RedBubble pops despite aspirational outlook

Redbubble shares crashed 23% on Thursday after the online marketplace provided a third-quarter trading and broader investor updates. In addition to key financial metrics for the quarter, the CEO of Redbubble Group, Michael Ilczynski, provided a detailed view of the overall direction and philosophy of the group and medium-term aspirations, in a separate letter to shareholders.

Trading Update

Redbubble’s YTD financial metrics (with YoY growth rates, where applicable) are:

  • Marketplace Revenue of $456 million, up 85%

  • Gross profit of $184 million, up 100%

  • EBITDA of $51 million, compared to a loss of $2 million in FY20

  • EBIT of $41 million, compared to a loss of $12 million in FY20

  • Operating cash inflow of $54 million, compared to $6 million in FY20

  • Closing cash balance at 31 March 2021 of $102 million

Group Direction

Redbubble’s mission is - “To create the world’s largest marketplace for independent artists”. As consumer preferences continue to change they believe by offering consumers a unique content and product offering within a compelling shopping experience, Redbubble is positioned to become one of the global winners in this evolving landscape.

Consumers are less interested in wearing the same commodity black t-shirt owned by millions of others, instead, they look for meaning and uniqueness in what they buy. They want a t-shirt, or phone case, or poster with a design that expresses their individuality, personality and passions. Redbubble is far and away the best destination to find a design-product combination that fulfils this need.

The company’s medium-term aspiration is to drive top-line (sales) growth to enable a step-change in the scale of the business and the impact, particularly for Artists. Specifically, to grow Gross Transaction Value to more than $1.5 billion, to grow Artist Revenue to $250 million, and to produce Marketplace Revenue of $1.25 billion per annum.

Redbubble noted that achieving these aspirations will be a challenge, requiring a combination of disciplined investment, and focused execution, as they make targeted investments at the Gross Margin, Marketing and OPEX lines. The combination of these investments may lead to short term reductions in EBITDA margins.

Despite the 23% drop on Thursday, shares in the online marketplace have soared over 400% in the last 12 months.