Articore Group Limited

Hello, everyone. This is Paul Gordon, Company Secretary for Redbubble. Welcome to this investor call following today's release of Redbubble's FY 2021 third quarter results, letter to shareholders, and accompanying slides, which we will refer to in the webcast. With me on the line, I have Redbubble CEO, Michael Ilchinsky, and CFO, Emma Clark. Please note that unless stated otherwise, the information provided is from internal management reports. and has not been subject to audit. Mike and Emma will now speak, and then we will open up the floor for questions. Please note that this session is also being recorded. Before we start, I would like to call your attention to the safe harbour statement regarding forward-looking information in our ASX release. That safe harbour statement also applies to the Sylvester call. Now I pass to Mike.

Thank you, Paul, and a very warm welcome to everyone. We have released quite a bit of information to the market today so I'll take a moment to explain how we will be discussing these on the call today. Shortly I will hand over to Emma who will provide an overview of our FY21 year to date and the third quarter results. The information and slides that she will be referring to are contained in the trading update. The call will then pass back to me and I will be using the letter to shareholders as well as the slides in the accompanying investor presentation. This will be the main focus today and I want to use most of the time that we have to talk through our vision for where Redbubble Group is headed and the size of the opportunity ahead of us. I will also outline the aspirations for the business as we pursue our growth potential. We'll then open up the lines for questions. First, over to Emma.

Thank you Mike and hello to everyone. It's been a good start to 2021 and we are pleased to see revenue generation continue at our now larger scale. We have our eyes firmly set on and are confident in our ability to continue our market leadership by growing and scaling Redbubble. In the nine months year to date, the business has delivered marketplace revenue of $456 million, up 85% on a floating basis and 97% on a constant currency basis. Of this, $103 million was delivered in the third quarter, up 54% and 76% respectively. Consumer confidence and spending in our core geographies is still largely being driven by macroeconomic factors such as lockdowns, reopenings and fiscal stimulus. The third quarter performance is more impressive once adjusted for mass sales, which contributed only 6% to sales for the quarter, down from 8% last quarter and 21% in the first quarter. For those of you who are less familiar with our business, it is worth noting that Redbubble generates approximately 94% of its revenues in US dollars, the euros and pounds sterling. however as we are domiciled in Australia we translate this back to Australian dollars for reporting purposes. This gives rise to FX differences which have been a headwind for the year to date of 12%. This difference was even more pronounced in the latest quarter with a headwind of 22%. Year to date Redbubble has generated growth profit of $184 million up 100% on a floating basis and 114% on a constant currency basis. growth margins were 38.4% in the third quarter. We have seen margins, including shipping margins, resume to normal levels. However, growth margins carry a small seasonal headwind in the third quarter as customer returns and refunds from the holiday season in the prior quarter are processed. On a year-to-date basis, growth margins are 40.3%. Growth profit after paid acquisition for the year-to-date was $125 million of which the third quarter contributed $26 million. Paid acquisition as a percentage of marketplace revenue was 12.8% for the year to date and 13.7% in the third quarter. We saw organic demand soften in February and took up opportunities to drive additional top line growth by a paid acquisition channel. Organic demand rebounded in March, especially in the US. Operating expenses remained largely flat with only a very small uptick of 3% versus 12 months ago. Operating expenses for the year to date have grown only 16%, well below the top line and GPAPA growth. Part of this is due to the currency differential I described earlier, however most of it is as a result of not filling headcount vacancies as quickly as we had expected and as at the end of the quarter there are still approximately 30 vacant roles that we are hiring for. We would expect to fill these over the next few months and OPEX will grow accordingly. These hires will add to Redbubble's ability to pursue its longer term potential. These factors resulted in a year-to-date EBITDA of $51 million compared to a loss of $2 million year-to-date for the prior year. EBIT for the year-to-date period has also grown significantly to $41 million compared with a loss of $12 million in the prior year. This contributed to operating cash inflows of $54 million for the year-to-date compared to only $6 million over the same period in FY20. Red bubbles closing cash balance as at the 31st of March 2021 was $102 million. For those of you who are familiar with the business, you will remember that a strong holiday season in the second quarter always results in a net cash outflow in the third quarter after payments for holiday sales are made to all other marketplace participants. We now head into the next quarter where all e-commerce businesses are expected to cycle COVID comps. Whilst we are mindful of the short-term volatility this may cause, we will continue to operate the business prudently and for the longer term. With a significant opportunity that lies ahead, The focus is now on making disciplined investments that will generate top line growth and we can do this confident that Redbubble has proven the economic viability and power of its business model. We are also pleased to see our progress reflected in the public markets and it is great to see Redbubble now included in both the ASX 300 and ASX 200 market indices. Lastly, I want to remind everyone again that the business operates through a retail cycle and is therefore seasonal in nature. The first half of the financial year is always larger than the second half and this is reflected all the way down the P&L as well as through the cash flows and across the balance sheet. As such, our financial metrics should be viewed over a full financial year period. This is particularly important as we work towards our medium term aspirations and longer term opportunity. I'll now hand back over to Mike.