The most pleasing aspect of this result for me is the decline in...

The most pleasing aspect of this result for me is the decline in [Marketing spend]/Revenue to 13.0%, from 13.6% in 1H22 (and 13.2% in 2H21).

Note that the improvement has not been driven by a decline in the unit Customer Acquisition Cost, which has actually kept increasing (albeit at a much slower pace than previously observed) to 69$ from 66$ in 1H22 (and 58$ in 2H21); it is the simultaneous increase in Revenue per active customer (+6%), Repeat customer percentage (running now at ~55%) and Conversion rate (running at ~2.75%) that has more than offset the negative effect of a slightly higher CAC.

What this means is that, once the CAC actually starts coming down from its cycle highs (as previously discussed in the links below),

https://hotcopper.com.au/posts/62347129/single

https://hotcopper.com.au/posts/62688949/single

and as long as the above-mentioned organic growth drivers remain intact, the EBITDA margin improvement will be even more pronounced. The fact that Management have just upgraded their FY23 EBITDA margin guidance from 2%-4% to 3%-5% indicates some confidence in these dynamics playing out.

In big picture terms, the simultaneous a) stabilisation of long-term yields (albeit at a higher level, after the inflation-driven shock of earlier this year) and b) peaking of CACs, are benefiting all e-commerce names (hence the broad-based re-rating that has occurred across this sector); within this space, though, businesses that are self-funded and enjoy organic growth drivers are particularly well-positioned. Today’s result confirms that TPW belongs to the latter group, and the market seems to agree.

Cheers

P.S.: yesterday’s sell-off was in all likelihood driven by a broker downgrade (see below, great timing CS I must say!), rather than by anything getting “leaked”.

*DJ Temple & Webster Price Target Cut 49% to A$4.91/Share by Credit Suisse

(END) Dow Jones Newswires

August 14, 2022 20:50 ET (00:50 GMT)