Thank you for standing by, and welcome to the Temple and Webster Half Year twenty twenty one Results Briefing. 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. Mark Coulter, CEO and Managing Director.
Please go ahead.
Thank you, Amanda. Good morning, everyone, and thank you for your time today. It gives Mark Taylor and myself great pleasure to be presenting the results for the first half of FY 'twenty one this morning. We've uploaded an investor deck on the ASX, which we will be running through. The key messages for you to take away today are, firstly, we have delivered record results with revenue up 118%, EBITDA up 556 percent year on year.
Secondly, we operate in a large market and we are still very early in the adoption curve of online shopping in our category even after any acceleration by COVID. And finally, we continue to make excellent progress on our strategy and have entered the year still growing in excess of 100%. Page 3 is a summary of a very busy half. I will take you through these points in more detail as we go through the deck. However, I would like to say upfront The rapidly scaling any business is not an easy task.
The team has done an amazing job on executing our roadmap, while dealing with a massive increase in customers and orders. One of the key points on this page is that we have significantly expanded our team, both onshore and offshore, and invested in infrastructure such as new offices and remote working technology to allow us to do that. We've also focused on team's well-being as the risk of burnout in conditions like this is high. The good news is that in our last employee engagement survey, we received a record score. Having an engaged, healthy and talented team remains our number one priority.
The other point to note on this page is that we have experienced strong growth across all the major product categories, geographies, marketing channels and customer demographics. This suggests to us that the shift up the adoption curve is going to remain with us, even if the world goes back to whatever the new normal looks like. Page 4 gives new shareholders a quick snapshot of the business. The key takeaway from this page is that we were a high growth business before COVID and plan to continue to be one for many years to come. We operate in a big market and have scale on our side to continue to accelerate our market share as more and more customers adopt online shopping in our category.
One of the business's strategic goals is to grow our private label division. On Page 5, You can see that as the share of sales of private label division has grown from 18% to 25%. This area of the business is a priority for a host of reasons, including margin growth, filling product and price gaps, greater control of our supply chain and as a strategic defense. We've added more resources in our buying and planning teams. We've invested into data and AI technologies to help with forecasting.
We've diversified our factories globally to reduce any reliance on a single country. And we've expanded our quality and compliance team and moved into product design. We've also leveraged our balance sheet into a high stock position, while ensuring our inventory turns remain high. As an online retailer, our efforts on ensuring people convert once they get to the site and then have a great experience post order will always be a priority. This half we were proud to launch our iOS app And although we're still testing the app, the data is looking pretty positive.
I don't know many of you will have questions on that. It's The conversion rate, basket size repeats are all looking pretty positive and we're actually going to be pushing out our Android app this half. We've also launched our new homepage, makes better use for deep reservoir of in house produced content. In addition to the Android app, watch out for our Swatch service, is a B2C service, so people can order swatches of key products that they're looking at. We're going to be rolling a visual search, so you can search by photo, and we'll be launching augmented reality using our 1st batch of 3 d models.
In terms of customer satisfaction, it actually reached record levels during the half. That was due to a bunch of improvements, both on the catalog side. We also doubled our care team and we've worked very closely with our freight partners on service level. Next year, we will be ensuring that we work even more closely with our warehouse providers and logistics departments,
so we
can handle the big peaks in the year. They come around particularly around the peak around November, Black Friday and Cyber Monday. We'll also be continuing our pilot of our after hours and weekend delivery service and we'll be adding more experts into our care team. On Page 7, you can see the results of our major of our first major foray into brand marketing since listing. Over the half, we ran a national TBC campaign on the free to air networks, Foxtel and YouTube.
We've seen a significant increase in our aided brand awareness as a result of this campaign, as you can see on the page. Later this calendar year, we will be testing other channels such as outdoor and radio. Importantly, as Page 9 details, while our cost per customer increased as a result of activity as expected, It was offset by an increase in orders per customer, an increase in average order value and an increase in our margin. The net effect of this was that our 12 month marketing ROI actually held steady at 2.6 even in the face of the increase in customer acquisition costs. What this allows us to do is continue to increase our investment to become the top of mind online brand in our category, which we are planning to do.
On Page 10, you can see our trade in commercial recovered from the week finished the last financial year. It actually grew 89% over the half. This is driven in by recoveries in sectors such as residential development and regional hospitality. And you can see on the chart with the first The customers are still very loyal and that's a testament to the great service that we're providing to those customers. I'll now hand over to Mark Taylor to take you through the results in more detail.
Thanks, MC. Good morning to all. As Mark mentioned, it's always pleasing to present another set of record numbers for the half. I'm going to start on Page 13, we summarize the Group's profit on loss results for the first half versus the corresponding half last year. As Mark noted, the half was headlined by the record revenue record profitability results.
Accounting revenue for the half came in at $161,600,000 which was up 118% year on year or 124% on a checkout revenue basis, which excludes accounting adjustments. The reason for the variance in growth was Essentially, a high level of deferred revenue as at the end of December relative to last year, which will ultimately benefit the month of January an accounting perspective. The consistency in revenue growth year over year for me highlights the plays with scale are the ones that will benefit the most from changing consumer preferences and those structural tailwinds that are in our favor as more of the spending of our Calgary moves online. This is highlighted on Page 20 of the deck, which outlines our growth profile relative to the rest of the market. Deliver margins came in above our short to mid term target
of circa 30%, primarily driven by
the growth in private label, which runs at a high delivered margin level to that of the drop ship component of the business. However, we also saw a continuation of favorable turns and a forging of stronger relationships with our drop ship partners, Not only from a cost perspective, but also in regards to things like exclusivity on ranges, both rights to products, priority shipping. Again, the benefits of scale for me really, I suppose, shown through during this half. Also, the favorable market conditions and strong demand throughout the first half Also assisted margin levels to an extent given we didn't have to discount or promote the product as heavily as anticipated. You will see a step up in marketing spend, both in dollar terms and also as a percentage of revenue, with marketing coming in at 12.8 percent of revenue with the main variance to last year being our investment in TV to continue to build brand awareness in the Australian market.
As Mark mentioned, ADA brand awareness is now at 55%, so the trajectory is looking very positive. As a result of the increase in delivered margins, our contribution margin levels came in above our short to mid term target of circa 15%. This is still the level to which we believe is more of an optimum level to deliver above market growth, while still providing leverage to invest into all of those growth areas of our business. The operating leverage in the first half was in part driven by the continued reduction In our fixed costs as a percentage of revenue, which for the first half were down to 7.5% of revenue from 11.7% last year excluding share based payments. However, it is important to note that as in previous years, the full cost of this reinvestment activity, Which is predominantly people investment into areas such as technology, our B2B teams, 3 d AR teams, Our product label teams, the full cost of these investments will be realized in the second half of FY 'twenty one as in previous years.
The end result being a record in terms of profitability with an EBITDA result of $14,800,000 or $15,300,000 excluding Share based payments, which is an increase as Mark said of over 5 50% on last year. The next page I want to talk to is Page 15, which highlights the cash generative nature of the business, while also highlighting an area we are beginning to allocate some capital. Ending cash for the half came in at $85,700,000 up from $38,100,000 as at June 30. Now I'd love to say that Delta was solely driven by operating cash flow and a good part of it was, but within this did contain the proceeds of the capital raise, which was conducted in July 2020 with net proceeds of between $38,000,000 $39,000,000 You will see on the walkable chart operating cash flow for the first half of circa $23,000,000 which highlights both the operating results, but also the cash flow nature of the dropship component of the business model, which is still by far the majority of the business. Those positive operating cash flows were offset by investments into private label inventory, the largest we have made to date off the back of a fairly successful last sort of 6 months where we've seen our private label products now make up over 25% or make up 25% of the group's sales.
As we start to fill some of those product and pricing gaps across our ranges, we'll continue to invest in this area where we believe it makes sense to do so. All of our inventory metrics, whether it's weeks of cover, Jymroy, aging profile, all those metrics are all tracking Better than our target ranges, which for me sort of signals that the buying decisions that we're making are quite strong. The investment that we made into our Israeli based AI interior design company, which completed in July 2020, also forms part of that cash flow waterfall chart under the column labeled other. So as in previous years, the full balance sheet will be presented as part of the Audited accounts, however, the strong balance sheet position remained. Strong balance sheet is a balance sheet with a healthy cash balance, no debt, The flexibility to allow the reinvestment of operating leverage and the ability to take advantage of both organic and inorganic opportunities in the market.
Thanks all. I'll hand you back to Mark.
Thank you, Mark. So before taking you through our strategy, I think it's worth retouching on the investment thesis at Temple and Webster. On Page 17, you can see the 2019 numbers from Euromonitor. Now we don't have more recent data, so 2019 data we'll have to do, but even then you can see it was a big market, dollars 14,600,000,000 That importantly excludes categories such as home improvement, appliances, it's really just our core furniture and home waste. So our TAM is actually bigger than this, but for For current purposes, you can see that it's still a big market.
Now that $14,600,000,000 only a fraction of that's moved online and Australia lags behind the U. S. And U. K, as you can see on the chart on the right. Even with COVID, we're not talking about A huge acceleration, it could be somewhere in between.
Our best guess is somewhere in between where the U. S. And UK was, where Sverile was, We still got a lot of growth left in terms of penetration. The next page shows you why that shift is happening. One of the main reasons is that people who have grown up buying a lot of things online are now entering the time of life where their homes are more important.
This trend has been accelerated, of course, by COVID. Now while it's impossible to predict the future, we believe online shopping habits has been formed and are being formed right now, which will permanently accelerate the adoption in our category. We have a pretty simple strategy, hasn't changed much, which good strategy shouldn't, that's on Page 19. We want to have the biggest and best range, Having everything you need for the home. Now importantly, the best bit of this means we won't list everything.
We want to be seen as a place of quality, but at an affordable price. We want to be a source of inspiration and the place you go to when you want to make your home more beautiful and want a seamless customer experience, both the support level and the delivery into the home. Now as Page 20 sets out, the bigger we get, the more scale benefits we get. And there are things like we can forge Close relationships with our suppliers and get better stock security, better terms, exclusive product ranges. We can make bigger investments into things like technology and data, A brand win in our private label products.
We can produce more content by having more studios and more creative resources. And in effect, essentially what happens is the big we get, the better and stronger Proposition becomes, which is the virtual cycle. And this in turn will lead us to increase our market share, which you can see on Page the right hand side of Page 20, We think we are increasing our share growth versus the market stats we have. Page 21 is our 1 page of initiative strategy. It's pretty simple.
We want to increase our range, keep improving our range to ensure it remains the biggest and best. This includes expanding our private label range, as Marcus said. We want to continue driving our digital advantage, including making better use of Omid's amount of data through initiatives such as personalization. We'll be adding more resources into our technology team. Our aided brand awareness post our TV campaign, as I said, was around 55%.
We are aiming for national brand status, so we want to get that to above 80%. We'll do that through digital and non digital channels. One of our key pillars is inspiration. Now we've already added over the half editorial design, 3 d artists, video resources and the team, But we also are in the process of building our 3 d model library and adding resources to make best use of those assets. We want to continue to improve our customer care as always through better training and platforms and we'll be focusing on the delivery experience In the process of piling an after hours weekend delivery, if that's successful, we'll roll out that pilot to a national customer base.
And of course, trade and commercial provides another growth market and we will be continuing to invest in our team, our range and service proposition to keep winning market share in this segment. Now while we don't have a specific M and A strategy, we will consider inorganic investments to accelerate any of the areas on this page where it makes financial, strategic and operational sense. Our trading update is on Page 22. As previously mentioned, the second half has started strongly with January's revenue growth tracking in excess of 100%. We continue to experience strong tailwinds, including the ongoing adoption of online shopping due to the structural and demographic shifts I mentioned before, the acceleration of these trends due to COVID and increasing discretionary income due to travel restrictions still in place and likely to be in place for a while and the continued recovery of the housing market and unemployment levels.
Now as Mark said, we will be continuing our reinvestment strategy. Really want to make sure we're investing into growth areas of the business to cement our online market leadership and drive market share. Finally, a big shout out to the Tempster team, many of whom listen to this call. Without them, Mark and I wouldn't be able to deliver such a great set of numbers. We'll now take any questions you have.
Thanks,
Your first question comes from Ash Chandra from Goldman Sachs. Please go ahead.
Thanks very much for taking the questions. Just a couple if I could. Could you talk So a little bit kind of the revenue profile as it went through that first half in terms of Q1, Q2 absolute dollars. Is there any sort of color you can Is there any sort of color you can give around that to give a sense of kind of how it progressed? Because the last update you gave was, I think towards the end of October.
Yes. Hi, Ash. It's Mark Teague. We probably need to let everyone know who's talking. Yes, look, the revenue profile throughout the half was in dollar terms Fairly consistent, I would say.
Q2 is always a bigger quarter for us than Q1, But it doesn't overly reflect in the growth rates. So if you look at the prior year, there was certainly A bit of a variance in terms of the comping, Q1 versus Q2. If you look at last year, We actually accelerated our growth throughout the half. So we started at sort of low 30% sort of levels in terms of year on year And that accelerated throughout the half up to ending the half at around a 50% growth rate. So that obviously implies that the Q2 We're always going to be comping a larger Q2 period relative to Q1.
But In terms of dollars, Q2 was a bigger quarter than Q1 as it always is. It's a seasonally, It's a larger quarter for us. And those underlying, I suppose, revenue growth trends have also then continued into January with January Continuing to grow at over 100%.
And would January, May, June be your sort of 3 of your most important months In this upcoming second half?
Yes. Look, there's a few big months for us throughout the year. We're not a typical sort of Gifting retailer or where the bulk of our profitability comes in 1 or 2 months per year. Certainly, Q2 and Q4 are our bigger quarters. And within those quarters, October November, they're bigger months in terms of dollars.
And then in Q4, and the reason for that is obviously Christmas and people setting up their homes for Christmas. But then May June are also very big months as well. June in particular, you've got a lot of end of year sales going on. Also from a B2B perspective, it's a big month from a B2B as companies get into to ensure that they take advantage of those tax advantages. So October, November, a big month.
December is still a big month for us as well. But what you typically tend to see in December is after about Mid December, it turns it flattens off a little bit as some more of that spend shifts From online back to offline. But then when Boxing Day comes around, the sales start to come up again. And then like I said in May and June as well you start to see an uptick in Q4 as well as end of year sales start to kick in.
Got it. Yes. The next question is, yes, Q2, Q4 are strongest in the quarters, but January still is a seasonally strong month. Yes, we are comping a good month.
And can I ask with respect to the commentary you've provided around the ongoing investment in in the foundation of the business to support future growth? Is this a reasonable step change that we're going to see through this fiscal 2021 year of which you are positioning the business to be able to service a considerably larger revenue stream? Or is this something that for the next 2 to 3 years, we should be expecting pretty decent year on year growth in the cost base? Just Trying to get a sense of how this investment is setting you up?
I mean, I'll Do you want
to take
that? Yes, maybe Mark,
you want to have a go and then I'll finish. So I
don't think I think the I mean, we're very much looking at the long term picture, right? Because we look at What's happening around the world and what's happening to Wayfair? And I mean Wayfair's numbers are extraordinary, right? So they're doing US13 billion dollars in America alone, in their main market. You kind of translate that back into Australian dollars and population, etcetera, and we should be doing Aussie, it's insane right now and they're still growing at 60%.
So when we talk about setting the business up for growth and long term growth, we're not talking about A year, 2 years, 3 years even, like we're talking about making this business into a multibillion dollar revenue business and Waste has proven Now obviously, we don't want to load the cost base completely straight away because it's going to destroy the economics. And also, there There's a natural rhythm of an organization that you only grow so quickly before it collapses, right? You know what collapse and there's a long way. But yes, we'll be making investments in the cost base This year and next year and the year after and the year after because we're chasing a much bigger number than the 2 to 3 year forecast.
Yes. I'll ask the last question before I
jump on. I'll just add to that as well. Agree with that.
Thank you. And I'll just ask the last one before I jump back in the queue. Your ROI on marketing spend is holding steady. How is your thinking on this sort of evolving as you're getting more indications of how repeat usage is rising? Is this something that you could actually take a view on?
It's a good question.
If you'd asked me before TV, I would have said
That ROI was going to come down actually. Interestingly, the ROI is held And even though you can see the cat go up, as I said in my commentary, it's being offset by an increase in Repeat rates, slight increase in AOV and increase in margin. So it's quite interesting. So our best guess is that we're actually reactivating repeats with this brand marketing. So I think it's going to be interesting equation as it plays out.
So we will be as we increase our Shift into brand marketing and cap rises, we actually increasing the repeat rate and we know that companies that way have to have a higher order structure cost. We know we've got Room left with that. We know how orders at sub-fifty percent of our orders come from repeat customers. Wafer is more like 70 7% plus. We've got a lot of growth left in repeat and that will set off the increase in CAC.
So it will be interesting one to watch. I think the dynamics will be, as I said, will be interesting. We don't have a fixed view that it has to be 2.6. I think 2.6 is really good. It means that we're making money on the customers, on the new customers.
We don't think it has To be that, it could be lower and we could fund more money into marketing to accelerate growth and we make sure we are that dominant player. But at the moment what's happening is that the two forces are counterbalancing and the ROI is holding.
Okay, terrific. Thanks, James. I'll jump back in the queue.
Thank you. Your next question comes from Callum Sinclair from Macquarie. Please go ahead.
Hi, guys. Just a couple for me. Maybe just if you can touch on how suppliers have gone and keeping up with the growth through that first half and if it's been a Straight through the period, just both in terms of the inventory availability and delivery time frame standards, all that sort of stuff?
Look, my line in the opening, which is it's not easy to scale rapidly scale a business. There's a lot in that, right? And clearly, there's all our internal things that go with scaling business, but it's all the external things as well because we are Like any business, you're aligned on all of your suppliers, but whether that be in our case, product suppliers or factories, but also logistics logistics suppliers. As you probably read from some of the commentary around the market, definitely there have been Bottlenecks in different parts of the supply chain. We had delays out of Asia saw some of the private label.
We had stock shortages in our drop shipping network as they have also experienced Same delays in their end. Good news is that today we've kind of washed through that. We've got a lot of stock that's arrived or arriving. Our suppliers have got a lot of stock also, so we're kind of in a good stock position actually right now, which is good. And that's certainly getting better.
Logistics network was humming actually, our warehousing and our carriers were humming up until The November peak, which is what I called out the Black Friday Cyber Monday period. I think the networks Do well when there's a kind of steady increase, even if it's a big steady increase, they can plan for it. The trouble is with the consumer e commerce sector is that the back period in that Weekend is getting so big and everyone's holding off to buy the Christmas shopping over that weekend that it puts a massive strain on the network for a short period of time until kind of it's sorted out. Now everything's going back to almost back to normal now. So it's okay and we found additional warehouse space Carriers are back to kind of normal delivery standards, but we definitely need to make sure that for the next peak, the next November and from now on, We are working on how to make sure we're addressing that sudden increased capacity.
But yes, as I said, most of those It should have been sorted out, but it was a challenging quarter.
Yes, I appreciate it. You touched on it briefly, but just in terms of the private label and new categories Going to just what are the key remaining gaps you're looking to focus on in the full period and whether you're sort of preferencing dropship versus private label? And maybe just adding to that, can you drive higher spend per customer by consistently increasing that range?
So the second question part of your question is easy to answer, which is yes. I definitely think The more bites of Terry that you give someone, the more they'll spend with you. So if you can add in More categories, more subcategories, they have they don't need to go to your competitors and I think you'll get I think I mean we know ourselves by What we've done over the last period X number
of years that you will get
a big AOV. So definitely expanding range Both within a category and adding categories is a focus. I think in terms of private label and drop ship, I mean, we'll always prefer like if we can make sure we have the stock for a drop shipper, We can get a good margin on it. We can rely on the dropshipper's operational metrics, we can rely on the dropship quality, No, it's great. Why would we not use a dollar shipper?
Like it saves our balance sheet, right? So we don't have a Preference to use private label, but in some areas, it gets tougher. So one of the classic examples is like entry level product range. So that is quite skinny margins at the entry level part of the furniture range. So When you start adding in wholesalers and retailers, etcetera, you get into quite low margins.
And we want to be careful, we don't Just chase the revenue at the expense of maintaining a good economics of the business. So I think there's some areas that makes more sense to import because the margin may not be there across the chain. In other areas, There may not be, we can see in our data, for example, that our customer wants a particular size or a particular color or material, etcetera. But Our drop shippers and we will often go to a drop ship and say, can you source this for us? Now we can, but we don't think there's a big enough market nationally for it.
And We will then have to go, okay, well, we think there's a big enough market on Tempur Webster and we'll take the inventory risk to bring it in. So I think there's We'll use the private label as an area to fill, as I said, the production price gaps and where we can't You know, make the margin we want on products, but our preference would always be to work with a drop shipper.
Hey, Greg. Maybe just last one for me before I hand it over. Just you mentioned that we're covering the housing market in the outlook. I guess Hard to answer, but how significant is it the general listing volumes and rental turnover to drive in the category and your revenue growth historically? So as that comes So do you think that's offset some of the other benefits you've got in the period to date?
I think So what we want is turnover. We want people moving, right. So when market recovers, people start selling, people start moving, That's what we want. There's obviously a bit of a wealth effect, right, the richer and they will Maybe redecorate the house or do something. But basically, we want people selling, moving, renting, Changing because when they do that, that's when they think of your own life stage, right, when was the time when you bought most of your furniture, it's usually when you've moved.
So I think That definitely is a trend as people start moving again. There's been a housing market the housing crisis didn't actually really take that much during COVID, right? Some markets went backwards, but it kind of because there was a really shortage of supply, so there was just nothing on the market. However, if listings volumes increases and the housing market recovers, then people start moving and that definitely helps us. And our house, it's furniture and housing is correlated to
Great. Thanks for that. I'll leave it to the other guys. Cheers.
Thank you. Your next question comes from Tim Piper from RBC Capital Markets. Please go ahead.
Good morning, team. Just a question on the deferred revenue, the differential in revenue and checkout based revenue. In terms of Orders unfulfilled, how far is that sort of stretching was stretching back at the end of December? Was there still undelivered orders from the Black Friday, Cyber Monday Then at the end of November and has this sort of backlog cleared completely now?
Yes, I'll take this one. So look, yes, it's completely well, completely, the majority Has all been shipped out throughout January. No, certainly no backlog going back that far. But essentially What we saw in December was that we're still catching up. So some of our logistics providers were still catching up throughout the month of December for that huge spike in that Black Friday cyber weekend.
So that backlog essentially transpired throughout the whole of December. So they were sort of Catching their tail throughout that whole sort of period. As we came into January, we started to see that backlog Start to then dissipate and then obviously by the end of January, things were returning back to normality. I can talk from my own personal experience having bought something on TPW a few weeks ago and I got it within a couple of days. So certainly back to where they should be.
But as Mark said, it's really those The difficulty is in those spikes, those sudden spikes in demand and we need to work through that. Our partners Need to work through that, but essentially from a deferred revenue perspective, they are orders that aren't delivered essentially. So As of the end of December, we had a portion of deliveries that weren't delivered more than what on a relative basis, more than last year, but then they were delivered in January. So from an accounting perspective, obviously we can't recognize that in December, but they'll be recognized in January.
Okay, got it. So when you talk about January revenue growth tracking in excess of 100%, is that Accounting revenue, are you taking into No, no. So whenever
we quote revenue Growth, that isn't at the end of the half or isn't at the end of a financial year. That is always just order based on order date, which excludes any accounting. So, anything any accounting benefits in terms of deferred revenue would be over and above That level?
Right. So the volume in January already looks pretty strong and then you're going to have that added tailwind of obviously, there's a Several $1,000,000 worth of deferred revenue kicking in as well.
Look, that's correct. And I think the other important point, which Mark noted as well Is January is seasonally a very good month for us. And January last year was seasonally very strong. Q2 was seasonally very strong last year as well. So the fact that we're able to grow in excess of 100% throughout Q2 and into Q2 into Q3, Yes, that gives us some confidence that things are holding up very well and there's still a lot of demand out there for furniture and home
Got it. Thanks for taking the questions. Well done on the update.
Thank you. Your next question comes from Sam Haddad from Bell Potter. Please go ahead.
Good morning, guys. Just a question on TV advertising again. So Just in reference to slide on Slide 8, there's a chart on the right. Is the first time customer Line more of a better litmus in terms of the traction you get from the increase in brand awareness. We saw that spike up with people working from home and forced to shop online with the fallout of COVID And sort of plateaued there since then, should we see an uptick on that green line with the increase in brand awareness from TV advertising?
I could say
it's a really interesting one, interesting question because I mean clearly we can see first time customers increase and It's probably don't forget those 3 months you're comparing like the peak at the end of COVID in FY 2020 versus coming into FY 2021. So the fact that they're holding at those Number the first time means we're still attracting a lot of first time customers. It's kind of impossible though because you don't have the tracking Like someone having clicked on the link, it's really, really hard to know is it a first time customer or a paid customer. And that's unfortunate reality with TV. We can look at things like baselines and We look at channels, we take, for example, our long tail search as a baseline and we're going to go, well, how does that compare First time and repeat versus a direct channel.
So people coming into Temple and Webster either by Typing in Temple Webster Google, which is called branded search or entering templewebster.com.au into their browser. So we can identify that traffic, which we attribute to TV, and we look at it versus the baseline of people who are searching for a blue couch. What we can see is that TV has had an impact not only on first time customers, but So I don't think it's that's what I'm saying. I don't think it's just a medium really interestingly for first time acquisition. It's also And medium to remind people who may have bought us before that we are around.
They may have it could have been a few years ago they bought with us and then and then they may but they may be in market or something. And rather Coming into Google and searching for something which they may not be doing, they are coming straight to us. So I think it's an interesting medium because it's not Just first time, it's first time on repeat. But when we look at even on a first time basis and we attribute the TV spend to 1st time customers, it's still looking okay on a cost of sale. Now one of the reasons why think we can get away with TV advertising.
The economics are okay. It's that we have a pretty high AOV. Our customers spend quite a bit of money with us. I think if you're a retail online retailer with lower, a little bit of low AOV, the economics on TV just wouldn't work.
Yes, because when I think of increasing brand awareness, I think that our report is the first thing to tick up would be the green line and obviously, you get an increase repeat purchase on the back of that.
Well, you don't know. I mean, Sam, I think a little bit of it is hidden evidence, right, because the green line could potentially be falling if we weren't doing TV. So it's kind of like It's hard to know what the green the green line is a factor of everything we're doing and It's still holding up, but quite a lot of new customers in that period.
Yes. Just back on the reinvestment strategy, just To ask previous question, I'll just ask it in a different way. If for the amount of investment that you've made in the business today where you stand, What level of sales can the business support? Just to get an idea of how far ahead of the curve you've invested in terms of The growth trajectory of the business?
I
mean, that's an interesting question. I think There's no real constraints of growth in terms of what we've currently got. So our Platform is very scalable. Like if we just froze, let's say we did nothing more from today, just literally froze, no more people, no more nothing. Our platform is very scalable.
We know we can do much more revenue because we do our peak days. We announced today that we had a $3,000,000 day. You times that by $3.65 you get $1,000,000,000 So our platform can handle $3,000,000 days. Our customer care team is variable, so that comes out that's not even in the fixed cost base, that will just scale Normally, our logistics is 3rd party, so that can scale without hitting our balance sheet or P and L. Our category teams, we have 100 and 100 suppliers.
We can also always increase the number of orders by just without adding people. But so If you are asking, could we be a much, much bigger business for the current cost base? I would say yes. However, I think like all businesses, you don't want to stop because if you stop, you're letting competitors potentially outcompete. So I think that there should be a continued investment in fixed cost base because that allow us to Keep pushing the customer proposition, keep pushing things like technology, keep leveraging data which will make marketing more efficient, etcetera.
The business will keep getting bigger and bigger. However, what we're very careful of is that we want to make sure the operating leverage is still apparent. So you can still see fixed costs as a percentage of sales come down. So we're not going to go crazy because we want to keep showing the operating leverage, but even with Investment each year and a significant investment in headcount to do all the things that I'm talking about, you'll still see that operating leverage. And you can see You see what happened last quarter with Wayfair, they've got a significantly bigger headcount than us, but Volume increase in volume meant that they got to profitability and quite I mean their adjusted EBITDA for last quarter was 9.5 It was quite high, but they've got leverage on their ad cost because it repeats
at such a high part of
the business now and they've got leverage on the fixed cost. That set themselves up to be a $13,000,000,000 U. S. Business. I think that's the journey we want to make sure we're going on.
So I understand your question, which is how much additional cost is needed to keep growing. I think how we look at it more is that We have a long term goal we want to get to and we want to make sure that we keep innovating the customer offer and keep making the proposition of Temple Hudson better and better. So there is no reason why you go to any of our competitors. And I think that does require investment, but you'll still see the operating leverage as we go through our journey.
I certainly recognize the additional cost needed. I was just wondering with your cost base today, what revenue can you support do you think?
Is there another one? So if you I mean we can do a $3,000,000 in a day.
Okay, okay. That's fine. Just on trade and commercial that seems to be rebounding quite strongly. Just Can you talk about the categories, the underlying markets there in that division, what you're seeing?
Yes. So it's a bit of
a mixed bag, still definitely So things like offices, like our office office used to be one of the major categories that hasn't yet come back Obvious reason, but it's being picked up other categories are picking up slack. So Residential development is going crazy, so a lot of developers are accelerating projects. And I think that's and so we do work with display suites and furniture packages and Even other lines of residential development like assisted living, for example. And then hospitality is having a boom. So And I was going overseas.
So the regional hospitality, regional hotels, restaurants, etcetera, are all going So those are they're probably the 2 ones that picked up. Our designer Markets, our trade bit of trade in commercial is also going quite strongly as people are Spending money in their homes and you can see that in the overall ABS market, Furniture and Home is having a good run. And so the Interior designers, interior decorators are also having a good run. So they're probably the 3 sectors which Countering the slower growth in some of them other sectors like office.
Just final question from me. FX with strong Australian dollar, what are the implications to your business?
Yes, good question, Sam. Look, historically, FX hasn't really had too much of an impact on our business, Given the fact we weren't transacting in any other currencies, I mean obviously we don't sell in overseas markets at the moment. So With the growth in private label, now we'll start to see some more effects. We've always hedged and we've always I love the risk on any transactions from a USD perspective and it's predominantly where we're buying Stock from factories that transacting in predominantly USD. So with the growth in private label, we will start to see A bit more FX starting to come into the business, still relatively low.
If you look at the amount of inventory we're holding relative to the size of the business, it's still Small, but as that grows, we'll start to see a bit more of an impact, obviously with the appreciation of the AED. Not only will we see Some benefits coming through there, but obviously our drop ship supplies as well will start to see some benefits from a COGS point of view, which will ultimately will be passed on through pricing through to us. Then it's up to us whether or not we want to then pass on those savings through to the customer Or bank some of that profitability. Given we're in that growth phase at the moment, I would suggest we'd be passing on a lot of those savings back to the customer.
Right. Thanks for your time.
Thank you. Your next question comes from Scott Hudson from MST. Please go ahead.
Good morning, gentlemen. A couple of quick questions from me. Firstly, in terms of, I guess, the behavior of the customers acquired Through COVID, is there any change in, I guess, how is that cohort spending relative to maybe historical cohorts?
Well, I think as I said,
the orders for active customer going up, so we can see in our cohorts, they're still good customers And their repeat rates are still higher than our historical cohort. Okay.
And then in terms of the, I guess the app, are you getting much sales activity through the app itself?
Yes. Look, it's still early days where all the metrics that we have Basically, we've launched it. We're promoting it. So when you land on a mobile site, you'll see a little banner at the top saying, do you want to install the app? That's all we've done.
We have done no other marketing pushing that. So it's really just organic installs. Having said that, the number is creeping up. Revenue is not revenue is also creeping up as well. So it's not tiny, but it's not huge.
What we're mostly interested are things like are the customers repeating at a higher rate than non app customers, are they Converting at a higher rate, is the AOV higher, they're spending more. So we're looking at the kind of those metrics. They're all the early reads that it's It's actually pretty good and that now we will be starting to mark the app hard. We worked on the Android app. The question is before we kind of go big bang down with the app, do we make sure we have an Android app?
Android customers can be a bit sensitive, but they don't like when Apple iOS companies don't have an iOS app, so I totally understand. But given the Android app is We're building as we speak. We may wait until we've got the Android app before we do big market download the app. And what's the timing on the Android app? This half,
But no clarity on earlier in the half or later in the half?
I've been doing it before by promising app launches, so I'm pretty sure every CR in the world has. In terms of the
I guess your margins sort of distribution margins And contribution margins sort of coming ahead of your mid to long or short to mid term expectations. I mean, is that Something that is likely to persist sort of over the immediate near term or is that just a
sort of a First half outlier.
Yes, I'll take this one. So look, I don't think it's an outlier per se, but we had said that and we've been saying We think around that sort of 30% delivered margin level is a more optimal level and around the 15% Level in terms of contribution margin is more of an optimal level in terms of being able to Generate pricing points to the customer and be able to provide really good promotional activity to the customer to drive Really healthy growth. Also allowing us from a contribution margin perspective to not only have enough funds there to invest in Growth in that marketing line, not just digital, but now as you can see, we're investing into above the line campaigns as well. That sort of 30%, 15% contribution As we've been sort of testing over the last sort of few years seems to be the sort of outcome where it's going to drive very good growth, Very good top line growth, very good customer acquisition, but also allow us enough operating leverage to Not only drives profitability, but also to be allowing for reinvestment back into the business. So Look at TBC, we don't give guidance, but certainly if we continue to grow private label Inventory as a percentage of the overall revenue base that will have a positive impact on the overall Delivered margin percentage, it's not up to us to look at that and to determine what sort of growth we want to drive because We view delivered margin, we view contribution margin and everything in between that is essentially levers for us to push and pull to drive as much to drive as much revenue growth as possible whilst not destroying the marginal economics of the business.
So we've always said those sort of short to mid term targets Closer to 30%, closer to 15%.
Okay. And then just in terms of, I mean
do you have a sort of sense of where Private label should end up as a sort of percentage
of sales going forward. Ben, so you are, it's Mark or me.
What's the range?
Mark, what's your range?
Look, we laugh because it's a debate that we have internally a lot. Obviously, from a CFO perspective, I would much prefer more of the business to be going through our negative working capital But obviously private label has a lot of inherent benefits both strategic and there's financial benefits I'll bet as well, but it carries a bit more risk as well. So it's currently at around 25%. Look, I've got no doubt that The capacity propensity for that to continue to grow. We'll always ensure that we maintain that negative working capital mix in the business.
And as Mark said, always our first port of call will be our dropship suppliers. But if we're seeing product to pricing gaps across the ranges then and it makes sense for us to invest into a certain line and it ticks all the boxes, then we'll continue to do that. So I think from a range perspective, I think 30% could be or even potentially a bit over 30% It could get to over time, but that's dependent on a lot of factors. It's dependent on the growth of our dropship component of the business As well, but like I said, we always want to try and maintain that negative working capital balance in our business as well.
Okay. And then lastly, I guess, dollars 80 $6,000,000 or $7,000,000 of cash. I guess what are the plans in terms of utilization of debt?
Yes, well, you can see private label, to start off with, we are investing in that area of the business. There's an allocation there of capital going into private label. And look, we are testing that, right? But If it continues to work, then we do believe that that's definitely a way in which we can allocate some capital towards an organic Element of the business. And if you look at some of the areas that we're investing, particularly around the 3 d augmented reality, we've already made a small investment into our Israeli based interior design company.
And there will potentially be further investment in and around 3 d And they are going forward. But what it also does, obviously, it gives us the flexibility to execute on any inorganic opportunities That are in the market. As the market leader, you tend to see a lot of those opportunities before anyone else. And we're always assessing Assisting those opportunities in the market. But look, we are pretty prescriptive in terms of what we're looking for as well.
We are not going to execute on a deal just because we can and need to tick a lot of boxes for us. So we'll continue to assess those inorganic opportunities as well.
That's helpful. Thank you.
Thank you. Your next question comes from Wazim Kisarani from Jarden. Please go ahead.
Yes. Good morning, guys. Can I just ask a question on your active customer numbers? And notwithstanding the comments you made Around the longer term market opportunity that you still see here, how are you thinking about the more sort of short term outlook for those numbers Given that surge that we've seen over the last 6 to 9 months, I guess, is it reasonable to expect some leveling off Over the short term as we sort of start to get into that period where you're comping those COVID impacted areas, is that how You guys are thinking about it and sort of will you be adjusting marketing in any way as we enter this period?
Look, it's a great question. Of course, I mean, everyone knows that we're going to be comping I think the short answer is we started the year strongly. We are Comping still pretty great. We were growing 50% plus in January last year and we're growing in excess of 100% now. So we're We're already comping big numbers.
We're growing pretty quickly. We have the short term levers, as Mark was saying, so marketing mix Pricing and margins that you play with. We also have The flexibility in the sense that we've told everyone we want to be a high growth and we're not running this for a high EBITDA margin business for now. We want to make sure we're growing quickly. The only thing I'd point to is that Wayfair in 2015, I'm pretty sure it was, had a few quarters of 2015, 2016 had a few quarters of quite high growth, so 80 in the U.
S. Direct growth, like 80%, 90% growth. And they were still able to comp that following year with 33%, 40%, 45% growth. So it is possible to kind of grow. You have to get all your ducks In line and make sure that your marketing mix is right and you've got your repeat strategy right and you've Conversion strategy is right, etcetera.
So it all comes back to fundamentals to make sure we keep focusing on the customer and keep executing on strategy. But we're definitely focused on making sure we keep growing.
Okay, great. And then can I just ask around category growth? And can you give us a sense of how much of the sales uplift Over the last quarter or a couple of quarters, it's kind of come about through new categories, If you can kind of give us any sense around that at all?
It's actually quite. So we've most of our efforts have been focused We've entered the home improvement categories. We've got a pretty limited range. We still need to beef that up. That's still a future growth play for us.
Definitely the lion's share by a long, long way is our core categories.
Okay, great. And then a final question from me, just on you made the comment to an earlier question that You don't want to stop investing and that sort of others get an edge. Is kind of logistics an area that you're seeing any sort of deficiencies or opportunities at all, especially in light of some of the delays that were experienced around the cyber Events over November December. I mean is that sort of on a midterm view an area that you think you'll focus more on or are you still happy with the kind of the logistics Footprint of the business at
the moment? I mean, I'm never happy, but I think, look, we got to try to carefully arrive because We don't want to necessarily go too heavy into Having our own fleets or loading up the assets of the business with logistics Infrastructure, but at the same time, we want to make sure we're talking to customers. Obviously, there's a balance between ensuring the profile of the business Really nice and clean and asset light, etcetera, and making sure that the customer is having experience that they that we want to give them. As I said,
it was really it was just the peak period. Up until the
peak period, everything was going okay. So if we can solve the peak period without having to go Too heavy into logistics, I'd much prefer to do that and that's what our focus is going to be. But never say never, right? So if The only way to solve it is to maybe go slightly more deeper into logistics. I think we wouldn't rule it out and Wayfair has done that quite In the U.
S, they have their own last mile fleets and they have their own warehouses where they store their own well, their suppliers' goods on basic consignment. They have done that. They've proven that actually with scale, it pays for itself in the last couple of quarters of possibility. I think that's a whole another operational team Set up capability which we will go into only if we need to.
Yes. That's good color. I appreciate it. Thank you.
Thank you. Your next question comes from Louise Sandberg from Bank of America. Please go ahead. Hi, guys.
Congratulations. First, just your spend per customer is up, But how does it compare to the average spend per first time customer? And is the first time purchase profitable given your at the post marketing spend?
So that is a first time customer. So that's our cap With an estimated percentage. We go through by channel and work out what channels the mix is by first time and repeat and we kind of that's how So that's the first time customers spend. And you can see that the ROI on that is still pretty good. So yes, it's still
And so but how does it compare? Because obviously, if we think about repeat Customers that's driving up your average customer spend per total customers. How does That compared to the first time customer spend?
As in the CAC or the?
As in just the dollar spend for customers?
Well, so this is so the ROI is essentially The 12 month ROI. So it's not only the first order, but it's also the subsequent order. So any subsequent order will improve the ROI of that cap. So I mean from an AOV, the first time and repeat customers spend about the same. So there's not much difference in an order, But obviously, a repeat customer has more orders than a first time customer.
And in terms of tax, how much tax benefits do you have left? When do you see yourself paying tax?
Yes, it's a good question, Louise. Probably best to have a look at that once we Lodge our balance sheet, which will come through in the audit accounts and there'll be full trends there'll be full visibility of that in a couple of weeks' time.
Okay. And I guess finally, just you talked about the shipping delays. How did that impact the private label side? Would private But label has been stronger and therefore also your gross margin stronger if delivered margin is stronger if shipping delays Not existing. I mean shipping
delays were across the board because it wasn't
I mean, there's a couple of things. One is the private label actually runs as a slightly longer ship time than our drop shippers because We do presales. We will sell containers, which are a few weeks out from port. So if a customer wants to Buy something which is not yet landed that will give them the option to buying it a few weeks out and we only do that with a very few select number of our dropshippers because we want to make sure So they can handle the operational complexity of ensuring as soon as a container arrives that those orders are prioritized and sent out first.
So we don't do that with all
the suppliers, we do that with a private label. So on average actually the ship time, the delivery time is a bit longer for our private label than our drop shippers because of that time. But really the delays were more in the once it was picked up, whether by one of our warehouse, third party warehouse or one of our drop shippers warehouse, It was injected into logistics networks and that's when the delays happened. So it was across the board. Our private label is growing fast and our dropshippers, As you can see that calculate because the share of the business has gone up.
So no, no, it's had to have outgrown the Drop shippers to increase share of the business. And that's really more about we've been able to Input good products at good pricing. We give a bit more promotional support to our private label and things like emails. We have more margin to play with to do better promotions, etcetera. So it's more of the fundamentals of why that private label It's growing faster than dropship as opposed to the delivery delay.
Okay. Got you all for me.
Thank you. That does conclude the question session. I will now hand back to Mr. Coulter for closing remarks.
Thank you, Amanda. So thanks everyone for your time today. It was great to take you through the results. Just to conclude on the key message today again, We delivered record results, revenue up 118%, EBITDA up 5 56% year on year. Remember, we operate in large markets.
It's still very early in the adoption curve even after the acceleration of COVID. And as you've seen today, we continue to make excellent progress on our strategy and have entered the year growing in excess of 100%. Thank you again. Mark and I look forward to seeing many of you on the virtual road this week. Thank you.
Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.