Over the past year, tech companies in the US have become notorious for mass layoffs. IT giants, from Google to Amazon, have laid off thousands of employees in light of growing inflation. Now, that trend seems to be gaining steam in Australia.
To return to cash flow positivity, Aussie online print-on-demand marketplace Redbubble (ASX: RBL) decided to undertake cost reduction measures, mainly mass layoffs.
The Company aims to reduce its operating expenditure by a further $13 million to $15 million on an annualised basis. It believes that the majority of the cost savings will be achieved by reducing Redbubble’s workforce by approximately 23% or 75 roles.
Redbubble CEO and Managing Director, Martin Hosking, said, “Since being appointed CEO, my primary focus has been returning the Group to profitability as soon as possible. It has become clear that to achieve this, we need to further reduce our cost base. As a result, we have made the difficult decision to remove a number of roles from the Group.”
Hosking—the co-founder of Redbubble—was appointed CEO and managing director on March 27, 2023. He is Redbubble’s largest shareholder and former CEO. He is a current Director and acted as interim CEO prior to the recruitment of Michael Ilczynski. Hosking left the role in 2018 after being unable to change the Company’s direction. But, with the removal of its chief, CEO’s resignation, and crashing share price, he is having to return to his post.
He added, “As part of this process, we have restructured our business to more clearly define the Group function and two operating companies, Redbubble and TeePublic. We expect this new structure will allow each marketplace to operate more efficiently and effectively, with a greater focus on their individual strengths and unique value propositions. We have also ensured that we have retained the necessary capability to continue to make targeted investments in initiatives, which have delivered, or we anticipate will deliver a financial benefit in the near term.”
In 1H FY23, the Company’s profit fell 6% from 108.1 million to 101.3 million. It suffered an EBITDA loss of $23 million, compared to a profit of $8 million in 1H FY22. It also reported a net loss after tax (NPAT) of $30 million, compared to a loss of $1 million in 1H FY22. Finally, its cash and cash equivalents at the end of the half-year reduced to 97 million from 142.7 million.
If that wasn’t enough, Redbubble has $1.7 million deposited with the recently collapsed Silicon Valley Bank. After taking the FDIC insurance into account, the Company estimates its cash exposure at approximately$1.3 million.
Redbubble reaffirmed its FY23 monthly payment rate (MPR) guidance to be slightly below FY22 MPR and its FY23 GPAPA (gross profit after paid acquisition) margin guidance to be between 18% and 20%. While the majority of the financial benefit of the cost-reduction is expected to be realised from the beginning of FY24, Redbubble expects its FY23 operating expenditure to be between $125 million and $130 million. This does not include one-off restructure costs of approximately $5.1 million.
Hosking feels that layoffs are necessary to return to cash flow positivity, especially now that the Company’s future is on the line.
Alinda is a Business Reporter for The Sentiment
Latest posts by Alinda Gupta (see all)
- Ovanti’s iSentric signs contracts worth $14.4m with Malaysian commercial bank - June 27, 2024
- Baby Bunting fights back from retail downturn with 5-year strategy, includes Gen-Z focus and self-funded growth - June 27, 2024
- CLEO meets with US FDA to develop strategy for ovarian cancer test launch - June 26, 2024
Leave a Comment
You must be logged in to post a comment.