Hello, everyone. I'm Bonnie Herzog, Goldman Sachs Beverage, Nicotine, and Household Product Analyst, and joining us today is ODDITY CFO Lindsay Drucker Mann, and she's served as a company CFO since September of 2021. Now, ODDITY has made significant strides towards evolving the beauty industry through the use of AI and other technology to improve the user experience, all while maintaining a strong growth and profitability profile. It's been incredibly impressive, so it's really my pleasure to welcome you, Lindsay, to our retail conference, so thank you for joining me today.
Thank you.
I guess I'd like to kick things off just with a high-level overview of your company, the beauty industry at large. It's really seen an increase in online penetration over the last few years. So could you talk us through your time as CFO and what you've done really to be able to operate in the beauty DTC industry in a way that really others haven't?
Yeah. Thanks. Thanks for having me. ODDITY today is, we believe, the largest Direct-to-Consumer beauty platform in the world. For the 95-plus% of our business that runs off of our tech platform, it's all Direct-to-Consumer, all online, off of our website, no sales to retailers, third parties, marketplaces. And as you roll forward, our earnings algorithm for next year will actually be approaching $1 billion of revenue. So it's a very, very sizable business. We have two brands today going on three. Our first brand, Il Makiage, which we launched in the U.S. in 2018, crossed $500 million of revenue last year. It makes it one of the largest beauty brands in the United States. And it's also growing rapidly all over the world. We have our second brand, SpoiledChild, which we launched three years ago. And this year, it'll cross $200 million of revenue with nice profitability.
So you have two brands consecutively really proving out the power of our platform. And then it's really exciting that we're in the midst of launching our third brand. We're already in soft launch mode now. And we have a formal launch for Q4. That's our first foray into telehealth, starting in dermatology in areas like acne, eczema, hyperpigmentation, where we know our customer actually has challenges with these pain points, and then expanding into other domains over time. So this is what the platform looks like. When we started in 2018, the view was, the consensus view was, beauty does not work online. You probably remember those days.
Yeah. Yeah.
Other consumer categories had really exploded online, and beauty had not. And the view was, the customer wants to be in store. And as our founders launched in the U.S., they thought, like, how is it possible? Beauty was number two, number three top category on Insta, on YouTube. The customer was very online. But the view was, she starts her journey there, but then she has to finish it in store. And the best way that I can describe what they realized, the insight of what goes wrong and why it wasn't working, is to take you to a Sephora, right? And imagine that you walk in. You have so many products, brands, ingredients, beauty routines, tones, undertones. It's an overwhelming experience. But the amazing thing about a Sephora is that somebody comes up to you, and they do three things. Number one, they ask you what you need.
Number two, they match you to the right product, and number three, they show you how to use it. We're at the retail conference. This is like retail 101, right, so you compare that to the experience that beauty companies were giving consumers on their websites, so you'll go to brand.com. Here's 100, maybe 1,000 SKUs. You figure it out, right, and the customer doesn't know, and so she leaves, or maybe even worse, she takes a guess, and she guesses wrong, right, and everybody has a bad experience, so the insight from our founders was, actually, we think that you can replace those store associates, and instead of a person asking you what you need and matching you to the right product, we have machine models that do it. We have video on demand that shows you how to use it.
And that was the initial unlock, is how do you use technology and data to replicate and improve upon the store experience? And it requires an entirely different way of thinking. Culturally, we are a very unique kind of business, very focused on maintaining our startup culture, moving fast, failing fast, taking big swings. But importantly, there is not a single convention or part of the status quo that we're afraid to challenge and transform. And we're always doing that. And it's created a very, very different model. I'll say just one more thing in terms of what has driven our success, is not just understanding the demand dynamics of the industry, where the consumer wants to shop online. We have to provide the tools that enable it, but also how the unit economics work for online.
Unlike most, the vast majority of other Direct-to-Consumer companies, we have been very profitable for a long time. You talked about that. This is really instilled in the fabric of the company. In order to make unit economics work for online, you have to have, among other things, great replenishment cycles. That has meant for us that the products that we create have to be products that she loves. We don't launch any products unless in our blind studies. We are the top performer relative to the best performer on the market. This makes us prestige, always focus on high efficacy, high performance, and in product categories that naturally have great replenishment cycles that she'll continue to come back to again and again. What I'd say has changed in the last four years is, number one, we've scaled Il Makiage in ways nobody thought was possible.
So the business, we were around 40% of revenue will be in skincare this year for Il Makiage brand. That was a color brand. And everyone said, you cannot transition a color brand into skin. We did it. We only launched skin in 2022. Also in 2022, we launched our second brand, SpoiledChild, which was a resounding success. It's catch lightning in a bottle once, it's luck. Do it twice, and you can show the power of a platform. And then the third thing would be, in addition, we talked a bit about Brand 3. Obviously, we're very excited about what those capabilities bring. But I would highlight that we have embarked on kind of a second phase of our industry transformation journey, which was we acquired a biotech.
Whereas we started the first part of our journey transforming how users shop online, in terms of the types of ingredients we use, everybody in the industry is using the same ingredients, the same molecules, right? Remixing, reformulating. We're very proud of the products we create. We always focus on high performance. But if you can actually discover proprietary novel molecules, novel ingredients, and delivery systems that actually perform not just incrementally better, but head and shoulders better than what the rest of the industry can do, you can create winner-take-all products. And that's our plan with ODDITY Labs.
Yeah. It's been incredibly impressive, and because of that, it's been about nine consecutive quarters of consistently beat and raise since, essentially, the IPO.
Yep.
So everything you just described is, I assume, giving you the conviction that this is sustainable and this growth will continue. But I'm curious, as you mentioned something of how the consumer really enjoys and likes your brands. And they keep coming back. Your repeat purchase is quite high. Do you foresee that continuing to drive a lot of this, or how much is going to come from new user acquisition?
Yeah. Repeat is an important part of our business. Last year, it was over 60% of our revenue came from repeat sales. Again, in Direct-to-Consumer, acquisition costs a lot of money. Repeat, you don't need much OpEx to generate that repeat sale. So if we have around a 70% gross margin, you can imagine the waterfall of incrementality from every repeat purchase. And that's something that we're very, very focused on. And that's why metrics like customer satisfaction matter to us so much, because if you have a satisfied customer, then you know that you're in a good position to generate that repeat sale. The reason why we feel confident, though, back to your question on our ability to sustain, you're right, we have eight nine consecutive quarters consistently beat and raised.
We have an algorithm that we're committed to of delivering 20% revenue growth every single year at a 20% adjusted EBITDA margin every single year, and the reason why we feel so confident in it is because we've never stretched to hit that 20. In fact, we're always dialing back, so we enter the year with an arsenal of growth drivers, constantly building future growth drivers. In fact, at this point in the year, 2025 is mostly behind us because we were successful in our effort of acquisition in the first half of the year, and now we have this kind of backlog of repeat that will sustain us through the end of the year, and so the teams have pivoted their focus from 2025 to 2026. And of course, there are many members of the team that are focused on 2027 and 2028.
But 2026 is now what all the teams are working on. And we have a lineup of growth initiatives in store for 2026 that is the strongest in the company's history. We can talk about what some of those things are. We have two new brands in 2026. We've got new geographies. We have tech product innovation that we've tested. It's really exciting. We have physical products that we'll be launching that also we're really excited about. So we always go in with many growth drivers to support us. We know we've never used even close to all of. We always leave a lot more on the table that we can come back to in the following year. And the underlying profitability of the business today is much higher than the 20% that we'll print because we're investing so much in future growth.
So we have a lot of ways to achieve those targets, even as we continuously invest in the future.
And that kind of brings me to my next question. You've touched on this, is Brand 3 and then ultimately Brand 4. It sounds like you're still on track for Q4 on Brand 3. And you mentioned the soft launch. So love to hear if you can share what you're seeing in the early days on that soft launch of Brand 3. And just maybe a little bit more color on how you can scale those brands. And is this something where you're going to leverage the relationships you have with the consumers that are purchasing Il Makiage and SpoiledChild, or is it kind of going out and also seeking new consumers?
Yeah. And I just want to add one more thing to my previous answer that I missed that I just want to make sure I got out, which is the other reason we're so confident in growth is that the market is enormous and the heads-up demand is so strong, right? So you've got a $600 billion global TAM. We think half of it moves online, right? And we are so dominant in Direct-to-Consumer. I mean, as you think about how every beauty company that you'll talk to at the conference today or yesterday that we've heard from, they will all say online is a super important channel to us. And it's a very different time than when we launched back in 2018, where it wasn't a focus. Now it's the focus, right? So it's an enormous channel. It's growing in an enormous market. And there's so much to do.
We believe that our competitors just do not have the right talent, tools, or mindset to achieve what we are achieving. I think having this super attractive, profitable, and lucrative TAM that's so large and growing, where online is so important, and there's many, many different categories for us to innovate in, is another reason why we feel so optimistic, which is a segue into many other areas to innovate in. Brand 3. Brand 3 is a telehealth platform starting in the dermatology space. We talked about areas like acne and hyperpigmentation. It's a natural place for us to start. We have a big color business. We sell a lot of foundation. We're the number one prestige foundation brand in the United States, number two in concealer, number one in primer.
So we have a lot of these customers who are coming to us for products to conceal their pain points. And some of those pain points are things like acne and hyperpigmentation. In fact, in our user base of over 60 million individuals, around half of them have some combination where they suffer from acne, eczema, hyperpigmentation. We know these are real problems. And when I say suffer, these are areas where people struggle with self-confidence, and it matters a lot. So it's a natural starting point for us because we already have the user. We've just never, in the past, we've been able to help her obscure her issues. We've never been able to give her the tools to actually get rid of them. And so now, with our entrance into medical-grade and prescription space, we can finally do it.
After dermatology, though, our ambitions are to expand into other medical domains. And we already have those projects in the works. And this is, again, like another enormous TAM, where things that we look for, big TAMs, where satisfaction is low, and this is true, where satisfaction is low and where our technology can solve a real problem, where there's been market failure and we actually have a solution to fix it. We'll have more to say on Brand 3. As you said, we're on track. Q3, we're in soft launch mode now. We'll have our formal launch in Q4. And then Brand 4 is on track for 2026.
And there's still not too much color on Brand 4, correct? I haven't missed anything. You still haven't alluded to what that might be.
We'll tell you more as we get closer, yeah.
And then sticking with Brand 3, like you touched on this, it's prescriptions also. Maybe talk to us about how you're going to be working with these medical providers that are going to be supplying the prescriptions and how you're going to facilitate that, how that kind of sharing revenue, profitability, etc.?
Yeah. So, Brand 3, we'll give our customers access to both prescription products and non-prescription products. We expect that non-prescription will be a bigger part of the business, but the prescription piece could be 30%-40%ish. Obviously, we have a lot to learn. But in general, that's how we're thinking about the composition. The users can go through the experience without ever having to speak to a provider. It can be fully asynchronous. We have providers that are available if they want to speak to them. But actually, it's a very seamless experience where, from start to finish, you're interfacing with our website in order to do and support assessment for something like acne, for example. You'll have vision tools that we're introducing for acne grading, lesion counts, lesion analysis, obviously, similar things for things like hyperpigmentation, hyperpigmentation detection, what types of hyperpigmentation, whether it's sunspots or melasma.
All of that stuff is enabled by a new suite of vision tools that we're introducing. We'll have other tools, something we call predictive view, which is, for example, in something like acne, the journey can be several weeks. Oftentimes, the problem can get worse before it gets better. Part of the challenge that others have had in this category is that the consumer can get frustrated and churn. And so we've developed tools to help them understand, here's what your journey will be like to appropriately set your expectations. So if you're not cleared up, for example, by four weeks, you're not saying this doesn't work. We have to have this interaction to help them understand it. That's also where our coaching post-purchase app comes into play.
Think something like Duolingo, where it's a high-frequency interaction that really helps hold your hand all the way to an outcome, not a paid-for service. It just comes with the product purchase. But that type of interaction where you're supporting somebody in an objective all the way, in our case, through to clarity. So those are some of the unique tools that we're building in addition to the product portfolio itself, which I'm super excited for everybody to see. We're putting a level of innovation and a suite of innovation in dermatology that I'm not sure that the category has seen in years, decades, maybe if ever. And part of what comes along with that is a very big focus on customization. There's different types of acne. There's hormonal acne. There's other types of acne that are non-hormonal. You have people who are very sensitive, not sensitive, just different parameters.
We did our deep work again, starting from first principles on the category and the customer. You have a lot of ways where personalization and customization of a treatment regimen can make a huge difference in things like satisfaction, and so that's another big focus for us.
Okay. As I'm listening to you and thinking about this, because it sounds fascinating but involved, it seems like there's more hand-holding. So I'm thinking about that from the perspective of your other two brands and the margin profile we can ultimately expect from Brand 3. Will it be comparable at scale, or will it be diluted by chance if there's more expense associated back-end to help facilitate that, or given that it's skincare, etc., the margins are going to be more attractive?
All of our brands are built to support the company-wide 20% adjusted EBITDA margin. There's a hard line under that. In the beginning, we will have a lot of investment for Brand 3. We talked about that on our last earnings call, where we expect to see around 700 basis points of EBITDA margin compression in the first half of the year, in part as we get Brand 3 up and running. The brand will be loss-making at first, which is the case for all Direct-to-Consumer brands. It was the case for Il Makiage. It took us about a year and a half to get to break even, which was an amazing outcome at the time. SpoiledChild, it took us about a year. There will be some period of time where the brand is loss-making until you have sufficient repeat.
Remember, the repeat customers are what really drive the profitability. And we believe that based on the differentiation that our entire suite of products offers the customer and its efficacy in solving their problems, that we'll be able to generate a really nice repeat business here.
Okay. And then thinking about your algo and going back to Il Makiage and SpoiledChild, should we also expect to see further innovation on those brands? Is that what you're sort of alluding to as well for next year? Because I guess I'm thinking about the runway for both of those brands. And how do we think about the growth for those brands, U.S. versus international? I know international is still relatively small, but growing rapidly. Is that going to be a huge driver of growth for those brands?
Yeah. International is one of, in particular, for Il Makiage. SpoiledChild is still in test mode in international. But Il Makiage, we already have markets where we're officially launched: Germany, Canada, U.K., Australia. And then we have other markets around the world, but in particular in Western Europe, where we have done a lot of good work. And we're conducting larger-scale tests there now. And we think that they're exciting markets for us to actually open. We talked on our earnings call about how international for the first half of the year was around $85 million of revenue, all right, up over 40% year- over- year. And of that 85, only 10 was from some of these new test markets, right? So the 75 is from markets that we've officially launched in. And the balance is from markets where we are barely getting started.
But we know, based on the information we're gathering, that there will be exciting markets for us for the future. Just taking a step back, though, yes, there is a lot of innovation and growth investment in both Il Makiage and SpoiledChild. So Il Makiage, we've committed to $1 billion of revenue by 2028. In order to do that, number one, we're continuing to grow our core business, which is the markets where we're already in, mostly in the U.S., and the product portfolio we have. With the large adoption of online, we have runway in our existing markets to continue to grow. Number two, skin is a really important driver for us. We only launched it in 2022. This year, it'll be around 40% of Il Makiage brand revenue. And there's more to go. And then the third piece is international.
For us, at the ODDITY level, international is around 15% of revenue in 2024. For our big competitors, it's like 70%. So there's just very big runway there. We can see in the international markets that we operate that the demand drivers are similar. The consumer wants to shop online. You probably know this better than others as a consumer staples analyst. There are some product categories that really work well as global brands and others less so. And beauty is among the top of the list in the types of product categories that can cross borders. So there's this natural tailwind that we have already in terms of market structure in doing it. And it's not just theoretical.
What we've actually seen in the markets where we operate already in places like the U.K., Australia, all of the existing markets we're in, we believe we're the number one or number two largest online business there. And that's without us putting a huge part of effort into doing it. The other benefit for us in online is that it's very asset-light. We don't need to open an office, have boots on the ground, put a lot of CapEx in place in order to launch a new market. A lot of it is done via software. It's done via our website. And we've built the infrastructure that allows us to be very, very agile and nimble in terms of how we set those markets up. And so nice, a creative source of growth for us.
So speaking of that, there's really nothing then that prevents you from accelerating growth internationally other than what you and I've just talked about, more of this disciplined growth philosophy that you have. Maybe talk to us a little bit about.
I'm glad you asked it because we first launched in the U.K. in 2020. And here we are in 2025. And between then and now, we've done a ton of infrastructure building in international markets and testing to put us in a position that when we were ready, we could actually accelerate our growth there. We had decided up to that point to slow play. We like to always have different levers to drive growth. And then depending on our strategic priorities in any given year, we'll focus on some specific ones, and others we'll leave for the future. And international is a great example of something we have known for years was going to be a big market, a big opportunity, revenue, and profit opportunity for us that we were just held off on. We were in preparation mode.
We didn't want to commercialize it at that point in time. In 2024, we made the strategic decision that in 2025, we would have more focus on international. Great outcome for us for the first part of the year. Really proved to us things that we believed through our testing was the case. But it's always nice to see it actually come to reality. And again, as you described, we have the ability to pivot resource allocation to turn these things on and off, which we're always doing. But as we look into 2026 and beyond, we think international will continue to be a nice driver for us.
I don't recall. Do you have a target of how big international will be as a percentage of your sales say in the next three years? I mean, if it continues, it's up to you if you decide to turn it on faster.
We don't have a three-year target. I mean, again, it's only 15% today. So we don't have a target. But for Il Makiage, for example, the international business could easily be as big as the U.S. business.
Yeah. Okay. I want to pivot a little bit because we haven't talked too much yet about ODDITY Labs and the role it plays as it relates to innovation. You touched on the molecules and discovery, and that seems like a huge competitive advantage and core capability. So maybe talk a little bit further about how you're leveraging that. You've built out ODDITY Labs. How much more investment is going to be required to kind of fully fund it at this point, and now you're just going to benefit from some of the findings.
ODDITY Labs is an absolute game changer for us. It's the biggest use of time for both our CEO, Oran, and our Chief Product Officer, Shiran. We really believe in it, and I think I mentioned earlier, whereas up to this point, we have been far superior in our approach to online and the distribution side versus others. We have been great in terms of product based on our focus, but you can only be so much better if everyone's working with the same ingredients and with the same OEMs, which is how the industry is set up today, and to the degree we can identify proprietary molecules and delivery systems to create products that are head and shoulders better than what's on the market, these are, again, winner-take-all scenarios and game changers. We know the technology works for pharma.
Pharma's grabbing this new innovation, things like digital biology and using artificial intelligence for molecule discovery, really grabbing it with both hands. And in our industry, first of all, pharma isn't focused on the beauty and wellness customer. And second, for whatever reason, your incumbents have not been focused on this side of R&D. And in fact, a lot of the R&D lives in third parties and sort of leaching out of the industry. And to the degree there is R&D focus, it's been mostly about new formulations for existing ingredients. But we think we can do a lot better. We know that the science is there. And as distinct from others, culturally and operationally, we are determined to figure it out. Last year, so we acquired Revela two years ago. Last year, we made some changes in the operating structure there.
The goal really to transition the business from what was more or less an academic research lab to a highly commercial factory output machine. So that has entailed a couple of different things. Number one, scaling the teams. So we're at around 70 scientists today, building to 100, multiple teams working on similar problems, same problems. And in addition, so more shots on goal for us operationally. And then number two, implementing processes and procedures and protocols very similar to how we think about things on the tech side. These systems and controls that ensure we're moving in the right direction and you don't wake up in a couple of years and the molecule doesn't work. We feel like we're in a great place today relative to where we were even a year ago in terms of operational capabilities. And the development pipeline is really excited.
We think about things sort of in two buckets. There's molecules for nearer-term delivery. We have a couple of molecules that will be coming out with Brand 3 and a couple of others for Brand 4. Those are for nearer-term commercialization. Then we also have things with longer timelines for further out. We expect most of these will fail. You need like a 10%-20% hit rate to really change the world. That's our plan.
Yeah. And listening to you, it sounds like there's a lot of change, excitement. Complexity also has increased. So how do you think about managing all of that to kind of minimize execution risk? And then in the context of all this innovation, how do you continue to push forward on new innovation with Brand 3, 4, etc., but also making sure you have enough innovation on existing Il Makiage, SpoiledChild to sort of prevent any fatigue there for the consumer, balancing all of that and prioritizing innovation?
We're constantly innovating across the board. I think it's a cultural thing. Within the organization, we're always looking to the future. We're never resting on our past success. We had 2024 was an unbelievable year. Our view is that the success of 2024 was based on things we did two years ago, so there's this innovation and growth mindset that is instilled across the organization. Yes, there's complexity, but we have a lot of structure in place to support it, and we're very focused on teams and culture. We have to recruit amazing people. I think, as you know, we don't recruit anybody from industry. We don't hire folks who worked at other big beauty companies because we believe if you really want to change an industry, you can't have people who believe they know how it works.
Cold way.
Yeah, and so very much culture and operational driven.
Okay. I want to go back to something you mentioned and you touched on in your calls, the investments, the first-half expectation. How do we get comfortable with, because of whether it's Brand 4 then that's going to come out later, will that investment spending level, will it remain even in the second half of next year, or is that kind of kicked out? How do we think about the phasing of the investments required for?
What we've said about 2026 is that it will be an algorithm year in terms of 20% revenue growth and 20% adjusted EBITDA margin. The only thing that we did call out was a shift in timing of spend where it's more front-loaded. We'll make up for that in the back half of the year. On a year-over-year basis, EBITDA margins will be flattish because we'll deliver around 20% EBITDA margins this year and around 20% next year. That's true. That's how we're thinking about, as you think about your models, that's 2027, 2028, you should be thinking about 20% type revenue growth and 20% adjusted EBITDA margins.
Okay. So that's kind of front-end loaded, managed that way, and then with continued drivers on the top line.
Yeah. And I think that for 2026, Brand 4 pre-launch expenses and launch expenses are already embedded in that view. So that's not changing.
That's more in the first half of 2026, the expenses too and considered.
It's part of the EBITDA margin behavior we described, the 700 basis points of compression. Part of that is Brand 4 expense.
Okay, so the ramp's going to continue, and the whole point of this is, again, going forward, 20% plus top line, 20% adjusted EBITDA margin consistently in this as you're managing it.
Yes. Yes.
Okay. One ask, sorry, about tariffs, obviously topical. Maybe update us on this situation, which, God, it's been incredibly fluid. Maybe walk us through the exposure you have, imports onto the U.S., and I know your manufacturing footprint. Maybe just update us on the risks there.
So first of all, our gross margin structure is such that it's not a big impact as a percentage of revenue because these costs are small as a percentage of revenue. We have a 70% gross margin, okay? About half of that would be roughly, a little less than that, would be the cost of product landed at the DC gate. All right. So before we do outbound shipping, before we have fulfillment costs, all that kind of stuff. And so if you're talking about 10%-15% of net revenue would be the cost, including tariffs, including incoming ocean freight, and including the raw material. All of that is lumped in. So it's just small. The second thing is that our biggest exposure is Europe because we buy our raw material from Europe.
And to the degree we have exposure in China, and you can tell me what you think the Chinese tariff will ultimately be, but to the degree we have exposure in China, it's smaller pieces of business, for example, in parts of packaging, so it's just not that big.
Yeah, it's not that big. Okay.
And just to clarify, so we have said less than 100 basis points impact this year and similarly manageable for next year. And that's before going through a lot of the work that we're doing to offset even that type of inflation.
Okay. And pricing as far as any of the products, is there any consideration of need for price increases?
No. We are not focused on price increases to offset tariff or other inflation. We have a very dynamic approach to pricing anyway. We're very surgical about it. And we're constantly evaluating pricing all the time. But in general, we are not taking pricing to offset inflation.
Okay. Maybe one final question. I want to ask about capital deployment going forward in light of your recent convertible note issue. So maybe touch on that. And then specifically as it relates to M&A. You have made a couple of acquisitions in the past, primarily focused on tech capabilities. But as you look forward, how big of a role will M&A play for your company? And then will it be more focused on tech, or will you also consider potential acquisitions of brands?
Yeah. So first, in terms of capital priorities, our first priority is reinvesting in the business. And that's a great dollar spent for us because our return on capital is very, very strong. Our cash conversion is very strong. So I love the fact that we have so many areas that we can redeploy within the business. And a great example is SpoiledChild, less than $30 million of upfront investment to deliver Brand 3 three years hence, which is going to cross $200 million of revenue and nicely profitable. So we get great IRRs on that type of internal investment. The second priority would be M&A. And as you mentioned, we have a great track record of acquiring capabilities. Revela is a great example in biotech, Voyage81 in computer vision. We had an acquired earlier this year with Fionic.
There's more opportunities like that in biotech land and in tech land, and we'll go after those opportunistically. We would love to find a brand to buy. The platform is set up really well to plug a brand in. We've productized our tech capabilities to support our unique organically built brands. So it's easy to do. And we are looking for opportunities, but there's really nothing out there that interests us right now. Very, very high hurdle for us to do something. And then the third priority is returning cash to shareholders. We have historically bought shares back last year. We have about $100 million left on our buyback authorization. So that's still there. I describe that as opportunistic rather than programmatic. The convert itself was an opportunity for us to access really efficient capital. So zero coupon, no dilution until the stock price doubles.
I should actually say around $140 relative to the strike, and cost us roughly the capped call around 2% a year, tax deductible, so we're effectively getting paid to sit and be patient.
All right. All sounds good. Well, thank you. I think that's all we have time for. I really appreciate this. Enjoyed the conversation. Thanks, Lindsay.
Thank you.
Thanks, everyone.