Temple & Webster Group Ltd (TPW) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Temple & Webster Group Limited Full Year 2021 Results Investor Conference Call. [Operator Instructions] I would now like to hand the conference over to Mr. Mark Coulter, Chief Executive Officer. Please go ahead.

Thank you. Good morning, everybody, and thank you for your time today. This morning, Mark Tayler and I will take you through the investor deck uploaded to the ASX. I'll begin by giving you an overview of the year, after which I'll hand over to Mark to take you through the numbers in more detail. I will then quickly take you through our strategy before throwing it and open to questions. Before beginning, I would like to acknowledge the difficult period that many Australians are currently living through. At Temple & Webster, we do not take for granted how fortunate we are to still be able to trade during this lockdown. Our singular goal is to keep delivering our customer -- great customer experience and hopefully have our customers enjoy their homes even just a little bit more during these challenging times. Turning to Page 2 of the deck, you can see that once again, Temple & Webster has delivered a record set of results. The full year revenue up 85% to $326 million. This growth was across all major categories, geographies, channels and demographics. Our market remains massive and subject to accelerating tailwinds, and we are well positioned financially to capitalize on our scale. Importantly, we were a high-growth business pre-COVID, growing 30% to 50% given -- on any given period. And while the lockdowns have no doubt accelerated the underlying trends of the shift to online shopping, what was pleasing to see was that we maintained growth when there was little to no restrictions on retail. Our final quarter actually grew a healthy 26%, up in the final quarter of FY '20, which in turn was up 130% on the final quarter of FY '19. What we've seen this year is that the growth has translated into operating leverage, with EBITDA up 141% to $20.5 million. We want to reiterate that we feel that this is the time to be in reinvesting some of this profit into growth initiatives to cement our market leadership. Mark will take you through these in more detail. On Page 5, you can see our customer chart. Active customers are up 62% year-on-year, with growth even on COVID period from last year. Now it's worth noting that active customers are mostly a function of first-time customers. Since if a customer repeats in the period, they are only counted once. Obviously, the final quarter of FY '20 and the first three quarters of FY '21 delivered a massive amount of first-time customers, as you can see on the right-hand chart. This was a result of many Australians turning to our channel out of necessity for the first time. Now we were never going to be able to replicate that kind of once in a generation growth to first-time customers. And we have been open about that. Our job was to give those customers a great experience, to get them to continue shopping online and more relevantly, keep shopping with us. The great news is that you can see on the right-hand chart that orders from repeat customers are growing quite significantly and have now overtaken first-time customers for the first time. This goes for our public position that we feel, COVID has resulted in a permanent shift update option curve. The growth in repeats will help us maintain a high growth rate even while working through the lapping of the spike in first-time customers from last year. As previously communicated, we've begun to invest into -- building our brand mode with the goal of becoming the top-of-mind retailer for Australian shopping for their homes. While we have a long way to go on this journey, the return on investment from our TV experiments continues to be positive. We've expanded our brand marketing team and are now preparing plans for future campaigns. On Page 6, you can see that as predicted, the customer acquisition costs have increased due to these longer payback periods -- longer payback channels. However, pleasingly, this has somewhat been offset by a 12% increase in annual revenue per active customer, which is now over $425, as you can see on the right. This is due to a higher peak rate and a higher average order value for both new and repeat orders. While a lot goes into this, it indicates customers continue to get comfortable buying larger items online, plus we're doing a better job at driving cross-sales by servicing more relevant items from our catalog on site and in our various marketing channels. Before I take you through some of the notable launches of the year in more detail, it's worth commenting on the customer satisfaction chart as measured by Net Promoter Score on the right of Page 7. The Net Promoter Score is a standard measure of customer satisfaction and ranges from a negative 100% to a positive 100%. So the score of 65% is actually world-class, especially for an online retailer. But unfortunately, the consequence of a record peak period towards the end of the first half was that the third-party logistics network and our internal customer service team stretched beyond breaking point. And this was further exacerbated by a crunch in our capacity at our 3PL warehouses due to an incredible spike in demand for warehouse space around the country. Over the half, we have increased our capacity in our 5 warehouse locations and worked hard at improving our internal and logistics partner systems and processes to allow for a smoother scaling. The good news is that our NPS has returned to our target levels. While we have no immediate plans to have our own sheds or trucks, we continue to investigate how we can take more control of the strong journey to ensure we are delivering a great customer experience. Our own inventory program of private label has been a strategic focus for the business one. We have publicly stated a goal of getting the share of revenue to these products to 30%. And it's great to announce that we grew the share from 19% to 26% in the year, as you can see on Page 8. This was done by increasing our buying and merchant planning teams, diversifying our factories outside of China, adding multiple warehouses in Queenan Sydney, investing in our data and analytics to improve forecasting accuracy and expanding our quality and compliance team. We're able to make a step up in inventory while maintaining our target weeks cover and a very low level of age stock. Importantly, we have no plans to change our negative working capital and asset-light model, however, our conservative level of inventory allows us to take strategic bets in stock to build product and price gaps we have identified using our massive amounts of data. Another goal has been to launch both iOS and Android apps and target and native mobile customer experience. We now have apps in both app stores with early feedback tremendously positive. The iOS app, which was launched during the first half, now has more than 4,000 reviews with an average rating of 4.8 stars out of 5. The app customer is a more engaged customer with a high conversion rate and repeat rate. Interestingly now, more than 50% of customer orders -- consumer orders, so excluding B2B, are now placed on a mobile device, which we expect will only increase. One of the benefits of the mobile experience, both app and mobile website is the ability to use functionality such as the phone's camera to use augmented reality. While there are many use cases of augmented reality, one of the most straightforward ones is seeing in object new home, a feature, which is now being piloted, as detailed on Page 10. With AR, customers can judge the look of the item and its size relative to their room or other pieces of furniture. We believe features such as AR can only help in reducing the barriers to buying online. Building our library of 3D assets remain the focus of the business to enable this use case. Along with AR during the year, we launched an artificial intelligence interior design service, again, aimed at reducing the friction of shopping online. It is in partnership with an Israeli startup, in which we have made a second round of investment after a successful pilot and service. The first version of the product is a 2D version with flat images, as you can see on Page 11. The next version will be using our 3D models to generate a photorealistic room. We love this service as it exposes our huge range of beautiful products across our many categories to our customers. And after a difficult end to the previous financial year, it was great to see our business customers come back in full force during FY '21, with our Trade & Commercial division growing 110% year-on-year. Again, it's worth noting that these are great customers with higher repeat activity and large order sizes. This year, we continue to focus on the rebounding residential property development sector and the regional hospitality industry. Our range of flexible go-to-market model has allowed us to quickly pivot and chase these growth sectors. I'll now hand over to Mark to take you through the numbers in more detail.

Thank you, Mark. Good morning all. So as we've stated publicly, our -- the interim strategy, it's all about growing as fast as we can and continuing to take a disproportionate share in our market. So it's pleasing to present some results today that reflect that strategy. I'm going to start on Page 15, which runs through the profit and loss results for FY '21 in comparison to FY '20. Revenue for the year, as Mark mentioned, was up 85% year-on-year to $326.3 million and Q4 was up 26% year-on-year, which was a pleasing result given Q4 last year grew 130%. In terms of margins, gross margin percentage increased from 44.6% in FY '20 to 45.4% in FY '21, primarily driven by increase in private label, which now makes up 26% of sales, up from 19% in the prior year. Although there are only a few percentage points in it, private label products in general, do run at a higher margin than dropship sales as we're sourcing directly from the factory. Delivered margin percentage was materially in line with last year over the year. However, it was impacted by some one-off distribution costs in the second half that were the result of some local shortages in 3PL space here and some issues relating to any ports that required us to transfer stock into state and temporarily store product in essentially more expensive alternate sites now. Now by June 30, the issues were resolved and alternative site and providers are now in place. We're now in a much better position heading into FY '22. You'll see marketing as a percentage of revenue increased to 12.9% in FY '21 and from 11.9% in FY '20. This is primarily due to the step-up investment of $3 million in TV in FY '21. This is certainly a medium which we will continue to invest further in FY '22. Contribution margin after one-off distribution costs came in at 14.6% of revenue or 15.5% before the one-off distribution costs. Our updated short- to medium-term target range is now 12% to 15% to allow for our stated reinvestment strategy, in which we will be aggressively going after market share through better pricing, tactical promotional activity and increasing investment in brand-building marketing initiatives. This reinvestment activity will also extend into the fixed cost line. Although FY '21 saw a reduction in fixed cost as a percentage of revenue, now down to 7.9% versus 10%, excluding share-based payments. We expect fixed cost as a percentage of revenue to land somewhere between these 2 points in FY '22 as we continue to invest in areas that will build -- essentially build strategic moats around our business. As a result, the group produced a record level of profitability with an EBITDA result of $20.5 million, up 141% on the prior year. So where to from here in terms of our financial profile? So if you turn to Page 16, we have reiterated our commitment to above-market growth and reinvesting for the future to be the #1 player in our home market. So what does this mean? It means we will be running the business to the highest possible revenue growth rate while staying profitable and staying within our 2% to 4% EBITDA range. Reinvestment will take the form of more variable-type investment, as I mentioned before, pricing, promotional activity marketing and more fixed cost-type investment, primarily people in areas such as mobile technology, augmented reality, AI, 3D, our Trade & Commercial division, improving our delivery experience, growing the size of our catalog in our private label ranges and data and personalization. This strategy was deployed in the second half and will accelerate our growth and competitive positioning. Longer term, we will take advantage of our market leadership position by leveraging our scale and strategic notes by improved trading terms, lowering our marketing spend as a percentage of sales as a result of much larger brand awareness and lowering our fixed costs as a percentage of sales as the natural operating leverage comes through. Page 17 shows our current balance sheet position, which continues to strengthen. Cash ended the year at $97.5 million off the back of a strong trading period, the capital raise, which took place in July '20 and the benefits of the group's capital-light negative working capital business model. In terms of outflows, we continued our step-up investment in our private label range to complement our dropship range, which with really strong results across the board, with private label now making up 26% of sales, as we mentioned before. We will continue to invest in private label where it makes sense to do so. However, we do not take an investment in private label lightly. We have invested in a team of experienced buyers, the platforms that we're using, quality and compliance teams have strict controls in place to ensure our key inventory metrics remain strong and the inventory will hold as low risk and it's high term. Also, as Mark mentioned earlier, we have increased our investment in our Israeli-based AI interior design startup, initial investment was USD 500,000 and we have increased this initial investment by a further USD 1.5 million in July '21 to accelerate their growth, but also the speed of [ prior deployment ]. So look, all in all, it's a really pleasing result of the back of a very challenging year for many people. We're starting FY '22 in a position of financial strength with a balance sheet to take advantage of both organic and inorganic opportunities. I'll now hand you back to Mark.

Thanks, Mark. So before taking you through the strategy, it's always worth retouching on the investment thesis of Temple & Webster. On Pages 19 and 20, you can see that we operate in a large $16 billion market, dealing with B. Importantly, this excludes any of our second or third horizon growth opportunities, such as the B2B furniture market or the home improvement market, It's just B2C furniture and homewares [indiscernible]. Less than 10% of this core market is currently sold online, which compares to circa 25% in the U.S., which is showing no signs of slowing down even at this point, by the way. Millennials, the oldest of whom are turning 40 this year, which is either comforting or horrifying, depending on which side of the fence you're on, will be driving this penetration for years to come. We believe that this high growth part of the adoption curve is the time to invest and scale our market leadership. This is the period where customers are choosing their trusted brands, and we want to be that brand. We have a simple strategy outlined on Page 21. We want to have the biggest and best range, having everything you need at home. Importantly, the best bit of this means we won't list everything. We want to be seen as a place for quality but at an affordable price. We want to be a source of inspiration in the place you go to when you want to make your home more beautiful. And we want a seamless customer experience, both at support level and delivery into the home. As Page 22 sets out with scale comes benefits such as being able to forge close relationships and obtaining better terms to disclose product ranges, making bigger investments in the areas that Mark outlined. And in fact, the bigger we get, the better and stronger our custom proposition becomes, which is the flywheel effect. This is leading us to increase our market share. Page 23 is our one-page growth strategy, again, it's pretty simple and doesn't change that much. We want to keep improving our range to make -- to ensure it becomes a -- it stays the biggest and best. This includes expanding our private label range. We will be driving our digital advantage, including making better use of our immense amounts of data through initiatives such as personalization. Half the country knows about us, we want the other half too. A key -- one of our key pillars is inspiration. We've added editorial design, 3D artists, [ peer ] resources across the team. We'll be adding more of those resources. And as I said, we're in the process of building out a 3D model library. We'll be improving our customer care teams to better training and platforms and specialization. And we want to be seen as the home for innovation to deliver experience, particularly around bulky delivery, which is the hard bit. And of course, Trade & Commercial provides another growth market and we'll be building out the team, building out a range and service proposition to keep winning market share in this segment. Trading update is on Page 24. The year has started strongly with year-on-year growth of 39%. That's from the 1st of July to 24th of July. We continue to experience strong tailwinds, including, as I talked about, the adoption of online shopping due to the structural and demographic shifts, acceleration of those transition due to COVID, increase in discretionary income due to travel restrictions and as we're all reading about the continued recovery of the housing market. As Mark has said, we will be continuing our investment strategy, investing into growth areas of the business to cement our online market leadership and drive market share. Now as always, a big shout out to the Temple's team. Once again, you have shown an incredible resilience, while we've bounced in it now to the office, you have had to cope -- and you've had to cope with the business bursting of the teams, you've done so with the humility and grace and the customer's first mindset. Thank you, everyone, for your time this morning. As you've heard, another great year with record revenue, profit and customers. Our markets have a ton of growth left, and we continue to make great progress on ensuring our customer proposition is the best in our category. We will now take any questions you may have.

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

And again, congratulations on another great result. Pretty much flawless. Just a couple of questions from me. I might just start, just to understand the supply chain of your business, can you maybe, if I go back and look at my notes from many months ago, you guys had maybe 600, 700 suppliers where you guys source from. Can you maybe talk through how that's evolved, where we are today? Maybe talk a little bit around have you been able to diversify? And maybe talk about the increasing percentage from offshore suppliers to get exclusive products on your website?

Yes. The total -- it's a good question, Owen. The total number of suppliers haven't changed that much. Definitely grown from those numbers, so we've definitely added suppliers. But we, a bit militant about pruning the catalog and pruning suppliers as we add to make sure the ones that we have are delivering not only the right product quality for our customers, but also the right operational quality for our supplies. And so we track how quickly the suppliers can fill the cancellation rate, the refund rate, how quickly they answer our queries, et cetera. So we have a scorecard by a supplier and we go through that every month of suppliers and the peak team manages suppliers, any suppliers that aren't managing -- or meeting our operational KPIs, including things like average star rating by products and any kind of issues around the product themselves, we will do less. So it's a bit of give and take in the catalog in any given moment some suppliers are coming on, some suppliers are coming off, hopefully put into remediation or we try to do them actually. But the total number has gone a bit. But definitely in terms of offshore diversification, you can see that the number -- the percentage of the businesses from private label has increased which means more of a business we're importing ourselves. And within that, we have made deliberate strides to diversify our factory base. So that's grown. And that's not because of any issues, but it's really a risk as we get bigger, we want to make sure that we're not vulnerable to any particular market. COVID has shown the world that on a single market or single supply chains can be problematic. So we are making a conservative effort to diversify that supply chain.

Okay. Good one. And just around...

I think I would just sort of add one more very quick point to that as well on the diversification point that Mark made, which is really important for us from a risk perspective, but we've also done that on the dropship side as well. So we're always evaluating how much particular drop shippers are making up as a percentage of our revenue. It's really important for us not to be single-point sensitive to any particular factory nor a drop-ship supplier as well. So we've got big diversification in terms of category mix and big diversification in terms of all of our suppliers. In particular categories, you'll have key accounts, but we don't have any dropship suppliers that make up a significant percentage of our revenue base, which is really important from a risk perspective.

Good one. And maybe just a quick one on private label. So private label is nudging up to 26%. The growth has been pretty phenomenal in the last 12 months. 30% is a target. Is that a steady-state target that we can think of in the medium term?

It's -- look, there's no -- there's obviously there's pros and cons with private label. And we mean -- importantly, when we talk about private label, we're not talking about our half label or white label because actually most of the sites is sold under brands that we've made up. It's actually -- when we talk about private label, we talk about imports and that's products that are on our balance sheet. Now obviously, there's pros and cons with that, which I don't need to go through. So the number of 30% is a number, which we think balances those pros and cons. It's a number, which means that we don't flip our working cap model to the positive working cap model. So we can still fund our growth from cash flow. So I think -- look, I think it's a number, which we think is a good target for now. Obviously, within each category, that splits into a different amount. So that's an aggregate amount that's in every category has a different percentage level. We will keep monitoring that number and update the market if we think that needs to change.

Okay. Good one and last one for me. Obviously, Wayfair saw some very positive gains and they launched their mobile app. Can you just talk through -- I know it's early, but around the different purchasing patents conversion rates through the app versus through, I guess, the desktop or mobile native, just talk through ARPUs or conversion rates, if that's possible?

Yes. I mean we don't disclose the conversion of ARPU by channel. I can say, though, and which we said here and I said before that what we're seeing is the app customer is actually converting to a higher rate is repeating more and is more engaged and actually having a higher AOV as well. Now obviously, there is the great customer -- all the customers are fine and out but naturally going to be probably better customers anywhere because they're higher up the -- or lower down the funnel in terms of the intent. However, what we've tried to do is isolate those customers and look at the same customers pre and post app usage. So actually it's the same people, how do they behave preinstalling the app and how do they behave postinstalling the app. And it does definitely look like the app itself is driving better behaviors, which means we're pushing our customers. So we have started marketing it. You can do some of your own back of the envelope. If you look at we have got 4,000 reviews, it means we have a lot more installs. So we're pushing it. Our app installed base is growing. And once we've tested the Android app a bit more, then we will start doing bigger scale marketing campaigns because now we can promote both.

Your next question comes from Tim Lawson from Macquarie.

Just 2 questions for me. I haven't asked a couple of others asked them as well. Just in terms of the repeat versus first-time customers, is that sort of crossed outline earlier than you expected? Or was that sort of what you thought would play out?

I mean, obviously, the line the incredible period of first-time customers growth that we've experienced last year has led to a growth in repeat because all those first-time customers because now a lot of them are now repeating, which has been driving the repeat customer growth. So yes, it happened earlier than expected because obviously, COVID wasn't in any of our plans. And the year we've had has been a fundamental year in terms of customer acquisition. It was always going to happen at some point. It's almost mathematical that the -- once your install base becomes so big, then the repeat levels are going to outweigh the first time customers. That's what happened pretty much every business ever. So do we still think that hits the first-time customers? Of course, there are so many customers that have transacted with us in the past that our repeat rates will -- most of the business will be repeat.

Yes. Okay. And then just if we adjusted that 2.9 million one-off that the EBIT margin -- or EBITDA margin goes above sort of 5% in the second half. Obviously, you're holding that sort of 2% to 4% sort of target range? Just sort of the reason why it was on an adjusted basis, still above 5%? And can you just sort of talk about the mechanism to get it back below 4%?

Yes, I'll take this one. Look, when we announced that, we were rolling out that strategy with -- throughout the second half to start playing within those ranges, so it does take a bit of time, obviously, to adjust your investments and your spending to that sort of level. But I think now that sort of sets the tone for the next couple of years for us, 2, 3 years and then we'll sort of reassess things. And the investment will be going into those areas that we kind of spoke about before. So there'll be, I suppose, a variable type investment, which will be focused on both promotions and pricing points, but also a fairly significant investment, a continuation and continued step-up in terms of brand building and marketing. So what that will do, that would naturally bring the contribution percentage -- contribution margin percentage down to -- within the ranges that we're talking about at the moment. And then if you kind of work back from that sort of 2% to 4% range, the residual investment is going into the fixed cost base, which is primarily people, and it's primarily people into the growth areas that we sort of spoke about before. So look, it's not easy managing a business to a particular profit outcome, but we're going to do our best to manage the business to that point and reinvest the leverage that we're building off the back of strong growth back into the business to really be driving that above-market growth rate.

Yes. Okay. And then just...

I think it's fair. It's worth noting, obviously, that everything takes time, in the real world, it's great to just put out a plan, but everything in the real world, recruitment takes longer, building teams and technology, et cetera, takes longer. So there's a bit of delay in terms of some of our investment case as well, which is just real world delays.

Yes, yes. And then just maybe outside the warehouse one-off that you've called out just general sort of cost pressures in the supply chain. What are you seeing there?

Yes. Look, there's certainly some inflationary pressures that have been placed on a lot of businesses throughout FY '21. If you look at container costs, in particular, there are multiples as to what they've been historically. A lot of that is a result of a variety of different things. So we're certainly not immune to those increases, and we'll be watching it very closely. Thankfully, for us, we have a business model that in terms of our supply chain is quite diversified. So obviously, 75%, 24% of the business is dropship and then clearly, the residual is private label. We'll feel a direct impact on the private label because we're sourcing directly from factory. We're managing the inflows and outflows of the inflows, whereas dropship is a little bit different, we're not really seeing material price inflation coming through the dropship network. And I think for us, given how material we are now to most of our suppliers and the growth that we're delivering to those suppliers, I think that's kind of helping us in terms of our terms with our dropship suppliers. But certainly, on the private label, there's been some inflationary pressures that have come through in FY '21. And look, we'll wait and see how that sort of plays out in FY '22. We're watching it very closely. Thankfully, for us, we've got quite a flexible business model, quite a -- it's -- the cost base is very variable. So we can scale up our pricing points quite quickly. We can scale up and down our investment in marketing and branding quite quickly. We can scale up our fixed cost investments up and down quite quickly. So that for us on a relative basis to our peers probably puts us in a pretty good position.

Your next question comes from Wassim Kisirwani from Jarden.

Can I ask around the trading through June and July, and obviously, have a very strong start to this financial year. But compositionally, does that look any different to trading over the last 12 months in terms of the types of customers, the demographics or the categories that are coming through?

Well there's a bit -- look, with lockdowns, there's always a little bit of spike and things like gym equipment and things like that, which is a tiny part of our sales. And the office category does better, obviously, with the home office. But broadly, it's pretty consistent to general category mix. Right besides now, there's not a huge shift in those category mixes month-to-month.

And the trading in the non-lockdown states has that sort of been -- is it trading -- is the July update sort of indicative of trading broadly across the business? Or is that skewed to what's happening in Sydney?

I mean, obviously, the parts of the country, which can't go to stores are growing faster, I mean that's been every lockdown. But no, we've seen growth around the country. So it's not -- we've seen that throughout the year. There are some areas of the country, which actually have been not affected that much at all, and they're still growing.

Okay. Great. And then you touched on some opportunities, inorganic opportunities if they come up. Are you able to elaborate on that in terms of where the priorities are and whether there are indeed opportunities to deploy your cash balance in a broader sense?

Yes. Look, we're always looking. There's always opportunities out there. Being the largest online retailer, being listed and having a good balance sheet obviously helps our position. And we do tend to see pretty much everything that is out there. For us, M&A is in the strategy. M&A for us is a tactical response to the strategy. So we're always working with our different departments to look at the big growth strategies and whether or not M&A can assist or if it's something that may hinder rather than help. So we'll continue to be assessing a number of different opportunities as we are all the time. But having the cash on the balance sheet means a couple of things. It means that we can transact in a way, in which it means that there's going to be less dilution for shareholders to start off with. But secondly, it means that we can act quickly. And a lot of the opportunities that we've seen in the past particularly the opportunistic ones, you've got to act pretty quickly. So having that strength in the balance sheet will allow us to do it, but we're very cognizant of the fact that these types of deals aren't easy and usually, they're not a slam dunk. There's a lot of work that goes into them. So we will make sure we are very diligent in what we're looking at, who we're looking at and why we're looking at them. For us, I think, in terms of the landscape, we've said it in the past, I don't think it's going to be anything sort of transformational for the group, but it's going to be more about sort of bolt-on opportunities that are going to be strengthening some of those capabilities or some of those strategic moats around the business. So it could be technology-led, could be AI, AR personalization data-led, could be logistics led to improve our last mile logistics. It could be in the B2B, a lot of opportunities in the B2B space. So I think -- I'm sure there'll be something done in the future in utilizing that balance sheet, and we're currently assessing a number of those opportunities.

Your next question comes from Aryan Norozi from Barrenjoey.

Just in terms of the July '21 update, are you seeing a similar marketing return on investment in the 2.3x you've done during the half? Or have you sort of further stepped up your customer acquisition cost to get that customer transacting, please?

I mean we don't do -- we don't disclose our ROI by month. That gets disclosed or released on report. But actually I've only been on TV one week of this month. So that gives you an answer, I guess.

Perfect. And second one, just in terms of your brand awareness for the quarter, it's about 55%. It's pretty similar to the first half. Is that 55% for the particular half? Or I mean I would have thought...

That's from November. So we will be -- we want to do the brand awareness annually. I think any shorter periods are kind of -- there's too much fluctuations and noise, and you have to give campaigns the times. So we will be releasing that brand awareness result each year, once a year.

Yes. Perfect. And last one, just in terms of the customers you've acquired during sort of calendar '20 that COVID peak period, what are you noticing in terms of their behavior of those cohorts? Your average revenue per customer is obviously up strongly, which likely suggest that that's there's strong sort of characteristics. Can you run us through maybe some numbers or qualitatively, how they're sort of transacting, please?

Yes. No, that's a great question. So yes, the cohorts that we acquired during the COVID period to the end of FY '20 and the first half of FY '21, definitely, you can see have a higher peak rate so they're ordering more frequently and spending more when they do, both in terms of the type of items they spend and the number of items that they put in their basket. So all in all, pretty good customers. I think it goes to a couple of things. One is I'm not going to take credit for everything we do, but a lot of the large part of its external. But there is definitely things that we're doing better. So we're doing things like the AI, interior design service. So we're servicing more of the content. So if you're shopping for a coffee table now we're showing you the lap and the rug that goes with it so you can complete your room, and that's generated on the fly. So things like that. We're doing cross-sales. Actually, as you check out and other parts of the site, we're doing more personalized marketing communications. In your e-mail, you'll see kind of product suggestions based on what you bought and what you've looked at. So there's lots of stuff we're doing to drive cross-sells and items to basket. Also, in terms of the actual dollar amount or how expensive an item is, we continue to just focus on furniture. We're experimenting with things like cap shipping to take it to reduce shipping as a barrier. So all in all, there's a lot of things we're doing. However, I think there's also an element of these customers just better customers generally because early adopters tend to be a little bit more fecal, a little bit more price-sensitive. They are -- just by definition, they're an early adopter. So therefore, they're probably an early adopter of other things than other competitors. Whereas the kind of customers coming to the market now, a bit stickier, probably a bit wealthier. And once they've had a good experience, are going to spend more money in the channel and then more specifically spend more money with us. So I think there's also that kind of -- as we move up the curve and adoption, you should see customers look better. So I think it's a factor of both external and internal factors that are driving that.

Your next question comes from Scott Hudson from MST.

Just a couple of questions. Firstly, surprised that there's no impact on the gross margin line from, I guess, what looks like a pretty heavy period of price motions. Can you maybe just understand why that wasn't evident through the half?

Yes, Scott. You will actually see that come through. If you look at the -- deliver the margins coming through from the first half to second half. So there is a little bit of an impact there. But they've held pretty strong. And like I said, in terms of some of the investments that we were making in the second half, a lot of that actually went into the marketing line in terms of TV. I think you'll start to see some of the impacts or some of that investment in pricing and promotional points, us testing a number of different initiatives, particularly with shipping as well. We can see the direct correlation there between conversion and what we'll be charging for shipping. So we'll be testing a number of those types of initiatives in FY '22. But we didn't go too hard in the second half, but certainly, we'll start to be testing some of those things in FY '22. But in terms of that variable investment, the bulk of that variable investment above the contribution line will be in marketing.

Got you. And then I guess in terms of controlling that delivery experience. Obviously, the cost you have to incur through the second half is indication that some of these things are outside of your control. I guess what are you doing going forward to ensure that you don't have those negative impacts on NPS? And I guess, how do you take more control of that delivery piece to ensure customer experience stays strong?

Yes, that is the $64,000 question or the 65% NPS question. Look, to be honest, it's hard, bulky delivery is hard, and if it was really easy everyone will be doing it. So I kind of like hard things strategically, businesses should do hard things because if you can crack hard things, you've got a really solid moat. We have been pivoting the business or shifting -- focusing on furniture and bulky for a while now for years. So there's a bunch of reasons why that is a good business to be in, but the con is that the logistics is hard. So we -- I mean the short answer of what we're doing is that we're scaling our capability in the area. So we've added people with significant experience in logistics into the team. We are now working much more closely with our logistics partners to integrate with them and actually, to the point where we're providing things like technology advice to those partners. We -- TBD, how we -- what we do going forward? At the very least -- I can say, at the very least, we will be ensuring that we take more control over the delivery experience. And that may mean actually making sure that we know and can control the various legs of the delivery network from pickup to middle mile to last mile. Now that does not mean that we will necessarily have our own trucks doing any or all of those bits. It may mean for some parts, for some customers in some areas, that has to be worked out. And it doesn't necessarily mean that we will have our own shares or that we may have, what we may have, what we are likely to have much tighter contracts and SLAs and dedicated partners running the bits of the fulfillment chain for us. Essentially, what we're doing is as we get bigger and we're increasing our certification. It will be allowing us to actually start putting in place the bits of the pieces to take us -- to allow us to take more control and then for ensure the customer experience. Now we're actually pretty confident we can do it without increasing cost per orders. We think we can do it while at least maintaining our costs. And so we should be able to avoid those kind of one-off costs you've seen as we take more control and have -- make sure our partners are on tighter contractual positions. Look, as I said, the goal is customer service. That's the #1 goal. I'd probably pay a little bit more if it meant that we can ensure a great customer service because I think that -- the business case in terms of repeat everything else will pay for that. But we have no desire to become an asset-heavy company. We don't want to become a logistics company. We just want to make sure that we're controlling the end-to-end experience.

And how long, I guess, before you have those contracts in place?

It's already starting to happen. So for example, the -- one of the -- our 3PL, for example, has now opened a dedicated site for Temple & Webster in Melbourne. So that is our insight. It's run based on the variable contract and the economics are the same, but it's our space. We get tighter control over to work, spare and the processes, everything else. So you can see -- and that's a function of scale. We have the scale now to go. We want our entire site because we're big enough. We want to just still run it. So we're not just won't change the economics, but we have tighter control over how that space operates and the process we put in place. That's an example of something that's already happening, doesn't hit the actual cost base because it's the same model that is allowing us to have much tighter control over the fulfillment from that space.

Great. And then just the last one for me. I guess 26% top line growth through the fourth quarter, any noticeable trends through that quarter? I mean was it fairly evenly spread month-to-month? Or was there any...

But we announced our April trading, which is lower. So you can see that as the quarter went on, the growth rate improved, but that's also a function of April last year was the month at basically the whole country was locked down. That was our fastest growing month so that was the hard. Obviously, the harder -- the fastest periods we grew last year, the tougher is to comp, right? It's just -- it's math. So there are -- last year was -- there were highs and peaks, and there weren't any troughs, but there were peaks and less peaky bits. And the peakier bits are going to be slightly lower growth rate, and less peaky bits would be high growth rate. So there is a fluctuation throughout there.

[Operator Instructions] Your next question comes from Joseph Michael from Morgan Stanley.

Congrats on a great result. Just a couple of questions from me. Maybe first one just around the mobile apps. I guess now that the Android app is up and running, do you have plans to go harder on marketing and push uptake and download of that app now that you've got both iOS and Android working?

Yes. As soon as we're happy that the -- Android, we only launched very recently in the app stores. So we're still in that piloting testing, getting enough customers to ensure that all the bugs are worked out, stability issues or performance issues. So while we are a -- we test and iterate, at the same time, we have pretty high levels of performance and standards that we put on ourselves on a public release products. So as soon as it passes all that, and we're okay with that, which is probably another a couple of months away, then yes, we will be in a position to go, okay, we're now happy to stand behind both our iOS and our Android app, and we'll do more public marketing campaign. That could be as things like changing the end card of the TV to say TV ad to say, install the app today and get dollar off or some discount off your next order, but we'll work that out.

Okay. Got it. And just a follow-up there. I mean I look at some third-party download data, and it did look like the iOS, the number of downloads started taking off from sort of April, May. So was that part of a deliberate strategy to push people into the app?

It's being taking off probably a bit for them. So we launched the app in the first half of the year. Again, we went through the same process, scale it, iterate it, test it, pilot it, make sure we're okay before pushing it. And then when we were in a position that we're okay with the iOS and we started pushing it from a digital market perspective, with more targets. We're targeting iOS users, so you won't see in the general iOS user. So it's been growing for the last few months. But it will be the same with the Android, the same position on Android as soon as we're ready, we'll start pushing it.

Okay. Got it. And then next question, just on the B2B division, obviously, really strong growth rates there 100% plus. Do you think that's a sustainable growth rate given it's still a -- you're growing off a small base and clearly, residential property has been quite strong? Do you think you can continue those kind of growth rates?

I think, look, obviously, we don't put out guidance for any particular part of the business. But I can't say, look, it's a small -- we are a tiny bit of a pretty big market segment. So we now back at the envelope for B2B because we can't find research reports, but we've done our own in-house and commission-grown research to understand the opportunity. But no matter how we cut it, it does suggest it's multibillions of dollars is the furniture market for B2B. Because think about it, it's basically every room in Australia outside of the ones you live in at home, so think about all the rooms you're going into over the course of the time, you're not, you're stuck at home, obviously. But look, whether it be schools or restaurants or hotels or offices or there's so many different rooms. So that's why it kind of adds up quite quickly. And we are -- the business is -- yes, it's going quite strongly, but it's still a very small part of the overall Temple & Webster revenue line, which suggests we've got lots and lots of opportunities. The other thing is that it's quite fragmented from a competition point of view. You have specialists in things like premium office furniture or you have specialty in hospitality furniture or education, et cetera. There's very few national brands in the space that do multi-category, multi-offering, multiproduct even offers. So we think the Temple & Webster, by leveraging the B2C bit, by leveraging the range we've already built for the B2C, by adding more bespoke commercial grade furniture into that, which is for our B2B customers, having that national offering built into our business model because it's online retailer, we can scale nationally. And then supplementing that with people to chase down -- salespeople to chase down the actual decision makers in the purchase decision, we think we can actually have a scale for proposition that could become that national brand. And if you play that out, if we become a national brand and get a relatively even in a okay market share in that category of a multibillion-dollar category, you get to big numbers, which implies big growth rates for a long time.

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

Thank you, everyone. As you can see, it was a great year. Reiterate, obviously, that it is a tough period, and we are -- we've got to take the credit that we can be delivering these sort of numbers in this period of history. It was a record year of revenue profit customers. As I said before, markets saw a ton of growth left and we continue to make great progress on our customer proposition. So on that note, thank you for your time.

Thanks all.

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