Kogan.com Earnings Call: Core Strength, NZ Reset

Kogan.com Ltd. ((AU:KGN)) has held its Q2 earnings call. Read on for the main highlights of the call.

Kogan.com’s latest earnings call mixed robust core performance with a candid assessment of challenges at its Mighty Ape unit. Management emphasized double‑digit sales growth, expanding margins, and strong cash generation at the main platform, while acknowledging that Mighty Ape’s reset has temporarily weighed on group earnings but is backed by a detailed turnaround plan.

Kogan.com Revenue and Sales Growth

Kogan.com’s core business extended its lead as the group’s engine, pushing gross sales past $0.5 billion, up 21% year on year. Revenue grew about 17%, underscoring resilient customer demand and validating management’s focus on scaling the platform despite a softer consumer backdrop.

Improved Profitability and Operating Leverage

Profitability improved alongside growth, with gross profit up roughly 16% to nearly $100 million and adjusted EBITDA rising 18% to $27.6 million. Adjusted EBITDA margin expanded to 11.9% and adjusted EBIT margin to 9.7%, highlighting operating leverage as higher volumes increasingly drop through to earnings.

Strong Cash Generation and Balance Sheet

The group converted earnings into cash efficiently, generating operating cash flow of $46.9 million and free cash flow of $45.1 million, up 2% year on year. Kogan.com ended the half debt‑free holding $71.8 million in cash, giving it ample flexibility to invest, manage volatility, and continue shareholder returns.

Platform and Exclusive Mix Lift Earnings Quality

Kogan.com leaned further into exclusive products and asset‑light services, which delivered 72% of gross profit. Platform‑based sales climbed 16.6% to $68.9 million, and platform margins expanded to around 52%, signaling that higher‑margin revenue streams are increasingly driving the group’s earnings profile.

Marketplace and Subscription Momentum

Marketplace and subscription businesses were standout contributors, with Kogan Marketplace revenue jumping 31.6% to $19.5 million. Kogan FIRST subscription revenue rose 7.6% to $30.3 million and deferred income grew 13.7% to $11.2 million, and about half of product gross sales now come from FIRST members, underscoring the stickiness of the customer base.

Verticals and Products Performance

Kogan Verticals posted an 8.8% revenue increase to $12.3 million, led by Kogan Mobile up 13% and Kogan Internet up 40%. Kogan Products revenue climbed 19% to $167.9 million, with gross profit up 26.4% to $35.1 million and margin improving to 20.9% as average selling prices rose and more than 70% of sales came from own brands.

Working Capital and Inventory Efficiencies

Inventory discipline continued to free up capital, releasing $7.1 million year on year as stock levels were optimized. Mighty Ape’s inventory was cut by 32%, improving working capital efficiency and setting the stage for a more deliberate rebuild focused on higher‑return product ranges.

Shareholder Returns and Capital Management

Despite funding growth and a turnaround at Mighty Ape, the company returned capital to investors through dividends and buybacks. It paid $5.8 million in dividends net of reinvestment plans and executed $4.8 million of on‑market buybacks, while declaring an interim fully franked dividend of $0.080 per share at a discount for plan participants.

Mighty Ape Revenue Reset

Mighty Ape’s top line suffered as management deliberately cut inventory and tightened procurement, leading to a 25% year‑on‑year revenue decline. The reset is strategic, aiming to correct prior stocking issues and reposition the New Zealand unit, but it has come with a meaningful short‑term hit to reported growth.

Mighty Ape Profitability Drag

The New Zealand business recorded an adjusted EBITDA loss of $3.2 million for the half, acting as a drag on group profitability. Management noted margins improved month by month and turned positive in December, yet the unit remains exposed to a volatile local retail environment and will take time to normalize.

Group EBITDA and Product Sales Impact

While the Kogan.com platform performed strongly, group adjusted EBITDA slipped about 3% as Mighty Ape underperformance offset gains. Group product sales were also tempered by the reset, with management attributing roughly a 5% decline in product sales to the actions taken at Mighty Ape during the half.

Inventory Rebuild and Working Capital Demands

With Mighty Ape inventory now at very low levels, Kogan.com plans to deploy additional working capital to rebuild stock. This restocking phase could temporarily absorb some of the strong free cash flow generated elsewhere in the group, introducing timing and execution risk as the mix shifts toward more exclusive offerings.

New Zealand Retail Backdrop

Executives stressed that the broader New Zealand retail environment remains challenging, complicating the recovery at Mighty Ape. They also highlighted difficulty separating macro headwinds from the effects of internal reset measures, increasing uncertainty around how quickly and sustainably the unit can return to former sales levels.

Guidance and Outlook

Management guided to full‑year FY26 adjusted earnings margins of 6% to 9% and expects Mighty Ape to return to positive adjusted EBITDA in the second half of that year as inventory is rebuilt. They see platform‑based sales as the key driver of margin expansion toward a medium‑term 8% to 12% range and a longer‑term aspiration above 20%, supported by strong cash generation, capital returns, and early signs of firm demand in recent trading.

Kogan.com’s call painted a picture of a business with strong underlying economics but facing a self‑inflicted earnings drag from a necessary fix in New Zealand. For investors, the story hinges on whether robust platform growth, cash strength, and improving margins can persist while Mighty Ape’s reset transitions into a profitable recovery over the next 18 to 24 months.