Announcement PDF 1HFY24 Results 27 February 2024 1HFY24 Group financial highlights $260.4m Marketplace revenue 1HFY23: $289.3 -10% Gross profit margin Gross profit GPAPA 41.6% 1HFY23: 35.0% GPAPA margin 24.6% 1HFY23: 17.9% Operating EBITDA $108.4m 1HFY23: $101.3m, +7% $64.1m 1HFY23 : $51.8m, +24% $13.5m 1HFY23: -$18.0m, +175% Closing cash balance $87.1m 31 December 2022: $97.0m Gross profit, GPAPA, operating EBITDA and underlying cash flow are non-IFRS measures. Non-IFRS measures are unaudited. The numbers shown in this presentation are underlying numbers and may differ from those reported in the statutory financial statements. Please see the table on slide 19 for an explanation of the underlying adjustment. Drove 670 bps improvement to GPAPA margin Maintained strong cost discipline with operating expenses down 27% on pcp Achieved positive underlying cash flow1 of $8.8 million, up $36.4 million on pcp Gross profit, GPAPA and operating EBITDA all significantly above pre-COVID results, reflecting successful execution of Group’s strategy 1. Underlying cash flow defined as operating EBITDA less payments for capitalised development costs, leases and property, plant and equipment (PPE). 2 1HFY24 marketplace highlights Focus in 1HFY24 was GPAPA, rather than volume Gross profit higher than pcp despite lower revenue Both marketplaces profitable on first order Marketplace revenue $149.3m 1HFY23: $181.1 -18% $61.2m Gross profit margin 41.0% 1HFY23: $60.4m, +1% 1HFY23: 33.3% $40.5m GPAPA margin 1HFY23 : $33.8m, +20% $11.8m 1HFY23: -$13.2m 27.1% Gross profit GPAPA $111.1m 1HFY23: $108.2, +3% Gross profit margin 42.5% 1HFY23: 37.8% GPAPA margin 21.3% 1HFY23: 16.6% 1HFY23: 18.7% Operating EBITDA Able to maintain revenue while driving margin expansion $47.2m 1HFY23: $40.9m, +15% $23.7m 1HFY23 : $18.0m, +32% $7.0m Higher paid marketing spend than Redbubble as TeePublic identified more opportunities for profitable marketing spend 1HFY23: $1.0m Both marketplaces delivered positive underlying cash flow 3 Marketplace updates Redbubble update 1HFY24 operational metrics Artists Selling artists ● ● ● Successfully controlled surge of low-value content being uploaded to marketplace Launched duplicate work detection using AI to protect most valuable artists Increased frequency of artist communication, providing more insight on how to move up tiers and generate sales on the marketplace Buyers ● ● Improved onsite experience, through faster site speed and enhancements to search and discovery Refined marketing strategy, enabling Redbubble to increase promotional days without impacting margins Supply chain ● Ongoing benefits from recently-implemented dynamic order routing system (DORS) 514k 1HFY23: 472k Artist earnings $31.1m 1HFY24 financial metrics 57% 1HFY23: $40.8m Customers 2.7m Marketplace revenue contribution 1HFY23: 63% 1HFY23: 3.3m Designs sold 63% 2.9m 1HFY23: 3.5m GPAPA contribution 1HFY23: 65% 5 Optimising the Redbubble flywheel to return to profitable revenue growth Artists & Content Inhibitors Surge in low-quality content being uploaded to marketplace Our response ● Added friction to sign-up process ● Introduced artist account categories to encourage positive engagement with marketplace Discovery Proportion of uploads from Pro and Premium artists ~56% in Dec-23 Dec-22: ~15% Customers Service Fulfilment & Operations Attracting new customers in highly-competitive market Protecting margins in an inflationary environment ● Refined offsite promotions to focus on more in-demand products ● Growing email, SMS and app user base ● Focusing on scaling paid marketing spend while maintaining profitability ● Rolled out DORS, increasing transparency to encourage competition among fulfilers ● Renegotiated shipping contracts, leveraging Group purchasing power Paid marketing spend down 22% in Dec-23 vs pcp COGS down ~8% in Dec-23 compared to pcp Improving one side of the flywheel creates a positive reinforcing impact on other side Inhibitors Our response TeePublic update Artists ● Embedded introduction of artisan and apprentice account categories and associated change in artist earnings Buyers ● ● ● Commenced roll out of website redesign Added content categories to assist customers initiate and narrow search results Launched gifting module Supply chain ● ● Increased allocation of volume to lower-cost third-party fulfilers Adjusted order priority to reduce shipping costs 1HFY24 operational metrics 1HFY24 financial metrics Selling artists 117k 1HFY23: 84k Artist earnings $11.3m 43% 1HFY23: $13.7m Customers 1.5m Marketplace revenue contribution 1HFY23: 37% 1HFY23: 1.6m Designs sold 37% 0.9m 1HFY23: 0.8m GPAPA contribution 1HFY23: 35% 7 Recent site upgrades improving customer experience on TeePublic Launch of search categories in Oct-23 Bounce rate for homepage more than halved in Nov-Dec 2023 compared to prior year Driving significant higher Google ranking for key searches Launch of gifting module in Oct-23 Conversion 87% higher for gifting module users, Nov-Dec 2023 1HFY24 financial overview 1HFY24 Group profit and loss statement 1HFY23 1HFY24 % change Total revenue 343.8 302.7 (12%) MPR 289.3 260.4 (10%) Gross profit 101.3 108.4 7% Gross profit margin 35.0% 41.6% 6.6pp Paid acquisition (49.5) (44.2) (11%) GPAPA 51.8 64.1 24% GPAPA margin 17.9% 24.6% 6.7pp Brand awareness project (6.1) 0.0 (100%) Operating expenses (63.6) (50.6) (20%) Operating EBITDA (18.0) 13.5 175% Other income/expenses (5.2) (3.5) (34%) EBITDA (23.2) 10.0 143% Depreciation and amortisation (4.9) (6.8) 37% EBIT (28.2) 3.3 112% Gross profit, Gross profit margin, GPAPA, GPAPA margin, operating EBITDA, EBITDA and EBIT are non-IFRS measures. Non-IFRS measures are unaudited. Expected decrease as the Group focused on profitability, rather than volume, and softer trading conditions. Improvement to gross profit driven by adjustment of base prices, introduction of artist account tiers and optimisation of each marketplaces’ supply chains. More efficient paid marketing spend, in line with focus on profitability, supported by increased understanding of unit economics. Full benefit of cost-reductions initiatives implemented in FY23 realised in 1HFY24 and maintaining strong cost discipline. 10 Improvement to GPAPA margin coupled with significant cost savings driving increased profitability Key drivers of GPAPA margin improvement Operating expenditure (1HFY23 to 1HFY24) (1HFY23 to 1HFY24) Redbubble 7.6% 30% 20% 27.1% $80 27% 18.7% 10% Uplift driven by base price increases, supply chain efficiencies and adjustments to artist earnings 0% TeePublic 30% 20% 0.8% 16.6% 4.6% 10% decrease Decrease in paid marketing spend correlated to revenue decline $60 $40 $20 0% 21.3% Scaled paid marketing spend profitably $0 1HFY23 Brand awareness 1HFY24 CODB People 0% 1HFY23 Improvement in gross profit Increased efficiency of paid spend 1HFY24 11 Necessary framework in place to deliver positive underlying cash flow for FY24 Closing cash balance (millions, 1HFY20 - 1HFY24) $150 ● Positive underlying cash flow delivered in 1HFY24 $143 $130 $97 $100 $87 $65 $50 ● Consistent with seasonal payments to marketplace participants, 31 January 2024 cash balance of $41 million (31 January 2023: $44 million), $5 million higher than cash balance at 30 June 2023 ● Aiming to deliver positive underlying cash flow for FY24 $0 1HFY20 1HFY21 1HFY22 1HFY23 1HFY24 Closing cash balance 12 Summary and guidance Near-term priorities to return the Group to profitable revenue growth Supporting marketplaces to leverage core strengths and maintaining cost discipline Addressing identified issues which are inhibiting the flywheel from operating optimally Building on strong performance by expanding into new products and customer segments, and building presence outside US 14 After stabilising our foundation, we are now focused on reinstating growth Phase 1 Both marketplaces delivered GPAPA growth and positive underlying cash flow in 1HFY24 Stabilise foundation Phase 2 Deliver profitable revenue growth from existing business and consider adding new companies Operating company Group has been restructured to enable addition of new operating companies, which leverage Group assets Phase 3 Execute long-term growth strategy Operating company Operating company Operating company 15 FY24 guidance In 1HFY24, the Group demonstrated its ability to drive absolute GPAPA growth by focusing on unit economics and optimising its paid marketing activities. While the Group expects trading conditions to remain soft in the near term, it is confident in the execution of its strategy and as a result, it has narrowed its FY24 GPAPA margin range to between 24% and 26%, the higher end of its previously given guidance, 23% to 26%.1 The Group expects the decline in Group MPR to be more moderate in the second half of the financial year, as the Group revised its strategy to focus on profitability in the comparable period in FY23. The Group realised the full benefit of cost-saving measures implemented in FY23 in 1HFY24. It will continue to focus on strong cost discipline in the second half of the financial year. Largely due to foreign exchange rate movements and a decision to change the executive team’s short-term incentive to an at-risk cash award, the Group now expects its FY24 operating expenditure to be between $97 million and $100 million, previously $92 to $100 million. After delivering positive underlying cash flow for the Group and both marketplaces in 1HFY24, the Group is continuing to focus on its aim to deliver positive underlying cash flow for FY24.1 1. Our ability to achieve this aim is highly dependent on consumer demand, foreign exchange rates, geographic and product mix. Supplementary information Two distinct marketplaces operating at a global scale Geographic Diversity (% of gross transaction value) North America 71% 71% Europe and United Kingdom Gross transaction value North America North America 21% 56% 93% Apparel Apparel May represent multiple third-party fulfiler sites. 53% 49 third-party fulfiler sites Australia and New Zealand 7% 93% 18 2QFY24 and 1HFY24 profit and loss statement P&L 2QFY23 2QFY24 % change % cc change 1HFY23 1HFY24 % change % cc change Total revenue 222.6 191.3 (14%) (16%) 343.8 302.7 (12%) (15%) Less: artist revenue (34.2) (25.6) (25%) (27%) (54.5) (42.4) (22%) (25%) 188.5 165.8 (12%) (14%) 289.3 260.4 (10%) (13%) - (2.7) (100%) (100%) - (2.7) (100%) (100%) 61.9 66.2 7% 5% 101.3 108.4 7% 4% Gross profit margin 32.9% 39.9% 7.1pp 7.1pp 35.0% 41.6% 6.6pp 6.6pp Paid acquisition (33.4) (28.5) (15%) (15%) (49.5) (44.2) (11%) (13%) MPR Underlying adjustment Gross profit (1) (1) GPAPA (1) 28.6 37.7 32% 29% 51.8 64.1 24% 19% GPAPA margin 15.2% 22.7% 7.6pp 7.4pp 17.9% 24.6% 6.7pp 6.5pp Brand awareness project (2.3) 0.0 (100%) (100%) (6.1) 0.0 (100%) (100%) Operating expenses (33.5) (27.4) (18%) (19%) (63.6) (50.6) (20%) (22%) Operating EBITDA (7.2) 10.3 243% 236% (18.0) 13.5 175% 168% Other income/expenses (1.4) (1.2) (13%) (27%) (5.2) (3.5) (34%) (24%) EBITDA (1) (8.6) 9.1 206% 178% (23.2) 10.0 143% 137% Depreciation & amortisation (2.5) (3.5) 39% 38% (4.9) (6.8) 37% 36% (11.1) 5.6 150% 134% (28.2) 3.3 112% 106% Interest expense (0.0) 0.0 (162%) (153%) (0.1) (0.0) (97%) (95%) Tax expense (1.5) (1.0) (32%) (32%) (1.5) (1.0) (32%) (32%) Net profit/loss (12.7) 4.6 137% 123% (29.8) 2.2 107% 103% EBIT (1) 1. The 1HFY24 statutory results include a one-off release of an accrual that has been excluded in this investor presentation for the purpose of assessing the Group’s 1HFY24 performance on a like-for-like basis. This table shows the impact this has on underlying gross profit, GPAPA, EBITDA and EBIT. These underlying results and the numbers presented in this investor presentation differ from the statutory financial statements by this amount. Gross profit, gross profit margin, GPAPA, GPAPA margin, operating EBITDA, EBITDA and EBIT are non-IFRS measures. Non-IFRS measures are unaudited. 19 Reconciliation of segment results 1HFY23 1HFY24 % change Redbubble MPR $181.1m $149.3m (18%) TeePublic MPR $108.2m $111.1m 3% Articore MPR $289.3m $260.4m (10%) Redbubble gross profit $60.4m $61.2m 1% TeePublic gross profit $40.9m $47.2m 15% Articore gross profit $101.3m $108.4m 7% Redbubble GPAPA $33.8m $40.5m 20% TeePublic GPAPA $18.0m $23.7m 32% Articore GPAPA $51.8m $64.1m 24% Redbubble operating EBITDA ($13.2m) $11.8m 190% TeePublic operating EBITDA $1.0m $7.0m 630% Corporate costs ($5.8m) ($5.3m) (8%) Articore operating EBITDA ($18.0m) $13.5m 175% Gross profit, gross profit margin, GPAPA, GPAPA margin, operating EBITDA, EBITDA and EBIT are non-IFRS measures. Non-IFRS measures are unaudited. 20 Glossary Term Definition $ All references to dollar amounts or figures are in AUD unless stated otherwise 1H/2H First or second half of the financial year 1Q/2Q/3Q/4Q First, second, third or fourth quarter of the financial year AI Artificial intelligence Selling artists b Number of artists who sold a product printed with their art during reporting period Billion bps Basis points CODB Cost of doing business COGS Constant currency (cc) Cost of goods sold CY Calendar year Designs sold DORS Number of artists’ designs that have sold on at least one product during reporting period Dynamic order routing system EBITDA Earnings before interest, tax, depreciation and amortisation. This is a non-IFRS measure and is unaudited FY Financial year GP Gross profit. This is non-IFRS measure and is unaudited GPAPA Gross profit after paid acquisition. This is a non-IFRS measure and is unaudited GTV Gross transaction value less taxes and artist revenue is equal to marketplace revenue. This is a non-IFRS measure and is unaudited MPR Marketplace revenue. Total revenue less artist revenue m Million pcp Prior corresponding period Underlying cash flow US Operating EBITDA less payments for capitalised development costs, leases and property, plant and equipment (PPE) United States of America YoY Year on year Reflects the underlying growth before translation to Australian dollars for reporting purposes. Redbubble sources about 88% of its marketplace revenue in currencies other than Australian dollars. TeePublic sources about 90% of its marketplace revenue in US dollars 21 IMPORTANT NOTICE AND DISCLAIMER This presentation contains summary information about Articore Group Limited (ACN 119 200 its related bodies corporate (together, ArticoreGroup Groupororthe theGroup) Group)and andthe theGroup’s Group’s Redbubble Limited (ACN 119 200 592)592) and and its related bodies corporate (together, the the Redbubble activities as at the date of this presentation. It is information given in summary form only and does not purport to be complete. It should be read in conjunction with the Group's other periodic corporate reports and continuous disclosure announcements filed with the Australian Securities Exchange (ASX), available at www.asx.com.au. This presentation is for information purposes only and is not a prospectus or product disclosure statement, financial product or investment advice or a recommendation to acquire the Group’s shares or other securities. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information, opinions and conclusions contained in this presentation. To the maximum extent permitted by law, none of the Group or its directors, employees or agents, nor any other person, accepts liability for any loss arising from the use of this presentation or its contents or otherwise arising in connection with it, including, without limitation, any liability from fault or negligence on the part of the Group or its directors, employees, contractors or agents. This presentation contains forward-looking statements in relation to the Articore Group, including statements regarding thethe Group’s intent, belief, goals, objectives, initiatives, commitments or Redbubble Group, including statements regarding Group’s intent, belief, goals, objectives, initiatives, commitments current expectations with respect to the Group’s business and operations, market conditions, results of operations and financial conditions, products in research, and riskrisk management or current expectations with respect to the Group’s business and operations, market conditions, results of operations and financial conditions, products in research, and management practices. Forward-looking statements can generally be identified by the use of words such as "forecast", "estimate", "plan", "will", "anticipate", "may", "believe", "should", "expect", “project,” "intend", "outlook", "target", "assume" and "guidance" and other similar expressions. 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Factors that could cause actual results to differ materially include: changes in government and policy; actions of regulatory bodies and other governmental authorities such as changes in taxation or regulation (or approvals under regulation); the effect of economic conditions; technological developments; and geopolitical developments. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as at the date of the presentation. The Group disclaims any responsibility for the accuracy or completeness of any forward-looking statement. Except as required by applicable laws or regulations, the Group does not undertake any obligation to publicly update or revise any of the forward-looking statements or to advise of any change in assumptions on which any such statement is based. Any projections or forecasts included in this presentation have not been audited, examined, or otherwise reviewed by the independent auditors of the Group. There are references to IFRS and non-IFRS financial information in this presentation. Non-IFRS financial measures are financial measures other than those defined or specified under any relevant accounting standard and may not be directly comparable with other companies’ information. Non-IFRS financial measures are used to enhance the comparability of information between reporting periods and enable further insight and a different perspective into the financial performance. Non-IFRS financial information should be considered in addition to, and is not intended to be a substitute for, IFRS financial information and measures. Non-IFRS financial measures are not subject to audit or review. 22 Contact us: Virginia Spring VP, Investor Relations +61 456 441 147 virginia.spring@articore.com