• Revenue: $314 million, up 24% year-on-year.
• Market Share: Increased to 2.9% in the furniture and homewares market.
• EBITDA Margin: 4.2%, up over 120 basis points from H1 '24.
• Free Cash Flow: $33 million, up 61% year-on-year.
• Cash Balance: $139 million with no debt.
• Active Customers: 1.2 million, up 22%.
• Conversion Rate: 3.1%, higher than during COVID years.
• Exclusive Products Revenue: 45% of total revenue.
• Home Improvement Category Revenue: $20 million, up 41% year-on-year.
• Trade and Commercial Sales: $24 million, up 10% year-on-year.
• Delivered Margin: $102 million, up 26% year-on-year, with an improvement from 31.8% to 32.4% of revenue.
• Operating Cash Flow: $35 million, up 60% from H1 '24.

• Warning! GuruFocus has detected 5 Warning Signs with TPLWF.

Release Date: February 12, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Revenue grew 24% year-on-year to $314 million, driven by both growth in new customers and higher average order values.
• Temple & Webster Group Ltd (TPLWF) achieved a record 1.2 million active customers, up 22% from the previous period.
• The company generated $33 million in free cash flow for the half, with a closing cash balance of $139 million and no debt.
• Revenue from exclusive products grew to 45% of total revenue, with 78% of the top 500 products being exclusive to Temple & Webster Group Ltd (TPLWF).
• AI integration has led to significant cost efficiencies, with over 60% of customer support interactions handled by AI, halving customer care costs in two years.

Negative Points

• The B2B division, trade and commercial, is facing significant headwinds due to macroeconomic factors and a downturn in the office market.
• The 12-month marketing ROI was lower than historical levels due to increased investment in brand building and performance channels.
• Increased promotional activity slightly offset the positives, impacting margins despite strong supplier support.
• There is a noted elevation in warehousing costs as inventory increases with higher revenue and private label penetration.
• The company reiterated its EBITDA margin guidance of 1% to 3% for the full year, indicating potential pressure on margins in the second half.

Q & A Highlights

Q: Can you provide more color on the 16% revenue growth during the January-February period? Was there a specific factor driving this growth? A: Mark Coulter, CEO: The growth aligns with our internal expectations despite the challenging retail environment. Consumers remain promotionally sensitive, and we saw strong performance during promotional periods like Black Friday. We have built margin flexibility, allowing us to leverage promotional and marketing strategies effectively.

Q: How are you managing the increased marketing costs, and what impact does this have on margins? A: Mark Coulter, CEO: We are investing in both brand building and performance channels, which has increased marketing costs. Despite this, our customers remain profitable on their first order, and we delivered a record 4.2% EBITDA margin for the half. We are using our margin flexibility to drive customer acquisition and growth.

Q: Can you explain the rationale behind reiterating the 1% to 3% EBITDA margin guidance for the full year, given the strong first-half performance? A: Cameron Barnsley, CFO: The strong first-half margin provides us flexibility to accelerate growth in the second half through tactical use of price promotions and marketing. This is a typical profile for our business, with higher margins in the first half and some annualization of fixed costs expected in the second half.

Q: How is the exclusive and private label product strategy impacting margins and product range? A: Mark Coulter, CEO: Exclusive and private label products offer higher margins due to less competition. We are growing into this strategy by encouraging suppliers to provide exclusivity, which benefits both parties. This approach does not limit our range but enhances our competitive advantage as we scale.

Q: What are the strategic priorities for AI in improving conversion and cost efficiencies? A: Mark Coulter, CEO: We are focusing on AI-driven personalized sorting to enhance conversion rates. This involves tailoring the order of products for individual customers, which should improve the shopping experience and drive sales. We have already seen significant cost savings in customer care through AI.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.