Temple & Webster Group Ltd (TPW) Earnings Call Transcript

Thank you for standing by, and welcome to the Temple & Webster Group Limited 2025 Full Year Results Call. [Operator Instructions] I would now like to hand the conference over to Mr. Mark Coulter, Chief Executive Officer. Please go ahead.

Thank you, and good morning, everyone, and thank you for joining us today. I'd like to begin by acknowledging the traditional owners and custodians of country throughout Australia. I'm joined today by our CFO, Cam Barnsley, and we'll be taking you through our FY '25 results presentation, which has been uploaded to the ASX this morning. Now, starting on Page 4, you can see Temple & Webster has delivered another exceptional set of results this year. Despite challenging retail conditions, we grew revenue by 21% year-on-year to a record $601 million for FY '25, driven by growth in both new and repeat customers. We ended the year in a strong position following the end of financial year promotional period, with checkout revenue in June up 28% year-on-year. This full year performance has seen our share of the furniture and homewares market grow by 17% versus PCP to a record 2.7%, showing we are making great progress towards our goal of being the largest furniture and homewares retailer and the first place Australians turn to when shopping for their homes. Pleasingly, we were able to deliver this growth, with an $18.8 million EBITDA result, increasing 43% year-on-year, and representing a margin of 3.1%, which was slightly above our FY '25 guidance range. Our cost discipline and the ongoing integration of AI across the business has also enabled us to achieve further conversion rate and cost advantages. As Cam will talk to later, our asset-light negative working capital model continues to position us well, generating $38 million in free cash flow for the year. We had a closing cash balance of $144 million with no debt, meaning we are fully funded to execute on our midterm goal of achieving $1 billion in annual sales. Now turning to Page 5, you will see our key performance indicators. Active customers grew to almost 1.3 million, an increase of 16% on last year, while maintaining exceptional levels of customer satisfaction. Our continued integration of AI tools has supported further improvements in conversion rate, which hit 3% for the full year, up 5% year-on-year. For the full year, our 12-month marketing ROI was in line with our expectations. This reflects increased investment in both performance and brand-building channels as we take advantage of our market-leading position. Importantly, our customers remain profitable in their first orders, and our bottom line is increasing even with this marketing investment. Turning to Page 6. We've continued to grow our share of our $37 billion total addressable market, which remains highly underpenetrated and supported by positive market dynamics. On the chart on the left, you can see online penetration has reached 20% in the Australian furniture and homewares market as shoppers increasingly shift to online. There is still significant runway ahead when you consider levels of online penetration in markets such as the U.S. have now reached 35% of all sales in our category are sold online. Additionally, the online segment of the Australian home improvement market is performing well. Like our furniture and homewares market in its early days, the home improvement category exhibits similar traits and is ripe for disruption. Page 7 highlights our market share gains over the last 5 years. The chart on the right shows that we continue to make solid headway. Our share of the Australian furniture and homewares market has grown to 2.7%, up from 2.3% at the end of FY '24, demonstrating that our strategy and disruptive proposition is on track. To achieve $1 billion in annual sales implies reaching 4.2% market share, and our customer proposition is key to achieving this goal. It is centered around 3 key pillars. First is our price. Our online asset-light model enables a low cost base and deliver margin, allowing us to pass meaningful savings on our customers. Second is our range. Our dropship model enhanced by our private label sourcing capabilities gives us a wide product selection, allowing us to meet many customer style and price point preferences. And third is convenience. With over 90% of products in stock ready to ship, we can offer fast dispatch and avoid the long lead times that have historically characterized the furniture category. Page 8 reiterates that, we continue to track to our strategic plan, and this plan remains unchanged. On Page 9, you can see we continue to build towards becoming the top-of-mind brand in our category. High awareness drives conversion, reengagement and greater marketing efficiency, ultimately reducing marketing spend as a percentage of revenue over time. In FY '24 and '25, we invested around $22 million in brand marketing to test its impact, broaden our channel mix and optimize our spend. These efforts are delivering results with our unprompted brand awareness ranking improving from #7 to #6 in Australia, and we continue to be the #1 online-only brand. Turning to Page 10. Exclusive products contributed approximately 45% of FY '25 revenue, up from 43% in FY '24. This growth was largely driven by exclusive drop-ship products, which remains our fastest-growing segment across all categories, representing 17% of revenue in FY '25. Around 80% of our top 500 selling products in FY '25 were exclusive to Temple & Webster. Over the year, we also added 925 proprietary designs to our range. We are focused on growth across private label and exclusives in key categories such as bedroom, sofa, sofas and outdoor, which all saw over 50% exclusive penetration in FY '25. During the year, we commenced working with a dedicated sourcing team in China, which enables us to have greater visibility over manufacturing, quality and compliance and will help as we continue to grow our private label range. We've also recently opened a new 3PL warehouse in Western Australia, which will hold our private label stock, helping to reduce shipping costs and lead times for customers in the West. This initiative should help us to improve our market share in WA, which remains below our national average. As set out on Page 11, we continue to harness data and AI to deliver initiatives and develop features that either drive revenue or reduce costs across the business. In FY '25, 80% of customer pre- and post-sales support interactions were partially or fully handled by AI or other tech solutions. This has contributed to an over 60% reduction in customer care costs as a proportion of revenue since FY '23. We also continue to benefit from operating leverage as the business scales with fixed costs as a percentage of revenue declining to 10.6% in FY '25. We expect further leverage as we progress towards our $1 billion midterm revenue target. And one of the highlights this year, as you can see on Page 12, has been the significant growth in our home improvement business. As I mentioned, this gives us access to a further $18 billion market, with no online-only dominant player and significantly lower online penetration compared to our core furniture and homewares category. FY '25 home improvement revenue of $42 million, was up 43% on the prior year, supported by growing customer awareness and demand from both new and repeat customers. This is particularly exciting, given private label penetration of home improvement has increased markedly since 2023, with the continued success of Temple & Webster's collection of products. Our Trade and Commercial business achieved $48 million revenue in FY '25, representing 9% growth on the prior year despite ongoing macro headwinds and subdued business investment. Encouragingly, forward order activity improved in the second half, driven by orders across the hospitality, living and build-to-rent sectors. These orders will be recognized as revenue in FY '26. I'll now hand over to Cam to take you through the financial results in more detail.

Great. Thanks, Mark, and good morning, everyone. It's good to be here today to present a strong set of financial results for our 2025 financial year. Firstly, let me start on Page 14. This page provides a high-level overview of our results. As Mark mentioned, we delivered an impressive $601 million in revenue for FY '25, which was up 21% year-on-year. This is a record annual revenue result for the business, and we're particularly pleased with this growth given challenging retail environment and the market conditions through the year. This reinforces the strength and agility of our business model. Our delivered margin result of $191 million also increased 21% on the prior year. This is an important metric to highlight as a continued strong delivered margin gives us the flexibility to reinvest into marketing programs as well as other long-term strategic initiatives through the cycle. Fixed cost as a percentage of revenue decreased to 10.6% in FY '25 compared to 11.3% in FY '24, reflecting ongoing cost discipline in our business. Our EBITDA margin of 3.1% was up 50 basis points year-on-year and slightly above our target 1% to 3% range. We continue to see the benefits of our cash-generative model with $38 million of free cash flow for the year, up a significant 90% on the prior period. This meant that we ended FY '25, with a cash balance of $144 million. With this cash balance and no debt, we remain in a strong position to continue executing against our strategic objectives. Now turning to Page 15, to look at our profit and loss results in more detail. As mentioned, we saw revenue increase 21% in FY '25, driven by growth in both new and repeat customers. We had a particularly strong finish to the year, with checkout revenue growth of 28% for the month of June, some of which we recognized in July for accounting purposes. Delivered margin improved as a percentage of revenue by approximately 10 basis points to 31.7%. This remains towards the top end of our 30% to 32% target range. This was supported by a shift towards higher-margin categories such as bedroom, dining and living room furniture, along with lower warehousing expenses from a new contract in Sydney, which is now recognized in accordance with AASB 16. These benefits were partially offset by higher promotional activity as we navigated market conditions through the year. This strong performance carried through to our contribution margin, which increased 19% year-on-year. This reflects continued efficiencies from our AI investments, particularly in customer service, offset by increased marketing investment for FY '25. As I previously noted, we maintained discipline on the cost base with our fixed cost ratio declining by 70 basis points to 10.6%. D&A increased by $2.5 million this year, as a result of the previously mentioned lease for our warehouse in Sydney. I'll also note that, unrealized currency losses had a $1.4 million negative impact on EBITDA for the year, and this primarily impacted cost of sales. Overall, despite our elevated marketing investment and tough conditions through the year, being able to grow our EBITDA by over 40% and show meaningful margin expansion is a pleasing outcome. Now on Page 16, which highlights our strong financial position. Our balance sheet continues to strengthen, reflecting the cash-generative nature of our business, closing the year with a cash balance of $144.3 million. Inventory levels increased by 10% year-on-year despite materially higher revenue growth. This reflects improved inventory turnover and greater penetration of exclusive dropship products. Our deferred revenue balance increased to $28 million, which is up 31% from FY '24, reflecting strong sales momentum towards the end of June, providing a positive start for accounting revenue in FY '26. Importantly, the group remains debt-free and fully funded to pursue both organic and inorganic growth opportunities. Turning to Page 17. Growth in our cash balance was underpinned by strong operating cash flow and the benefits of our asset-light negative working capital model. Operating cash flow increased to $46 million, reflecting the strength of our underlying business and disciplined working capital management. The continued growth in free cash flow, combined with the low capital intensity of our model provides us with meaningful flexibility and capability to execute on our growth strategy. On the right-hand side of this page, we have outlined our capital management priorities, which remain the same as at the half. Maximizing shareholder returns remains central to our longer-term strategy and is consideration in every capital allocation decision we make. Now turning to Page 18, which sets out our FY '26 and long-term financial profile. FY '24 and '25 were investment years, with higher marketing spend to accelerate growth and build brand awareness. From FY '26, note that brand marketing will become a recurring part of our BAU costs rather than being called out separately. In FY '26, we expect delivered margin to remain within our 30% to 32% target range. Marketing costs are expected to reduce as a percentage of revenue as we see efficiencies from past brand investment. We also expect further fixed cost leverage as we scale. Our EBITDA margin guidance for FY '26 is 3% to 5%, targeting the midpoint of the range. Importantly, this range will allow us to continue to focus on revenue and market share growth whilst maintaining flexibility to adjust our margin and marketing levers in response to conditions. Over the longer term, our margin aspirations remain unchanged. We expect to achieve these levels through supplier scale benefits, a greater mix of private label and exclusive products, improved logistics efficiency and the long-term impact of brand investment in driving repeat customers. In addition, our ongoing investment in AI will continue to deliver revenue and cost efficiencies across the business. Finally, just some housekeeping metrics for FY '26. At this stage, please expect the following: BAU PP&E CapEx will be consistent with FY '25 as a percentage of revenue. Intangible CapEx of between $1 million to $1.5 million, D&A expense of between $12 million and $14 million. This increase is largely driven by our Sydney warehouse lease moving to AASB 16, share-based payments expense of between $5 million and $6 million, and an effective tax rate closer to 30%. Thanks, everyone. I'll now hand you back to Mark.

Thanks, Cam. So, turning to Page 20, you can see that we remain on track to achieve our midterm goal of over $1 billion in annual sales as first outlined at the end of FY '23. This goal requires us to achieve market share of just over 4% versus our current position of 2.7%. We're on track to deliver the strong growth in both our core B2C furniture and homewares market and our growth plays, particularly in home improvement. Turning to Page 21. Pleasingly, the new financial year has started strongly with revenue from 1st of July to 11th of August, up 28% year-on-year. Home improvement continues to outperform. Looking ahead, with anticipated further interest rate reductions, coupled with stimulatory government policies relating to housing. We remain optimistic that conditions in FY '26 should be favorable for the furniture, homewares and home improvement categories. Our on-market share buyback program remains in place, allowing us to improve shareholder returns in the absence of more accretive opportunities. And finally, I'd like to recognize the outstanding efforts of our entire Temple & Webster team. Their dedication, drive and adaptability makes results like these possible. Every day, they help us deliver on our vision to make the world more beautiful one room at a time. Thank you, everyone. We'll now open the line for questions.

[Operator Instructions] Today's first question comes from Owen Humphries at Canaccord.

Well, done again. Just leading and beating expectations. Just to touch on the exclusive range strategy. Obviously, that's core to your business and creates a bit of a moat for you guys over the long term. Just noting that the percentage of revenue was flat half-on-half. Is this just due to the expanded range within the product?

There's 2 things to look at from an exclusive standpoint. So, there's 2 components to that. There's private label and exclusive drop ship. The exclusive dropship piece has been growing very strongly, as you can see in the presentation. And this is a really important piece for us, because it gives you a lot of the benefits of a private label product being exclusive and sort of the moat around our business, but also we don't have to hold the inventory as we do in private label. So that's been a real focus for the team getting that piece growing. And pleasingly, that's increasing as a percentage of revenue. So, we -- overall, we're trying to look at exclusives, both private label and exclusive drop ship together and growing that proportion of revenue over time.

The only thing I'd add to that is it takes time. So, to build out a private label range requires working with factories, or designing our own products and putting in production. So that's a long lead time. And then exclusive drop ship products require scale, and scale will build over time. So, the scale benefits from half-to-half are not as apparent as scale benefits over years. So, you'll see that metric tick up over a longer period of time. We're not expecting it to get to that 70% in a 12 months' time. It's -- the goal of the business is to get to 70% of the business -- 70% of the revenue of the business is exclusive to us, and that will take a time. It is a strategic goal.

And I guess you're going to get asked this question every meeting over the next couple of weeks. But just I guess, a big market, you're the leader. You've got a significant cash balance, your unit economics year-on-year were favorable, particularly on the direct basis, performance marketing. Just to understand why we're still building cash, like the 3% to 5% guidance range there, last year, this year was 3%, next year, 4% kind of margin. Just interested in your view around cash generation versus reinvestment growth.

Yes. So look, we -- as we sort of outlined in the presentation, and we did at the half as well, we do have a framework around capital management. We do have a series of investment initiatives that we're looking at for FY '26 being organic. But even with those initiatives, things like, for example, you called out the Western Australia warehouse, we'll put inventory in that, and that will obviously be a capital investment, and there's other things, too. Despite those capital investments, we are still expecting to be cash generative. We have looked more at M&A opportunities in the past 6 to 12 months. Nothing has emerged that's sort of within our strategy at this point. But we are looking at deploying that capital in different ways. And we're very conscious of the fact that we need to think about shareholder returns in that. And we'll always have a look at both organic and inorganic opportunities when we're thinking about expansion. So it's definitely a priority for us.

And our next question today comes from James Bales at Morgan Stanley.

Firstly, on home improvements, the reinvestment that you see as being required there for scaling home improvements, including the build-out of private label. Can you give us some idea on that? And maybe as a follow-on, how do you expect the gross margins in home improvements to compare to homeware and furnishing in the long run?

Yes, it's a good question. Primarily -- I mean, I'm going to speak to the dollars because that we're buying to growth forecast, and I'm not going to give you a back door into the growth forecast. But obviously, we are predicting high growth for home improvement. We want it to be high growth. So we are supporting the growth through increased investment in private label. The issue for home improvement versus furniture and homewares is it is an earlier part of the cycle. So most of the supply chain is oriented around offline. There's limited wholesalers in this market. So really cracking the home improvement category has required us to leverage our balance sheet, our sourcing capabilities and our China sourcing office to really build out the range and have a range of great quality products at right prices. And once you can see -- once we start improving the range, you see the growth is slow, because Australians are hungry for great quality products at great prices. I think in terms of margin profile, yes, a large part of the category is branded. However, a large part of it is not as well. So you go into a Reese and Reese's on private label, you go into Bunnings, Bunnings has its own private label. So actually, private label suits this category because, I mean, other than the really top end brands, I think people just want products that look good. Wherever there's a big opportunity for private label, usually, there's higher margins. So, we think there's a higher -- a pretty big opportunity for private label and home improvement. There's less competition. Australian -- some of Australian home improvement retailers are quite profitable. So, we actually -- it's early days and thesis is yet to be proven and the businesses are operating relatively similar margins now. But I actually think longer term, home improvement could have a higher margin potential than Furnish Homes.

Okay. Got it. That's interesting. And then I also wanted to ask about the way that you view the unit economics. So logically, marketing ROI could dip below 1x and still be meaningfully LTV accretive. How much more aggressive do you guys plan to get on brand and performance marketing? And with brand having a longer payoff, how do you expect the shape of that ROI trend to move over the next couple of years?

Yes. Look, actually, what we're -- counterintuitively, we actually think we're at the point now that we've spent enough to learn what works, what doesn't, whether it -- the mix of marketing, how that's all working together, the impact on performance. We're at that point where every -- all the models are telling us and all the analysis and the media mix modeling and everything else is that actually we should be spending more of our mix on nonperformance channels. And brand -- look, brand for us, don't forget, is a code name is a code word for anything that's nonperformance. And so, we talk about brand ads includes paid social, includes audio, includes out-of-home, includes TV. It's pretty much every channel which we're not buying on a straight performance basis. So, it's not necessarily just brand, but it's channels outside of our core performance. But everything we're seeing and what we're being advised to is actually more of a mix should be on those other channels. And what we're now seeing is because we've got to the point where we're spending enough, we've reinforced the brand. We're changing people's memory structures. You can see that we're improving our brand awareness ranking. What's happening is that, the entire marketing msix is working more effectively. And actually, our ROI on marketing spend as a whole is now improving. So weirdly actually, if the models are right and what we're seeing is going to play out, then actually as we increase brand spend, our ROI should improve because the entire marketing stack is working is better as our performance is working harder, so the other channels. So, it's the full channel mix. You see TV ad, you then maybe read some sort of content, or you see a social ad and then you're in Google and you click on the app, the whole thing has worked really well. And so Temple & Webster is the go-to brand. We're seeing that now and the overall ROI is improving. So we're actually -- I don't want to necessarily predict the marketing metrics. But as I said, if everything continues as it is, you should actually see that metric start improving even as we go further into brand marketing.

And James, it's Cameron here. Just to your question around sort of how much more aggressive we would go on brand. You can see the step-up between '24 and '25. So, we spent $10 million on what we classify as brand in '24. That was $12 million in '25. So, you see there's incremental spends here. It's not huge step changes over time.

And our next question today comes from Aryan Norozi with Barrenjoey.

Just a few ones for me. Apologies, if they're accounting based. Just around the deferred revenue piece, is the best way of just looking at that is it increased $5 million half-on-half. And so, like the vast majority of that is what you would have booked as revenue in the month of June. So basically, your revenue is understated by $5 million.

Yes. So, look, deferred revenue is a feature of our model because we do have a cutoff date where we are unable to deliver our products to our customers. And in order for those revenues to be accounted for, it does need to be delivered. Given the strength of the end of financial year period, the growth rate in June, that was a slightly higher uptick than what we were expecting in deferred revenue. So, I think, Aryan, your comment is valid.

And just on the AASB 16 accounting. So, I guess the guidance was always 1% to 3% EBITDA margins, but like there's a pretty material movement in lease costs going out of EBITDA and into sort of D&A. Like -- the 4% to 5% margin, like -- was that always part of the thinking around the lease costs falling away from it and giving a benefit to EBITDA? Or is that a change? Because if you take the 4% to 5% and you take out the benefit from lease accounting, it implies a much lower margin.

Firstly, 3% to 5%, not 4% to 5% on the guidance range.

Sorry, 4% to 5%. Sorry.

Targeting midpoint. Secondly, look, that's an accounting EBITDA guidance measure. So, we did get a, call it, 30 to 40 basis point sort of improvement from that lease moving out of our warehouse costs and into D&A being below EBITDA. But there's a lot of things that go into like FX, for example, we had an FX headwind to the tune of about $1.4 million for the full year, which is over 20 basis points. So, you net those 2 things out, and we're still at the top end of our guidance range. So, look, there are definitely things that move EBITDA like FX and AASB 16, but it is an accounting EBITDA measure that we focus on.

And our next question today comes from Rachael Harwood at Macquarie.

Just a quick one for me. You mentioned the WA 3PL that you're opening. Could you maybe just talk to the market share that you've got in WA at the moment and how big you see that market?

Yes. So, I mean as far as we can tell, and obviously, the data is everything here. But definitely, we are underpenetrated in WA by -- it's probably around -- I think it's around 20% to 30% below our national average. The reason for that is pretty obvious. Our products are stored mostly in Melbourne and Sydney and shipping times are longer and most problematically, shipping costs are much higher. If you look at -- if you take out WA, basically, we're at the scale where our sales follows population. So primarily Eastern Seaboard in the metro areas. However, WA is a high-growth market. It's one of the few high-growth markets in Australia. So, what we've done is, as I said, we set up a 3PL in WA, and we've had containers sent directly there to start right. We will also be looking at sending mixed containers across the country from our Sydney, Melbourne, so having goods stored in WA. The goal, obviously, is that then we'll market to WA residents that we have goods that are quick ship and cheap to ship to you, with the goal of trying to get the WA back to kind of national market share averages.

And our next question today comes from Chami Ratnapala with Bell Potter Securities.

Congratulations team, Cam, and Mark, again, another solid sort of execution. First question, just on fixed cost leverage and also AI, you talked a bit in detail, Again, once again, leading the group here. Perhaps talk to us -- just give a bit more color on where -- because now the customer service cost line seems to be nearly fully executed. Out of that into revenue and cost lines, including that marketing investment as well, maybe talk to us through where this could lead to because the fixed cost line in addition also looks pretty promising over the next few years in getting to that 15% EBITDA margins.

Yes. Maybe I'll -- it's Cameron here. Maybe I'll take the question on the operating leverage first. So, I think look, it was a pleasing outcome for the year. So, we reduced that fixed cost ratio down from 11.3% to 10.6%. The key driver of that and the largest fixed cost in the business is our employment expense. So that grew by 13% year-on-year versus revenue at 21%. So, there's obviously very natural operating leverage there, and we hope that we continue to see that operating leverage as we go towards our long-term goal of 6% fixed cost to revenue. There are a bunch of different drivers in that operating cost. And I think you spoke to Chami, around the customer service cost. That has continued to come down year-on-year, as a result of AI investment. So about 60% reduction as a percentage of revenue over the past 2 years.

Sorry, Mark, you go, yes, on the AI.

Yes, I was just going to say, in terms of AI, I mean, it's a big question, right, where we're going to be using AI. I mean, I think it's safe to say, we're at the start of the journey with AI. Yes, we have deployed into some of the more obvious first areas such as our customer care interactions. But we're using it, as I said in other calls, across the site in terms of content, in terms of search, in terms of personalization -- but we're at the really start. So, the goal -- our goal that we're working towards is really everything is personalized, whether it be the products that you see, your service levels you get, the marketing offers that you may receive, the experience will look very different from one Temple & Webster customer to another. And to do that, you need AI at scale. So, I think, look, we're at the very start. I think cost base, we're still working through enabling our teams to be more effective and have higher productivity using AI. We're now training the entire -- pretty much the entire company on AI. We have an AI dedicated team, which comes up with the innovative out-of-the-box solutions, plus we have our engineering team, which is also being trained in AI. So, where it goes, I think we're really at the start of the journey. So, I think there is -- as you say, there's opportunities in every line of the P&L, whether it be fixed cost or marketing, or even margin and pricing, there is opportunity for AI to have a huge impact.

Perfect. And then, if I may, just on the revenue and FY '26 outlook, great to see 28% maintained in the month of July, checkout revenue-wise. I mean, rate cuts earlier this week and comps in September, October, obviously much easier than after that seasonal period on November, December, quite harder or challenging. How do you view the uplift you get from the overall consumer sentiment benefit as well to your category?

Yes. I mean, definitely, we want there to be more rate cuts. That has a benefit for the business in a few ways. Obviously, the most obvious one is if customers have more disposable income and they're paying less on their mortgages, then great retail will benefit. But there's secondary benefits, particularly for a furniture and homewares retailer, and that is it gets the housing market going. So really, we want these people moving, because if you think about your own life, when are the times where you bought the most furniture, and it's usually life event. It's you've moved out of home or you've moved into your first department or you moved into -- you bought your first house or bigger house or kids come along or whatever kind of those life stages. But getting the housing market turning, getting people moving is great for the furniture industry. And you can already see the rate cuts start leading to the housing market improvement. I think what happens from now, we'll see. But economies are as much psychology as financial fundamentals. So, the moment customers think, okay, we're safe. We don't have another rate rise around the corner. Actually, we've got another rate cut coming, and that may be another cut. But once the psychology shifts into, okay, we can breathe now, then I think you'll see consumers open their wall.

And our next question comes from Ed Woodgate at Jarden.

Well done on the results. So just wanted to follow on from the warehouse question. So, you mentioned there's a 30 to 40 bps benefit there, but can you just talk to whether there was any increase in warehouse capacity as part of the new lease agreement? And was it related to the WA contract?

No, this is in relation to our Sydney warehouse. So, we entered a new lease with our provider in Sydney. It was a slightly longer term, and we have a bit more control over it than we previously did, and it meets the requirements now for AASB 16 accounting. So no, the WA warehouse is a separate contract.