The Redbubble marketplace has reported a $32.4 million turnaround in operating profit for FY24 despite a marketplace revenue fall of 17 per cent.
Redbubble sells a range of print-on-demand products, including clothing and accessories, based on user-submitted artwork. It is managed under ASX-listed holding company Articore Group, which also manages TeePublic in the United States.
The Redbubble marketplace’s earnings before interest, tax, depreciation and amortisation lifted out of the red to hit $14.8 million. This lift is despite a 17 per cent drop in marketplace revenue - which is total revenue minus artist revenue - to $241.3 million.
This drop in revenue was driven by significant changes to Redbubble’s paid marketing strategy in the third quarter, which enabled the marketplace to scale paid marketing spend.
“While the implementation of this strategy was initially disruptive, the intended benefits of these changes have started to take effect with the rate of decline in MPR moderating to 14 per cent in the fourth quarter of FY24,” Articore Group reported.
The surge in Redbubble’s EBITDA and underlying cash flow was achieved by focusing on growth in absolute gross profit after paid acquisition (GPAPA), Articore reported, which was up 5 per cent on FY23 to $69 million, matched with a $29.3 million (35 per cent) reduction in operating expenses.
“Redbubble’s FY24 GPAPA margin increased by 590 basis points to 28.6 per cent driven primarily by the introduction of artist account categories and associated fees for some accounts, ongoing benefits from the implementation of a dynamic order routing system (DORS) in 2HFY23 and adjustments to base prices,” the company reported.
“It also reflected a reduction in paid marketing spend as the marketplace adopted a more disciplined approach of being profitable on first order.”
Overall marketplace revenue for Articore Group was down 9.5 per cent to $423.1 million for the full year, with overall gross profit up 4 per cent to $181.7 million, driven by its TeePublic marketplace.
In FY25, Articore expects to deliver a GPAPA margin of 24-26 per cent, operating expenditure between $96 million to $100 million and positive underlying cash flow.
“Articore exited FY24 in a strong financial position and our immediate priority is to leverage the group’s assets to drive sustainable and profitable revenue growth,” Articore CEO and managing director Martin Hosking said. “In FY25, we will remain cash flow positive while extracting maximum value from both marketplaces, maintaining cost discipline and maximising synergies across the group.
This will enable us to invest in organic opportunities that leverage our distinctive assets including our well established and growing base of global creators and their content, growing fulfillment network and superior unit economics.
“By the end of FY25, we aim to have gone beyond the existing marketplaces in pursuit of our vision of being the global leader for connecting digital creators with their customers.”