Redbubble Ltd (ASX: RBL) has just released its half-year result for FY21, I think the share price could be a buy.
Redbubble is a website business that’s the platform for artists to sell their products, such as wall art, apparel and stationery.
Redbubble’s FY21 half-year result
The company continues to deliver high levels of growth after the first quarter. Its marketplace revenue increased by 96% to $353 million for the six months to 31 December 2020. Redbubble boasted that high growth rates continued across all geographies and product categories, even as mask demand moderated to 7% of the overall product mix.
Gross profit surged higher by 118% to $144 million. Redbubble’s EBITDA (EBITDA explained) jumped by 1,028% to $48.8 million, up from $4.3 million in the prior corresponding period. EBIT improved to $41.8 million, up from a loss of $1.9 million last year.
Operating cashflow, which some investors view as the best measure of profit, almost doubled from $41 million to $80 million in this result.
However, included in the above numbers is a positive delivery date adjustment as delivery times returned to normal. Excluding the adjustment, marketplace revenue (paid) grew by 90% to $343 million, gross profit (paid) went up 102% to $138 million and it generated $35 million of EBIT (up from $0.2 million last year).
Redbubble explained that COVID-19 is still impacting the global shipping network, resulting in lower margins for the month of December. Management said that the company managed expenses prudently, however the strengthening Australian dollar had a $2.2 million currency impact on earnings in the second quarter.
Is a dividend on the cards?
Surprisingly, the board mentioned the word ‘dividend’ in this result. The company’s leadership said that given the opportunities to invest in key initiatives, coupled with the uncertain macro environment, the board does not expect to pay a dividend in the short to medium term.
Management comments
Redbubble CEO Michael Michael Ilczynski said: “The strategic priority for the group now is to ensure we extend that market leadership we have established. We intend to invest in both the artist and consumer experiences, to improve loyalty and retention and to ensure long-term growth.”
Summary thoughts
Redbubble is doing very well to continue to grow the business at a high double digit rate. This isn’t just a quick growth surge during COVID-19 lockdowns – it continues to scale at a fast rate with rising profit margins. The gross profit margin increased by 4.1% from 36.7% to 40.8% in this result.
I think Redbubble is demonstrating lots of the characteristics you’d want from a growth share. High levels of revenue growth, growing profit margins, increasing market share, focused leadership and it’s expanding the total addressable market with new product lines.
Redbubble is one near the top of my own watchlist for the long term.
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