Articore Group Limited · ASX:ATG
Articore — Investor Presentation (October 2018)
45 slides from Articore's investor presentation, Oct 24, 2018
Slide 1: Investor Presentation – Acquisition of TeePublic and Capital Raising
Investor Presentation – Acquisition of TeePublic and Capital Raising 24th October 2018 NOT FOR RELEASE TO US WIRE SERVICES OR DISTRIBUTION IN THE UNITED STATES
Slide 2: Important Notice and Disclaimer (1 of 3)
IMPORTANT NOTICE AND DISCLAIMER (1 of 3) Important notices The following notice and disclaimer applies to this investor presentation (Presentation) and you are therefore advised to read this carefully before reading or making any other use of this Presentation or any information contained in this Pr
Slide 3: Important Notice and Disclaimer (2 of 3)
IMPORTANT NOTICE AND DISCLAIMER (2 of 3) Future performance This Presentation contains certain ‘forward looking statements’, including but not limited to projections, guidance on future revenues, earnings, margin improvement, potential synergies, other estimates, the timing and outcome of the TeePub
Slide 4: Important Notice and Disclaimer (3 of 3)
IMPORTANT NOTICE AND DISCLAIMER (3 of 3) Disclaimer None of the underwriters, nor their or Redbubble's respective advisers or any of their respective affiliates, related bodies corporate, directors, officers, partners, employees and agents have authorised, permitted or caused the issue, submission,
Slide 5: Transaction Overview
Transaction Overview
Slide 6: Accelerating Redbubble's marketplace leadership in connecting independent artists with fans
Accelerating Redbubble’s marketplace leadership in connecting more independent artists with passionate fans across the world Redbubble to acquire TeePublic for total cash consideration of US$41.0m (A$57.7m)1, 2 TeePublic is an on-demand commerce marketplace for independent artists to sell their desi
Slide 7: Strategic rationale
Strategic rationale Creating a compelling digital platform for independent artists and customers and accelerating the Redbubble flywheel Accelerating Broader reach and more opportunities to make Redbubble+TeePublic the predominant online destination market leadership for independent artists for ar
Slide 8: Redbubble+TeePublic – accelerating the marketplace flywheel together
Redbubble+TeePublic – accelerating the marketplace flywheel together More content for deeper customer Faster production, faster delivery engagement driving loyalty and and broader geographic coverage increasing customer lifetime value for better customer experiences Strengthen artist relationships,
Slide 9: Redbubble+TeePublic positioned to emerge as the platform with scale to disrupt mainstream retail commerce
Redbubble+TeePublic positioned to emerge as the platform with scale to disrupt mainstream retail commerce Rise of the sharing economy enabling artists to share their creativity with a global customer base at low risk Increase in consumer demand for personalisation and self- expression enabled by the
Slide 10: The TeePublic business
The TeePublic business Similar business models and a shared mission: to create the world’s largest marketplace for independent artists TeePublic is a three-sided global online marketplace that enables artists from around the world to sell their designs on 45 products produced and fulfilled by a netw
Slide 11: Attractive financial profile
Attractive financial profile TeePublic Pro-Forma Revenue1 TeePublic financial highlights (A$m) 35.9 26.9 Attractive 87% Revenue CAGR between CY14 6.6 10.4 and CY172 FY17 FY18 1Q FY18 1Q FY19 Growth 33% 57% TeePublic Pro-Forma Gross Profit1 Strong pro-forma Revenue growth in FY18 of 14.1 33% and
Slide 12: Operational highlights – TeePublic and Redbubble
Operational highlights – TeePublic and Redbubble Countries where Third party Founding buyers Paid to artists fulfilment year and artists are since inception locations located 2013 75+ 11 A$14m+1 2006 c.200 32 A$100m+ Unique Selling artists Unique art Global customers and designers works / products w
Slide 13: Redbubble+TeePublic – Integration, synergy potential and operating plan
Redbubble+TeePublic – Integration, synergy potential and operating plan + TeePublic to operate semi-autonomously and continue to be run by Adam Schwartz, TeePublic’s co- founder and current COO Co-founder, Josh Abramson, will remain with TeePublic until the end of December to enable a smooth trans
Slide 14: Combined business mission to be the #1 home for independent artists
Combined business mission to be the #1 home for independent artists to sell their content Enable artists to reach a wider audience and target customers well Developing differentiated Redbubble and TeePublic brand positions over time, enabling artists to connect with more customers One efficient pl
Slide 15: Geographic and product mix expansion can follow the Redbubble playbook
Geographic and product mix expansion can follow the Redbubble “playbook” of localisation and fulfiller network expansion Exciting opportunities for TeePublic to follow Leverage Redbubble’s experience to accelerate the Redbubble’s growth template in Europe and UK1 next product additions for TeePublic
Slide 16: Transaction highlights
Transaction highlights • Redbubble has executed a definitive agreement to acquire all of the issued shares of TeePublic from TeePublic’s founders • Total cash consideration of US$41.0m consisting of US$35.0m to be paid at completion and US$6.0m to be paid 18 months post-completion, of which Transact
Slide 17: Redbubble Business Update
“=s Redbubble Business Update
Slide 18: 1Q FY19 business highlights
1Q FY19 business highlights 31.3% YoY Revenue growth, including 30.3% YoY Product and Shipping Revenue growth, on a constant currency basis1 Successful delivery across 'Back to School' campaigns Strengthening unit economics generating Gross Profit of A$18.0 million and margins of 36.5% (based on Pro
Slide 19: Robust marketplace dynamics driven by strong and consistent growth on all sides
Robust marketplace dynamics driven by strong and consistent growth on all sides Unique customers Selling artists Product / third party fulfilment capability 4.5 350.0 400 4.0 350 Product / Fulfilment combination2 300.0 3.5 3.9x 4.8x 300 5.6x Unique customers1 (m) 250.0 Selling artists ('000) 3.0 250
Slide 20: 1Q FY2019 key marketplace metrics
1Q FY2019 key marketplace metrics Commentary • Key marketplace metrics such as 1Q FY2018 1Q FY2019 YoY Growth number of customers, repeat customers and selling artists continue to underpin GTV1 $45.6M $64.1M 40.5% growth • Repeat GTV growth of 48.8% reflecting Mobile GTV $16.6M $26.7M 60.7% strong g
Slide 21: Scaling business demonstrating sustained Revenue and Gross Profit growth
Scaling business demonstrating sustained and strong Revenue and Gross Profit growth Revenue1 has grown at CAGR of 39% over five years Gross Profit growing at similar rates Revenue Gross Profit (A$m; FY14 – FY18) (A$m; FY14 – FY18) 183 64 CAGR 39% CAGR 40% 141 50 115 39 72 24 49 17 FY14 FY15 FY16 FY1
Slide 22: 1Q FY2019 P&L analysis
1Q FY2019 P&L analysis YoY QoQ Commentary 1Q 4Q 1Q (1Q19 v 1Q18) (1Q19 v 4Q18) P&L (A$M) FY18 FY18 FY19 Growth CC Growth3 Growth CC Growth3 • 1Q FY19 GTV and Revenue growth of >30% (CC basis1*) in line with guidance GTV1 45.6 52.6 64.1 40.5% 31.2% 21.8% 19.0% • 1Q Gross profit increasing 33.6% YOY (
Slide 23: A global Australian growth stock
A global Australian growth stock A leading global marketplace riding three major disruptions Historically rapid organic scaling on the back of fundamentals Combination with highly complementary TeePublic platform expected to grow Redbubble's total marketplace and enhance revenue growth and operating
Slide 24: Guidance update
Guidance update Reiterating previous guidance for the standalone Redbubble business for FY19: Revenue growth at or above 30% on a constant currency basis Operating EBITDA range of A$2m – A$4m Cash consumption under A$2m Guidance applies to Redbubble on a standalone basis and excludes the potential i
Slide 25: Funding Overview
Funding Overview
Slide 26: Overview of capital raising
Overview of capital raising Fully underwritten A$60.6 million equity capital raising Structure and size • Placement of 24.0 million shares to raise A$36.0 million • 1 for 13 accelerated non-renounceable Entitlement Offer, 16.4 million shares, to raise a further A$24.6 million Placement and Entitleme
Slide 27: Source and use of funds
Source and use of funds Uses of funds A$ million 1, 2 Sources of funds A$ million TeePublic purchase price 57.7 Placement 36.0 Transaction fees 4.8 Entitlement Offer 24.6 Redbubble cash 2.0 Total uses 62.6 Total sources 62.6 1. Reflects a purchase price of US$41.0 million at a US$:A$ exchange rate o
Slide 28: Illustrative 30 September pro-forma cash position
Illustrative 30 September pro-forma cash position (Equivalent (A$m; adjusted as of 30 September 2018) of US$35.0m)1 2 60.6 (49.3) (Equivalent of US$6.0m) 2 (8.5) (4.8) 22.1 20.1 Initial standalone Gross proceeds Initial cash purchase Deferred consideration Estimated transaction Illustrative 30 30 Se
Slide 29: Equity raising details
Equity raising details Event Date Trading halt and announcement of the Acquisition, Placement and Institutional Entitlement Offer opens Wednesday, 24 October 2018 Placement and Institutional Entitlement Offer closes Thursday, 25 October 2018 Announcement of results of Placement and Institutional Ent
Slide 30: Appendices
¥ Appendices [WANK YOU ee ©
Slide 31: Appendix 1: Summary of TeePublic financial profile pro-forma adjustments
Appendix 1: Summary of TeePublic financial profile pro-forma adjustments Revenue Recognition: adjustment to recognise Revenue only when item shipped instead of when sales proceeds received, to align with Redbubble's accounting policy Outside Creative (i.e. Artist Commission): adjustment to treat
Slide 32: Appendix 2: Glossary
Appendix 2: Glossary Financial glossary Acronyms Gross Processed Sales Total Currency Tendered COGS (Cost of Goods Sold) - Refunds Reissues for returned goods CYXX (Calendar Year) -Jan to Dec, aligns with US fiscal years - Fraud Reverses for any fraudulent payments EBITDA (Earnings before Interest,
Slide 33: Appendix 3: Key risks
Appendix 3: Key risks This section discusses some of the key risks associated with an investment in shares in Redbubble. These risks may affect the future operating and financial performance of Redbubble and the value of Redbubble shares. The risks set out below are not listed in order of importance
Slide 34: Business risks (1 of 3)
Business risks (1 of 3) Competition risk Redbubble operates in a competitive landscape alongside a number of other online marketplaces and e-commerce websites with competing offerings and geographically diverse presences. There is the potential for Redbubble's business to be disrupted by new technol
Slide 35: Business risks (2 of 3)
Business risks (2 of 3) Intellectual property Although Redbubble is strictly an online marketplace service provider that does not sell or manufacture the products sold on the Redbubble marketplace litigation risk and does not adopt or endorse any third party content appearing on the Redbubble websit
Slide 36: Business risks (3 of 3)
Business risks (3 of 3) Indirect tax risk The application of indirect taxes, such as goods and services tax, sales and use tax and value added tax to marketplaces such as Redbubble's and the sellers they serve is a global, complex and evolving issue. In many cases, the ultimate tax determination is
Slide 37: Acquisition risks (1 of 3)
Acquisition risks (1 of 3) Risks in relation to Redbubble undertook a due diligence process in respect of TeePublic, which relied mostly on the review of financial and other information provided by due diligence on TeePublic and its current owners. Although Redbubble considers the due diligence proc
Slide 38: Acquisition risks (2 of 3)
Acquisition risks (2 of 3) Integration risks The Acquisition involves the integration of TeePublic, which carries risk including potential delays or costs in implementing necessary changes, and difficulties in integrating operations that previously operated independently. The success of the Acquisit
Slide 39: Acquisition risks (2 of 3)
Acquisition risks (2 of 3) Integration risks The Acquisition involves the integration of TeePublic, which carries risk including potential delays or costs in implementing necessary changes, and difficulties in integrating operations that previously operated independently. The success of the Acquisit
Slide 40: Acquisition risks (3 of 3)
Acquisition risks (3 of 3) Change of control The Acquisition may trigger change of control clauses in some material supplier contracts to which TeePublic is a party. Where triggered, the change of and termination control clause will, in most cases, require TeePublic to seek the counterparty's consen
Slide 41: Offer risks (1 of 3)
Offer risks (1 of 3) Underwriting risk Redbubble has entered into an underwriting agreement under which Canaccord Genuity (Australia) Ltd and Petra Capital Pty Ltd (the Underwriters) have agreed to fully underwrite the Entitlement Offer and Placement, subject to the terms and conditions of that agre
Slide 42: Offer risks (2 of 3)
Offer risks (2 of 3) Risks associated There are general risks associated with investments in equity capital, such as Redbubble shares. The trading price of Redbubble shares may fluctuate with with an investment movements in equity capital markets in Australia and internationally. This may result in
Slide 43: Offer risks (3 of 3)
Offer risks (3 of 3) Economic risk General economic conditions (in particular, deterioration in the global retail environment and price deflation) may negatively affect Redbubble's performance and the performance of Redbubble's shares. Any protracted slow down in economic conditions or factors such
Slide 44: Foreign selling restrictions (1 of 2)
Foreign selling restrictions (1 of 2) This document does not constitute an offer of new ordinary shares (New Shares) of Redbubble in any jurisdiction in which it would be unlawful. In particular, this document may not be distributed to any person, and the New Shares may not be offered or sold, in an
Slide 45: Foreign selling restrictions (2 of 2)
Foreign selling restrictions (2 of 2) Singapore This document and any other materials relating to the New Shares have not been, and will not be, lodged or registered as a prospectus in Singapore with the Monetary Authority of Singapore. Accordingly, this document and any other document or materials
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