Articore Group Limited (ATG) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Redbubble Limited 3Q Trading Update. [Operator Instructions] I would now like to hand the conference over to Ms. Louise Lambeth, Head of Investor Relations. Please go ahead.

Thank you, operator. Good morning, everyone, here in Australia, and good afternoon and evening for our U.S. investors. This is Louise Lambeth, Head of Investor Relations for Redbubble Group. Welcome to this investor call following the release of our FY 2022 third quarter trading update provided earlier today. With me on the line, I have Redbubble's CEO, Michael Ilczynski; and CFO, Emma Clark. The key information for today's update is contained in the ASX announcement and the accompanying slides that we released to the market. The financial and operational metrics are from internal management reports and have not been subject to audit. Michael and Emma will speak shortly, and we will then open up the lines for questions. This session is also being recorded. Before we start, I would like to call your attention to the safe harbor statement regarding forward-looking information in our ASX release. That safe harbor statement also applies to this investor call. I will now pass on to Mike.

Thank you, Louise. Hello, everyone. Thank you for joining us today. We will go through the Redbubble Group's third quarter and year-to-date trading update. I will speak basically briefly before passing to Emma to walk through the financials. At the high level, the Redbubble Group delivered third quarter Marketplace revenue of $96 million, which was largely in line with our expectations for the quarter. Gross margins for the quarter were consistent with year-to-date at 37.5%, and we continue to see elevated customer acquisition costs impacting our GPAPA margin. OpEx was slightly below budget, driven by slightly lower staffing expenses. These factors resulted in operating EBITDA loss for the quarter of $6 million. Given the year-to-date results, we are reiterating our FY '22 outlook statements provided in February. We had a significant cash balance on hand, having ended the quarter with cash balance of $94 million, which continues to give us the ability and the confidence to invest for our future growth. As I said at the start of the year, the team and I have our sights firmly focused on driving sustainable growth for the medium and long term. During the quarter, we continued with the investments we were making across the business to build our capabilities and expand our capacity, which is included by hiring more than 100 new staff into the Redbubble business since July 2021. This has really boosted our capacity, particularly within the product and engineering teams in the Redbubble.com business. As we have stated, these teams are focused on improving our technical foundations, but we are also starting to see some improvements in the on-site experience. To give you a few examples, we recently launched our first Add to Cart recommendations on the Redbubble site. So when a customer adds a product to their cart, a carousel of recommendations based on that product now appears. We have added this functionality to both of our Redbubble major apps. So we see a lot of user behavior, particularly amongst the Gen Z audience, around creating and sharing lists of products and designs. And adding this feature to our apps has been our #1 feature request. So it was great to have that out this quarter. And we have been experimenting in our search results to boost newly onboarded artists to improve their ability to get discovered while not degrading overall conversion results. And this experiment has shown good promise. We also remain on track to launch our pets category in the Redbubble business later this year. Additionally, we remain really focused on driving retention and repeat across both businesses. For Q3, a record high 47% of our Marketplace revenue for the group was generated from repeat customers. We also shared in this release an initial cohort data. This was -- some initial cohorts analysis. This was looking at new customers who first purchased on Redbubble in the second half of calendar year 2020. So this was the real COVID-impacted cohort. We compared that with new customers from the same time a year earlier in 2019 pre-COVID. What the analysis demonstrated was that the H2 2020 new customer cohort was some 64% larger than the 2019 cohort. Despite being so much larger, the 2020 cohort's 12-month repeat rate is very similar to the 2019's rate, 20.3% versus 21.7% over 12 months. This is really encouraging for us as this demonstrated the ability to retain those COVID-impacted customers at virtually the same rate, even though the 2020 cohort had the reopening phase during 2021 in the following 12 months, in the U.S., in particular, which should have had a negative impact on repeat online behavior as off-line stores reopened. We also believe this demonstrates that the Redbubble value proposition does appeal to a broader mass consumer segment that we can build loyalty at a scale. And that's why our focus is equally on improving retention and building our brands so that we can drive increasing numbers of new customers over time. As such, both businesses are continuing with a number of experiments this year to drive retention. And those experiments are across all aspects of the customer journey, from different remarketing channels to shifting experiments to physical product experience changes as well as looking at how we start to build our brands over the periods ahead. We don't normally provide this level of operational detail in our quarterly trading updates. However, given the investments that have been happening across the business, I thought it was important to take the opportunity to demonstrate some of the tangible examples of the work that we're able to undertake with additional talent and resourcing coming into the business. We are also making progress with our platform work that we need to undertake in order to unlock future value. So during the remainder of calendar year '22, we will continue to build up this foundational work required for the next phase as well as working on some of these opportunities to deliver earnings growth in the shorter term. We're all immensely excited about the incredible opportunities that lie ahead of us. And within the business, there are multiple high-potential growth leaders that can enable us to achieve a meaningful step-up in scale. I remain highly confident that the Redbubble Group is a compelling investment opportunity that can deliver long-term value to all stakeholders. That being the case, we do not believe that our current share price reflects the fundamentals and prospects of Redbubble and our strategy. As such, the Board and management have and continue to actively investigate value-enhancing options on behalf of all stakeholders. These include organic and inorganic opportunities that could assist in the acceleration of shareholder value as part of our usual considerations for the Board and the company. Before I wrap up, I want to spend a moment to discuss how the Redbubble Group is rallying to support the people of Ukraine. Over the past few weeks, our team has been coordinating to offer Redbubble's support of humanitarian relief assets for Ukrainians. This is including looking at ways we can support the Redbubble Ukrainian artists and amplify the efforts of artists on Redbubble from across the world who have been moved to create artwork in support of the Ukrainian people. Already, we have facilitated sales of several hundreds of thousands of dollars of artists' products. And we are donating -- as we are donating our profits from these sales, this means that Redbubble Group will be donating over AUD 70,000 to GlobalGiving and International Rescue Committee, 2 charitable organizations who are working to mobilize resources to save lives in Ukraine and assist refugees. I'm very proud of the meaningful way that our team has worked together to show support for the people of Ukraine, and I'm truly grateful for the wonderful response that we've seen from both the artists and customer communities to drive humanitarian initiatives. I'll now pass over to Emma.

Thanks, Mike. I would like to echo your comments and thank all of our communities for their ongoing support of Ukraine. Let's now turn to the year-to-date and third quarter financial performance and our outlook. Please be aware that unless otherwise stated, the financial results discussed are on a delivered basis and have not been subject to audit. On a year-to-date basis, Marketplace revenue was $384 million, down 16% year-on-year on a floating basis and down 17% on a constant currency basis. However, this is up 56% on a 2-year view. Of this, $96 million was delivered in the third quarter, down 7% on a floating basis and 12% on a constant currency basis. This is largely in line with our expectations. On an underlying basis, for the year-to-date, which is effectively on a paid basis excluding masks, Marketplace revenue was $376 million, down 4% year-on-year on a floating basis and 5% on a constant currency basis. Year-to-date, Redbubble has generated gross profit of $144 million, down 22% on both a floating basis and a constant currency basis. Gross margins were 37.5% in the third quarter. Once again, this is in line with our expectations, noting that gross margin carries small seasonal headwinds in the third quarter as customer returns and refunds from the holiday season in the prior quarter are processed. On a year-to-date basis, gross margins were also 37.5%. Gross profit after paid acquisitions for the year-to-date was $84.1 million, of which the third quarter contributed $20.6 million. Paid acquisition, a substantial Marketplace revenue, was 15.6% for the year-to-date and 16.1% for the third quarter. As Mike shared earlier, repeat customer spend remains strong. However, new customer acquisition costs remained elevated in the quarter due to a combination of high levels of competition in the digital channels with what appears to be some general weakness in consumer demand. Operating expenses during the third quarter were $26.7 million, which was down 10% on the second quarter results of $29.6 million. As discussed in previous quarters, the second quarter expenses always contain a seasonal uptick to support the peak sales period in November and December. Third quarter operating expenses, however, were up 27% on the prior year. Mike talked earlier about the investments in people capacity with over 100 new Bubblers joining the group this financial year, and this is the main driver of the year-on-year increase in expenses. Even so, we are still running below our internal head count expectations. And therefore, this expense line was lower than we had anticipated, offsetting much of the paid acquisition cost increase. The variance between operating EBITDA and EBITDA for the quarter was impacted by unrealized net foreign exchange losses being a $2.7 million loss in the quarter as the AUD strengthened from $0.70 to $0.75 during this period. The other items in other expenses are share-based compensation payments. The year-to-date EBITDA loss is $2.3 million. Redbubble's closing cash balance as at the 31st of March 2022 was $94 million. For those of you who are familiar with the business, you will remember that the seasonality of the business always resulted in a net hedge outlook in the third quarter after payments for holiday sales unmade to all other Marketplace participants. The business operates through a retail cycle and, therefore, seasonal in nature. The first half of the financial year is always larger than the second half, and this is reflected all way down the P&L as well through the cash flows and, of course, the balance sheet. As such, our financial metrics should be viewed over a full financial year period. At the half year results, Redbubble reiterated its outlook statements, and our year-to-date performance gives us confidence that these will be met. Redbubble still expects financial year 2022 Marketplace revenue to be slightly below financial year 2021 underlying Marketplace revenue of $497 million. We remain a much larger business than pre-COVID, and our cash balance will continue to allow us to invest to achieve our medium-term aspirations. We are confident and excited about the medium- to longer-term opportunity to grow strongly and extend Redbubble's global market leadership. As such, we will be continuing to invest into the business and funding these investments out of our existing cash reserves. Financial year 2022 EBITDA margin as a percentage of Marketplace revenue is expected to be negative low single digits. Thank you very much for listening in. I will now open up the line for questions.

[Operator Instructions] Your first question comes from Anna Guan from Goldman Sachs.

A couple of questions from me, if I can. The first one is just around guidance and I suppose the new information that came out of today. Emma, correct me if I'm wrong, if I'm understanding your comments earlier correctly. So you guys are reiterating guidance. But obviously, OpEx was lower than expectations. But also, at the same time, paid acquisition costs were higher as well compared to your previous expectations. Would that be a fair read?

Yes. So as you know, thanks for the question, Anna, we have guided that on both Marketplace revenue and EBITDA, not every line in between in the P&L. So yes, as we've disclosed today, paid acquisition remained elevated through the quarter, and OpEx came in lower than our expectations. Obviously, our full year guidance reflects swings and roundabouts within the lines within the P&L itself, and we do reiterate our guidance statements on both Marketplace revenue and EBITDA.

Yes. Understood. Just on that OpEx piece, to what degree is that related to sort of the timing of hiring?

So it is largely related to exactly that, Anna. So we're recruiting. Lots of people talk to us about seeing the role on the Redbubble page, and we continue to recruit. But obviously, it's just taking us a little bit longer to recruit people in than we had initially forecast in our internal models, and that's the gap. So we continue to recruit those roles. And obviously, as they come on board, that gap closes.

Yes. Okay. Understood. My second question is just around the top line performance in this quarter. So backing out the masks component and also looking at what some of your competitors' comps are saying out of the U.S., the -- I thought -- from my point of view, I thought the quarterly top line performance was actually quite encouraging, just given the stimulus impact in the U.S. in the pcp being very difficult to cycle over. Any sort of color you guys can give around the exit run rate towards the back end of the quarter will be helpful. Any color there by any chance?

I'm going to put that in the nice try bucket, Anna. So no, we're not going to give live commentary on where we're at, at the moment. I will note that for the quarter, on an underlying basis, floating, we were 2% down year-on-year. So yes, we're quite close to neutral in terms of top line. As we said earlier, our revenue was largely in line with our internal expectations.

Got you. Okay. That's helpful. Last question for me. Just on the comments around organic and inorganic opportunities, is there any sort of color you guys can give around any direction, what you guys are looking at, how we should be thinking about it? That will be quite helpful.

Thanks, Anna. No, we think that we just wanted to be clear that it's something that we've talked about really for a year now. We wanted to reinforce that, yes, we have a very clear organic plan that we believe that can take us through to our medium-term aspirations, that's all aspects of our medium-term aspirations. And at the same time, though, of course, part of my job, part of the Board's job is to look for those other opportunities, those other inorganic opportunities that might accelerate the path of those aspirations or accelerate shareholder value. And that's what we continue to do.

Your next question comes from Tim Piper from UBS.

The fulfiller network, particularly in the U.S., as -- cost inflation, obviously, is a big topic. But has there been a significant increase in the available capacity across the fulfiller network in the U.S. after a lot of investment through COVID and then sort of demand has come off a bit more recently? Just thinking about in terms of absorption of cost inflation across that network.

Thanks, Tim. That's a good question. So in terms of inflation, we're continuing to see some small requests for cost increases come through inside of our fulfillment network, but nothing that's material and changes our position on gross profit margin. We do continue obviously to manage pretty tightly both our costing and pricing levers to make sure that margins end up where it needs to be. In terms of capacity of the network, that is perfectly fine at the moment. So as we've discussed in prior quarters, when we -- with our network being a seasonal business as we are, the network naturally has the capacity to flex because it has to flex over holidays anyway. So obviously, we're running in a nonholiday period. So capacity -- there's been no capacity concerns in our fulfillment network during the quarter.

Got it. Just secondly, about Etsy, I think it's a week ago or so, the sellers boycotted the platform. Did you see any change in the activity on the Redbubble or TeePublic site as that occurred, either positive or negative?

Thanks, Tim. It's Michael here. I think 2 things is, one, we do operate a slightly different business model to Etsy, where the way that we set up our services that we offer to artists is a much more aligned model where the artist sets the price, the artist sets their margin. We charge -- we're effectively -- our network, our platform charges all artists the same fee to help facilitate and then fulfill their transactions and fulfilling their products. So we have a slightly different model that we believe is highly aligned to artists. And we have -- so you don't hear us talk about things like take rates because that's not how our model works. In terms of seeing a change, we continue to see good new content and good new artist acquisition, no real change. But those areas have been reasonably strong for us over the past 12 months. And we have a different -- a somewhat different artist base relative to the broader Etsy base, which are much more makers and creators. We're obviously more focused on digital designers and digital artists.

Yes. Sure. I just thought with what was going on there, maybe the Redbubble platform would have seen maybe a bit of an uptick in either organic or paid sort of traffic coming your way. Has that occurred? So that's not the case?

Look, as I said, the Etsy platform is much -- yes, it's quite a broader platform than us in terms of their product base and their artist base. All of our artists and our content metrics during the quarter remained where we'd expect. And as I said, they've been pretty strong all the way through the past 12 months.

Okay. Got it. Sorry, just one last one on the marketing side. And I take your point around increased competition in a more subdued sort of demand environment. Just everyone, we all focus on Google. But maybe can you just quickly talk to some of the emerging or newer social channels out there and how you're approaching your marketing budget with respect to social?

Yes. Thanks, Tim. We'll talk just at a high level. We've been pretty clear that there's a variety of channels that we use for acquisitions. So yes, yes, the Google channels are important for us. But so too are a variety of other paid acquisition and a variety of other marketing channels. And the team works really hard at constantly optimizing across those channels. We had -- we did talk about in February that a lot of platforms saw with the ATT changes that attribution, particularly within those paid social channels, does -- has become more challenging in terms of the ability to look back and understand what is driving it to burst. So that just means that our team needs to work harder in terms of understanding what is applicable to those channels and make sure that we're still hitting all of our -- what we refer to as our ROAS targets, our return on ad spend. We still very much have our first transaction profitable goal that we have across all of our paid acquisition channels, including paid social. So clearly, those channels have been challenged over the past 7, 8, 9 months, particularly with the ATT changes. But as I said, they're important channels for us. We continue to add -- look for the new platforms and new channels and experiment into those as well.

Your next question comes from Aryan Norozi from Barrenjoey.

First one for me, just around cotton prices. I know this is short term, but it's -- there's a lot of sort of moving parts. So they're up around 70%, 80% this year on last year. To what extent has that been reflected in your numbers? Because you don't really run stock turn, so it should come through pretty quickly. And how do we think about that in terms of the impact over the next few quarters, please?

Yes. It's a great question. So as you rightfully point out, Redbubble has third parties on the network, and they're -- the third parties are the ones who effectively carry the blank stocks. So there's obviously quite a long supply chain that comes off the back of that. There has been obviously some talking about the impact of those cotton prices on things like T-shirt [ links ]. As I said earlier, we've only seen a couple of small requests for price increases come through to date. We do expect more to come through, though I will note, I've been saying that now for 6 months, and there's been nothing material yet. Most of our fulfillers do carry quite a few months of stock on hand and replenish relatively infrequently because of supply chain disruptions. So those changes do come through slowly. At the moment, we would not expect them to be having a material impact on our business. And as I said earlier, we still have pricing levers in our control as well should both cotton prices manifest into larger -- sorry, higher T-shirt like prices over time.

Perfect. And seasonally, the fourth quarter gross margin has been sort of 2-ish base...

Oh, sorry.

I think we lost him.

Pardon me, it seems that we have lost Aryan. Your next question comes from Owen Humphries from Canaccord.

Quick question. Just can you just provide a bit more color when you talk about organic and inorganic? I obviously understand what inorganic means. So the question about inorganic is, what do you perceive is the available cash that you guys could deploy?

Thanks, Owen. Look, I don't think we're going to answer that specific question to that degree. When we're looking at opportunities, clearly, understanding the different ways, the different types of opportunities, the different funding arrangements that might come with that are a fair consideration. But I don't think we're going to specify that there's an X amount of dollars in -- to that degree of specificity.

You must have a minimum amount of cash you've got on your balance sheet at any given time. I imagine there's $30 million to $50 million. Is that -- how do you guys think about that?

Yes. So I mean, once again, don't want to get drawn into specifics, Owen, that -- as most on the call are aware, Redbubble is a pretty working capital-light business, obviously, with the way that our economics work with customer purchases flowing directly to us on the day of selling. And artists, they're seeing money like the other Marketplace participants. And when you combine that model with the amount of cash that we've got on the balance sheet, it's not hard to come up with a range of what the available cash would actually be. But we're very comfortable with having that cash on the balance sheet at the moment. Hopefully, that's all for organic purposes.

And when you say organic, is that excluding capital management initiatives?

Such as?

Well, we're talking about inorganic, so the gross profit of your multiple in your business is 1x. I don't think you'll find that elsewhere, I would imagine. I'm just wondering why you wouldn't engage given the balance sheet and engage a buyback and be -- when you say organic, is that -- are you just talking about your current OpEx base being what it is or further investments in your OpEx base for new product lines?

Yes. Thanks for the actual color. So when we're talking organic, we're talking all the things that we wish to do to be able to achieve our midterm aspirations. And so you will have heard Mike speak quite consistently over the last 6 months about brand spend and how that might be coming in FY '23. So that still remains an option. Obviously, there's no brand spend in our financials at the moment. So that would represent an organic investment. Obviously, what we're going to continue to do is be very prudent and monitor the macro environment. As we said, there is signs of general consumer weakness that we see that across the board in e-commerce at the moment, and it's quite a volatile environment generally from a macro perspective. So we're going to continue to monitor that. So there's also prudent reasons to hold the cash in terms of headwinds in the macro environment. But then also, as we go through the next period from an economic perspective, I agree with what you're saying now in terms of relative valuation, but that can also change very quickly.

Yes. And Michael, in the past, you talked about building more of a Redbubble brand. I know the unprompted brand awareness of Redbubble is extremely low. I'm just wondering, you guys were thinking about putting forward an initiative during this year. Has that changed in terms of the quantum? Or is that something that you are thinking about in FY '23?

Yes. Thanks, Owen. Yes, exactly as you just said. Absolutely, we've talked about, we believe, the importance of building both of our brands. Both businesses continue to work on their planning around that. We haven't -- obviously, we haven't pushed the button on that part of that. That would be part of our FY '23 planning process. But when we talk about a variety of organic opportunities, clearly, you can see the investment going into our people capacity at the moment. Part of the investment that we really -- we think that is really important is building our brand. So that investment will come at the appropriate time. But our current plan is that would be during FY '23. But we're yet to go through our FY '23 budget cycle, which would confirm that.

And then -- okay. Great. And then the last question, just around the medium-term aspirations, which the market obviously doesn't believe at the moment. But I noticed you guys didn't talk about your expected margin profile. Has that changed? Or is that just -- you've just kind of kept the top line growth expectations there?

No. Absolutely. Thanks for asking your question. No, absolutely no change. Maybe -- apologies. We just -- remember last time, we didn't mention it at all, and we were asked. Does that mean we're moving away from it? No, we haven't moved away from it at all. Our top line and right through the P&L, we believe that if we can achieve that scale, our previous EBITDA margins of 13% to 18% are absolutely achievable at that level of scale. At $1.5 billion GTV, at $1.25 billion of Marketplace revenue, those -- we are very confident those margins are achievable at that level of scale. Our challenge, our opportunity is to get to that level of scale. That's what we need to do. That's why the investment is going into our platforms, into our people. That's why our investment is going to our brands. Again, just to be really clear, we just didn't want to throw out the whole release and go through every line in the P&L. But no, to be really clear, no change in any aspect of our medium-term aspirations. So thank you for asking the question.

I think I'll just add a point. Just completely for the avoidance of doubt, obviously, this is a quarterly update focused on the quarterly and year-to-date financials, which is why we didn't go line by line through that. If we are going to move away from our midterm aspirations, any of them, we will say so at the time. If we have not said anything, it is that they're still intact. They're intact until we say or if we are to say otherwise. So we should...

We shouldn't...

We're [ trying ] on that basis.

Yes. No, appreciate you asking. Thank you. Yes, best to avoid any confusion. So thank you.

And one last very quick question. Historically, the fourth quarter has seen a little bit of seasonality to the upside versus the third quarter, excluding that -- obviously, the big pickup in the second quarter. Is there any change in expectations that the seasonality will be experienced in the fourth quarter?

Yes. We're not going to give any guidance specifically on the quarter. But obviously, we've given per quarter year-to-date, and we're reiterating the full year, which only has 1 quarter left. So we can mathematically work out what the fourth quarter should be in order to be able to achieve those guidance numbers.

Because consensus -- I'm just thinking, when you say slightly below, what does the quantum of slightly mean? Are we talking about 2% or 10%?

Well, slightly, we're not going to give anything more than slightly below. That slightly below $497 million, like there's only a range you can come up that's slightly below that. So I'm going to leave that to you, but it's slightly below. And once again, given we've got third quarter in at $384 million, like you can look at historically what fourth quarter does and what the current trajectory of the business is. And you'll come down to a relatively narrow range.

Your next question comes from Mike Younger from Prime Value.

I just wanted to clarify when you're talking at -- looking at closing the valuation gap that you perceive, is that on the inorganic side only looking at outward opportunities? Or are you also looking at the potential to realize value from inward opportunities?

Thanks, Mike. I mean, as you expect from all -- from any Board or management, we have to look at all opportunities, and we will absolutely proactively investigate a range of opportunities that might provide value for all stakeholders across the business.

[Operator Instructions] Your next question is a follow-up from Aryan Norozi from Barrenjoey.

Sorry, apologies. I got cut out. Just 2 more for me, please. Just around the customer acquisition cost backdrop. I mean, you obviously mentioned that you saw some level of improvement, I think, last half early into this quarter, but that sort of still remained elevated. Can you just give us an idea around how you're thinking about that, particularly with respect to Google's cookie changes in 2023? And then how should we expect -- would that be another step-up in tax over the next sort of 12, 24 months, please?

I'll talk to the second part, and Emma will talk specifically about the quarter. Look, in terms of the cookie deprecations, that's obviously something that the industry is aware of and coming. And you can imagine that there's a lot of work both internally for us here at Redbubble but also right across the industry to work through that. So I think that, that is -- given that has been flagged well in advance, there's plenty of opportunities for the industry to work through what that means and adjust. Whether that causes another step-up, I'm not sure, to be honest. As I said, there is a lot of work and a lot of new tech coming through to adjust to those changes. And both ourselves and the whole industry does have a period of time to adjust to those changes. And in terms of during the quarter, I'm going to let Emma talk to that a little bit.

Yes. And it's one of the challenges in talking intraquarter because obviously, we came out and did the half year results and talked to those briefly in January. And then February again, everyone kept asking us at the time what's happening with tax this week, today, tomorrow. And I keep saying that they will be volatile. And I know everyone hates hearing that, but that is actually true. And so even over the quarter's results that we are reporting, there was volatility in that line. So at various points during the quarter, tax was actually low. Competition was decreased, and organic demand was strong. And in other points in the quarter, that wasn't the case. And certainly, it wouldn't come as a surprise to anyone on the call to know that fuel prices have gone up. We've got the war announced in March. Consumer demand during that March period was a little bit more subdued, but it does change quite frequently from day to day and from week to week.

Perfect. And just a clarification, you mentioned 2% for the fourth quarter in an earlier question. Could you please clarify what you're talking to? Are you saying that the fourth quarter to date is up 2%? Sorry, I missed that bit.

No. No. No. Thank you for the opportunity to clarify. No comment on current quarter to date. That was in response to Anna's question about the revenue performance that wasn't in line with our expectations from an underlying perspective, what was it doing. And so the answer I was giving was that for the third quarter on an underlying basis, which excludes Marketplace on a paid basis, it was a negative 2% growth rate year-on-year from a -- on a floating basis.

Perfect. And sorry, last one, just around the hiring pace. I mean, how far through that hiring process are you? So do you expect to be full by the end of this quarter? Like can you just give us an idea on how many full-time heads you expect to employ over the next sort of 3, 6, 9, 12 months, please, just so we can get an idea on that pipeline?

Yes. Thanks, Aryan. Appreciate it. So there's a couple of things. One, we still have a number of vacancies, particularly in the Redbubble business. We have still a number of those vacancies with some of the contractor staff, so on medium-term contracts. That's been a real help to us this calendar year in terms of giving us some of that capacity to get moving on some of these opportunities. What that does come at, though, is a bit more of a run rate. They're obviously more expensive resources than that permanent FTEs. So part of our challenge is both to increase our total number of staff, but also over the next 3 to 6 months, to be rolling off some of those contractors into FTEs, which is a challenge for our talent team to be doing both, but also actually brings down the run rate that we're experiencing. So we still have a bit of work to do on the talent side. We're not putting out the exact target because of these 2 issues. You can imagine, this depends on who's the exact person that's being recruited. Are they filling one of our vacancies? Or are they rolling in for a role currently filled as a contractor? Our FTE number would, therefore, be the same. But obviously, the cost goes down in that scenario versus if it's a vacancy, the cost goes up. So I'm sorry, I'm not giving you an exact answer, but there's quite a few moving parts at the moment in the talent space.

Yes. I think I would just add to that, that -- because we've been asked this question consistently before, particularly around the operating expense investment, we are not at the moment planning to do another big step-up in operating expenses in the next financial period. That being said, as we've progressively built up our operating expense base during this financial year period, we go through the gate at the 30th of June at a certain run rate. And so obviously, it's that run rate that matters. And so next year will be higher than this year just based solely off the run rate. But we're closer to the end of the hiring than we are at the start, I think it would be safe to say.

There are no further questions at this time. I'll now hand back to Mr. Ilczynski for closing remarks.

I just want to say thank you all for joining us today. We very much appreciate the questions. I also want to take this moment to acknowledge Louise Lambeth. She's been our Head of IR, had been with Redbubble for almost 5 years. Louise is, unfortunately, leaving us soon to go into a wonderful new opportunity. And so I just want to add -- so this is her last Investor Relations call with us. And I just want to take this moment to acknowledge and thank Louise for all the work she's done with all of our business. And thank you all for talking to us. We look forward to talking to a number of you over the coming days.

That does conclude our conference for today. Thank you for participating. You may now disconnect.