Audity (ODD) Q2 2025: International Sales Surge 40% as Brand Three Sets Up Healthcare Entry
Audity’s Q2 showcased accelerating international expansion and a strategic pivot into digital healthcare, with core brands sustaining high growth and profitability. Brand three’s upcoming launch in dermatology signals a bold adjacency move, leveraging proprietary technology and a growing user base. Management’s steady reinvestment and disciplined growth targets underpin long-term compounding, even as near-term margin headwinds emerge from upfront investment.
Summary
- International Expansion Accelerates: Overseas sales grew over 40%, highlighting global runway and outpacing U.S. growth.
- Healthcare Platform Bet: Brand three’s Q4 launch positions Audity to disrupt online dermatology and unlock new revenue streams.
- Disciplined Growth Model: Management reaffirms 20% growth and EBITDA margin targets, prioritizing sustainable compounding over outsized short-term gains.
Performance Analysis
Audity delivered 25% net revenue growth in Q2, exceeding guidance and driven by double-digit online gains across both core brands, Il Makiage, prestige makeup and skin, and Spoiled Child, wellness and haircare. International markets contributed $85 million in H1, up over 40% year-over-year, as the company scaled in established regions like the UK and Australia and initiated tests in France, Italy, and Spain. Repeat sales increased as a share of business, reflecting strong retention and cohort quality, though this mix shift, alongside faster international growth, modestly compressed average order value by 1%.
Gross margin of 71.3% expanded 10 basis points year-over-year, outperforming expectations despite initial tariff headwinds. Adjusted EBITDA margin compressed to 28.8%, reflecting deliberate reinvestment in new brands, Audity Labs, and technology. Free cash flow conversion remained robust, with $99 million generated in H1, representing over 80% conversion of adjusted EBITDA. Management upsized its first convertible note to $600 million, bolstering liquidity for future growth and M&A.
- Online Channel Drives Growth: Digital-first execution continued to outpace beauty peers, with technology investments supporting scale and retention.
- International Markets Gain Traction: Non-U.S. revenue now represents 15% of total, with substantial white space remaining versus competitors at 70%.
- Repeat Revenue Increases: Cohorts deliver over 100% repeat rates, supporting visibility and backlog-driven H2 performance.
Profitability remains strong despite margin compression, as management prioritizes long-term compounding and future category expansion over maximizing near-term earnings.
Executive Commentary
"In just seven years since launching our first beauty brand in the US, Audity has transformed into a platform of soon-to-be three brands, spanning four categories and six closed markets. We have gone from pure makeup to then skin and hair and now offering medical grade prescriptions and OTC products with our upcoming launch of brand three."
Aron Holtzman, Co-founder & Chief Executive Officer
"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%."
Lindsay Druckerman, Global Chief Financial Officer
Strategic Positioning
1. International Penetration as Next Growth Lever
Audity’s international business is now a clear growth engine, with sales outside the U.S. up over 40% in H1 and established markets like the UK and Australia reaching leadership positions in online beauty. Management views international as potentially as large as the U.S. business, and competitors derive 70% of revenue overseas, underscoring the addressable opportunity. Early returns from new markets (France, Italy, Spain) show strong metrics, though initial costs are higher due to lack of repeat base.
2. Brand Three: Digital Dermatology Platform
Brand three’s Q4 launch marks Audity’s entry into telehealth, targeting dermatology with prescription and OTC products. The go-to-market leverages proprietary computer vision and personalization, with 20+ treatment cohorts and a mobile app for compliance and dynamic regimen adjustment. Management sees this as a category-defining play, addressing unmet consumer needs and leveraging a 60 million user base, half of whom report skin issues.
3. Audity Labs and Molecule Innovation
Audity Labs, in Boston, with 70 scientists, is developing proprietary molecules and delivery systems for brands three and four, aiming to set new efficacy standards. Near-term launches will feature new molecules, with longer-term bets on breakthrough ingredients and technology-enabled personalization.
4. Disciplined Growth and Margin Stewardship
Management reaffirmed its 20% revenue growth and 20% EBITDA margin “algorithm,” emphasizing compounding over chasing outsized, unsustainable gains. Investments are front-loaded in H1 2026, with margin drag offset by lower spend in H2. Growth from new brands is treated as incremental, not embedded in base targets, giving flexibility to manage pace and margin profile.
5. Capital Allocation and Liquidity
The $600 million convertible note and $815 million cash balance provide ample firepower for organic and inorganic expansion. Buybacks remain opportunistic, with $103 million authorized but no repurchases to date. Reinvestment in technology, labs, and new brands remains the top priority.
Key Considerations
Audity’s Q2 results reflect a company scaling across geographies and categories, while making deliberate bets on technology and healthcare adjacencies. The business model is built around direct-to-consumer (DTC), where online channels, personalization, and repeat revenue are central levers for both growth and margin durability.
Key Considerations:
- International Ramp: Growth outside the U.S. is accelerating, but initial investments are heavier as repeat revenue builds.
- Healthcare Expansion Risk: Brand three’s telehealth dermatology launch introduces new regulatory, operational, and execution complexities.
- Margin Compression from Investment: EBITDA margin dipped as management front-loads spend in new brands, labs, and tech, with a stated willingness to keep margins at 20% for long-term growth.
- Repeat Revenue as Visibility Anchor: High repeat rates and backlog support H2 performance and reduce forecasting risk.
- Capital Allocation Flexibility: Large cash reserves and new convertible note provide optionality for future M&A or accelerated investment if market conditions warrant.
Risks
Audity’s push into digital healthcare with brand three faces regulatory scrutiny, operational complexity, and potential execution risk in a new category. International expansion exposes the business to currency, compliance, and market fit challenges, while ongoing tariff headwinds could pressure gross margin. Management’s commitment to margin discipline may be tested if competitive intensity or launch costs escalate.
Forward Outlook
For Q3 2025, Audity guided to:
- Net revenue growth of 21% to 23% year-over-year
For full-year 2025, management raised guidance:
- Net revenue of $799 to $804 million (23% to 24% growth)
- Gross margin of 71%, including full-year tariff impact
- Adjusted EBITDA of $160 to $162 million
- Adjusted diluted EPS of $2.06 to $2.09
Management flagged several factors for modeling:
- Brand three launch will not contribute to 2025 or 2026 base guidance, with all upside treated as incremental
- 2026 investments will be front-loaded in H1, creating a 700 basis point margin drag, offset in H2
Takeaways
Audity’s disciplined execution and multi-brand platform strategy are compounding value, with international and digital healthcare the next vectors of growth.
- International Outperformance: Overseas revenue is scaling rapidly, with established markets delivering leadership positions and new markets in early traction mode.
- Healthcare Platform Launch: Brand three’s Q4 introduction will test Audity’s ability to leverage DTC and technology in a regulated category, with significant upside if successful.
- Margin Management Focus: Management’s willingness to “constrain” growth and margin in favor of long-term compounding provides predictability, but could limit near-term upside if new bets outperform.
Conclusion
Audity’s Q2 results reinforce a platform in expansion mode, with core brands compounding, international gaining momentum, and a healthcare adjacency set to launch. Disciplined capital allocation and growth pacing signal a management team focused on durable value creation, even as new category bets add complexity and risk.
Industry Read-Through
Audity’s international acceleration and digital healthcare foray signal rising competitive pressure for legacy beauty and traditional telehealth providers, as DTC platforms leverage technology and personalization. The company’s willingness to manage margin and growth pace for long-term compounding sets a new bar for public beauty and wellness peers, highlighting the importance of repeat revenue, cohort quality, and technology-enabled product innovation. Investors in consumer, beauty, and digital health should watch for further convergence of these models, as category boundaries blur and platform scale becomes a key differentiator.