Redbubble highlights potential of independent artists after profit surge

Redbubble ASX RBL artists revenue increase
Redbubble’s marketplaces enable independent artists to profit from their original creativity.

Independent artist promoter Redbubble (ASX: RBL) has published a business update for the first quarter of the 2020 financial year in which the company revealed a 43% increase in revenue and a 48% growth in gross profit.

In a statement to the market, the company declared it was “increasingly profitable and cash generative”.

A key reason for the growth spurt has been a focus on reducing operating costs and refocusing attention towards free or low-cost channels for its clientele.

The company also attributed its performance to “disciplined decision making” which has led to a boost in free cashflow.

Redbubble’s parent company RB Group currently operates the leading global online marketplaces hosted at Redbubble.com and TeePublic.com – well-established online platforms powered by over one million independent artists.

TeePublic was acquired merely last year but has already helped RB Group to realise $1.3 million in synergies with integration work still ongoing.

In the first quarter of this financial year, Redbubble’s marketplace revenues reached $55 million, a growth rate of 6% on a year-on-year basis, while TeePublic generated $15 million, an increase of 42% compared to the same time last year.

Redbubble’s community of creatives sell uncommon designs of high-quality, everyday products such as apparel, stationery, housewares, bags and wall art.

Through the Redbubble and TeePublic marketplaces, independent artists are given the opportunity to profit from their creativity and reach a large market audience that buys into the quirky and innovative designs up for sale.

According to Redbubble, its focus on independent artists and creatives is a portal for self-expression and “a simple but meaningful way to show the world who they are and what they care about”.

The RB Group explained that its overarching vision is to “connect authentic artists and content partners with millions of loyal customers enabling personalised adventures in creativity.”

Financial growth

RB Group reported that its online marketplaces generated $70 million and a gross profit figure of almost $27 million.

Operating EBITDA was $3.7 million – a complete U-turn from this time last year when the company recorded a loss of $800,000.

According to Redbubble, its branded platform is undergoing a shift in marketing that has provided a short-term reduction in marketing spend below targeted levels. The shift involves a move from higher-cost social media channels toward lower cost, brand associated channels as well as improving customer retention via free or low-cost channels including the Redbubble iOS app.

In its own right, the app generated a 146% boost in sales growth.

The company reported that both Redbubble and TeePublic continue to generate profitable growth on the first transaction from paid channels with TeePublic actively scaling up its focus on Google Shopping.

“RB Group is making good progress in areas of strategic investment that are critical to long term marketplace growth and profitability,” the company said.

Another unexpected effect upon its financial metrics came from the recent accounting rule change in Australia.

The AASB 16 rule change came into effect on 1 July 2019 and meant that Redbubble was able to shift lease charges below the EBITDA line and boosted both operating EBITDA and EBITDA by $700,000 in Q1 2020.

Additionally, free cashflows improved by $900,000.

Access to US investors

As a means of furthering its international aspirations, RB Group has also announced the launch of its Level One American Depositary Receipts program in the US after securing regulatory approval.

RB Group anticipates this program will complement its listing on the ASX.

ADRs enable qualifying non-US companies to have direct exposure to the US investment community.

This move is expected to propel the company into the larger and more visible US over-the-counter markets, and positions RB Group in proximity to its US online marketplaces and e-commerce peers.

Today’s financial update helped to spur Redbubble shares up 21% to $1.775 in morning trade.