Redbubble share price tumbles 40% as profit turns to loss

The e-commerce company for artists reported a tough FY22 to the market today.

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Key points

  • The Redbubble share price is in freefall after the company reported a difficult FY22, with EBITDA down 121%
  • The company struggled amid various headwinds, squeezing revenue and cash flow
  • In FY23, the company forecasts that its revenues will improve and that it will dramatically reduce hiring

The Redbubble Ltd (ASX: RBL) share price is plummeting today after the company announced a severe FY22 loss in its latest annual report.

Shares in the artists' e-commerce marketplace are currently trading for 90 cents apiece, a drop of 39.8% at the time of writing. They closed yesterday's session at $1.495 each.

Let's go over the key metrics of the report.

What did Redbubble report?

The company cited numerous headwinds contributing to its earnings and revenue reductions. They included disruption from COVID-19, volatility from supply chain disruptions, inflationary pressures, and the war in Ukraine.

Despite the financial pain, Redbubble stated it now has 809,000 monetised artists on its platform, the largest number ever.

However, the number of selling artists was offset by a 7% reduction in the number of active members on the platform, which shrank to 14.4 million.

What else happened in FY22?

The company noted that $55 million worth of mask sales boosted its FY21 revenue. In FY22, mask sales accounted for just $10 million.

Redbubble said 68% of its marketplace revenue was recurring from existing artists. Furthermore, 46% of revenue came from users making repeat purchases, up from 42% in FY21.

Organic sales, or sales generated in the absence of paid ads, were said to account for 60% of the company's revenue.

A new pet category was also launched on the website in June.

What did management say?

Redbubble CEO Michael J. Ilczynski gave the following comments on the company's performance.

Actions taken by Redbubble during FY22 remain focussed on continued investment in our technology platforms, experiences for artists and their customers, and more recently our brand. This reflects our disciplined approach to investing to drive sustainable growth for the medium and long term. Overall, the Group's outcomes demonstrate continued resilience across all three sides of the marketplaces, and importantly, financial performance and operating momentum improved in Q4FY22.

What's next?

The company said it expects revenue growth in FY23, supported by a 6% increase in the average price of products on the platform.

Redbubble also intends to significantly slash its employee growth, down to 4% this financial year from 30% in FY22.

An investment in the company's brand will also run to a total of $8 million to $12 million.

Over the medium term, Redbubble intends to grow its gross transaction value to more than $1.5 billion, with the majority coming from marketplace revenue at $1.25 billion.

Redbubble share price snapshot

The Redbubble share price is down 70% over the last 12 months and 72% year to date.

That's signifantly below the performance of the S&P/ASX 200 Index (ASX: XJO), which has dropped 5.4% in a year and 4.5% in 2022 so far.

Redbubble's market capitalisation currently stands at around $251 million.

Motley Fool contributor Matthew Farley has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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