Good morning, shareholders and guests, welcome to Kogan.com's 2022 Annual General Meeting. For those of you who I've not met previously, my name is Greg Ridder, I have the privilege of being the Chair of your company and also of today's meeting. Today's AGM is a hybrid meeting held both in-person in Melbourne and online. Shareholders and proxy holders have the ability to ask questions and submit votes during the meeting. As it is now 12:00 P.M. and a quorum is pre-present, I declare the meeting open. I'm joined today by my fellow board members, Janine Allis, Independent Non-Executive Director. David Shafer, CFO, COO, and Executive Director. Harry Debney, Independent Non-Executive Director. James Spenceley, Independent Non-Executive Director. Ruslan Kogan, Founder, CEO, and Executive Director. Also in attendance today, we have Mark Licciardo, Kogan.com's Company Secretary, and Simon Dubois from KPMG, the company's auditor. Mr.
Dubois will be available to answer questions on the conduct of the audit and the audit report, as well as the accounting policies of the company for the period ended 30th of June 2022. Representatives from Computershare, the company's share registry provider, are also in attendance. The notice of this meeting and explanatory memorandum were made available to all shareholders. I propose that the Notice of Meeting be taken as read. Today, we will walk you through an outline of the company's growth, strategy, and performance. We will then conduct the formal business of the meeting. Voting at this meeting will be conducted by way of a poll. Mr. Peter Renda of Computershare will act as Returning Officer for the poll. Voting on the resolutions is now open.
Due to the hybrid nature of today's meeting, Computershare will be facilitating voting on the formal part of this meeting, both in person and using their online voting platform, accessible on your desktop or internet-enabled device. You can vote at any time during the proceedings until I declare the poll voting closed. You may also change your vote at any time throughout the proceedings. I will give you a clear prompt later in the meeting to warn of the close in voting. You can also ask questions verbally, online, and should you wish to do so, you will be prompted by the moderator as to when to ask your question.
When asking if there are any questions on the presentation to be provided to the meeting or on the resolutions to be put to the meeting, I will request the moderator provide written questions first via the shareholder's portal, followed by verbal questions. Those in attendance will be able to ask questions when prompted at each item. Before I pass you on to our Founder, CEO, and Executive Director, Ruslan Kogan, for questions about the year and the strategic direction for our business, I'd like to take this opportunity to recap some highlights of the 2022 financial year. In FY 2022, the business demonstrated its resilience and strength, managing continuous disruption and volatility driven by the ongoing COVID-19 pandemic.
Despite this, the Kogan.com Group was still able to achieve its highest ever gross sales, return to positive operating cash flows, and successfully met the needs and desires of millions of shoppers in Australia and New Zealand. It was another exceptional year for our Kogan Marketplace. Our proprietary Marketplace platform was recognized at a leading industry awards night as the Top Australian Marketplace in 2022. We grew our Marketplace Seller community by over 49% year-on-year, and grew Marketplace gross sales by over 20% year-on-year. We are now partnering with thousands of Marketplace Sellers to offer millions of products to our customers. This is truly a win, win. Customers access incredible range and choice. Kogan.com can exponentially grow without increasing capital requirements, and small businesses can grow through a very attractive avenue to reach millions of customers around Australia and New Zealand.
Our Kogan First Loyalty Program grew very rapidly in FY 2022, as more and more smart shoppers quickly learned the exceptional value available to them. Over the 12 months of FY 2022, we more than tripled Kogan First subscribers to over 372,000. We see enormous potential in our Loyalty Program as it provides a stronger value proposition for our most loyal customers. FY 2022 marked the first full year with Mighty Ape as part of the group, having joined the Kogan.com family in December 2020. Mighty Ape delivered on some fantastic projects, most notably the Jungle Express delivery services, which is already receiving huge accolades. Both Kogan.com and Mighty Ape continued to work together to achieve synergies across the group that will reap benefits in the years ahead. During the year, Gracie MacKinlay was promoted to the CEO role at Mighty Ape.
Gracie has been the Chief Marketing and Sales Officer for the past 10 years at Mighty Ape and is a very deserving appointment. Simon Barton, the founder of Mighty Ape, will continue as Chief Financial Officer, Mighty Ape, as he assists Gracie with her transition. In terms of our board and governance, we operated with a majority independent board, Audit and Risk Committee, and Remuneration and Nomination Committees, following the appointments of Janine Allis and James Spenceley as non-executive directors at the end of last year. Our new directors have brought additional insights and experience to our strategic leadership and further enhanced our robust governance practices and sound risk management. Turning briefly to the Group results of FY 2022. There are many highlights, some of which I'll touch on now.
The business achieved its highest ever gross sales result, despite a challenging trading environment, delivering AUD 1.18 billion in gross sales. Our Loyalty Program tripled in size, reaching 372,000 Kogan First subscribers, with renewal rate demonstrating the strength of the program. We worked through part of the excess inventory issues, reducing our inventory level by almost 30%, down to AUD 159.9 million, and setting the business on course to fully resolve this issue quickly. Importantly, we delighted almost 4 million customers, and we returned to positive operating cash flows, generating AUD 61.8 million of operating cash flow, and ended FY 2022 with AUD 31.2 million of net cash. As a board, we're extremely excited about the opportunities ahead.
Over the next 12 months, we expect to see significant opportunities in Kogan Marketplace, including a new advertising platform to be launched in the second half of FY 2023. We expect Mighty Ape to continue growing and benefiting from group synergies. The Kogan First Loyalty Program is expected to continue building a large, loyal customer base who are rewarded with exclusive deals every day. We also look forward to rolling out enhancements across our verticals, including Kogan Mobile, our largest vertical. We're excited by the opportunities we see for our business as we continue to deliver on our mission of making the most in-demand products and services more affordable and accessible for all. I'm extremely proud of the Kogan.com team, who have been relentless in delivering on our mission each and every day.
They have continued to perform at such an incredibly high standard through what has been another challenging operating environment. On behalf of the board, thank you for your continued commitment to the Kogan.com mission, values, and community. I would now like to invite our founder, Ruslan Kogan, to address the meeting and provide opportunities about the year that's been and so far, what we've seen in FY 2023. Go straight, Rus.
Thanks for that, Greg. As you guys would all know that, a few hours ago, the script and the speech gets published to the ASX. This is one of those silly corporate procedures that we have where the person who runs your company gets up here and proves that they know how to read. I won't be trying to prove that. The script is available for everyone to read in their own time. Most of you have probably already read it. I would far rather spend extra time chatting to you about your company after the formal proceedings to see how things are going, have more time to answer questions, and so on. Yeah, I won't be standing here proving that I know how to read a document that was published a few hours ago.
It's been a challenging year, you know, in terms of the macroeconomic environment, in terms of everything post-COVID, but the most important thing is from a customer perspective, they are receiving remarkable value, and that is something that has not changed at Kogan day in and day out. We have largely the team here to thank for that. Many of our senior team are here. They're the ones that are making that possible. While the year's been challenging and we've dealt with all sorts of things, from a customer perspective, it continues to be remarkable value, whether you're looking to buy an LED TV or a toy rhinoceros. Whatever it is, the remarkable value has continued across our business.
Please have a chat to our team, throughout the, throughout the event today, and, you know, we can chat you through how we achieve that for our customers. I'll now hand it over to Greg for the formalities of the day. Thank you.
Thanks, Ruslan. I think we can pause at that stage, though. If there are any questions about what was published from the operational, perspective, we're happy to take them. Are there any on the portal?
Thank you, Chair. There are some questions from shareholders on portal. The first question comes from Mariano Castillo and Ms. Jacqueline Castillo. Marketplace seems to be doing very well. Congratulations. It seems that many players are chasing the online Marketplace opportunity in Australia, from Catch to Shopify to eBay and Amazon and many more. How do you perceive these low barriers to entry in the competitive environment? What differentiates Kogan Marketplace from the many others?
Thank you for that question. The companies mentioned there are some of the biggest companies in the world, so I wouldn't quite say there's a low barrier to entry to Marketplaces. Our team has been relentlessly building a quality platform that ensures both a wonderful customer experience, meaning that you can easily find your product, they're high-quality products, the sellers are delivering on their promises and delivering high-quality products to our customers. Whilst also at the same time, ensuring that from a seller perspective, it's easy to use our platform, easy to list the products and have them seen. It's a very important part of our strategy because the more the more sellers that we enable to use our platform, the more competition there is on our platform and the more our customers benefit.
There has been a lot of investment and knowledge and smarts from our team that we've learned through our, you know, core retail business over the years, and implementing that in the platform that we're rolling out. The numbers speak for themselves. Our sellers are very happy. Our customers are getting more choice than ever. There's now over 20 million products listed on the Kogan website.
Are there any other questions, Ronn?
Thanks. We do, Chair. A follow-up question from Mariano Castillo and Jacqueline Castillo on Marketplace. The Marketplace opportunity has many benefits, including the reduced need for investment in inventory and other working capital requirements. The downside is you lose control of product delivery and timing. Is there a risk that this may impair your ability to delight customers?
We put delighting customers at the top of our priorities because, you know, we've been doing what we do for over 16 years now, day in, day out. Kogan.com will only continue to exist if we continue delighting customers in the way that we have been doing it. Yes, in the Marketplace, we allow others to use our platform and various sellers to sell on our platform. We are constantly building out measures to ensure that customers receive the highest quality of service across that platform. That means ongoing monitoring and development to ensuring that it's high-quality products with highly accurate descriptions, with great images, with excellent customer service and speedy delivery.
Yes, that is one of the challenges when you become a Marketplace, is ensuring the health of the Marketplace, and it's one of the challenges that, you know, we take head on, and we treat it very seriously.
Any further questions?
We have-
Yes.
Yes, we do, Chair. This question is from Stephen Mayne. His question is: Did any of the five main proxy advisors recommend a vote against any of today's resolutions? Which of the proxy advisors are covering us? Have there been any material proxy protest vote? Will you disclose the proxy votes before the debate on each resolution, so shareholders can ask questions about the reasons for any protest votes? Why did you not disclose the proxies to the ASX with formal addresses like other companies do now?
I suppose I'll take that one.
We actually did. That did go out, Mark.
Oh. Please take the microphone. It's our Company Secretary, Mark Licciardo.
Thanks, Greg. I was just gonna make the point. In the announcements we put out this morning, the proxy voting was included with the AGM presentation.
Thank you.
Yeah.
I assume that answers the question because it will detail any for/against and what the nature of it was. Any further questions, Ronn?
Just, there is one further question on general business. It's from Stephen Mayne. Thank you for offering shareholders a hybrid AGM this year. Will you commit to keep doing so in future years to maximize shareholder participation? Harvey Norman is holding its AGM right now with no online component. Your video production values are also very good. How strong a competitor is Harvey Norman when it comes to online retailing?
I think there's more than one question there. The last part I'll leave just to opinion. The first part about hybrid meetings, we are holding a hybrid meeting now. Where we have not in the past, it's been through pretty much enforced dispensations from regulators. It's our intention to always engage shareholders in the way that we feel is the best way for everyone to have a voice, to be able to ask questions, to express themselves, and to get to know this company a little better. Whichever format that takes may be dependent on the circumstance of the day.
We have no further questions in relation to general business online.
Thank you, Ronn, thank you to everyone who asked questions. Let's move more to the formal elements of the meeting today. I will read, partly because I'm obliged to be very precise at this time. Shareholders, validly appointed proxies, corporate representatives are entitled to ask questions at today's Annual General Meeting. Please submit your questions through the shareholders portal, stating your name or the organization you represent before doing so, please keep questions concise. You can also ask questions verbally, should you wish to do so, you will be prompted by the moderator as to when to ask your question. I now invite any questions relating to my address or Ruslan's address that shareholders may have. I'm sorry, we've been through that. Move to the specific questions relating to each of the resolutions prior to voting on the relevant resolution.
Moderator, are there any questions or comments submitted other than that we should think about in advance of these?
There is one question that's been submitted in relation to Item 1.
I think we'll take that at Item 1 then. Is that it?
Yeah.
Thank you. I'll now return to the business of today's meeting. There are five items of business for the AGM today, as set out in the Notice of Meeting. Four of these items are to be voted on. I note that Item 5 is dependent on the requisite approval of Item 4, as it is embedded in the proposed constitution. Also that both Items 4 and 5 are special resolutions which require a minimum of 75% of votes cast to be carried. Shareholders, validly appointed proxies, and corporate representatives will be given the ability to vote upon registration today. Proxy voting received prior to the meeting will be shown on the screen for each resolution dealt with today. Voting on the resolutions is currently open, and you may vote at any time until I declare the voting closed.
Results will be released to the ASX at the conclusion of the meeting. The voting icon is available within the navigation bar. Once you click on this, the resolutions will appear on your screen, along with the for, against, and abstain voting options. Simply select one of these options to cast your vote. When voting is closed, your final voting selection will be recorded. If you have any difficulties, please refer to the user guide, which can be accessed through the platform. I note that Item 2, adoption of the remuneration report, is subject to voting exclusions as outlined in the Notice of Meeting. The first item of business is to receive and consider the company's annual financial report, together with the directors' and auditors' reports for the period ended 30 June 2022.
Are there any questions or comments in relation to the directors' and auditors' report submitted through the shareholders' portal? I believe there is. Ronn?
We have one question, Chair. It's from Adrian Sutantio, if I pronounced his surname correctly. The question is: What about Dick Smith's sales report? Why is it not shown under the Kogan Group earnings?
Dick Smith is not a segment which meets the criteria for separate reporting. You'll see in our reports that Mighty Ape, which has a span of control under one Chief Executive or General Manager of that division, is separately reported and the remainder of the business is reported as Kogan.com.
Thank you, Chair. There are no further questions in relation to Item 1 online.
I will now take questions from those in attendance in person. As noted earlier, we have our auditor present if you wish to direct any questions pertaining to the audit to him. Are there any verbal questions or comments in relation to the director and auditors' report? No? There being no questions, we come to the items of business for which a vote is required. Details for the proxy votes will be displayed on the screen after all resolutions have been considered. Pursuant to the fourth edition Corporate Governance Principles and Recommendations, all votes will be taken on a poll. The second item of business and our first resolution to be voted on today relates to the adoption of the 2022 Remuneration Report. Proxy votes received are displayed on the screen now.
Are there any questions or comments in relation to Item 2 submitted through the shareholder portal?
There are no questions in relation to Item 2 online.
I will now take questions from those in attendance in person. It appears there are no questions or comments. I now put the motion that the remuneration report be adopted as set out in the Notice of Meeting. As the next resolution relates to myself, I will hand the chair to Harry Debney.
Thank you, Chair. The next resolution relates to the re-election of board-endorsed Mr. Greg Ridder as director. Proxy votes received are displayed on the screen now. Are there any questions or comments in relation to this item submitted through the shareholder portal?
Thank you, Mr. Debney. There is one question in relation to Item 3. It's from Stephen Mayne. He states as follows: We've had some issues in previous years of multiple founder share sales coinciding with placements to new institutional shareholders that are now out of the money. At the same time, the founders were issued with option grants. Could Mr. Ridder comment on whether he has sought to negotiate more lock-up agreements with the founders to reduce the likelihood for future sales and more generally, how the option grants were handled?
I suppose I can. I'm not sure it's a relevant question, the option packages for executives still have some time to run. They do not expire until pretty much this time next year at the presentation of accounts to this meeting in 2023. As we said at that time, there was not an expectation that there'd be any other remuneration adjustments throughout that period, and there have not been.
Thank you, Greg. Are there any questions from the floor? Thank you. As there are no questions or further questions or comments, I now put the motion that Mr. Greg Ridder be re-elected as a director of the company, as set out in the Notice of Meeting. I'll now hand back to Greg. Thank you.
Thank you, Harry. The next resolution relates to the amendments to the company's constitution. Proxy votes received are displayed-
As a director of the company, as set out in the Notice of Meeting. I'll now hand back to Greg. Thank you.
Thank you, Harry. The next resolution relates to the amendments to the company's constitution. Proxy votes received are displayed on the screen now. Moderator, are there any questions or comments in relation to this item submitted through the shareholder portal?
Thank you, Chair. We have one question in relation to Item 4 from Stephen Mayne. He says, "Apologies for the error on the proxies and well done for disclosing them to the ASX ahead of time. Any chance you could do an additional voluntary disclosure on all items by revealing how many shareholders voted for and against each item, similar to what happens with a scheme of arrangement? This provides a better gauge of retail shareholder sentiment on all resolutions, and was a disclosure initiative adopted by several other companies this AGM season.
We explain in a compliant manner, recognizing that shares held are the currency of voting, and I think they're validly disclosed throughout. I'm not sure really that the sentiment of voters of, you know, a one shareholder voter or a 1 million voter carry equal weight or add value to the insight that is provided here. Are there any other questions, Moderator?
There is one further question that's come in on Item 4 from Stephen Mayne. "It looks like Item 4 is being defeated on the proxies. Who is voting against?
Regardless of who is voting against, the vote is as it's measured. We will know at the close of the poll what the valid outcome is. I think it is worth saying that there is an element which has happened with a number of companies during the course of this year, where constitutions have been amended to update for a number of regulatory compliance Corporations Act differences, which on the surface of things are minor but are worthy of update. One of which is the conduct of meetings.
We, along with some other companies, have the option in there to hold a virtual only meeting, and that some proxy advisors don't feel that that is the best way for all shareholders to have the greatest access to meetings, despite the fact that sometimes it's a mandated requirement. We're listening to that. If the vote does not reach the requisite 75%, we'll repackage, we'll adjust for that item. It wasn't or isn't really an intention to do such. It's just the option to do it. As it now stands, it would have to be a mandated requirement for us to do that.
Thank you, Chair. There are no further questions online in relation to Item 4.
Are there any other questions from the room? I now put that the motion for the new Constitution be adopted. The next resolution relates to the adoption of proportional takeover provisions. Proxy votes received are displayed on the screen now. Moderator, are there any questions or comments in relation to this item submitted through the shareholder portal?
We have one question in relation to Item 5 from Stephen Mayne. Given the interesting discussions across the range of topics today, including the two constitutional amendments, could the Chair undertake to make a copy of the webcast, plus a full transcript of proceedings available on the company's website? This is something that a number of companies have been doing for several years.
I know it's a similar question has arisen in the past. It's not our practice to do that. We do look across corporations from time to time and see what is de rigueur, and we're comfortable with the role that we play and the formats that we're applying at present, but we're always open to those sorts of adjustments to providing greater accessibility and greater insight into the organization.
Thank you, Chair. There are no further questions online in relation to Item 5.
I'll now take questions from those in attendance in person. Are there any questions in relation to item 5? I thought there was one there, but somebody just stood up. As there are no questions or comments, I now put the motion that the proportional takeover provisions set out in clause 16 of the new constitution be adopted. I would like to advise that the voting on all resolutions will close shortly. We will take a few moments now to allow you to finish voting. Please complete your voting now. Please note that the final results will be advised to the ASX and also made available on Kogan.com's investor website after the meeting. That concludes the formal business of Kogan.com's 2022 Annual General Meeting. However, I'd like to take a quick moment to thank some important members.
Firstly, thank you to my fellow board members for your valuable contribution throughout the year. Our board has enjoyed another strong year, full of robust discussions and debate to ensure Kogan.com has a bright future. I'd also like to acknowledge and thank once again the contributions of both Janine and James in their first year as Kogan.com board members. To our dedicated team, many are in the room, you turn our vision into a reality. Thank you for that. The board regularly reflects on the incredible talent we have within our team and would like to acknowledge that once again, you're here today. Finally, thank you to our fellow shareholders. I'll just pause for a few seconds before we close the poll, just so that everyone is on notice that that is happening.