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Edited Transcript of TPW.AX earnings conference call or presentation 1-Feb-21 11:30pm GMT

·60 min read

Half Year 2021 Temple & Webster Group Ltd Earnings Call Feb 2, 2021 (Thomson StreetEvents) -- Edited Transcript of Temple & Webster Group Ltd earnings conference call or presentation Monday, February 1, 2021 at 11:30:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Mark Coulter Temple & Webster Group Ltd - Co-Founder, CEO, MD, Customer Experience Officer & Director * Mark Tayler Temple & Webster Group Ltd - CFO ================================================================================ Conference Call Participants ================================================================================ * Ashwini Z. Chandra Goldman Sachs Group, Inc., Research Division - Equity Analyst * Callum Sinclair Macquarie Research - Analyst * Louise Sandberg BofA Merrill Lynch, Research Division - VP * Sam Haddad Bell Potter Securities Limited, Research Division - Industrials Analyst * Scott Lyndon Hudson MST Marquee - Senior Research Analyst * Timothy Piper RBC Capital Markets, Research Division - Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Thank you for standing by, and welcome to the Temple & Webster Half Year 2021 Results Briefing. (Operator Instructions) I would now like to hand the conference over to Mr. Mark Coulter, CEO and Managing Director. Please go ahead. -------------------------------------------------------------------------------- Mark Coulter, Temple & Webster Group Ltd - Co-Founder, CEO, MD, Customer Experience Officer & Director [2] -------------------------------------------------------------------------------- Thank you, Amanda. Good morning, everyone, and thank you for your time today. It gives Mark Tayler and myself great pleasure to be presenting the results for the first half of FY '21 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% year-on-year; secondly, we operate in a large market, and we're 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 up front that rapidly scaling any business is not an easy task. The team has done an amazing job on executing our road map 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 our teams' 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 #1 priority. The other point to note on this page is that we have experienced strong growth across all of our major product categories, geographies, marketing channels and customer demographics. This suggests to us that the shift of 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' 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 in 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 higher 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 they 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 if many people will have questions on that. It's -- the conversion rate, faster [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 home page, which makes better use for our deep reservoir of in-house produced content. In addition to the Android app, watch out for our Swatch service, which 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 first batch of 3D models. In terms of customer satisfaction, we 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're working more closely with our warehouse providers and registry departments, so we can handle the big peaks in the year when 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 TVC 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 this 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 cost. What this allows us to do is to 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 & Commercial recovered from the weak finish to 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 first time repeat orders that 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 Tayler to take you through the results in more detail. -------------------------------------------------------------------------------- Mark Tayler, Temple & Webster Group Ltd - CFO [3] -------------------------------------------------------------------------------- Thanks, MC. Good morning, all. As Mark mentioned, it's always pleasing to present another set of record numbers for the half. We're going to start on Page 13. We've summarized the group's profit and loss results for the first half versus the corresponding half last year. As Mark noted, the half was headlined by the record revenue and record profitability result. Accounting revenue for the half came in at $161.6 million, 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 from 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 our category moves online. This is highlighted on Page 20 of the deck, which outlines our growth profile relative to the rest of the market. Delivered margins came in above our short to midterm target of circa 30%, primarily driven by the growth in private label, which runs at a higher delivered margin level to that of the drop-ship component of the business. However, we also saw a continuation of favorable terms 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, first 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 the marketing spend, both in dollar terms and also as a percentage of revenue, with marketing coming in at 12.8% of revenue with the main variance for last year being our investment in TV to continue to build brand awareness in the Australian market. As Mark mentioned, aided 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 midterm 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 forecast of this reinvestment activity, which is predominantly people investment into areas such as technology, our B2B teams, 3D AR teams, our private label teams, the full cost of these investments will be realized in the second half of FY '21 as in previous years. The end result being a record in terms of profitability with an EBITDA result of $14.8 million or $15.3 million, excluding share-based payments, which is an increase, as Mark said, of over 550% on last year. The next page I want to talk to is Page 15, which highlights the cash-generative nature of the business whilst also highlighting an area we are beginning to allocate some capital. Ending cash for the half came in at $85.7 million, up from $38.1 million as of June 30. Now I'd love to say the delta was solely driven by operating cash flow, and a good part of it was, but within this did contain the proceeds of a capital raise, which was conducted in July 2020 with net proceeds of between $38 million and $39 million. You will see on the waterfall chart, operating cash flow for the first half of circa $23 million, which highlights both the operating results but also the cash flow nature of the drop-ship 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 both 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, GMROI, 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. It's 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 -- now I hand you back to Mark. -------------------------------------------------------------------------------- Mark Coulter, Temple & Webster Group Ltd - Co-Founder, CEO, MD, Customer Experience Officer & Director [4] -------------------------------------------------------------------------------- Thank you, Mark. So before taking you through our strategy, I think it's worth retouching on the investment thesis of Temple & Webster. On Page 17, you can see the 2019 numbers from Euromonitor. Now we don't have more recent data, so 2019 data will have to do. But even then, you can see it was a big market, $14.6 billion. That, importantly, excludes categories such as home improvement, appliances. It's really just the core furniture and homewares. So our TAM is actually bigger than this, but for -- just current purposes, you can see that's still a big market. Now that $14.6 billion, 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 huge acceleration, it could be somewhere in between. Our best guess is somewhere in between where the U.S. and U.K. was, where Australia was, but 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 have 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 fit 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 we want a seamless customer experience, both at 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, our brand awareness and our private label products. We can produce more content by having more studios and more creative resources. And in fact, essentially, what happens is the bigger we get, the better and stronger our customer proposition becomes, which is the virtuous 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 of growth versus the markets that we have. Page 21 is our 1-page 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 Mark has said. We want to continue driving a digital advantage, including making better use of our immense 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%, and we'll do that through digital and nondigital channels. One of our key pillars is inspiration. Now we've already added over the half editorial, design, 3D artists, video resources in the team, but we also are in the process of building our 3D 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. We're in the process of the piloting an afterhours, weekend delivery. If that's successful, we'll roll out that pilot to a national customer base. And of course, Trade & 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&A strategy, we will consider inorganic investments to accelerate any of the areas on this page where it makes financial strategic 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, an increase in 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. We 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 Temple's team, many of them are listening 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, Amanda. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Your first question comes from Ash Chandra from Goldman Sachs. -------------------------------------------------------------------------------- Ashwini Z. Chandra, Goldman Sachs Group, Inc., Research Division - Equity Analyst [2] -------------------------------------------------------------------------------- Just a couple, if I could. Could you talk us through a little bit kind of the revenue profile that went through that first half in terms of first quarter, second quarter, absolute dollars? 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. -------------------------------------------------------------------------------- Mark Tayler, Temple & Webster Group Ltd - CFO [3] -------------------------------------------------------------------------------- Yes, Ash. It's Mark T. 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 was 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 growth. And that accelerated throughout the half, up to ending the half at around a 50% growth rate. So that obviously implies that 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. 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%. -------------------------------------------------------------------------------- Ashwini Z. Chandra, Goldman Sachs Group, Inc., Research Division - Equity Analyst [4] -------------------------------------------------------------------------------- And would January, May, June be your sort of -- 3 of your most important months in this upcoming second half? -------------------------------------------------------------------------------- Mark Coulter, Temple & Webster Group Ltd - Co-Founder, CEO, MD, Customer Experience Officer & Director [5] -------------------------------------------------------------------------------- Yes. Look, there's a few big months for us throughout the year. We're not a typical sort of, I suppose, 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 and November, the bigger month in terms of dollars. And then in Q4, and the reason for that -- the reason for that is obviously Christmas and people setting up their homes for Christmas. But then May and June are also a 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 for B2B as companies get in 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 the, I suppose, mid-December, it turns -- it flattens off a little bit as some more of that spend shifts from online back to off-line. But then when Boxing Day comes around, the sales are bound 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. -------------------------------------------------------------------------------- Ashwini Z. Chandra, Goldman Sachs Group, Inc., Research Division - Equity Analyst [6] -------------------------------------------------------------------------------- Got it. And... -------------------------------------------------------------------------------- Mark Tayler, Temple & Webster Group Ltd - CFO [7] -------------------------------------------------------------------------------- The only thing I'll add to that is -- yes, Q2, Q4 are stronger season quarters, but January still is exceedingly strong month. Yes, we are comping a good month. -------------------------------------------------------------------------------- Ashwini Z. Chandra, Goldman Sachs Group, Inc., Research Division - Equity Analyst [8] -------------------------------------------------------------------------------- And can I ask, with respect to the commentary you've provided around the ongoing investment 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 '21 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. -------------------------------------------------------------------------------- Mark Coulter, Temple & Webster Group Ltd - Co-Founder, CEO, MD, Customer Experience Officer & Director [9] -------------------------------------------------------------------------------- I mean -- Yes. I'll -- maybe, Mark, you want to have a go and then I'll finish. -------------------------------------------------------------------------------- Mark Tayler, Temple & Webster Group Ltd - CFO [10] -------------------------------------------------------------------------------- Yes, 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? They're doing USD 13 billion in America alone in the main market. You kind of translate that back into Australian dollars and population, et cetera, and we should be doing AUD 1.3 billion. 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, right, we're talking about making this business into a multibillion-dollar revenue business and Wayfair has proven it. 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's a natural rhythm of an organization that you can only grow so quickly before it collapses, right? You don't want to collapse under your own weight. 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. -------------------------------------------------------------------------------- Mark Coulter, Temple & Webster Group Ltd - Co-Founder, CEO, MD, Customer Experience Officer & Director [11] -------------------------------------------------------------------------------- Yes. I don't have anything further to add to that as well. I agree with that. -------------------------------------------------------------------------------- Ashwini Z. Chandra, Goldman Sachs Group, Inc., Research Division - Equity Analyst [12] -------------------------------------------------------------------------------- And I'll just ask a last one before I jump back in the queue. Your ROI on marketing spending 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 there something that you could actually take a view on? -------------------------------------------------------------------------------- Mark Coulter, Temple & Webster Group Ltd - Co-Founder, CEO, MD, Customer Experience Officer & Director [13] -------------------------------------------------------------------------------- Good question. It's a good question. If you 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 CAC go up, as I said in in my commentary, it's being offset by an increase in repeat rates, slight increase in AOV and increase in margins. 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 an interesting equation as it plays out. So we'll be -- as we increase our shift into brand marketing and CAC rises, we're actually increasing the repeat rate. And we know that companies that work to have a higher order [have attractive] costs. We know we've got room left with that. We know how orders -- about 50% of our orders come from repeat customers, Wayfair's more like 70% 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 2.2 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 funnel 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 2 forces are the counterbalancing and the ROI is holding. -------------------------------------------------------------------------------- Operator [14] -------------------------------------------------------------------------------- Your next question comes from Callum Sinclair from Macquarie. -------------------------------------------------------------------------------- Callum Sinclair, Macquarie Research - Analyst [15] -------------------------------------------------------------------------------- Just a couple for me. Maybe just if you can touch on how suppliers have gone in keeping up with the growth through that first half, and if it's been a constraint through the period, just both in terms of the inventory availability and delivery time frame standards, all that sort of stuff. -------------------------------------------------------------------------------- Mark Coulter, Temple & Webster Group Ltd - Co-Founder, CEO, MD, Customer Experience Officer & Director [16] -------------------------------------------------------------------------------- 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, reliant on all of your suppliers, both whether that be in our case, our product suppliers or our factories, but also logistics, logistics suppliers. As you probably read from some of the commentary around the market, definitely, there have been bottlenecks in parts -- different parts of the supply chain. We had delays out of Asia for some of our private label. We have stock shortages in our drop shipping network as they also experienced the same delays in their end. The good news is that 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 going to get to get 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 kind of a 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, that 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 gets sorted out. And everything has gone back to -- is almost back to normal now. So it's okay, and we found additional warehouse space and our carriers are back to kind of back to kind of normal delivery standards, but we definitely need to make sure that for the next peak to 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 issues have been sorted out, but it was a challenging quarter. -------------------------------------------------------------------------------- Callum Sinclair, Macquarie Research - Analyst [17] -------------------------------------------------------------------------------- Yes, appreciate it. You touched on it briefly, but just in terms of the private label and new categories you can go into, just what are the key remaining gaps you're looking to focus on in the fourth period and whether you're sort of preferencing drop ship versus private label? And maybe just adding to that, can you drive higher spend per customer by consistently increasing that range? -------------------------------------------------------------------------------- Mark Coulter, Temple & Webster Group Ltd - Co-Founder, CEO, MD, Customer Experience Officer & Director [18] -------------------------------------------------------------------------------- So I mean, the second question -- part of your question is easy to answer, which is yes. I definitely think the more bites of cherry 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 competitors, and I think you'll get -- I think -- I mean we know ourselves by what we've done as in the last period, x number of years, then you will get a bigger 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 stock through a drop shipper, we can get a good margin, we can rely on the drop shipper's operational metrics, rely on the drop shipper's quality and everything's great, why would we not use a drop 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 there is quite skinny margins at the entry level part of a furniture range. So when you start adding in wholesalers and retailers, et cetera, you get into quite low margins. And we want to be careful we don't just chase the revenue at the expense of maintaining good economics of the business. So I think there's some areas it 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 on our data, for example, that if our customer wants a particular size or a particular color or material, et cetera, but our drop shippers -- and we'll often go to our drop shippers and say, "Can you source this for us?" Now great, we can, but we don't think there's a big enough market nationally for it. And so we will then have to go, okay, well, we think there's a big enough market on Temple & Webster, and we will 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 product and price gaps and where we can't make the margin we want on products, but our preference would always be to work with the drop shippers first. -------------------------------------------------------------------------------- Callum Sinclair, Macquarie Research - Analyst [19] -------------------------------------------------------------------------------- Okay. Great. Maybe just last one for me before I hand it over. Just you mentioned the recovery in the housing market in the outlook. I guess, hard to answer, but how significant just the general listing volumes and rental turnover to drive in the category and your revenue growth historically? So yes, as that comes through, do you think that offsets some of the other benefits you got in the period to date? -------------------------------------------------------------------------------- Mark Coulter, Temple & Webster Group Ltd - Co-Founder, CEO, MD, Customer Experience Officer & Director [20] -------------------------------------------------------------------------------- I think, I think -- so what we want is turnover. We want people moving, right? So when the market recovers, people start selling, people start moving. It's that -- that's what we want. There's obviously a bit of a wealth effect, right? The richer now -- they will maybe redecorate their 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 furnitures? Usually when you've moved. So I think that definitely, as a trend, as people start moving again because there's been a housing market -- the housing prices didn't actually really tank that much during COVID, right? Well, some markets went a bit backwards. But it kind of -- because there was a real 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 furniture and housing is correlated to that. -------------------------------------------------------------------------------- Operator [21] -------------------------------------------------------------------------------- Your next question comes from Tim Piper from RBC Capital Markets. -------------------------------------------------------------------------------- Timothy Piper, RBC Capital Markets, Research Division - Analyst [22] -------------------------------------------------------------------------------- Just a question on the deferred revenue and the differential in revenue and checkout base 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 event at the end of November? And has this sort of backlog cleared completely now? -------------------------------------------------------------------------------- Mark Coulter, Temple & Webster Group Ltd - Co-Founder, CEO, MD, Customer Experience Officer & Director [23] -------------------------------------------------------------------------------- Yes, I'll take this one. I would say, look, yes, it's completely -- well, completely. It's -- the majority is -- has all been shipped out throughout January. No, certainly, no backlog going back that far. But essentially, what we saw in December was they were still catching up. So some of our logistic 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 January -- 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 -- 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 at 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. -------------------------------------------------------------------------------- Timothy Piper, RBC Capital Markets, Research Division - Analyst [24] -------------------------------------------------------------------------------- Okay. Got it. So when you talk about January revenue growth tracking in excess of 100%, is that accounting revenue? Or are you taking into account that (inaudible) that's on a (inaudible)... -------------------------------------------------------------------------------- Mark Tayler, Temple & Webster Group Ltd - CFO [25] -------------------------------------------------------------------------------- No, no. So whenever -- yes, 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 any being any accounting benefit in terms of deferred revenue would be over and above that level. -------------------------------------------------------------------------------- Timothy Piper, RBC Capital Markets, Research Division - Analyst [26] -------------------------------------------------------------------------------- Right. So the volume in January already looks pretty strong, and then you're going to have a tailwind of obviously, there's several million dollars’ worth of deferred revenue kicking in as well. -------------------------------------------------------------------------------- Mark Tayler, Temple & Webster Group Ltd - CFO [27] -------------------------------------------------------------------------------- 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 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 homewares. -------------------------------------------------------------------------------- Timothy Piper, RBC Capital Markets, Research Division - Analyst [28] -------------------------------------------------------------------------------- Got it. Well done on the update. -------------------------------------------------------------------------------- Operator [29] -------------------------------------------------------------------------------- Your next question comes from Sam Haddad from Bell Potter. -------------------------------------------------------------------------------- Sam Haddad, Bell Potter Securities Limited, Research Division - Industrials Analyst [30] -------------------------------------------------------------------------------- Just a question on TV advertising again. So just in reference to the 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 increasing brand awareness? We saw that spike up with people working from home and forced to shop online with the falling out of COVID, and it sort of plateaued there since then. Should we see an uptick on that green line with the increasing brand awareness from TV advertising? -------------------------------------------------------------------------------- Mark Coulter, Temple & Webster Group Ltd - Co-Founder, CEO, MD, Customer Experience Officer & Director [31] -------------------------------------------------------------------------------- I could say it's a really interesting one, interesting question because, I mean, clearly, we can see our first-time customers increased. And it's probably -- don't forget those 3 months. You're comparing like the peak at the end of COVID in FY '20 versus coming into FY '21. So the fact that they're holding up those numbers the first time means we're still attracting all those first-time customers. It's kind of impossible though, because you don't have the tracking, like someone having clicked on a link. It's really, really hard to know is it a first-time customer or a repeat customer. And that's unfortunately the reality with TV. When 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 both first time and repeats versus direct channels, so people coming into Temple & Webster by typing in Temple & Webster in Google, which is called branded search, or entering Temple & Webster company URL into their browser. So we can identify that traffic, which we attribute to TV, when 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 also on repeat. So it's driven repeat. 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 a 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 that they may be a market or something. And rather coming into Google and searching for something, which they may not be doing, they're coming straight to us. So I think it's an interesting medium because it's not just first time. It's first time and repeat. But when we look at even on a first-time basis and we attribute the TV spend to first-time customers, it's still looking okay on a cost per sale. Now one of the reasons why we think we can get away with TV advertising, the economics are okay, is that we have a pretty high AOV. Customers spend quite a bit of money with us. I think if you're a retail and retailer was lower, a little bit low AOV, the economics on TV just wouldn't work. -------------------------------------------------------------------------------- Sam Haddad, Bell Potter Securities Limited, Research Division - Industrials Analyst [32] -------------------------------------------------------------------------------- Yes, because when I think of increasing brand awareness, I think that -- I would have thought that the first thing to tick up would be the green line. And obviously, you get an increased repeat purchase on the back of that. -------------------------------------------------------------------------------- Mark Coulter, Temple & Webster Group Ltd - Co-Founder, CEO, MD, Customer Experience Officer & Director [33] -------------------------------------------------------------------------------- Well, we 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, we don't -- 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, got quite a lot of new customers in that period. -------------------------------------------------------------------------------- Sam Haddad, Bell Potter Securities Limited, Research Division - Industrials Analyst [34] -------------------------------------------------------------------------------- Yes. Just back on the reinvestment strategy, just to ask -- to ask a previous question just asked 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 or the trajectory of the business. -------------------------------------------------------------------------------- Mark Coulter, Temple & Webster Group Ltd - Co-Founder, CEO, MD, Customer Experience Officer & Director [35] -------------------------------------------------------------------------------- I mean that's an interesting question. I think, there's no -- look, there's no real constraint 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 frozen, 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 million day. And times that with 365, you get $1 billion. So our platform can handle $3 million 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 third party. So that can scale without hitting our balance sheet or P&L. Our category teams, we have hundreds and hundreds of 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 with 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, to keep pushing things like technology, keep leveraging data, which will make marketing more efficient, et cetera. So 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 our 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 their volume, increase in volume, meant that they got to profitability and quite -- I mean their adjusted EBITDA for last quarter was 9.5% or something. It was quite high. But they've got leverage on their ad cost because repeats is such a high part of their business now and they got leverage on the fixed cost. But they've set themselves up to be a USD 13 billion business. And 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 that -- 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 & Webster better and better. So there is no reason why you'd 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. -------------------------------------------------------------------------------- Sam Haddad, Bell Potter Securities Limited, Research Division - Industrials Analyst [36] -------------------------------------------------------------------------------- No, 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 a number that you can... -------------------------------------------------------------------------------- Mark Coulter, Temple & Webster Group Ltd - Co-Founder, CEO, MD, Customer Experience Officer & Director [37] -------------------------------------------------------------------------------- If you -- I mean we can do a $3 million in a day. -------------------------------------------------------------------------------- Sam Haddad, Bell Potter Securities Limited, Research Division - Industrials Analyst [38] -------------------------------------------------------------------------------- Okay. Okay. That's fine. Just on Trade & 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? -------------------------------------------------------------------------------- Mark Coulter, Temple & Webster Group Ltd - Co-Founder, CEO, MD, Customer Experience Officer & Director [39] -------------------------------------------------------------------------------- Yes. So it's a bit of a mixed bag. It's still definitely mixed bag. So things like offices, like our office, office used to be one of the major categories that hasn't yet come back for obvious reasons. 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 until 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 no one's going overseas. So a lot of the regional hospitality, regional hotels, restaurants, et cetera, all going bananas. So those are -- they're probably the 2 ones that have picked up. Our designer market, so our trade bit of Trade & Commercial is also going quite strongly as people are spending money on their homes. And you can see that in the overall ABS market. Furniture and homewares is having a good run. And so the interior design and interior decorators are also having a good run. So they're probably the 3 sectors which counter -- countering the slower growth in some of the other sectors like office. -------------------------------------------------------------------------------- Sam Haddad, Bell Potter Securities Limited, Research Division - Industrials Analyst [40] -------------------------------------------------------------------------------- Okay. Just final question from me. FX with the strong Australian dollar, what are the implications to your business? -------------------------------------------------------------------------------- Mark Tayler, Temple & Webster Group Ltd - CFO [41] -------------------------------------------------------------------------------- Yes. It's a 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, and we don't sell to the overseas markets at the moment. So with the growth in private label, now we'll start to see some more impacts of that hedge. We've always hedged, and we've always loved the risk on any transactions from the U.S. -- USD perspective. And it's predominantly where we're buying stock from factories that transact 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 depreciation of the AUD. Not only we will see some benefits coming through there, but obviously, our drop ship suppliers as well will start to see some benefits from a COGS point of view, which will ultimately 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. -------------------------------------------------------------------------------- Operator [42] -------------------------------------------------------------------------------- Your next question comes from Scott Hudson from MST. -------------------------------------------------------------------------------- Scott Lyndon Hudson, MST Marquee - Senior Research Analyst [43] -------------------------------------------------------------------------------- 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? -------------------------------------------------------------------------------- Mark Coulter, Temple & Webster Group Ltd - Co-Founder, CEO, MD, Customer Experience Officer & Director [44] -------------------------------------------------------------------------------- Well, I think as I said, the orders back to 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. -------------------------------------------------------------------------------- Scott Lyndon Hudson, MST Marquee - Senior Research Analyst [45] -------------------------------------------------------------------------------- Okay. And then in terms of the, I guess, the app, are you getting much sales activity through the app itself? -------------------------------------------------------------------------------- Mark Coulter, Temple & Webster Group Ltd - Co-Founder, CEO, MD, Customer Experience Officer & Director [46] -------------------------------------------------------------------------------- Yes. Look, it's still early days where all the metrics -- so we have basically launched it, we're promoting it. So when you land on our mobile site, you'll see a little banner at the top thing, do you want to install the app. That's all we've done. We have no other marketing push in that. So it's really just organic installs. Having said that, the number's creeping up. Revenue is not -- revenue is also creeping up as well. So it's not tiny, but it's not huge. But what we're mostly interested are things like, are the customers repeating at a higher rate than our non-app customers? Are they converting at a higher rate? Is the AOV higher? Are they spending more? So we're looking at the kind of those metrics. They're -- all the early reads are that it's actually pretty good and that now, we will be starting to mark the app hard. We're working on the Android app. So 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 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. -------------------------------------------------------------------------------- Scott Lyndon Hudson, MST Marquee - Senior Research Analyst [47] -------------------------------------------------------------------------------- And what's the timing on the Android app? -------------------------------------------------------------------------------- Mark Coulter, Temple & Webster Group Ltd - Co-Founder, CEO, MD, Customer Experience Officer & Director [48] -------------------------------------------------------------------------------- This half. -------------------------------------------------------------------------------- Scott Lyndon Hudson, MST Marquee - Senior Research Analyst [49] -------------------------------------------------------------------------------- This half. But no clarity on earlier in the half or later in the half? -------------------------------------------------------------------------------- Mark Coulter, Temple & Webster Group Ltd - Co-Founder, CEO, MD, Customer Experience Officer & Director [50] -------------------------------------------------------------------------------- I've been burned before by promising app launches. So I'll just say this half. -------------------------------------------------------------------------------- Scott Lyndon Hudson, MST Marquee - Senior Research Analyst [51] -------------------------------------------------------------------------------- Fair enough. I'm pretty sure every CEO in the world has. So 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 midterm expectations, I mean, is that something that is likely to persist sort of over the immediate near term? Or is that just sort of a first half outlier? -------------------------------------------------------------------------------- Mark Coulter, Temple & Webster Group Ltd - Co-Founder, CEO, MD, Customer Experience Officer & Director [52] -------------------------------------------------------------------------------- Yes, I'll take this one. So look, I don't think it's an outlier per se, but we have said that -- we've been saying it for a while now, but 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 optimum 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 continued 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 drive profitability, but also to be allowing for reinvestment back into the business. So look, it's 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 then 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 margin economics of the business. So we've always said those sort of short to midterm targets are closer to 30%, closer to 15%. -------------------------------------------------------------------------------- Scott Lyndon Hudson, MST Marquee - Senior Research Analyst [53] -------------------------------------------------------------------------------- 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? -------------------------------------------------------------------------------- Mark Coulter, Temple & Webster Group Ltd - Co-Founder, CEO, MD, Customer Experience Officer & Director [54] -------------------------------------------------------------------------------- [Then so you ask, it's] Mark, or me. -------------------------------------------------------------------------------- Scott Lyndon Hudson, MST Marquee - Senior Research Analyst [55] -------------------------------------------------------------------------------- What's the range? -------------------------------------------------------------------------------- Mark Coulter, Temple & Webster Group Ltd - Co-Founder, CEO, MD, Customer Experience Officer & Director [56] -------------------------------------------------------------------------------- Mark, do you -- what's your range? -------------------------------------------------------------------------------- Mark Tayler, Temple & Webster Group Ltd - CFO [57] -------------------------------------------------------------------------------- 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 business model, so in the drop-ship component of the business. But obviously, private label has a lot of inherent benefits, both strategic and its financial benefits of it 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 there's a capacity propensity for that to continue to grow. We'll always ensure that we maintain a negative working capital mix in the business. And as Mark said, always our first port of call will be our drop ship suppliers. But if we're seeing product and 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% could get to over time. But that's dependent on a lot of factors. It's dependent on the growth of our drop-ship component of the business as well. But like I said, we always want to try and maintain the negative working capital balance in our business as well. -------------------------------------------------------------------------------- Scott Lyndon Hudson, MST Marquee - Senior Research Analyst [58] -------------------------------------------------------------------------------- Okay. And then lastly, I guess, $86 million or $87 million of cash, I guess, what are the plans in terms of utilization of debt? -------------------------------------------------------------------------------- Mark Tayler, Temple & Webster Group Ltd - CFO [59] -------------------------------------------------------------------------------- Yes. Well, you can see private label, just to start off with, we are investing in that, in that area of the business. There's -- there's an allocation there of capital going into private label. And look, we are testing that, right? So -- 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 3D augmented reality, we've already made a small investment into our Israeli-based interior design company. And there'll potentially be further investment in and around 3D and AR 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, you tend to see a lot of those opportunities before anyone else. And we're always assessing 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. It needs to tick a lot of boxes for us. So we'll continue to assess those inorganic opportunities as well. -------------------------------------------------------------------------------- Operator [60] -------------------------------------------------------------------------------- Your next question comes from [Wasan Kisarani] from Jarden. -------------------------------------------------------------------------------- Unidentified Analyst, [61] -------------------------------------------------------------------------------- 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? -------------------------------------------------------------------------------- Mark Coulter, Temple & Webster Group Ltd - Co-Founder, CEO, MD, Customer Experience Officer & Director [62] -------------------------------------------------------------------------------- Look, it's a great question. Of course, I mean everyone knows that we're going to be comping COVID numbers soon. I think the short answer is, we started the year strongly. We are comping -- still pretty growing. We were growing 50% plus in January last year, and we're growing in excess of 100% now. So we're already comping big numbers. We're growing pretty quickly. We have the short-term levers, as Mark was saying, so marketing mix and pricing and margins and such to play with. We also have the flexibility in the sense that we've told everyone we want to be higher 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 -- was it 2015 or 2016? It had 2 quarters of quite high growth, so 80 -- 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 got your conversion strategy, right, et cetera. So it all comes back to fundamentals to make sure we keep focusing on the customer and keep executing our strategy. But we're definitely focused on making sure we keep growing. -------------------------------------------------------------------------------- Unidentified Analyst, [63] -------------------------------------------------------------------------------- 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 has kind of come about through new categories? If you can kind of give us any sense around that at all? -------------------------------------------------------------------------------- Mark Coulter, Temple & Webster Group Ltd - Co-Founder, CEO, MD, Customer Experience Officer & Director [64] -------------------------------------------------------------------------------- It's actually quiet. So we've -- most of our efforts have been focused on our core. We've -- we've entered the home improvement category. 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. -------------------------------------------------------------------------------- Unidentified Analyst, [65] -------------------------------------------------------------------------------- Okay. Great. And then a final question for 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 and 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? -------------------------------------------------------------------------------- Mark Coulter, Temple & Webster Group Ltd - Co-Founder, CEO, MD, Customer Experience Officer & Director [66] -------------------------------------------------------------------------------- I mean I'm just happy. But I think -- look, we've got to tread carefully, right, 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 focus on the customer. So obviously, there's a balance between ensuring the profile of the business is really nice and clean and asset-light, et cetera, and making sure that the customer is having experience today that we want to give them. As I said, it's really -- it was just a peak period. Up until the peak, everything was going okay. So if we can solve the peak period without having to go too heavy into the logistics, I much prefer to do that, and that's where 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 successfully in the U.S. They have their own last-mile fleets and they have their own warehouses where they store their own little bit supplies [with them], basic and consignment. So they have done that. They've proven that actually with scale, it pays for itself in the last couple of quarters of profitability. I think that's a whole another operational team set up, capability which we will go into only if we need to. -------------------------------------------------------------------------------- Unidentified Analyst, [67] -------------------------------------------------------------------------------- Yes. That's good color. I appreciate it. -------------------------------------------------------------------------------- Operator [68] -------------------------------------------------------------------------------- Your next question comes from Louise Sandberg from Bank of America. -------------------------------------------------------------------------------- Louise Sandberg, BofA Merrill Lynch, Research Division - VP [69] -------------------------------------------------------------------------------- Congratulations. First, just your spend per customer is up, but how does it compare to the average spend per first-time customer? And isn't first-time purchase profitable given your post-marketing spend? -------------------------------------------------------------------------------- Mark Coulter, Temple & Webster Group Ltd - Co-Founder, CEO, MD, Customer Experience Officer & Director [70] -------------------------------------------------------------------------------- So that is a first-time customer. So that's our CAC with an estimated percentage. We go through by channel and work out what channels the mix is by first time repeat, and we kind of -- that's how we guess. 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 profitable. -------------------------------------------------------------------------------- Louise Sandberg, BofA Merrill Lynch, Research Division - VP [71] -------------------------------------------------------------------------------- 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 compare to the first-time customer spend? -------------------------------------------------------------------------------- Mark Coulter, Temple & Webster Group Ltd - Co-Founder, CEO, MD, Customer Experience Officer & Director [72] -------------------------------------------------------------------------------- As in their CAC or their... -------------------------------------------------------------------------------- Louise Sandberg, BofA Merrill Lynch, Research Division - VP [73] -------------------------------------------------------------------------------- As in just the dollar spend per customer? -------------------------------------------------------------------------------- Mark Coulter, Temple & Webster Group Ltd - Co-Founder, CEO, MD, Customer Experience Officer & Director [74] -------------------------------------------------------------------------------- So this is -- the ROI is essentially the 12-month ROI. So it's not only the first order, but it's also the subsequent orders. So any subsequent order will improve the ROI of that CAC. So I mean, from an AOV, the first time and repeat customers spend about the same. So there's not much difference in an SG&A order. But obviously, a repeat customer has more orders than a first-time customer. -------------------------------------------------------------------------------- Louise Sandberg, BofA Merrill Lynch, Research Division - VP [75] -------------------------------------------------------------------------------- Yes. And in terms of tax, how much tax benefits do you have left? When do you see yourself paying tax? -------------------------------------------------------------------------------- Mark Tayler, Temple & Webster Group Ltd - CFO [76] -------------------------------------------------------------------------------- Yes, that'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 audited accounts and there'll be full trans -- yes, there will be full visibility of that in a couple of weeks' time. -------------------------------------------------------------------------------- Louise Sandberg, BofA Merrill Lynch, Research Division - VP [77] -------------------------------------------------------------------------------- Okay. And I guess, finally, just -- you talked about the shipping delays. How does that impact the private label side? Would private label have been stronger and therefore also your gross margin stronger if -- and delivered margin stronger if shipping delays had not existed? -------------------------------------------------------------------------------- Mark Coulter, Temple & Webster Group Ltd - Co-Founder, CEO, MD, Customer Experience Officer & Director [78] -------------------------------------------------------------------------------- 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 an option to buying it a few weeks out. And we only do that with a very few select number of our drop shippers because we want to make sure that 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 our suppliers. We do that with our 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 that's by one of our warehouse or third-party warehouse or one of the drop shippers' warehouse, it was injected into the logistics networks, and that's when the delays happen. So it was across the board. Our private label is growing faster than drop shippers, as you can see. That calculates because the share of the business has gone up. So no, no, it had to have outgrown the drop shippers to increase share of the business. And that's really more about we've been able to import good products at good pricing. We give a bit more promotional support to our private label in things like e-mails. We have more margin to play with to do better promotions, et cetera. So it's more of the fundamentals of why that private label is growing faster than drop shippers as opposed to the delivery delay. -------------------------------------------------------------------------------- Operator [79] -------------------------------------------------------------------------------- Thank you. That does conclude the question session. I will now hand back to Mr. Coulter for closing remarks. -------------------------------------------------------------------------------- Mark Coulter, Temple & Webster Group Ltd - Co-Founder, CEO, MD, Customer Experience Officer & Director [80] -------------------------------------------------------------------------------- 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 messages today. Again, we delivered record results, revenue up 118%, EBITDA up 556% year-on-year. Remember, we operate in a large market. 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. -------------------------------------------------------------------------------- Mark Tayler, Temple & Webster Group Ltd - CFO [81] -------------------------------------------------------------------------------- Thank you. -------------------------------------------------------------------------------- Operator [82] -------------------------------------------------------------------------------- Thank you. That does our conference for today. Thank you for participating. You may now disconnect.