Articore Group Limited (ATG) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Redbubble Limited FY '22 Results Conference Call. [Operator Instructions] I would now like to turn the conference over to your speakers. Please go ahead.

Good morning, everyone, and welcome here in Australia, and good afternoon and evening to our Northern hemisphere investors. My name is Peter Kopanidis, I'm responsible for Investor Relations at Redbubble. Welcome to this investor call following the release of our FY '22 full year results and reports provided earlier today. With me today, I have the Redbubble CEO, Michael Ilczynski, and CFO, Emma Clark. As well as our full year results and reports, the key information for today's update is contained in the ASX announcement and the investor presentation also released to the market this morning. Please note that unless stated otherwise, the financial results have now been subject to audit review. Strategic and operational metrics are from internal management reports and have not been subject to audit review. Mike and Emma will speak shortly, and we'll then open up the lines for questions at the conclusion of their presentations. 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. With that, I'll now pass on to Mike.

Hello, everyone. Thank you for joining us today, where we will go through the Redbubble Group FY '22 results. Overall, FY '22 has been a year of challenge and transition for the group. Coming out of quarter 4, I feel encouraged and excited about how we are performing and positioned. The group has undoubtedly faced the challenges of reduction in the sales of masks, homewares and artwork, that have all reduced from their COVID-driven FY '21 highs. At the same time, increased competition in digital marketing channels and the impact of ATT changes have driven up paid customer acquisition costs. And consumers have had to face record high inflation and the invasion of Ukraine. Within this context, the group internally has undergone significant transition, with over 140 new team members and 5 new executives in the past 12 months. We have been clear and committed to our strategy of internal investments to develop platforms and processes required to improve the artist and customer experience. This disciplined approach to building internal capacity and capability is required to return the group to growth and achieve our medium-term aspirations. Despite a much more challenging macro and geopolitical environment over the past 6 months than we or anyone anticipated, we have delivered FY '22 results in line with the guidance we provided back in early January. Encouragingly, the group delivered positive growth for the year in our core apparel category, which represents almost 60% of gross transaction value. The growth in apparel was particularly strong in quarter 4, driven by a strong quarter from the TeePublic business. We saw the whole group report positive year-on-year growth on a floating currency basis in quarter 4 as well as quarter 4 being up almost 2% on quarter 3 compared to last year, where quarter 4 was down almost 10% on Q3. These outcomes demonstrate the resilience and ongoing appeal of our marketplaces, and importantly, the improving operating and financial momentum of the group over the last few months of the year. The group has invested substantially in our capabilities in order to improve the artist and customer experiences, to drive loyalty and retention, and we're beginning to see the positive impact of this investment. As such, we will continue with our strategy to deliver further improvements in FY '23 and excitingly start investing in our brands to drive additional awareness and sustainably grow our businesses over the medium and long term. Given our bottom line outcome, we are not at all satisfied with our results for the year, but we are encouraged by the improvement and momentum we are starting to see, the quality and capability of the people we have added to the group through the investments we have made and the genuine uniqueness of the scale and potential of our marketplaces. I'll turn now to the summary of our FY '22 financial results. Our gross transaction value was $630 million, and we achieved a marketplace revenue of $483 million. Adjusting for the impact of mask sales and delivery date adjustments, our underlying revenue was down 2.6% year-on-year to $472 million. Gross profit of $183 million was down 18% versus FY '21. And a 2-year view, which looks through the benefit of mask sales in FY '21, gross profit was up 36%. EBITDA was negative $11.2 million. This reflects the significant increase in OpEx during the year as the business invested in building internal capacity and capability. Our cash balance of $89 million as of 30 June remains strong and continues to provide us with operational and investment flexibility, and Emma will cover our financial results in more detail later in the presentation. Moving to Slide 4. We are continuing to execute against our 4 key strategic themes. There has been no change to our foundational pillars upon which we can build and scale to our next phase of growth. I'll talk about -- I'll talk through progress against these 4 themes over the next few slides. For this year, we've also included our 2 enablers, business enablement and risk mitigation. These enablers have been in place since we first shared our 4 strategic themes. Business enablement is a particular focus on our core technology platforms and processes, modernizing and enhancing them to ensure the scalability and reliability of our platforms and to enable more rapid future progress against our strategic themes. There is a significant proportion of our engineering capacity currently dedicated to this enabler. Risk mitigation includes areas such as compliance and regulatory testing and products manufactured by the third-party fulfillment network as well as development of our ESG strategy, which we have set out in some detail in our annual report, which we also released today. So Slide 5, starting with the artist activation engagement theme. This slide is a really important chart for us as a business. The slide on artist activation engagement reinforces that we continue to see new artists join the platform and make sales and existing artists to sell more works. In FY '22, 68% of marketplace revenue was generated by artists who have been on the platform for over a year. This metric has been pretty steady and demonstrates the long-term recurring annuity value that artists and their content earn and bring to the marketplace. This combination of new artists bringing fresh, relevant content to the marketplace and existing artists continuing to make many -- to make sales many years after joining demonstrates the ongoing compounding nature of sales and growth that our platforms can and do generate. On Slide 6, Redbubble Group is continuing to unlock opportunities for artists by connecting them with customers on a global scale. Our investments enabled initiatives aimed at driving artist engagement this year included expanding the physical product range that artists can sell through, sending targeted messages to segmented artists encouraging them to upload new content to the platform for customers to purchase, and through the Redbubble fan art partnership, legendary entertainment empowered artists around the world to express their unique fan and while reaching a new customer base to sell licensed fan art for the critically acclaimed and Oscar winning movie Dune. On Slide 7, the Redbubble Marketplace continues to attract new content. This slide demonstrates the strong increase we have seen in content uploaded over the past couple of years. Given this ongoing influx of new content, in order to ensure marketplace integrity, a key area of investment for us has been in our content operations and integrity teams. We have scaled the number of people in this area by 11x in the past few years enabling a 13x increase in the number of works reviewed. This investment in content operation clearly comes at a cost. This area represents approximately 8% of our OpEx base for the Redbubble business. In quarter 4, we launched an initial implementation of a new image detection technology. This important investment of both people and technology will enhance our capabilities and enable us to scale in a much more effective and efficient manner as our marketplace continues to grow. Moving to Slide 8 that covers user acquisition and transaction optimization. The tens of millions of designs that artists have on our platforms translate into billions of individual product listings for consumers to buy. This extremely long tail of content and product listings provide significant advantages for attracting customers in the digital environment. On a last click basis, organic and unpaid channels remain the source of the majority of marketplace revenue, 60% in FY '22 in line with the prior year. The marketplaces are aggregators of demand on behalf of artists. In FY '22, there were 8.3 million unique customers across the group, with unique customer numbers growing at a CAGR of 20% since FY '18. Moving to Slide 9, developing a culture and process of targeted experimentation across the business continues to be a key aspect of enabling us to achieve our long-term -- longer-term potential. This remains an ongoing focus area as we continue to make investments and experiment across the customer transaction line. We've included some examples of these experiments on this slide, including leveraging our new customer data platform to drive improvements to audience targeting and creative strategy, both designed to increase users to Redbubble through social channels and improved promotional experiences in the Redbubble native apps. Pleasingly, our average order value, AOV, was up 9% in the fourth quarter and up 5% versus FY '21. This was driven by a combination of the May price rise and initiatives which built order value, such as bundling incentives and free shipping tests, which involve a threshold over which shipping is free. We are encouraged by the traction the teams are starting to get in this area. We still have a lot of work to do and a lot of opportunity right through the transaction funnel, and the teams will continue to experiment and improve. On Slide 10, as I mentioned in the opening, consistent with our strategic priorities, during FY '22, we invested significantly in additional people to boost our internal capabilities. In the second half, this was particularly within the product and engineering teams in the redbubble.com business. They are focused on improving both our technical foundations and the artists and customer experience. Some examples of how this investment is leading to improvements in the customer experience includes the launch of branded dynamic product ads, particularly on social channels where the products presented are dynamically created depending on the customers' behavior, improved promotional experience that has increased promotion take-up and therefore overall sales in our native apps, and the launch of buy now, pay later option to check out providing additional payment options for consumers that have helped both checkout conversion and AOV. Moving to Slide 11. The mobile customer experience remains crucial, with 60% of MPR on the platform now occurring on a mobile device. This is up from 58% in the first half. We have spoken consistently about our apps, and they continue to be an important element of our long-term strategy, being both the user acquisition and importantly, a loyalty plan. 15% of the Redbubble Marketplace sales were generated by iOS and Android apps in FY '22. The iOS app retains a very high rating of 4.5 stars, and we continue to see stronger engagement and retention from customers who use our apps. Increasing the proportion of customers installing and using apps will be an increasing focus over the years ahead. On Slide 12, Redbubble's membership base is substantial. During FY '22, there were 14.4 million active members, down 7% on FY '21, however, up 32% versus FY '20. Being a member means that the customer has a Redbubble account and use this to log in, browse and purchase on the Redbubble Marketplace. We define a subsection of these as active members, who are unique members who visited either the web or app platforms while logged in at least once during the period. Of the 14.4 million active members in FY '22, 12% went on to make a purchase during the period. Converting more members to active members and then more active members who are on the platform to purchasing customers represents a significant opportunity for the business. Pleasingly, when a member does purchase, they're much more likely to make subsequent purchases relative to nonmembers and the increased frequency leads to a higher average annual order value. There is ample opportunity for us to continue to build our membership program over time, which will result in more users becoming active members and more active members purchasing. Moving to Slide 13. Purchases by repeat customers made up 46% of marketplace revenue in FY '22 across the 2 businesses. This is up from 45% for half and 42% in FY '21. As we did at the half year results, we have broken down the repeat purchases into existing and reactivated customers. Existing customers contributed $160 million to FY '22 revenue. These're customers who made a previous purchase in the prior 12-month period and this period. Reactivating customers contributed $62 million of revenue and these're customers who made a previous purchase more than 12 months ago, who came back to purchase during the year. At our first half results, we noted the increased competition in online channels as both online and traditional retailers increased digital spend and ATT changes impacted the effectiveness of some channels and further pushed up spending on others. The result was an increase in CAC, customer acquisition cost. And given our focus on profitable acquisition, it impacted the volume of new customers we acquired. This can be seen in the contraction of new customers with revenue contribution from this group of $260 million for the year, down from the $321 million in FY '21. We know that FY '21 also included a large volume of customer demand in masks. CAC still remain elevated. However, they have stabilized. Our response has been twofold. First, we continue to focus on diversifying both our paid and unpaid customer acquisition channels. And secondly, our focus on retaining new customers through dedicated retention activities and a variety of loyalty experiments. The chart demonstrates that we are making progress in both businesses in growing revenue from repeat customers, and believe there is still significant upside for us in increasing royalty over the short and medium term. It's a validation that our focus on better customer understanding and loyalty is of high potential, while we also continue to work to develop new diversified customer acquisition channels. Moving to Slide 14. Thus far, we have been able to remain relatively insulated against the well-publicized global supply chain pressures that continue during FY '22. This is in large part a specific feature of our business model. The make on-demand model, coupled with diversified third-party network of fulfillers means that Redbubble does not hold inventory. Goods are only manufactured when a customer order is placed and product inputs help involved in advance of demand by the fulfillers. Investments into our supply chain logistics and operations teams during the financial year have enabled us to achieve improvement in the delivery experience and product quality for artists and customers. Some examples of these positive progress are that average days to ship decreased by 28% in the second half compared to the first half, the on-site delivery time estimates were reduced from 91 products by between 1 to 5 days, and we reduced the defect rate for stickers by 26% in the first half compared -- in the second half compared to the first half. The group also continued to focus on localizing products at existing facilities during the year, particularly in the TeePublic marketplace, where 18 products were localized into existing third-party Australian and Canadian fulfiller sites. Increased localization has multiple benefits, including reduced shipping costs to customers, lower transit times and improved sustainability as well as strengthening the resilience of the entire network by adding optionality and redundancy. On Slide 15, our teams have continued to deliver new product launches, line extensions and visual merchandising improvements in FY '22. These drove tangible commercial outcomes, including incremental sales and conversion gains. We achieved $5.3 million of sales in FY '23 -- in FY '22 from product launches, including mouse pads and caps and $6.1 million from line extensions across apparel, stationery and device cases. During the second half, we also added line extensions to a range of T-shirts, phone cases and mouse pads. On Slide 16, as I flagged that we would during our first half results, we launched a new pet category in June. This will help the group gain access to new addressable markets by expanding the existing product portfolio into new areas of rising demand amongst our core audience. The new products include pet blankets, pet mats shaped for cats and dogs and bandanas with further extensions to this category to come over time. In the next section, I'll recap on the group's unit economics and outline the exciting brand investment program we have planned for FY '23. So moving to Slide 18. Redbubble Group unit economics remain compelling, and we took some proactive actions in the second half to further solidify them. Pricing actions were implemented in early May via an average 6% increase to base prices, and this is in recognition of expected higher cost of doing business and to enable a continued focus on lowering shipping margins. Our experience post the price rise has been encouraging with negligible impact on conversion and higher AOV. For the fourth quarter, we achieved a gross profit margin of 39.7%, which was down 50 basis points versus PCP, but up 220 basis points versus the third quarter. Our fourth quarter GPAPA contribution margin was 23%, and this was up 160 basis points versus the third quarter. Our logistics and supply chain teams were able to successfully renegotiate improved shipping agreements in the U.S., Canada and the U.K., and we will continue to see the financial benefits from these improved agreements in FY '23. Moving to Slide 19. Slide 19 reiterates the ongoing positive unit economics for the group. This is a critical point. It is why we have invested in our teams and why we will now begin investing in our brands, to drive growth at the top line. Every dollar of revenue has a positive contribution margin, and that is why our focus now is all about driving efficient scale. In addition to the 6% average base price rise, in early May, the Redbubble business implemented a free shipping trial in the U.K. to purchases over GBP 50. Our experience from this trial has resulted in a larger shopping basket, with increased marketplace revenue offsetting the shipping cost and growth in gross profit dollars versus the preceding month. In July, we also launched a free shipping trial in the U.S. for purchases greater than the USD 65 on redbubble.com. Both of these free shipping trials remain in place today and are aligned with our strategy of reducing shipping costs to customers and replacing shipping margin dollars with product margin dollars. So moving to Slide 20. As per our strategic themes, we have previously flagged the need to build our brands. This is a core strategic priority to build a deeper understanding with customers of our proposition to increase the effectiveness of both paid and unpaid acquisition channels and to improve customer loyalty and repeat purchases. We believe that the time is now right to begin investing in the Redbubble brand. As I've mentioned, we have invested in our internal capacity and capability, and we are now improving the artist and customer experiences to drive loyalty and retention and to ensure sustainable growth. Building awareness of our brand is one of the untapped long-term growth opportunities for both businesses. With these investments, we are aiming to grow awareness in our unique value proposition and core platform offering with messaging we have developed through learnings over the last financial year. Redbubble is creatively inspired commerce. Redbubble enables self-expression for customers through a breadth and depth of content powered by the largest independent artist marketplace. Redbubble enables economic empowerment for artists, enabling artists to turn their passion into profits. And Redbubble is confident commerce through building a trusted experience for all marketplace participants. On Slide 21, our awareness efforts will focus on attracting and retaining the Gen Z audience, that is people aged 10 to 25 today. For the Redbubble brand, we know and have reaffirmed that Gen Z is the core growth audience who already engaged the most with the brand. We also know that there is ample opportunity for growth with this audience. For FY '23, we will evolve our on- and off-platform experience that better meet the expectations of Gen Z, which you can start to see through the merchandising experience of this year's product launches on Redbubble, bucket hats being a clear example, and on-site improvements, such as offering buy now, pay later options, of which Gen Z is the largest generation to use. On Slide 22. So for FY '22, we did a large amount of work to understand who the customers are and our starting point. We know that it takes time to build a brand. And in FY '23, we will commence our investment in building awareness of Redbubble. Our execution plan for the year is grounded in learning, what creative the media mix approach grows awareness in key U.S. cities with Gen Z? Successful learnings will be scaled into new types of media and additional U.S. cities. We've selected a strong agency partner to work with us on this, and Emma will outline the quantum of investment we intend to make. And so moving to Slide 23. Before I hand over to Emma to run through the financials, I just want to take a moment to offer our support to the people of Ukraine and to thank the Redbubble and TeePublic community for the way they have so greatly and significantly demonstrated their support also. This response really highlights the power of our platform to enable a meaningful response to invest that impact our communities and world. It shows how Redbubble moves at the speed of culture. That is, artists to respond immediately when cultural moments happen, uploading content onto the platform, enabling customers to purchase their products and express themselves, express their feelings and express their support. As a company, we enacted our global event policy, which means we will not take profits from these works and instead seek to donate them. We selected 2 charities to donate, to develop landing pages, to promote the works by Ukrainian artists and works in support of Ukraine. And we promoted those on sites through e-mail and off-site through both paid and owned channels. To date, we have had over $1 million in gross sales. We have donated $170,000 to charities and artists have generated $150,000 in earnings. I'm incredibly proud of the Redbubble community and the Redbubble and TeePublic teams for the way that they have rallied to support the people of Ukraine. I'll now hand over to Emma to run through the financial performance to FY '22.

Thanks, Mike, and hello to everyone. I will now walk you through the income statement on Slide 25. I won't go through every line item, but I did want to take the opportunity to call out both the improved fourth quarter operating performance as well as the full year results. In the fourth quarter versus the prior comparative period, marketplace revenue was up 1% to $98.2 million and gross profit of $39 million was flat. Mask sales were down $2.5 million to $500,000. Gross profit margin was down 50 basis points to 39.7%. Paid acquisition costs were up $3.5 million and operating expenses, excluding the $1.1 million of brand spend, were up $6.5 million or 28%, reflecting the investment in internal capacity across the business that Mike has already talked to. Versus the third quarter, operating performance improved in the fourth quarter. Marketplace revenue and gross profit were up 1.9% and 7.9%, respectively. Gross profit margin was up 220 basis points to 39.7% and GPAPA margin was up 160 basis points to 23%. For the full year, reported marketplace revenue was down 13% or $70.7 million versus the prior year. I will step through the bridge to underlying marketplace revenue on the next slide. Gross profit was $183.1 million, down 18%, TeePublic was $106.7 million, down 30%. Operating expenses, once again, excluding the $1.1 million of brand spend were up 23% to $109.3 million. I will cover this step up in more detail shortly. And finally, the EBITDA outcome for the year was a loss of $11.2 million. Moving on to Slide 26. Given the quantum of mask contributions and delivery date adjustments recorded in the prior year, we have been transparently bridging reported figures to the underlying numbers. The delivery date adjustment added $13 million in the prior year and masks also contributed $55 million of marketplace revenue in FY '21. In the current year, the delivery date adjustment was only $260,000 and masks contributed $10 million. Adjusting for these 2 factors, FY '22 underlying marketplace revenue growth was down 2.6% or $13 million year-on-year, 4.3% on a constant currency basis. Looking over the longer term, FY '22 marketplace revenue was 38% higher than FY '20. On to Slide 27. Consistent with our previous commentary, this is a business that needs to be assessed over the longer term. As whilst there has been volatility quarter-to-quarter, the longer-term growth rate since the business commenced in 2007 have been consistently high. Marketplace revenue has grown at a compound annual growth rate of 27% since FY '18 with a corresponding CAGR of 30% at the gross profit line and a CAGR of 23% for gross profit after paid acquisition. I'd like to focus specifically in on the GPAPA result. Back in April, at our third quarter results, we detailed how one of the factors impacting the results was increased competition that had a flow-on effect to organic, which is largely unpaid demand. We responded to these changes in the landscape by increasing total paid acquisition spend and have continued spending at this level. These actions across both marketplaces have positively impacted our revenue results, but at a lower contribution margin with the fourth quarter GPAPA margin down 390 basis points to 23% versus the prior year. However, as I referenced earlier, the fourth quarter GPAPA margin was up 160 basis points versus the third quarter, which was driven by a 220-basis-point increase in gross margin, which is largely the impact of the May price rise that Mike spoke to earlier. I would also like to reiterate that we maintained our first transaction profitability hurdle. So whilst paid acquisition remains elevated, it also remains profitable. Increasing scale will help to drive further gross profit and GPAPA improvements. During COVID, we have already shown the ability to deliver strong returns when the business step changes at scale, and we are not in an investment phase. Moving to Slide 28. Redbubble is a truly global business and our multiregional footprint is a key strength. North America continues to be our largest region at 69% of total platform sales and on a 2-year basis, which has grown 33%. Australia and New Zealand provided a source of positive year-on-year growth, up 4% as lockdowns continue to occur intermittently during FY '22. Since FY '20, Australia and New Zealand are up 63%. On Slide 29, you can see that there are a diverse range of physical products available on the marketplaces and this broad mix of lifestyle categories has enabled artists to maximize their selling opportunities as consumer needs and preferences have continuously shifted over the past 2 years. During the peak of the pandemic, categories such as accessories, which includes face masks as well as homewares and wall art performed exceptionally well. However, they have all faced a stronger year-on-year decline as they cycle those COVID comparatives. During FY '22, we were pleased to see other apparel and T-shirts, which is the group's largest product category contribute positive year-on-year growth. Importantly, T-shirts and other apparel were also up in the fourth quarter versus prior year, up 20% and 5%, respectively. Stationery and stickers were also up by 2% in the fourth quarter. These results highlight the importance of continuing to have a diversified physical product offering on the marketplaces. And as Mike talked through earlier, we continue to invest in both expanding the products available as well as improving the life cycle appeal of existing products. On to Slide 30. Our cash position remains strong. As at the 30th of June, we had $89 million cash at bank. This continues to provide us the flexibility to invest into our future business growth and for the prudent management of our working capital needs. There are also a couple of other balance sheet-related items that are worth mentioning. As some of you would be aware, we had $48 million of off balance sheet tax losses. These losses are available to offset future taxes payable. And as we have previously discussed, Redbubble is required to recognize revenue upon delivery of goods rather than when the customer has paid for the order. This results in revenue being deferred to the balance sheet. As at year-end, this was $13 million. Moving to Slide 31. Given the internal investments we have made, we thought it was important to set out the step-up in our OpEx spend in FY '22 and also provide a delta forecast range for FY '23. Our total OpEx increased by $22 million in FY '22 to $110 million. This includes $1.1 million of brand spend that we incurred in the fourth quarter. The largest driver of the OpEx increase was salary and wages, up $12 million, increasing from $58 million in FY '21 to $70 million in FY '22. In FY '22, we had an increase of 99 approved FTEs to 429. This is a 30% increase versus FY '21. For FY '23, we expect our FTE growth to slow substantially from the 30% increase in FY '22 to approximately 4%. We expect our monthly salary and wages expense to increase to a range of $7 million to $7.4 million per month for FY '23, noting that the actual number will depend on the timing and start date of the new roles. This final step-up in salary and wages equates to a range of $14 million to $18 million for FY '23 as the full year run rate of the FY '22 hiring is embedded and the remaining 46 vacancies are filled. Our FY '23 Redbubble brand investment is a 12-month program with a range of spend in the order of $8 million to $12 million for the year. Thank you, and I will now hand back over to Mike.

Thanks, Emma. Moving to Slide 33. I've presented this slide previously, but I wanted to take an opportunity to revisit the unique aspects of the Redbubble business model and specifically how we create value. Redbubble and TeePublic are large-scale, difficult-to-replicate 3-sided marketplaces. 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 monetize their creativity and sell to millions of their customers globally at very little risk to them. The marketplaces connect artists and creators to a third-party on-demand fulfillment network that enables neither the artists or the marketplaces to need to carry inventory or warehousing cost and risks as well as being highly scalable and capital light for the group. These millions of artists provide a large-scale, highly dynamic and deep source of content and they create a massive constantly evolving catalog of content and product listings. Redbubble Group's core role is to aggregate and enable consumer demand for artists by utilizing these enormous product content library across organic and paid channels. When the artists sell an item to a customer, it is fulfilled and shipped on demand directly from the third-party network. Our business model, therefore, enables effectively infinite product listings, each of which, if and when purchased, has a positive contribution margin for the marketplaces. Importantly, we've made solid progress to improve the underlying operational performance of the group and solidify these strong unit economics. The artists and their content, their customers and the third-party fulfillment network form genuinely unique 3-sided marketplaces, and we are focused on driving the flywheel effects to build scale, efficiency and growth, profitability. On Slide 34, we have previously shared our medium-term strategic plan based upon our high potential growth levers. These initiatives will be phased over the next 4 to 5 years and has been ordered to give us the best chance of maximizing our returns on investment. This slide sets out our current and medium-term growth levers for the period of financial year '23 to '25 and then beyond financial year '25. While we continue to work on improving our foundation in some areas, in other areas, we are now moving into the second phase of earning growth through disciplined investment. In FY '23, this includes commencing investment in the Redbubble brand as I described earlier and a continued focus on gaining efficiencies across the fulfillment network as we scale. So Slide 35, we shared our medium-term aspirations to reach $1.5 billion in gross transaction value and $250 million in annual artist earnings in April last year. We remain committed to these aspirations, and we continue to believe that the margin profile presented with these aspirations is achievable at that level of scale. In recognition of our current position, the progress we are making against our strategic priorities and the challenges faced by the group to replace the $55 million of mask sales in FY '21, we have updated and clarified our time frame for these aspirations to the 2-year period from FY '26 to FY '27. So moving to Slide 36. To reiterate, when we achieve this level of scale, which includes growing marketplace revenue in line with our historic CAGR of between 20% and 30%, we remain confident that this level of profitability is achievable. Our aspirations are for the group to be 2.5x larger from [indiscernible] and marketplace revenue perspective than it is today. And at that scale, we are confident in the operating leverage achievable and that, that will enable us to produce EBITDA margins in the medium term of 13% to 18%. So moving now to our FY '23 outlook on Slide 37. Revenue growth is expected in FY '23 with the benefit of one-off mask sales in FY '21 of approximately $55 million now largely fully cycled. Redbubble unit economics to remain compelling, supported by the 6% average base price rise from early May '22 and with 60% of marketplace revenue from unpaid sources on a last click attribution basis. Our forecast FY '23 OpEx reflects the following: a slowing of new roles in FY '23, down to 4% from 30% growth in FY '22. FY '23 forecast FTE salaries and wages, average run rate is between $7 million to $7.4 million per month, an increase of between approximately $14 million to $18 million for the year, and FY '23 forecast Redbubble brand investment of approximately $8 million to $12 million at constant currency to build awareness that reinforces the path to our medium-term aspirations. That concludes our presentation. Thank you very much for listening, and we will now open up the line for questions.

[Operator Instructions] We have our first question from the line of Owen Humphries with Canaccord.

I guess, yes. Could you just maybe describe what the constant -- I guess, can you just highlight what the constant currency growth was for the fourth quarter from a revenue perspective? We just couldn't see it.

Yes. thanks, Owen. It should be on the first page of the release, the constant currency marketplace revenue was down 4% quarter 4 versus quarter 4 of last year. Was that the question you're asking?

Yes, that's right. Good one. So that -- and just talking through the price rises of 6% in May, how much of that will fall through to gross profit margins of, call it, FY '23? Are we expecting a 6% uplift in margins? I am guessing not, but just how much of that will fall through of that 6%?

So thanks, Owen, great question. So as we called out in our speaking notes just previously, the fourth quarter results had a 220 basis point increase in gross profit margin. That was largely the impact of those 6% price increases falling through. So you can effectively factor that in. Obviously, as Mike said, there will be increased cost of doing business coming through in the future. We don't know to what order of magnitude those will come through, but we will continue to monitor pricing and take action to keep our unit economics and GPAPA level pretty consistent.

Good one. Okay. And just noted last quarter, you guys talked about strategic corporate initiatives to extract value to shareholders. I noticed it wasn't reiterated in this release. Can you maybe talk through what was taken, and is that now updated?

Look, thanks, Owen. There's no change in our focus. Obviously, it's core responsibility of management and the Board to continue to look at all opportunities to enhance value for shareholders. We have been doing that and we can see -- and we will continue to do that moving forward. Our core focus, though, is on internal -- is on our internal growth path. We've obviously made significant investments into our people. We're now backing that with investments into the Redbubble brand. That is our core focus. But at the same time, obviously, we'll continue to look at all opportunities providing high shareholder value.

Good one. One last quick 1 for me. I know I've got to limit it to 2. But just basically the GPAPA margin of 23% of that fourth quarter, obviously, a bit of power went to other price rises potentially into FY '23. Given the OpEx base, I know there's been ambiguous around the revenue growth guidance, but what's the revenue growth that's expected to drive an improvement in EBITDA in FY '23?

Yes. So, Owen, we're not giving specific revenue guidance for FY '23 because of the uncertainties in the overall environment. We're obviously flagging that we expect to return to growth. That growth will not be linear across the 4 quarters of the year. So we'll move around a little bit, but we're not actually giving any revenue guidance this time now.

Okay. So I can ask another way, what was -- is the GPAPA margin of 23% in the fourth quarter, are you guys thinking that you can get back to the long-term trend between 25% and 27% in FY '23?

Yes. So once again, if you look at the outlook statement on the last page of the presentation, you will see that we explicitly state that we expect our unit economics to remain compelling, which has been supported by that price rise. And as Mike said earlier, we're looking forward now into going to that next phase where we're looking to get further efficiencies out of our fulfillment network. Obviously, these are all supported to that GPAPA margin percentage.

We have next question from the line of Joseph Michael with Morgan Stanley.

Just couple of questions. So obviously, the revenue growth trajectory improved through FY '22. So just trying to see what you're seeing in the first quarter of '23. Has that improving trajectory continued?

Yes, great question, Joe. So we're not giving any specific commentary about the current period performance because we are going to be out again in October talking about that, which is going to be very soon. What I will say is July was in line with our expectations. So I would note, and it comes back to the previous comment that I had for one of Owen's questions. We are cycling a strong first quarter '22 because if you think back to that July to September period last year, we had our back-to-school seasonal uplift and that period last year, that was the first year after 2 years of lockdowns that North Americans actually were able to go back anywhere. So we had the reopening trade. We've factored that into all of our projections. And obviously, what we're looking for is really where we're going to land over the first half. And specifically quarter-to-quarter, I do think those comps will move around a little bit. What I will say is July is in line with expectations. And encouragingly, we have seen the uptick that would reflect that normal back-to-school seasonal pattern at the end of July.

Okay. Got it. And then just a second question, just around that sort of OpEx increase. So Slide 31, we've sort of highlighted called as sort of a $30 million OpEx increase. How is that being funded? Is that being funded from the price increase? Or should we kind of view that cost increase is incremental?

Well, effectively, the net outcome at the EBITDA line level is being funded out of our cash balance. So obviously, we're internally investing into that.

We have next question from the line of Tim Piper with UBS.

Sorry, just unmuting myself. Just a follow-on for the last question, maybe asking it a different way. That you put through the price increase, so is it fair to say like on your run rate of where do you think it's going to be in '23, the top line. GPAPA, once that [indiscernible] through could be an incremental like $20 million, hence you're investing that back into OpEx. I mean you're clearly taking a different path to some of the other companies we've heard come out and you're kind of talking about uncertainty that sort of certain enough to throw a lot of additional OpEx here? I'm just trying to understand your thought process around balancing what's incremental versus what's additional?

Yes. Thanks, Tim. I might start and then, Emma, feel free to jump in if you need to. I think there's a couple of things to think about, Tim. #1, there is absolutely uncertainty moving forward. That said, as we spoke, we do feel that the time is right to start investing in our brand. The cost increases that you're seeing, the majority of the cost increases you're seeing on the salary and wages line is really full year effect of the people that we've brought in over particularly the past 3, 4, 5 months and seeing that full year reflect effect flow in, plus filling the vacancies that we had year-end. As we talked about, we are significantly slowing down our new FY '23 rolls down to just a 4% increase, majority of them into our -- into the TeePublic business. So we are obviously not just at the external environment, at the same time, we're starting to see the benefits of this increase in people and capacity and we're starting to see that flowing in. We're feeling confident about the trajectory of our business. And given our positive unit economics, it is all about scale for us. It's all about driving scale at that top line. That obviously doesn't happen overnight. We've got levers that we can pull in the short term through product improvements or paid marketing. But we do believe that growing our brand awareness is fundamentally important to growing that longer term -- our growth over the longer term. We know that stronger brand means better both unpaid and paid acquisition. We know that it leads to stronger retention in roles. And we think now the time is right. Obviously, obviously, we do have a degree of discretion amongst our OpEx base if the world turns more negatively against us than we would hope. And clearly, we'll be assessing on a weekly to monthly basis on how we're tracking versus our plans because we do have discretion amongst some of those elements of spend. But we actually -- we really -- we really have some confidence in how the business is starting to move. And we believe that the time is right to continue, obviously assessing to make sure the world is moving how we expect it to move.