Online marketplace Redbubble
(ASX:RBL) has released their third quarter and year to date update which has seen their share price tumble over 20 per cent during today's session.
To help you understand the figures, the company compares its results on a constant currency basis before converting it to Australian dollars for reporting purposes. The reason for this is that the company sources about 93 per cent of its marketplace revenue in other currencies given that they sell artwork online from independent artists from around the globe. Bear in mind, during this period the Australian dollar has strengthened over the falling greenback which has assisted in their figures.
In the third quarter ending in March 2021, their gross transaction value increased by 58 per cent, their marketplace revenue grew by 54 per cent to $103.4 million or 78 per cent in constant currency. Their marketplace revenue increased by 54 per cent or 76 per cent on constant currency basis to $103 million. Their gross profit rose by 55 per cent or 78 per cent in constant currency to $39.8 million with their gross profit margin lifting to 38.4 per cent from 38.3 per cent.
In the period, the company grew by 71 per cent through paid marketing which means the gross profit after these fees rose by 47 per cent versus 71 per cent. Their operating costs increased by 3 per cent to $21 million. These third quarter numbers show strong growth over the period.
The company did mention that business activity is seasonal in nature and to view its financial metrics over a full financial year period.
Comparing to their year to date results, the company’s gross transaction value is up 82 per cent or 94 per cent in constant currency to $576 million, their marketplace revenue is up 85 per cent or 97 per cent in constant currency to $456 million, gross profit rose by 100 per cent or 114 per cent in constant currency to $184 million. EBITDA is $51 million or $53 million in constant currency versus a $2 million loss compared to FY20. On comparison to their year to date figures, the numbers show growth.
Let's have a look at the open letter that was released with the figures which outlined its medium term aspirations. In their accompany investor presentation -
https://shareholders.redbubble.com/site/PDF/1b18fab0-0203-4e69-a18a-a8ea7a7036e7/InvestorPresentationaccompanyingLettertoShareholders (page 10), it outlines EBITDA as 9.5 per cent and mentions that "the short-term EBITDA as a percent of marketplace revenue is expected to be in the mid single digit range over an annual period". This means that its profitability margins will reduce from double digits to in this case, "mid single digit".
Additionally, CEO Michael Ilczynski shared the company's aspiration to produce their marketplace revenue of $1.25 billion per annum and increase their gross transaction value to more than $1.5 billion. In the same table, the company states that they are looking to increase their EBITDA to 10-15 per cent in calendar year 2024 and beyond, at least three years from now. He said that “achieving these aspirations will be a challenge, requiring a combination of disciplined investment, creative and thoughtful experimentation, and focused execution. As we make targeted investments at the gross margin, marketing and opex lines, the combination of these may lead to some short term reduction in EBITDA margins".
Despite its strong performance in the third quarter to its year to date performance, the company is looking to reduce its profit margin to a mid single digit with the lens to increase it to double digits from calendar year 2024. Over the last 12 months, their share price has fallen by over 28 per cent. Within that time, Michael was appointed as the CEO in January this year coming online employment marketplace SEEK as former CEO.
Shares in Redbubble
(ASX:RBL) are trading 21.42 per cent lower at $1.18.
