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Redbubble CEO: “There is More Work to be Done.”

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By Published On: April 26, 20240 Comments

Redbubble’s third quarter results are showing a slow yet steady return to profitability, but CEO Martin Hosking says they aren’t done yet as revenue continues to fall.

Articore Group, formerly known as Redbubble Limited, owns and operates online marketplaces Redbubble.com and TeePublic.com.

FY23 was a rough year for the Group as it reported $18 million operating loss for 1HFY23 and hit a two year ASX low in October 2022 at $0.46, dropping 88.5 percent over 12 months. In the second half, it recovered to positive cash flow and implemented initiatives including the introduction of artist account tiers on both the Redbubble and TeePublic marketplaces, a dynamic order routing system for the Redbubble marketplace in the US, and further optimisation of paid marketing spend.

The Group has continued to see the benefit of initiatives rolled out in the past 12 months to improve unit economics. In Q3 FY24, Articore reported a gross profit of $34.8 million, up 4 percent on the pcp, and gross profit margin of 44.6 percent, up 660 basis points. 

Marketplace revenue, however, is down 12 percent to $78.1 million, reflecting the Group’s continued focus on profitability and a short-term disruption to paid marketing efficiency as the Redbubble marketplace enhanced its paid marketing strategy. This decline was expected as Q3 is seasonally low for MPR. with both operating EBITDA and underlying cash flow negative for the quarter.

Operating expenditure has reduced down 25 percent to $23.5 million as the Group continued to realise the benefits of cost-reduction initiatives implemented in FY23 and maintained strong cost discipline.

Martin Hosking, Group CEO and Managing Director of Articore, said, “Over the last 12 months, we have delivered a number of initiatives across both our marketplaces, Redbubble and TeePublic, to drive profitability. We are pleased to see the sustained improvement in unit economics this quarter, with the Group’s gross profit up 4 percent on the pcp and its gross profit margin increasing 660 basis points to 44.6 percent.

“Driving profitable revenue growth for the Group remains our primary objective going forward. This quarter the Redbubble marketplace implemented significant changes to its paid marketing strategy to enable it to scale its paid marketing spend, while maintaining the marketplace’s disciplined approach of being profitable on first order.

“We purposefully implemented these changes in 3QFY24, as it is seasonally the lowest MPR quarter of the financial year. As expected, the changes were disruptive and had a negative impact on Redbubble’s MPR in 3QFY24. We are starting to see the intended benefit in April.”

The Group reaffirms its FY24 guidance range for FY24 GPAPA margin to be between 24 to 26 percent and FY24 operating expenditure to be between $97 million and $100 million. 

“The Group has implemented a marked turnaround this financial year but there is more work to be done,” Hosking said. “The first step is returning to positive underlying cash flow, which the Group remains focused on achieving for FY24. Reinstating profitable revenue growth is the next step that will assist the Group to be underlying cash flow positive on a quarterly basis going forward.”

About the Author: Rosalea Catterson

Rosalea is the Editor of Power Retail. With a keen interest in consumer behaviour and tech, she covers everything ecommerce and hosts the Power Retail Power Talks Podcast.

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