FY21 Q1: Redbubble (ASX:RBL) reports more rocketing growth

The Redbubble Ltd (ASX: RBL) share price will be on watch today, Redbubble has reported more rocketing growth in the first quarter of FY21.

Redbubble’s strong first quarter of FY21

The online artist marketplace company has continued to see strong growth after an impressive FY20 report.

It revealed that marketplace revenue soared 116% to $147.5 million. Gross profit grew even faster, rising by 149% to $64.5 million.

The company is now reporting EBIT to investors, rather than operating EBITDA and EBITDA (click here to learn what EBIT and EBITDA means). It generated $22.1 million of EBIT in the first quarter, up from an EBIT loss of $1.5 million last year.

Operating cashflow shot up by 166% to $27.1 million, up from $10.2 million in the prior year. The e-commerce business finished with a closing cash balance of $85.4 million.

However, included in the above numbers included a positive adjustment as delivery times have reverted back to more normal levels. Excluding the delivery date adjustment, marketplace revenue (paid) grew 98% to $139.3 million, gross profit (paid) jumped 118% to $59.6 million and EBIT (paid) generated was $17.2 million.

Management comments

Redbubble CEO Martin Hosking said: “The strategic priority for the group now is to ensure we extend the market leadership we have established. We intend to invest in the customer experience to improve loyalty and retention and ensure long term higher levels of growth. The company has the resources to undertake the anticipated investments and the margin structure to ensure it can do so while remaining profitable.”

Thoughts

I think that Redbubble is one of the most promising smaller businesses on the ASX. It has great global growth potential, with most of its revenue coming from overseas.

Whilst the revenue growth and profit will obviously get the most attention, I think it’s the rising profit margins that particularly attract me. In the first quarter, Redbubble saw its gross profit margin increase from 37.8% to 43.7%. That’s a big increase in one year and shows how scalable the company is.

Redbubble is going to continue to winning more (and retaining) artists, winning more customers, providing a better service to customers, and expanding its product lines and improving efficiencies.

I think expanding into new product lines is a really attractive move because it opens up more addressable markets. For example, starting to sell masks opened up another great opportunity for the company.

Time will tell whether the strong growth continues for the rest of the financial year. I think it may – it seems the shift to online shopping is here to stay, and a vaccine (which would help bricks and mortar sales) doesn’t seem close yet.

I’d be happy to buy Redbubble shares today for the long term, along with other ASX growth shares such as Pushpay Holdings Ltd (ASX: PPH).

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At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.

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