Hey, James, how are you? Thanks for the jams.
Good, you bet. Before we transition, I just want to throw out a thank you to Addison for the continued great music. He has selected the music over the last couple of years, and it's been wonderful.
Nice.
Are you related to Peter Drucker?
No.
No? Well, you've got such great strategic, you know, insights in what you're doing. I thought you might be some of the great management folks. So this is a really, really exciting company, and I can't wait to hear the story about it from you. It's anyway, let's get going 'cause just fabulous. So thank you for being here. Hopefully, you've had some great meetings.
I have. Yeah, it's been great so far. I, it's been a great use of time for me, so thanks for having me.
Wonderful. Well, we're proud of our clients. They're really smart and good people, and I'm glad to hear that you've had a good, good time. We'll keep it going.
Great.
Okay. I'll go in the background.
Okay, great. So I'm going. Nice. Hi, I'm Lindsay Drucker Mann. I am the CFO of ODDITY Tech. We went public last year on the NASDAQ in July. Let me just try to screen share here. ODDITY is the largest online direct-to-consumer beauty platform in the world. We have two brands today: IL MAKIAGE, which is the largest beauty brand, largest online-only beauty brand in the world, and is actually one of the largest beauty brands in all channels in the world. It'll do around $500,000 in revenue this year, we said on our last earnings call. We have our second brand, Spoiled Child, which we launched in 2022. That's more of a wellness business, so skincare and haircare, which we believe is the most successful direct-to-consumer brand launch in any category, you know, beauty or beyond in history.
It did $110 million in revenue in its second year. It'll do $150 million around this year, according to what we said in our last guide based on our guidance that we gave in our last earnings call. It's nicely profitable. It achieved break-even in just a year after launch, which, if you know, for direct-to-consumer businesses is really something that's quite unheard of. The business was founded and launched in the U.S. as an online-only business in 2018, so six years ago, by a brother-sister team of entrepreneurs, Oran Holtzman and Shiran Holtzman. The vision they had was really reconciling something that actually feels quite obvious, which is how is it that the beauty industry is so very online that it's like the number two or number three most popular category on YouTube, on Insta?
We know that the beauty customer is consuming a tremendous amount online, yet in terms of penetration of sales, e-commerce sales, it lags many other consumer categories. And what's driving this disconnect? And the best way to describe why that disconnect occurs is by taking you to, if you were to go into a Sephora, right? And if you were to walk into a Sephora, you would see so many products, tones, undertones, ingredients, beauty routines. It's actually quite overwhelming. But the beauty of a Sephora is that a sales associate comes up and helps you. And by helping you, she really does three things. She, number one, asks you what you need. Number two, matches you to the right product. And number three, shows you how to use it.
These three functions, asks you what you need, matches you to the right product, and shows you how to use it, are the most important pieces so that at the end of the experience, you walk up to the cash wrap, you are so excited with your purchase, you walk out of there feeling like a million bucks. That's the secret to selling beauty successfully in one of those formats. Compare that to what the industry had built for online. It was go to a MAC.com or wherever and get dropped off at a website catalog with hundreds of SKUs and go, you know, figure it out yourself. Obviously, the customer, she doesn't know what she needs, she leaves, she's overwhelmed, she leaves. Or maybe she takes a guess and she picks something and she picks wrong and she has a bad experience and she doesn't come back.
So this is the problem, and this is why beauty had lagged in online adoption, even though the customer really wanted to, was already very much in that, in that channel. And it's why, you know, most brands actually stopped investing in figuring out direct-to-consumer beauty. They said, "It doesn't work. Let's double down on stores." The insight from our founders was, we can actually recreate that store experience, but instead of an associate, I have machine models that can match you, that can ask you what you need and match you to the perfect product. I have video on demand that can show you how to use it. And that was effectively what they built, as they launched in the U.S. And the outcome of that experiment has been really, incredible. Maybe I'll just skip forward to the financials.
These are on an LTM basis, but this year we'll approach, call it $650 million in revenue. Like, remember, we launched as an online business in the U.S. in 2018, so this is in a very short timeframe. $150 million-ish of EBITDA, very strong profitability, 24% EBITDA margins on an LTM basis, powerful cash generation, $130-ish million of cash over the last 12 months. We exited the quarter with $250 million of cash on our balance sheet. We redeployed around $100 million of that, towards a buyback of Catterton's, a portion of Catterton's position to help, manage that, overhang better as we fully transition into public market life. But really, really incredible financial performance. Let me just walk you through our platform. It was built to support a portfolio of standalone brands. I mentioned IL MAKIAGE is our first.
It's a color cosmetics brand, but today we've built it to around 25% of the business is skin. The business is mostly U.S., call it 80% U.S., and rapidly growing across many different product categories, very profitable. I mentioned Spoiled Child. That's more of a wellness brand, skincare, haircare. As I said, we'll do approximately $150 million in revenue this year. Still a very U.S. brand. We haven't really approached any international opportunities for that. We have new brands that are in the pipeline. Brand 3 and Brand 4 will be ready for launch next year. Brand 3 we've described as a telehealth platform for consumers with medical-grade skin and body issues. So think acne, eczema, hyperpigmentation, those kinds of concerns, that Brand 3 will address.
We have a new bespoke set of vision tools and other digital tools to support conversion and compliance to minimize churn, which I'll talk about in a sec. Brand 4 we haven't really given much detail about, externally, except to say that it's a product category we're extremely bullish on, we really believe in, we're super excited for it. We have more brands that we're incubating in our new ventures team, which basically, you know, drove Spoiled Child and all of our new brand launches. It's our in-house brand incubator, including Brand 5, which is in the works. That's the business operations. That's all run out of our business headquarters in New York. And those are, again, all standalone. But below that, we have shared technology and shared user data.
And the technology is all run out of our R&D center in Tel Aviv, where we build and share everything from, you know, data science, machine learning, computer vision tools, web interfaces, video on demand platform. All of this stuff is shared across all brands. And then the user data, which these are the folks that come up on our website and give us information about themselves. Often they don't purchase. Mostly they don't purchase. But we use that data to find ways to convert them into consumer customers over time. The business is characterized by a strong track record of very, very profitable growth. We've committed to, on an ongoing basis, achieving 20% revenue growth and 20% EBITDA margins. We're obviously performing above that this year.
We have the ability to grow faster than 20%, but we think this is the right balance for us to grow in a very high-quality way, in a durable way that continues to compound over time, and relative to our competitors or other things across consumer or consumer tech, this sort of Rule of 40 algorithm of 20%, 20%, is very compelling in our view. In terms of profitability, the underlying business today is a lot more profitable than the 24% LTM that I talked about before. And the reason, the gap between that and, you know, the 24% that we're delivering is that we're making pretty significant investments in future growth. Brand 3, Brand 4, and ODDITY Labs, which is our in-house biotech. We acquired it a year ago, and we're putting a lot of investment.
Instead of, as the rest of the industry uses ingredients that are already on the market and widely available, we're working to leverage the full force of pharma and biotech, but in our sector, in our category, in order to create the next generation of products, high-performing products that really solve consumer pain points in a way that's never been done before. We don't need ODDITY Labs to succeed to achieve our growth ambitions, but if we get it right, it's a, call it a 10x differential for us to be able to do. Gotten a lot of questions about what's happening in the industry, and maybe I'll just address those here. We've heard of and seen sluggish performance from a number of incumbents. You see here L'Oréal and Lauder on the page. LVMH has Selective Retailing, which includes Sephora, but not only Sephora here.
These are just the quarterly, year-over-year, like-for-like revenue growth numbers. We think the dynamic here is really a function of channel shift and industry transformation, which we deeply believe in. And I'll explain a little more of that. The beauty industry, we think, is one of the most attractive and lucrative TAMs on the planet, $600 billion in size, global, with a number of amazing product categories with unit economics that work really well for online, meaning high AOV, high product margin, and great replenishment cycles. We think online becomes 50% of the category before you know it. Today it's around 25%, so online penetration will double. And the incumbents are just not set up for it. The focus for them over the years has been very clearly in brick and mortar.
And to be honest, a lot more of the focus as they gave up on the U.S. has turned to China in particular and other international markets where they're now struggling. And they have underinvested in technology and fallen behind the curve. This is why our business has been able to deliver such outsized growth, for many years consecutively, and we, and we haven't seen any signs of industry weakness. At the other end of the barbell is Amazon, where the beauty category has actually been quite strong. And you're seeing some of these incumbents really flock to Amazon as a channel of distribution to try to capture some of the growth where the growth in the industry is going to, and they currently have limited exposure. So rather than highlighting some deep issue with the beauty category, what we see is a category that's quite healthy.
We don't see any signs of slowing among our customer base or our user base or our ability to acquire users. But we do see an industry that's shifting more online with an incumbent set that is just not positioned, simply just not positioned to address this. The other area of transformation is the consumer shift towards science-backed, high-performing products that really, really solve their pain points. These are areas that have been neglected by beauty companies and by pharma, candidly, because, for pharma, their customer is not the consumer, their customer is the payer. And payers don't really care about problems that are not acute. And so you're never going to get coverage for something like driving hair growth.
In our case, we believe and we see in this massive TAM just a tremendous amount of room to innovate and create molecules of the future that will drive the products of the future. And that's our focus on ODDITY Labs. But even before we talk about ODDITY Labs, our product portfolio has always been based on prestige products that are the highest performing in their categories based on hundreds and sometimes thousands of consumer-blind studies that show us we have the absolute best performing product in the market. As an online-only business, we can't afford to have product that people aren't obsessed with and love. And the reason is because for an online-only business, you must have repeat in order to generate LTV and in order to make the unit economics work. If you're a brick-and-mortar business, you have the luxury of relying on traffic and impulse buys.
That's not the case for us. So we really have to make sure our product is the best. We've always invested in high-performing product. We've built a product development muscle that's centered around that, and we believe that's where the industry is going. Just one more, on this point. What you see on this page here is ODDITY's over the last 12 months for the quarter ending September, the 12-month dollar change in revenue for us versus the 12-month dollar change in revenue for Estée Lauder. Just their Americas division. If you added global, it would be a worse picture. So I wanted to cut through the noise.
We're much smaller than Lauder in terms of overall dollar sales, but the impact of our dollar growth, incremental dollar growth is absolutely having an impact on overall dollar change and market share shift in the category. And I think that's another thing that's showing up for these companies. Let's talk for a sec about how we think about our platform. And we're different than other direct-to-consumer companies that you know in that we don't acquire revenue and we don't acquire customers. Instead, we acquire users. And a user is anyone who gives us a lot of data about themselves. So the way it works is typically we will find you on a digital platform, whether it's Snap or Insta or TikTok, we'll serve you an ad and we'll pull you onto our website and into what we call a data funnel.
Our goal is to convert all that website traffic, all those visitors into users. A user, again, is someone who gives us a lot of data. So they're going through, for example, a quiz. They're answering questions about their beauty concerns, their skin conditions, their tone, beauty routines. We ask them lots of questions. We're also picking up important metadata about them, including their device, the weather, and all that sort of stuff. Most importantly, they give us a way to get back in touch with them. So whether that's an email or over SMS, we know how to get back in touch with them. By doing that, we create, and today we have over 50 million of these users who we know a lot about.
And we use that data we know about them to convert those users into customers, oftentimes not at that moment, but over the next one, two, or three years. We have a really strong track record of converting them in the future. And I can talk about how that works in a slide or two from now. So using that data to convert users to customers, customers to repeat customers, and we continue to add new products and new brands and new touchpoints that drive conversion, that drive loyalty, and ultimately increase the efficiency of our marketing spend at every turn. I think this might be the most important chart in the deck. And what you're looking at is our net revenue repeat rates. Let me just take a moment to level set on the definition, okay?
On the left side, these are 12-month rolling net revenue repeats. Currently, it's at 125%. When I joined, it was like in the mid-40s, but I call it 45%, and I was shocked because it's so much better than anything else in the industry. And also, you know, as a new joiner, you know, concerned would we be able to keep it up? And my boss, our CEO, said, we'll be at 100%. I had no idea we would get to 100% in like the next year plus, but we did it. What this means is for all of us who made a first purchase a year ago, that entire cohort, let's say that cohort collectively spent $100. Over the next 12 months, that same cohort spent an additional $125, so 225 total, 100 of the first purchase, 125 within the next year for 125% repeat, okay?
For most direct-to-consumer companies, it actually works in reverse. The first customer is your best customer. And then as you get bigger, the customer quality gets worse and the cohorts fade. I only know of one other internet company, direct-to-consumer company that reveals this data. It's Warby Parker. And they have held their 12-month repeats flat at 25% for the last several years. We were at 25% for our 2019 cohorts, and we continue to improve. The drivers of this improvement are, number one, because we know a lot about our users and our machine models and algorithms are getting better and better based on better training data and more innovation and actually driving remarketing, retargeting, reconversion. We do it just incrementally more unlocks, more success at driving repeat.
Number two, I'll talk about on the next page how we've expanded our product portfolio, which means we have more products to offer her, and drive that kind of conversion, and number three, we've layered on, this is ODDITY level, so we've layered Spoiled Child on top of IL MAKIAGE. If you were to just pull and disaggregate the two brands, their individual curves would have a similar shape, but together, you know, we're driving even more share of wallet, and just to close the loop, the chart on the right side is that same metric, net revenue repeat, but instead of just looking at a rolling 12-month basis, we look at it over 12 months, 24 and 36, and we look at the half-year cohorts.
So you can see the starting points are higher, the slopes get steeper, and the repeat continues to compound, even after the first year, even after the second year into the third year. This is another really compelling chart in my view. What you see here is net revenue contribution based on product vintage. So the year that the product was launched, when we initially opened our site in 2018, you can see the original product portfolio. A lot of that is our complexion products that we launched with, so, and our color cosmetics portfolio, but a lot of foundation, concealer, primer, some of the stuff that we started with, which has continued to grow. But on top of that, we've added new product franchises, that have been nice, nice new franchises that will continue to grow, and they have continued to grow.
Call it, you know, 20%-30% per year contribution of revenue based on these new product introductions. I don't actually know of another consumer company that has a chart like this. Typically, for a hyper-growth story like ours, you might have a couple SKUs that you really blow out, and the rest is sort of supporting cast to see the level of diversification among our product portfolio, based on this, the ability to launch new products into an existing audience is really a testament to the power of our platform. 2022 was a special year because we launched Spoiled Child that year, and we launched IL MAKIAGE Skin, which we've continued to add to, but that's why 2022 had a disproportionate impact.
And what I would say about the Spoiled Child launch, and again, speaking to the power of our platform, that we spent $20 million upfront to launch that brand. Like I said, it'll do around $150 million of revenue today. If we were to acquire it today, you know, multiples, transact, you know, acquisition multiples in our space are between five and ten times revenue. So you'd be paying between $500 million to $1 billion to acquire that business, for something that we were able to do in-house for $20 million. And again, for those that know the consumer space, they know that consumer platform companies really struggle to launch new brands organically.
So our proven ability to do that with Spoiled Child, our ability to do that with incremental new products, we'll do it again with Brand 3 and Brand 4 is a real differentiator for us and a very strong IRR for us to continue to drive growth. International is a big opportunity for us. We've barely scratched the surface on what that can be. You know, we think that could be about half the business. It's certainly a larger portion of the business for our competitors. Our approach has been because we've constrained ourselves to this 20% revenue growth and 20% EBITDA margin, we have to prioritize where we want to grow. Oran, our CEO's, you know, mantra has really been no easy wins.
It would be very simple to open up a website and, you know, sort of boost in any given market $50-$100 million of revenue sort of, without much effort, and we have those opportunities in the future, but what we've decided to do instead is prepare international markets by opening up local websites, local distribution, local language, local creator, everything, and then selling a bunch of test orders, so thousands of orders, where we can then see how the business performs, you know, over time, make sure everything works and shut it down, so what you'll see here is the 12-month LTRs, lifetime revenue divided by CAC of a bunch of international markets that we've tested. The size of the bubble is the size of the market, and the index to one, which is the LTR to CAC that the U.S. generated in 2019.
And you can see how the U.S. is performing in 2023, which is no easy feat. But you can see that these markets all perform at or above, for the most part, where the U.S. did in 2019. And these are large markets. Some of these we've actually opened. We internationally do operate in U.K., Canada, Germany, Australia, in addition to a small business that we have in Israel that includes stores in Israel and online in Israel, which is separate and not on this page. But we have additional geographies with large, you know, population pools that are just sort of waiting in the background for us to go. Finally, I'd say that everything you see on this page, you know, it was from a year ago, within the last, you know, 12 months that we have the data.
But in 2024, we actually tested some large developed markets, developing markets, I should say, versus these developed markets on the page where we also got very good performance. So we're super excited about international. We've been slow playing it, but it's a huge opportunity for us. Let's kind of breeze through the technology piece pretty quickly. And then I think I have, if someone wants to remind me how much time I have, another 10 minutes, 15 minutes, I should chat. I don't know. You guys can jump in and tell me when to stop, but let me spend a second to talk about our technology. So first, I would say, it starts with our ability to recruit amazing people. Our R&D center is set up in Tel Aviv.
We have access to the most elite areas of the Israel Defense Forces and the Israeli tech ecosystem. Our CTO comes out of Unit 81. It's one of the most elite tech units in the Israel Defense Forces. He ran R&D for them. What he likes to say is that his unit's motto is making the impossible possible. That's the same ethos that he brings to the team and the team brings every day in our quest to really, you know, break the status quo and create the most amazing tools possible to unlock online in the beauty category. We use artificial intelligence and machine learning across really every aspect of the consumer journey. I mentioned ODDITY Labs , which I can touch on a little bit more later, but within ODDITY Labs , we're using AI for molecule discovery.
This is a capability that was really pioneered in pharma for the discovery of drugs and other therapeutics. We're using the same capability to turbocharge molecule discovery in beauty and wellness. And we think that's a game changer, but also in things like product matching. Again, you know, what happens in the store where somebody asks you what you need and matches you to the right product. The complexity of these problems really gets exponential when you consider all the factors of how somebody got to your platform, got to your website, what platform they came in on, what time of day, what their specific concerns are, what their age is, and a whole lot more. And these complicated problems become very well suited for machine models to figure out rather than a rules-based algorithm that a human put together. And that's what we found.
And then, you know, another important area where we're using machine models is the user journey itself. So think about what a store format is and how much, if you're in a brick and mortar world, how much a store format really drives store productivity, sales per foot, and the success of a retailer. For us, we're really building the store around her as she walks through based on the data we have about her. So we don't know what the assortment's going to look like. We don't know how we're going to merchandise it to her. We don't know what her experience will be. But we're changing all those things that actually the model is making those decisions on the fly, in order to deliver the best outcome, the best conversion outcome. And that's also been really successful for us.
Let me take a second to talk about vision and go into a little more detail in Brand 3, and then maybe I'll pause there. So, we have the largest database of unique images in our industry, like in, and nobody even comes close. We have around 10 million unique images. At the time of our IPO last year, we had around three, which just goes to show you how much pent-up demand. Seven million people over the last year or so have given us a scan of their face. And we use these images to learn about our user base, figure out, you know, segment this group and determine how to create products and tools that support them, and also to, you know, train models to deliver better outcomes.
Let's talk about Brand 3, which I said is a telehealth platform for medical-grade skin and body issues, including acne. One of the challenges with acne is that the problem often gets worse before it gets better, so imagine you go to a dermatologist and they serve you, your face might get really red, irritated, dry, and often for patients, they just get frustrated and churn because they're not happy with it and they don't want to wait another couple of months to go back to the doctor. That's a real problem, and in fact, I'll even take a step back. This whole area of medical-grade skin and body is a huge challenge for our user base. Over half of our users suffer from some combo of acne, eczema, hyperpigmentation, so that's like the perfect area for us to start hunting.
But also importantly, not only is the population of the addressable market big, but the satisfaction levels are extremely low. People are really dissatisfied with the experience of having to go to a dermatologist, or of having to go to a drugstore and find something that's not effective, and then finally, where we look is for areas that are going to have economics that really work for online, which means high AOV, high product margins, and high replenishment rates. So this is like a great area for us to hunt. But in order to do it, we're building a bespoke set of vision tools. The first one will allow us to really assess, in the case of acne here, a person's condition.
So you can see here our vision tools map out full lesion maps, where they identify lesions, understand inflammation, severity. Actually we're at around 85% accuracy in determining severity relative to a human doctor here based on our vision tools, and not only assessment, but also tracking where you can see how those lesions evolve, how the inflammation scores look over time to understand progress. And then one more thing I would mention is one of the newer tools that we've been able to bring up to a great point is our what we call predictive view. On the bottom, what you'll see is an actual patient and how she performed using our products over 12 weeks.
On the top, you'll see her original picture, but using large language models and our data set, we can actually understand how her condition will evolve over that 12-week horizon, which is really important for expectation setting, help her know what her journey is going to look like, ultimately drive coaching and mitigate churn, and the way that we are able to do it, and one of the breakthroughs of these, you know, foundation models that are available for us to use right now is it allows us to build products much faster and for a lower cost than if we had to do it all on our own from scratch.
So in this case, we've combined our lesion mapping capabilities with Stable Diffusion model here that can help give us a very realistic visual for that user on how her journey is going to look. On the right side, what you'll see is if you just ask Stable Diffusion, "Hey, will you please clear up her acne?" They'll give you something that looks quite photoshopped. But in the middle version, you have our model where the only thing we're dialing up and down is her inflammation, her lesions. So we keep her freckles, we keep her wrinkles, we keep the sunspots, but we provide an accurate mapping of how she'll evolve over the course of treatment. And that's Brand 3, that's a little bit about Brand 3. So maybe I will pause there. I hope that's good timing. It is.
Rarely have I been blown away by a small cap company like I've just been blown away by you. Wow, what a statement. Thanks, James. You have a large end market. You have obviously an incredible talented team with the highest level of intelligence directed with technology to providing solutions. You have a scalable business model and you're just beginning. You know, you look at cosmetics as a man and, you know, you, I did not expect to be blown away like this. One question would be, why separate brands, when you had such scale with IL MAKIAGE? I think I know the answer, but I want to hear it in your words. Yeah, the way that Oran would answer this and the way he thinks about it is, I love Mercedes, but I don't want to buy a mattress with it, right?
You have different brands that have different sort of, that stand for different things. So for example, for Brand 3, where we're really doing something medical grade, IL MAKIAGE, which is a maximalist color cosmetics brand, would not succeed, and given the surface area we're trying to cover is so vast, there's no, it's, you're much better off having different brands go at it, different customer segmentations, different brand equity. And candidly, that's how we've seen a lot of consumer categories evolve, right? As you have sort of segmentation of different brands. I mean, I think the category is way overly fragmented relative, and that's a function of distribution. That's a function of Sephora and Ulta trying to drive newness and drive fragmentation. So it's, it's more fragmented than sort of the natural state.
And we think because of this, we'll be able to build the largest beauty brands in the world. IL MAKIAGE already at $500 million after only six years is pretty mind-blowing. That being said, different brands can serve different purposes, and we think we have more success. There's also culturally, internally, we value competition among the brands, push each other to get stronger, better, faster, innovate more, inspire each other so that we never get lazy. One of the biggest, and this was a question I got from one of my one-on-ones earlier was like, what are, you know, what are some of the biggest risks to your business?
One of the things that our CEO talks about is never losing our startup DNA, never ossifying into corporate culture, always running fast, working like crazy, failing fast, you know, going after big dreams and taking big swings. I think that setting up, you know, sort of different brand structures so we never fall in love with our business, we never get lazy, we're always working hard to beat ourselves and disrupt ourselves over and over and over again is something that from a cultural standpoint is really important here. SpoiledChild is not a name I would have chosen. Clearly, it's a good one. IL MAKIAGE, I don't necessarily get, maybe it's the makeup in another language. You clearly, you know, now it's Brand 3, soon to be announced, maybe a name when you launch it.
What is your thinking behind how you name these brands? We go, I mean, IL MAKIAGE is a little bit different because that brand was, it was a distressed acquisition in like 2013. It was a small Israeli brand that Oran and his sister bought together and basically created, they used that time to build amazing product. There were stores in Israel, called 20 stores, like build profitable stores and learn about the beauty customer mentality, and it was from there that they jumped off and brought IL MAKIAGE to the U.S. as an online-only business and now globally as an online-only business. So I think the brand naming in that case has a history. For SpoiledChild, Brand 3, Brand 4, we go through enormous sort of brand development work in-house to make sure, I mean, we have a couple things that matter.
One of the biggest ones is, you know, our team really believes brands should stand for something because if you don't stand for something, you don't mean anything. So our brands take a bold point of view. They have strong brand equities and the name is a part of that process. ODDITY Labs was an acquisition, if I, that's right, I believe. So when I was reading the materials earlier, it didn't jump out at me with the magnitude of its importance to you. Yeah. But after hearing you, there's a magnitude to it that gets you into almost the medical world. So could you put some context around who these people are, what their relationship is, kind of age, how long they're tied up, et cetera, because clearly, I mean, this thing could just take off in the acne space. Yeah, and you wouldn't want another competitor. Yeah.
I really didn't go into labs, so thank you for giving me that question. I'll use it as an opportunity to just give a little bit of background. We acquired Revela as a biotech a year ago. The acquisition closed in May. The team was, call it 10 people, including three founders, and they're all PhDs out of Harvard, Princeton, et cetera, who were working, using this new, you know, digital biology as a discipline. Artificial intelligence for drug discovery, robotics, synthetic biology, all of these, new capabilities, which are, again, the golden age, in biology right now. Our, you know, pharma is running at them with tons of investment, full force. Actually, funny, aside, I heard an interview with Jensen Huang, the, you know, CEO of NVIDIA a couple of years ago.
And when he was asked, what part of AI is most exciting to you, he said, the language of proteins, the language of cells, understanding that. And they've made investments, for example, in a company called Recursion, ticker RXRX, which is using digital biology for drug discovery. So this emergent capability is the future. It just has never been an area of focus for anyone in beauty. And the founders of Revela saw an opportunity, hey, we have a huge market here. Why don't we try to run after it with these capabilities? And that's what they, that's what they did. That's why we got so excited about it. And actually, this is the chart that really sort of encapsulates the opportunity. What you see here, it's the INCI database.
So this is actually registered new ingredients in hair and in skin that are registered in the database. All right. And in 2011, only seven new ingredients since then have been registered in hair. In 2015, since then it's five, sorry, in 2015 in skin. So almost nothing. And as you think about it, the products on the market today, minoxidil, retinol, hyaluronic acid, it's the same stuff my parents used. And if you were to look at pharma, these charts would be in reverse, right? We are seeing so much proliferation of innovation and novel molecule discovery. So our industry has been on the sidelines with almost no investment in this area, which is really the opportunity to truly, truly solve customer pain points in a way that's never been done before. And so with Labs, we set up this biotech.
Our lab is in Kendall Square, right between Harvard and MIT. We're recruiting top doctoral talent in that area. We announced in September that two of the co-founders, two of the three, had left, and that we were, you know, moving on without them. And the reason for that was they were amazing guys, built a great little startup, but wanted to run like an academic lab, okay? Full freedom of scientists, no timelines. And for us, we need a factory. We need something that, number one, there's systems and protocols, and number two, where you can build. We want a lot of shots on goal, right? If we're trying to cure hair loss or address hair loss, we don't have just one team sort of messing around with beautiful science to go at it.
We need more shots on goals, more teams doing more things, but also we need systems and protocols to make sure you don't wake up in two years and the molecule doesn't work, so transitioning from like an academic lab to a real factory output has been kind of the next phase that's been going on over the last few months. After the founders left, we didn't lose a single person from their team, and in fact, we've been able to scale the number of PhDs and scientists even more. So we're really. We have a new Chief Science Officer, Ido Bachelet, who is extraordinary. He has an unbelievable academic background, but he's also built and scaled large biotech labs in the past, so we're adding to the team.
We're adding, you know, capabilities from how we run our tech business, including, again, these processes and protocols to get people to move fast, sprints, and really drive to an outcome, and we're very excited. Man, who would think a cosmetics company would have all these PhDs? Yeah. Takes Estée Lauder in her kitchen to another level. Yeah. We have a couple of online questions. I've been hogging the questions. Let me read them. First one is, you indicated you thought your first two products could achieve $1 billion in sales. What are the drivers and what is the timeline for achieving that revenue? IL MAKIAGE is $500 million a day, SpoiledChild is $150 million. We have three, three real drivers. The first is we are a tiny market share of a very large category and we continue to, our, our existing products, continue to grow.
And so we'll continue to drive growth and market share with those products. Number two is launching new products. Again, I think you can see here, this illustrates it well. Our core products, our existing products are growing and we're layering new product franchises on top of that. And then finally, it's international. Those three levers alone, we think take us easily to $1 billion. Next question online. What type of contribution do you expect from brand, Brand 3 and Brand 4 next year? Will you market Brand 3 or 4 differently given that they seem a bit different from IL MAKIAGE and Spoiled Child brands? Will they need prescriptions? Yeah. Okay. That'll be a good one. So revenue contribution from Brand 3 and 4 will be immaterial. Cost impact will be material. They're small, you know, they're just getting started. We have a much bigger business today.
And before we really scale Brand 3 , we're going to figure out all the LTVs and what works, and we'll wait until we have that equation before we start really pouring acquisition dollars into it. So that's a big driver of why we are calling for 20% EBITDA margin next year. We're sort of in the low twenties this year. We are modeling EBITDA margin compression year over year, because we need to carve out enough space for all of the pre-brand launch expenses and for the brands to be loss-making at first. Will we market the same way? The answer is yes. Just today, similar to today, how we find you and pull you into an IL MAKIAGE data funnel. We found you on Insta, we found you on TikTok, and we pull you in onto a website. That's all really the same move.
What's different for Brand 3, though, is the post-purchase app, which we're really excited about. It's another source of investment for us to, you know, get the brand off the ground is building this app. But that's our way to really coach you, similar to how Duolingo coaches me in my desperate attempts to learn Hebrew over the last couple of years, and sadly, I'm not making much progress, but it's a high-frequency interaction that allows us to support compliance and actually learn a lot more about our user. We're really excited about occupying that space. And then finally, yes, Brand 3 will be a combination of over-the-counter and prescription, mostly over-the-counter, less prescription. We do need doctors to support writing prescriptions in the backend, but it's not part of the interaction, the actual interaction.
So you shouldn't think about this as like an Amwell, hey, I need something, I'm calling a doctor. This is, you know, we have the algorithm, our algorithms determine what product you should be matched with. And then on the backend for prescription product, a doctor will validate it and write the script. Interesting. Will you have any economics with a referral fee to the prescription drug company? We will have to pay the prescription network, the doctor network for their services. But there's no, I don't think referral fee is the right way to talk about it. I think that's something different. We're getting towards the end, but I want to ask the last question coming in. Does the company have any brick-and-mortar stores?
Only, we have around 40 stores in Israel that's separate from, so, 95% of our business, and we disclosed this on the last earnings call, about 95% of our business is direct consumer sales off of our website, not to resellers, not to Amazon, not to other marketplaces, but purely off of our website. The remaining 5% is our Israeli business, including the 40 stores, the online sales in Israel, as well as some sales we have to marketing affiliates. So it's a small part of our business, brick-and-mortar. We have no, maybe to follow the thread on that question, what are your plans for stores? We have nothing against stores. We have a nice retail business that we obviously run where the business started, but there's no immediate plans and no urgency. It's not off the table. It's just not a focus for us.
Lindsay, thank you so much. As I said, I am blown away and I am so excited. This is what the.