The Redbubble Ltd (ASX: RBL) share price is down over 14% after giving its March 2019 quarter update.
Redbubble was founded in 2006, it owns and operates Redbubble.com and TeePublc.com, two global online market places where over 800,000 independent artists can sell their designs on products like apparel, stationery, bags, wall art and so on. It allows customers to shop through a wide range of options rather than just going to one art gallery at a time.
Here’s Why The Redbubble Share Price Has Been Pierced
Redbubble reported that in the third quarter of FY19 the company grew its marketplace revenue (being the product and shipping revenue less payments to artists) by 40.3% year on year thanks to the addition of TeePublic. On a constant currency basis the growth was 32.6%.
However, the business saw lower growth in the March 2019 quarter compared to the December 2018 quarter because of the continuing organic search issue.
Gross profit for the year to March 2019 was $71.7 million, which was 47.7% higher. Cash operating expenses only grew by 30.6% to $47.2 million. This increasing operating leverage allowed the company to reveal an operating EBITDA profit of $3.2 million (click here to learn what EBITDA means) – this was an improvement of $3.7 million compared to last year’s $0.5 million loss.
Looking at the performance of the Redbubble platform, product revenue from ‘authentic’ sellers grew by 36% in the third quarter and now represent 80% of Redbubble’s product revenue.
In the year to date, unique customers have increased by 21.1% year on year to 4.4 million and selling artists have increased by 41% to 334,000.
Management said that the TeePublic acquisition is proceeding well and is adding to the group performance.
To try to fix the organic search issues Redbubble management are trying to improve the speed of pages that attract high traffic and also the company is aiming to consolidate the content that Redbubble allows Google to index.
However, the company did say that it experienced its “normal seasonal” cash outflows in the third quarter of the financial year after the strong inflows during the second quarter. Total outflows were $29.6 million and it ended with cash of $29.1 million.
With the share price falling so much over the past six months, I think Redbubble could be one to watch because of its operating model. There is a lot of power in network effects. The fact that Redbubble is getting closer to a cash profit is a positive sign. I think Redbubble and the 2 rapid ASX growth shares in the free report below are worth watching over the next couple of years.
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