Thank you for standing by, and welcome to the Redbubble Group Q1 Market Update Conference Call. All participants are in a listen only mode. There will be a presentation followed by a question and answer session. I would now like to hand the conference over to Mr. Paul Gordon, Company Secretary.
Please go ahead.
Hello, everyone. This is Paul Gordon, Company Secretary for Redbubble. Welcome to this investor call following the release of Redbubble's first quarter financial year twenty twenty one trading update earlier today. With me on the line, I have Redbubble Group CEO, Martin Hosking and CFO, Emma Clark. The key information for today's update is contained in the trading update and investor presentation released to the market this morning Australian time.
Please note that the financial information and release documents and in the upcoming call are from internal management reports and have not been subject to audits. Martin and Emma will now speak, and then we will open up the floor for questions. This call, including the Q and A session, is being recorded. Now before we start, I would like to call your attention to the Safe Harbor statement regarding forward looking information in our trading update and investor presentation. That Safe Harbor statement also applies to this investor call.
Now I will pass on to Martin.
Thank you, Paul. I'm going to keep my comments brief as we only spoke a few weeks ago. What we are seeing in Q1 reflects what we had foreshadowed with the year end results, namely that Redbubble is moving into a period of rapidly increasing profitability as the business scales. The scaling reflects the fundamentals of the business, our strong margins and low marginal OpEx, underlying solid growth and the acceleration brought about by the COVID crisis. Our challenge and opportunity is to extend the gains created by this period of accelerated growth and ensure Redbubble is the defining global e commerce leader in the new commerce category of more relevant and meaningful products.
We must be willing to both innovate and invest, which ensures this is achieved. We are much closer to the start of the game than the finish. After Emma runs through the numbers, I'll comment further on this matter. Over to Emma.
Thanks, Martin. The shift in consumer behavior due to COVID, which started in April, has continued through to the end of the current quarter, resulting in the strongest quarterly financial results in Redbubble's history. Marketplace revenue came in at $147,500,000 up 116%. Strong margins and efficient paid acquisition translated to an ever stronger set of numbers as we progress down the P and L, and I'll speak to more detail on this in the next slide. Given we are required to report statutory accounts on a delivered basis, we have been quite transparent in this trading update by also providing key financial metrics in the release on a look through paid basis.
Either way, it is clear that the business is performing very well, and this can be seen in the cash balance, which has increased by over $27,000,000 in the quarter, considered a healthy $85,400,000 as at the September. Moving through the P and L. With such strong customer demand, we had a quarter of all time lows in promotional activity, resulting in much higher gross profit percentages. The 43.7% gross profit margin is our best result delivered to date. As we head into the holiday season, we do expect the macro level of promotions to increase, and we will be participating as required to ensure continued level of voice and sales, as demonstrated by the four day promotion we are currently running that aligns with Amazon Prime Day.
Paid acquisition costs continue to remain well under control, and return on spend has been incredibly efficient. However, once again, we expect these costs to increase in the next quarter as we spend more with the objective of protecting and gaining even more market share over the peak retail season. At $21,100,000 the quarter's operating expenses fell below the fourth quarter of financial year twenty twenty, in spite of the sustained increase in volumes leading to more variable costs being incurred. We expect our cost base to remain quite stable, noting, of course, that we usually do have a seasonal uptick in variable costs over holidays. Other expenses, largely containing share based compensation, leasing and currency gains or losses, has remained in line with last year's full year expense of $10,100,000 with $2,700,000 of expenses booked within the quarter.
Depreciation and amortization costs have also remained consistent. It is worth noting that Redbubble is currently writing back more in capitalized development than it is deferring each month, creating a headwind on total OpEx that we expect to carry for at least the remainder of this year. Overall, I am very pleased to report that we continue demonstrate the sound fundamentals of a marketplace that is now operating at scale with an extremely high take rate that directly translates both at the bottom line of the P and L and also in our cash balance. As we discussed at the full year results, Redbubble now operates at scale from both a product and geographical perspective. Whilst this makes us difficult to benchmark directly against some of our smaller competitors, we fundamentally believe this this to be an ongoing strength of our business.
Indeed, in the past three months as macro instability has continued, we are glad we are not overly reliant on any one product category or geography. Masks are a good casing point. When we last reported, mask sales were rapidly increasing as a proportion of our total sales, reaching 27% in July. The sales levels of masks then moderated back from the August due to a range of external factors. In September, masks had dropped back to be 14% of sales, still a meaningful percentage, but well off their highs.
However, over the same period, our homeware and artworks categories continued to perform exceptionally well. In addition, T shirt sales arrested their long term gradual decline as a percentage of sales, which helped offset the reduction we experienced in masks. However, even given all of that, we certainly wouldn't want anyone to think that we are resting on our laurels. We have been busy at work developing the next generation of masks, and I'm pleased to say that this is available for customer sales from tomorrow, the October 16. We are excited to both offer our artists yet another opportunity to generate sales and our customers a much better product that will meet their day to day mask wearing needs.
From a geographical perspective, we have continued to see very strong sales growth in The UK. And even with all of the current instability, The U. S. Has continued to grow at over 100% year on year. The star performer in the quarter was Australia and New Zealand, with growth accelerating from 79% last quarter to 124% this quarter, largely driven by increased localization, particularly for masks.
As Martin has mentioned in previous announcements, there are over 1,000,000,000 people in our core geographies, and one of the main focus areas for us will be to reach as many of them as possible with fantastic offering that encourages them to make multiple purchases in a year. And with that, I will hand back over to Martin.
Thank you, Emma. I hope you all recognize this slide is unchanged from a few weeks ago and indeed is only a small iteration of what I've shared with you over the last six months. This is deliberate. Redbubble is entering a period where our success will not be determined by the evolution of our strategy, but by the effectiveness of our execution. The promise of the company is not about doing something new, but about doing what we do better and with relentless commitment to improving the customer experience.
In this context, the four areas of strategic focus are worth commenting on. The first, artist retention and activation is an area which is well advanced. The group by IT public was already good at this and the Redbubble marketplace had also developed solid systems. It has been at the core of both marketplaces and the integration is proceeding well. Increasingly, we'll be able to serve those artists that matter the most and create the most value much more effectively.
This is of high importance as we've seen an influx of many more artists during the current crisis. The second area, user activation and transaction optimization is also well advanced. Again, both marketplace had expertise in this area and this is being shared across the group. We work on streaming artists assist in this area and both marketplaces are leveraging well understood technologies such as the customer data platform to improve our ability to acquire customers cheaply and have them transact efficiently. We're already seeing the impact of this work and the continuing low customer acquisition costs.
The third area, customer understanding, loyalty and brand building is as I previously said, where the most innovation will need to occur. Both marketplaces are increasingly confident of who their customers are and our work over the next year and beyond is going to be about building solutions to ensure greater brand clarity and to build loyalty with those segments. Over the coming quarters, we look forward to sharing more with you on this topic. Finally, physical product and fulfillment network expansion. Again, this is a well understood area for the company.
While we will continue to take tactical opportunities as they emerge, such as masks, the primary orientation for this area of activity is actually about building customer loyalty. Our ability to deliver more timely products with lower shipping costs and a better total customer experience is a known area for increasing loyalty. It should be looked at through this lens. As Emma has noted, our work in the last two areas in particular will increasingly be about delivering higher actual and perceived customer value. Even small changes in loyalty can have a major impact on overall long term growth rates and future profitability.
We'll be actively exploiting the trade off between our margins and loyalty as we evolve in this area. Such work is vital to ensure we seize the promise, which is being presented, extend our market leadership position and to define the global category, which have largely been responsible for creating. We're in the fortunate position that our margins and operating expenditure structure means we can do this while maintaining overall profitability. Thank you, and over to questions.
Your first question comes from Ashwini Chandra from Goldman Sachs. Please go ahead.
Good morning. I was wondering if I just ask a couple of questions. I do have a few, but obviously, I'll just jump out of the queue. But one question I'd like to ask is, with the OpEx that you've reported in the quarter, and I think your comment was that you expect that to be stable. So can I just interpret that as roughly we can just multiply that by four over the course of the year?
Or is there
any sort of nuance we should be a
little bit aware of as to how that will
flex? Obviously, I'm just looking for a simplistic answer.
Yes. Look, and as with all lines in the P and there's a range of headwinds and tailwinds on all of them. I think in regards to OpEx, as we've previously discussed in prior announcements, we obviously undertook the restructure in June. And so the cost saves that we talked about at that time are flowing through the base and obviously provide a tailwind to the OpEx. That being said, the point that I pulled out just before in the actual announcement around, if you go back and look at our OpEx and you look at the seasonal nature of our OpEx, you'll always see an uptick in OpEx over the Christmas quarter as we invest in the variable costs, particularly around customer service through holidays.
I wouldn't expect that to be any different this year. And then, look, you know, over time, I still think you will see a slightly increasing OpEx base because we still will need to add more people over time. Like, know, keeping the kind of growth we have and and keeping, you know, our our OpEx completely flat is probably not particularly realistic. That being said, I would expect it to be only small increments, not not large increments. So I would I would not simply multiply it by four.
I would add a little bit, but not not a great deal.
So can I ask? I mean, you know, you you you're now being in a in a multi month period of seeing this rapid ratchet up in in revenue growth. Are you getting a better sense of, you know, just exactly what scale you can achieve per dollar of OpEx? Yeah. Just just because it that's just so sensitive to how we think about the value that's being created on the platform.
And so, you know, if if if your revenues from here would have, you know, incrementally run rate at an extra hundred mill a year, for example, just as a random number, are you getting any sense of, you know, what kind of OpEx that takes to to facilitate every incremental hundred million?
Well, no. So we haven't so we haven't actually, you know, run the model and looked at it in in the way that you're exactly asking asking the question, Ash. But I think if you look at the period of time since COVID started for the last, you know, six months now, as you say, it's it's been going on for a while. You know, we did the restructure in the middle of it, took the OpEx base, you know, down by by 10% of the people, and we've been able to absorb that % growth and that that higher sales revenue with the base of people that we currently have. Now, you know, there are some things we want to keep doing and do better to Martin's points on the call, and some of those things will require more people over time.
But I think we've demonstrated that, you know, the the days going back a few years where, you know, we we had to we kept growing OpEx a lot. You know, we can absorb our current volumes with our current OpEx base. If we want to add more or more to our current back to, obviously, over time, need to add more people. But as I said, we're talking a lot smaller increments than what we've had in the past.
And could I just start? Sorry, Ash. Just on that. I think what we have said to the markets very clearly is our commitment is to profitable growth. So we will achieve so these are decisions which are being which we make at the board level, not things which are forced on us by the fundamentals of the business.
So the board will achieve their profitable growth and they'll make the right decisions, which you believe is the long term interest of the company. And some investments will be required to do that, but they're not forced by the fundamentals of the business have demonstrated a strong margin. Thank you. And could you give
us a sense of the face mask contribution? Because obviously, I think when you gave the update for the July number year to date, that was a fairly material contribution. Is that is that remained at the I think it was about 28% in July. Has it remained at those levels? And is that also adding to the gross profit margin strength?
So as as I said in the in the actual start of the call, the the masks reached a peak of 27% in July. By September, they're down to 14%. Oh, sorry. Can see how they've changed over time. So you can you can absolutely work out the the masks contribution in dollars if you so choose based on the information that we've released this morning.
Your
next question comes from Grace Fulton from Goldman Sachs.
I was just wondering if you could maybe just start building what Ash had earlier to start with the gross margins. You had a really good uplift in this quarter. Can you just go through how sustainable you expect that to be going forward?
Look, it's as I said in the last quarter's update, you know, the three the three things that are effectively impacting margins being so strong at the moment in order of their their impact are the low level of promotional activity, the contribution of higher margin products like masks, and thirdly, the the underlying tailwind that we have from continuing to localize and and getting volume across our fulfillment network. They're all the same factors this quarter as well. But the main one and the reason I called out on the speaking note is the lack of promotion. If you were to go back and look at particularly the Redbubble marketplace and look at how many promotions they were over the quarter, I think it's the lowest number of promotions that we have ever run. So, that was part of the reason that I made sure I called out that for the Christmas quarter, and as you guys know, we're running a promotion right now, I expect that we will increase that level of promotion.
So that will have a headwind impact on margin in the Christmas quarter.
K. Great. So Emma, you mentioned briefly in the notes something about a headwind from capitalized R and D through the P and L. Didn't quite catch that. Can maybe just expand that a little bit?
Yes. Sure. So over the last couple of years, if you were to in terms of our operating expense base that we report, obviously, we have capitalized cost development costs that we we defer. And if you were to look at that line, not that you guys can see that line, and look at the depreciation and amortization line, they're pretty much offsetting each other. So the actual impact of capitalization on our OpEx base was negligible over the past few years.
That has shifted slightly this year. We're we're actually deferring less every month, and we're still writing back a higher level through the DNA line. So that's what the headwind actually is, is there's now a slight disconnect between those two lines in terms of timing.
Okay. Brilliant. And your cash balance increased quite a lot in the quarter. Could you maybe just talk about how you're planning to be using it from the quarter? The cash balance you're sitting on is quite elevated now.
Yes. So I think, once again, sort of reaffirming what we've said previously, the focus right now is is getting a good holiday Christmas quarter. And I think as we said last time, you know, last quarter, we're very focused on the tactical through to the December To pick up Martin's points, and he may wish to further expand on this as well, to pick up on Martin's points, you know, we really do see our four priorities quite clearly. And within that, the third priority around customer understanding, loyalty and brand building, we do feel that we we need to probably make the most change there, lean into there, and that's probably the the area of those four priorities that will require the most of that cash balance that we have as we as we choose to go back in and reinvest.
Just I think it's worth so just just go it's a relatively new experience for the company to have this rapidly increasing cash balance. So the board's not made any decisions about how they wish to provide in a fundamental sense. So it is clearly something that the board will need to look at in due course. But just to give us a little bit of a grace here, if you will, we've had we've already been sort of in this period for sort of six months or so. So think the board will will be considering that issue because even the cash balance certainly is larger than any conceivable or foreseeable investments, but we haven't made any final decisions.
Okay. Great. And just one last question for me. From your past experience with U. S.
Election cycles, is there anything we should be aware of if you want this in the next couple of weeks?
I don't think so. People have sort of suggested that US elections are are good for us. They are only at the margin, is the truth of the matter, And they know that they're not they're not particularly good nor particularly bad. I can I can see scenarios though, which would be bad in the total scenario for the global for the total global, but it really just depends upon what happens with the election? The worst outcome for us would be a hung scenario, which could have a devastating impact on the total global economy, but that's something well beyond our control.
Your next question comes from Owen Humphries from Canaccord.
Well done on some big numbers today. Maybe just to help with my math and just maybe doing it wrong. Can you maybe just highlight what the growth was exiting period called September? Because masks because that seems to be a topic that where it gets asked a lot. Just maybe just to highlight what that was adjusting for masks.
Yeah. Look. So I can't give you the period in September. I don't have that number in front of me for for that month itself. But across the quarter, the growth rate x masks was around 60% on a paid basis.
So obviously, once again, if you start at the 98 in the release and you come back down, take masks out completely. But masks are pretty stable now. As I said, they're around 14% in September. This is without the new mask variant that's being released tomorrow. They've been pretty stable for the last month.
And just obviously, you've had a bit of a tick up through COVID and structural tailwinds back. Do you expect the seasonality to be broadly similar to what it's been in the past in terms of that second quarter? Or do you believe because obviously, this quarter, you've got Prime Day, Black Friday, Cyber Monday, Christmas. Do you believe the seasonality will be as much to what it's been in the past?
Yeah. Look. I actually we we actually had a a all staff update literally an hour ago. We were talking about our holiday plans, and and I said, look. You know, fundamentally, trying to predict Christmas is like blindfolding me, putting a dartboard up on the wall and asking me to throw some darts at it.
It's quite difficult to get a really good look through on whether this Christmas will be like Christmas' price for Redbubble. That being said, you know, we're I think the the two things I would say is, one is we're prepared for a range of scenarios. So if it does seasonally uplift the way that it has historically seasonally uplifted, we're confident that we can deal with the volume, and we're confident that we can give customers a really good experience and artists a really good experience. So we are we are, like, ready for that. If it ends up being something different, we're ready for a a a vast array of scenarios that hopefully would encompass what actually happens.
The profile is somewhat different this year. I can already see that because, obviously, with Amazon Prime Day running right now, that that is an earlier kickoff, I suppose, of the holiday season than what we would have seen in prior years. So I think, you know, that's that's we see that as a good thing. That gives us early signals on, you know, where customers hit that and what their buying behavior is actually gonna be through the holiday season. So we'll be monitoring that closely.
But honestly, Owen, there's a lot of uncertainty around how how that holiday season is gonna play out.
Your next question comes from Anthony Porto from Morgan Financial.
Congratulations on the quarterly result. Just a quick question. The percentage of sales via the app won and then repeat customers in the period?
Yes. So repeat customers has remained relatively consistent to last quarter and app percentage of sales, noting, of course, that the app is Redbubble only. TeePublic doesn't have an app. So I take the app as a percentage of Redbubble sales, it was about 16%. If I take it at the group level, it's about 12.
How does that confirm okay. So that was kind of 15%
higher. It's it's it's continuing to steadily increase.
Okay. Yep. No problem. And just the the impact of of Prime Day on kind of September trading. I mean, is is The US consumer I suppose The US in general, but generally, you know, the the global consumer, have they been kind of you know, did they know that Prime Day was coming, and do you think it kind of impacted your sales growth towards the September?
Yeah. I saw your note on that, and I and I smart and thought this is as good a theory as any other theory. I don't know is the short answer, Anthony. I mean, you know, we're we're we're seeing quite consistent strong performance. So it would be hard for me to look at, you know, the the the last September and say that, you know, the upcoming prime had any material impact on on what was happening at that point within the quarter.
Yes. Okay. And just finally, I mean, Martin mentioned kind of the gross margin, which quite very strong. I just get I guess, just a question of how you're going to reinvest some of that gross margin. It all in price?
Or is there other ways you're going to invest it?
Thank you. Take this one, Ananda. I think what we're doing is we're very actively exploring a whole range of things. So we have been actively experimenting with various loyalty programs related to shipping, free shipping, shipping with different thresholds. So that is an area which we would be exploring.
It is important that what we're looking at doing here overwhelmingly is not to increase the first purchase, but to increase loyalty. So that's the lens which we're looking at. And so margin reduction, which has an impact on loyalty has a long term potential net growth upside to business in terms of growth. So that could be discounting programs for multiple purchases, either multiple purchases a year could be related to shipping. It could be related to the inserts and packaging, for example.
We've historically not done very much there. We've got an advantage versus Etsy. Etsy can't put in into into the packages actual insert because they're they're packaged. They they they come from the the the diversified network. That's not something which we've very actively explored.
We've had limited a range of things into the packaging, the unboxing experience itself, the nature of what a customer is and what you would offer to a more loyal customer over time. So the lens through which we're looking at it is, you know, to the extent that we can any reduction in margin can increase royalty, it is of the business a serious net positive. And so that's what the Board and the management team are looking at.
Your next question comes from Robert Bruce from Akorn Capital.
Result, guys. A quick question. I think last time we spoke, you mentioned that heading into Christmas period, you weren't going to try and do too much and just let it run to a degree rather than sort of make significant changes. I'm just wondering, following your experience in the last couple of years in what is traditionally peak trading period, what lessons you might have learned where sometimes it has disappointed and sometimes it's been successful? How are you preparing for all these sort of peak events this year?
Is it any different to what you've done in previous years?
Yeah. Look, it's a good question, Rob. And I think we touched on this in the last quarter's update as well. So I think we're more joined up and prepared this year. I mean, obviously, you know, I say that with some hesitation only because I haven't been here for five or six years, and there may have been a time a few years ago where that we were better prepared.
I wouldn't have been here to see that, so I don't wanna give it a recency bias. But I certainly you know, we started planning for holidays in May. Normally, we start planning for holidays in August. We we we really engaged widely across the entire organization and made sure we were very aligned on the few things that we wanted to deliver well for holidays, and then we've gone off and we've executed those things, and we haven't got distracted by other things, which sometimes can happen. So I feel like from an execution perspective, the things that we needed to do on our end to be ready for holidays, even with the uncertainty of what it will bring, I feel like we're actually very well prepared.
And so I think that that does make a difference. I think, you know, there's there's a lot more transparency across our entire group around exactly what's happening with things like last order by dates, what's happening within the shipping networks. You know, our fulfillers are all, like, well set up with, you know, various ranges of volume forecast. So I just think it comes down to, like because I can't control the macro environment, no one in Redbubble can control the macro environment, it really comes down to us making sure that we're executing very, very well. And so that's what we focused on.
So all the things we can control, we've gotten together and we've controlled those. And I think we're in a really great position from an execution perspective.
And just on that front, Rob, one of the things which we had had been on the back burner, but had not actually got done, got accelerated, has been a a gifting experience. So that is actually rolling out right now. So people will be able to send to different locations. The person will be able to track their own gift. So we are there is you will see in the AFR this morning is a conversation about the expectation that there'll be much higher levels of virtual gifting going and actual gifting going on.
And so we've enabled that in anticipation of these holidays. So I think to the extent we can feel confident about our own position, we're very confident what the total macro environment looks like. That's out control, although there are some reasons to be optimistic about that as well.
Great. Well done, and good luck for the upcoming periods. Thank you very much. Thank you. Thank
you, Rob. Thanks.
Thank you. Your next question comes from Richard Cawsey from Denali Capital. Please go ahead.
Happy birthday, Martin. It's a great present that you and the team decided to coincide with your birthday. Thanks for the insight so far on the call. And two further questions that come to mind is you've Emma, you mentioned that you pulled back on promotional spending, and I presume that was based you didn't need to do it. But was there an opportunity to do it to grow faster?
Or you you felt that the the economics weren't there?
It's a good question, Richard, because, you know, quite often people will say to me, hey. Like, you you got a 16% growth rate. Why not just throw more at paid acquisition? You could get a 60% growth rate. And and as you know, there's there's a point at which that spend becomes inefficient.
I think, you know, we're we're making sure that we're keeping an eye across all of the p and l, not just the top line. And so if if we're looking at it that way, you know, maximizing GPupper dollars is effectively has been the goal and remains the goal, and so our paid acquisition spend is set to a level that actually delivers that. And we do chain like, you know, two weeks ago, we did a a bunch of tests on some channels to push that spend out to see where that line was, where it became inefficient. We found where that line was, and we stopped spending just before that line. So, you know, at the total quarterly level, it's it's a big number and comes in at a at a rough percentage, but, you know, it's something that we manage on a day to day best basis.
And so, honestly, to answer your question, I feel like I could have spent more, got more growth, but financially, it would have cost us at the bottom of the p and l if I had done that.
So in that sense Richard was Richard was also asking about promotional to the can run discounts. So we have trials and discounts, smaller discounts during the quarter. So it relates to very specific product items. There was one done with iPhone cases and so forth. So it is an area which we continue to explore, but it could end this point.
It is about driving the g papa dollars when it's not necessary to run a discount and if you can actually get the, you know, full market, full retail price, that's clearly better. I think it is as well as we look at our brand, the brand of the Redbubble marketplace, it's become increasingly clear to us that we are seeing by our customers as a premium brand. And as a premium brand, we don't want to be undermining that by running discounts. So it's a strategic as well as financial decision not to to get overly discounted. So it has been a very good opportunity for us to consolidate that brand positioning, which we have which our customers see us as.
So that means the promotional will be the promotional spend will be seasonable and brand driven rather than purely efficiency driven? Very much so, Richard. It's all again, it comes back to the loyalty lens. We we had we had sort of we were undermining. We've done a lot of work on the brand over the last month, and we were undermining how the premium nature of the brand.
If you're Gucci and you run a a discount every week, you're no longer Gucci. If we were running we were running good discounts too frequently and undermining the actual value of the brand itself. Right. Okay. One further question before dropping off is now that we're in impact or coming to impact, what the tax assets, how do you think that's going to start showing up on the balance sheet or reemerging on the balance sheet?
And what how do you think this will roll out through the earnings through the half and the full year?
Yes. So we test, the tax asset position every half in line with our statutory audit. So we'll obviously be testing that again in December and then once again in June. And so we'll write back well, the intention would be to write back the tax losses onto the balance sheet as we need them. Generally speaking, most most auditors and and and finance teams take a relatively conservative view of of tax assets.
And so no one's yelling at me right now to write it all back on the balance sheet, which is good. But obviously, we'll continue to assess it, we'll write it back on as needed. So we won't be paying taxes for quite some time.
So then how so I guess that's going to come down. So you're going to be expecting the EBIT to be almost falling straight through to NPAT for some period of time?
Yes, absolutely. So we did a quick check-in this quarter on what the difference between EBIT and NPAT actually is, and it's almost zero.
Okay. I think and Richard was asking about, I think, the ultimate size of the tax asset as well, will you? I guess, no. So because it's if you're writing it back, what's the ultimate size of tax asset?
I don't have the number in front of you, it's in the high $20,000,000 in terms of the actual tax dollars. So we have to divide that by 0.3 to get the amount of profits we'd have to put through before we actually start to pay tax.
But you won't be right if I heard you correctly, and you won't be writing that onto the balance sheet in
01/1960 not the whole
twenty nine million
to 29,000,000 whatever the number was. But
that's effectively the sheltered position over the next period of time with impact coming in. Okay. Thanks very much, folks, and congratulations. Great outcome to you and the team.
Thanks. Thank you. Your next question comes from Tim Piper from RBC Capital Markets. Please go ahead.
Congrats on the results. I also had one sort of high level question. When we're sort of looking at the acceleration in growth you've seen over the past six months or so and kind of look at sustainability of that going forward. Obviously, a key pillar in your strategy of building customer loyalty and brand, etcetera, is going to be very important. Now that we've sort of gone through six months of an accelerated customer new customer acquisition cycle, can you give us a sense on how you see those customers, those new customers behaving on the platform compared to either existing customers or in the past?
You mentioned the repeat rate is pretty steady. But within those newer cohorts, are they spending more? Are they spending more frequent more frequently? Do you have any stats on that?
Yes. So in terms of the spending more, what we've seen through COVID across both new customers and repeat customers is an increase in AOV, about 6% or 7%, and that's largely driven by product mix changes that that we had we saw at the start of COVID, and they've remained relatively stable. So, obviously, people buy more homewares and wall art, less stickers, higher AOV. Outside of that shift, there hasn't really been a change. And so at the moment, the the customer the COVID customers that we've got on you can't see me, but I'm air quoting it, aren't behaving any differently to the customer cohorts that we had before, neither better nor worse.
They're they're pretty much of a muchness, which I think is, you know, what I think is one of the reasons that, you know, we we know that we need to lean into customer retention and customer loyalty through customer experience because there is an annuity value there to be had that we're not necessarily maximizing at the moment.
Okay, great. And just one quick one. You sort of talked about marketing spend maximizing GPAPA dollars. Given the seasonality of the second quarter, I mean, you sort of willing to forgo a little bit of that just given the opportunity to build out a significant number of new customers over the next couple of months?
Yes.
There are no further questions at this time. I'll now hand back to Mr. Hosking for closing remarks.
Thank you very much. There's a large number of people on call and it's been great to engage with you all. So thank you to all our new investors and particularly thank you to all of the longer term investors and we're very pleased to have been able to deliver these results for you, staff and for the entire group of stakeholders in their bubble.
Thank you. That does conclude the conference for today. Thank you for participating. You may now disconnect.