in the business here with the launch of Brand 3 later this year and then Brand 4 next year? And then when do you expect we'll start seeing some returns here on just the investments with those launches?

Oran Holtzman, CEO

Sure. Lindsay, I'll start. We continue to invest a lot of our margin dollars in the future. Going back to the previous question, I believe there is no reason to deliver higher margins than 20%, especially since those investments could lead to significant improvements in business performance and growth. When we consider investments, there are mainly three pillars. First is new brands, Brand 3 and Brand 4, each with its own team that has been working for many years, spending considerable resources on building them. Second is ODDITY Labs, which we are still developing. We currently have around 70 scientists in Boston and are investing heavily in infrastructure and building this operation. Lastly, technology remains the largest team in the company. We acquired a small company this year and expanded the team, which we believe is the right approach. Looking to the future, we invested around $25 million or $20 million in SpoiledChild, and today, three years later, it has generated $200 million in revenue with very healthy margins. I hope we can continue investing in this area and expect to see margins and growth following.

Operator, Operator

Our next question comes from Andrew Boone of Citizens.

Andrew Boone, Analyst

I wanted to ask about International and just the drivers of growth going forward there. Can you guys just talk about whether that includes new markets, deeper penetration or anything else we should be thinking about as we think through the international opportunity? And then, Lindsay, I want to go back to just a recurring theme of just repeat rates. Is there anything you guys can share either on cohorts, repeat rates to help us better understand how kind of the existing customers are progressing on the platform?

Lindsay Drucker Mann, CFO

Sure. I'll take the part about International. International is an area we're very excited about. This is a segment of the business we've been laying the groundwork for over the years, preparing the markets and getting them ready. As we discussed in the Q4 call, we're taking significant steps to advance our efforts in these markets. I'm very pleased with our performance in the first half of the year. This business has the potential to be as large as our U.S. operations. For our competitors, about 70% of their business comes from international markets. Everything we observe suggests that the markets outside the U.S. behave similarly to what we've achieved domestically. To quantify this, in the first half, sales outside the U.S. increased by more than 40%, totaling around $85 million. Of that amount, $75 million came from established markets like the U.K. and Australia. We also generated about $10 million from new testing markets that show a lot of potential. This highlights the growth possibilities for us in emerging markets like France, Italy, and Spain, where the metrics look very promising. Our teams have been preparing to actively engage in these markets. We are still in the early stages and have significant opportunities ahead, but it has been encouraging to see progress this year. Looking toward 2026, we have even more initiatives planned. This includes increased spending and more efforts in user acquisition in those markets, as well as enhancing product availability and other technological aspects. We're focused on generating strong returns and executing effectively in these markets. Regarding your next question on repeat business, our repeat rates remain strong. Repeat purchases continue to represent a larger percentage of our business year-over-year. Our 12-month repeat cohorts also remain robust, exceeding 100%, and are performing well for both brands.

Operator, Operator

Our next question comes from Mark Mahaney of Evercore.

Mark Mahaney, Analyst

Okay I just wanted to ask about the Brand 3 go-to-market strategy. I think given the type of offering, it's probably going to require a different go-to-market strategy than what you've had with the first 2 brands. Could you just talk about your ability to execute well against that? How different the planning is? How do you mitigate some of the operational risk involved?

Oran Holtzman, CEO

Sure. I'll start. We're still leveraging our user base and technology, and in addition, we have our vision technology that we've developed over the past two and a half years. The infrastructure for the pharmacy and our third-party partners is the main change. Regarding Brand 3, our unique approach focuses heavily on personalization. Our team dedicated nearly two years to create critical personalized treatments, resulting in approximately 25 customer cohorts with customized treatment combinations based on our tests. This has led to significant improvements in satisfaction, with some metrics exceeding 50% compared to existing market options. The synergy between product development and technology is something that most companies struggle to achieve. This combination is what drives our success, and we remain very optimistic about our future. In terms of our go-to-market strategy, it remains largely unchanged.

Operator, Operator

Our next question comes from Dara Mohsenian of Morgan Stanley.

Dara Mohsenian, Analyst

Just on Brand 3, can you just take a step back and give us an update on exactly what the brand sort of entails longer term from a consumer standpoint? Obviously, there's the product itself. You also mentioned monitoring. How does the professional recommendation fit in also potentially? And just basically, how we think about revenue from Brand 3? Is it essentially mostly the product itself? Or are you thinking there's substantial opportunity around charging for monitoring or other revenue streams just given commercialization potential in the derm area goes well beyond the product potentially unlike traditional beauty products. So just what's your approach there? And how do you think about the long-term revenue streams?

Oran Holtzman, CEO

Sure. As I mentioned on the call before, Brand 3 is a telehealth platform with medical-grade products. We are starting with dermatology, but we have already plans for the next categories because we already have the infrastructure of shipping OTC and Rx products for the first time. This is a huge opportunity for ODDITY. And in my view, we are addressing it differently than anyone else. We developed, as I mentioned before, ODDITY's most customized and comprehensive line that we did so far. In addition to that, it's the first time we're doing something that deep in a new area of OTC and Rx, all to be sold online under our own brand and most products are formulated with existing ingredients. But for the first time, we are going to launch products coming from ODDITY Labs, including new molecules. So this is another area where we are very excited. What else we did here that is different, we are building a mobile app to ensure that high compliance. Based on our study and our research, one of the main problems in this category is compliance. So we need someone there to coach and to make sure that users are on track for cure. If it means that we need to change their regimen, we will do it automatically, everything with vision technology and doctor setup. And number three is leveraging our 60 million users. As Lindsay mentioned on her part, a significant portion of our user base already suffers from these problems. Therefore, we are planning to leverage it and offer them the product. Don't forget, we use them as design partners to build this line. So we are pretty confident that this is something that is going to excite them as well.

Dara Mohsenian, Analyst

Great. That's helpful. And you mentioned some of the metrics which have you excited in your testing for Brand 3. Just take us back versus where you were 3 months ago? And what have you learned in the last 3 months in that testing? Has that changed how you're thinking about the commercial process going forward or excited.

Oran Holtzman, CEO

Yes, 3 months is a short cycle. It takes us around 3 months to get a read, okay? But I can tell you that comparing to 2 years ago, and even a year ago, we are in a significantly better position. I think that the key here was to unlock both the diagnosis and ensure that we're shipping the right customized product. Even if we had the right product or the right molecule 1 or 2 years ago, if we sent it to the wrong tester, therefore, the satisfaction was low. I believe that we made significant progress in matching the right patient with the right treatment.

Operator, Operator

Our next question comes from Scott Schoenhaus of KeyBanc Capital Markets.

Scott Schoenhaus, Analyst

Oran, as a health care technology analyst, I find the Brand 3 launch to be a very exciting growth opportunity. It's well-known that dermatology providers in health care are often overwhelmed, leading to extensive wait times for appointments. It appears that the launch is primarily focused on acne, providing topical treatments and prescriptions that demonstrate greater effectiveness than tretinoin. Could you also address the potential in treating more acute conditions, such as eczema? This might create an entirely new platform, attracting a different customer base, including those with serious skin issues. Please share your perspective on the progression and opportunities for Brand 3 as you establish yourselves as a health care technology company.

Oran Holtzman, CEO

Thank you for your support. We are launching this because it's a significant challenge with low satisfaction levels. Initially, we will focus on acne and hyperpigmentation, as we believe we have strong advancements in both technology and our product offerings in these areas. We are also prepared to address eczema, although it has a smaller prevalence, so our primary push will be for acne and pigmentation at first. We plan to introduce additional body products in the first quarter of next year and are exploring more categories as well. Regarding new users, we are excited about expanding our user base, and many current users face these issues. We identified that at least 20% to 25% of users experience these problems, which led us to investigate further. This process helped us develop our product line, and we see this as a promising start for launching the brand.

Operator, Operator

Thank you so much. There are no further questions at this time. I would now like to turn the call back over to Oran Holtzman for his closing remarks. Oran? Thank you.

Oran Holtzman, CEO

Thank you very much. See you next quarter.

Operator, Operator

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.