Good morning, everyone. Welcome to Step One's FY26 results conference call.

I'm Greg Taylor, CEO and Founder of Step One, and I'm joined by our CFO, Nigel Doole. We'll be going through the presentation that was lodged this morning with the ASX, and there'll be time for questions at the end.

Turning to slide 2: results highlights. FY26 was a year of deliberate change for Step One.

We set out at the half to reset the business, and the full year result reflects both the impact of that decision and some early indicators of progress against that reset program. Revenue for the year was $63.7 million, down 26.7% on FY25.

As we spoke in February, the reduction in discounting was a significant contributor to the revenue decline during the year, a decision we took to restore brand equity and pricing integrity rather than chasing volume. We reported an EBITDA loss of $7.4 million for the year.

On an adjusted basis, excluding the inventory provision, EBITDA was a profit of $1.7 million. The provision expense for the full year settled at $9.1 million, down from the $10.9 million we raised at the half as we recovered $1.8 million through the second half as older product moved.

We reported an adjusted gross margin of 75.9%, at just 0.5% below FY25. Maintaining adjusted gross margin at that level while reducing discounting provides an encouraging indication of the resilience of our pricing and product proposition.

Our indirect channel continued to grow during FY26. Revenue through third-party channels, such as Amazon, TikTok Shop, and John Lewis, grew 62.3% and now represents 18.2% of total revenue.

We also released 16 products during the year, extending the range beyond our core, aligned with our vision of owning more of the customer's drawer. Revenue of our women's range was down 35.7% and represented approximately 15% of revenue.

This performance was below our expectations and we're reviewing opportunities to improve the performance of this segment. Nigel will speak to the cost pressures that weighed on the result.

We have more work to do and the reset program has further to run. Turning to slide 3.

Our growth strategy continues to be anchored around the same four pillars that underpin the reset program. We will remain disciplined in executing these priorities while responding to changes in customer demand and market conditions.

First, on products and range. We released 16 products during the year, being our cloud press, men's briefs, socks, periods and sleepwear, and our active top.

Our priority from here is to keep expanding into logical adjacencies, and to extend beyond bamboo fabric where customer demand supports it. With bralettes, to PJs, and socks now established, we're building a more complete offering that positions Step One as part of the customer's broader basewear wardrobe.

Despite releasing new women's products during the year, performance in the women's range was below expectations. We're reviewing opportunities to improve performance and grow this segment of the business.

Second, customer acquisition. We recruit through consistent, brand-led advertising that positions Step One as comfortable and quality brand.

We've increased our brand investment with sharper focus on marketing efficiency. Over 2.1 million customers have purchased Step One products.

Encouragingly, new customers made up 47% of orders in the second half, up from 36% in the first half, which is an early indicator of new customer acquisition as we increase our focus on brand investment. Thirdly, indirect channels.

Revenue from these channels grew 62.3% during FY26, and our approach remains selective. We expand with partners who align to the brand, and we protect brand integrity and margin discipline in every one of those relationships.

Our presence in John Lewis continues to provide credibility and market insight in the UK. Finally, footprint.

Australia remains our foundation, though it's worth noting the UK was more resilient this year, down 11.1% against a 36.1% decline in Australia, and it now represents 41% of group revenue. Our UK strategy is digitally focused and our approach to US remains disciplined.

Across both markets, we're prioritizing sustainable growth and improving profitability rather than growth at any cost. Turning to slide 4.

Average order value for the year was $98 and recovered to $101 in the second half as the benefit of reduced discounting came through. Our customer mix shifted to 41% new customers, which reflects the brand investment I mentioned, with returning customers at 59%.

Conversion moderated to 4.1% for the year and compared with 4.6% in FY25. Our customer database grew to 2.1 million, an increase of 215,000 over the year.

The remaining charts illustrate the revenue and profit performance we've discussed. I'll now hand over to Nigel to walk through our financials in more detail.

Thanks, Greg. Turning to slide 5.

Revenue for the year declined 26.7% to $63.7 million. Australia was down 36.1% to $35 million.

The UK was down 11.1% to $26.2 million, and the US was down 7.2% to $2.5 million. As Greg mentioned, the UK was more resilient than Australia during the reset period.

Reported gross margin was 61.6% after including a $9.1 million specific inventory obsolescence provision. Shareholders can obtain more information about the specific provision and its impact on the financial result on slide 12 of this presentation and in the annual report.

While the reported gross margin was 61.6%, excluding the impact of the $9.1 million specific inventory provision, it improved to 75.9%. This is 0.5 percentage points below FY25, predominantly reflecting the higher discount rates applied in the first half.

Advertising and marketing fell $2.4 million in absolute terms to $21.1 million, but rose to 33.1% of revenue, up 6.1 percentage points on PCP as we maintain brand-led investment through a lower revenue base. Distribution and fulfillment costs of $12.7 million were broadly flat in dollar terms, but increased to 19.9% of revenue, up 4.9 percentage points.

Cost pressure on global logistics and distribution was compounded by higher inventory levels and the costs associated with the transition to a new 3PL in Australia. Overhead was held at $9.7 million, down 1.4% on the prior year.

The result was reported EBITDA loss of $7.4 million, with an adjusted EBITDA profit of $1.7 million against a $17.4 million profit in FY25. Reported loss after tax was $6.4 million, with an adjusted profit after tax of $0.8 million.

Turning to the balance sheet on slide 6. The business is debt-free, with $25.8 million in cash and financial assets held with licensed banks across a variety of terms.

Inventory on hand increased $1.7 million during the year through range expansion and accumulation of slower-moving lines. The net inventory balance reduced by $9.4 million to $15.8 million, predominantly as a result of the obsolescence provision.

We plan to dispose of the obsolete inventory in 1H27. Net assets closed the year at $40.4 million.

After allowing for $8.2 million of liabilities and $1.3 million of inventory purchase orders placed but not yet fulfilled, available cash at 30 June was $16.4 million. Step One remains a capital-light business, and that provides a financial foundation from which to continue executing the reset plan.

Looking at cash flow on slide 7. Operating cash flow reflected the softer trading performance, with an outflow of $2.7 million against an inflow of $8 million in FY25.

Receipts declined 27.3% in line with reduced revenue. Dividends totaling $4.4 million were paid during the year, distributing a 100% of earnings to 30 June 2025.

There is no change to our dividend policy, and declarations are expected to recommence once retained earnings return to a positive balance. Term deposits with a duration greater than 3 months are classified as investments.

Closing cash was $16.7 million, and with term deposits together totaling $25.8 million, all held with licensed banks. I will now hand back to Greg to talk about FY27.

Thanks, Nigel. Turning to slide 8.

In FY27, we'll continue to execute the reset plan. We'll release new products with adjacencies, we'll enhance our brand advertising, and we'll maintain our brand premium through reduced discounting.

Step One will prioritize long-term value creation over short-term performance, with a focus on sustainable growth and improving profitability. There is no change to our dividend policy, and as Nigel noted, declarations are expected to recommence once retained earnings return to a positive balance.

We will not be issuing financial guidance. FY26 was a hard year.

We've not shied away from that, but we finished it with a stronger margin structure, materially clean inventory position, a growing indirect channel, and a customer base over 2 million. We believe the decisions we took this year were the right ones for the business over the longer term, and I'm confident they position Step One to deliver sustainable, profitable growth.

I'll now hand back to the operator to open the line for questions.

Hi, Greg and Nigel. Thanks for the presentation.

Maybe I guess I appreciate you haven't given guidance, but I guess how should we think about sort of top-line growth moving forward, maybe a bit of color by region, and I guess just generally how you're sort of seeing the consumer environment and how your customers are responding to the pricing reset? Thanks.

As as we spoke, we're focused on the reset plan. We're focused on rebuilding the cred- the the full-price customer with within our cohort.

We will look to growth where we can see growth, but at this stage it's so we're focusing on the reset plan. I Overall, from a marketing from a market perspective, yes, the consumer is under under cost-of-living pressures, we acknowledge that.

However, our our focus remains the same. We're clear on where us where our plan is, and we'll continue to execute that throughout the next year.

Okay. That's great.

Maybe just in terms of the women's revenue, down a fair bit on last year, and I think you noted probably below your expectations. Maybe if you can just give a bit more color around why you think this is?

In line with reduced discounting across the site, we've looked at where our brand sits and how we speak to our customers. All we've identified is that the way we speak to our women's customer is a little bit different to the way we speak to our men's customer.

What we'll be doing is we'll be focusing on, as we said during the presentation, is the product will still remain on the site. However, we will continue to develop strategy that can bring back that revenue and provide a stable yet profitable path forward within that women's category.

Thank you. Maybe on the indirect channels, some really strong growth up over 60%.

Maybe if you can just talk to that by the different channels and sort of how you think about indirect moving forward as well.

Indirect was strong for us, it grew at over 62%, and made up 18.2% of our revenue. It's profitable and disciplined, and we look at partners who fit our brand, we protect our margin in every relationship there.

It also puts the brand in front of customers that we're not reaching. Whilst D2C remains our core focus, indirect will extend that.

Thanks, guys. I'll leave it there.

I'll let someone else have some questions. Thanks.

Morning, Greg and Nigel. Just a few from me.

Just to start, as we saw, Australian revenue had a significant drop, and that was sort of below our expectations, while the UK seemed far better, and it's great to hear that it was more resilient in your words. Can you just sort of talk to what made the UK market more resilient versus Australia?

UK is a little less mature as we are in Australia, but as we said last year and it's also a bigger market as well. As we said last year, we focused on localized advertising, local tone of voice, and looking at ways in which we can extend not only our D2C business, but through Amazon and through John Lewis.

We are in John Lewis in the UK, and whilst that doesn't provide what I'd call meaningful revenue at the moment, it does provide credibility and brand credibility to us. We will continue to focus on the UK market, as we said, and that all forms part of the reset plan.

Great. Thank you.

Then just moving on to advertising. Obviously it grew as a percentage of revenue, but we saw conversion drop quite a bit.

You're basically spending more to convert less. Is there just sort of a weaker underlying customer here, or is it a traffic issue, or can you just talk to that?

The total spend fell $2.3 million for the year, but within that, we shifted the mix towards brand, TV sponsorships, ambassadors, and away from discount-led performance spend. Less money was spent, but it's pointed at building the brand rather than essentially renting the next transaction, and that forms part of our strategy moving forward.

Great. Then just lastly, if we talk about inventory.

Obviously inventory on hand increased when you released the new product range, and I think you noted that it's an accumulation of slower-moving lines. I'm just wondering if the slower-moving stock is still accumulating and does that mean or at least signal risk into FY27 of more obsolescence?

In the actual annual report we flagged that we've modified the way we look at the inventory provision, but we will take the lesson of what we've had to do currently and we will improve the way we push through inventory, but what we're looking at is that our processes over the last period of time have improved considerably, we're not expecting any repeat of this specific obsolescence provision.

Great. That's all from me.

Thanks, Nigel, and thanks, Greg.

good morning. Do I read the accounts correctly that the US lost $3.9 million this year versus half a million last year?

That's correct, but it was predominantly because of the inventory write-off.

Okay. Can you give a number ex inventory write-off?

We haven't gone through it, but if you held probably last year's number, you're pretty close. For the base.

Right, gotcha. I noticed in there's a bit of a headcount reduction that were most basically females.

Is that an indication, I guess, of a restructuring of the people behind the women's brands?

No, it had nothing to do with women's market. It was just the roles that were changing had happened to be female.

Okay. Are you happy with, new products being 4.3% of revenue, is that sort of what you expected behind your expectations and what do you expect for these product adjacencies as a percentage of revenue over time?

We're not guiding as to mix by products, but we obviously would like all new products to be much bigger portion of our revenue, whilst we target growth, we're not indicating what sort of mix we're looking for.

Yeah. I guess you didn't have an end of financial year sale, as you said earlier.

Are you going from one extreme to the other, do you think, in terms of having obviously buy seven, get 10 free pairs free to basically not even having an end of financial year sale?

Yeah. I want to be very clear on this.

This reset is very deliberate. It's very cost-structured, and it's about rebuilding the LTV of our customer base.

We've seen and reported on this that discounting isn't the way to do that. We're not here to compete on price.

We need to compete on quality and brand, and we'll continue to do that. The purpose of not doing the EOFY sale was to signify to our customer base that we're no longer offering those discounts, and then if you do want a Step One product, then this is the price and we stand behind that.

I guess normally retailers use EOFY, obviously a number of reasons, but it is used as a clearance process as well for obsolete stock and slow-moving stock, how do you do that if you don't have sales like that?

Whilst we're not completely ruling out sales totally, what we'll be potentially looking to do is come Black Friday, potentially looking at any slow-moving stock and providing a much more discount on those lines, but we will not be reverting back to the previous levels of discounting.

Yeah. I guess in terms of marketing spend, how do you now look at it in terms of with a customer acquisition cost or a cost per number of emails you've got on board, how do you look at the cost of acquisition and accept or think it's too high or too low?

Cost of acquisition is something we look at very closely, but we also look at the LTV of the customer, and with the product adjacencies now on board, what we do look at is the AOV of first customer, and then the time to repeat on the second customer, and then thirdly, the mix of new products versus underwear within that product. It's a mix of looking at each customer on value, but we're more focused on the LTV of the customer and increasing the AOV, cross-selling adjacencies to them.

With the email addresses, you can measure that first order and then the following orders and have a pretty good idea of what the composition is?

Correct.

Yeah. Right, Thank you.

Thank you everyone for dialling in today. FY26 was a challenging year, but we maintain forward and in continuing our reset plan.

Thanks for your time, everyone.