Redbubble Ltd (ASX: RBL) has reported its trading update for the first quarter of FY19.
Redbubble operates a global online workplace for artist-submitted works.
It reported impressive growth across the board. Gross transaction value (GTV) grew by 40.5% to $64.1 million. This was 31.2% growth in constant currency terms.
Total revenue increased by 40.7% to $59.6 million, which was 31.3% growth in constant currency. This was largely driven by a 39.6% increase of product and shipping revenue to $49.2 million.
Gross profit after paid acquisition (GPAPA) went up 42.3% to $12.6 million. Gross profit grew by 42.9% to $18 million.
The gross profit margin improved by 50 basis points to 30.2%. Management attributed the increasing margin to Redbubble's negotiated fulfiller terms, as it benefits from economies of scale as it grows in size.
It wasn't just the revenue and profit numbers that were impressive. Customer numbers grew 31.7% to 1.2 million year on year. The number of selling artists also increased by 32.8% year on year to 199,100.
Management also pointed to repeated customer loyalty as another positive. 'Repeat' GTV grew 48.8% to $25.5 million.
Redbubble reaffirmed its FY19 revenue guidance growth rate of 30% in constant currency, with GPAPA growth expected to be similar to revenue growth. Operating earnings before interest, tax, depreciation and amortisation (EBITDA) is expected to be $2 million to $4 million and cash outflows is expected to be less than $2 million.
Acquisition
Redbubble went into a trading halt before announcing an acquisition.
It is acquiring TP Apparel for US41 million, or $57.7 million in Australia dollars. This will be funded with a $60.6 million capital raising from existing shareholders and institutional investors. The offer price is at $1.50, a 10.4% discount to the last closing price of $1.675.
Redbubble describe Teepublic as a business which "enables artists from around the world to sell their designs on 45 products produced and fulfilled by a network of third party suppliers.It sounds like a good match for the Redbubble business.
In FY18 TeePublic generated pro-forma revenue of US$25 million, pro-forma gross profit of US$10 million and pro-forma operating EBITDA of US$3.3 million.
It has apparently been growing at an impressive rate because in the first quarter of FY19 TeePublic reported that revenue grew by 57% year on year.
Foolish takeaway
The first quarter of Redbubble's FY19 was impressive and the acquisition seems compelling. Redbubble seems like the type of platform business that could grow very nicely over the coming years due to network effects, it will be one I'm going to keep an eye on.
