Cettire Limited (CTT) Earnings Call Transcript & Summary

Good morning, everyone, and thanks for joining today's full year FY '26 results call for Cettire. My name is Sam Wells from NWR, and I'm pleased to have joining me from Cettire today, Founder and Chief Executive Officer, Dean Mintz; as well as Chief Financial Officer, Tim Hume. Both Dean and Tim will spend some time reviewing results released to the ASX this morning, including some notable financial and operational highlights. Following their comments, we will have some time for questions at the end of the call. [Operator Instructions] We'll aim to have the call wrapped up in 30 minutes, including Q&A. Thanks again. And with that, I'll pass it over to you, Dean.

Thanks, Sam. Good afternoon, everyone, and thank you for joining Cettire's results briefing for the 2026 financial year. Before we begin, I'd like to remind you of the disclaimer statement in our ASX result presentation. That disclaimer also applies to this investor call. I'm joined today by our CFO, Tim Hume, and together, we'll take you through the company's results for the year ending 30 June 2026. Today's results are the outcome of our relentless focus on profitable growth with a clear bias towards profit in what remained a tough luxury market. Gross revenue was $953.4 million, and sales revenue was $718.4 million. Both were broadly stable year-on-year. Importantly, excluding the U.S., sales revenue grew 14% year-on-year to $420 million, which is a testament to our ability to grow our market share in newer markets. We had 605,000 active customers during the period, reflecting a deliberate reduction in paid marketing, combined with softer U.S. demand. Repeat customers continue to represent the lion's share of gross revenues now at 68%. Our bias towards profitability saw an adjusted EBITDA at $17.1 million and a year-on-year improvement of $16.7 million. This result clearly demonstrates the benefits of our agile and flexible business model. Our AOV increased 10% year-on-year to $904, reflecting the continued loyalty of our customers and the pass-through of higher U.S. duties in our pricing. We closed the period with $27.9 million in cash and 0 financial debt. Against the backdrop of significant headwinds, our team executed exceptionally well. Our strategy to prioritize profitability, maintain cash and strengthen customer loyalty continued through FY '26. This was executed in an environment where demand for luxury goods remained soft. While the luxury industry has experienced a couple of years of softness, when you look at the -- across the recent commentary from luxury peers, there are some signs of early stabilization. We're seeing this in our business outside of the U.S., which increased sales revenue by 14% year-on-year. In the fourth quarter ex-U.S. growth was closer to 25% year-on-year. In constant currency terms, the growth rates are actually materially higher. We also deliberately reduced paid marketing investment and turned our efforts towards enhancing engagement with our existing customers. This drove continued strong contribution of gross sales from repeat customers. On the supply side, engagements with brands and inventory holders has never been stronger. We exited FY '26 with record available inventory levels, further strengthening our customer value proposition and minimizing supplier concentration. Localization remains a core strategic priority. Our efforts in the half delivered an uplift in sales from emerging markets, representing 44% of gross revenue, up from 37% at the same time last year. And from a balance sheet perspective, our capital-light model continued to deliver resilience with a closing cash balance of $28 million and no financial debt. Turning to Slide 6. We finished the year with 605,000 active customers. Looking at the year as a whole, new customer adds slowed, reflecting both softer demand and the decision to lower marketing spend. We prioritize our investment towards quality engagement and conversion over volume. However, as we cycled Liberation Day in Q4, the active customer count began to increase again, supported by improving acquisitions and lower churn. The customer growth trends have continued into the financial year. Our average order value increased to $904 with repeat customers spending $994 per order on average compared to $759 for new customers. The increase largely reflects the incorporation of higher duties costs in our pricing. Repeat customers accounted for 68% of gross revenues, in line with last year. This continuing loyalty reflects the ongoing attractiveness of our business model to consumers. This loyalty is a key enabler as it helps sustain the business through cycles and underpins long-term profitable growth. This chart once again reflects the benefits of having a strong cohort of loyal customers and our ability to increase our share of wallet over the long term. Our unit economics over the period strengthened, primarily driven by customer acquisition costs. Customer acquisition costs declined to $84, reflecting a reduction in paid marketing investment. While this came at a cost to new customer adds, we believe it is prudent to manage marketing spend in line with achieving a reasonable return on that investment. Delivered margin per active customer was $179, a slight reduction on the prior year as we absorbed higher U.S. duties costs. Our localization strategy continued to diversify our revenue base during the period with emerging markets gross revenue increasing by 17% year-on-year. These strategic markets now represent around 44% of Cettire's gross revenue. Established markets, including the U.S., U.K. and Australia, contracted 13%, primarily driven by the challenges impacting the U.S. The U.S. now represents approximately 41% of revenues with Australia at 7%. We continue to focus on increasing market share in existing and new markets by focusing on enhancing our capabilities and driving localized initiatives. During the year, we launched Cettire in several new markets, which are supportive of continued growth in emerging markets. We also announced a partnership with TMall Global to broaden our channel presence in China. This remains on track for launch during Q1 FY '27. Our supply chain with hundreds of suppliers continues to grow through the year. Engagement levels remain very high as inventory holders and luxury brands seek new routes to market in this challenging demand environment. Pleasingly, we exited the half with record levels of inventory and grew our published stock product counts by 1/3 year-on-year. I'll now hand over to Tim.

Thanks, Dean, and good afternoon, everybody. Sales revenue was $718.4 million, that was down 3% on the prior year. This reflects the impact of U.S. tariff changes and softer demand in the region. Excluding the U.S., sales revenue grew 14% to $420 million. Gross revenue was $953.4 million, while refund rates remained relatively stable. Currency was a headwind throughout the year, particularly in the second half. On a constant currency basis, the business was slightly up year-on-year. Delivered margin at 15% of sales was impacted by higher U.S. duties costs being absorbed into our fulfillment cost base. This was partially offset by a decrease in overall promotional activity. In the second half, we accrued tariff refunds as a result of the U.S. Supreme Court decision in relation to IEEPA tariffs. This supported delivered margin in the fourth quarter and served to offset the costs incurred for these tariffs in the first 3 quarters of the year. Paid acquisition expenses were 4.6% of sales revenue and brand investment was modest at $3.3 million. This reflected our deliberate strategy to prioritize profitability. Adjusted EBITDA was $17.1 million, delivering an EBITDA margin of 2.4%. Moving on to the balance sheet. Closing cash was $28 million, and we continue to have 0 financial debt. The movement in cash during the year reflects positive trading and working capital movements, offset by investments in the tech platform and some purchases into the employee share trust in H1. There have been no additional share purchases into the employee share trust in the second half. We have commenced receiving IEEPA tariff refunds, but the bulk of this is expected to be received in FY '27, supplementing the balance sheet. We continue to invest in the technology platform to develop capability and reinforce our competitive advantage. This resulted in capitalized investments as a proportion of sales revenue being 2.3%. Again, to flag the receivables, we have receivables relating to credits for VAT paid on purchases in Europe. To remind investors, these are statutory receivables that are due and payable that could be paid at any time. However, we are subject to the time line of the government to pay out these amounts. The government has been slow to pay and out of caution, we continue to conservatively reclass a large portion of this receivable to noncurrent. On the sector outlook. Importantly, the long-term fundamentals of the sector remain robust. The most recent study on luxury by Bain-Altagamma estimates that the personal goods -- personal luxury goods market declined by 2% in 2025. However, on the positive side, a rebound is expected in calendar year '26 with a return to modest growth. We are seeing the improvement in fundamentals in our trading, and this is supported when looking across to the commentary from other players in our sector. I'll hand you back to Dean now to conclude.

Thanks, Tim. In the short term, while there continues to be -- in the short term, while there continues to be uncertainty with the global luxury personal goods market, Cettire has commenced FY '27 with a continuation of the positive trading momentum observed in Q4 FY '26. We achieved year-to-date gross revenue growth of approximately 22%, supported by improving trading conditions and the company's ongoing focus on geographic diversification. Growth ex-U.S. has exceeded this rate over the same time period. Reflecting its focus on profitable growth, Cettire achieved positive adjusted EBITDA in July 2026. On that note, I'll hand back to Sam.

Great. Thanks, Dean. Thanks, Tim. [Operator Instructions] The first question on constant currency. How does your performance in constant currency look versus AUD terms for year-to-date FY '27?

Sorry, Sam, that was for year-to-date, was it, just to clarify?

Yes.

Yes. So I don't have the precise figure for year-to-date, but I think it remains the case in the period post year-end that foreign exchange is a revenue headwind at the moment. I would expect it to be our growth rate to be in the order of 5 to 10 percentage points higher than what was reported for the first few weeks of the year. If we look back to fiscal year '26, though, overall revenue growth increased in constant currency terms. That compares with a modest decline in reported terms. And the second half of the year grew strongly in constant currency terms.

Great. Thank you. On growth ex-U.S.A., you've called out growth outside of the U.S.A. Which markets, excluding the U.S., are responsible for driving the growth?

It's quite broad-based, Sam, across the footprint. So Europe, Middle East, all performing very strongly as are Canada and Australia.

On year-to-date trading, from your commentary and growth profile in the last few months, it seems you're pointing to some green shoots. What specifically are you seeing?

I think there's a couple of things. I think the growth outside U.S., as we've mentioned, has been very strong. As we know, the U.S. has its own specific issues right now. But the rest of the market portfolio is growing very nicely. And I think the encouraging thing is that the growth is both from a customer growth perspective and order volumes growth. In the preceding 18 months or so, we've achieved volume growth itself has been harder to achieve given the pass-through of U.S. tariffs. And at the same time, we've achieved this growth without materially increasing marketing spend. So overall, it's quite promising.

Just sticking to the year-to-date trading, what exactly do you think -- or why exactly do you think you're growing better in the last few months? Have you adjusted any internal operational settings in relation to this performance as well as in Q4 of '26, i.e., paid marketing -- sorry, paid advertising or marketing spend to drive this improvement?

There's not -- there hasn't been any major changes in operating settings. I think what's really happening is that the U.S. itself has stabilized and it's no longer an anchor. And at the same time, the growth ex-U.S. continues to perform very, very strongly.

Okay. Great. And can you provide any insights into the Q3, Q4 revenue trends, noting your comments around Q4 stabilization?

I'll comment on that. Look, I think we provided a trading update in -- at the half year results, which showed the revenue trajectory fairly deeply into February. And at that point, the third quarter was tracking down in the high teens percentage points year-on-year. The third quarter was always going to be a very difficult quarter for us just given the comparator. So we ended up with a negative Q4, but a very strong rebound in the fourth quarter, where we saw both -- I mean, the U.S. business grew in the fourth quarter to Dean's point just now around how we've seen a stabilization in the U.S. And ex-U.S.A., in Aussie dollar terms was approximately 25% up year-on-year. But to my earlier comments, from a constant currency perspective, those growth rates were even stronger.

Okay. Great. And just on the U.S. opportunity, does Cettire consider the U.S. market still viable given ongoing tariff policies? And what contingency plans does Cettire have in place if future tariff changes come to life?

Look, it's absolutely still viable. And look, I think tariff and duty changes are just business as usual, and we are well adept to adapting as needed.

Okay. And maybe just sticking with tariffs for a minute. Do you have any update on your progress in getting a tariff clawback mechanism in place for return goods in the U.S.

Do you want to take that one, Tim?