Edited Transcript of KGN.AX earnings conference call or presentation 26-Feb-21 10:59am GMT

Half Year 2021 Kogan.com Ltd Earnings Call MELBOURNE Feb 26, 2021 (Thomson StreetEvents) — Edited Transcript of Kogan.com Ltd earnings conference call or presentation Friday, February 26, 2021 at 10:59:00am GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * David Matthew Shafer Kogan.com Ltd – CFO, COO & Executive Director * Ruslan Kogan Kogan.com Ltd – Founder, CEO, MD, & Executive Director ================================================================================ Presentation ——————————————————————————– Ruslan Kogan, Kogan.com Ltd – Founder, CEO, MD, & Executive Director [1] ——————————————————————————– Good morning, and welcome to the Kogan.com First Half FY ’21 Results Presentation. I’m Ruslan Kogan, Founder and CEO of Kogan.com. Presenting with me today is David Shafer, Kogan.com’s Chief Financial Officer and Chief Operating Officer. David and I are pleased to present Kogan.com’s first half FY ’21 results today. We launched Kogan.com to change the retail industry nearly 15 years ago, and we would have been cheering if we helped 3,000 customers that year. So even though well over 3 million customers used Kogan.com in the last 12 months, we feel like we’re just getting started. We’re not just focused on today or tomorrow, but how we’ll continue to delight all of our customers on our 30th birthday. This includes significant improvements to our logistics network, speed of delivery, range expansion and improved competition on our platform to drive even better deals for our customers. With a rapidly expanding network effect that Kogan.com means that as we attract more customers, we’re able to make the products and services they need even more affordable and accessible. I love hearing feedback from customers that have shopped with us many times over our 15-year journey about how the experience keeps getting better and better. This is what makes our team jump out of bed in the morning. The investments we’re making into Kogan.com today are to ensure that we can continue to delight millions of customers in more and more ways. During the same period in which we grew our active customers to more than 3 million smart shoppers, we also grew our gross sales by over $300 million from the prior equivalent half. During the half, our team also delivered our largest acquisition to date. Mighty Ape’s team and operations are progressively being integrated into the Kogan Group. Kogan Marketplace continues to be a standout performer, exceeding all our expectations during the half and providing our customers with more choice than ever. The growth of Kogan Marketplace demonstrates the scalability of the platform and the strong customer and seller engagement achieved to date, while also indicating the size of the opportunity as the Kogan Marketplace expands its offering and makes it easier for sellers to list products on Kogan.com. The pipeline for new sellers remains strong and continues to grow. As we enter the halfway mark of this critical financial year of growth, I’d like to thank the Kogan.com team for their tireless work to delight our customers. They are the most talented and passionate team in e-commerce, and they’re helping to completely change our industry and the customer experience for the better. Our business is experiencing extreme growth, which for the first half of FY ’21, included a record-breaking Black Friday week and active customers surging past 3 million. Kogan.com active customers grew by 76.8{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} to just over 3 million at December 31, 2020 and Mighty Ape active customers grew to 719,000 . We have achieved gross sales, revenue, gross profit and adjusted EBITDA growth of 97.4{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3}, 88.6{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3}, 126.2{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} and 184.4{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} respectively. Our business is now operating with significant scale with our gross sales growing by well over $300 million in the half compared to the prior equivalent half. Kogan Marketplace increased gross sales by 194.3{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} during the half compared to the first half of FY ’20 and continue to have a strong pipeline of new sellers keen to be listed on our platform. Our product divisions achieved year-on-year growth with exclusive brands revenue increasing 114.9{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} on the first half of FY ’20 and gross profit growth of 174.9{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3}. Third-Party Brands revenue increased 50.5{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} during the half and gross profit increased 77{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} on the first half of FY ’20 through improved product selection and sourcing. The Kogan First community of members grew exceptionally during the first half. And importantly, these loyal members, on average, purchased much more often demonstrating loyalty to the Kogan platform and also demonstrating the wonderful experience and savings available through the loyalty program. The Kogan.com platform and our portfolio of businesses continues to grow and strengthen as a result of the commitment and determination of our team. We get the best deals for our customers, deliver on our promises and always endeavor to exceed customer expectations. Finally, today, we are also announcing a fully franked interim dividend of $0.16 per share for the first half of FY ’21, which reflects an increase of 113.3{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} on the first half of FY ’20 interim dividend. David will take you through the detailed financials shortly, but let me first give you the highlights. After a strong trading period, the company reported gross sales of $638.2 million, up 97.4{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} on the prior year. Adjusted EBITDA of $51.7 million, adjusted NPAT of $36.5 million and adjusted earnings per share of $0.35 per share exceeded prior year by 184.4{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3}, 250.2{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} and 211.7{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3}, respectively, driven by gross profit growth of 126.2{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3}. The charts on this page illustrate gross sales, gross profit, adjusted EBITDA, net profit after tax, adjusted NPAT and adjusted earnings per share growth achieved versus the prior corresponding period of the first half of FY ’20. The charts highlight an improved operating leverage position over many years, which has allowed Kogan.com to grow adjusted EBITDA at a faster rate than gross sales and gross profit. We’re proud to be able to cycle strong growth in our business through delighting our customers and at the same time, continuing to produce solid results for our shareholders. The Mighty Ape business has a similar history to Kogan.com. We share similar values. Most importantly, our obsession was delighting customers and continually improving the online shopping experience. This slide takes us through the beginnings of the Mighty Ape business from 1995 when Founder and CEO, Simon Barton, launched a traditional bricks-and-mortar store game zone to its rebranding and online-only transformation in 2008 through to today, where Mighty Ape is now part of the Kogan.com group. Mighty Ape is an award-winning New Zealand business focused on delighting their 719,000 active customers. We look forward to further integrating the Mighty Ape business and team in 2021 and delivering some valuable synergies to delight customers even more and grow the group. We’re continually evolving the business to respond to the demands of customers and to strengthen our competitive advantage. Our growing portfolio of businesses provides diversification of income, making us a more resilient business. We’re always looking for new ways to delight our customers. While our customer numbers are growing, at this stage, our platform represents only around 3{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} of the Australian online retail trade. We’re just getting started. We still believe we’ve barely scratched the surface. We see many more opportunities. We remain 100{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} focused on giving the Kogan community access to products and services that are in high demand and delivering value better and more efficiently. A few of you have asked me lately about the virtual cycle in our business and why it’s important. I’ll take a moment to explain this unique aspect of the Kogan.com business. Each step of the cycle continuously works towards our mission to make the most in-demand products and services more affordable and accessible. We have continued to build our active customer base, which is now at over $3 million. The Kogan community continues its strong growth. Because of the trust and reach of our platform and the size of our community, we become more attractive to potential suppliers, marketplace sellers and partners and can, in turn, continue to onboard new brands, new sellers and broaden our product offering. This then allows us to grow and gives us the commercial clout to secure a broader offer and improved pricing for the Kogan community, which then further grows our active customer base who want access to these ever-improving deals. We consistently have more to offer our customers across many aspects of their lives, from our price leading products to mobile phone plans, holidays, insurance, internet, home loans, cars, superannuation, credit cards and energy utilities. Moving into the second half of financial year 2021. We will further enhance and develop the Kogan Marketplace platform, improving both the customer and seller experience. Turning to the next page. You can see that our loyal customer base are choosing Kogan.com time and time again. The first half of the year has seen a rapid growth in repeat orders as customers access loyalty benefits and breadth of range. Importantly, the rapid acceleration of customer orders is in line with the significant growth of active customers in recent months. Annual gross sales per customer is expected to grow as product range expands, loyalty benefits improve and customers increasingly come to rely on Kogan.com for more of their general shopping needs, providing a strong tailwind for gross sales per customer. We have invested heavily in our platform and growing active customers in the first half of the year, recording our largest marketing spend ever in the half. This is expected to have ongoing long-term benefits as active customers continue repurchasing, meaning that we can’t yet see the full benefit of the gross profit per customer metric during the period as many of these customers have only been shopping for a short while. This is a very important slide. You can see that our platform and loyal customer base continues to drive most of our traffic As mentioned on the previous slide, we have invested heavily in marketing to grow active customers in the first half of the year, recording our largest marketing spend ever in a half. Given our record marketing investment, the proportion of traffic from free sources reduced on last year. But importantly, free traffic sources still represents the vast majority of visits to our websites, which demonstrates that satisfied customers continue to return to Kogan.com. This is a very important metric for the platform we have built. As mentioned previously, Kogan Marketplace continues to be a standout performer during the half, exceeding all our expectations, increasing its gross sales by 194.3{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} compared to a year ago, continuing the extraordinary growth achieved in the second half of FY ’20. We have broadened the product range available on our marketplace to millions of items, making Kogan.com more relevant to more customers. Importantly, the creation and impact of Kogan Marketplace has made the company even more scalable by enabling us to grow infinitely without the ongoing investment in inventory. In the long term, Kogan Marketplace will create huge benefits to both customers and our shareholders as we build one of the major e-commerce platforms in Australia and New Zealand. The pipeline for new sellers remains strong and continues to grow. And importantly, our marketplace platform continues to improve enabling sellers more easily to join our platform and deliver a superior customer experience. Our Exclusive Brands product division delivered an astounding 114.9{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} revenue growth year-on-year in the first half of FY ’21. This growth was achieved through the expansion of our platform, our large active customer base and development of proprietary systems and processes that enable us to quickly detect changing consumer demand then move quickly to service that demand. With almost 15 years’ experience, we have built a loyal customer base that recognizes the quality and value of our Exclusive Brands products. It is this strong customer demand that enables us to continue to invest in and expand our range. As our long-term shareholders know, we make data-driven decisions backed by existing demand metrics to determine how we deploy your capital on inventory. We don’t use gut feel or guesses when we make decisions about selecting the right inventory to service customer demand. We often joke internally about us being a statistics business macerating as an e-commerce platform. The Kogan First community of members grew exceptionally during the first half, and importantly, these loyal members on average purchased much more often than nonmembers, demonstrating loyalty to the platform and also demonstrating the significant savings available through the loyalty program. Our team not only concentrates on meeting the demand of products and services our customers want but also ensures that the shopping experience we deliver is first class. We use machine learning and AI at Kogan to ensure that our customers get the tailored shopping experience they deserve. Our proprietary algorithms and AI technology mean that we are communicating the right product or service to the right person at the right time. We have also invented proprietary systems to reduce fraud and optimize marketing spend, making us smarter and stronger as a business. This leads to the best deals for customers. I’ll now hand over to David, who will run through the financial results in more detail. ——————————————————————————– David Matthew Shafer, Kogan.com Ltd – CFO, COO & Executive Director [2] ——————————————————————————– Thank you, Ruslan. Through the turbulent period of the first half of financial year 2021, our business navigated numerous operational challenges to deliver growth and gross sales of more than $300 million in the half. During the half, we faced challenges in securing products from manufacturers, challenges in gaining access to international logistics, challenges in securing local warehousing. We had an entire business working from home for most of the period, and some of our suppliers went insolvent or faced cyber attacks impacting their services to us. We faced increased regulatory scrutiny on our business, while significant governmental assistance was provided to competitors. Through all these challenges and more, we achieved growth in gross sales of 97.4{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} across the group, effectively doubling the size of the business in its 15th year. Gross sales reflects the gross transaction value of Kogan Retail and Kogan Marketplace, also the December 2020 Mighty Ape transaction value and the transaction value of the new verticals. Revenue reflects only the seller fees received from Kogan Marketplace and the commission from the new verticals. Gross margin increased by 4.5 percentage points to 27.3{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} as a result of the growth of the product divisions and Kogan Marketplace seller fee-based revenue. Marketing costs reflect the largest ever half year marketing investment in the company’s history, enabling us to grow active customers to over 3 million. Our marketing investment reflects our confidence in the future of the business. We’re building a large and growing brand and customer base, which lays the foundation for the years to come. Effective targeted marketing is a key driver of growth and a core strategy of the business to grow market share. And we are proud to have delivered a period reflecting both the greatest profitability ever in the history of the business, while also delivering the greatest ever investment into the future of the business. Contribution profit being gross profit less variable and marketing costs grew 110.6{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} year-on-year. Demonstrating our growth is real and sustainable and that our marketing investment is driving a strong ROI. EBITDA of $38.8 million reflects an increase in EBITDA margin of 1.8 percentage points to 9.4{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3}. But importantly, EBITDA is impacted by a number of noncash or nonrecurring items. For instance, people costs are inclusive of a provision for the future potential payment of tranches 3 and 4 of the Mighty Ape purchase. As part of the sale agreement for Mighty Ape, tranche 3 and tranche 4 are only payable if Simon Barton, Mighty Ape’s founder and CEO is not a bad lever. This means that in line with accounting standards, tranches 3 and 4 payments are considered as compensation for post-combination services and as such, treated as employee remuneration. The group will proportionately account for these expenses up until the respective payment dates. People costs are further inclusive of significant equity-based compensation expense driven by the recent awards of options after the company’s AGM in November 2020. We are proud to have been there for Aussies when we were needed most, supplying critical products around the country during the heart of the pandemic and then donating more than $1 million of masks to Australian charities. We wanted to ensure adequate supply of PPE under any likely health scenario. So due to the containment of COVID in Australia, we ended up having to write down some PPE stock, that’s personal protective equipment. It’s actually a write-down that we’re happy and thankful to make. Adjusted EBITDA, adjusted NPAT and adjusted earnings per share, all of which exclude unrealized FX losses, equity-based compensation and other one-off costs grew to $51.7 million. $36.5 million and $0.35 per share, respectively. Please refer to Annexure 2 of this presentation for a detailed reconciliation of all these adjusting items. It is also important to note that the Kogan Group results for the half reflect the inclusion of Mighty Ape’s results for the 1-month period of December 2020. In that month, Mighty Ape delivered $20 million of gross sales, $20 million of revenue, $5.4 million of gross profit, $2.9 million of EBITDA and $2.9 million of adjusted EBITDA, finally, also $2 million of adjusted NPAT. Moving on to the next slide. This page reflects the performance of Kogan.com excluding Mighty Ape, which was acquired in December 2020. These results reflect the strong organic growth in the business, which is now being complemented by the acquisition of Mighty Ape as seen on the prior slide. Revenue was driven by the growth of exclusive brands, Kogan Marketplace and third-party brands, which increased 114.9{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3}, 141{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} and 50.5{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} year-on-year, respectively. Gross margin increased by 4.5 percentage points to 27.3{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} as a result of the growth in product divisions and Kogan Marketplace seller fee-based revenue. Variable costs reflect the increased volume in transactions and stock holdings, including logistics demurrage charges of $1.9 million, driven by warehousing and supply chain interruptions from late 2020. We have almost never previously incurred demurrage charges, and we expect to have resolved the demurrage issue in early 2021. Marketing costs reflect the strategic investment in marketing and has delivered active customer growth of 76.8{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} since the first half of FY ’20, equating to 1.3 million incremental active customers. Contribution profit grew 96.1{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} year-on-year. Other costs are inclusive of an infringement notice of $300,000 paid to the ACMA in relation to Australia’s spam laws. EBITDA of $35.9 million reflects an increase in EBITDA margin of 1.5 percentage points to 9.1{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} and is impacted by the adjusting items previously referred to. Adjusted EBITDA and adjusted NPAT, which excludes the unrealized FX losses, equity-based compensation and other one-off costs grew to $48.8 million and $34.6 million, respectively. Again, please refer to Annexure 2 of the presentation for a detailed explanation of the reconciliation and reconciliation of the adjusting items. The key drivers of financial performance of the Kogan Group in the first half of FY ’21 are as follows. There were a range of key drivers of financial performance this year, some of which Ruslan touched on earlier, and I’ll provide some additional commentary on these now. Firstly, platform growth. As mentioned, we grew active customers by 76.8{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} in the last 12 months. It’s a result the team is very proud of. We define active customers as unique customers who have purchased from our core retail channels in the last 12 months. Kogan First membership scaled significantly during the first half of FY ’21 as more and more customers recognize the significant value we’re offering via our loyalty program. The business strategically increased its marketing activities in order to grow active customers. The significant investment to grow our platform and active customers had a strong impact on growth in active customers and is also expected to have ongoing long-term benefits for our business. Exclusive Brands continue to achieve year-on-year revenue growth with an increase of 114.9{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} on the first half of FY ’20. Exclusive Brands also achieved gross profit growth of 174.9{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3}, resulting in a contribution of 55.9{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} to the group’s overall gross profit in the first half of FY ’21. This was achieved through ongoing investment in Exclusive Brands’ inventory to broaden our range and meet consumer demand from the growing base of active customers. We now have a very broad and deep range of Exclusive Brands’ inventory that has laid the foundation for further growth in Exclusive Brands through 2021. Third-Party Brands achieved growth in revenue and gross profit, delivering an increase of 50.5{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} and 77{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} on the first half of FY ’20, respectively. The success of Kogan Marketplace has resulted in gross sales increasing by 194.3{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} in the first half of FY ’21 compared to the first half of FY ’20. The platform continues to resonate with sellers with Kogan Marketplace having increased the number of sellers significantly, while there continues to be a strong pipeline of new sellers ready to be onboarded. We’re continually improving our proprietary marketplace platform, which enables the business to achieve ongoing growth without a corresponding investment in inventory. The growth of Kogan Marketplace means that customers have more choice than ever and the ongoing development of our marketplace platform means that their shopping experience will continually improve. Kogan Mobile grew 12.9{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} year-on-year, contributing over 4.8{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} of the group’s total gross profit. Kogan Internet customers grew 17.9{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} year-on-year. We experienced negative growth in some verticals, driven by travel and insurance. This includes travel insurance and certain other insurances, which have been suspended as a result of COVID-19. The Mighty Ape team in operations are progressively integrating into the Kogan Group following the acquisition in December 2020. December 2020 trading showed strong sales over the Christmas peak trading period with revenue and gross profit of $20 million and $5.4 million, respectively. Active customers from Mighty Ape grew to 719,000 These results for December 2020 are included in our consolidated accounts. Variable costs predominantly consist of warehousing and selling costs. The increase in these costs is largely driven by growing volumes of transactions and stockholdings that has allowed the business to deliver its largest gross sales and gross profit ever. Variable costs also includes logistics demurrage charges of $1.9 million driven by warehousing and supply chain interruptions from late 2020. As discussed previously, we’ve almost never previously incurred these charges and expect them to be resolved in early 2021. We also continue to invest in our team in order to retain key talent and align their interest with our shareholders. The business has made strategic investments in team members. LTIs or long-term incentives remain in place and people costs have increased year-on-year as a result. The first half of FY ’21 is also inclusive of significant equity-based compensation expenses driven by the recent award of options after the company’s AGM in November 2020. As previously mentioned, people costs also includes a provision for tranches 3 and 4 of the Mighty Ape acquisition amount. Over the past 4 first half financial periods, we have delivered growth in gross margin. We have also grown, delivered margin after logistics costs, contribution margin, EBITDA margin and adjusted EBITDA margin. We continue to deliver significant projects to grow our products and services offering, invest in the future of the business while also delivering strong returns to our shareholders. We take our responsibilities to ensure every dollar we spend is working hard for the business very seriously. We continually review our overheads and investments, and we’re always working hard to improve this efficiency. When we conceive with our growth plans for this business, we focus on scalable projects that leverage the assets we have already built and can offer asymmetric returns. When we invest in building our assets, we track return on our investments very carefully. Turning to the next page, we can see the gross profit mix across the group for the half. Exclusive Brands, as a percentage of overall gross profit, is 55.9{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} and therefore, continues to deliver the largest gross profit contribution across the business. Third-Party Brands, Kogan Marketplace, Kogan Mobile and now Mighty Ape are material contributors to overall gross profit. As you can see, Kogan Internet and Kogan Mobile continued to achieve growth in customers. Kogan Mobile Australia continues to contribute significantly to gross profit. The business is continuing to work on new offerings to reinvigorate growth in the second half of FY ’21 and beyond. Kogan Internet customers grew 17.9{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} year-on-year. We expect Kogan Internet to continue scaling in the second half of the financial year. This slide highlights the active customer growth in the new verticals, Kogan Energy and Kogan Credit Cards, which were launched in the first half of FY ’20. These new verticals have had strong growth during the half, and we look forward to continuing strong momentum of these business units. On to the net asset summary. The group had a cash balance at December 31, 2020 of $79 million with $1.4 million of the group’s debt facility drawn within Mighty Ape. This cash balance is after the payment of tranche 1 of the Mighty Ape acquisition. The group held a total of $152.7 million of inventory in warehouse at the end of the period, of which more than 99{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} of Kogan.com inventory and more than 92{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} of Mighty Ape inventory in warehouse was aged less than 365 days. Total inventory was $225.3 million, an increase of $130.6 million held at the same time last year. The acquisition of Mighty Ape resulted in the recognition of goodwill, which has been included within the intangible assets balance. Financial liabilities is reflective of the unrealized FX loss recognized against forward contracts, which is noncash. Trade and other payables reached a seasonal high following the peak Christmas trading period. Acquisition payables reflects tranche 2 of the Mighty Ape acquisition amount. On to the cash flow. The group significantly expanded its inventory levels to respond to increasing demand from the growing community of active customers and our internal projections of future demand. The group finished the period with a cash balance of $79 million. The group completed the tranche 1 payment for the Mighty Ape acquisition and completed the $20 million share purchase plan during the period. I’ll now hand back to Ruslan to discuss our outlook and some further detail on what’s to come in the second half of financial year ’21. Thank you. ——————————————————————————– Ruslan Kogan, Kogan.com Ltd – Founder, CEO, MD, & Executive Director [3] ——————————————————————————– Thanks, David. We’re excited about the opportunities ahead as we continue to grow our platform and expand our portfolio. Our growing portfolio of businesses provides huge opportunities for growth, as you can see from the market size data. We’re proud to be partnered with industry-leading providers for our new verticals and to be able to bring more and more compelling offerings to the Kogan community. Our ambition is to achieve more than 1{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} market share across each new vertical, and we’re working hard to achieve this on our existing verticals. There is a huge market potential for growth. This page also illustrates the diversification of our income and the future potential. For each new vertical, Kogan.com provides the marketing services, branding, customer acquisition, while our Tier 1 partners provide most of the underlying service. This setup leverages our strengths for most of our partners for the benefit of our customers. We’re leveraging our platform and business assets to form these partnerships, which in turn allow us to present our customers with great value offers in a wide array of services. We are proud to be in a position to add additional ticks next to Kogan Marketplace, which now reflects more than 1{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} of the Australian online retail market in its own right and newly acquired Mighty Ape, which reflects more than 1{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} of the New Zealand online retail market. As we look to the second half of FY ’21, we expect to further grow exclusive brands driven by the strong inventory position. We will also enhance and develop Kogan Marketplace and complete the integration of the Mighty Ape team and operations and further growth in the group’s active customer base. Consistent with prior years, the company will not be providing earnings guidance for the second half of FY ’21. However, the company will provide regular business updates during the period. With regard to recent trading, January 2021 unaudited management accounts showed gross sales growth of more than 45{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} year-on-year, which includes 111.6{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} growth in Kogan Marketplace and 54.6{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} growth in Exclusive Brands, which was partially offset by negative growth in some new verticals driven by travel and insurance, including travel insurance and certain other insurances, which remain suspended as a result of COVID-19. The unaudited management accounts for January 2021 further showed gross profit growth of more than 102{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} and more than 90{14cc2b5881a050199a960a1a3483042b446231310e72f0dc471a7a1eddd6b0c3} growth in adjusted EBITDA year-on-year. Our Board is looking forward to the second half of the year with confidence. As announced earlier in the presentation, the Board has declared a fully franked interim dividend of $0.16 per share. This concludes our presentation. David and I look forward to meeting with many of our shareholders over the coming days. For those of you who have any questions following today’s presentation, please feel free to e-mail [email protected], and we will respond as soon as possible. Thank you for your interest in Kogan.com.