Kogan.com Ltd (KGN) Earnings Call Transcript & Summary

FY '24 results presentation. My name is Ronn, and I'll be moderating the Q&A. With us this morning are Ruslan Kogan and David Shafer. As with previous results presentations result presentation webinar will commence with a short presentation and then followed by Q&A. [Operator Instructions] So please sit back, enjoy this short video on the FY '24 results presentation, and then we'll come back for some Q&A afterwards.

Good morning, and welcome to Kogan.com's FY '24 Results Presentation. I'm Ruslan Kogan, the Founder and CEO of Kogan.com, and I'm joined today by David Shafer, Kogan.com's CFO and COO. Together, we're pleased to present the group's financial and operating results for the year. I'd first like to reflect on the journey that we've been on over the last few years. We faced challenges that we've all talked about and [Technical Difficulty] way through them has put us in the strongest position Kogan.com has ever been in. The past 2.5 years have brought a wave of uncertainty that rippled through every aspect of our business. We faced [Technical Difficulty]. And in country that turns from a great opportunity to a lingering [Technical Difficulty] predictability of the retail market in the context of the [Technical Difficulty] Testament to the strength of our business and team, we adapted and never lost sight of our commitment to delivering value to millions of customers. The journey back to profitability required tough decisions [Technical Difficulty] we have a fair share of resilience over 18 years, and the business and our customers are much better for it. Today, I'm pleased to inform, that we've emerged stronger and more resilient than ever before. Our business has evolved, our strategies have sharpened and our focus on delivering remarkable value has never been more intense. This financial year, we provided remarkable value to over 2.6 million customers. It's truly humbling to know that during the cost of living crisis, we were able to ease some of the pressure for millions of our customers. We also provided even more remarkable value to a smart community of shoppers through our loyalty programs, Kogan First and Mighty Ape Primate. By the end of the financial year, Kogan First had grown to over 0.5 million subscribers, while Mighty Ape Primate grew by more than 35% during the year. Our customers benefited from the ecosystem we've built, accessing millions of products through our marketplace and the best prices on essential services through our verticals or what we call our platform-based sales. These are capital light, scalable and have helped to deliver significantly improved operating leverage. [Technical Difficulty] Touched on verticals, it's worth reflecting on the fact that we have recorded another [Technical Difficulty] additional verticals through Mighty Ape, and we're confident that the strong growth achieved this year will continue. In the first half of FY '24, we launched a Kogan advertising platform. The platform provides small business owners with the tools to promote their products and scale their businesses through our ecosystem. The platform has gained rapid traction, already generating $2.9 million in advertising revenue, a clear indication of its potential [Technical Difficulty] who assumed the role of Mighty Ape's CEO in April 2024. Dan is shaping up to be an excellent choice, drawing on his strong commercial and financial expertise honed during his time as Mighty Ape CFO. We've got several exciting initiatives in progress at Mighty Ape, including the highly anticipated launch of the Mighty Ape marketplace and the expansion of the verticals, following the success of Mighty Mobile earlier this year. In terms of the group's financial results, David will take you through this in detail in a moment. That said, I'm delighted to confirm that the group achieved strong profitability, allowing us to declare a final year dividend of $0.075 per ordinary share. This means that the total dividend for the financial year '24 was $0.15 per share. This slide underscores the remarkable financial turnaround we've accomplished in just 12 months. Our top-line sales dipped due to a strategic decision to focus on platform-based sales, but the real story here is now our profitability has soared across all metrics. We achieved $40 million in adjusted EBITDA for the year, marking our return to strong profitability. I'll shortly hand over to David, who will give you an in-depth review of our full year financial results. Our Kogan.com platform-based sales represented 62% of our gross sales in FY '24. This includes all non-inventory-based sales like marketplace verticals, the advert Kogan furthest. The growth in contribution has driven increased profitability, enabling a more capital-light operation and higher recurring revenue. This strategic shift in our business model has been critical to strengthening our resilience, particularly through recent years. As I mentioned earlier, we're making significant progress in expanding our platform-based sales even further. The Mighty Ape marketplace is set for launch for and our advertising platform is rapidly gaining momentum. We anticipate that these initiatives will further boost our platform-based sales, driving increased contribution and profitability and further improving the value that we can deliver to customers. The largest revenue contributors [Technical Difficulty] First. The Kogan First loyalty program delivers exclusive benefits to our most dedicated [Technical Difficulty] volumes about the remarkable value our subscribers are getting. Kogan [Technical Difficulty] of [indiscernible]. This demonstrates the loyalty of our subscribers and [Technical Difficulty] my mind that we've been able to scale from those humble beginnings, the ever-growing value we're able to offer each and every one of our customers. Our owned and earned traffic sources remained strong at 68% for the period, underscoring the effectiveness of our marketing strategy. This success is further amplified by the increasing number of repeat customers and the growth of our Kogan First and Mighty Ape Primate subscribers, both of which continue to enhance our overall marketing efficiency. As our loyalty programs have grown, we've refined our marketing approach to better align with our strategic priorities. Kogan First and Mighty Ape's Primate subscribers are a key segment of our customer base. So we've concentrated much of our marketing efforts on engaging and expanding [Technical Difficulty] our products division comprising both our exclusive brands and third-party brands, stocks [Technical Difficulty] division cycled a period which had increased promotional activity and that optimizing our inventory levels. Pleasingly, throughout the year, revenue showed an increasingly positive trend [Technical Difficulty] making year-on-year revenue growth in the fourth quarter. This achievement was made while maintaining much healthier inventory levels and much stronger gross margins, which led to gross profit growth of over 39% in the year. Our product division is a vital part of our because it gives us unique products and [indiscernible] offering from the rest and [indiscernible] we achieved in FY '24 [Technical Difficulty] '25. Since 2013, we've been steadfast [Technical Difficulty], travel, insurance and banking. Our goal has always been to deliver the same exceptional value across everyday essential services that we provide [Technical Difficulty] we're excited about the next chapter of our verticals. Mighty Mobile has already proven to be a success in its short time in New Zealand, meeting our high expectations. Our team has been hard at work forging new partnerships to expand the Mighty Ape verticals. I look forward to providing exciting announcements in the months ahead. I will now hand over to David, who will provide a more detailed [Technical Difficulty]

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Announcements in the month ahead. I will now hand over to David, who will provide a more detailed overview of the financial results.

Thank you, Ruslan, and good morning to everyone. For the first 14 years of Kogan.com, we delivered strong and consistent growth in both top line results and profitability. That strong track record was disrupted by the pandemic, pushing us off course into very unfamiliar territory, impacting our financial results for the last couple of years. Fast forward to the end of FY '24, and I'm now very glad to report that we've returned to our typical stable performance. The strength of our business model has been reaffirmed with a return to historically high operating leverage and profit margins and a return to revenue growth in the final quarter of the year. Our balance sheet is strong with a healthy level of inventory and a solid cash position with no debt. Having successfully realigned the business, we are confident that the new foundations we have established will lead to strong, consistent and sustainable results into the future. I will now go through the key drivers of our group's performance in further detail. As part of the strategic repositioning of the business to enhance its more resilient, consistent and sustainable revenue streams, we focused on growing the group's platform-based sales. As a result, revenue for the product division was impacted, particularly while cycling the prior year of increased promotional activity to realign inventory to post-pandemic market conditions. However, we improved our ranging and focus on quality in inventory, and this resulted in higher margins and helped the growth of our loyalty programs too. To briefly explain the difference between growth, sales and revenue. Gross sales reflects the total transaction value of Kogan Retail, Mighty Ape, Kogan marketplace verticals and advertising income. Revenue reflects the accounting revenue of Kogan Retail and Mighty Ape, but only the seller-based fees or commissions received, which is platform-based revenue from Kogan Marketplace, Kogan verticals, Kogan First and Mighty Ape Primate and advertising income. Gross profit and gross margin. The increased contribution of platform-based sales and recovery in margins within our Product division drove an increase in gross profit of more than 23% year-on-year. Overall margins of the business expanded to 36.6%, which was an increase of 8.7 percentage points. Platform performance. Strong double-digit growth in both Kogan First and Mighty Ape Primate subscribers demonstrates the value of the loyalty programs and a sustainable business model we are building with over 2.6 million active customers as at 30 June 24, our loyalty program subscribers reflects only a fraction of our broader customer base. We still have a huge opportunity to grow both programs and deliver an even better shopping experience for our most loyal customers. The Kogan product division. As we have consistently communicated in our prior announcements and presentations, we have been cycling a prior period of increased promotional activity that realigned our inventory levels to prevailing post-pandemic market conditions. As a result, product division revenue in the prior year was greater than this year. However, gross profit increased by more than 39%, reflecting the better product ranging and the return to normalized levels of inventory throughout the year. Kogan marketplace. The Kogan marketplace complements our product division by enabling us to offer millions of products without the need to invest capital into researching, sourcing, purchasing, warehousing or dispatching an inventory. This model also empowers small businesses to reach millions of customers driving their growth. The Kogan Marketplace achieved $228.6 million of gross sales and $21.9 million of revenue for the year. This year, we launched the advertising platform and new tools designed to help our marketplace sellers promote their products and boost their sales. Although it's still in the early stages, the platform has already generated $2.9 million in advertising revenue, and we're excited about the new initiatives that we have to help grow that platform. Mighty Ape we delivered gross margin expansion of 7.7% as a result of our continued initiatives to expand the private label offering through the Mighty Ape business. This offset the top-line reduction year-on-year to deliver gross profit growth of 2%. Ongoing operational initiatives, including the setup of our new Christchurch warehouse has temporarily increased operating costs, resulting in an adjusted EBITDA of $7.4 million, which was a decline year-on-year. However, with the warehouse setup nearing completion, we anticipate a reduction in these costs in the near future. This year, we successfully reduced variable costs by over 12% year-on-year, thanks to our strategic realignment of inventory, which enabled us to both consolidate and streamline costs within our logistics network. In addition, we shifted our marketing efforts to focus on nurturing growth among our most loyal customers through our 2 loyalty programs. This resulted in Kogan First subscribers growing by more than 25% and 98 primary subscribers increasing by over 35% year-on-year, while keeping marketing costs relatively stable. People costs have reduced year-on-year following the completion of the Mighty Ape tranches as well as vesting of the 2020 AGM options package having fully vested as of 30 June 2023. Other costs decreased by 19.2% year-on-year due to successfully renegotiating several service contracts to more favorable terms and implementing internal systems improvements that resulted in significant IT expenditure savings. Bottom line profitability metrics. All of the items we have just covered resulted in a return to strong profitability for the group with adjusted EBITDA, adjusted EBIT and adjusted NPAT totalling $40 million, $28.3 million and $21 million, respectively. Having now returned operations of the business to a stable and healthy position; we expect these strong profitability results to continue. Turning to the next slide, we can see gross profit contribution by each business division. More than 53% of our gross profit now comes from platform-based sales, illustrating the strong profitability and scalability of our business model. As Kogan First, the verticals and the new advertising platform continuing to expand, we expect to see further improvement in our operating leverage. The return to financial stability in the business is best demonstrated on this slide. Our gross derivatives and contribution margins have now reached historical highs for the business and our adjusted EBITDA and adjusted EBIT margins have rebounded from the prior year. With the resetting of the product division now completed and planned expansion of our platform-based sales, we expect improving profitability in the years to come. The retail environment in New Zealand continues to be a challenging one. Increased economic pressure from rising inflation, combined with rising interest rate have resulted in reduced consumer spending. Despite this, through our strategy to expand the private label offering of Mighty Ape, gross margin and therefore gross profit in the division grew year-on-year, which offset the decline in top line sales. Over the coming year, we plan to work on key initiatives that we believe will help Mighty Ape scale, namely the launch of the Mighty Ape marketplace and the mobile app and the delivery of significant improvements to the Mighty Ape Primate loyalty program on to the balance sheet. We completed FY '24 with a solid balance sheet. The group held $41.2 million of cash with zero debt. The movement in cash year-on-year of $24.2 million is largely as a result of our investment in the company's share buyback program for which we invested $23.8 million. During the year, the company also completed the final Mighty Ape tranche acquisition payment paid in FY '24 and the interim dividend. The company also cash settled the 2020 AGM options package. The company's inventories totaled $73.4 million as at 30 June 2024, consisting of $67.9 million in warehouse and $5.5 million in transit. With the Products division having achieved growth in the fourth quarter of FY '24, we consider this level of inventory to be well aligned with market conditions. On to the cash flow statement. We continued to generate positive cash flows from operating activities with the reduction year-on-year, reflective of the significant sell-through of inventory in the prior year, that being FY '23 as well as inclusion of the cash settlement of the 2020 AGM options package in the FY '24 operating numbers. Cash outflows through investing activities contained the last of the Mighty Ape acquisition tranche payments, while cash flow from financial activities included the payment of the FY '24 interim dividend, net of the dividend reinvestment plan and the significant share buyback investment made during the year. The business is cash generative and is now growing again, enabling the company to pursue a number of growth strategies while managing capital in the best interest of shareholders. I'll now hand back to Ruslan to discuss our outlook and some further detail on the exciting things to come in FY '25. Thank you.

Thanks, David. As we enter FY '25, we have a lot to look forward to and high expectations for ourselves. Consistent with prior years, we will not be providing earnings guidance for FY '25. However, we will provide regular business updates throughout the year with the next scheduled update to be provided at the AGM in November. July 2024, our unaudited management accounts showed year-on-year growth of gross sales, revenue and gross profit. This resulted in group adjusted EBITDA of $5.3 million and group adjusted EBIT of $4 million. Having exited FY '24 with a strong trajectory, I'm looking forward to FY '25 for a number of reasons. The remarkable growth of our platform-based sales has greatly strengthened our business with new vertical set for launch through Mighty Ape, I'm excited about the positive impact this will have on our millions of customers. I'm looking forward to our product division continuing its recent growth trajectory, providing the most in-demand products at the best prices in the market. I'm also excited to continue scaling our advertising platform and to deliver even better results, which will enable our verticals division to achieve another record year of revenue. We have a number of care initiatives in FY '25, including the launch of the Mighty Ape marketplace and the Mighty Ape mobile app, which we expect to be game changes for our customers. And finally, I look forward to welcoming many more Kogan First and Mighty Ape Primate subscribers. We will be continuing to improve and evolve our loyalty programs, delivering even more remarkable value to our multiple customers. Reflecting the strength of Kogan.com's financial performance in FY '24 and strong balance sheet, the company's Board of Directors has reinstated a final dividend for FY '24, declaring a fully franked final dividend of $0.075 per ordinary share. The dividend reinvestment plan will be available for the dividend. Together with David and the Board, I am looking forward to delivering a strong result in FY '25. This concludes our presentation. We look forward to meeting with many of our shareholders over the coming days. For those of you who have any questions or are interested in hearing more, please stay with us for the Q&A. Thank you for your interest in Kogan.com.

Thanks, Ruslan, and thanks, David. Apologies for the minor technical glitch, my Internet dropped out about midway. So hopefully, you all got to listen to the presentation, and we have a bunch of Q&As that have been put through. Just to remind everyone, I'll be moderating the Q&A with Ruslan and David. [Operator Instructions] We've got a few questions that have come through from James Wang, might start with the January update that you gave at the end of the presentation, Ruslan. James has asked, looking back at the January update, adjusted EBITDA was $4.9 million. That represented about 1/4 of the second half '24 EBITDA. As of July update, the $3.5 million represented about 1/6 of the first half '24 adjusted EBITDA. Given the ongoing shift to platform-based revenue seasonality may have changed is what he is proposing. Are the seasonal factors closer to the January update of the half? Or is it closer to the PCP?

Well, firstly, James was quick in there with a whole heap of questions. We'll go through a few more shortly. I just want to say, thank you, James, for your keen interest and enthusiasm about our business. We gave a trading update for July. And as we point out, we don't give any full guidance. So analysts will have the benefit of seeing a long history of our trading and how the business has performed over time. There's nothing out of the ordinary in July. It's a standard month. We're pleased with the performance, and we'll see how the rest of the year pans out.

Just one of the other questions that James had asked about how should we think about margin profile going forward? Obviously, in light of what you've just said in the presentation, Ruslan, there's no guidance being provided so we can't obviously cover off that question. And saying that, James, has the business seen any changes to membership rates since removing the default auto check box for Kogan First membership?

Yes. So since we launched Kogan First, there has been a large number of changes. We're always AB testing and set best performing and best for the consumer, different implementations of the various flows and programs and offers and so on. You can see the results of what we do with Kogan First and how it performs based on the numbers that we disclosed in terms of the sales and the revenue for Kogan First.

Last question from James, and I think we'll move across to somebody else. Between Kogan First verticals and products, what was the main driver of the 15.6% revenue growth for July?

Yes. So we don't break out that we gave the July performance number, but we don't -- we're not going to be providing month-by-month analysis on various lines of product performance.

Thank you. We might switch across now to Owen Humphries. So whose first question was on a similar thing to what James had just asked. I'll skip to the next question from Owen. Kogan First revenue was down half-on-half, second half versus first half despite price and subscriber growth year-on-year and half-on-half, can you explain the dynamics on how subscriber growth translates to revenue and earnings?

Yes. So subscriber growth in Kogan First is related to promotional activities and transactional volumes. So it depends a lot on what sort of promos we're running, whether those promos have really strong Kogan First offerings, how many subscribers signed up 1 year ago, the renewal rates and so on. So there's a lot of factors that go into that dynamic. And the best way to monitor that is to look at the revenue and sales over time, revenue and sales over time for Kogan First.

Last question from Owen, what other costs from opening -- sorry, the Christchurch warehouse? And what are the earnings tailwinds in FY '25 and operating synergies from this initiative?

I'll take that one. So thanks, Owen, for that question. The Christchurch warehouse, so you'll know, Owen, that we already operate a warehouse in Auckland, and we inherited that when we bought Mighty Ape. We've since opened a southern island of New Zealand warehouse in Christchurch. The setup costs for that involved consultants to help us select the operation and actually set it up, installation of racking, tech infrastructure and moving stock into the warehouse, combined with operational things like hiring staff and getting people actually working at the warehouse. So there are -- most of that -- in fact, I think all of it has been expensed rather than capitalized. So there are upfront expenses associated with actually opening the warehouse, which is still not yet at full capacity. Having said that, we do believe that those expenses are one-off in nature. And therefore, we've called out the fact that there should be a reduction in costs associated with that warehouse moving forward. In terms of giving you a precise number, I'm hesitant to do that because it remains to be seen how much of it will be one-off and how much will be continuing. Suffice to say that we do believe it will be a material saving in the Mighty Ape business into FY '25 in terms of costs that were incurred in FY '24 that will not be continuing or will reduce progressively over the course of the year.

Thanks, David. Maybe some questions now from Aryan Norozi -- to what extent can we -- obviously, we're not giving guidance, but to what extent you'd ask can we extrapolate July '24 EBITDA update of $5 million for FY '25, it implied $32 million for the first half $25. Is this the right way of thinking about earnings?

Well, we're hesitant to give any forward commentary whatsoever. Aryan will be very familiar with the pattern of our earnings activity historically. If you look over the long -- if you zoom out and look over a long period of time with our business, we've had consistent growing profitability up until Covid. We then had a couple of years of diminished earnings in the tail half of Covid and FY '24 reflects a return to significant adjusted EBITDA and adjusted EBIT in the business. As Ruslan already mentioned, there's nothing one-off in nature in the July results. you will observe that our gross sales grew less than revenue. That's because there are lots of end of financial year sales in June, but a dispatched and therefore recognized as revenue in July. That's a normal part of the July result. There's nothing one-off in nature in July. Having said that, Aryan's guess is as good as ours in terms of whether you can replicate or sort of on that number for the remainder of the calendar year.

And on that as well, it's part of normal business course of business. There the sales that occurred in July that don't get dispatched till August. So it will -- that's something that happens every month. We recognize revenue on dispatching an item to our customer.

On Kogan First, Ariana, what have you noticed around churn post the price increase?

So we announced the price increase, I believe it was in February with our half year results, and that came into effect in April. So the best way to monitor Kogan First just to have a look at the results on the financials that it produced. So we obviously still disclose the Kogan First numbers for the end of financial year. We had over 500,000 Kogan First subscribers. But the price increase, we feel is not something that will impact customers too much. Like obviously, you have less customers at higher prices than you do at lower prices, but the amount of value that the program delivers is immense. So we feel that -- to the contrary, somebody can't afford not to be a Kogan First subscriber. So one of the drivers of our performance people, for instance, would have seen in our presentation is our verticals. So the utilities like Kogan Mobile, Kogan Internet, Kogan Energy, these are all things that in the current cost of living crisis. Firstly, if you're not with Kogan Energy, you're probably paying too much. It's very easy to compare these days. We have some of the best energy prices in the country, which become even cheaper and a better deal if you've got program first. We've currently got the best mobile deal in the country for $99 for a full year, you can get unlimited talk and text and 120 gigabytes of data. unheard of unseen anywhere else, best mobile deal in the country becomes even better if you are with Kogan First. We've got the best Internet deal in the country with Kogan NBN. So in spite of the price rise in the current economic environment, somebody who's looking after all the household expenses, I'd say they can't afford not to be a Kogan First subscriber.

Thanks, Rus. I might have to switch it close to Kogan in the given the glitch that happened today.

I think that would be a very good idea.

Yes, I think so, too. Last question from Aryan. What percentage of the Kogan First back book is now on the revised pricing?

Yes, we don't go into that level of detail on our various cohorts.

A couple of questions from Johannes Faul. Gross sales up 2% in July '24. Can you provide a breakdown of how that's split between Australia and New Zealand?

Again -- yes, we don't provide that on a month-by-month basis.

And a more general question from Johannes.

Just before we move on to that. Like one thing that's worth just reiterating based on the presentation is that our products division, which is just an Australian, Kogan, excluding Mighty Ape reporting line did return to growth in the fourth quarter. The verticals, which exclude Mighty Ape, are all growing 20%-ish year-on-year. Obviously, advertising income is exclusively in the Kogan, excluding Mighty Ape division. So there is positive momentum in the Australian business generally, which you can see in the pre-30 June results, particularly in the fourth quarter. And in New Zealand, you can see that the fourth quarter did represent a general trend downward. So that's not to say anything in July because we haven't provided that information more generally, but those were the trends that operated as at 30 June.

Okay. Great. Last question from Johan, the more generalized. Are there any categories in particular underperforming or outperforming an exclusive brand.

So what we're most famous for and the strongest area of our business for exclusive brands is TVs and home appliances. So your big brown box goods, they're performing very strongly and driving a lot of the performance in our business. The things that the cost of living crisis, people are comparing a lot more shopping around a lot more, doing a lot more research comparing specifications, prices and making the value-based choice. So they're walking into a big name store seeing a few of the big name TVs, opening up their phone, doing a bit of research segment can get the same specifications for a fraction of the price. And that's across the board throughout TVs, dishwashers, washing machines, air conditioners, heaters and so on. So the things that our business has been known for the longest, very strong performance.

A question from Ray David. The total Kogan First membership FY '24 revenue was $41.9 million compared to first half of $22.7 million, implying a fall in revenue per customer in the second half. Can you explain why this has declined?

So revenue from Kogan First is recognized progressively over the year based on the earnings pattern or the purchasing pattern of the consumers. So we did have a significant growth period during the first half with significant spending activity during the first half. Hence, why we had a very strong revenue result in the first half. The price rise that applied only really kicked in from mid- to late April and obviously only applied in respect of any new customers from that point on and only in respect of the month that they will member before 30 June. So while it did have an impact on the full year FY '24 results, the impact wasn't as significant as we've had a full financial year to apply or to be recognized. Even if someone became a member and paid their full membership in May, it might be that there's only 1 month or a certain proportion of their annual membership fee being recognized as revenue in FY '24.

Thanks David. And maybe just while we're sticking on Kogan First, a question for Wei-Weng-Chen, which was largely answered, except for one part where she asked, do you think membership pricing for Kogan First has much more room to move?

Yes. Look, we are a value-based retailer, and we do our best to keep prices low. So the Kogan First membership program is unlike any other in the market in the sense that it gives you real big chunky discounts on these products that were well-known and famous for being TVs, appliances, dishwashers, bridges and so on. And on top of that, then it gives you a wide range of benefits across the store as well in terms of exclusive discounts, double Qantas points, credits back and so on. And then on top of that, it gives you a lot of benefits like in the verticals and essentials and utilities that we spoke about. So like I said earlier, I think somebody can't afford not to be a Kogan First member. I think we could double the price of Kogan First if we wanted to, and it would still be incredible value for customers, and you'd be silly not to sign up. But at the current levels, we are happy with where it's at. It's showing it's a win-win relationship between the company and our customers. Obviously, we will watch costs and business performance and the value that we keep adding to the program as we go and monitor. But for now, we think it is at the right level.

Some questions from Edward Woodgate. Amazon has launched same-day delivery in Sydney. Do you feel Kogan.com needs to respond.

Look, we have done same-day delivery during periods of the business, and we've set up the peer-to-peer delivery networks and so on. Our logistics approach is that it's a good enough approach, meaning that we offer a very reliable delivery service in the major cities, 1 to 3 days, it will take to deliver your item. The items we specialize in are not typically items you need the same day. Like if you need your TV today, probably go somewhere else. If you need your fridge today, there's better places to buy than Kogan.com. We are a value-focused retailer that focuses on the product and price with a good delivery service, but we're not trying to compete on speed of delivery because that gets very expensive and we'd much rather invest that in the price points of our products.

Thanks Ruslan. Second question for me. July trading up that strong. Can you confirm that revenue was driven by a mix shift to product sales?

Again, we're not providing a breakdown of the revenue mix inside the 1 month of April of July. So you'll have to wait until our next results to see a mix shift update.

Thanks, David. Ed had a couple of questions on Kogan First, which has already been answered. His last question now that you're seeing an uptick in sales and revenue, have you increased marketing spend in July and August?

We are in full control of our marketing spend as a business. And obviously, depending on the various promotional periods or sales, and we will tweak it multiple times a day even based on metrics that our business wants to hear. The biggest positive momentum in terms of the efficiency of our marketing and what we get to do with that is Kogan First. And one of the not overt benefits of Kogan First is that you stop renting customers from Google. There's a lot of online retailers who think that they've won a customer just because they've paid Google and then have seen a transaction on their site. However, that's just merely renting a customer from Big Tech. And you can see that in Big Tech's earnings results. The way that you build a sustainable business where you own the customer, we believe, is through a program like Kogan first. So as the name implies, the entire program is designed to drive customers to think of Kogan First when making purchase going to our site directly and researching of there. And we believe that we're already seeing the benefits of that, but the long-term benefits of that will be very efficient marketing spend. Similar to businesses like a Costco, which spend close to zero on marketing because they've got that membership program.

Thanks Ruslan. A couple of last questions from a Wei-Weng-Chen. Can you please remind us about the upcoming comps that you're cycling for the rest of this half, specifically in the key year-end period? Anything to point out good or bad that you're cycling in November, December?

The primary thing to be aware of in terms of what we're cycling in FY '25 that we were not cycling or have different cycling in FY '24 is that in FY '24, we had a prior year being FY '23, which contained a huge amount of promotional activity as we wound down inventory from peak pandemic levels. So you had in the FY '23 year relatively low margins and relatively high sales driven by effectively loss-making sales of very low-margin sales. As we know from the FY '24 results, we had stable inventory through the year, and we had stable growing margins through the year. So the revenue comps are, in effect, lower or easier, almost reflect profitable, sustainable levels of sales rather than reflecting prior period of promotional activity that was not sustainable. So that's why we have more confidence about returning to top-line growth now from this from the -- and why we think that the July result is not an aberration in terms of its top-line growth performance. And we're now comping normal, stable, profitable sales, and therefore, we believe that top line growth will return into the business.

Thanks, David. Last question from Wei-Weng-Chen and probably I'm not sure how much you can answer it, given its potentially a bit of a look forward statement. The Wei-Weng asked you previously had an aspirational gross sales target of $3 billion, but you've changed the model since to more platform-based sales. What's the new median goalpost you're working towards?

If you monitored our business over the last few years, people would have seen that there's been a really strong focus in our business, not just on sales because it's very easy to just spend more marketing, rent more customers from Google, achieve more sales, very easy to do in e-commerce and for very little benefit. There has been a strong focus on quality of sales and revenue and quality of earnings in the business. And people following our business would have seen that post Covid as well. And that's partially what happens when we had too much stock, sold down a lot of it and then in this period of consolidation that we've had in the last few years because we found that, yes, at one point, we had a really high sales number, and we've doubled, or more than doubled our business overnight essentially through the Covid period. But a lot of it was eating soup with a fork. It was a lot of effort for very little benefit. And that's why the shifts in the business that we've seen over the last couple of years, and that's why we're seeing the results that we're seeing in the business now. It is high-quality revenue, lots of recurring revenue with margins improving by us focusing on the areas where we can deliver the most value to customers. And that will continue being a focus in the business. And on a like-for-like basis, when you're comparing high-quality revenue to high-quality revenue, you can see that we've returned to growth.

Thanks, Ruslan. A question that's come through from Reece on Kogan First revenues. Has there been any change in the way they are recognized, maybe one for David?

There's no change in the way Kogan First revenues are recognized. Just to recap -- so Kogan First, we will make a sale -- the majority of the customers are annual customers, so they'll come through and buy an annual membership. We will then recognize that revenue over the course of the year based on the usage pattern of customers in general over the course of the year following membership. So the usage pattern is reviewed regularly in line with the accounting standards and the revenue recognition occurs in line with usage. That's been consistent since we started Kogan First, 4 or 5 years ago.

Thanks, David. So we have no further questions that have been viewed. Maybe I'll hand across back to you, Rustin, just to wrap up off the back of the FY '24 results and the start to FY '25. Yes.

Well, firstly, thank you, everyone, for your interest and persevering with us for close to one hour now. I'm incredibly proud of the team and the resilience they've shown over the years. And if you look at the results amongst Australian e-commerce players, you'll see that we have consistently been a high-performing, high earning business, improving operating leverage and pivoted our strategy and operations significantly to deal with the macroeconomic environment at the time and also the competitive environment at the time. What we have built and what we've come out of at the other end of that is now a business that has very high quality of revenue and high quality of earnings, and it's a win-win-win for everyone. Our customers are benefiting with incredible prices and incredible benefits through Kogan First. Our stakeholders are benefiting and our business is benefiting through the performance. So we're happy with where we're at, at the moment, but still a long way to go with all the opportunities that are on the table in front of us, and we're very excited about the year ahead.

Thanks, Ruslan. Thanks, David, and thanks, everyone, for joining us today. That ends the Kogan.com FY '24 results webinar. And I'm sure Ruslan and David would be happy to answer any further questions or meet with people now that the result is out. Thank you, everybody. Have a great day, and thanks again, listen and David, for your time today.