Annual Report 2021 Redbubble Founded in 2006, the Redbubble Group (RB Group) incorporates Redbubble Limited and its subsidiaries including TP Apparel LLC (TeePublic). RB Group owns and operates the leading global online marketplaces hosted at Redbubble (redbubble.com) and TeePublic (teepublic.com), powered by over one million independent artists. RB Group’s community of passionate creatives sell uncommon designs on high-quality, everyday products such as apparel, stationery, housewares, bags, wall art and so on. Through the Redbubble and TeePublic marketplaces, independent artists are able to profit from their creativity and reach a new universe of adoring fans. For customers, it’s the ultimate in self expression. A simple but meaningful way to show the world who they are and what they care about. Contents 03 04 06 08 11 18 43 44 71 118 119 124 127 Year in Review Final Performance Highlights Chair’s Letter CEO’s Review ESG Information Directors’ Report Auditor’s Independence Declaration Remuneration Report Consolidated Financial Statements Directors’ Declaration Independent Auditor’s Report Shareholder and other ASX Required Information Corporate Information Front Cover Artworks: FAST FOOD / Softdrink Art Board Print designed and sold by Daniel Coulmann Let’s Dance Retro Rainbow Text Art Print designed and sold by ShowMeMars Disco Poster designed and sold by souloff Retro Spectrum Poster designed and sold by mojovalley Malibu Art Board Print designed and sold by mojovalley Retro Radio Boombox Art Print designed and sold by sundrystudio Sunglasses Collection – Pink Ombré Palette Canvas Print designed and sold by Cat Coquillette This Report covers Redbubble Limited as a consolidated entity consisting of Redbubble Limited (referred to in this report as Redbubble or the Company) and its controlled entities. Redbubble is a company limited by shares, incorporated and domiciled in Australia (ACN 1192002592). Its registered office is at Level 3, 271 Collins Street, Melbourne VIC 3000. Redbubble is listed on the Australian Securities Exchange (ASX:RBL). Through the use of the internet, the Company ensures that our corporate reporting is timely, complete and available globally. All press releases, financial reports and other information are available on the Redbubble Investor Centre at shareholders.redbubble.com Redbubble Limited ABN: 11 119 200 592 Year ended 30 June 2021 Butterfly Spots Throw Pillow designed and sold by Andrea Lauren Monstera leaf tropical pattern minimal botanical Throw Pillow design designed and sold by Andrea Lauren Puffins Throw Pillow designed and sold by Andrea Lauren Safari Plants Throw Pillow designed and sold by Andrea Lauren Swans Throw Pillow designed and sold by Andrea Lauren Alpaca - Wisteria Purple Throw Pillow designed and sold by Andrea Lauren Year in Review Total Revenue Less: Artist Revenue FY YoY (FY21 v FY20) FY21 FY20 Growth 657.3 416.3 (104.0) (67.4) 58% 54% Marketplace (MP) Revenue 553.3 348.9 59% Gross Profit (GP) 222.7 134.4 66% GP % (on MP Revenue) 40.3% 38.5% 1.7pp Paid Acquisition (Marketing) (71.2) (39.8) 79% Gross Profit After Paid Acquisition (GPAPA) 151.5 94.5 60% GPAPA % (on MP Revenue) 27.4% 27.1% 0.3pp Operating Expenses Other Income/Expenses(1) Earnings before interest, tax, depreciation and amortisation (EBITDA) (88.7) (79.3) (10.0) (10.1) 12% (1%) 52.7 5.1 930% Depreciation & Amortisation (13.3) (13.7) (3%) Earnings before interest and tax (EBIT) 39.4 (8.6) N/A(2) (1) Includes non-cash share-based payments and currency gains/losses (2) Meaningful growth rates cannot be provided for metrics that have moved from a negative to a positive amount. 03 Annual Report 2021 Financial Performance Highlights Marketplace Revenue (A$m, FY17 - FY21) GP (A$m, FY17 - FY21) GPAPA (A$m, FY17 - FY21) +41% CAGR 553 +45% CAGR 223 +41% CAGR 152 Redbubble Group (consisting of Redbubble Limited and its subsidiaries) delivered record financial results and operational achievements during FY2021, providing strong foundations from which to drive future growth. The business is well capitalised to pursue its medium term aspirations with confidence and conviction. 350 257 134 95 95 67 183 141 64 50 47 38 Gross Transaction Value (1) Marketplace Revenue Artist Revenue FY17 FY18 FY19 FY20 FY21 FY17 FY18 FY19 FY20 FY21 FY17 FY18 FY19 FY20 FY21 $701m $553m $104m ↑ 48% floating currency ↑ 58% floating currency ↑ 58% floating currency ↑ 60% constant currency (2) ↑ 71% constant currency (2) ↑ 70% constant currency (2) Gross Profit EBITDA Cash Balance $223m $53m $99m ↑ 66% floating currency ↑ $48m ↑ $41m ↑ 79% constant currency (2) Over the last 5 years Marketplace Revenue has grown at a compound annual growth rate (CAGR) of 41%. Gross Profit and GPAPA growth also displayed scalable unit economics as shown on the following page. (1) Gross Transaction Value (GTV) represents total receipts from customers less fraud, refunds and chargebacks. (2) “Constant currency basis” reflects the underlying growth before translation to Australian dollars for reporting purposes. Redbubble sources about 93% of its Marketplace Revenue in currencies other than Australian dollars. TeePublic sources about 91% of its Marketplace Revenue in US dollars. Redbubble operates a unique three-sided marketplace with genuine flywheel effects where improving one side creates a positive reinforcing impact on the other side. The content that artists sell attracts customers and more customers enables the fulfilment network to scale, lowering costs and improving services, thus attracting additional customers. This increase in customers creates more Artist revenue, encouraging new Artists to the platform adding more content, attracting more customers and the cycle continues. This powerful flywheel effect was witnessed throughout FY2021 and drove record financial results for RB Group. The RB Group Flywheel Delivering value to artists inspires them to create more unique content 728,000 selling artists on RB marketplaces (↑54% YoY) and they earned $104m in FY2021 (↑54% YoY) Driving top line growth through customer acquisition and loyalty reinforces our competitive position 9.5 million unique customers (↑40% YoY) spending $701 million GTV (↑48% YoY) Scaling the network improves the customer experience and unit economics 44 fulfilment locations across global networks (↑7% YoY). 04 05 RedbubbleAnnual Report 2021 Chair’s Letter On behalf of the Redbubble Board of Directors, I am pleased to present the 2021 Annual Report. The past year has again been very challenging. Staff at all Redbubble’s offices in Melbourne, San Francisco, New York and Berlin worked remotely for almost the entire year and, while this has become the norm in many places, prolonged absences from the office continue to be demanding. The company has worked hard to maintain a sense of community and support the mental health and well-being of our people during this time. All geographies in which the Redbubble and TeePublic marketplaces operate continued to be disrupted by COVID-19 during FY2021. As we all faced the second year of the global pandemic, Redbubble’s purpose of bringing more creativity into the world has never been more important. The pandemic continued to have a profound effect on consumer behaviour and accelerated the shift to online platforms, including ours. We are now seeing a freeing of restrictions in many places around the world, at least in relation to retail, hospitality and travel. I am pleased to report that, with many countries entering the ‘post-COVID’ era in the latter part of FY2021, our business continued to perform strongly and retain many of the customers introduced to our marketplaces during lockdown. In FY2021, the Group delivered record financial results and operational achievements including record earnings for creative artists using our marketplaces to connect with their customers. These results are a testament to how well Redbubble was able to meet the challenges of FY2021 through a resilient business model, a robust fulfillment network, adaptable staff and a loyal community of artists who continued to produce work that attracted customers to our marketplaces in greater numbers than ever before. In addition to these outstanding financial results, in my first full year as Chair, I have been particularly pleased with the collegiate approach of the Board to its work in challenging times. A key responsibility of the Board during the year was to select and appoint a new CEO to take over from interim CEO and Redbubble founder Martin Hosking. In November 2020, the Board was pleased to appoint Michael Ilczynski who brought to the role a wealth of experience in leadership of technology companies, development of high-performing teams and scaling of businesses, having been most recently CEO of Seek, Asia Pacific & Americas. With Mike’s commencement in January 2021 and changes to the structure and composition of the Executive Leadership Team, the Group has the right team in place to build on the significant achievements to date and lead Redbubble into its next phase. The FY2021 results provide strong foundations for the team to drive future growth. After a year of exceptional growth, we look forward in the short term to consolidating our achievements and investing prudently to enable us to seize the opportunities that lie ahead. Readers will note that, in this report, we provide greater detail than previous years in relation to the Group’s approach to environmental, social and governance (ESG) issues. Redbubble’s business model has always emphasised a small environmental footprint together with a strong focus on social good. However, as the report explains, we have recognised the need to better understand our material ESG impacts and more clearly integrate ESG into our strategy and decision making in the future. In FY2022, we look forward to expanding further on the detail around ESG provided in this report. In closing, I would like to thank the talented artists who choose Redbubble to bring more creativity into the world, the third party fulfillers and content partners and the customers who continue to use our marketplaces in increasing numbers. Thank you also to my fellow Directors, Mike and the Executive Leadership Team and the many committed employees of the Group for their ongoing contribution. I would also like to welcome all new employees who have joined us over the past year. Finally, thank you to our shareholders for their continued support as we realise our ambition of creating the world’s largest marketplace for independent artists Anne Ward Board Chair 06 07 RedbubbleAnnual Report 2021 CEO’s Review I am delighted to be presenting my first annual review as CEO of Redbubble Limited. As readers will be aware, the COVID-19 pandemic has again challenged us all in FY2021. Having commenced with the Group in January 2021, travel restrictions have meant that I have not yet had the opportunity to visit our offices in San Francisco, New York and Berlin or meet many of our Melbourne staff in person. Even without this face to face contact, though, I have been impressed by the skill, professionalism and resilience of our staff and their dedication to the Artist community whose customers our marketplaces service. In our Annual Report last year, our founder and then interim CEO, Martin Hosking, described FY2021 as a year of promise provided the Redbubble Group maintained the momentum of FY2020 through a clear focus on our four key strategic themes: artist activation and engagement; user acquisition and transaction optimisation; customer understanding, loyalty and brand building; and physical products and the Third Party Fulfilment Network. FY2021 Results I am pleased to report that in FY2021 the Group delivered on that promise and achieved record results demonstrating the power of the business when it is operating at scale. In summary, at the Group level, Gross Transaction Value across the marketplaces was $701 million for the year, up 48% year on year and up 60% on a constant currency basis, Marketplace Revenue was $553 million, up 58% year on year and 71% on a constant currency basis and NPAT was $31 million compared to a loss of $9 million in FY2021. This represents a remarkable year for the Group, but we are particularly proud of the record Artist revenue that was earned by the community of creative Artists who use our platforms to connect with their customers. In April 2021, I shared our medium-term aspirations. These aspirations are focused on driving a step-change in business scale and Artist impact by growing our core topline metrics of Gross Transaction Value to $1.5 billion p.a., Marketplace Revenue to $1.25 billion p.a. and Artist revenue to $250 million p.a. These aspirations will be achieved through a process of making disciplined and phased investments against our 4 key strategic themes outlined above. During FY2021, substantial progress was made against all four strategic themes delivering record growth during the year and providing a solid foundation for sustained growth into the future. Artist Activation and Engagement FY2021 saw $104 million earned by 728,000 Artists across the Redbubble Group marketplaces, the highest annual amount ever earned by the Artist community. This represents not only strong growth in the number of selling Artists during the year, but also the continued engagement of existing Artists, demonstrating the long-term value that Artists and their content bring to the marketplaces. Operationally, a Group level Artists function was established in the second half of the year and this will enable us to take a more proactive and segmented approach to Artist acquisition and engagement across both the Redbubble and TeePublic marketplaces in the years ahead. User Acquisition and Transaction Optimisation We had 9.5 million unique customers that made purchases on our marketplaces during FY2021, up 40% year on year. Organic customer acquisition channels grew strongly and remain a key source of competitive advantage for the Group, while we also saw particularly strong growth in acquisition from Google Ads, affiliates and PR channels. More than half of all sales on the platforms in the year occurred via a mobile device. Marketplace revenue on our apps grew 77% year on year during FY2021. We also saw stronger engagement and retention of customers who use our apps and we will continue to invest in improving the customer experience and attracting customers to these platforms. Customer Understanding, Loyalty and Brand Building A very encouraging aspect of FY2021 performance was that purchases by repeat customers made up 42% of marketplace revenue with the rate of revenue growth from repeat customers outpacing that of first-time purchasers. The rate of repeat purchases is a key loyalty metric and data from the H1 FY2021 customer cohort showed that those customers who first purchased on the platform during the shutdowns last year have shown a 6 month repeat rate at the same level as those who were first acquired in the equivalent half in FY2020 (pre-COVID). This provides us confidence that many of the gains made during this unique period will be sustained as economies re-open. Increasing brand marketing to drive awareness and engagement will be a significant part of the next phase of investments, and we are already making progress with early experiments on our brand positioning. The focus on growing our PR channel started about 18 months ago and is progressing well, the early results indicating we are laying the right foundations for launching future successful brand campaigns. 08 09 RedbubbleAnnual Report 2021 Product Range and Third Party Fulfilment Network In FY2021, we saw the value of our investments to enable the third party fulfillment network, with the network maintaining continuity of operations and supply in the face of surging demand, record holiday season volumes and constrained shipping conditions due to COVID, all without compromising the customer experience. We also continued to expand the product range by adding new products including jigsaw puzzles, aprons and magnets, in addition to the significant lift from masks which were added in Q4 FY2020. In addition to the uplift achieved by expanding the range, we also saw customer acquisition and conversion gains through our focus on improving and refreshing existing product quality and range. The focus of investment in the growth levers that we have will change over time, but the past year has shown that we are well placed to deliver on the medium-term aspirations we have set ourselves for the benefit of the community of Artists, their customers, our staff and shareholders. I would like to close by thanking the talented and resilient teams at Redbubble and TeePublic for their commitment and dedication during a challenging year and Anne and the Board for their support. Michael Ilczynski Chief Executive Officer ESG Information Introduction Redbubble Group’s mission is to create the world’s largest marketplace for independent artists. As a socially responsible and environmentally conscious business, we have always felt a strong duty to the artists, customers and third-party fulfillers that use our marketplace, as well as our employees, shareholders and community, to evaluate the environmental and social impact of key aspects of the marketplace flywheel. With the growing sense of urgency about climate change, concerns about human rights impacts in the supply chain and the global move towards a circular economy, responsible business practices are now non-negotiable. Environmental, social and governance factors (ESG) are no longer an externality of business success. Instead, they are critical for the long-term sustainability of organisations. This imperative is not new to Redbubble Group. Our mission-driven business model was designed to have a small environmental footprint, but we know that we have the potential to do more. This section introduces our first ESG strategy, reflecting our desire to better understand and formalise our approach to ESG. The ESG strategy will inform our broader objectives, goals and disclosures in the future, as we work towards building an enduring marketplace that connects people through creativity and empowers our community without compromising the planet. ESG strategy In FY2021, Redbubble Group commenced a robust exercise to identify and prioritise the ESG areas where we have the greatest impact across our value chain. The result of this work has informed our ESG strategy, which reflects: ● our ESG vision, which is aligned to Redbubble Group’s broader mission ● the impact areas that are most important to our stakeholders and our business ● our overarching areas of ambition – People, Planet and Prosperity ● the United Nations Sustainable Development Goals (SDGs) that we believe our business can contribute to ● the main enablers to delivering our strategy. As we continue our ESG journey, our ESG strategy will evolve, as our business and the context in which we operate are constantly changing, as is the understanding of our environmental and social impacts. 10 11 RedbubbleAnnual Report 2021 Redbubble Group ESG strategy overview Redbubble mission: Creating the world’s largest marketplace for independent artists, bringing more creativity into the world ESG vision: Build an enduring marketplace that connects people through creativity and empowers our community without compromising the planet ESG ambitions PEOPLE PLANET PROSPERITY Enable our people to positively impact our culture and community Impact areas: Reduce waste and emissions from our operations and the third party supply chain network that uses our marketplace ● Inclusion & Diversity Impact areas: ● Culture ● Community Impact ● Waste Management Empower and protect people who design, sell, make and use products from our marketplace Impact areas: ● Artist Empowerment ● Supply Chain Social ● Carbon Emissions Responsibility ● Supply Chain ● Digital Marketplace Environmental Impact Integrity ● Product Development & Quality SDGs: Enablers: Governance Communication and transparency Technology and innovation Systems and standards Partnerships The five enablers will support the delivery of our strategy and help embed ESG across the Group through strong governance, transparent and effective communication, the smart use of technology, clear marketplace standards and guidelines, and strategic partnerships. Our next steps include a comprehensive review of the current state and the development of an action plan aimed at achieving and reporting on these goals. We want to be more deliberate and impactful in the way we run our business, and we believe that clear ownership and actions will be key to our success in delivering on both existing efforts and new initiatives. Strategy development process We undertook a number of activities to develop our strategy with substantial support and leadership from the Redbubble Group Leadership team and senior employees throughout the business. The table below details the activities at each step. Steps Activities Desktop research Review of current trends, industry context, peer analysis, sustainability reporting frameworks and internal documents Stakeholder engagement Internal and external interviews with selected stakeholders including the Group’s Leadership team and senior employees, customers and fulfillers, and a survey of over 2,000 artists UN SDGs mapping Gap analysis Mapping of the identified impact areas to the UN SDGs, assessing the extent of the Group’s potential impact on each and our alignment to the SDGs goals Analysis of the Group’s current management approach across impact areas, the extent to which the Group is already addressing the material topics, and areas for improvement ESG strategy development Strategy development including the alignment of ESG impact areas under agreed pillars, the development of goals for each People, Planet and Prosperity pillar and creation of the overarching ESG ambition Validation Tested and validated the impact areas and the ESG strategy with the Group’s Leadership team and senior employees 12 13 RedbubbleAnnual Report 2021 UN Sustainable Development Goals The Sustainable Development Goals (SDGs) were adopted by United Nations member states in 2015 as a universal call to action to end poverty, protect the planet and ensure that by 2030, all people enjoy peace and prosperity. The SDGs can help a business define its aspirational purpose in a way that is relevant and inspiring to stakeholders, allow purpose to become the foundation for its strategy, and ignite long-lasting positive change to support increasing shareholder value over the long term. The 17 goals translate to 169 targets. As part of Redbubble Group’s ESG strategy development, we mapped our impact areas to the SDG targets and identified the SDGs that we believe we could most meaningfully contribute to as a business, in order to ensure our efforts were aligned with the bigger world picture. SDGs What this means for Redbubble Group SDG 5 Gender equality | Relevant targets 5.1, 5.5, 5.b As a thriving tech company, we have a duty to recognise the glaring gender inequities that exist in the tech industry, and to make a positive impact where we can, such as by promoting gender equality in our workforce. We also have the opportunity to use technology to support the empowerment of women through STEM. SDG 8 Decent work and economic growth | Relevant targets 8.3, 8.5, 8.7, 8.8 In working towards our mission, we enable entrepreneurship, creativity and innovation to thrive amongst the network of artists and third-party fulfillers that use our marketplace; most of which are small and medium-sized enterprises. SDG 10 Reduced inequality | Relevant targets 10.2, 10.3, 10.4 The past few years have shone a light on social inequalities beyond gender, such as race and ethnicity. We must take active steps to promote the social and economic inclusion of all the people who use our marketplace, and extend this to the communities that we operate in. SDG 12 Responsible consumption and production | Relevant targets 12.1, 12.2, 12.4, 12.5, 12.6, 12.7, 12.8 While our business model is designed to have a small environmental footprint, we have the opportunity to support the reduction of waste generated by marketplace users throughout the supply chain, including through supporting the efficient use of natural resources and encouraging responsible consumption. SDG 13 Climate action | Relevant targets 13.2, 13.3 As a business that intends to thrive for years to come, we believe that embedding climate positive actions in our business decisions and company culture is crucial to achieving a prosperous future for our company and for the world. People Impact areas Inclusion and diversity Culture Community impact SDGs Our Goal: Redbubble Group enables our people to positively impact our culture and community. To do this, we need to ensure that we have a diverse workforce that reflects our broader communities, and that we create a working environment that supports our employees’ development opportunities and wellbeing. We provide flexible working arrangements and support their health and wellbeing, which has been especially important during COVID-19. More broadly, this is one step towards cultivating an inclusive workplace where everyone has the opportunity to thrive. In early 2021, we launched our new Group Diversity Policy, which restates, reinforces and raises the bar on our diversity objectives and commitments. Currently, 40% of our Board identify as female and six of the eight direct reports to the Group CEO identify as female. We have a range of commitments and objectives to deliver greater inclusion and diversity across the Group, and support our employees’ sense of belonging. While we have strong female representation within our leadership team, we know that identity extends beyond gender and that there is more work to be done to achieve greater representation in our broader workforce, and among the artists and third- party fulfillers that use our marketplace. Social good is part of Redbubble Group’s DNA, and our employees embody this. As our business grows, we are focused on keeping true to our social mission and values. Many of our employees choose to work at Redbubble Group because they believe in our mission. We actively back them to advocate for issues they care about through philanthropy, volunteering and in-kind support. Our Community Collective is an employee-driven initiative that helps us give back to our local communities. In previous years we’ve partnered with organisations who focus on issues like the environment, cancer, HIV/AIDS, domestic violence, and poverty. Our efforts this year shifted to donating clothes and tech equipment to communities and schools in need to support them during COVID-19. This year, we also partnered with Black Art Futures Fund (BAFF) for Black History Month celebration. BAFF provides general operating support for U.S. small and community-based Black-led and Black-benefitting arts and culture organisations, and partnering with them allowed us to extend our financial and cultural contribution to an artist community outside the Group. While we have supported a range of social causes and community initiatives to date, we plan to be more deliberate in the coming year in aligning our contributions to the areas where we believe we can have the most impact. 14 15 RedbubbleAnnual Report 2021 Planet Impact areas Waste management Product development and quality Carbon emissions Supply chain environmental impact SDGs Our Goal: Redbubble Group is working towards reducing waste and emissions from our operations and the third party supply chain network that uses our marketplace. As a digital marketplace where products are sold by artists on-demand, our business is designed to have a small environmental footprint. While the local third-party fulfillers that manufacture products offered through the marketplace minimise excess unsold stock and unnecessary transportation, environmental impacts are still occurring throughout the product lifecycle. We know that there are opportunities for us to support the third party supply chain network in creating greater efficiencies and reducing waste from product development, manufacturing, packaging, delivery and end-use, including encouraging continuous improvement of the quality and design of products available on the marketplace so that they last and minimise returns, and better managing returns when they are received. We are currently assessing how we can help artists be more sustainable in the design of their products and support the circular economy. Where possible, product returns are also donated to local charities. TeePublic’s partnership with Terecycle is an example of finding recycling solutions for products that are not donated to charity, such as stickers and phone cases. While Redbubble Group does not own or control the businesses in the supply chain, it is important that going forward, we better understand and manage the collective environmental footprint of the marketplace, and that we do this in close cooperation with the supply chain. We help to identify environmental benchmarks for the third-party fulfillers. We continue to work with the fulfillers and other third parties in the supply chain to better understand the significant environmental impacts and to establish a set of marketplace-wide standards and objectives specific to ESG. Emissions from transportation also have an impact on the environment. Local fulfillers help to minimise transport distances, but for the remainder, Redbubble offsets emissions from product shipping through a renewable energy partner, 3Degrees. In terms of the Group’s operations, we know there are more things we can do to take action on climate change, such as reducing our own emissions and running our business with renewable energy. Over this year we will assess our current state, evaluate areas of improvement and set specific marketplace standards, goals and targets to track our progress in the years ahead. Prosperity Impact areas Artist empowerment Supply chain social responsibility Digital marketplace integrity SDGs Our Goal: Redbubble Group strives to empower and protect people who design, sell, make and use products from our marketplace. To succeed in our purpose to bring more creativity into the world, we have a set of expectations and guidelines for all the creators and users to maintain an open marketplace where artists are free to express themselves, whilst protecting marketplace users from abusive, hateful or racist content. As a tech company geared at empowering artists, the integrity of our marketplace is mission critical. We want to ensure our marketplace is free from offensive, sexist, racist or hateful content, but this comes with challenges in a marketplace of user-generated content. We proactively find and remove content on the marketplace that falls outside our guidelines and are proud of our efforts, but as the volume of content uploaded to the marketplace grows, it’s crucial that we continue to think about how we can improve and continue to scale these efforts in the years ahead. We are also continually improving our operational procedures for data security and privacy and ethical business conduct to ensure we remain agile and responsive to changes in our operating landscape. Our expectations, marketplace standards and guidelines support 728,000 independent artists to be compensated fairly for their work, and to protect their intellectual property. Artists earnt $104 million in revenue across the platforms in FY21, the largest ever annual amount, of which we are extremely proud. Our business model gives artists control over their products and what they earn, and we are looking at ways we can help the development of emerging artists. We also have an important role to play in helping artists to protect their intellectual property, and we do this through a number of elements including offering anti-piracy and watermark features so artists can protect their creations. We do our best to strike a balance between artistic freedom and IP protection across the board. With the IP landscape and the social landscape often shifting, we will continue to invest in improvements in this area to ensure we can deliver the best results. To be true to our value of social responsibility, Redbubble Group extends our expectations to the third-party fulfillers in the supply chain who use the marketplace, to ensure that they provide safe and fair working conditions for their staff, and that they treat them with respect and dignity. Our intentions are to only allow participation in our marketplace by third-party fulfillers that meet our social responsibility standards, which are in line with the Australian Modern Slavery Act, the California Transparency in Supply Chains Act and the Fair Labor Association Code of Conduct. Due to COVID-19, we have paused the auditing of third-party fulfillers to verify compliance with these marketplace standards, but we are working to resume these as soon as possible. Our policies and statements guide how we address the issues that affect our business and enable us to take swift mitigating actions, and our Corporate Governance Statement sets out our approach to managing risk. 16 17 RedbubbleAnnual Report 2021 Directors’ Report Your Directors present their report on the consolidated entity, consisting of Redbubble Limited (the Company or Redbubble) and the entities it controlled during the financial year ended 30 June 2021 (referred to hereafter as the RB Group or Group). Directors The following persons were Directors of the Company during the 2021 financial year and to the date of this Report: Anne Ward Martin Hosking Chair, Non-executive Director Non-executive Director (became a Non-executive Director on 27 January 2021 following the end of Mr Hosking’s interim Managing Director and CEO tenure) Love is the Journey T-shirt designed and sold by goldendazeart Jennifer (Jenny) Macdonald Non-executive Director Ben Heap Non-executive Director Greg Lockwood Non-executive Director Principal activities RB Group, through its websites at Redbubble.com and TeePublic.com, owns and operates the Redbubble and TeePublic online marketplaces. These marketplaces facilitate the sale and purchase of art and designs on a range of products sold by independent creatives to consumers. The products are produced and shipped by third party service providers (i.e. product manufacturers, printers and shipping companies) referred to as fulfillers. There was no significant change in the nature of RB Group’s activities during the year. 19 Annual Report 2021 The group holds $99 million in cash at 30 June 2021. These cash reserves will be used to sustainably invest into our future business growth and gives management and the Board considerable strategic flexibility around a range of capital management options. In January 2021, the Board was pleased to announce the appointment of Mr Michael Ilczynski as the new CEO of Redbubble. As a result of Mr Ilczynski’s appointment, our interim CEO and Managing Director, Mr Martin Hosking, has returned to his role as Non-Executive Director, as was foreshadowed in last year’s Remuneration Report. COVID-19 The Group has experienced significant growth and is operating at a much larger scale than 12 months ago. Increased demand was evident across both marketplaces, in all core geographies and product categories as the Group has benefited from an acceleration in online activity since the beginning of the global pandemic. The COVID-19 pandemic adds inherent uncertainty into global economic conditions, and as such, the business continues to monitor online sales, trends and the fulfillment networks. Teams across the business have demonstrated remarkable resilience with the entire company operating remotely since April 2020. The agility of the team, supported by secure cloud based technology has supported a decentralised working model without losing productivity and has ensured the Group was able to exceed both customer and artist expectations. The RB Group did not receive any Government benefits across the jurisdictions in which the Group operates. Review of operations Redbubble delivered record financial results and operational achievements during FY2021, providing strong foundations from which to drive future growth. The business is well capitalised to pursue its medium term aspirations with confidence and conviction. Redbubble’s FY2021 financial metrics1 (with year on year (YoY) growth rates, where applicable) are: ● Gross Transaction Value (GTV) of $701 million, up 48% (60% on a constant currency basis2 ); ● Marketplace Revenue of $553 million, up 58% (71% on a constant currency basis); ● Gross profit of $223 million, up 66% (79% on a constant currency basis); ● EBITDA of $53 million, up 930% (695% on a constant currency basis); ● EBIT of $39 million, compared to a loss of $9 million in FY20; ● Net profit after tax of $31 million, compared to a loss of $9 million in FY20; ● Operating cash inflow of $55 million, compared to $47 million in FY2020; and ● Closing cash balance at 30 June 2021 of $99 million. Marketplace Revenue of $553 million was up 58% (71% on a constant currency basis) on the prior period. Customer demand was sustained throughout the entire year, even as the second half of the year saw global macro conditions change noticeably with much of the offline economy opening back up, particularly in the US which is our largest market. Growth of the business across all geographies showed the broad and global appeal of the Group’s offering, while growth across multiple product categories demonstrated the breadth and variety of consumer markets in which the model can apply. Face masks were a significant contributor during FY2021 contributing $57 million to Marketplace Revenue. FY2021 underlying Marketplace Revenue was $497 million excluding masks, which still represents substantial growth over FY2020 Marketplace Revenue of $349 million. Unique customers increased 40% to 9.5 million in FY2021, with repeat customer purchases accounting for $232 million in Marketplace Revenue. Gross Profit margins were higher in FY2021 primarily due to the strong contribution of higher margin product categories such as face masks. This resulted in a Gross Profit of $223 million, up 66% (79% on a constant currency basis). In FY2021 the marketplaces had a 54% increase in selling artists up to 728,000, with both new and earlier artist cohorts witnessing significant growth. Artists earned $104 million in revenue across the platforms in FY21, the largest ever annual amount, of which we are extremely proud. Artist activation and engagement remains a core growth pillar for Redbubble and we are committed to growing and optimising the library of unique content available on the platform. (1) Please see table 1 on page 22 for calculations of the non-IFRS metrics (2) “Constant currency basis” reflects the underlying growth before translation to Australian dollars for reporting purposes. Redbubble sources about 93% of its Marketplace Revenue in currencies other than Australian dollars. TeePublic sources about 91% of its Marketplace Revenue in US dollars. 20 21 RedbubbleAnnual Report 2021 A reconciliation of reported results to non-IFRS numbers in this Directors’ report is provided below. Strategic and Business Update Table 1: Reconciliation of reported results to non-IFRS (1) numbers Gross Transaction Value (3) Less sales taxes and timing differences Total reported revenue from services Less Artists' margin Marketplace revenue Fulfiller expenses Gross profit Gross profit margin on Marketplace revenue Paid acquisition costs Gross Profit After Paid Acquisition costs (GPAPA) GPAPA% (on MP Revenue) Employee and contractor costs Marketing expenses (excluding paid acquisition costs shown above) Operations and administration costs Other expenses Earnings before interest, tax, depreciation and amortisation (EBITDA) Depreciation and amortisation Earnings before interest and tax (EBIT) Interest expenses Interest income Total profit/(loss) before income tax Income tax benefit/(expense) Reported total profit/(loss) for the year FY2021 FY2020 $’m (2) 700.7 (43.3) 657.3 (104.0) 553.3 $'m (2) 474.1 (57.9) 416.3 (67.4) 348.9 (330.5) (214.5) 222.7 40.3% (71.2) 151.5 27.4% (64.5) (2.0) (28.9) (3.3) 52.7 (13.3) 39.4 (0.3) 0.0 39.1 (7.9) 31.2 134.4 38.5% (39.8) 94.5 27.1% (59.5) (3.5) (24.3) (2.1) 5.1 (13.7) (8.6) (0.6) 0.2 (9.0) 0.2 (8.8) (1) Non-IFRS measures are presented to provide readers a better understanding of Redbubble’s financial performance. The non-IFRS measures are unaudited, however, they have been derived from the audited financial statements (with the exception of Gross Transaction Value). (2) For presentation purposes, numbers have been rounded to millions of dollars, however calculations and totals are based on unrounded numbers. (3) Gross Transaction Value (GTV) represents total receipts from customers less fraud, refunds and chargebacks. As flagged in the Letter to Shareholders in April, Redbubble is undertaking investment in its four strategic themes to build a strong foundation for future growth. These are across: ● Artist activation and engagement ● User acquisition and transaction optimisation ● Customer understanding, loyalty and brand building ● Product range and 3rd party fulfillment network These investments will aid the Group to deliver continued top-line growth, reinforcing Redbubble’s competitive position and enabling the Group to continue on its mission to create the world’s largest marketplace for independent artists. In pursuit of Redbubble’s medium term aspirations, targeted investments will continue to be made across the Group. Specifically, investments in FY2022 will focus on key aspects of the customer experience, both digital and physical. These are aimed at driving cumulative increases in users, order rate, average order value and repeat rate. We remain focused on the tremendous opportunity we have as a business, and on our medium term aspirations to grow GTV to more than $1.5 billion, to grow Artist Revenue to $250 million, and to produce Marketplace Revenue of $1.25 billion per annum. Significant changes in the state of affairs In the Directors’ opinion, there have been no significant changes in the state of affairs of RB Group during the 2021 financial year. Significant events after end of the 2021 financial year In the Directors’ opinion, there have been no matters or circumstances arising since the end of the 2021 financial year that has significantly affected, or may significantly affect: ● RB Group’s operations in future financial years; ● the results of those operations in future financial years; or ● RB Group’s state of affairs in future financial years. 22 23 RedbubbleAnnual Report 2021 Dividends Environment No dividends were paid or declared since the start of the 2021 financial year. Given the opportunities to invest in key initiatives, coupled with the uncertain future macro environment, the Board does not expect to pay a dividend in the short to medium term. Environmental, Social and Governance (ESG) Statement RB Group’s mission is to create the world’s largest marketplace for independent artists. Empowering the global artist community to make a living doing what they love is key to our success. The business drives significant value for the artists, customers, third-party printers and manufacturers (fulfillers) that participate in the marketplace, as well as for our employees and shareholders. The ESG landscape is ever-evolving, with increasing stakeholder expectations, a more stringent regulatory environment, a push for greater inclusivity in our workforce and through our marketplace. A range of external factors, including COVID-19, the Black Lives Matter (BLM) movement, climate change and the circular economy (designing products that can be reused, in contrast to the traditional linear model of make and dispose) continued to evolve and challenge our thinking and approach in FY2021. These will certainly not be the last of challenges that test our business model, company culture and mission. The artists, customers, employees and third-party fulfillers that participate in the marketplace have high expectations of our approach to ESG. To keep true to our mission, to support our culture of passionate people working collaboratively for a cause, and to ensure a sustainable business model, we want to better understand our material ESG impacts and better integrate ESG into our strategy and decision-making. We are currently developing our inaugural ESG Strategy. The strategy will help us identify and prioritise the areas where we can have the greatest positive impact across the value chain. We are conducting a materiality assessment to identify our key impact areas and to get a better understanding of our stakeholders’ needs and expectations. These material topics will inform our broader strategic objectives, goals and future disclosure. Below we cover our current approach to ESG and provide a preliminary indication of likely material topics. With the growing sense of urgency about climate change, concerns about human impacts on the environment and the global move towards a circular economy, responsible business practices are now non-negotiable. Our mission to create the world’s largest marketplace for independent artists means that we have a duty to them and to customers to ensure that the products sold by artists on the marketplace are environmentally and socially responsible. We designed our business model to have a small environmental footprint. The third-party fulfillers make products on-demand, which means there are no warehouses full of unsold stock, and as a result, less waste. Over 90% of the third-party fulfillers that use the marketplace are based in the same region as the customers, which significantly reduces the carbon emissions from international shipping. We also offset carbon emissions from shipping for all products sold via our marketplace. This is a great start, but we have more to do to manage the Group value chain’s environmental impacts. While we don’t own the businesses in the supply chain, we are mindful of our collective environmental footprint. We identify environmental benchmarks for the third-party fulfillers and we are assessing how we can help artists be more sustainable in their designs and support the circular economy through setting specific goals and targets in these areas allowing us to track our impact. RB Group is committed to compliance with all applicable environmental legislation. The Directors are not aware of any material breaches of any environmental legislation affecting the Group’s operations. Social Social good is part of the Group’s DNA. The artists, employees and third-party fulfillers that participate in the marketplace are crucial to the delivery of our social mission and ultimately our success. Being socially responsible means treating artists with respect, backing our employees on issues they care about and ensuring that we only engage with third-party fulfillers that ensure fair working conditions for their staff. The Redbubble marketplace gives 728,000 independent artists a new way to express themselves. Artists have the flexibility to set their own pricing for their products to ensure they are paid fairly and have control over what they earn. We also have anti-piracy and watermark features to make sure that artists’ creations are protected. 24 25 RedbubbleAnnual Report 2021 We have a diverse and distributed employee base in the United States, Australia and Germany, and are committed to building a workforce reflective of the communities we serve, of which we are individually and collectively members. Many of our employees choose to work in our organisation because they believe in our social mission. In early 2021, we launched a new Group Diversity Policy, to restate, reinforce and raise the bar on our diversity objectives and commitments. We are proud to report that 40% of our Board identify as female and six of the eight direct reports to the Group CEO identify as female. Redbubble and TeePublic have programs and strategies in place to promote diversity and inclusion, aligned to each company’s business and community contexts. These enable us to achieve our Group objectives and commitments and deliver an inclusive workplace environment, where belonging underpins our collective impact and outcomes. While we have been successful in achieving strong representation of women within our leadership team, we know that identity extends beyond gender; it is fluid, complex and multifaceted, and there is more work to be done to achieve greater representation in our broader workforce, and among our partners and artists. The COVID-19 pandemic challenged us to better support our workforce during this time of uncertainty. We responded by giving our employees flexibility in their working conditions and greater support for their health and wellbeing. The Group strives to inspire our employees and the marketplace customers every day, and to treat members of the artist and wider communities with compassion. Our Community Collective is an employee-driven initiative that looks to extend this compassion into our local communities. In previous years we’ve partnered with organisations who focus on issues like the environment, cancer, HIV/AIDS, domestic violence, and poverty. In the current year, due to the impacts of COVID, we have shifted our efforts to donating clothing and tech equipment to communities and schools in need. For this year’s Black History Month celebration, the Group partnered with Black Art Futures Fund (BAFF) to make a significant financial and cultural contribution to an artist community outside of the Group. Black Art Futures Fund provides general operating support for U.S. small and community- based Black-led and Black-benefitting arts and culture organisations. Greater transparency and collaboration across the marketplace supply chain will help us continue to mitigate associated risks and promote responsible working practices. Like our supplier environmental standards above, we also have social standards that all third-party fulfillers have agreed to comply with in order to use the Group’s marketplaces. We expect the fulfillers to ensure that their employees have safe working conditions and to treat their employees with respect and dignity, in line with the Australian Modern Slavery Act, the California Transparency in Supply Chains Act and the Fair Labor Association Code of Conduct. Governance To succeed in bringing more creativity into the world in a fair and ethical way, we rely on strong governance practices to help us navigate rapidly evolving regulations and stakeholder expectations. We look to our leadership team for direction on ethics and moral standards. We aim to maintain an open marketplace where artists are free to express themselves, whilst protecting marketplace users from abusive, hateful or racist content. While we do our best to strike a balance between freedom and protection, this can sometimes be challenging in a marketplace of user generated content. We strive for the highest governance and risk management standards. These standards are described in Redbubble’s Corporate Governance Statement - available to view in the Corporate Governance section of the Redbubble Ltd Investor Centre at: shareholders.redbubble.com. Our policies and statements guide how we address the issues that affect our business and enable us to take swift mitigating actions. We are now looking to more transparently and assertively address the key governance issue areas for our stakeholders, especially our shareholder base. We will also continue to improve our operational procedures for data security and privacy, content moderation and ethical business conduct to ensure we remain agile and responsive to changes in our operating landscape. Risk Framework The Group acknowledges that it has an obligation to shareholders, customers, employees, creatives and contractors to implement a risk management framework that reflects its risk appetite, thus contributing to the achievement of its strategic objectives. RB Group seeks to take and manage risk in ways that will generate and protect shareholder value. The Group is committed to ensuring that a consistent and integrated approach to managing risk is established at all levels and is embedded in its processes and culture. The Group has a risk appetite the objective of which is to foster a culture of innovation. The Redbubble Board is aware that an overly cautious approach to risk management may have a harmful impact on the achievement of strategic and operational objectives. For this reason, the Board encourages prudent risk taking by RB Group staff that balances the risks of action versus inaction and subject always to applicable RB Group policies. The Board and management have agreed on specific risk tolerance levels for each risk within these categories and review the tolerance levels in the annual risk review: ● Strategic risk; ● Operational risk; ● Reputational risk; ● Financial risk; ● People and Culture risk; and ● Legal & Regulatory Compliance risk. 26 27 RedbubbleAnnual Report 2021 Redbubble Governance The Redbubble Board is ultimately responsible for ensuring risk management processes have been established and are operating effectively. The Redbubble Audit and Risk Committee, through its Charter, is responsible for overseeing the Group’s ongoing risk management program framework and any key supporting policies and procedures. The Audit and Risk Committee ensures that the scope of the annual risk review encompasses whether the Group is operating with due regard to the Board’s risk appetite. The CEO and the Executive Team are responsible for managing and embedding risk management practices throughout the Group. Framework for Managing Risk The Group has adopted a risk management strategy that aims to identify and minimise the potential for loss while also maximising strategic opportunities for growth and enhanced service delivery and profitability. RB Group’s Risk Framework, Principles and Process is consistent with the following model from AS/NZ ISO 31000:2018: The Risk Framework outlines the responsibilities for risk management at all levels in the organisation. The Board approves a Delegation Register that provides for delegation to management in specific areas and prescribes the limits on such delegations. The Framework also supports these responsibilities by defining a risk reporting structure, expectations and the resources and tools required. Annual Report 2021 Continual Improvement Integrated Human and Cultural Factors Structured and Comprehensive Value Creation and Protection Best Available Information Customized Dynamic Inclusive Principles (clause 4) Integration Design Leadership and Commitment Improvement Implementation Evaluation I N O T A T L U S N O C & N O T A C N U M M O C I I SCOPE, CONTEXT, CRITERIA R I S K A S S E S S M E N T Risk Identification Risk Analysis Risk Evaluation RISK TREATMENT RECORDING & REPORTING I I M O N T O R N G & R E V E W I Framework (clause 5) Process (clause 6) 28 29 Principal risks The following are key risks that may impact RB Group’s financial and operating results in future periods: ● Competitive activity - To mitigate the impact of this risk RB Group is focusing on ensuring that its marketplaces provide a market leading experience for artists and customers. ● Macroeconomic Risks - RB Group is subject to macroeconomic risks affecting consumer demand in relevant retail markets. These risks are largely outside of RB Group’s control, and are mitigated by current diversity in both product mix and geographic presence, combined with the intention to continue to grow the size of the overall revenue base. Whilst the Group benefited from an acceleration in online activity due to the impacts of the COVID-19 pandemic on consumer behaviour, as the business cycles these comparatives and various geographies move to a post COVID normal there may be some short term volatility. ● Google search channel risk - RB Group has prioritised search engine optimisation initiatives, including improved user and crawler navigation experience and site speed. RB Group is also focused on further diversification of customer acquisition sources to reduce reliance on Google search. ● Litigation brought against RB Group for intellectual property infringement - Litigation risk arises from the RB Group marketplace’s roles as intermediaries for user-generated content. RB Group mitigates this risk in various ways, including by responding expeditiously to takedown notices from intellectual property rights holders; engaging in collaborative relationships with rightsholders to promote the integrity of hosted content (including by facilitating licensing through our Partner Program and by proactively finding and removing content through our Policing Program); developing automated platform software to manage content at scale; building our litigation capabilities and holding appropriate levels of insurance. RB Group will continue to mitigate its IP infringement litigation risk by further building its capabilities through process and technology improvements. ● Technology Security and Reliability Risk - As a technology‐focused business, managing security, and taking care of consumer and customer data is essential. To manage this risk, the Group has developed and tested its disaster recovery capability and procedures, implemented high availability infrastructure and architectures, and continually monitors our systems for signs of poor performance, intrusion or interruption. The Group maintains appropriate data management, security and compliance policies, procedures and practices in place. ● Platform / Technology constraints - ‘Technical debt’ slows delivery of marketplace improvements. Consistent investment in eliminating platform and technology constraints will be required to further improve the Group’s marketplaces. ● Privacy and Data Protection Compliance Risk - Compliance with applicable Privacy and Data Protection Laws, including the GDPR, California Consumer Privacy Act and the Australian Privacy Act 1988 remains an ongoing focus. The Group has implemented appropriate data security measures; including preventative, detective and responsive capabilities. A Data Breach Response Plan is in place and is strictly adhered to. ● Attracting and retaining top talent in business critical functions - The Group continues to encounter competition for talent across all our locations. The mitigations for this risk have included improvements to the executive compensation plan in FY2021 and compensation adjustments for key talent roles. Change in key management personnel during the 2021 financial year and since the end of that financial year The “Key Management Personnel” for the purposes of the FY2021 Remuneration Report have been determined to be the current Redbubble Limited directors and the following members of the Redbubble Executive Team: ● Michael Ilczynski - Chief Executive Officer from 27 January 2021; and ● Emma Clark - Chief Financial Officer. There were no changes to the membership of the Redbubble Limited Board during the 2021 financial year, however Martin Hosking transitioned from Managing Director and CEO to Non- executive Director upon Michael Ilczynski’s commencement as CEO on 27 January 2021. Information on Directors At the date of this report, the Board comprises five Non-executive Directors, who collectively have a diverse range of skills and experience. The names of Directors and details of their skills, qualifications, experience can be found below on pages 32 to 35 of this Report. Details of the number of Board and Board Committee meetings held during the year and Directors’ attendance at those meetings are shown on page 36 of this report. 30 31 RedbubbleAnnual Report 2021 Details of the qualifications and experience of the Directors and their directorships of other listed companies held by each current Director in the three years before the end of the 2021 financial year are listed below. Directors’ qualifications and experience Ms Anne Ward Independent Non-executive Director and Board Chair Member of the People and Nomination Committee Member of the Audit and Risk Committee Chair of the Disclosure Committee Anne Ward is a highly experienced company director with extensive experience in business management, strategy, finance, risk and governance across a range of industries including financial services, technology, healthcare, government, education and tourism. In addition to chairing Redbubble, Anne is independent Chairman of MNF Group Ltd (ASX:MNF), a Council member at RMIT University, a Director of the Foundation for Imaging Research, and a Governor of the Howard Florey Neuroscience Institutes. Anne was formerly Chairman of Colonial First State Investments Ltd, Chairman of Qantas Superannuation Ltd, Chairman of Zoos Victoria and a director of MYOB Group Ltd, Flexigroup Ltd (ASX:HUM), the Transport Accident Commission, Epworth Hospital and the Brain Research Institute. Prior to becoming a professional director, Anne was a commercial lawyer for 28 years and was General Counsel for Australia at the National Australia Bank and a partner at Minter Ellison in Melbourne. Anne holds a Bachelor of Laws and a Bachelor of Arts from the University of Melbourne and is a Fellow of the Australian Institute of Company Directors and a Life Member of ASFA. Anne has held the following listed company directorships in the last 3 years: ● MNF Group Ltd (from July 2021 to current) ● MYOB Group Ltd (from March 2015 to May 2019) Mr Martin Hosking Non-executive Director Member of the People and Nomination Committee Member of the Disclosure Committee Martin Hosking is a co-founder of Redbubble. He first became the CEO and Managing Director in July 2010. Martin resigned from executive duties and commenced as a Non-executive Director on 1 October 2018. Martin was then re-appointed CEO and Managing Director on 18 February 2020, before resuming as a Non-executive Director upon Michael Ilczynski’s appointment as CEO on 27 January 2021. Martin has spent over 20 years scaling Australian technology companies. Previously, Martin was the chair of Aconex, a SaaS provider to construction firms, and Southern Innovation, a digital pulse processing solution. He was instrumental in the development and subsequent listing on the NASDAQ of search company, LookSmart. Martin started his career as a diplomat with the Australian Department of Foreign Affairs and Trade before joining McKinsey & Company, serving clients focusing on emerging technologies. Martin has a Bachelor of Arts (Hons – First class) degree from the University of Melbourne and an MBA (with distinction) from Melbourne Business School, where he has also lectured. Martin is a graduate of the Australian Institute of Company Directors. Martin has not held any other listed company directorships in the last 3 years. 32 33 RedbubbleAnnual Report 2021 Ms Jenny Macdonald Independent Non-executive Director Chair of the Audit and Risk Committee Member of the People and Nomination Committee Member of the Disclosure Committee Jenny Macdonald brings extensive expertise in corporate finance, accounting, and auditing, coupled with a strong focus on and understanding of market trends, customer and consumer behaviour. She has a proven track record in developing and implementing strategy with a focus on risk management, growth, and value creation. Jenny spent her executive career in customer facing organisations primarily in technology, retail, travel services and manufacturing, where she was responsible for strategic turnaround and digital transformation. Her last executive role was CFO and interim CEO at Helloworld Limited, where she oversaw the merger with AOT Group to create the second largest integrated travel distribution business in Australia and New Zealand. Prior to that, Jenny was the CFO and General Manager International of the REA Group, with responsibility for the financial growth strategy and execution for operations in South East Asia and parts of Europe, having delivered record revenue and net profit for the company. Jenny holds a Masters of Entrepreneurship and Innovation: Swinburne University (Victoria) and a Bachelor of Commerce from Deakin University (Victoria). She is a Graduate of the Australian Institute of Company Directors and a member of the Institute of Chartered Accountants ANZ. Jenny has held the following listed company directorships in the last 3 years: ● Healius Limited (from 2 November 2020 to present) ● Bapcor Limited (from 1 September 2018 to present) ● Australian Pharmaceutical Industries Limited (from 9 November 2017 to present) ● Redflow Limited (from 22 December 2017 to 30 September 2019) Mr Greg Lockwood Independent Non-executive Director Member of the Audit and Risk Committee Member of the Disclosure Committee Greg Lockwood was appointed as a Non-executive Director with effect from June 2015. Greg is a partner of Piton Capital, which is a shareholder in Redbubble. In 1999, Greg founded UBS Capital’s early stage venture investing activities in Europe. Subsequently, he co-founded Piton Capital, the London-based venture capital fund specialising in marketplaces and business models with network effects. Prior to his venture capital activities, Greg worked in telecommunications corporate finance with UBS in London and Zurich and held operating roles in classified media publishing in Toronto. Greg has an Honours Business degree from the University of Western Ontario, and a Master’s degree in management from the Kellogg Graduate School of Management. Greg has not held any other listed company directorships in the last 3 years. Mr Ben Heap Independent Non-executive Director Chair of the People and Nomination Committee Member of the Audit and Risk Committee Ben Heap is a Sydney-based non-executive director with a portfolio of public, private, government and non-for-profit roles. Ben is currently the independent chairman of CBA New Digital Businesses, a non-executive director of The Star Entertainment Group Limited (ASX:SGR) and of Colonial First State Investments Limited. He is also a founding partner and chairman of H2 Ventures, a venture capital investment firm, and a member of the Commonwealth Government’s Fintech Advisory Group. Ben was previously CEO of UBS Global Asset Management in Sydney and a managing director with UBS in New York. Ben has extensive experience in a range of sectors including asset management, digital & technology transformation, fintech & data science innovation and venture capital investment. He has a bachelor’s degrees in science (Mathematics) and Commerce (Finance) from the University of NSW and is a graduate of the Australian Institute of Company Directors (GAICD). Ben has held the following listed company directorships in the last 3 years: ● The Star Entertainment Group Limited (from 23 May 2018 to present) 34 35 RedbubbleAnnual Report 2021 Board and Committee Meetings - attendance during FY2021: Company Secretaries Board Audit and Risk Committee (ARC) People and Nomination Committee (PNC) Held whilst in office Attended whilst in office Held whilst an ARC member Attended whilst an ARC member Held whilst a PNC member Attended whilst a PNC member Anne Ward Martin Hosking Greg Lockwood Jenny Macdonald Ben Heap 14 14 14 14 14 14 14 14 14 14 5 - 5 5 5 5 - 5 5 5 8 4 - 8 8 8 4 - 8 8 Directors’ interests in shares and options Name Anne Ward Martin Hosking Ben Heap Greg Lockwood Jenny Macdonald Total interests Shareholdings Options outstanding 200,000 44,500,090 50,000 6,465,131 95,539 51,310,760 50,714 26,832 - - 47,509 125,055 Retirement, election, continuation in office of Directors Under the Company’s constitution, Directors cannot serve beyond three years or the third AGM after their appointment, whichever is longer, without submitting for re-election by the Company. A retiring Director is eligible for re-election without needing to give any prior notice of an intention to submit for re-election and holds office as a Director (subject to re-election) until the end of the general meeting at which the Director retires. Jenny Macdonald, Greg Lockwood and Martin Hosking are seeking re-election at the 2021 AGM. RB Group’s Company Secretaries are Ms Corina Davis (based in the US) and Mr Martin Bede (based in Australia). Ms Corina Davis, Executive Vice President - Business Development, Chief Legal Officer and Company Secretary Corina Davis joined Redbubble in 2012 and oversees the company’s legal function. In 2017 Corina also assumed responsibility for Redbubble’s partnerships and licensing initiatives. Corina has a wide range of cross-functional experience with particular expertise in copyright and trademark law, litigation, compliance and risk management. Before joining Redbubble, Corina practiced law in Los Angeles and New York City at Milstein Adelman, McCurdy & Fuller and Mendes & Mount. Corina is an active member of the Women’s General Counsel Network and the San Francisco General Counsel Group. Corina holds a Bachelor of Arts degree from the University of Michigan, Ann Arbor and a Juris Doctor degree from the University of San Diego School of Law, California. Mr Martin Bede, Company Secretary (Australia) Martin Bede is a lawyer with experience in private practice and in-house legal roles. He holds Bachelor of Laws and Bachelor of Commerce degrees from the University of Melbourne, a Graduate Diploma in Applied Corporate Governance from the Governance Institute of Australia (GIA) and is a fellow of the GIA. Details of share options and performance rights for Directors and Executives Below are details of options, share appreciation rights and performance rights in respect of ordinary shares in the Company granted to Directors or any of the 5 most highly remunerated officers of the Company (other than the Directors) during the 2021 financial year. For FY2021, Board fees are now paid entirely in cash and no equity has been granted to the Directors. Name Michael Ilczynski Emma Clark Corina Davis Joseph Burns Adam Schwartz Total Granted Number of options / restricted stock units granted Number of ordinary shares granted under options / restricted stock units Number of share appreciation rights granted 338,549 (1) 53,411 30,881 12,910 194,373 630,124 338,549 53,411 30,881 12,910 194,373 630,124 159,854 174,385 100,824 - - 435,063 (1) Options granted to Michael Ilczynski include shares purchased with a limited recourse loan. Under the requirements of AASB 2 - Share Based Payment these shares are considered to be options until the loan is repaid. Please see section 7.6 in the renumeration report for further details. 36 37 RedbubbleAnnual Report 2021 There are no options or performance rights granted to this group or since the end of the 2021 financial year to the date of this Report. The following table shows the total numbers of ordinary shares in the Company subject to options, share appreciation rights or performance rights as at the date of this Report: Options Share appreciation rights (1) Restricted Stock Units (2) Total awards outstanding Number outstanding 6,855,123 4,523,698 1,388,175 12,766,996 Last expiry date 1 December 2030 1 June 2027 (1) Share appreciation rights (SARs) entitle the holder to equity equal to the appreciation of the Group’s share price over a defined period. There is not a 1 to 1 relationship with the number of SARs on issue and the number of shares that will be issued upon exercise. (2) Restricted stock units granted do not have an expiry date. Ordinarily these vest and are settled according to a participants’ vesting schedule, and any outstanding restricted stock units are otherwise forfeited when a participant no longer satisfies the service conditions in their agreement. Holders of options or performance rights do not, by virtue of their holdings, have any pre-emptive right to participate in any share issue of the Company or any related body corporate. The Financial Report contains details of the total number of ordinary shares in the Company issued following exercise of options and vesting of performance rights during the 2021 financial year. The following table shows the total number of ordinary shares in the Company issued following exercise of options and vesting of performance rights since the end of the 2021 financial year, to the date of this Report: Indemnification and insurance of officers The Company has entered into Deeds of Indemnity with all its Directors in accordance with the Company’s constitution. During the 2021 financial year, the Company paid a premium to insure the Directors, Officers and Managers of RB Group entities. The insurance contract requires that the amount of the premium paid is confidential. Proceedings against entities within the Group Although the Group is strictly a service provider that does not sell or manufacture the products sold on the Redbubble and TeePublic marketplaces, it periodically receives notices alleging infringement of third party copyright, trade marks, other intellectual property rights or publicity rights via the marketplaces or for breach of consumer protection laws. This is not uncommon for marketplaces that host user generated content. As at the date of these financial statements there are current lawsuits filed against entities within RB Group that relate to alleged intellectual property infringement and/or breach of consumer laws. There is no certainty around the amount or timing of any outflow (or inflow from related insurance recoveries) should any of the actions ultimately be successful (at first instance or on appeal, as applicable). RB Group does not currently consider that any of the current proceedings are likely to have a material adverse effect on the business or financial position of the Group. RB Group is not aware of any other current or material threats of civil litigation proceedings, arbitration proceedings, administration appeals, or criminal or governmental prosecutions in which entities within the Group are directly or indirectly concerned. Number Exercise price paid CEO and CFO declaration Settlement of vested restricted stock units Exercise of options Total 23,000 68,145 91,145 $ - 73,324 73,324 No amounts remain unpaid in respect of the shares issued, as outlined above. The CEO and CFO have provided a written statement to the Board in accordance with Section 295A of the Corporations Act. With regard to the financial records and systems of risk management and internal compliance in this written statement, the Board received assurance from the CEO and CFO that the declaration was founded on a sound system of risk management and internal control, and that the system was operating effectively in all material aspects in relation to the reporting of financial risks. Remuneration Report The Remuneration Report is set out on pages 44 to 70 and forms part of the Directors’ Report for the financial year ended 30 June 2021. 38 39 RedbubbleAnnual Report 2021 Rounding of amounts The amounts contained in the Financial Report have been rounded to the nearest $1,000 (where rounding is applicable) where noted ($000) under the option available to the Company under ASIC Legislative Instrument 2016/191. The Company is an entity to which the Legislative Instrument applies. Auditor Ernst & Young was appointed as the Group’s Auditor on 25 November 2014 and continues in office in accordance with section 327 of the Corporations Act 2001. To the extent permitted by law, the Company has agreed to indemnify Ernst & Young, as part of the terms of its audit engagement agreement, against claims by third parties arising from the audit (for an unspecified amount). No payment has been made to indemnify Ernst & Young during or since the end of the 2021 financial year. Mr Ashley Butler, Partner at Ernst & Young, commenced as the Group’s Audit Partner from the Company’s 2020 AGM. Mr Butler succeeded Ms Kylie Bodenham, Partner at Ernst & Young, as Ms Bodenham rotated off the RB Group engagement in accordance with independence requirements of Section 324DA of the Corporations Act 2001 and Ernst & Young’s policy. Non-audit services During the year Ernst & Young performed other services in addition to its audit responsibilities. The Directors are satisfied that the provision of non-audit services by Ernst & Young during the reporting period did not compromise the auditor independence requirements set out in the Corporations Act. All non-audit services were subject to the Group’s External Auditor Policy and do not undermine the general principles relating to auditor independence set out in APES 110 Code of Ethics for Professional Accountants as they did not involve reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the Group, or jointly sharing risks and rewards. Details of the amounts paid to the auditor of the Group and its related practices for non-audit services provided throughout the 2021 and 2020 financial years are set out below. Non-audit services Taxation services Assistance in developing the Group’s inaugural ESG strategy Total 40 2021 $ 43,630 30,370 74,000 2020 $ 39,400 - 39,400 Enjoy the Little Things Throw Pillow designed and sold by Alexandra Bordallo Kenya Poster designed and sold by Ross Murray Pomegranate and Lovebirds Canvas Print designed and sold by CatyArte Flower Garden Photographic Print designed and sold by CatyArte 41 RedbubbleAnnual Report 2021 Fees for Audit services Details of the amounts paid to the auditor for audit services provided throughout the 2021 and 2020 financial years are set out in Note 24 to the Consolidated Financial Statements. Auditor’s Independence Declaration A copy of the Auditor’s Independence Declaration, as required under section 307C of the Corporations Act, is set out on page 43. The Auditor’s Independence Declaration forms part of the Directors’ Report. The Directors’ Report is made in accordance with a resolution of the Directors of the Company. Anne Ward Chair 19 August 2021 Ernst & Young 8 Exhibition Street Melbourne VIC 3000 Australia GPO Box 67 Melbourne VIC 3001 Tel: +61 3 9288 8000 Fax: +61 3 8650 7777 ey.com/au Annual Report 2021 Auditor’s Independence Declaration to the Directors of Redbubble Limited Tel: +61 3 9288 8000 Ernst & Young As lead auditor for the audit of the financial report of Redbubble Limited for the financial year ended Fax: +61 3 8650 7777 8 Exhibition Street 30 June 2021, I declare to the best of my knowledge and belief, there have been: ey.com/au Melbourne VIC 3000 Australia GPO Box 67 Melbourne VIC 3001 a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and b) no contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of Redbubble Limited and the entities it controlled during the financial Auditor’s Independence Declaration to the Directors of Redbubble year. Limited As lead auditor for the audit of the financial report of Redbubble Limited for the financial year ended 30 June 2021, I declare to the best of my knowledge and belief, there have been: Ernst & Young a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and b) no contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of Redbubble Limited and the entities it controlled during the financial year. Ashley Butler Partner 19 August 2021 Ernst & Young Ashley Butler Partner 19 August 2021 42 43 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Redbubble Remuneration Report Remuneration Report Cat Invaders Laptop Skin designed and sold by GloriaSanchez Letter from the People and Nomination Committee Dear Shareholder, On behalf of the Board, I am pleased to present our Remuneration Report for FY2021. Overview of company performance and remuneration outcomes The business has performed exceptionally well within a challenging macro environment. Record Marketplace Revenue of $553 million and EBITDA of $53 million, driven by a 54% increase in selling artists (to 728,000) and a 40% increase in unique customers (to 9.5 million) have demonstrated the strength of the marketplace model. This level of business performance enables Redbubble to commit to the investment required for continued growth, including investing in our people – domestically and around the world - that will underpin our ability to build long term value for shareholders. Turning to our people, COVID-19 continued to impact business operations throughout the entire period. Our teams in Melbourne, San Francisco, New York and Berlin, continued to operate almost completely remotely. Given the operating environment and the level of business growth experienced, our management and staff have experienced significantly increased workloads during FY2021. We are very proud of the outcomes our people have achieved in these challenging circumstances. Other marketplace participants, such as the third party fulfillers and logistics partners faced their own workplace limitations but were able to continue producing and shipping products to customers and we thank them for continuing to meet Redbubble’s service standards, and to service the artist community with such care and diligence. This Report details the remuneration arrangements for the KMP being those persons who have authority and responsibility for planning, directing and controlling the major activities of RB Group, directly or indirectly, including any director (whether executive or otherwise). The FY2020 long-term incentive share price appreciation target was achieved in July 2020, as is detailed in Section 4.3. Further remuneration decisions and outcomes are detailed in Sections 4 & 5 of this Remuneration Report. 44 45 RedbubbleAnnual Report 2021 Successful transition to a new CEO Remuneration Framework Changes In January 2021, the Board was pleased to announce the appointment of Mr Michael Ilczynski as the new CEO of Redbubble. Mr Ilczynski has extensive experience in helping Australian companies to become global forces in the technology and consumer space, having worked in a range of senior roles in Australia and overseas. That track-record, including the successful development of his teams, evolution of products and his experience in scaling businesses are the right combination to continue Redbubble’s transition from a niche to mainstream global consumer marketplace. Further information on Mr Ilczynski’s remuneration and contractual arrangements can be found in section 4.4. As a result of Mr Ilczynski’s appointment, our interim CEO and Managing Director, Mr Martin Hosking, has returned to his role as Non-Executive Director, as was foreshadowed in last year’s Remuneration Report. Remuneration strategy overview Our remuneration strategy is designed to support the business strategy and drive sustainable outperformance over the long-term. The remuneration framework itself is subject to ongoing improvement to ensure it maintains the strongest alignment possible with shareholder experience and with contemporary executive compensation philosophy and practice. As shareholders may recall, the RB Group Executive Compensation Model (RECM) applies to the Company’s senior executives and provides a strong foundation to attract and retain talent and align them with building long-term value for shareholders. The objectives of the RECM are to: ● Link executive performance with RB Group’s financial goals; ● Motivate executives to create sustainable, long-term value for shareholders; ● Align the leadership team by providing consistent goals that encourage a long-term focus; and ● Attract and retain exceptional talent in globally competitive, highly mobile markets. During FY2021, the Board implemented several changes to the RECM framework to further strengthen the alignment between senior executives and shareholders (refer to section 4.2 for further detail on these changes): ● The Long Term Incentive (LTI) performance period has been amended (in relation to future awards), with a minimum of 3 years required for any awards to vest (previously the minimum performance period was 1 year). The share appreciation rights remain as the instrument, with a 10% compound TSR requirement needed to be achieved for any LTI awards to vest. The awards, should they not vest after 3 years, are able to vest after years 4 or 5, with the required compounding rate continuing throughout these years; and ● The former long term equity award has been repositioned as Base Equity (BE), forming part of the base compensation of senior executives, but with a direct link to shareholder value creation. The Board also implemented several changes in relation Non-Executive Directors (NEDs) remuneration (refer to section 5.1 for further detail on these changes): ● Removal of the deferred equity component such that Board Fees are now paid entirely in cash, but with the introduction of a minimum shareholding expectation; and ● Increases to NED base fees, in consideration of the increasing scale and complexity of the business. On behalf of the Board, we invite you to read the Report and we look forward to receiving your feedback at the Annual General Meeting (AGM). Our RECM creates strong shareholder alignment through the incorporation of significant deferred equity components to encourage executives to behave like owners of the business. It is through this ownership that executives are driven to create long-term shareholder value. Ben Heap Chair People and Nomination Committee We are committed to engage with our shareholders and other key stakeholders in relation to the Company’s remuneration strategy and to continuously improve the effectiveness of our remuneration arrangements. 46 47 RedbubbleAnnual Report 2021 Contents 1. 2. 3. 4. 5. 6. 7. Remuneration Report Overview How Remuneration is Governed Company Performance in FY2021 Executive Remuneration Non-executive Director (NED) Remuneration Statutory Reporting for FY2021 Other Information In this Remuneration Report the following definitions are used: ● Redbubble means Redbubble Limited (ACN 119 200 592); ● Board means the Board of Directors of Redbubble; ● Committee means the People and Nomination Committee of the Board of Redbubble; ● Executives means the members of the RB Group senior executive team; ● NED means the Non-executive Directors of the Company; ● RB Group means Redbubble and its subsidiaries; and ● RECM means the RB Group Executive Compensation Model. 1. Remuneration Report Overview The Directors of Redbubble present the Remuneration Report (Report) for the RB Group for the financial year ended 30 June 2021. This Report forms part of the Directors’ Report and has been audited in accordance with section 300A of the Corporations Act 2001. The Report details the remuneration arrangements for Key Management Personnel (KMP) being those persons who have authority and responsibility for planning, directing and controlling the activities of RB Group. The table below outlines the KMP of RB Group during FY2021: Classification NED Name Anne Ward Ben Heap Martin Hosking Position Non-executive Chair Non-executive Director Non-executive Director (re-appointed from 27 January 2021) Greg Lockwood Non-executive Director Jennifer (Jenny) Macdonald Non-executive Director Executive KMP Michael Ilczynski CEO (appointed 27 January 2021) Former Executive KMP Emma Clark Martin Hosking CFO Interim CEO and Managing Director (retired 27 January 2021) 2. How Remuneration is Governed 2.1 People and Nomination Committee Role The role of the People and Nomination Committee (Committee) is to ensure that the RB Group has appropriate remuneration and retention strategies to attract and retain high quality talent - both locally and globally - to enable the Company to execute its mission and purpose, in order to build long-term value for shareholders. The members of the Committee during FY2021 were: ● Ben Heap - Independent Non-Executive Chair; ● Anne Ward - Independent Non-Executive Member; ● Jenny Macdonald - Independent Non-Executive Member; and ● Martin Hosking - Non-Executive Member (from 9 February 2021) 48 49 RedbubbleAnnual Report 2021 2.2 Remuneration Governance Overview 2.3 Remuneration Benchmarking Redbubble Board ● Overall Responsibilty for the remuneration strategy and outcomes for executives and non-executive directors ● Reviews and approves recommendations from the People and Remuneration Committee The quantum of both Fixed Salary and the Total Remuneration Package are generally positioned having consideration for benchmarking data, relevant market conditions and sentiment, the trajectory of the company’s growth, strategic objectives, competency and skillset of individuals, scarcity of talent, changes in role complexities and the geographical spread of the company and of the relevant talent pool. Market benchmarks are undertaken independently and set with reference to market capitalisation, and with reference to industry sector and levels of business complexity, as determined by external advisors, in collaboration with the Committee each year. People and Nomination Committee 2.4 Clawback of Remuneration ● Four Non-Executive Directors (75% Independent with an Independent Chair) make recommendations to the Board on remuneration strategy, governance and policy for Executive KMP and Non-Executive Directors ● The Committee is responsible for reviewing and advising the Board on remuneration policies and practices. This Committee also reviews and advises the Board on the design and implementation of performance packages, superannuation entitlements, termination entitlements and fringe benefits policies. The Committee also manages the nomination process of Board members and the selection of the CEO ● The remuneration of Directors, the CEO, KMP and other Executives is reviewed by the Committee which then provides recommendations to the Board. Management Remuneration Advisors Provides information to the PNC in relation to: ● Incentive targets and outcomes ● Remuneration Policy ● Short and Long-term incentive participation eligibility ● Individual remuneration and contractual arrangements for executives ● Annual performance reviews and target setting ● Provide external independent advice, information and recommendations relevant to remuneration decisions ● The Committee periodically engages the services of independent external consultants to provide insights on KMP remuneration trends, regulatory and governance updates, pros and cons of possible alternatives, and market data. No remuneration recommendations as defined in Section 9B of the Corporations Act 2001 were obtained during FY21 In the event of serious misconduct or a material misstatement of RB Group’s financial statements, the Board has the discretion to reduce, cancel or clawback any unvested equity or other long term incentive. 2.5 Standard Employment Arrangements Executives are employed on open ended individual employment agreements that set out the terms of their employment. Each Agreement varies according to the individual Executive but typically includes: ● Termination provisions incorporating six month notice periods (to manage business continuity risk during any executive transition) ● The Board may in certain circumstances apply discretion to approve a payment of up to six months’ salary; ● Performance and confidentiality obligations on the part of both the employer and employee; ● Limited non-solicitation and post-employment restriction provisions; and ● Eligibility to participate in the RB Group RECM (or other transitional compensation plans). Specific employment arrangements for our CEO, Mr Ilczynski, are included in section 4.4. 50 51 RedbubbleAnnual Report 2021 3. Company Performance in FY2021 3.1 Performance against Financial Metrics RB Group’s key financial measures of performance over the last five financial years are summarised in the table below: Gross Transaction Value FY2021 $700.7m Marketplace Revenue FY2021 $553.3m Artist Revenue FY2021 $104.0m Key indicators (1) FY2021 FY2020 FY2019(2) FY2018(3) FY2017 CAGR (4) Gross Transaction Value (GTV) ($'m) Total Revenue ($'m) 700.7 657.3 474.0 328.0 416.3 307.0 Marketplace Revenue ($'m) 553.3 348.9 256.9 Artist Revenue ($'m) Gross profit (GP) ($'m) Gross profit after paid acquisition (GPAPA) ($'m) Earnings before Interest, taxes, depreciation and amortisation (EBITDA) ($'m) Cash balance ($'m) Share price at year end ($) 104.0 222.7 151.5 52.7 98.7 3.61 67.4 134.4 94.5 5.1 58.1 2.06 50.1 94.5 67.5 (2.0) 29.0 0.91 (1) The non-IFRS metrics in the table above are defined as follows: 231.3 218.7 182.8 35.9 63.9 47.1 (7.4) 21.2 1.57 175.4 141.0 141.0 N/A 50.1 37.9 (8.1) 27.8 0.97 41% 47% 41% 43% (5) 45% 41% N/A 37% 39% • Gross Transaction Value (GTV) represents total receipts from customers less fraud, refunds and chargebacks. • Gross Profit represents marketplace revenue less fulfiller expenses • Gross Profit After Paid Acquisition costs (GPAPA) represents Gross Profit less paid acquisition cost Non-IFRS metrics are unaudited. (2) On 1 July 2019 the Group adopted AASB 16 - Leases using the full retrospective method of adoption. EBITDA for FY19 and onwards includes the impact of this new standard. (3) On 1 July 2018 the Group adopted AASB 15 - Revenue from Contracts with Customers using the full retrospective method of adoption. The revenues for FY18 and onwards include the impact of this new standard. (4) Compound Annual Growth Rates (CAGR) are shown for the period since FY2017. Meaningful growth rates cannot be provided for metrics that have moved from a negative to a positive amount. (5) Artist Revenue as a reported metric began in FY2018 with the introduction of AASB 15 - Revenue from Contracts with Customers. The CAGR has been calculated from FY18 to FY21. 4. Executive Remuneration 4.1 Remuneration Objectives & Strategy RB Group’s vision is to scale the business to be a global leading online marketplace platform and an enduring organisation that creates value for shareholders over the long-term. RB Group operates in four highly competitive global talent markets - Melbourne, San Francisco, New York and Berlin. Attracting and retaining talent in these markets must be supported by a compelling remuneration strategy. The RECM is designed to attract, motivate and retain proven, global executive talent who will successfully execute on RB Group’s vision and strategy in a manner that aligns with the company’s values. The RECM recognises compensation needs to be positioned to extract mid-career executives on a strong earnings trajectory from roles in companies that provide them with the experience that RB Group needs. The Board sets key annual result areas for the CEO and tracks performance against those objectives. The CEO sets semi-annual performance objectives with each senior executive, in support of company objectives, behaviours that are in line with our purpose and values, key results and personal development areas. Performance against these objectives, along with total company performance informs annual compensation reviews for all executives. The performance of all senior executives reporting to the CEO is also discussed with the Committee semi-annually to ensure all leaders are meeting performance expectations in terms of both behaviours and outcomes. The Committee believes that traditional short term incentives may encourage a focus on short- term performance at the expense of long-term value creation. This is compounded by the difficulty of setting short-term targets in a fast paced growth environment. Under the RECM, the value of Base Equity and Long Term Incentive components are fundamentally dependent on share price performance, aligning executives with shareholder interests. Furthermore, the Committee has carefully considered a wide range of performance scenarios and outcomes in order to ensure the remuneration outcomes are consistent with its expectations in those circumstances. 52 53 RedbubbleAnnual Report 2021 Executive remuneration levels are reviewed regularly by the Committee with reference to RB Group’s remuneration strategy, company performance, talent competitor market activity and external benchmarks. Fixed Salary Fixed salary and superannuation(3) intended to provide the Executives with the financial resources commensurate with executives at companies of a similar size in that location. Link Motivate Align Attract & Retain executive performance with RB Group’s financial goals executives to create sustainable, long-term value for shareholders the leadership team by providing consistent goals which encourage a long-term focus exceptional talent in globally competitive, highly mobile markets FY2021 Base Equity (BE) BE ensures immediate alignment between executives and shareholders and creates an owner mindset in executives that has a retention impact within the compensation year. Executives are taking on risk when accepting part of their base compensation in equity. Equity is also required to be held for one year post vesting to ensure focus on sustainable share value appreciation. The BE is part of the base compensation and does not have a performance hurdle but rather varies in value with the Company’s share price. It is designed to ensure executives act as owners from the outset with a focus on sustainable value creation rather than short-term financial metrics which may be incompatible with shareholder longer-term interests. Further, with US and other overseas remuneration practices in mind, the Board has assessed many alternative remuneration structures, noting that we acknowledge this award does not reflect typical Australian market practice. The Board determined that having a deferred equity component such as this BE award to be best fit- for-purpose at this time to best align executives with shareholder experience in conjunction with the newly structured LTI award, noting that this approach to remuneration is widely accepted internationally. The BE component of the RECM operates as outlined below: 4.2 Elements of Remuneration The following remuneration mix summarises the key components, and weightings associated, that make up the RECM: BE instrument Restricted Stock Units (RSUs) for US-based executives and US citizens resident in Australia or Germany. RSUs are rights to be issued Redbubble shares upon satisfaction of the applicable vesting conditions. Executive KMP Michael Ilczynski Emma Clark (1) Assumes full vesting of LTI. Role CEO CFO Fixed Salary Base Equity (BE) Long Term Incentive (LTI) (1) $800,000 $450,000 $400,000 $225,000 $800,000 $450,000 Grant quantum Grant date Vesting date Zero-priced options (ZPOs) for Australian-based (non-US resident) executives. ZPOs are call options to acquire Redbubble shares, with a zero exercise price to convert the option into shares. The grant quantum of the BE award to executives is calculated as a percentage of fixed salary. Grants are made on 1 October of the relevant year following the setting of total compensation for the year and Board approval. Grants vest after 12 months, subject to the executive remaining in service with an RB Group company at the vesting date. The Board has unfettered discretion to determine any adjustment to awards at time of vesting. Disposal restriction period 12 months following vesting. Holding period remains in place even if employment ends. Officers & Executives of the Group are subject to the RB Group share trading policy. 54 55 (3) Australia only RedbubbleAnnual Report 2021 Termination Executives forfeit grants that have not vested. Clawback Change of Control Holding periods remain on foot. The Board has unfettered discretion to award pro rata vesting in the event of an employee’s termination. In the event of serious misconduct or a material misstatement of RB Group’s financial statements, the Board has the discretion to reduce, cancel or clawback BE to the extent that the law will allow. The early vesting of any unvested awards may be permitted by the Board in other limited circumstances such as a change in control of Redbubble. In these circumstances the Board will determine the timing and proportion of any unvested awards that vest. FY2021 Long-Term Incentive (LTI) It is intended that LTI will allow executives to access uncapped fair upside based on strong shareholder value creation, while assuming significant risk as the SARs have no value unless the executive remains with the business for a minimum of 3 years and enterprise value grows at a rate that provides shareholders with attractive returns. The LTI component of the RECM operates as outlined below: LTI instrument Share Appreciation Rights (SARs) Grant quantum Grant date The grant quantum of the LTI award to executives is calculated as a percentage of fixed salary. Grants are made on 1 October of the relevant year following the setting of total compensation for the year and Board approval. Vesting date & conditions The LTI’s vest on the earlier of either the third, fourth or fifth anniversaries following the grant date subject to: • The Executive remaining employed at RB Group (time vesting) • The achievement of a compounding target of 10% Total Shareholder Return (TSR) per annum on either the third, fourth or fifth anniversaries following the grant date. The compounding return target to be determined based on a 10% per annum Total Shareholder Return (TSR) from time of grant. TSR is calculated as the total of the share price appreciation plus any dividends paid during the period. TSR has been chosen as the appropriate target so that Executives are fully aligned with shareholders. Disposal restriction period 12 months following vesting. Holding period remains in place even if employment ends. Termination Should a participant exit during the LTI vesting period, participants will retain pro-rata retention of LTI awards that have yet to vest. Pro-rata retention has the following conditions: • The employee must have been part of the RECM LTI program for at least 3 years • The employee must not be considered a “bad leaver” • The employee must have served at least 12 months of a grant’s vesting period to be entitled to a pro-rata portion • The award retained will be pro-rata for the number of months since that award was granted and the employee’s resignation, divided by the total number of months until First testing of that award • The pro-rata award remains subject to all testing, disposal restriction and other conditions • Once an award has achieved its TSR hurdle and has vested, the (former) employee will have 90 days to exercise before the equity expires The Board retains complete discretion in these matters. Strike price Strike price is set on 1 October based on 30 day VWAP. The Board retains Board discretion in respect of adjusting the strike price if it considers there have been unusual trading circumstances within the 30 day period. For FY2021 the strike price was $4.2126. SARs valuation used for the allocation of equity The dollar amount of equity is converted to SARs at the fair market value determined at the beginning of grant period based on a Black Scholes valuation of the SAR. The Black Scholes valuation will use the 30 (calendar) day VWAP calculated on 1 October and be calculated on an “unhurdled” basis i.e. valued for the purposes of equity allocation as if there was no performance hurdle. Expiration 6 years from grant date and therefore the SARs must be exercised by this point or they lapse. Hedging Clawback Change of Control Upon resignation or termination, the exercise period for SARs ends 90 days following the date of resignation or termination unless the Board decides otherwise. Executives are prohibited from hedging under RB Group’s Share Trading policy and clawback under existing rules. In the event of serious misconduct or a material misstatement of RB Group’s financial statements, the Board has the discretion to reduce, cancel or clawback LTI to the extent that the law will allow. The early vesting of any unvested awards may be permitted by the Board in other limited circumstances such as a change in control of Redbubble. In these circumstances the Board will determine the timing and proportion of any unvested awards that vest. 56 57 RedbubbleAnnual Report 2021 Vesting and exercise periods of the LTI 4.4 CEO Employment Arrangements YEAR 0 YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 Period 1 Period 2 Period 3 Period 4 Period 5 Share price of 133% of strike price Executive can exercise if year 3 conditions are met Share price of 146% of strike price Executive can exercise if year 4 conditions are met Share price of 161% of strike price Executive can exercise if year 5 conditions are met Legend Exercise condition testing period Exercise condition achieved Exercise condition not achieved Exercise condition requirement (10%CAGR) 4.3 LTI Outcomes Ms Clark, our CFO, was the only KMP Executive to have an eligible LTI Award vest during the year, as is outlined in the table below: Participant Grant Date Vesting Date Share price performance calculated to trigger exercise condition achievement (90 day VWAP calculated from 25 April 2020 to 23 July 2020) FY2020 Minimum health conditions (Cash Balance, Artist & Content Growth, Customer Loyalty, and People & Culture)* Percent vested due to service and performance based vesting FY2020 LTI Award Emma Clark 1 October 2019 1 October 2020 Increase of 11% at 23 July 2020 Achieved 100% * Minimum health conditions applied in relation to the LTI equity award issued for FY2020. The principles behind the minimum health metrics remain an important part of annual Executive performance evaluation; however, these conditions have been removed from the LTI award methodology in FY2021. The Board continues to review the remuneration framework on an annual basis to ensure it provides a strong foundation to attract and retain talent and align them with building long-term value for shareholders. The employment of Mr Ilczynski, our CEO, is governed by an Employment Agreement that commenced 4 January 2021. The table below summarises the compensation arrangements of Mr Ilczynski: Remuneration Element Contracted Annual Remuneration Fixed Salary Base Equity (BE) $800,000 inclusive of superannuation $400,000 (50% of fixed salary) Long-Term Incentive (LTI) $800,000 (100% of fixed salary) The Company also entered into a one-off limited recourse Loan Arrangement with Mr Ilczynski at the time of his appointment (see section 7.6 for further information). 4.5 Executive KMP Terminations during the year Mr Hosking ceased to be the interim CEO and Managing Director of RB Group on 27 January 2021. Mr Hosking was paid a pro-rata proportion of his contracted bonus ($300,000) following his time as interim CEO and Managing Director at the period to 27 January, as well as being paid his agreed fixed remuneration until 27 January 2021. Mr Hosking has since returned to the Board as a non-executive director. Details of Mr Hosking’s remuneration throughout FY2021 can be found in section 6.1. 5. Non-executive Director (NED) Remuneration 5.1 NED Remuneration Policy RB Group seeks to attract and retain high calibre Non-Executive Directors who will provide good governance, strong oversight, independence, a range of skills and alignment of interests with long- term share price appreciation. During FY2021, the Committee undertook a review of the level of Board fees awarded to NEDs. As part of this review, the Committee considered not only the level, but also the structure of NED remuneration and how it could be enhanced to best align with shareholder expectations, whilst attracting and retaining high calibre NEDs. The Committee also considered the increasing scale and complexity of the business. 58 59 RedbubbleAnnual Report 2021 The following fees were approved, effective 1 November 2020, as a part of a review of the NED Remuneration Policy: Chair Member Board Audit & Risk Committee $250,000 $120,000 $15,000 Nil People & Nomination Committee $15,000 Nil It was further resolved that all Board fees would be paid entirely in cash (and therefore, no deferred equity grants were made to NEDs in FY2021). The above fees apply to all of Redbubble’s NEDs, except for Mr Lockwood and Mr Hosking. Mr Lockwood is a partner with Piton Capital, a private equity firm with a shareholding in RB Group. Mr Lockwood receives no remuneration from RB Group, in accordance with Piton Capital’s policy that their partners do not accept remuneration for external board positions. Mr Hosking has declined to accept remuneration for his role as a NED of Redbubble. 5.2 Maximum Aggregate NED Fee Pool The total amount paid to all Directors for their services must not exceed in aggregate in any financial year the amount fixed by shareholders in a general meeting, currently set at $1,200,000 which has remained unchanged since the Company’s IPO in 2016. Any changes to this amount in future will require approval by shareholders in a general meeting in accordance with the ASX Listing Rules. 5.3 Other Information NEDs are reimbursed for all reasonable travel and other expenses properly incurred by them in attending Board meetings or any meetings of committees of the Board, in attending any general meetings of Redbubble or otherwise in connection with the business or affairs of RB Group. NEDs may be paid additional or special remuneration if they, with the approval of the Board, perform any extra services or make special exertions for the benefit of RB Group. There are no retirement benefit schemes for Directors. The remuneration of the NEDs in FY2021 is set out in detail in section 6.2. Pink Angel Classic T-Shirt designed and sold by gross-girl99 60 61 RedbubbleAnnual Report 2021 Redbubble Annual Report 2021 6. Statutory Reporting for FY2021 6.1 Executive KMP remuneration for the year ended 30 June 2021 The following table shows details of the nature and amount of each element of remuneration paid or awarded to Executives for services provided during the year while they were KMP. Short term benefits Post - employment benefits Other benefits Long-term benefits Cash salary (1) Cash bonus (2) Non-monetary benefits (3) Superannuation (4) Termination benefits Long service leave (5) Share-based payments Limited recourse loan (In- substance share options) (6) Share options (Performance based) (7) Share options (Time based) (7) Share appreciation rights (Performance based) (8) Chief Executive Officer Michael Ilczynski (appointed as CEO on 27 January 2021) Executive Director Martin Hosking (resigned as CEO on 27 January 2021) (11) Barry Newstead (terminated as CEO 18 February 2020) 2021 2020 2021 2020 2021 $ 390,520 - $ - - $ $ 8,420 25,000 - - 317,206 177,293 750 25,000 252,179 80,211 - - - - - 770 - 9,798 - 25,000 25,000 2020 333,464 12,760 25,000 316,976 (23,001) Other key management personnel Emma Clark (CFO) 2021 2020 431,322 416,499 - - Total 2021 1,139,048 177,293 9,940 75,000 $ - - - - - $ 302 - (275) 275 - - - - 2,112 742 2,139 $ - - - - - $ $ 144,534 89,426 - - - - - - - - Deferred STI (9) Total remuneration Performance -related (10) $ - - - - - $ 710,343 - 519,974 342,463 - $ 13% 0% 34% 23% 0% (297,747) 66,102 157,312 (16,481) 574,385 (25%) - - - 225,659 214,547 262,783 527,489 370,193 303,973 - - - 899,410 1,232,513 2,129,727 24% 43% $ 52,141 - - - - - - - 52,141 2020 1,002,142 92,971 - 59,798 316,976 (21,984) - (297,747) 328,885 684,801 (16,481) 2,149,361 (1) Includes base salary, excess superannuation (refer to footnote 4) and short term compensated absences, such as leave entitlements accrued. In the prior period from 20 April 2020 to 30 June 2020 Martin Hosking and Emma Clark took a voluntary salary reduction of 20% of their base salary. (2) Represents cash bonus accrued for the year. (3) Non-monetary benefits include wellness benefits available to all executives. For Michael Ilczynski the amount also includes fringe benefits tax payable by the Group on the limited recourse loan. (4) Staff can elect to have their superannuation capped at $25,000 (2020: $25,000), with any amount above this included in cash salary. These amounts include superannuation (7) Amounts disclosed reflect the value of remuneration consisting of performance rights/options, based on the value of rights/options expensed during the year. The fair value of rights is equivalent to fair value of shares at the grant date. The fair value of options is ascertained using the Black-Scholes model and is amortised over the vesting period. (8) Amounts disclosed reflect the value of remuneration consisting of share appreciation rights (SARs), based on the value of SARs expensed during the year. The fair value is ascertained using the Monte Carlo options model and is amortised over the vesting period. (9) Includes share based payment expenses recognised during the year over the vesting period, in relation to deferred STI awards for prior years. on bonus paid during the year. (10) Cash bonus, share options with a performance condition and deferred STI are all considered to be performance-related remuneration, based on their nature at grant (5) Australian executives are entitled to long service leave. The annual charge reflects long service leave accrued (or lapsed) during the period. (6) The accounting standard, AASB 2 – Share Based Payment, requires limited recourse loans for the purchase of shares to be treated (for accounting) as an option. Amounts disclosed represent the deemed in-substance option cost for the limited recourse loan provided to Michael Ilczynski to acquire Redbubble shares. Please see section 7.6 for further details. The fair value of in-substance options is ascertained using the Black-Scholes model and is amortised over the loan period date. (11) Martin Hosking resigned as CEO on 27 January 2021 and resumed as a non-executive director of the Group at this time. The remuneration shown in this table is for his services as CEO only. 62 63 6.2 NED Remuneration for the year ended 30 June 2021 (1) Short term benefits Post - employment benefits Director Fees (2) (8) Superannuation $ $ Non-executive directors Ben Heap Martin Hosking (4) Greg Lockwood (5) Jenny Macdonald Anne Ward Richard Cawsey (6) Grant Murdoch (7) Total 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 116,473 17,940 - 35,960 - - 115,025 64,760 201,275 83,369 - 94,803 - 20,594 432,773 317,426 11,065 1,704 - 3,416 - - - 2,864 19,121 7,920 - - - 1,956 30,186 17,860 Share-based payments Share-based payments - Share options (Time based) (3) $ - - - 15,788 - - 17,642 37,194 17,642 37,575 - Total $ 127,538 19,644 - 55,164 - - 132,667 104,818 238,038 128,864 - 29,658 124,461 - 2,720 35,284 122,935 - 25,270 498,243 458,221 (1) The NED remuneration table has been prepared in accordance with Australian Accounting Standards and Section 300A of the Corporations Act 2001 (Cth). (2) Effective 1 November 2020 all Board fees are paid in cash. See section 5 for further details on this change. (3) Amounts disclosed reflect the value of remuneration from options granted in the prior year but still vesting in the current year. The fair value of options is ascertained using Black-Scholes model. (4) Martin Hosking resigned as CEO on 27 January 2021 and resumed as a non-executive director at this time. The remuneration shown in this table is for his services as a non-executive director only. In FY21, Mr Hosking did not accept remuneration as a non-executive director. (5) Greg Lockwood is a partner with Piton Capital, a private equity firm with a shareholding in Redbubble Ltd. Mr Lockwood receives no remuneration from the Group, in accordance with Piton Capital’s policy that their partners do not accept remuneration for external board positions. (6) Richard Cawsey resigned effective 30 March 2020. His fees were paid to and options / rights are issued to Denali Venture Partners (Aust). Amounts are provided for prior year comparatives. (7) Grant Murdoch resigned effective 23 October 2019. Amounts are provided for prior year comparatives. (8) In the prior year in response to the COVID-19 health crisis and resulting economic uncertainty, RB Group non-executive directors agreed to a 20% reduction in the cash component of their remuneration, effective from 20 April 2020 until 30 June 2020. 7. Other Information 7.1 Minimum Shareholding Expectation The Board has set minimum shareholding expectations for the Directors and Executives to promote alignment between their interests and those of shareholders. In the case of Executives, the design of the RECM ensures that all Executives progressively acquire shares or other equity instruments, so that they are aligned in building long term value for shareholders. The RECM operates to ensure that over time the Executives will acquire an equity exposure equal to or greater in value than 100% of their annual base salaries. In the case of NEDs, who are paid entirely in cash and do not participate in any incentive program, the Board has introduced a minimum shareholding expectation. NEDs are expected to progressively acquire shares over a three year period from the date of their appointment (or, for existing directors, within three years from the 1 November 2020 commencement of this requirement) and within this timeframe are expected to hold shares equal in value to their annual base fees at the time of their appointment. Direct and indirect shares and equity instruments (such as RSUs, ZPOs and SARs) count towards this minimum shareholding target. 7.2 Options and Share Appreciation Rights The tables below disclose the number of share options and share appreciation rights granted, exercised, vested or forfeited during the year. 64 65 RedbubbleAnnual Report 2021 Option holdings Limited recourse loan share option holdings (1) Share options do not carry any voting or dividend rights, and can only be exercised once the vesting conditions have been met, until their expiry date. Limited recourse loan share options do not carry any voting or dividend rights, and can only be exercised once the vesting conditions have been met, until their expiry date. 2021 Balance at the start of the year Granted during the year as compensation Exercised during the year Cancelled during the year Expired during the year Balance at the end of the year Vested and exercisable at the end of the year Unvested at the end of the year Vested during the year Non-executive directors Greg Lockwood - Jenny Macdonald 47,509 Anne Ward 50,714 Ben Heap - Martin Hosking 43,621 Chief executive officer - - - - - Michael Ilczynski - 49,388 Other key management - - - - - - Emma Clark 233,097 53,411 233,097 - - - - 16,789 (1) - - Total 374,941 102,799 233,097 16,789 - - - 47,509 47,509 50,714 50,714 - - 26,832 26,832 - - - - - - 27,798 27,798 - 7,121 49,388 53,411 - - 49,388 - 53,411 233,097 227,854 125,055 102,799 295,814 - - - - - - - 2021 Balance at the start of the year Granted during the year as compensation Exercised during the year Cancelled during the year Balance at the end of the year Vested and exercisable at the end of the year Unvested at the end of the year Vested during the year Chief executive officer Michael Ilczynski Total - - 289,161 289,161 - - - - 298,161 289,161 - - 298,161 289,161 - - (1) Under the requirements of AASB 2 - Share Based Payment the shares purchased by Michael Ilczynski with a limited recourse loan are considered to be options until the loan is repaid. Please see section 7.6 for further details. 7.3 Shares on exercise of options/rights Number of ordinary shares on exercise of options/rights Exercise price per option (1) Share price per share at exercise / settlement dates Value at exercise / settlement dates (2) (1) The options granted to Martin Hosking were for his services as a non-executive director (NED). Mr Hosking was appointed as CEO on 18 February 2020 and ceased as a NED on this date. A portion of his NED options were cancelled at the November 2020 vesting date to reflect the proportion of the NED remuneration year that Mr Hosking was a NED for. 2021 Nature of grant Key Management Personnel Share Appreciation Rights holdings Share appreciation rights do not carry any voting or dividend rights, and can only be exercised once the vesting conditions have been met, until their expiry date. 2021 Balance at the start of the year Granted during the year as compensation Exercised during the year Cancelled during the year Balance at the end of the year Vested and exercisable at the end of the year Unvested at the end of the year Vested during the year Chief executive officer Michael Ilczynski - 159,854 - Other key management personnel Emma Clark 1,069,298 174,385 91,000 Total 1,069,298 334,239 91,000 - - - 159,854 - 59,854 - 1,152,683 978,298 174,385 1,069,298 1,312,537 978,298 334,239 1,069,298 Emma Clark Emma Clark Total Options 233,097 $0.00 Between $4.04 and $5.51 $996,364 SARs 66,713 $1.41 Between $5.13 and $5.45 $353,651 299,810 1,350,015 (1) For SARs, the exercise price represents the share price from which any share appreciation is measured. (2) Value at exercise / settlement date is calculated as: • for options: share price on exercise date less exercise price paid, multiplied by number of options exercised • for SARs: share price on exercise date multiplied by number of shares received upon exercising the SAR 66 67 RedbubbleAnnual Report 2021 Jungle leopard Floor Pillow designed and sold by steveswade Jungle Leopard Family! Premium T-Shirt designed and sold by Amber Davenport Dragon Kids T-Shirt designed and sold by fishcakes 7.4 Shareholdings of Directors and KMP 2021 - Redbubble Limited ordinary shares (1) Non-executive directors Ben Heap Greg Lockwood Jennifer Macdonald Anne Ward Martin Hosking Chief executive officer Michael Ilczynski (2) Other key management personnel Emma Clark Related parties Beneficiary Jackson Alexander Capital Pty Ltd Ben Heap Jellicom Pty Ltd as trustee for the Three Springs Family Trust Martin Hosking Three Springs Foundation Pty Ltd as trustee for the Three Springs Foundation Martin Hosking Piton Capital Venture Fund II LP Greg Lockwood Piton Capital Investments Cooperatief B Greg Lockwood Balance at the start of the year Received on exercise of options / SARs Purchase of shares Sale / transfer of shares Balance at the end of the year - - 88,539 100,000 2,393,552 - - - 46,606,538 1,500,000 5,537,291 927,840 - - - - - - - - 7,000 - - - - - - (1,633,452) - - 95,539 100,000 760,100 72,339 - 72,339 299,810 - (99,810) 200,000 - - - - - - 50,000 - 50,000 - - - - - (4,366,548) 42,239,990 1,500,000 5,537,291 927,840 - 100,000 Walros Pty Ltd as trustee for the Anagnostou Super Fund Anne Ward 100,000 Total 57,253,760 299,810 129,339 (6,099,810) 51,583,099 (1) Includes shares held directly, indirectly and beneficially by KMP. (2) Michael Ilczynski also holds 289,161 shares funded by a limited recourse loan from the Group. Under the requirements of AASB 2 - Share Based Payment these shares are not shown in this table until the loan is repaid. Please see section 7.6 for further details 68 69 RedbubbleAnnual Report 2021 7.5 Details of equity awards granted # of options / rights granted Grant date Type of equity Vest date (1) Expiry date (2) Exercise price Unit value at grant date Total Value at grant date (3) Chief executive officer Michael Ilczynski 04-Jan-21 49,388 Options 04-Jan-22 04-Jan-27 $0.00 $5.95 $293,859 04-Jan-21 159,854 SARs 01-Oct-23 04-Jan-27 $5.99 $3.10 $495,547 04-Mar-21 289,161 In-substance share options (4) 04-Mar-26 04-Mar-26 $6.45 $2.77 $800,510 Other key management personnel Emma Clark 01-Oct-20 53,411 Options 01-Oct-21 01-Oct-26 $0.00 $4.09 $218,451 01-Oct-20 174,385 SARs 01-Oct-23 01-Oct-26 $4.21 $2.06 $359,233 Total 726,199 $2,167,600 (1) The vesting of equity is subject to the CEO or KMP (as applicable) remaining in service with Redbubble as at the vest date and, in relation to the SARs, the total shareholder return hurdle being satisfied. (2) For options and SARs, if the CEO or KMP (as applicable) leaves Redbubble service then the expiry date is brought forward to be 90 days after the employment end date. For in-substance share options, if the CEO leaves Redbubble service then the expiry date is the employment end date. (3) The value at grant date for options and in-substance share options has been determined using the Black-Scholes valuation model. The value for share appreciation rights has been determined using the Monte Carlo valuation model. For presentation purposes, share price has been rounded to two decimal places, however the value at grant date has been calculated based on unrounded numbers. (4) Under the requirements of AASB 2 - Share Based Payment the shares purchased by Michael Ilczynski with a limited recourse loan are considered to be options until the loan is repaid. Please see section 7.6 for further details. 7.6 Other Transactions with KMP On 10 February 2021, Redbubble Limited and Mr Ilczynski, CEO, entered into a limited recourse loan arrangement with a loan amount of $1,600,000. Mr Ilczynski used the loan amount plus $400,000 of his own funds to purchase Redbubble Limited shares on-market in the trading window that followed release of Redbubble’s half-year 2021 results and Appendix 4D. This transaction was completed on 4 March 2021, with an average share price of $5.53. The loan amount plus interest equal to the RBA cash rate plus 3% (compounding annually) is to be repaid 5 years from date of loan, or on cessation of employment if earlier. The purchased shares are subject to dealing restrictions, including a prohibition on granting security interests, which fall away upon the loan being repaid in full. The security for the loan is limited to the shares acquired with the loan amount. Consolidated Financial Statements Strawberry Chequers Fruit Squares Pattern Jigsaw designed and sold by Rock 70 71 RedbubbleAnnual Report 2021 Consolidated statement of comprehensive income for the year ended 30 June 2021 Consolidated statement of financial position as at 30 June 2021 Revenue from contracts with customers Marketplace revenue Artists’ revenue Total revenue from contracts with customers Operating expenses Artists' margin Fulfiller expenses (1) Employee and contractor costs Marketing expenses Operations and administration Depreciation and amortisation Total operating expenses Other income (2) Other expenses (3) Profit / (Loss) before income tax Income tax (expense) / benefit (4) Notes 2021 $'000 2020 $'000 553,285 348,888 104,038 3 657,323 67,369 416,257 (104,038) (67,369) (330,541) (214,521) (64,534) (59,496) (73,180) (43,300) (28,947) (24,342) 4 5 6 12, 13 & 14 (13,331) (13,727) (614,571) (422,755) 43 (3,692) 39,103 (7,856) 31,247 (3,073) (3,073) 28,174 Cents 11.57 11.28 342 (2,838) (8,994) 223 (8,771) 1,512 1,512 (7,259) Cents (3.38) (3.38) 7(a) 8 8 Total profit / (loss) for the year attributable to owners Other comprehensive income / (loss) Items that will be reclassified subsequently to profit or loss Gain / (loss) on foreign currency translation Total other comprehensive income / (loss) attributable to owners Total comprehensive income / (loss) for the year attributable to owners Profit / (loss) per share attributable to the ordinary equity holders of the company Basic profit / (loss) per share Diluted profit / (loss) per share (1) Fulfiller expenses comprise product and printing, shipping and transaction costs, and are equivalent to cost of goods sold. (2) Other income includes finance income. (3) Other expenses include interest expenses on lease liabilities, losses recognised on disposal of assets and net foreign exchange losses. Refer to note 10(a) for further details on foreign exchange losses. (4) A portion of the income tax benefit applicable to the Group is recorded directly in equity. Please see note 7(b) for further details. The above Consolidated Statement of Comprehensive Income should be read in conjunction with accompanying notes. 72 Current assets Cash and cash equivalents Other receivables Prepayments Net investment in sublease Current tax assets Other assets Total current assets Non-current assets Property, plant and equipment Intangible assets Right of use assets Prepayments Deferred tax assets Other assets Total non-current assets Total assets Current liabilities Trade and other payables Unearned revenue (1) Employee benefit liabilities Provisions Lease liabilities Other liabilities Total current liabilities Non-current liabilities Lease liabilities Employee benefit liabilities Other liabilities Total non-current liabilities Total liabilities Net assets Equity Contributed equity Treasury reserve Share based payment reserve Foreign currency translation reserve Accumulated losses Total equity Notes 9 10(b) 14(b) 7(b) 11 12 13 14(a) 7(d) 11 15 16 14(a) 17 14(a) 16 17 18(a) 18(b) 18(d) 18(d) 2021 $'000 98,686 4,602 4,525 - 1,270 4,693 113,776 1,928 62,486 4,466 506 2,717 723 72,826 186,602 47,473 12,235 2,195 2,561 2,280 - 66,744 3,722 268 - 3,990 70,734 115,868 162,552 (7,351) 11,414 (3,408) (47,339) 115,868 (1) Unearned revenue represents the value of goods paid for by customers that are not yet delivered. The above Consolidated Statement of Financial Position should be read in conjunction with accompanying notes. 2020 $'000 58,129 5,236 4,063 994 1,032 7,328 76,782 2,229 71,576 6,649 46 617 1,621 82,738 159,520 45,036 28,855 5,059 1,780 3,944 1,281 85,955 5,819 198 70 6,087 92,042 67,478 145,438 (5,303) 13,699 (335) (86,021) 67,478 73 RedbubbleAnnual Report 2021 Consolidated statement of changes in equity for the year ended 30 June 2021 Consolidated statement of changes in equity for the year ended 30 June 2021 Contributed equity Treasury reserve (1) Share based payments reserve Foreign exchange translation reserve Accumulated losses Total Contributed equity Treasury reserve (1) Share based payments reserve Foreign exchange translation reserve Accumulated losses Total For the year ended 30 June 2021 Notes $'000 $'000 $'000 $'000 $'000 $'000 For the year ended 30 June 2020 Notes $'000 $'000 $'000 $'000 $'000 $'000 Balance as at 1 July 2020 145,438 (5,303) 13,699 (335) (86,021) 67,478 Balance as at 1 July 2019 135,194 (1,394) 8,677 (1,847) (77,250) 63,380 - 31,247 31,247 Profit / (loss) for the year (3,073) - (3,073) (3,073) 31,247 28,174 Profit / (loss) for the year Other comprehensive income / (loss) Total comprehensive loss for the year Exercise of share options Transfer to issued capital (2) Share based payments expense Shares issued to Employee Share Trust Shares issued / allocated to participants (3) Payment of withholding taxes (4) Limited recourse loan made to related parties (5) Income tax benefit recognised directly in equity for Employee Share Trust deductions (6) - - 18(b) 18(b) 4 8,366 8,990 - - - - - - - - - (8,990) 6,705 18(b) 44,326 (44,326) 18(b) (41,413) 41,413 18(b) 18(b) 18(b) (3,155) - - - - (1,600) 9,900 (7,435) - - - - - - - - - - - - - - 8,366 - 6,705 - - (3,155) (1,600) 9,900 - - - - - - - - - Other comprehensive income / (loss) Total comprehensive loss for the year Exercise of share options Transfer to issued capital (2) Share-based payments expense Shares issued to Employee Share Trust Shares issued / allocated to participants (3) - - - 18(b) 18(b) 4 3,556 3,009 - - - - - - - 18(b) 10,321 (10,321) 18(b) (6,412) 6,412 - - - - (3,009) 8,031 - - - - (8,771) (8,771) 1,512 - 1,512 1,512 (8,771) (7,259) - - - - - - - - - - - - 3,556 - 8,031 - - (230) Payment of withholding taxes (4) 18(b) (230) - Balance at 30 June 2020 145,438 (5,303) 13,699 (335) (86,021) 67,478 (1) The Group operates an Employee Share Trust (the Trust) for the purpose of issuance of shares to participants on exercise of options / restricted stock units. The balance in the Treasury Reserve represents the book value of shares held by the Trust for future issue to participants on exercise of options / restricted stock units. (2) Transfer to issued capital on issuance of shares for exercised options / restricted stock units. Transfer to accumulated losses (7) 18(b) 7,435 - (3) Shares issued / allocated to participants from the Employee Share Trust. Balance as at 30 June 2021 162,552 (7,351) 11,414 (3,408) (47,339) 115,868 (1) The Group operates an Employee Share Trust (the Trust) for the purpose of issuance of shares to participants on exercise of options / restricted stock units. The balance in the Treasury Reserve represents the book value of shares held by the Trust for future issue to participants on exercise of options / restricted stock units. In FY2021 the Treasury Reserve also includes shares used as security for the limited recourse loan provided to the CEO. (2) Transfer to issued capital on issuance of shares for exercised options / restricted stock units. (3) Shares issued / allocated to participants from the Employee Share Trust. (4) Payment of withholding taxes to US tax authorities on issuance of restricted stock units funded by shares withheld. (5) A limited recourse loan was provided to the Redbubble Group CEO to purchase Redbubble shares on-market. This is treated as an acquisition of treasury shares. Refer to Note 23(b) for further details. (6) A tax benefit of $9.9m was recognised directly in equity for income tax benefits relating to contributions to the Employee Share Trust in excess of the associated cumulative remuneration expense. (7) The balance transferred to accumulated losses represents the income tax benefit recorded in the reserve for equity rights that were converted into shares in the current period. The above Consolidated Statement of Changes in Equity should be read in conjunction with accompanying notes. (4) Payment of withholding taxes to US tax authorities on issuance of restricted stock units funded by shares withheld. The above Consolidated Statement of Changes in Equity should be read in conjunction with accompanying notes. 74 75 RedbubbleAnnual Report 2021 Consolidated statement of cash flows for the year ended 30 June 2021 Notes to the consolidated financial statements for the year ended 30 June 2021 Cash flows from operating activities Receipts from customers Payments to artists Payments to fulfillers Payments to other suppliers and employees Payments of interest Receipts of interest Income taxes received / (paid) Net cash provided by / (used in) operating activities Cash flows from investing activities Payments for property, plant and equipment Payment of deferred consideration for TeePublic acquisition (1) Proceeds from net investment in subleases Payments for development of intangible assets Net cash provided by / (used in) investing activities Cash flows from financing activities Proceeds from exercise of share options Payments for limited recourse loans to related parties (2) Payment of withholding taxes to US tax authorities on settlement of restricted stock units funded by shares withheld Notes 2021 $'000 2020 $'000 715,556 471,973 (100,907) (63,114) (330,093) (217,810) (228,785) (142,058) (333) 27 (360) 55,105 (861) (979) 854 (456) 232 (2,165) 46,602 (476) (7,104) 785 (5,384) (9,205) (6,370) (16,000) 8,366 (1,600) (3,155) 3,556 - (230) 14(a) 14(b) 13 18(b) 23(b) 18(b) Payments for lease liabilities 14(a) (3,919) (3,576) Net cash provided by / (used in) financing activities Net increase / (decrease) in cash and cash equivalents held Cash and cash equivalents at beginning of year Effect of exchange rate changes on cash and cash equivalents Cash and cash equivalents at the end of the financial year (308) 48,427 58,129 (7,870) 98,686 (250) 30,352 29,030 (1,253) 58,129 (1) In FY2019, the Group acquired 100% of TP Apparel LLC and its subsidiary TP Apparel Europe Limited (TeePublic). The final deferred consideration payment of US $0.7 million (AU $1.0m) was made during the year (US $4.8 million (AU $7.1m) was paid in the prior year). (2) During the year Redbubble provided a limited recourse loan to the Redbubble Group CEO to purchase Redbubble shares on-market. Refer to Note 23(b) for further details. The above Consolidated Statement of Cash Flows should be read in conjunction with accompanying notes. 76 Notes 1. 2. Basis of Preparation Changes in significant accounting policies Performance 3. 4. 5. 6. 7. 8. Cash 9. 10. Assets 11. 12. 13. 14. Liabilities 14. 15. 16. 17. Equity 18. Revenue from contracts with customers Employee and contractor costs Marketing expenses Operations and administration expenses Income tax Earnings per share Cash and cash equivalents Financial risk management Other assets Property, plant and equipment Intangible assets Leases Leases Trade and other payables Employee benefits liabilities Other liabilities Contributed equity and reserves Group structure 19. 20. Interests in subsidiaries Parent entity financial information Unrecognised items 21. Commitments and contingencies Others 22. 23. 24. 25. 26. 27. Share-based payments Related party transactions Remuneration of auditors Segment information Events occurring after the balance sheet date Other significant accounting policies Page 78 79 79 80 80 80 81 85 86 87 91 91 94 97 97 99 100 101 101 103 104 105 106 110 111 111 111 112 77 RedbubbleAnnual Report 2021 1. Basis of preparation 2. Changes in significant accounting policies The consolidated financial statements of Redbubble Limited and its controlled entities (the Group) for the year ended 30 June 2021 were authorised for issue by a resolution of the Directors on 19 August 2021. Redbubble Limited (the Company or the parent) is a for profit company incorporated and domiciled in Australia and whose shares are publicly traded on the Australian Stock Exchange. The Group, through its websites at Redbubble.com, TeePublic.com and three foreign language Redbubble.com websites, owns and operates the Redbubble and TeePublic online marketplaces. These marketplaces facilitate the sale and purchase of art and designs on a range of products between independent creatives and consumers. The products are produced and shipped by third party service providers (i.e. product manufacturers, printers and shipping companies) referred to as fulfillers. These financial statements: ● are general purpose financial statements; ● cover Redbubble Limited and its controlled entities as the consolidated Group. Redbubble Limited is the ultimate parent entity of the Group; ● have been prepared in accordance with Australian Accounting Standards (AASBs) and interpretations issued by the Australian Accounting Standards Board and the Corporations Act 2001; ● comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB); ● have been prepared on a going concern basis under the historical cost convention; ● are presented in Australian dollars with all values rounded off in accordance with the Australian Securities and Investments Commission 2016/191 Legislative Instrument, to the nearest thousand dollars or in certain other cases, nearest dollar, unless otherwise stated; and ● apply significant accounting policies consistently to all the years presented, unless otherwise stated. Comparatives are also consistent with prior years, unless otherwise stated. The preparation of financial statements requires the use of certain critical accounting estimates and exercise of significant judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement and use of estimates are disclosed in the relevant notes. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under circumstances. The Group makes estimates and assumptions concerning the future which may not equal the actual results. There are no new or amended accounting standards that required Redbubble to change its accounting policies for the 2021 financial year. 3. Revenue from contracts with customers The Group provides internet-based marketplace platforms and associated services to facilitate the sale of goods from artists to those who want to purchase goods bearing the artists’ designs. Artists display and sell art via the Group’s websites. The Group aggregates demand from the buyers to support preferential relationships between third party suppliers, fulfillers and drop shippers and the artists, using the Group’s platforms. Under AASB 15 Revenue from Contracts with Customers the Group is the principal for accounting purposes in the sale of goods bearing artists’ designs. Artists’ revenue is included in revenue with the corresponding artists’ margin being recognised in operating expenses. The Group has concluded there is only one performance obligation for goods bearing the artists’ designs. Both the artist and the Group are involved in satisfying the performance obligation. The performance obligation is satisfied (and therefore revenue is recognised) when control of the goods is transferred to the customer, which is deemed to be when the product is delivered. Amounts disclosed as revenue are net of trade discounts, returns, rebates, taxes and transaction fraud. Critical accounting estimates and judgements All of the unearned revenue balance as at 30 June 2020 was recognised as revenue during the FY2021 year. All of the unearned revenue balance at 30 June 2021 is expected to be recognised as revenue within the following month. Where possible the Group uses delivery tracking information to calculate the volume of goods in transit at the end of the reporting period. When delivery tracking information is not available the group estimates the likely delivery timeframe using average delivery times and information from shipping partners. For information regarding disaggregated revenue from contracts with customers refer to note 25. 78 79 RedbubbleAnnual Report 2021 4. Employee and contractor costs 7. Income tax Salary costs Contractor costs Share-based payments expense Superannuation and other pension related costs (1) Termination benefits Restructure costs 2021 $'000 41,880 13,219 6,705 2,730 - - 2020 $'000 39,113 6,569 8,031 2,708 530 2,545 Total employee and contractor costs 64,534 59,496 (1) Includes contribution to 401K funds, which is the superannuation equivalent for the US subsidiaries, and contributions to pension funds in Germany. 5. Marketing expenses Paid marketing (1) Other marketing expenses Total marketing expenses 2021 $'000 71,208 1,972 73,180 2020 $'000 39,840 3,460 43,300 (1) Paid marketing represents affiliate marketing and other paid marketing costs paid on a per click basis on search engines and social media platforms. 6. Operations and administration Technology infrastructure and software costs Other operations and administration expenses Total operations and administration expenses 2021 $'000 19,060 9,887 28,947 2020 $'000 14,704 9,483 24,342 Recognition of tax expense / (benefit) The tax expense recognised in the statement of comprehensive income relates to current income tax expense plus deferred tax expense (being the movement in deferred tax assets and liabilities and unused tax losses during the year). The tax effect of share based payment awards granted is recognised in current income tax expense, except to the extent that the total tax deductions are expected to exceed the cumulative remuneration expense. In this situation, the excess of the associated current or deferred tax is recognised in equity and forms part of the treasury shares reserve. Current and deferred tax is recognised as income or an expense and included in the income statement for the period except where the tax arises from a transaction which is recognised in other comprehensive income or equity, in which case the tax is recognised in other comprehensive income or equity respectively. Current tax Current tax is the amount of income taxes payable / (recoverable) in respect of the taxable profit / (taxable loss) for the year and is measured at the amount expected to be paid to / (recovered from) the taxation authorities, using the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. Current tax assets and liabilities are offset where there is a legally enforceable right to set off the recognised amounts and there is an intention either to settle on a net basis or to realise the asset and settle the liability simultaneously. Deferred tax Deferred tax is provided on temporary differences which are determined by comparing the carrying amounts of tax bases of assets and liabilities to the carrying amounts in the consolidated financial statements. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. Deferred tax assets are recognised for all deductible temporary differences and unused tax losses to the extent: ● it is probable that future taxable profits will be available against which the deductible temporary differences and losses can be utilised; ● the likelihood of achieving appropriate continuity of ownership levels and continuing to meet the relevant definitions of “same business” are met; and ● there are no changes in tax legislation that adversely affect the ability to realise the deferred tax asset benefits. 80 81 RedbubbleAnnual Report 2021 Deferred tax assets and liabilities are offset where they relate to income taxes levied by the same taxation authority and the intention is to realise the assets and settle the liabilities simultaneously in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered. Critical accounting estimates and judgements Current and deferred income taxes arise from temporary differences between the tax and financial statement recognition of revenue, expense and equity items, the incurrence of tax losses and entitlement to non-refundable tax offsets. In evaluating the Group’s ability to recover deferred tax assets within the jurisdiction from which they arise, the Group considers all available positive and negative evidence, including probability of achieving appropriate continuity of ownership levels, likelihood of meeting relevant definitions of “same business”, expected reversals of temporary differences, projected future taxable income and results of recent operations. This evaluation requires significant management estimates and judgments. The Group has in aggregate $92.4 million (2020: $83.7 million) of unrecognised losses and $9.6 million (2020: $8.7 million) of unrecognised R&D tax offsets. An unrecognised deferred tax asset of $37.3 million exists as at 30 June 2021 (2020: $33.9 million), in relation to these items. These losses will be recognised at a future point in time when sustainable taxable income can be reliably estimated. In addition, the Group has unrecognised temporary deferred income tax items that will be recognised on a similar basis (a) Income tax expense / (benefit) recorded in the Statement of Comprehensive Income Recorded in the Statement of Comprehensive Income Current tax Current tax expense / (benefit) Under/(over) provision in prior years Deferred tax Deferred tax expense / (benefit) Under/(over) provision in prior years 2021 $'000 9,902 (24) (2,076) 54 Total income tax expense / (benefit) recorded in the Statement of Comprehensive Income 7,856 (b) Current tax assets / (liabilities) The current tax asset is comprised of the following Current tax expense recorded in the Statement of Comprehensive Income Current tax benefit recorded in equity (1) Total net current tax payable on current year operations Tax instalments made and refunds due for prior years Total current tax asset 2021 $'000 (9,902) 9,900 (2) 1,272 1,270 2020 $'000 339 18 (530) (50) (223) 2020 $'000 (339) - (339) 1,371 1,032 (1) The tax effect of share based payment awards granted is recognised in current income tax expense, except to the extent that the total tax deductions are expected to exceed the cumulative remuneration expense. In this situation, the excess of the associated current or deferred tax is recognised in equity and forms part of the treasury shares reserve. Bixby Creek Bridge Art Print designed and sold by fernandaschalle It is not the mountain we conquer but ourselves Art Print designed and sold by Matcha & Ink Lilac Skys Art print designed and sold by Cassia Beck Stardust Aquarius Duvet Cover designed and sold by Daniel Coulmann 82 83 RedbubbleAnnual Report 2021 (c) Numerical reconciliation of income tax expense / (benefit) to prima facie tax payable Profit / (loss) from ordinary activities before income tax expense / (benefit) Income tax calculated @ 30% Tax effect of amounts that are not deductible / (taxable) in calculating income tax: Tax effect of foreign jurisdictions’ different tax rates US income tax benefit due to exercise / disposition of employee stock options Net Australian income tax benefit from funding the employee share trust Tax effect of share based payment deduction recognised in equity Research and development Other non-deductible / non-assessable items Effect of movements in foreign exchange Under/(Over) provision in prior year Unrecognised tax losses and R&D tax offsets Income tax expense / (benefit) attributable to loss from ordinary activities (d) Deferred tax asset / (liability) Deferred tax assets Deferred tax liabilities Net deferred tax asset / (liability) The balance comprises temporary differences attributable to: Amounts recognised in profit or loss: Employee benefits Property, plant and equipment Lease assets and liabilities Unrealised FX Intangible assets US Carried Forward Tax Losses Other items Net deferred tax (liability) / assets Movements: Opening balance at 1 July Credited / (debited) to the consolidated statement of comprehensive income Exchange differences Closing balance at 30 June 84 2021 $'000 39,103 11,730 (270) (3,335) (12,222) 9,900 (99) (647) (352) 30 3,121 7,856 2021 $'000 2,717 - 2,717 2021 $'000 1,039 (249) 332 1,203 2020 $'000 (8,994) (2,698) (171) (163) (1,579) - (217) 226 193 (32) 4,218 (223) 2020 $'000 617 - 617 2020 $'000 873 (275) 395 1,347 (2,142) (1,395) 2,781 (247) 2,717 617 2,022 78 2,717 - (328) 617 27 580 10 617 8. Earnings per share Basic earnings per share (EPS) Basic EPS is calculated by dividing the profit attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the financial year. Diluted EPS Diluted EPS is calculated by dividing the profit attributable to ordinary equity holders of the Company (after adjusting for the after income tax effect of interest and other financing costs associated with the dilutive potential ordinary shares) by the weighted average number of ordinary shares outstanding during the financial year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares. Basic and diluted earnings per share The following table reflects the profit / (loss) and share data used in the basic and diluted EPS calculations: Profit / (loss) attributable to the ordinary equity holders of the company used in calculating basic and diluted earnings per share Weighted average number of shares used as the denominator Weighted average number of shares used as denominator in calculating basic earnings per share Adjustments for calculation of diluted earnings per shares: Add: Options Add: Restricted stock units Add: Share appreciation rights 2021 $'000 31,247 2020 $'000 (8,771) 2021 Number 2020 Number 270,031,293 259,379,690 4,269,483 1,156,139 1,652,778 - - - Weighted average number of shares used as denominator in calculating diluted earnings per share 277,109,693 259,379,690 (1) In the prior year, none of the options, restricted stock units and share appreciation rights that could be considered as potential ordinary shares have been included in determination of diluted EPS, since they are anti-dilutive. Due to losses incurred, inclusion of potential ordinary shares in weighted average number of shares would increase the denominator used in calculating diluted EPS and thereby reduce the loss per share. There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of authorisation of these financial statements that would significantly impact the above calculations. 85 RedbubbleAnnual Report 2021 9. Cash and cash equivalents 10. Financial risk management Cash at bank and on hand Total cash and cash equivalents 2021 $'000 98,686 98,686 2020 $'000 58,219 58,219 (a) Reconciliation of profit / (loss) for the year to net cash outflow from operating activities Profit/(Loss) for the year Non-cash items (Recognition) / de-recognition of net deferred tax asset 7(d) Notes Depreciation and amortisation Amortisation of share-based payments Net exchange differences Net loss on the disposal / write off of property, plant and equipment and intangible assets Other Change in operating assets and liabilities Net decrease / (increase) in trade and other receivables, prepayments and other assets Net (decrease) in current tax liabilities Net increase / (decrease) in trade and other payables, employee benefit and other liabilities and provisions Net increase / (decrease) in unearned revenue Net cash provided by operating activities (b) Changes in liabilities arising from financing activities Lease liabilities Opening balance at 1 July Cash flows from principal repayments New leases Foreign exchange movement Closing balance 30 June Notes 14(a) 14(a) 14(a) 2021 $'000 41,146 (2,022) 13,331 6,705 9,255 241 2020 $'000 (8,771) (580) 13,727 8,031 2,233 171 (128) 188 3,245 (9,077) (238) 190 (16,620) 55,105 2021 $'000 9,763 (3,919) 826 (668) 6,002 (1,881) 21,807 20,754 46,602 2020 $'000 11,848 (3,576) 1,335 156 9,763 This note explains the Group’s financial risk management and how the exposure to these risks affects the Group’s future financial performance. The Group’s risk management framework is maintained by senior management through delegation from the Board of Directors. The Board oversees and monitors senior management’s implementation of the Group’s risk management framework. This is based on recommendations from the Audit and Risk Committee, where appropriate. The risk management framework includes policies and procedures approved by the Board and managed by internal legal counsel and the Finance function. Financial assets Cash and cash equivalents Other receivables Security bonds Net investment in sublease Total financial assets Financial liabilities Fulfiller payables Artist payables Staff payables Other payables Deferred consideration Lease liabilities Total financial liabilities Notes 9 10(b) 11 14 Notes 15 15 15 15 17 14(a) 2021 $'000 98,686 4,602 1,685 - 2020 $'000 58,129 5,236 1,930 994 104,973 66,289 2021 $'000 22,500 12,673 1,602 6,810 - 6,002 49,587 2020 $'000 22,319 9,892 1,781 5,498 1,227 9,763 50,480 The carrying value of the assets and liabilities (excluding lease liabilities) disclosed in the table equals or closely approximates their fair value. Refer to note 14 for more information on lease liabilities. (a) Market risk Foreign exchange risk The Group collects funds from customers in five currencies (USD, AUD, EUR, CAD and GBP) and maintains bank accounts in these currencies. The Group has liabilities to fulfillers, artists and other suppliers in these currencies. Where possible, the Group settles its liabilities in the native currency hence creating a partial natural hedge. Any surplus funds are converted into the required currencies’ operating accounts when management feels it is prudent to do so. 86 87 RedbubbleAnnual Report 2021 Increased sales volumes during the year have led to larger foreign currency cash balances as at 30 June 2021. The net exposure to foreign currency financial instruments (expressed in AUD) held by the Group, which are largely held by the US subsidiaries whose functional currency is USD and Redbubble Ltd whose functional currency is AUD, are as follows: Net exposure (asset / (liability) (expressed in $’AUD) 30 June 2021 30 June 2020 GBP $’000 3,924 4,206 USD $'000 35,964 (766) EUR $'000 4,361 (525) CAD $’000 2,809 2,984 Total $’000 47,058 5,899 The aggregate net foreign exchange gains / (losses) recognised in profit or loss were: Net foreign exchange loss included in other expenses 2021 $’000 (3,092) Total net foreign exchange losses recognised in profit / (loss) before income tax for the year (3,092) 2020 $’000 (1,860) (1,860) Foreign Currency Sensitivity Cash and bank balances / other financial assets As at 30 June 2021, the Group holds $1.3 million (2020: $13 million) in bank deposits within cash and cash equivalents and other assets, that attract interest at normal rates. The Group’s bank accounts are predominantly non-interest bearing accounts. The other financial assets include certain other operational deposits over and above the deposits placed with banks as security. The banks with which securities are held are reputable financial institutions and hence, the credit risk is considered low. Other receivables The Group is not exposed to any significant credit risk on account of other receivables. The Group accepts payments either via credit card platforms, PayPal, Amazon Pay or Apple Pay. In any case, the Group ensures that cash is received prior to the product being manufactured. The other receivables balance as at 30 June 2021 represents amounts receivable from these payment service providers and other non-trade receivable balances. It is believed that the credit risk from collections from payment service providers is low. 2021 $’000 1,526 3,076 4,602 2020 $’000 4,614 622 5,236 The following table demonstrates the sensitivity to a reasonably possible change in exchange rates with all other variables held constant. The impact on the Group’s profit before tax is due to changes in the fair value of monetary assets and liabilities. Receivables from payment service providers Other receivables Total other receivables (1) Change in FX rate + 10% - 10% + 10% - 10% Effect on profit before tax (amounts shown in AUD) GBP $’000 392 USD $'000 3,596 (392) (3,596) 421 (421) (77) 77 EUR $'000 436 (436) (53) 53 CAD $’000 281 Total $’000 4,706 (281) (4,706) 298 (298) 590 (590) Year 30 June 2021 30 June 2020 (b) Credit risk Credit risk is the risk that a counterparty will default on its contractual obligations resulting in a financial loss to the Group. The Group faces primary credit risk from potential default on receivables by payment service providers. The Group receives payments of the balance due from two of the three service providers, every day, two to three days in arrears. The credit risk of balances held with the third party service provider is managed by regularly sweeping funds out of the provider accounts into a portfolio of managed banking facilities held with highly rated and regulated financial institutions. (1) None of the other receivables are impaired or past due date. The Group does not hold any collateral in relation to these receivables. The Group encounters credit card fraud typical of the industry in which it operates, representing less than 0.1% (2020: less than 0.1%) of marketplace revenue. (c) Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash in accordance with forecast cash usage. Due to the dynamic nature of the underlying business, flexibility in funding is maintained by ensuring ready access to the cash reserves of the business. All financial liabilities (excluding lease liabilities and deferred consideration in FY20) are current and anticipated to be repaid over the normal payment terms, usually 30 days. Financial arrangements The Group had no borrowing facilities at the end of reporting period nor at the end of the prior reporting period. 88 89 RedbubbleAnnual Report 2021 Maturities of financial liabilities 11. Other assets Financial liabilities owed by the Group at 30 June 2021 are $50.0 million (2020: $51.5 million). These items are based on contractual undiscounted payments. The table below summarises the maturity profile of the Group’s financial liabilities based on contractual undiscounted payments: Year ended 30 June 2021 1 to 3 months 3 to 12 months 1 to 3 years > 3 years Total (1) Excludes sales taxes. Year ended 30 June 2020 1 to 3 months 3 to 12 months 1 to 3 years > 3 years Total (1) Excludes sales taxes. Trade and other payables (1) Lease liabilities $’000 43,585 - - - 43,585 $’000 840 1,751 3,097 745 6,433 Deferred consideration $’000 - - - - - Trade and other payables (1) Lease liabilities Deferred consideration $’000 39,490 - - - $’000 1,169 3,315 3,864 2,458 $’000 - 1,227 - - 39,490 10,806 1,227 Total $’000 44,425 1,751 3,097 745 50,018 Total $’000 40,659 4,542 3,864 2,458 51,523 (d) Capital management The Group’s policy is to maintain a capital structure for the business which ensures sufficient liquidity, provides support for business operations, maintains shareholder confidence and positions the business for future growth. The Group manages its capital structure and makes adjustments in light of changes in economic conditions. The ongoing maintenance of the Group’s policy is characterised by ongoing cash flow forecast analysis and detailed budgeting which is directed at providing a sound financial positioning for the Group’s operations and financial management activities. The Group is not subject to externally imposed capital requirements. Security bonds Goods in transit (1) Total other assets Current Non-current 2021 $'000 962 3,731 4,693 2020 $'000 309 7,019 7,328 2021 $’000 723 - 723 2020 $’000 1,621 - 1,621 (1) Goods in transit represents the cost of goods that have been manufactured but are in transit to customers. 12. Property, plant and equipment Plant and equipment is measured on a cost basis and carried at cost less accumulated depreciation and any accumulated impairment losses. Depreciation The depreciable amount of all fixed assets is depreciated on a straight-line basis over the asset’s useful life to the Group commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements. The depreciation rates used for each class of depreciable asset are shown below: Class of Fixed Assets Leasehold improvements Computer equipment Furniture and equipment Useful life Life of the applicable lease 3 years 2-5 years At the end of each annual reporting period, the depreciation method, useful life and residual value of each asset is reviewed. Any revisions are accounted for prospectively as a change in estimate. 90 91 RedbubbleAnnual Report 2021 Leasehold improvements Furniture and equipment $’000 $’000 Computer equipment $’000 Cost Balance at 1 July 2020 Additions Disposals Reclassification Exchange differences Balance at 30 June 2021 Balance at 1 July 2019 Additions Disposals Exchange differences Balance at 30 June 2020 Accumulated depreciation Balance at 1 July 2020 Charge for the year Disposals Reclassification Exchange differences Balance at 30 June 2021 Balance at 1 July 2019 Charge for the year Disposals Exchange differences Balance at 30 June 2020 Net book value As at 30 June 2021 As at 30 June 2020 3,925 166 - - (192) 3,899 3,883 - - 42 3,925 (2,584) (464) - - 106 (2,942) (2,017) (560) - (7) (2,584) 957 1,341 786 135 - (81) (43) 797 721 66 (8) 7 786 (494) (116) - 19 23 (568) (356) (140) 3 (1) (494) 229 292 Jungle leopard Floor Pillow designed and sold by steveswade Jungle Leopard Family! Premium T-Shirt designed and sold by Amber Davenport Dragon Kids T-Shirt designed and sold by fishcakes Total $’000 7,562 861 (106) - (340) 7,977 7,359 476 (347) 74 7,562 (5,333) (995) 71 - 208 (6,049) (4,434) (1,159) 285 (25) 2,851 560 (106) 81 (105) 3,281 2,755 410 (339) 25 2,851 (2,255) (415) 71 (19) 79 (2,539) (2,061) (459) 282 (17) (2,255) (5,333) 742 596 1,928 2,229 Critical accounting estimates and judgements At the end of each reporting period, the Group assesses whether there is any indication that any property, plant & equipment asset may be impaired. If such an indication exists, an impairment test is carried out on the asset by comparing the recoverable amount of the asset, being the higher of the asset’s fair value less costs to dispose, and value in use, to the asset’s carrying amount. Any excess of the asset’s carrying amount over its recoverable amount is recognised immediately as a loss. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. No items of property, plant and equipment have been impaired in the financial year ending 30 June 2021 (2020: $nil). 92 93 RedbubbleAnnual Report 2021 13. Intangible Assets Recognition and measurement Capitalised development costs Goodwill Brand Name Amortisation Development expenditure is capitalised when future economic benefits are probable. The Group capitalises internal engineering time spent on development of the Redbubble and TeePublic marketplace websites. Expenditure during the research phase of a project is recognised as an expense when incurred. All costs for Software as a Service (SaaS) are expensed. Goodwill arising on the acquisition of subsidiaries is measured at cost less accumulated impairment losses. All of the goodwill held by the Group is attributable to the TeePublic cash generating unit (CGU). The brand name asset is measured at cost less accumulated impairment losses. The brand name asset is attributable to the TeePublic cash generating unit (CGU). Amortisation is calculated to write off the cost of intangible assets using the straight-line method over their estimated useful lives and is recognised in profit or loss. Goodwill is not amortised. The estimated useful lives for current and comparative periods are as follows: Capitalised development costs: Goodwill (attributable to the TeePublic CGU): Brand name asset (attributable to the TeePublic CGU): 2–3 years Indefinite Indefinite The Brand name asset is considered to have an indefinite useful life as it is expected to contribute to future economic benefits as the Group continues to sell its products under the brand name indefinitely. Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if deemed necessary. Critical accounting estimates and judgements Key assumptions used in value in use calculations and sensitivity to changes in assumptions The Group assesses the recoverability of its goodwill and brand name in the TeePublic CGU annually. Recoverable amounts have been determined based on a value in use calculation using cash flow projections over a 5 year period. Management have considered the potential impacts of trading volatility from COVID-19 in this assessment. The key assumptions in the calculation are as follows: (a) Growth rate The business growth rate in year 1 is based on the next financial year’s budget approved by the board. Growth in years 2 to 5 is based upon Management’s experience with the historical growth of the business and expectations about future performance. Cash flows beyond the forecast period are projected using a growth rate of 2.5% (2020: 2.5%). (b) Gross margins Gross margins are based on historical values and expectations about future performance. These values are increased over the forecast period for anticipated efficiency improvements as the business scales. (c) Discount rates The pre-tax discount rate applied to cash flow projections is 12.5% (2020: 13.9%). Discount rates represent the consideration of the time value of money and the individual risks of the underlying assets. The discount rate calculation is based on the specific circumstances of the Group and is derived from its weighted average cost of capital (WACC). Adjustments to the discount rate are made to factor in the specific amount and timing of the future tax flows in order to reflect a pre-tax discount rate. Impairment The Group performed an impairment test as at 30 June 2021. Using the above assumptions, it was concluded that the carrying value of the Group’s CGUs does not exceed its value in use and therefore no impairment charge has been recognised. Sensitivity analysis has been completed which considered a range of possible scenarios. There is no reasonably possible change in key assumptions used to determine the recoverable amount that would result in impairment. 94 95 RedbubbleAnnual Report 2021 Cost Balance at 1 July 2020 Additions Disposals Exchange differences Balance at 30 June 2021 Balance at 1 July 2019 Additions Disposals Exchange differences Balance at 30 June 2020 Accumulated amortisation Balance at 1 July 2020 Charge for the year Disposals Exchange differences Balance at 30 June 2021 Balance at 1 July 2019 Charge for the year Exchange differences Balance at 30 June 2020 Net book value As at 30 June 2021 As at 30 June 2020 Brand name Capitalised development costs $'000 $'000 6,878 - - (552) 6,326 6,756 - - 122 6,878 - - - - - - - - - 6,326 6,878 48,791 5,384 (140) - 54,035 39,692 9,205 (109) 3 48,791 (35,582) (9,647) 2 - (45,227) (25,532) (10,041) (9) (35,582) 8,808 13,209 Goodwill $'000 51,489 - - (4,137) 47,352 50,501 - - 988 51,489 - - - - - - - - - 47,352 51,489 Total $'000 107,158 5,384 (140) (4,689) 107,713 96,949 9,205 (109) 1,113 107,158 (35,582) (9,647) 2 - (45,227) (25,532) (10,041) (9) (35,582) 62,486 71,576 No intangible assets have been impaired in the financial year ending 30 June 2021 (2020: nil). 96 14. Leases a) Group as a lessee The Group leases various offices in Australia, the United States and Germany. Rental contracts are typically made for fixed periods of between 1 to 8 years (2020: 1 to 8 years). Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. Set out below are the carrying amounts of right-of-use assets and lease liabilities and the movements during the period: Right of use assets Balance at 1 July Additions Disposals (1) Depreciation and amortisation expense Exchange differences Balance as at 30 June (1) The disposal is a result of recognising net investment in sublease in the prior year. Lease liabilities Balance at 1 July Additions Interest expense Lease liability repayment Exchange differences Balance as at 30 June Classification of lease liabilities Current Non-current Total lease liabilities 2021 $’000 6,649 953 - (2,689) (447) 4,466 2021 $’000 9,763 826 320 (4,239) (668) 6,002 2021 $’000 2,280 3,722 6,002 2020 $’000 8,378 1,348 (654) (2,527) 104 6,649 2020 $’000 11,848 1,335 456 (4,032) 156 9,763 2020 $’000 3,944 5,819 9,763 97 RedbubbleAnnual Report 2021 Amounts recognised in the statement of cashflow Operating – payments of interest Operating – payments for short term leases (1) Financing – payments of principal Total cash (outflow) relating to leases 2021 $’000 (320) (4) (3,919) (4,243) 2020 $’000 (456) (155) (3,576) (4,032) (1) Includes leases with a lease term of 12 months or less. This amount is also recognised in operations and administration expenses in the consolidated statement of comprehensive income. The future cash outflows relating to leases that have not yet commenced are disclosed in Note 20 (b). The Group has several lease contracts that include an extension option. Management exercises significant judgement in determining whether these extension options are reasonably certain to be exercised. Set out below are the undiscounted potential future rental payments relating to periods following the exercise date of extension options that are not included in the lease term: Within five years More than five years $’000 2,757 $’000 6,015 Total $’000 8,772 Extension options not reasonably certain to be exercised b) Group as a lessor The Group sub-let offices in the United States. These subleases had original terms of up to 4 years and all ended in FY2021. Set out below are the carrying amounts of net investment in sublease and the movements during the year: 2021 $’000 994 - 17 (871) (65) (75) - 2020 $’000 1,248 500 53 (838) - 31 994 Net investment in sublease Balance at 1 July Additions Interest income Net investment in sublease receipts Other Exchange differences Balance as at 30 June 98 Classification of net investment in sublease Current Non-current Total net investment in sublease Amounts recognised in the statement of cashflow Operating – receipt of interest Investing – receipt of principal Total cash inflow relating to leases 2021 $’000 - - - 2021 $’000 17 854 871 2020 $’000 994 - 994 2020 $’000 53 785 838 The table below summarises the maturity profile of the Group’s net investment in sublease based on contractual undiscounted receipts with a reconciliation to the carrying amount of net investment in sublease: Undiscounted lease receipts Year 1 Year 2 Year 3 > 3 years Total undiscounted lease receipts Less: unearned finance income Exchange differences Net investment in sublease 15. Trade and other payables Fulfiller payables Artist payables Staff payables Sales tax payables Other payables (1) Total trade and other payables (1) Other payables consist of operations, administration and marketing payables. 2021 $’000 - - - - - - - - 2021 $’000 22,500 12,673 1,602 3,888 6,810 47,473 2020 $’000 1,046 - - - 1,046 (22) (30) 994 2020 $’000 22,319 9,892 1,781 5,546 5,498 45,036 99 RedbubbleAnnual Report 2021 16. Employee benefit liabilities 17. Other liabilities Wages, salaries, annual and long service leave A provision is made for the Group’s liability for employee benefits arising from services rendered by employees to the end of the reporting period. Employee benefits that are expected to be settled within one year represent the amounts expected to be paid when the liability is settled. Employee benefits expected to be settled more than twelve months after the end of the reporting period have been measured at the present value of the estimated future cash outflows to be made for those benefits. In determining the liability, consideration is given to employee wage increases and the probability that the employee may satisfy service period requirements. Cash flows are discounted using market yields at the reporting date on high quality corporate bonds with terms to maturity that match the expected timing of cash flows. Employee benefits are presented as current liabilities in the balance sheet if the Group does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting date regardless of the classification of the liability for measurement purposes under AASB 119 Employee Benefits. Changes in the measurement of the liability are recognised in the income statement. Defined contribution schemes Obligations for contributions to defined contribution superannuation plans are recognised as an employee benefit expense in the income statement in the periods in which services are provided by employees. Termination benefits and restructure costs Termination benefits are those benefits paid to an employee as a result of either the Group’s decision to terminate an employee’s employment before the normal retirement date or an employee’s decision to accept an offer of benefits in exchange for the termination of employment. Termination benefits and restructure costs are recorded as a provision when the Group can no longer withdraw the offer of those benefits. Current Non-current 2021 $'000 1,912 283 - 2,195 2020 $'000 2,572 307 2,180 5,059 2021 $’000 - 268 - 268 2020 $’000 - 198 - 198 Annual leave Long service leave Termination benefits Total employee benefit liabilities 100 Deferred consideration payable (1) Other Total other liabilities Current 2021 $'000 - - - 2020 $'000 1,227 54 1,281 Non-current 2021 $’000 - - - 2020 $’000 - 70 70 (1) The final deferred consideration payment of US $0.7 million (AU $1.0 million) in relation to the TeePublic acquisition was made in June 2021. 18. Contributed equity and reserves (a) Share capital Ordinary shares (1) Issued and fully paid Total share capital Consolidated and parent entity 2021 Shares 2020 Shares 273,620,223 263,462,966 273,620,223 263,462,966 2021 $’000 162,552 162,552 2020 $’000 145,438 145,438 (1) The holders of ordinary shares are entitled to participate in dividends and the proceeds on winding up of the Company. On a show of hands at meetings of the Company, each holder of ordinary shares has one vote in person or by proxy, and upon a poll each share is entitled to one vote. The Company does not have authorised capital or par value in respect of its shares. 101 RedbubbleAnnual Report 2021 (b) Movements in ordinary share capital and treasury reserve (c) Dividends Number of shares $’000 256,156,543 135,194 4,521,415 465,844 - 7,267,000 (4,795,461) (152,375) 3,556 - 3,009 10,321 (6,412) (230) No dividends were declared or paid during the year (2020: $nil). The Group’s franking account balance is $nil (2020: $nil). (d) Nature and purpose of reserves Share based payments reserve The share-based payments reserve arises on issue of share options / restricted stock units as payment for services to board members, employees (including senior executives) and contractors. 263,462,966 145,438 Foreign Currency Translation Reserve Share Capital Balance at 1 July 2019 Exercise of options Settlement of restricted stock units (RSUs) Transferred from share based payments reserve Shares issued to Employee Share Trust Shares allocated to participants from the Employee Share Trust Payment of withholding taxes to US tax authorities (1) Balance at 30 June 2020 Exercise of options Settlement of restricted stock units (RSUs) Transferred from share based payments reserve Shares issued to Employee Share Trust Shares allocated to participants from the Employee Share Trust Other shares issued Payment of withholding taxes to US tax authorities (1) Balance at 30 June 2021 12,004,768 1,344,372 - 10,100,000 (12,783,499) 57,257 (565,641) 273,620,223 8,366 - 8,990 44,326 (41,413) - (3,155) 162,552 (1) Represents payment of withholding taxes accounted for as a deduction from equity in accordance with AASB 2 Share-based Payments. Treasury Reserve Balance at 1 July 2019 Shares issued to Employee Share Trust and held in Treasury Reserve Shares allocated to participants from the Employee Share Trust and released from treasury reserve Balance at 30 June 2020 Shares issued to Employee Share Trust and held in Treasury Reserve Shares allocated to participants from the Employee Share Trust and released from treasury reserve Income tax benefit for contributions to the Employee Share Trust in excess of the associated cumulative remuneration expense Transfer of the income tax benefit to accumulated losses for equity rights that were converted to shares in the current period Shares held as security for limited recourse loan (2) Balance at 30 June 2021 Number of shares (1,394,118) (7,267,000) 4,795,461 (3,865,657) (10,100,000) 12,783,499 - - (289,161) (1,471,319) $’000 (1,394) (10,321) 6,412 (5,303) (44,326) 41,413 9,900 (7,435) (1,600) (7,351) (2) Represents limited recourse loan provided to the CEO to purchase Redbubble shares on-market. Refer to Note 23(b) for further details. 102 Exchange differences arising on translation of the foreign controlled entities are recognised in the foreign currency translation reserve within other comprehensive income. The cumulative amount is reclassified to the income statement when the foreign controlled entity to which it relates is disposed of. Treasury reserve The treasury reserve is used to hold the book value of shares held by the Employee Share Trust for future issue to participants on exercise of options / restricted stock units. FY2021 also includes limited recourse loan provided to the Redbubble Group CEO to purchase Redbubble shares on- market. Refer to Note 23(b) for further details. The tax effect of tax deductions for contributions to the Employee Share Trust in excess of the associated cumulative remuneration expense is recorded directly in equity and forms part of the treasury shares reserve. Amounts are transferred out of this reserve and into accumulated losses when the relevant equity rights are converted into shares. 19. Interests in subsidiaries Information about subsidiaries The consolidated financial statements of the Group include: Name of entity Country of incorporation Principal activities Redbubble Incorporated USA Redbubble Europe Limited UK Redbubble Europe GmbH Germany TP Apparel LLC USA Provider of global sales, marketing and distribution services in respect of the Redbubble marketplace Marketing and distribution services in Europe Marketing and distribution services in Europe Provider of global sales, marketing and distribution services in respect of the TeePublic marketplace Equity holding Equity holding 2021 2020 % 100 % 100 100 100 100 100 100 100 103 RedbubbleAnnual Report 2021 20. Parent entity financial information (d) Contingent liabilities of the parent entity The financial information for the parent entity, Redbubble Limited, has been prepared on the same basis as the consolidated financial statements except for investments in subsidiaries. They are recognised at cost in the financial statements of the parent entity. (a) Summary financial information Statement of financial position Assets Current assets Non-current assets Total assets Liabilities Current liabilities Non-current liabilities Total liabilities Equity Contributed equity Share based payment reserve Treasury reserve Accumulated losses Total equity Profit / (loss) and other comprehensive income Profit / (loss) for the year Total comprehensive profit / (loss) b) Commitments 2021 $’000 98,041 10,465 108,506 6,122 364 6,486 162,559 11,414 (7,351) (64,602) 102,020 23,301 23,301 2020 $’000 51,499 15,006 66,505 5,828 381 6,209 145,438 13,699 (5,303) (93,538) 60,296 (7,686) (7,686) The parent entity has signed a new lease agreement for new Melbourne office premises that has not yet commenced as at 30 June 2021. The future undiscounted lease payments for the lease contract are $0.9m (2020: $nil) within one year and $5.4m (2020: $nil) within five years. At 30 June 2021, the parent entity had capital commitments of $3.4m (2020: $nil) relating to fit-out works for its new Melbourne office. These commitments have not been recognised as liabilities as the relevant asset has not yet been received. The Group will also receive a $2.3m lease incentive for the fit-out works. (c) Guarantees entered into by the parent entity During the year the parent entity obtained a bank guarantee as security amounting to $0.9m (2020: $nil) in respect of a lease agreement signed for its new Melbourne office. No liability is expected to arise. Although the Group is strictly a service provider that does not sell or manufacture the products sold on the Redbubble and TeePublic marketplaces, it periodically receives notices alleging infringement of third party copyright, trade marks, other intellectual property rights or publicity rights via the marketplaces or for breach of consumer protection laws. This is not uncommon for marketplaces that host user generated content. As at the date of these financial statements there are current lawsuits filed against the Company that relate to alleged intellectual property infringement and / or breach of consumer laws. There is no certainty around the amount or timing of any outflow (or inflow from insurance recoveries) should any of the actions ultimately be successful (at first instance or on appeal, as applicable). The Company does not consider that any of the current actions are likely to have a material adverse effect on the business or financial position of the Company. 21. Commitments and contingencies (a) Commitments Other than the commitments mentioned in note 20(b), the Group had no other commitments as at 30 June 2021 (2020: $nil). (b) Contingent liabilities/assets Legal claim contingencies Although the Group is strictly a service provider that does not sell or manufacture the products sold on the Redbubble and TeePublic marketplaces, it periodically receives notices alleging infringement of third party copyright, trade marks, other intellectual property rights or publicity rights via the marketplaces or for breach of consumer protection laws. This is not uncommon for marketplaces that host user generated content. As at the date of these financial statements there are current lawsuits filed against some of the entities within the Group that relate to alleged intellectual property infringement and/or breach of consumer laws. There is no certainty around the amount or timing of any outflow (or inflow from insurance recoveries) should any of the actions ultimately be successful (at first instance or on appeal, as applicable). The Group does not consider that any of the current actions are likely to have a material adverse effect on the business or financial position of the Group. (c) Guarantees Other than the guarantees mentioned in note 20(c), the Group did not obtain any other guarantees as at 30 June 2021 (2020: $nil). 104 105 RedbubbleAnnual Report 2021 22. Share-based payments 2014 Option Plan Options to employees / contractors of the US subsidiaries are granted under this plan. The vesting conditions and expiry period under this plan are akin to the Redbubble Equity Incentive Plan. Limited recourse loans for the purchase of shares The granting of limited recourse loans to purchase Redbubble shares is considered to be an in-substance option grant in accordance with AASB 2 Share Based Payment. An option pricing model is used to determine the fair value of the in-substance option and expensed in the financial statements over the service period. During the year a limited recourse loan has been provided to the Chief Executive Officer (CEO). The CEO does not have a beneficial interest in the shares until the loan is repaid. The repayment of the loan principal plus accrued interest represents the exercise of the option, and returning the shares as settlement of the loan is the expiry of an unexercised option. Further details on the loan are provided in Note 23(b). Restricted Stock Units (RSUs) Restricted Stock Units are granted under the Restricted Share and Performance Rights Plan to certain employees including senior executives and consultants. Once granted, the rights have a predetermined time-based vesting schedule. All the restricted stock units are subject to service conditions. Share Appreciation Rights (SARs) Share appreciation rights have been granted to the Chief Executive Officer and the Executive team. Refer to the Remuneration Report for further details. The Group operates equity-settled share-based payment employee share and option schemes. The fair value of the equity to which employees become entitled is measured at grant date and recognised as an expense over the vesting period, with a corresponding increase to an equity account. The fair value of options with a strike price and share appreciation rights are ascertained using industry standard valuation models. A Black-Scholes pricing model is used for options and the Monte Carlo simulation model is used for share appreciation rights. The amount to be expensed is determined by reference to the fair value of the options or shares granted. This expense takes into account any market performance conditions and the impact of any non-vesting conditions but ignores the effect of any service and non-market performance vesting conditions. Non-market vesting conditions are taken into account when considering the number of options expected to vest and at the end of each reporting period, the Group revisits its estimate. Revisions to the prior period estimate are recognised in the income statement and equity. The fair value of zero priced options and restricted stock units is equal to the fair market value of a Redbubble Ltd share at the grant date. Critical accounting estimates and judgements Some of the inputs to the pricing models require application of significant judgement. The Black-Scholes and Monte Carlo simulation pricing models require inputs for the expected share price volatility of Redbubble Limited shares for a period similar to the expected life of the options. The Group has used its historical share price volatility to estimate expected future volatility. Options over ordinary shares Redbubble Equity Incentive Plan for Australian and German employees The “Redbubble Equity Incentive Plan” has been established to grant options over ordinary shares to Redbubble Limited employees (including senior executives under the RB Group Executive Compensation Model (RECM)) and contractors. In FY21, board members are no longer granted equity. Board fees are now paid entirely in cash. The options are subject to service conditions and have a predetermined time-based vesting schedule. The grantees of options under this Plan may exercise vested options at any time before the earlier of: (a) a specified expiry date (generally 10 years from the grant date); and (b) 90 days after ceasing to be a Director, employee or contractor for the Group. Some of the options have a zero exercise price, so as to be akin to performance rights or restricted stock units. 106 107 RedbubbleAnnual Report 2021 (a) Movement (b) Modifications to the awards The table below summarises the movement in the number of options, restricted stock units and share appreciation rights during the year: The table below details modifications to a number of options / restricted stock units (RSUs) during the year. 2021 2021 Number WAEP ($) (1) 2020 Number 2020 WAEP ($) (1) 2021 2020 Number Number Options over ordinary shares Outstanding at 1 July Granted during the year (2) Exercised during the year Forfeited during the year Expired during the year Outstanding at 30 June Exercisable at 30 June Restricted stock units Outstanding at 1 July Granted during the year Settled during the year Forfeited during the year Outstanding at 30 June Share appreciation rights (SARs) (3) Outstanding at 1 July Granted during the year Exercised during the year Forfeited during the year Outstanding at 30 June Exercisable at 30 June 18,510,058 867,545 (10,405,267) (2,188,371) (11,969) 6,771,996 3,401,054 2,200,400 942,592 (1,344,372) (333,567) 1,465,053 7,276,161 985,378 (2,215,514) (1,522,327) 4,523,698 1,983,114 0.85 - 0.80 0.64 0.93 0.90 0.87 - - - - - - - - - - - 23,376,683 2,921,778 (4,521,415) (2,788,674) (478,314) 18,510,058 9,510,335 727,766 2,110,590 (465,844) (172,112) 2,200,400 5,666,668 6,029,146 - (4,419,653) 7,276,161 - 0.76 0.04 0.77 0.83 1.28 0.85 0.81 - - - - - - - - - - - Accelerated vesting of unvested options / RSUs over ordinary shares upon termination 459,214 154,082 Total 459,214 154,082 (c) Additional disclosures Weighted average fair value of Share at the date of exercise of options / settlement of restricted stock units during the year Share options granted during the year Share appreciation rights granted during the year Restricted stock units granted during the year Weighted average remaining contractual life of Share options outstanding at the end of the year Inputs to pricing models for options and SARs granted during the year (weighted average) Expected volatility (%) (1) Risk-free interest rate (%) Expected life (years) Expected dividend yield (%) Fair market value of share ($) (2) 2021 $ 4.23 4.27 2.21 4.34 2020 $ 1.63 0.45 0.42 1.58 2021 2020 (years) (years) 7.07 7.29 2021 69.94 0.67 4.72 - 4.32 2020 68.41 0.41 4.29 - 1.42 (1) WAEP stands for Weighted Average Exercise Price. (2) 867,545 options granted during the year have a zero exercise price (2020: 2,846,778). The expiry period for options and RSU grants made during the current and prior year is 10 years. (1) The expected volatility reflects the assumption that the historical volatility over a period similar to the life of the options is indicative of future trends, which may not necessarily be the actual outcome. The range of exercise prices for options outstanding at the end of the year is $nil to $1.62 (2020: $nil to $1.62). (3) SARs do not have an exercise price, however they do have a base share price from which any share appreciation is measured. (2) The fair market value of a share has been calculated using the close price on grant date. 108 109 RedbubbleAnnual Report 2021 23. Related party transactions 24. Remuneration of auditors (a) Compensation of the key management personnel of the Group Short-term employee benefits Post-employment benefits Share-based employee benefits Other long-term benefits Termination benefits Total transactions with key management personnel 2021 $ 2020 $ 1,759,054 1,412,539 105,186 77,658 761,591 822,393 2,139 (21,984) - 316,976 2,627,970 2,607,582 (b) Transactions with key management personnel Limited recourse loan On 10 February 2021, Redbubble Limited and Mr Ilczynski, CEO, entered into a limited recourse loan arrangement with a loan amount of $1,600,000. Mr Ilczynski used the loan amount plus $400,000 of his own funds to purchase Redbubble Limited shares on-market in the trading window that followed release of Redbubble’s half-year 2021 results and Appendix 4D. This transaction was completed on 4 March 2021, with an average share price of $5.53. The loan amount plus interest equal to the RBA cash rate plus 3% (compounding annually) is to be repaid 5 years from date of loan, or on cessation of employment if earlier. The purchased shares are subject to dealing restrictions, including a prohibition on granting security interests, which fall away upon the loan being repaid in full. The security for the loan is limited to the shares acquired with the loan amount. The loan is recognised as an option grant under AASB 2 Share Based Payment and as a result this loan is not recognised in the consolidated statement of financial position. (c) Transactions with related parties There were no other related party transactions in the current and prior year. Ernst & Young (Australia) Audit fees: 2021 $ 2020 $ Fees for auditing the statutory financial report of the parent covering the group and auditing the statutory financial reports of any controlled entities 285,890 280,144 Fees for other services: Assistance in developing the Group’s inaugural ESG strategy Taxation services Remuneration of Ernst & Young 30,370 - 43,630 39,400 359,890 319,544 25. Segment information AASB 8 Operating Segments allows for the aggregation of operating segments where they exhibit similar economic characteristics. The Group considers the Redbubble and TeePublic marketplaces to have similar economic characteristics and therefore have been aggregated to form a single reportable operating segment. Geographical information required per AASB 8 and disaggregated revenue reporting is detailed below: 2021 2020 Revenue Non-current assets (1) Revenue Non-current assets (1) $’000 37,715 443,682 73,476 102,450 657,323 $’000 7,939 60,475 - 466 68,880 $’000 22,624 287,810 43,299 62,524 416,257 $’000 14,708 66,564 - 176 81,448 Australia United States United Kingdom Rest of the world Total (1) Non-current assets for this purpose consist of property, plant and equipment, intangible assets, right of use assets and net investment in sublease. 26. Events occurring after the balance sheet date The financial report was authorised for issue on 19 August 2021 by the Board of Directors. Other than the above, there have been no further significant events after the balance sheet date that require disclosure. 110 111 RedbubbleAnnual Report 2021 27. Other significant accounting policies (a) Principles of consolidation Subsidiaries are all entities over which the Group has control. Control is established when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the relevant activities of the entity. Subsidiaries are fully consolidated from the date on which the Group gains control. They would be deconsolidated from the date that control ceases. A list of the subsidiaries is provided in note 19 to the financial statements. Intercompany transactions, balances and unrealised gains or losses on transactions between Group entities are fully eliminated on consolidation. Accounting policies of subsidiaries have been aligned where necessary to ensure consistency with the policies adopted by the Group. (b) Business combinations and goodwill Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, which is measured at acquisition date fair value, and the amount of any non-controlling interests in the acquiree. For each business combination, the Group elects whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred and included in operations and administration expenses. When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree. Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. Contingent consideration classified as an asset or liability that is a financial instrument and within the scope of AASB 9 Financial Instruments, is measured at fair value with the changes in fair value recognised in the statement of profit or loss in accordance with AASB 9. Goodwill is initially measured at cost (being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests and any previous interest held over the net identifiable assets acquired and liabilities assumed). If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the Group re-assesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognised at the acquisition date. If the reassessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognised in profit or loss. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Where goodwill has been allocated to a single cash-generating unit (CGU) and part of the operation within that unit is disposed of, the goodwill associated with the disposed operation is included in the carrying amount of the operation when determining the gain or loss on disposal. Goodwill disposed in these circumstances is measured based on the relative values of the disposed operation and the portion of the cash-generating unit retained. (c) Foreign currency transactions Functional and presentation currency The functional currency of each of the Group’s entities is the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in Australian dollars which is the parent entity’s functional and presentation currency. Transactions and balances Transactions in foreign currencies are initially recorded by the Group’s entities at their respective functional currency spot rates at the date the transaction first qualifies for recognition. At the end of the reporting period: ● Foreign currency monetary items are translated using the closing exchange rate; ● Non-monetary items that are measured at historical cost are translated using the exchange rate at the date of the transaction; and ● Non-monetary items that are measured at fair value are translated using the exchange rate at the date when fair value was determined. Exchange differences arising on the settlement of monetary items or on translating monetary items at exchange rates different from those at which they were translated on initial recognition or in prior reporting periods are recognised through the statement of comprehensive income, except where they relate to an item of other comprehensive income. 112 113 RedbubbleAnnual Report 2021 Group companies The results and financial position of all the Group entities that have a functional currency different from the presentation currency are translated into the presentation currency (none of which has the currency of a hyperinflationary economy) as follows: ● Assets and liabilities for each balance sheet are translated at the closing exchange rate at the date of that balance sheet; ● Income and expenses for each income statement and statement of comprehensive income are translated at average exchange rates; and ● All resulting exchange differences are recognised in other comprehensive income. (d) Other income Finance income an insurance contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the statement of income net of any reimbursement. (h) Sales Tax (includes Goods and Services Tax (GST) and Value Added Tax (VAT)) Revenue, expenses and assets are recognised net of the amount of sales tax, except where the amount incurred is not recoverable from the Australian Taxation Office (ATO) or other similar international bodies. Receivables and payables are stated inclusive of sales tax, where applicable. The net amount of sales tax recoverable from, or payable to, the ATO or other similar international bodies, is included as part of receivables or payables in the statement of financial position. The statement of cash flows includes cash on a gross basis and the sales tax component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the taxation authority is classified as operating cash flows. Finance income is recognised on an accruals basis using the effective interest method. (i) Leases (e) Financial assets Trade and other receivables and other financial assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial recognition, loans and trade and other receivables are measured at amortised cost using the effective interest method. Any change in their value is recognised in the statement of comprehensive income. The Group applies a simplified approach in calculating Expected Credit Losses (ECLs) in trade receivables. Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date, where appropriate, based on historical credit loss experience and adjusted for forward-looking factors specific to the receivables and the economic environment. (f) Trade and other payables Trade and other payables represent the liabilities for goods and services received by the Group that remain unpaid at the end of the reporting period. The balance is recognised as a current liability with the amounts normally paid within 30 days of recognition of the liability. (g) Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Group expects some or all of a provision to be reimbursed, for example, under Set out below are the accounting policies of the Group upon adoption of AASB 16, which have been applied from the date of initial application: Group as a lessee Right-of-use assets The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred and lease payments made at or before the commencement date of the lease less any lease incentives received. Unless the Group is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognised right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right-of-use assets are subject to impairment in accordance with AASB 136 Impairment of Assets. Lease liabilities The Group recognises lease liabilities at the commencement date of the lease (i.e., the date the underlying asset is available for use), measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in- substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The variable lease payments that do not depend on an index or a rate are recognised as expense in the period on which the event or condition that triggers the payment occurs. 114 115 RedbubbleAnnual Report 2021 Significant judgement in estimating the incremental borrowing rate Short-term leases and leases of low-value assets Lease payments on short-term leases and leases of low-value assets are recognised as an expense on a straight-line basis over the lease term. Significant judgement in determining the lease term of contracts with renewal options The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised. The Group has the option under some of its leases to extend the term of the original lease. The Group applies judgement in evaluating whether it is reasonably certain to exercise the option to renew. That is, it considers all relevant factors that create an economic incentive for the Group to exercise the renewal option. After the commencement date, the Group reassesses the lease term when there is a significant event or change in circumstances that is within its control and affects its ability to exercise (or not to exercise) the option to renew. The Group has determined that no lease extension options will be exercised as they are not reasonably certain that those options will be exercised and therefore, the extended periods have not been included in calculations. (j) Accounting standards issued but not yet effective A number of new accounting standards, amendments to standards and interpretations, have also been issued and will be applicable in future periods. While these remain subject to ongoing assessment, no significant impacts on the financial statements of the Group have been identified to date. These standards have not been applied in the preparation of these Financial Statements. In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. The rate is determined using a government bond (risk free) rate adjusted for a risk premium commensurate with each lessee’s profile. The bond rates used are for a bond with a term and security similar to each lease and are country specific. After the commencement date, the amount of the lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. The carrying amount of lease liabilities are adjusted if there is a modification, a change in the lease terms or a change in the in- substance fixed lease payments. Group as a lessor (subleases) In classifying a sublease, an intermediate lessor shall classify the sublease as a finance lease or an operating lease as follows: ● if the head lease is a short-term lease, the Group will classify the sublease as an operating lease. ● otherwise, the sublease will be classified by reference to the right-of-use asset arising from the head lease, rather than by reference to the underlying asset. Sublease classified as finance lease The Group recognises net investment in sublease at the commencement date of the sublease (i.e., the date the underlying asset is subleased) due to the term of the sublease constituting a major part of the economic life of the right-of-use asset relating to the head lease. The net investment in the sublease is measured using the discount rate for the head lease. The Group derecognises the right-of-use asset relating to the head lease that it transfers to the sublessee and replaces it with a net investment in the sublease. Any difference between the right-of-use asset and the net investment in the sublease is recognised in profit or loss. The lease liability relating to the head lease is retained and represents the lease payments owed to the head lessor. During the term of the sublease, the Group recognises both interest income on the sublease and interest expense on the head lease. Sublease classified as operating lease Leases in which the Group does not transfer substantially all the risks and rewards incidental to ownership of an asset are classified as operating leases. Rental income arising is accounted for on a straight-line basis over the lease terms and is included in revenue in the statement of comprehensive income due to its operating nature. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income. Contingent rents are recognised as revenue in the period in which they are earned. 116 117 RedbubbleAnnual Report 2021 Directors’ Declaration In accordance with a resolution of the Directors of Redbubble Limited, we state that in the Directors’ opinion: Report on the Audit of the Financial Report Report on the Audit of the Financial Report Independent Auditor's Report to the Members of Redbubble Limited Independent Auditor's Report to the Members of Redbubble Limited Ernst & Young Ernst & Young 8 Exhibition Street 8 Exhibition Street Melbourne VIC 3000 Australia Melbourne VIC 3000 Australia GPO Box 67 Melbourne VIC 3001 GPO Box 67 Melbourne VIC 3001 Tel: +61 3 9288 8000 Tel: +61 3 9288 8000 Fax: +61 3 8650 7777 Fax: +61 3 8650 7777 ey.com/au ey.com/au (a) the financial statements and notes, as set out on pages 71 to 117 are in accordance with the Corporations Act 2001 including: (i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and (ii) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2021 and of its performance for the financial year ended on that date; and (b) there are reasonable grounds to believe that Redbubble Limited will be able to pay its debts as and when they become due and payable. The financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board. The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by Section 295A of the Corporations Act 2001. Jennifer Macdonald Audit and Risk Committee Chair Melbourne 19 August 2021 Anne Ward Board Chair Melbourne 19 August 2021 118 Opinion Opinion We have audited the financial report of Redbubble Limited (the Company) and its subsidiaries We have audited the financial report of Redbubble Limited (the Company) and its subsidiaries (collectively the Group), which comprises the consolidated statement of financial position as at 30 (collectively the Group), which comprises the consolidated statement of financial position as at 30 June 2021, the consolidated statement of comprehensive income, consolidated statement of changes June 2021, the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, notes to the financial in equity and consolidated statement of cash flows for the year then ended, notes to the financial statements, including a summary of significant accounting policies, and the directors' declaration. statements, including a summary of significant accounting policies, and the directors' declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: Act 2001, including: a) a) b) b) giving a true and fair view of the consolidated financial position of the Group as at 30 June giving a true and fair view of the consolidated financial position of the Group as at 30 June 2021 and of its consolidated financial performance for the year ended on that date; and 2021 and of its consolidated financial performance for the year ended on that date; and complying with Australian Accounting Standards and the Corporations Regulations 2001. complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. for our opinion. Key Audit Matters Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial report of the current year. These matters were addressed in the context of our audit of the financial report of the current year. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters. For each matter below, our description of how our audit a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. addressed the matter is provided in that context. We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report, including in relation to these matters. Accordingly, our audit Financial Report section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial report. The results of our audit procedures, including the material misstatement of the financial report. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial report. accompanying financial report. A member firm of Ernst & Young Global Limited A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Liability limited by a scheme approved under Professional Standards Legislation 119 Redbubble Capitalised development Why significant As disclosed in Note 13 to the financial statements, development costs associated with development and engineering activities of website and mobile applications are capitalised as intangible asset. The carrying value of capitalised development in the consolidated statement of financial position at 30 June 2021 was $8.8m. The accounting for capitalised development involves judgment, including considering technical and commercial feasibility, the Group’s intention and ability to complete the intangible asset, future economic benefits to be generated by the asset, the ability of the Group to measure the costs reliably, and determining the useful lives for capitalised a) development costs. In addition, determining whether there is any indication of impairment of the carrying value of assets requires judgment in making b) assumptions which are affected by future market or economic developments. This was considered a key audit matter given the judgement required in accounting for it, the value of development cost assets relative to total assets, the rapid technological and economic change in the industry, and the specific Australian Accounting Standards criteria that have to be met to enable costs incurred to be capitalised. Revenue recognition Why significant As disclosed in Note 3 to the financial report, revenue is recognised when the goods are transferred to the customer, which is deemed to be when the product is delivered. Due to the volume of online transactions processed on a daily basis, and the arrangement in place with fulfillers whereby fulfillers dispatch goods directly to the Group’s customers, the judgement involved in the timing of when revenue is recognised is considered to be a Key Audit Matter. Ernst & Young 8 Exhibition Street Melbourne VIC 3000 Australia GPO Box 67 Melbourne VIC 3001 Tel: +61 3 9288 8000 Fax: +61 3 8650 7777 ey.com/au Ernst & Young 8 Exhibition Street Melbourne VIC 3000 Australia GPO Box 67 Melbourne VIC 3001 Tel: +61 3 9288 8000 Fax: +61 3 8650 7777 ey.com/au Independent Auditor's Report to the Members of Redbubble Limited Independent Auditor's Report to the Members of Redbubble Limited Information Other than the Financial Report and Auditor’s Report Thereon How our audit addressed the key audit matter Report on the Audit of the Financial Report Our audit procedures included the following: Opinion assessing the eligibility of the development costs for capitalisation as an intangible asset in accordance with Australian Accounting Standards; selecting a sample of capitalised development costs by We have audited the financial report of Redbubble Limited (the Company) and its subsidiaries (collectively the Group), which comprises the consolidated statement of financial position as at 30 June 2021, the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, notes to the financial statements, including a summary of significant accounting policies, and the directors' declaration. project and assessing whether the nature of projects and costs incurred were supported by underlying evidence such as employee time sheets, employee contracts and supplier invoices; checked the clerical accuracy of the capitalised In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: development cost rollforward; appropriate; assessing whether the amortisation rates used are giving a true and fair view of the consolidated financial position of the Group as at 30 June 2021 and of its consolidated financial performance for the year ended on that date; and testing for a sample of projects, the feasibility and benefits expected from each based on the current status, forecast performance and related assumptions. This included discussions with project managers and developers and reviewing project plan approvals and reporting; complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion impairment; and considering whether there were any indicators of evaluation of the disclosures in Note 13 of the financial We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. How our audit addressed the key audit matter report. Our audit procedures included the following: The directors are responsible for the other information. The other information comprises the Report on the Audit of the Financial Report information included in the Company’s 2021 Annual Report other than the financial report and our auditor’s report thereon. We obtained the Directors’ Report that is to be included in the Annual Opinion Report, prior to the date of this auditor’s report, and we expect to obtain the remaining sections of the Annual Report after the date of this auditor’s report. We have audited the financial report of Redbubble Limited (the Company) and its subsidiaries (collectively the Group), which comprises the consolidated statement of financial position as at 30 Our opinion on the financial report does not cover the other information and we do not and will not June 2021, the consolidated statement of comprehensive income, consolidated statement of changes express any form of assurance conclusion thereon, with the exception of the Remuneration Report in equity and consolidated statement of cash flows for the year then ended, notes to the financial and our related assurance opinion. statements, including a summary of significant accounting policies, and the directors' declaration. In connection with our audit of the financial report, our responsibility is to read the other information In our opinion, the accompanying financial report of the Group is in accordance with the Corporations and, in doing so, consider whether the other information is materially inconsistent with the financial Act 2001, including: report or our knowledge obtained in the audit or otherwise appears to be materially misstated. complying with Australian Accounting Standards and the Corporations Regulations 2001. If, based on the work we have performed on the other information obtained prior to the date of this giving a true and fair view of the consolidated financial position of the Group as at 30 June a) auditor’s report, we conclude that there is a material misstatement of this other information, we are 2021 and of its consolidated financial performance for the year ended on that date; and required to report that fact. We have nothing to report in this regard. b) Responsibilities of the Directors for the Financial Report Basis for Opinion The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under and for such internal control as the directors determine is necessary to enable the preparation of the those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial financial report that gives a true and fair view and is free from material misstatement, whether due to Report section of our report. We are independent of the Group in accordance with the auditor fraud or error. independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional In preparing the financial report, the directors are responsible for assessing the Group’s ability to Accountants (including Independence Standards) (the Code) that are relevant to our audit of the continue as a going concern, disclosing, as applicable, matters relating to going concern and using the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with going concern basis of accounting unless the directors either intend to liquidate the Group or to cease the Code. operations, or have no realistic alternative but to do so. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. testing the operating effectiveness of controls over the We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis Auditor's Responsibilities for the Audit of the Financial Report for our opinion. capture, timing of revenue recognition and measurement of revenue transactions; Key Audit Matters for a sample of revenue transactions, testing whether Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial report of the current year. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. the revenue was recorded in the appropriate period and whether management’s estimate of sale transactions not delivered to the customer at 30 June 2021 were appropriately included as unearned revenue and Goods in Transit for items shipped but not yet delivered, as at that date; test the assumptions used in management’s estimate based on the average delivery days between payment, shipment and delivery; We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial report. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial report. assessing whether the revenue recognition policy applied to the terms and conditions of sale was in accordance with Australian Accounting Standards; and considered the adequacy of the revenue recognition policy disclosure contained in Note 3. Our objectives are to obtain reasonable assurance about whether the financial report as a whole is Key Audit Matters free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an Key audit matters are those matters that, in our professional judgment, were of most significance in audit conducted in accordance with the Australian Auditing Standards will always detect a material our audit of the financial report of the current year. These matters were addressed in the context of misstatement when it exists. Misstatements can arise from fraud or error and are considered material our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide if, individually or in the aggregate, they could reasonably be expected to influence the economic a separate opinion on these matters. For each matter below, our description of how our audit decisions of users taken on the basis of this financial report. addressed the matter is provided in that context. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report, including in relation to these matters. Accordingly, our audit • Identify and assess the risks of material misstatement of the financial report, whether due to included the performance of procedures designed to respond to our assessment of the risks of fraud or error, design and perform audit procedures responsive to those risks, and obtain audit material misstatement of the financial report. The results of our audit procedures, including the evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not procedures performed to address the matters below, provide the basis for our audit opinion on the detecting a material misstatement resulting from fraud is higher than for one resulting from accompanying financial report. error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. 120 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation A member firm of Ernst & Young Global Limited A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Liability limited by a scheme approved under Professional Standards Legislation 121 • • • • • Ernst & Young 8 Exhibition Street Melbourne VIC 3000 Australia GPO Box 67 Melbourne VIC 3001 Tel: +61 3 9288 8000 Fax: +61 3 8650 7777 ey.com/au Ernst & Young 8 Exhibition Street Melbourne VIC 3000 Australia GPO Box 67 Melbourne VIC 3001 Tel: +61 3 9288 8000 Fax: +61 3 8650 7777 ey.com/au Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. Report on the Audit of the Financial Report Independent Auditor's Report to the Members of Redbubble Limited Independent Auditor's Report to the Members of Redbubble Limited Report on the Audit of the Remuneration Report Report on the Audit of the Financial Report Opinion on the Remuneration Report Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. Opinion We have audited the Remuneration Report included in pages 23 to 43 of the directors' report for the Opinion year ended 30 June 2021. 44 to 70 Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. We have audited the financial report of Redbubble Limited (the Company) and its subsidiaries (collectively the Group), which comprises the consolidated statement of financial position as at 30 June 2021, the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, notes to the financial statements, including a summary of significant accounting policies, and the directors' declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. giving a true and fair view of the consolidated financial position of the Group as at 30 June 2021 and of its consolidated financial performance for the year ended on that date; and a) We have audited the financial report of Redbubble Limited (the Company) and its subsidiaries In our opinion, the Remuneration Report of Redbubble Limited for the year ended 30 June 2021, (collectively the Group), which comprises the consolidated statement of financial position as at 30 complies with section 300A of the Corporations Act 2001. June 2021, the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, notes to the financial Responsibilities statements, including a summary of significant accounting policies, and the directors' declaration. The directors of the Company are responsible for the preparation and presentation of the In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our Act 2001, including: responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. a) giving a true and fair view of the consolidated financial position of the Group as at 30 June 2021 and of its consolidated financial performance for the year ended on that date; and b) complying with Australian Accounting Standards and the Corporations Regulations 2001. complying with Australian Accounting Standards and the Corporations Regulations 2001. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. Basis for Opinion b) Ernst & Young Basis for Opinion We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the independence requirements of the Corporations Act 2001 and the ethical requirements of the Ashley Butler Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Partner Accountants (including Independence Standards) (the Code) that are relevant to our audit of the Accountants (including Independence Standards) (the Code) that are relevant to our audit of the We also provide the directors with a statement that we have complied with relevant ethical Melbourne financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with requirements regarding independence, and to communicate with them all relationships and other 19 August 2021 the Code. the Code. matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. From the matters communicated to the directors, we determine those matters that were of most significance in the audit of the financial report of the current year and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Key Audit Matters Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial report of the current year. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial report of the current year. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial report. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial report. We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial report. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial report. 122 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation A member firm of Ernst & Young Global Limited A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Liability limited by a scheme approved under Professional Standards Legislation 123 Shareholder and other ASX Required Information The shareholder information set out below was applicable as at 10 September 2021 (except as otherwise stated). A. Distribution of shareholders Analysis of numbers of ordinary shareholders by size of holding: Range 100,001 and Over 10,001 to 100,000 5,001 to 10,000 1,001 to 5,000 1 to 1,000 Grand Totals Total holders Shares % of Issued Capital 83 343 434 2,252 5,458 8,570 253,580,156 9,222,816 3,210,934 5,526,649 2,079,668 273,620,223 92.68 3.37 1.17 2.02 0.76 100 There were 945 holders of less than a marketable parcel of ordinary shares. 124 B. Top 20 Registered Holders of Fully Paid Ordinary Shares The names of the twenty largest registered holders of quoted fully paid ordinary shares are listed below: Rank Name Number of ordinary shares % of Issued Capital 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED J P MORGAN NOMINEES AUSTRALIA PTY LIMITED JELLICOM PTY LTD BNP PARIBAS NOMINEES PTY LTD BNP PARIBAS NOMINEES PTY LTD ACF CLEARSTREAM CITICORP NOMINEES PTY LIMITED BLACKBIRD FOF PTY LTD NATIONAL NOMINEES LIMITED BNP PARIBAS NOMS PTY LTD PITON CAPITAL VENTURE FUND II LP CBC CO PTY LIMITED RADIATA INVESTMENTS PTY LTD BNP PARIBAS NOMINEES PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2 MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED DENALI VENTURE PARTNERS FUND 1 LP OSBORNE TAS PTY LTD CS THIRD NOMINEES PTY LIMITED PAUL VANZELLA 20 RADIATA SUPER PTY LTD Top 20 holders of Ordinary Fully Paid Shares (TOTAL) Total Remaining Holders Balance Grand Totals 76,547,084 24,466,374 19,143,172 16,527,488 16,383,373 12,407,901 11,361,819 8,384,937 6,407,195 5,537,291 4,404,907 3,914,640 3,886,820 2,531,416 1,996,717 1,840,240 1,836,968 1,751,503 1,661,500 1,600,568 222,591,913 51,028,310 273,620,223 C. Unquoted equity securities The numbers of unquoted equity securities in the Company are set out below: Type of equity security Share Options Share Appreciation Rights Performance Rights Total number of ordinary shares subject of options and performance rights 27.98 8.94 7.00 6.04 5.99 4.53 4.15 3.06 2.34 2.02 1.61 1.43 1.42 0.93 0.73 0.67 0.67 0.64 0.61 0.58 81.35 18.65 100 Number held 6,261,331 4,552,861 1,247,734 12,061,926 125 RedbubbleAnnual Report 2021 D. Redbubble’s American Depository Receipt (ADR) program Redbubble ADRs are negotiable certificates issued by BNY Mellon, with one ADR representing ten RBL ordinary shares. They are traded under the symbol RDBBY and are classified as Level 1. They are traded over the counter via brokers. Corporate Information BNY Mellon is the depositary bank for the ADRs and plays a key role in the process of issuance and cancellation of ADRs. For additional questions about ADRs please contact: Directors BNY Mellon Shareowner Services P. O. Box 505000 Louisville, KY 40233-5000 U.S. Toll Free Telephone: 1-888-BNY-ADRS (1-888-269-2377) Telephone for International Callers: 1-201-680-6825 Website: http://www.mybnymdr.com/ E-Mail: shrrelations@cpushareownerservices.com Further information about Redbubble’s ADR program can be found on Redbubble’s Investor Centre website at: https://shareholders.redbubble.com/site/investor-information/adr-information E. Substantial Holders Substantial holders in the Company are set out below: Name Number held % of Issued Capital Kayne Anderson Rudnick Investment Management Mr Martin Hosking Osmium Partners 29,174,143 26,403,272 13,814,925 10.66% 9.65% 5.05% F. Securities subject to escrow arrangements There are no shares on issue that are subject to voluntary escrow. G. Voting Rights The voting rights attaching to each class of equity securities are set out below: ● Ordinary Shares On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. ● Options, Share Appreciation Rights and Performance Rights No voting rights H. Other ASX Required Information There is no current on-market buy-back of shares. 126 Anne Ward (Chair, Non-Executive Director) Martin Hosking (Non-Executive Director) Ben Heap (Non-Executive Director) Jennifer (Jenny) Macdonald (Non-Executive Director) Greg Lockwood (Non-Executive Director) Chief Executive Officer Michael Ilczynski Company Secretaries Registered Office Share Register Auditors Corina Davis (US) Martin Bede (Australia) Level 3, 271 Collins Street Melbourne VIC 3000 Australia Link Market Services Tower 4, 727 Collins Street Melbourne VIC 3008 Australia Ernst & Young 8 Exhibition Street Melbourne VIC 3000 Australia Bankers Citibank, N.A. Stock Exchange Listing Redbubble shares are listed in the Australian Securities Exchange (ASX listing code: RBL) Redbubble has a Level 1 American Depository Receipt (ADR) facility trading in the Over-The-Counter (OTC) market in the United States and is managed by The Bank of New York Mellon (ADR Code: RDBBY) Website Redbubble.com and TeePublic.com Investor Centre Shareholders.redbubble.com 127 RedbubbleAnnual Report 2021 Dog Throw Pillow designed and sold by Rosa Picnic Cat Throw Pillow designed and sold by Rosa Picnic
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