TEMPLE & WEBSTER GROUP LTD — Investor Presentation 2021

Aug 29, 2021

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TEMPLE & WEBSTER GROUP LTD ABN 69 608 595 660

ASX ANNOUNCEMENT

REGISTERED OFFICE AND PRINCIPAL PLACE OF BUSINESS Unit 1, 1-7 Unwins Bridge Road St Peters NSW 2044

30 August 2021

Full Year 2021 Investor Presentation

Temple & Webster Group Ltd attaches a Full Year 2021 Investor Presentation.

This document has been authorised for release by the Board of Directors.

About Temple & Webster

Temple & Webster is Australia’s leading online retailer of furniture and homewares.

Temple & Webster has over 200,000 products on sale from hundreds of suppliers. The business runs an innovative drop-shipping model, whereby products are sent directly to customers by suppliers thereby enabling faster delivery times and reducing the need to hold inventory thereby allowing a larger product range.

The drop ship range is complemented by a private label range which is sourced directly by Temple & Webster from overseas suppliers.

Temple & Webster is listed on the Australian Securities Exchange under the code TPW.

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FY21 Investor Presentation

Mark Coulter CEO Mark Tayler CFO

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Summary

FY21 Revenue $326.3m FY21 EBITDA $20.5m Jun-21 Cash $97.5m 85% growth vs pcp Sources: Euromonitor International Limited; Home Furnishings and Homewares System 2020 edition. IBISWorld Online Home Furnishing Sales in Australia Industry Report and Online Household Furniture Sales in Australia Industry Report Jun-20 cash balance excludes proceeds from $40m placement which took place in Jul-20 141% growth vs pcp FY20 Revenue $176.3m FY20 EBITDA $8.5m Jun-20 Cash $38.1m

• Temple & Webster is the leading pure play online retailer for furniture & homewares in Australia • Large addressable market with accelerating online adoption • Business is profitable with strong top-line growth, capital light and a debt free balance sheet

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Temple & Webster at a glance

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Operating in a large ~$16b market (excludes The leading pure play online retailer for
B2B), with less than 9% sold online furniture & homewares in Australia
2020 B2C Furniture & Homewares Market, Australia Only Revenue, $’000s.
350,000
Total 300,000
~$16b
250,000
200,000 65% CAGR
150,000
100,000
50,000
Online
$1.1b—1.4b 0
FY18 FY19 FY20 FY21
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Leverage to fund reinvestment activity to
outgrow the market
EBITDA, $’000s.
25,000
20,000
15,000
10,000
5,000
0
FY18 FY19 FY20 FY21
-5,000
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Range & content a key differentiator

Large website traffic and database

Asset light business model

• Curated range: ~210k products from 500+ suppliers across 210 categories

• 74% drop-ship (no inventory risk) and 26% private label

• Large in-house content team (e.g. stylists, photographers, editors)

• 30m page impressions from 3.6m website users per month

• 3.2m subscribers; ~890k combined social media reach

• 778k active customers

• 55% aided brand awareness (Nov-20)

• Negative working capital model with 74% of sales drop-ship with no inventory risk

• Leverage 3[rd] party warehouses and carrier networks

• Average time to dispatch ~1.9 days

Source: Euromonitor International Limited; Home Furnishings and Homewares System 2020 edition. ABS Retail Sales data, TPW estimates., Google analytics, social media platforms, T&W systems. All metrics are as at Jun-21 unless otherwise stated. Active customers are the number of unique customers who have transacted in the last twelve months (LTM)

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FY21 Business Update

Strong growth across the year

• Revenue up 85% for the year, EBITDA up 141% to $20.5m

• Q4 revenue up 26% pcp (which is comparing to Q4 FY20 which in turn grew ~130% over Q4FY19)

• Strong growth across all categories, geographies, channels & demographics

• Scale is increasing operating leverage, enabling significant reinvestment

Launched iOS & Android Apps

• Launch of Android & iOS Apps

• 4.8-star rating from +5k reviews to date

• App is leading to higher levels of engagement and repeat purchasing

Customer satisfaction remains a key focus

• Net Promoter Score back to 65%+ after dip post November peak

• Improvements in quality, range and service

• Working with logistics partners on scaling during peak periods

Accelerated tech investment

• Further investment in AI interior design start up

• Launched augmented reality

• Expanded tech and product team (onshore & offshore)

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Android app launched 1 July 2021.

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Customer growth remains strong even after comparing against FY20 COVID impacted growth rates

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Active Customers grew 62% year on year
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800,000
700,000
600,000
500,000
400,000
300,000
200,000
100,000
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Cohorts are performing well, leading to an
increase in repeat rate
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
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First Time

Repeat

Active customers are the number of unique customers who have transacted in the last twelve months (LTM).

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Strong growth in revenue per active customer is partially offsetting an increase in CAC due to longer term brand investments

12 month marketing ROI still strong, even with large brand investment (TV advertising)

Revenue per active customer up 12% due to a higher repeat rate and average order value[2]

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2.8
2.4
2.0
1.6
1.2
0.8
0.4
0.0
As at 30 June 2020 As at 30 June 2021
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$450
$430
$410
$390
$370
$350
$330
$310
$290
$270
$250
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Customer
Acquisition $46 $58
Cost (CAC)
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1. Marketing ROI = Margin $ / CAC

Margin = Revenue per active customer as at 30 June 2021 x delivered margin % for FY21

CAC = Total marketing spend for FY21 x 78% (being the estimated percentage of marketing spent on new customer acquisition, i.e., excludes estimated spend on repeat customers) divided by the number of first-time customers during FY21 2. Revenue per active customer = Last 12 months revenue divided by active customers

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Key initiatives driving conversion rate and customer satisfaction

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Conversion rate continues to improve
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21
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Customer satisfaction (NPS) has returned to target
65%+ after dip post Christmas peak
Net Promoter Score (score range: -100% to 100%)
70%
65%
60%
55%
50%
45%
40%
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Key Launches

• iOS & Android apps; new desktop/mobile homepage

• Swatch service

• Augmented reality with 3D models

• Relaunch Visual search (search by photo)

• Expanded care & logistics management team

• Piloted upgraded delivery option

• Increased to 5 x 3PL warehouse locations

• Doubled our capacity in our Customer Care team

FY22 Pipeline

• Expand scope of augmented reality offer

• 3D room visualisations

• Virtual designer (AI led)

• • Visual search (app)

• After hours / weekend delivery service

• Category experts for pre-sales

• Data integration for self-service; AI-assisted help

• Working with logistics partners on peak periods

Conversion rate = number of transactions divided by number of unique visitors (source: Google Analytics)

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Temple & Webster Private Label

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Private label share (% of total sales)
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19% 26%
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FY20 FY21
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Private label is providing strategic benefits such as a diversification of supply (less dependency on drop-ship network), improved margins, stock assurance and speed of dispatch.

Key Initiatives during FY21

• Expanded Buying and Merchandise Planning teams for range development and inventory forecasting

• Step up investment in private label inventory of $15m in FY21

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• 5 warehouses now in place across VIC & NSW, with multiple 3PL providers, which will enable further scaling and diversification of providers

• Geographical diversification of factories into Indonesia, India and Europe; 15 factories added in FY21 across 5 countries

• Testing machine learning forecasting software for inventory planning

• Expanded Quality & Compliance team

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We have now launched both iOS and Android apps

• iOS app launched in H1 FY21

• Android app launched Jul-21

• Customer feedback has been extremely positive:

• +5,000 reviews

• Rating: 4.8 out of 5

• App is leading to higher levels of engagement and repeat purchasing

• Mobile (mobile web & app) now accounts for the majority of orders (ex Trade & Commercial)

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Apple app store
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Review and rating as of August 2021

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We are merging the online and offline experience through Augmented Reality (AR)

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• Augmented Reality (“see in your room”) pilot launched in H2 and will be progressively rolled out

• Removing barriers in the online shopping journey while providing an interactive feature for customers which will drive conversion and customer engagement

• 3D Assets being built to enable Augmented Reality and also 3D imagery

• Combining online and offline worlds, creating a unique experience for customers

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We have increased our investment in an AI Interior Design start up

• AI (Artificial Intelligence) Interior Design service, suggesting products to match a customer’s selected item

• Next version: 3D generated life-like room

• Exposes Temple & Webster’s huge range of furniture & homewares

• Developed by an Israel based technology start up, TPW has exclusive rights in Australia/NZ

• Drives conversion rate and average order values

• We increased our investment and % stake to accelerate the company’s growth in July 2021

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Our Trade and Commercial (B2B) division grew 110%

1 T&C has rebounded quickly with revenue up 110% $’000s.

• 3 Residential property development sector and regional hospitality remain key areas of focus:

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• $8,000 $6,000 $4,000 $2,000 $0

• Successful launch of new service model for the residential property development market including advertising, selling incentive packages, display home design & installation services

• Expanded installation & fit-out capabilities

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• 2 Service model improvements, such as extra care resources and specialised sector-based sales teams, have led to high repeat customer rates

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8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
First Time Orders Repeat Orders
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• Launch of bespoke made to order range of commercial products for hospitality & residential markets

• Capitalised on regional tourism boom with accommodation upgrade packages, glamping campaigns and design services

• Expansion into childcare market including outbound sales, marketing campaign and range additions

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Revenue based on checkout revenue which is pre accounting adjustments (deferred revenue, refund provision)

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FY21: Strong growth and performance

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Revenue $m EBITDA $m
326.3 20.5
Up Up
85% 141%
176.3
8.5
FY20 FY21 FY20 FY21
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$ per Active Customer

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Active Customers $ per Active Customer
778k 426
380
Up Up 12%
480k 62%
30-Jun-20 30-Jun-21 FY20 FY21
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EBITDA %

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Up
6.3%
4.8% 1.5 pts
FY20 FY21
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Fixed Costs (% of Rev)

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10.0% Down
7.9% 2.1 pts
FY20 FY21
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NB. Active customers are the number of unique customers who have transacted in the last twelve months (LTM). Revenue per active customer = Last 12 months revenue divided by active customers..

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FY21 produced record revenue and profitability

A$m	FY20	FY21
Revenue	176.3	326.3
Cost of Sales	(97.7)	(178.3)
Gross Margin	78.6	148.0
	44.6%	45.4%
Distribution	(24.7)	(44.4)
One-off distribution	0.0	(2.9)
Delivered Margin	53.9	100.7
	30.6%	30.9%
Advertising & Marketing	(21.0)	(42.4)
Customer Service & Merchant Fees	(5.9)	(10.7)
Contribution Margin	27.0	47.6
	15.3%	14.6%
Wages	(13.9)	(19.0)
Other Adjusted EBITDA	(3.7) 9.4	(6.9) 21.7
	5.3%	6.7%
Share Based Payments	(0.9)	(1.2)
EBITDA	8.5	20.5
	4.8%	6.3%
Depreciation & Amortisation EBIT	(0.6) 7.9	(1.6) 18.9
	4.5%	5.8%
NPBT	8.0	19.2
NPAT	4.5% 13.9	5.9% 14.0
	7.9%	4.3%

Record revenue

• Revenue of $326.3m for FY21 was up 85% YoY

• Q4 revenue was up 26% YoY which is comparing to Q4 FY20 which grew ~130% YoY

Private label now making up 26% of overall sales

• Gross margin % increase was primarily driven by the growth in private label which now represents 26% of sales

One-off distribution costs in H2

• As a result of shortages in available 3PL space and port related issues, there were significant one-off costs of $2.9m in the 2[nd] half of FY21, all issues however were resolved by June 30 with new 3PL facilities now in place

Investment into brand building channels

• 12-month marketing ROI remains strong at 2.3x after a significant investment in TV (+$3m). Investment in brand building will continue into FY22

Contribution margin above target level

• Contribution margin after one off distribution costs was 14.6% (15.5% before one off distribution costs). Updated short-med target range is now 12%-15% to allow for reinvestment activity (as discussed on the following page).

Fixed costs do not have to scale in line with revenue growth

• Fixed costs as a % of revenue down to 7.9% from 10.0% last year (ex share based payments)

Record profitability

• Record profitability with EBITDA up 141% to $20.5m

• NPAT of $14.0m, which on a normalised basis (excluding deferred tax adjustments) was up 165%

Adjusted EBITDA excludes share based payments, one-off costs and depreciation and amortisation.

EBIT includes the impact of depreciation of right-of-use asset representing long term leases in line with AASB16 Leases, including depreciation for dedicated warehousing space which started in Mar-21.

Normalised NPAT is calculated as NPAT adjusted for any benefits received from the recognition and utilisation of historical tax losses.

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Reiterating our high growth strategy

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Short-mid term Longer term
High growth / win the market Leverage scale / grow profit
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	our high growth strategy	our high growth strategy
	High growth / win the market Short-mid term
Revenue	• Market leader takes a disproportionate share of accelerating online penetration • Execute on organic and inorganic growth opportunities	• Continue to take advantage of longer-term online market penetration • Leverage scale and strategic moats to grow contribution margin % • Smarter pricing; better supplier terms due to scale; higher brand awareness • Slow investment in fixed costs • Take advantage of operating leverage in our business model • Disciplined investment in next horizon growth businesses (e.g. international expansion) • Focus on growing profit $ and % as a result of operating leverage
Contribution margin	• Focus on growing contribution dollars (versus contribution margin %) • Areas of investment: • Using price and promotions to drive new customer conversion • Brand building initiatives (e.g., TV)
Fixed Costs	• Invest in longer term growth plays and capabilities to build strategic moats around business: • Mobile, tech, AR/AI/3D • Brand awareness • Trade and Commercial division • Delivery experience • Size of catalogue and private label range • Data and personalisation
Profit	• Maintain a 2-4% EBITDA level and reinvest operating leverage to drive above market growth

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Capital light/cash flow positive business model

A$m	30-Jun-20	30-Jun-21	•	Strong balance sheet position with a closing cash balance of $97.5m and no debt	Strong balance sheet position with a closing cash balance of $97.5m and no debt	Strong balance sheet position with a closing cash balance of $97.5m and no debt	Strong balance sheet position with a closing cash balance of $97.5m and no debt	Strong balance sheet position with a closing cash balance of $97.5m and no debt	Strong balance sheet position with a closing cash balance of $97.5m and no debt	Strong balance sheet position with a closing cash balance of $97.5m and no debt	Strong balance sheet position with a closing cash balance of $97.5m and no debt
Assets Cash & Cash Equivalents Inventories	38.1 6.6	97.5 21.3	•	Positive cash flows from operations and the group’s capital light/negative working capital model were partly offset by a step-up investment ($15m) in private label inventory
Other current assets	3.5	5.4
Intangibles, (inc. goodwill)	7.9	8.1	•	Investment in private label paying off with growth				exceeding drop		ship. All metrics
Right-of-use assets	1.4	7.0		(WOC/ageing profile/GMROI) continue to track better than target ranges
PPE	0.5	1.2
Deferred tax assets	9.4	7.8	•	Flexible balance	sheet position to take advantage of organic and inorganic
Total Assets	67.3	148.3		opportunities
Liabilities
Trade and other payables	22.2	33.2
Employee accruals and provisions	3.7	5.6		Closing cash
Deferred revenue	10.0	15.3		$000
Lease liabilities	1.4	7.1
Income tax payable	0.0	3.2		95,000
Total Liabilities	37.3	64.3		85,000
				75,000
Net Assets	30.0	84.0		65,000
				55,000
Equity				45,000
Contributed capital	76.6	115.4		35,000
Reserves Retained earnings Total Equity	3.5 (50.1) 30.0	4.7 (36.1) 84.0		5,000 15,000 25,000 FY17		FY18	FY19		FY20		FY21

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Our core B2C furniture and homewares category is a ~$16b market, undergoing a structural shift towards online

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Hypothetical adoption curve for online penetration in the Furniture & Homewares market Aus US
%
50%+
40%
30%
Short-Med term 2020: 25.3%
20%
2019: 15.2%
10%
2020e: 7-9%
2019: 5.1%
Time
Start Up Scale Up Optimise
Become #1 Expand market leadership Bank scale benefits
Online market penetration
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Source: Euromonitor International Limited; Home Furnishings and Homewares System 2020 edition, ABS Retail Sales data, TPW estimates

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Demographic and structural changes will drive strong market growth for years to come

1 Millennials are entering our core demographic

Structural changes 2 in our favour

Hypothetical distribution of homewares and furniture spend by age

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Millennials
Age 25 - 40
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35 65
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• Offline exits/store closures

• New consumer habits forming during lock downs

• Faster internet and mobile speeds eg. NBN, 5G

• New market entrants accelerating online shopping take-up eg. Amazon

• New technologies improving experience and conversion eg. augmented reality

• COVID-19 has accelerated online penetration

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Our strategy is based on range, inspiration and service

Our Core Belief

• We believe everyone wants to live more beautifully.

Our Vision

• Our vision is to make the world more beautiful, one room at a time.

Our Mission

• Our mission is to deliver beautiful solutions for our customers’ homes and work spaces, and for all of our other stakeholders, including suppliers and shareholders.

Our Strategic Pillars

• We want to be famous for having the biggest and best range in our category, the most inspirational content and services and the best delivery experience & customer service .

• Our foundations are built on data-driven marketing, world-class technology and exceptional execution by an amazing team.

Our Goal

• We believe if we can deliver the above, Temple & Webster will become the first place Australians turn to when shopping for their homes and work spaces.

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Scale increases our operating leverage, allowing us to accelerate investment in future growth and take market share

REINVEST FOR GROWTH

Use cash flows generated to reinvest in marketing, technology development, product range and overall customer experience

STRONG CONSUMER PROPOSITION

Trusted brand, large range of quality products and great user experience attract customers, grow conversion and drive customer satisfaction

Leveraging our leadership position to realise scale advantages

BETTER UNIT ECONOMICS

Increased scale provides cost advantages in product sourcing, logistics and marketing

REPEAT & FIRST TIME ORDERS

Great initial customer experience builds customer loyalty and grows share of wallet, delivering revenue growth

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Add depth and breadth across our core and adjacent categories; grow private label division

Expand digital capabilities: data, personalisation, AI, augmented reality

Increase brand awareness from 55% to +80% through digital and non-digital channels

Add inspirational content & service: video; 3D; AR/VR; design help

Focus on exceptional customer service and a great delivery experience to drive repeat behaviour

Continue to build out Trade & Commercial division, competing on range, value and a fullservice offering

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Revenue growth is based on checkout revenue which is pre accounting adjustments (deferred revenue and refund provisioning).

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