With one of the world’s highest pet ownership rates at 69%, Australia’s 2022 national pet survey reveals Aussies spare no expense in caring for their pets, of which they are parting with over $33.2 billion per year for the well-being, including food, grooming, and accessories of their beloved fur friends.
Online pet ecosystem operator Mad Paws (ASX: MPA) is taking the reins by recording more than 30% increase across Group Operating Revenue, Marketplace Operating Revenue, and eCommerce revenues in the quarter ending 30 September 2023, indicating substantial growth within the pet care industry.
Operating four pet service brands, including a marketplace, pet chemist, subscription box, and dog accessories, the company achieved substantial revenue growth. With Group Operating Revenues of $7.2 million, marking a 34% increase on the previous year, or 43% when excluding closed Dinner Bowl product lines, the Company is moving closer to achieving cash flow break-even.
During the quarter, the Marketplace division excelled with a 32% growth in operating revenue compared to the previous year, reaching $2m. EBITDA margins hit a record high at 39%, reflecting the Company’s ambition to improve its pet services platform. This included cost efficiencies, also features like seasonal surcharges, expanded payment options, marketing efforts, and data strategies in matching sitters with pet owners, resulting in increased conversions.
Revenue from the eCommerce division reached $5.2m, a 34% increase from the previous year, or 47% when excluding closed product lines. The Company expanded capacity, added 900 new SKUs to its Pet Chemist business, and improved its website, laying the groundwork for integrating its E-commerce tech stack across all verticals on the Mad Paws platform.
During this quarter, Group Operating EBITDA of negative $0.2m was achieved, inching closer towards achieving a positive EBITDA. Mad Paws achieved its first month of positive Group Operating EBITDA in September 2023, thanks to increased demand for their services and various operational improvements.
The Marketplace division achieved an EBITDA of $0.8m with strong margins, while the E-commerce division improved EBITDA by $0.7m compared to the previous year.
Mad Paws also secured a $1m growth working capital facility from specialist working capital provider Kashcade to support operations during busy periods like Black Friday and the festive season, which has only been drawn down by $0.25m to effect completion of the Facility.
Moving forward, Mad Paws holds positive $3.1m net cash on hand. This facility allows for continued marketing and technology investment while at the same time safeguarding against any potential fluctuations in intra month cash as Mad Paws enters the traditional busy second Quarter. Strong growth is expected across the end of the year, with the Marketplace division building towards the busy Christmas holiday period and current bookings indicate that travel and demand for sitting remains strong.
In the E-commerce business, the Black Friday sales represent an opportunity to build sales in the expanded range and promote greater cross selling using the improving data rich platform and tools. The division is focused on expanding its product range and enhancing its margin strategy, with intentions to introduce 700 new SKUs at Pet Chemist.
Growth within the petcare sector does not appear to be impacted by challenges in other parts of the retail sector, as customers continue to prioritise spending on their pet needs, especially across food, health, and toys. This encourages Mad Paws to concentrate on integrating its technology stack for a seamless shopping experience, launching loyalty programs including a partnership with Qantas Frequent Flyer, expanding private label products and Marketplace efficiency, and exploring new marketing channels like new app launch set in Q2 FY24.
Clara is a Business Reporter for The Sentiment.
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