Company Overview: Redbubble Limited (ASX: RBL) is the world’s largest online marketplace for independent artists, bringing more creativity into the world. It was founded in 2006. The headquarter of the company is situated in Melbourne, Victoria, Australia and is being currently headed by Mr. Barry Newstead – the MD, CEO & Director. It operates an independent designers' marketplace that facilitates the sale and purchase of art and designs on a range of products between independent creatives and consumers in Australia, the United States, the United Kingdom, and internationally. It offers its services through its official website i.e. Redbubble.com and three foreign language sites. For men, the Company offers T-Shirts, Classic T-Shirts, Tri-blend T-Shirts, Graphic T-Shirts, V-Neck, Long Sleeves, Tank Tops, Hoodies, Lightweight Hoodies, Sweatshirts and Lightweight Sweatshirts. For women, it offers T-Shirts, Chiffon Tops, Contrast Tanks, A-Line Dresses, Graphic T-Shirt Dresses, Fitted Scoops, Fitted V-Necks, Relaxed Fit, Tank Tops, Hoodies, Leggings, Scarves and Mini Skirts. For kids, the Company offers Kids T-Shirts, Baby T-Shirts, and Baby One-Pieces. The Company also offers cases and skins, such as iPhone Cases, iPhone Wallets, Laptop Skins and Laptop Sleeves; stickers; wall art, such as Posters, Canvas Prints, Photographic Prints, Art Boards and Art Prints; home décor items, such as Throw Pillows, Duvet Covers, Mugs and Clocks; stationery, such as Greeting Cards, Postcards and Calendars, and bags, such as tote bags, drawstring bags and studio pouches. The company currently works with 32 fulfillers in North America, the United Kingdom, Europe, Australia and Hong Kong. It operates 28 different production centers to fulfill the 66 different product types currently sold. 

Redbubble 


RBL Details

Unique Business Model: Redbubble Ltd (ASX: RBL) provides a global online marketplace for print on demand products based on user-submitted artwork. The company has a unique business model in which the artists and designers create their own designs and creative works by using a wide range of techniques and digital design tools. Initially, the artists upload their designs and creative works to Redbubble website then set their mark up over a base price for each product, which includes Redbubble’s service fee and the manufacturing fee; and offer their designs and creative works for sale on the Redbubble marketplace. All image ownership rights are retained by the artists. Once the customer has found a design and selected the product they wish to buy, they proceed to checkout and pay via credit card or other industry standard payment methods. Once orders get placed then the order information is immediately sent to one of the third-party fulfillers via Redbubble’s online platform and enters the fulfiller’s production queue. The chosen design is then printed on the selected product using state of the art print on demand techniques, packaged, and shipped directly to the customer’s chosen address. For every product sold on the Redbubble marketplace, RBL receives a service fee for connecting the artist, customer and fulfilled. Redbubble’s revenue is derived from deducting tax and the artist margin from gross Transaction value (GTV). As of now, the company is actively working on strengthening relationships with artists and creates content partnerships to increase sales potential for commercially-oriented segments. 

Unique Business Model (Source: Company Reports)

Growth Momentum to be Continued: The company continues to display significant momentum and is building strong fundamentals over the period. It has recently posted a robust marketplace dynamic driven by strong and consistent growth on all sides. As per the release, for FY18, customer number increased by 38.1% YoY to 3.97 Mn whereas selling artist increased by 28.2% YoY to 298,700. In addition to this, the company experienced positive response from the market for its product portfolio and recorded the site visits growth of 37.4% (Y-o-Y) to 258.8 million in FY18, of which mobile visits represented 54.2% of total visits for the full year. As of now, the group is focused on to expand its global relevance as European language websites demonstrated significant growth potential with GTV from Spain growing at 106%, Germany at 101% and France at 75%, reflecting high potentiality in the market resulting to topline growth of the company in years to come.


Consistent Growth in Customers, Artists and Fulfilments (Source: Company Reports)

Expanding footprint into new geographies to drive topline of the business: As of now, RBL has a presence in more than 200 countries, serving over 4 million customers across all business segments. North America subsidiary counts for highest share in the international business segment and contributed ~61% in the total sale and other geographic subsidiaries contributed ~39% in total sales of the business. A large amount of this growth has been led by North America (61.3%), Europe (16.8%), UK (13.4%), AU/NZ (7.2%), and rest of the world (1.3%) in FY18. We expect that the growing footprints in other regions and adding more new products in the key markets like North America, Europe, etc would work in the favor of the company going ahead.


Geographic contribution (Source: Company Reports)

Highly Experienced Team: The company has a highly skilled executive management team with deep understanding of corporate governance, technology, accounting, finance, and marketing, combined with deep industry experience in online marketplaces, technology growth companies, retail and e-commerce space. The members of its senior management team have over 20 years of experience in the global drug and device development field and possess an in-depth understanding of the specific industry, products and geographic regions they cover, which we believe enables them to support and provide guidance to its employees and grow its business. Currently, the group is headed by Mr. Barry Newstead – the MD, CEO & Director. He has a soundtrack record to work as a strategy consultant with the Boston Consulting Group and the Bridgespan Group (an affiliate of Bain & Company). Hence, we expect that the team will continue to work towards creating the group as the world’s largest marketplace for independent artists, bringing more creativity into the world.

Financial Highlights: During FY18, the group has delivered topline growth of 29.7% to $182.8 Mn. The topline flagged up due to solid trading performance during the Thanksgiving (including Black Friday and Cyber Monday) and Christmas holiday seasons as well as the “Back to School” period in the northern hemisphere. Gross profit margin was moderately down by ~ 60 bps to 35.0% in FY18 from 35.6% in FY17 due to the seasonal difference in product mix, and pricing and promotional activity during the same period. The company recorded operating EBITDA loss of $3.8 Mn in FY18, up 20.6% on YoY basis. However, net loss after tax came at $10.1 Mn in FY18 from $7.6 Mn in FY17. Total cash outflow for FY18 came in at $6.6 Mn compared to $14.2 Mn for FY17. As of 30 June 2018, the company has a decent cash position of $21.3 Mn with zero debt facility. It reflects a healthy balance sheet which will support to execute growth plans without affecting the financial performance of the company.


Financial Highlights (Source: Company Reports)

Positive Outlook: We are optimistic on the company at the back of strengthening its artist relationships and creating content partnerships to increase sales potential for commercially-oriented segments, continuous strategic investments in data science, mobile, marketing, and operations, and increasing user base in all the key geographic areas. Moreover, the management provided FY19 guidance and stated that the group will continue to maintain Revenue growth rates at or above 30% on a constant currency basis for FY 19 and operating EBITDA in the range of $2 Mn to $4 Mn. In our view, the key takeaway from the result was the company's impressive gross profit after paid acquisition (GPAPA) growth of 24.4%, driven by the strong acceleration in organic/unpaid GTV growth of 31.9% in FY18 which is in line with the guidance.

Stock Performance: RBL has generated positive YTD return of 12.96% and the price continues to move in the positive direction. The typical pattern that the stock follows is to consolidate for a while in a broad price range before giving a breakout. From April 2018 to July 2018, the prices consolidated for almost four months before moving higher. At the higher levels, the stock has again entered into a consolidation phase between the price range $1.74 and $1.65. Also, momentum strength indicator (relative strength) does not show any divergence from the price movement. At current levels, the risk-reward ratio looks good for the investors who want to take fresh entry in the stock. Based on foregoing and looking at a highly attractive global marketplace for its merchandise, we give a “Buy” recommendation on the stock at the current market price of $ 1.740 (up 2.353% on September 04, 2018). 

RBL Daily Chart (Source: Thomson Reuters)

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