The Redbubble Ltd (ASX: RBL) share price dropped 18% yesterday after the e-commerce business released its FY21 half-year result.
What is Redbubble?
Redbubble owns two of the world’s largest global online marketplaces for artist-produced products. Various products are sold on those websites including apparel, stationery, housewares, bags, wall art and so on.
What were the main highlights of the Redbubble FY21 result?
The Redbubble report included a lot of growth. It said it generated $353 million dollars of marketplace revenue, up 96% compared to the prior corresponding period.
Gross profit went up even faster, rising by 118% to $144 million. Redbubble generated $42 million of earnings before interest and tax (EBIT), compared to a loss of $2 million in the first half of FY20.
Operating cash flow of $80 million was up almost 100% from the $41 million generated in the prior corresponding period.
The company benefited from a positive delivery date adjustment during this period. Excluding this adjustment, in the six months to 31 December 2020, marketplace revenue grew 90% to $343 million, gross profit rose 102% to $138 million and it made $35 million of EBIT – up from $0.2 million last year.
The company reported that the number of artists using the marketplaces increased to 659,000 – up from 511,000 in FY20.
3 things you may have missed:
1: The trading update
Management said that healthy demand continued into January, with marketplace revenue (paid) rising by 66% (or 82% in constant currency terms) compared to the prior corresponding period.
Investors like to know what the recent trading of a business has been to see if trends are continuing or not. For Redbubble, it was able to tell investors about the first month of the second half of FY21.
The growth rate of 62%, or 82% in constant currency terms, was a slower growth rate than what the company had experienced in the first half of the financial year.
2: Mask sales are now a smaller part of the overall sales picture
In the last few months of FY20, Redbubble was selling large numbers of masks to consumers who wanted a product to protect themselves against COVID-19. The addition of the mask product line amounted to millions of dollars of extra revenue for Redbubble.
Redbubble said that high growth rates continued across all geographies and product categories. The company revealed that mask demand moderated to 7% of the overall product mix for the second quarter.
3: Rising profit margins
The ASX technology share revealed that all of its profit margins improved compared to the first half of FY20.
The gross profit margin increased by 4.1 percentage points to 40.8%, up from 36.7%. The gross profit after paid acquisition, or marketing, (GPAPA) margin improved by 2.6 percentage points to 28.3%.
The earnings before interest, tax, depreciation and amortisation (EBITDA) margin rose significantly after an increase of over 1,000% to $48.8 million of EBITDA.
The EBIT margin is now positive. Last year there was a $2 million EBIT loss, in this result EBIT was positive at $41.8 million.
