Articore Group Limited (ATG) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Redbubble Investor Update - Appointment of Interim CEO. [Operator Instructions] I would now like to hand the conference over to Mr. Richard Cawsey, Board Chair. Please go ahead.

Thank you. Welcome everybody. I'm here with Martin Hosking and, offhand, other Board members. Further to our statement to the market this morning, Martin and I would like to make the following points to you, and we'll take questions at the end. We've all been disappointed by the company's growth. As the prospects of growth did not return, management and Board have started a thorough review of strategy and operations. Following these extensive deliberations, the Board came to the view that a change in leadership was required. And so the decision was made to terminate the CEO. The company's fundamentals are and remain strong. This is a unique business that is difficult to replicate, and we're increasingly confident that growth is, can and will emerge in our core Redbubble business. The company's focus must be on the core of the business while investing in opportunities in front of us to further entrench our position and create value for our shareholders, employees, artists and partners. The leadership transition comes ahead of the release of the company's half yearly results on the 26th of February, which shows the company's financial and operating measures are in line with expectations: growth in operating revenues of 25% in the first half year-on-year, positive -- and positive cash flow for the fiscal year ended 30 June 2020. Business performance in current calendar year to date has been encouraging, and -- but please note that this reflects floating currency, and the results are unaudited. Beyond the conversation of these headline numbers, we will not be taking questions on the numbers that will be announced next week. In coming periods, our investment focus will be on continuing the current growth initiatives and including accelerating the new product launch cycle and realizing opportunities provided by the quickly growing Fan Art partnerships. We have incredibly talented and passionate executive team in place. Martin knows the business inside out. He is passionate about the business. And he, like us all, has a desire and intent to ensure the company reaches its full potential. A global search for a new long-term CEO will commence immediately. I'm now going -- before passing for questions, I'm now going to hand over to Martin.

Thank you, Richard. Hello, everyone, again. Just to reinforce Richard's comments, nothing has changed from a strategy perspective. This is a business that has strong fundamentals, demonstrated growth and a talented, committed team behind it. Our focus remains on accelerating the upcoming growth phase to further entrench our position and create value for our shareholders, employees, artists and partners. We're committed to accelerating the growth initiatives underway, including the new product release cycle and investing in quickly growing Fan Art segment as we continue to build out our great content partnerships. We'll obviously talk half year results next week. However, we're happy to take questions you might have on the current announcement. Are there questions?

[Operator Instructions] Your first question comes from Grace Fulton from Goldman Sachs.

This is Ash Chandra here. I work with Grace here at Goldman. Just wondering if there's anything you can perhaps provide with respect to what aspects of the business do you feel have been relatively, I guess, under-executed on within your overall review. You mentioned you've done a full and thorough review, yes. Is there anything you can say with respect to -- is it particular geography? Is it -- I can't imagine it's TeePublic specifically, yes. Just to give us a sense of what has been the sort of catalyst given you're just going to report next week anyway.

Thank you very much, Ash. This was not a precipitated action. We -- it's been under deliberation for quite a long period of time throughout that review process. I think where I'd like to leave it is to say that I think we need to focus on the core activities of the transactional business, really around SEO and around others, as we've discussed in the past, and then focusing on the investments and particularly identified through our release and our discussion today around increasing the product release cycle and increasing our investment in the quickly growing Fan Art marketplace. But it has been under deliberation for quite some time. And so this is -- there's not a degree of reactivity in here, and we wish to focus with -- through this whole process, we're focused on what we believe is the leadership required going forward. And unfortunately, Barry did not fit what we believe the leadership fit -- that was in the best interest of the company.

And was this review fully internally driven process? Or did you use external consultants?

It was led by management and involved the Board. And on some occasions, we sought the insight from other strategic consultants to test some of the assumptions and hypotheses.

And is there any chance that during the course of this year, we're going to see, I don't know, any sort of one-off restructuring costs in and around any changes that might be made as a result of today's announcement?

No.

That was Richard, actually.

[Operator Instructions] Your next question comes from Owen Humphries from Canaccord Genuity.

Welcome back, Martin. Just a question around the -- any views or the Board's views as to the catalyst that could see the growth return back to more industry trends. And what part of the business has been underperforming? And you look forward 1, 2, 3 years, what plans or what changes are you going to be -- to put in place to rectify that growth?

So I think the -- as Martin has identified, the core areas of strategic focus that we've had for some period of time are growing quickly and are very strong, and we can expect those to become a larger part, in fact, the most significant driver of value going forward. I think in terms of the transactional elements around SEO and e-mail marketing and others which are more tactically based, I think we'll be looking to increase our focus there. But I -- and feeding the green shoots in the growth areas that we've clearly identified and also seeing the benefits and realizing the benefits that we've really proven through the release of new products.

And then from a cost perspective, is the Board happy with the cost level of the business?