Redbubble : Half Year Update Conference Call Transcript

For personal use only

Investor Update - Half FY2022

Conference Call Transcript

Melbourne, Australia; 17 February 2022:Redbubble Limited (ASX: RBL)

The transcript of the Investor Update Half FY2022 conference call on 16 February 2022 is attached.

For further information, please contact:

Louise Lambeth

Head of Investor Relations

[e-mail]

This announcement was authorised for release to the ASX by the Redbubble Limited Board Chair.

Level 12, 697 Collins Street, Docklands VIC 3008 PO Box 274, Flinders Lane VIC 8009 Redbubble Limited ABN 11 119 200 592

16 February 2022

Conference Call Transcript

INVESTOR UPDATE HALF FY2022

Louionlyusee Lambeth: This session is also being recorded. Before we start, I would like to call your attention to the safe harbour statement regarding forward looking information in our ASX announcement. That safe harbour statement also applies to this investor call. I will now pass on to Mike.

MichaepersonalI czynski: Thank you Louise. Hello everyone, thank you for joining us today where we'll go through the Redbubble Group first half FY22 results.

We shared a preview of these numbers in our January update and we can now confirm that they have not changed post audit review. We are proud of the $54 million that was earned by a record number of selling artists during the half. We ended the half with a significant cash balance, which gives us the ability and confidence to invest for future growth.

A we have mentioned, COVID was an awful time for many people around the globe but it was a tremendous boon for Redbubble. While we have come off those highs, when the Group is viewed over a two, three or four year basis, it is clear to see that the Group is substantially larger and significantly better placed than it was pre-COVID.

On slid 3, over the last six months as we have cycled the peak of the prior period comparables, combined with ongoing shifts in many elements of the external environment, we're in no doubt that it has been a challenging period for the business. None of that however changes the incredible opportunity that lies ahead of us. I remain highly confident that Redbubble Group is a great business that can deliver long term value to all stakeholders.

I'dForlike to take a few moments to run through the Redbubble Group investment opportunities and why I'm so excited about what we're building. I'll then discuss our first half operational achievements across two of the four strategic themes before passing to Emma who will speak to the remaining two as well as our financial performance and outlook.

1

On slide 4, I believe Redbubble Group offers a compelling investment opportunity. We are the owner/operator of the world's largest marketplaces for independent artists. The platforms utilise on-demand technology which is more efficient and scalable than traditional retail and drives strong unit economics.

Theonlyteam and I are energised and have our sights firmly focused on driving sustainable growth. Let me go through each of these in a bit more detail.

As we saw during the pandemic, the business model can drive exceptional returns at scale when profit maximising. We play in

massive addressable markets, which means there's no foreseeable caps on the potential upside. Within the business there are multiple high potential growth levers that can enable us to achieve a meaningful step up in scale.

Slide 5, is the core business model on a page. Redbubble and TeePublic are large scale, difficult to replicate three sided

marketplacesuse to carry inventory or warehousing costs and risks, as well as being highly scalable and capital light for the Group.

mark tplaces. They offer a simple, no upfront cost selling model for artists, which is uniquely positioned in the way we serve the

creator economy, helping artists to monetise their creativity and sell to millions of customers globally at very little risk to them.

The marketplaces connect artists and creators to a third party on demand fulfillment network that requires neither artist nor the

These millions of artists provide a large scale and highly dynamic source of content. They create a massive, constantly evolving catalogue of content and product listings. Redbubble Group's core role is to aggregate and enable this consumer

dem	nd for artists by utilising this enormous product content library across organic and paid channels.
Whe	a artist sells an item to a customer, it is fulfilled and shipped on demand, directly from the third-party network. This
personal

model enables infinite product listings with positive unit economics for the marketplaces. The artists and their content, their cust mers, and the third-party fulfillment network form three sided marketplaces with flywheel effects that drive improvements and efficiencies as they each scale.

So, in slide 6, breaking this down a bit more. The marketplaces are powered by one of the largest online communities of independent artists. At the core of the marketplace are the artists and their content that they bring to the platforms. As more artists continue to join and sell on Redbubble and TeePublic more content is created and added to the platforms.

This is not only highly scalable. It is extremely dynamic and constantly evolving as artists react to memes, trends and cultural changes. There is no upfront cost for artists and relatively little cost to the marketplaces. The vast array of unique content is then combined with a variety of physical products that artists can choose to sell, featuring their designs. With more content and moFore p oducts this growing variety of listings increases the potential appeal to a wider and wider audience, attracting more cust mers to the marketplaces.

The more customers, the more scale benefits accrue in the fulfillment network, enabling customers to be serviced more

2

efficiently. Nearly all customers are now receiving their orders from fulfillers in the same broad geographic region as them. This means faster delivery times, better shipping economics and a lower carbon footprint. All of which helps improve the overall customer experience.

Asonlyou can see from the metrics on this page, all aspects of the marketplaces have shown increases in improvements over the medium term, demonstrating these flywheel effects can and do positively impact the marketplace.

O slide 7, our dedication to our mission of bringing more creativity into the world has helped us to successfully build an incredible community that uniquely positions us in this growing creator economy. As I said, the model offers a simple, low risk, n upfr nt cost way for them to sell across the globe. The strength of this position means artist acquisition is very low cost for the Group.

Thusenumber of selling artists on the platform has been growing at a CAGR of 37% over the past five years with a record

634,000 artists selling an item in the first half. The success of current artists encourages new artists to join and existing artists to continue adding new works.

The total library currently encompasses some 60 million different designs across the two marketplaces, a significant portion of

which can be considered evergreen and has long lasting recurring value. This library constitutes a large and growing asset with

competitive advantages and strong defensive attributes given how difficult it would be to try to replicate this at this level of

scpersonalle.

O slide 8, each artist's design can then be made available for purchase on up to 126 different physical products. This

treme dous leverage is highly valuable for each artist and also for the marketplaces, as it means there's now some 5.7 billion listings across the two businesses.

As a result, the Group is host to one of the largest catalogues of content and product listings on the internet that can continue to grow as new content is uploaded by artists and as new products are made available through the fulfillment network for them to sell. This large variety means increasing diversity and relevance to a growing pool of potential customers.

On slid 9, this long tail of content and product listings provide significant advantages for attracting customers. On a last click basis, organic channels remain the source of the majority of marketplace revenue at 60% in the first half. The marketplaces are aggregators of demand and have helped artists to sell to millions of customers with 5.3 million unique customers in the first half of the year.

LookingForahead, there is a real opportunity to turn first time customers, particularly those acquired by highly specific long tail searches into loyal customers who keep coming back to the marketplaces.

On slide 10, now moving to the third side of the marketplace, Redbubble Group provides artists access to a global network of third-party fulfillment and logistics partners who help them service their customers once an order is placed. This on-demand model is exceptionally efficient when compared to the traditional retail supply chain process. It offers no lead time on content, no inventory risk, less waste and no direct warehousing costs to the marketplace or artists.

3

The third-party nature of the fulfillment network means minimal capital investments are required by the Redbubble Group to scale and expand the network. The network currently has some 44 fulfillment locations around the world enabling 98% of orders to be shipped from the same broad geographic region as the customer or intended recipient.

Ononlyslide 11, from a financial perspective, the marketplaces have demonstrated their ability to generate strong economics and

deliver attractive returns to scale. These numbers represent the average across the Group over the last two years. Cash from

customers is received upfront and on hand for at least four weeks on average, and then gradually distributed to various parties.

For every $100 of marketplace revenue, artists on average earn $19, while the Redbubble Group earns on average $26 as

gr ss pr fit after paid acquisition, which is effectively the Group's contribution margin that is then offset against fixed costs.

These positive unit economics are why we are so focused on investing for scale and growth in order to get our GPAPA, or total contributionuse margin, consistently well above our underlying ongoing cost base.

On lide 12, when we look at the markets we operate in, we know that market size is no barrier to the growth of the business. Given the broad range of physical products available to consumers via the marketplace, these total addressable markets are estimated to grow to over $1 trillion by 2024 with at least 35% to 40% of all customers seeking something unique or meaningful.

Onpersonalslide 13, the Redbubble Group continues to be positioned at the intersection of a number of positive macroeconomic

t ilwinds. We've spoken about these at length before. These have driven continued and sustained growth, and we believe they

will co tinue to benefit the business moving forward. This gives us confidence that the growth opportunity into the longer term remai s highly intact, and it's therefore firmly our job to deliver on this potential.

On slide 14, to that end we've shared a clear overview of our medium-term strategic plan based upon our high potential growth levers. These initiatives will be phased over the next three to five years and have been ordered to give us the best chance of maximi ing our returns on this investment.

As I spoke to in January, there is more platform work that we need to undertake in order to unlock future value. So, during cal ndar year '22, we will continue to build on the foundational work for the next phase, as well as commencing some of the investments required to deliver ongoing earned growth.

On slide 15, in terms of these opportunities for earned growth, two of the areas we've spoken about have been the opportunity to improve our brand awareness and increase customer loyalty and purchase frequency. As shown by these graphs when compaFored to our peers, there is plenty of headroom in both areas. For us, we're excited about the very real opportunity that this presents.

Loyalty or repeat purchase along with brand awareness are important areas to both businesses that will require sustained disciplined investment over the near term. These are just two examples of the many high potential growth levers that we have in the Group. The more and more I get to know the business, the more excited I am about the opportunity that lies ahead of us and the levers that we have to grow while also being very realistic about the work that we need to do to go after them.

4