RBL - Redbubble at 0.24x sales???

[aperitif]

From VIC

”The Year of Efficiency Comes to Redbubble Combined with:
Exceedingly Cheap; 0.15x EV/Sales with 35-40% of market cap in net cash. Peers are valued at .8-3x + sales.

Guiding to steady state profits in 2H23

Hidden Asset: Subsidiary Teepubblic +39% CAGR revenue growth rate since 2018-> grew from $35 to $135 million going from 12% to 30% of total revenue. Was profitable at acquisition, grew last year as well, and smoked the parent company in success. Teepublic is NYC based and is likely worth 1.5x sales + cash = +100% just for Teepublic alone

Return of Owner-Operator as CEO: Martin Hosking (owns $16 million worth of stock or 15% of the company) returns as full-time CEO March 2023: As CEO Martin has grown revenue at +39% top-line growth compounded annual revenue growth, +40% compound annual gross profit growth, and generated the current EV in cash flow. As CEO Martin’s track record of success RBL has traded at roughly 2x sales as a public company vs. the current 0.15x. I have known Martin for 5 years, and he is massively uncomfortable not making money as he track record has shown over the last decade.

Monetization Improvements with AI roll out to the content library on search, and Artist Tiers which will add to profits started May 1st

Further Cost Cuts:

Potential M&A: Zazzle, Etsy, eBay, Amazon, or another large digital marketplace RBL at 1-2x+ sales = 5-10x the current valuation.

Strong talent base from other large and successful digital marketplaces: Uber, Etsy, AMZN, Target, REA, and Wayfair

#1 global digital marketplace for independent artists-> Strong incentive structure w 800,000 global artists earning $90 million a year in Redbubble royalties + $85 million in direct marketing or reach of $175 million a year. We think as this continues to grow to north of $200 million the ratio of buyers/artists will increase from 10 to 1 to something more like ETSY at 20 to 1. More brand awareness, given effective reach.

Winner take most industry structure, like every other large scale digital marketplace they are very hard to build but at scale the moats are deep and businesses become significantly more valuable-> Etsy, DASH, SHOP, Ebay, etc

We think there is a reasonable chance that RBL achieves both revenue growth and targeted margins to $600 million in 24 months with 13% EBITDA margins which would equate to $78 million or the current enterprise value. If this occurs the stock would likely be closer to 15-20x from the current price assuming a 15x EBITDA multiple”

[Snow Leopard]

As a little relaxing exercise before sleep I gave RBL a quick lookover.

I never give any credence to speculative pieces.

It is an impressive decline from $6 down to the $0.4x range of today and the recent rise could be off the back of seller exhaustion, but it ain't broke the downtrend yet.

This year will report a loss but with the sweeping cost cutting, changes to 'artists' income/fees etc balanced against the more difficult market conditions and it is never as easy as predicted, I would not be confident as to when they start to be profitable again.

I would not currently buy it as an investment or even as a trade.

Watch and wait if you want, beware the pump & dump, but buy a Snow Leopard themed t-shirt.

[aperitif]

As a little relaxing exercise before sleep I gave RBL a quick lookover.

I never give any credence to speculative pieces.

It is an impressive decline from $6 down to the $0.4x range of today and the recent rise could be off the back of seller exhaustion, but it ain't broke the downtrend yet.

This year will report a loss but with the sweeping cost cutting, changes to 'artists' income/fees etc balanced against the more difficult market conditions and it is never as easy as predicted, I would not be confident as to when they start to be profitable again.

I would not currently buy it as an investment or even as a trade.

Watch and wait if you want, beware the pump & dump, but buy a Snow Leopard themed t-shirt.

Yeah, who knows???

I’ll put in the too hard basket, no doubt it will fly once the market gets a sniff of cost cuts and profitability realised and i will miss it.

1x sales would be a 4 bagger from here, not unachievable. These two sided networks are hard to displace so a PE firm will be paying close attention to their FY result and outlook

[Azz]

This is one of the worst stocks of all time. Don't touch it with the proverbial. Short it down to nothing if you can.

[aperitif]

“This is one of the worst stocks of all time” - statements like this get me interested….

It doesn't have a debt problem, it’s simply getting their cost base in line with their revenue.

They are reporting in a month, any hint of a turnaround in profitability in 24’ and this will double/triple. I don’t own but following closely

[Azz]

“This is one of the worst stocks of all time” - statements like this get me interested….

It doesn't have a debt problem, it’s simply getting their cost base in line with their revenue.

They are reporting in a month, any hint of a turnaround in profitability in 24’ and this will double/triple. I don’t own but following closely

It's the entire concept of the business that gets me. It strikes me as being non-useful, easily competed against, and pie in the sky - all at the same time. The whole thing could just collapse overnight, one day.

[aperitif]

This has been a rocket the last two days. Looks as if someone knows something heading into FY result.

With MH back in the helm and heavily incentivized this could be worth a look on a 24 month timeframe

[Azz]

This has been a rocket the last two days.

Be a good "selling into it" rocket. :-)

[Azz]

could be worth a look on a 24 month timeframe

On the other hand, could be. But not for me. :-)

[aperitif]

Teepublic has shot the lights out....growing organically from $40 million to $177 million since 2018 (36% CAGR top line grower) and now is 38% of RBL....Teepublic has 100% of its team in NYC and 93% of its revenue in the US. We believe if this were theoretically spun off at 2x sales Teepublic would be worth alone +100% more than the current share price alone (it wont be spun off...but just as a perspective). We could argue there is a good co/bad co...and that bad co....should begin to look more like good co going forward.
We are getting what we expected...a return of an owner-operator...who is underpromising and delivering...there should be north of a $50 million swing to the bottom line for the year ended in June 2024 and this is on a $120 million current EV.
Redbubble massive cost-cutting....has led to a trough cash balance of $36 million or about 25% of the market cap.
from yesterday's earnings calll...RBL one of the worst month seasonally is July...last July burned $5 million this July cash flow neutral....
Gross profit after paid acquisition 23-26% margins with OPEX of $92-100 million....which means with flattish revenue +$20 million EBIT...this is a massive improvement over last year of -$38 million.
We still believe owning the world's largest marketplace for independent artists for print on demand is worth a lot more than 0.3x sales with 25% of the market cap in net cash, 13-18% targeted adjusted EBITDA margins, and a return to steady state + cash flow, led by CEO/CFO with a strong track record.
Redbubble and Teepublic are reshaping artists with tiering and other carrots/sticks to improve quality and conversion....
Redbubble/Teepublic...built a bidding platform for their fulfillment network...to optimize for delivery speed, quality, and profitability...