Aussie pet services company Mad Paws (ASX: MPA) spent over $20 million on product development and operations in H1 FY24. As it edges closer to EBITDA breakeven, the Company ditched excessive marketing spending to focus on data-driven strategies and growth across key brands.
In Q2 FY24, Mad Paws saw Group Operating Revenues reach $7.6 million, marking a 15% increase on Q2 FY23 and a 21% increase when excluding closed Dinner bowl product lines. The Marketplace Operating Revenue stood at $2.5 million, reflecting a 31% increase on pcp, and the e-commerce revenue stands at $5.2 million, up 9% on pcp (17% excluding closed product lines).
The Group Operating EBITDA neared breakeven, coming to a negative $100k for the quarter, which is a $1 million improvement on pcp.
Co-Founder & CEO Justus Hammer commented, “Another great quarter on our path towards profitability with record quarter for the Group. We achieved multiple highlights, hitting $10m in GMV for the marketplace for the first time as well as our second consecutive quarter of positive Group operating cash flow. We are now well positioned to start 2024, on the back of a record month, record revenue and record Group EBITDA in December 2023.”
He added, “Our marketplace vertical has again outperformed expectations with year-on-year revenue growth for the quarter of 31%. Not only did we acquire a record number of customers for the marketplace, but also a record number of sitters. Achieving this at a very low cost per acquisition shows that we can scale both sides of the marketplace efficiently.”
The quarter saw the addition of 33,000 new customers, achieved with strong efficiencies and the lowest level of marketing expenditure as a percentage of revenue for any prior Q2. Mad Paws also achieved its second consecutive quarter of positive operating cash flow, totaling over $1 million for the Quarter, and helping build a closing cash balance of $3.6 million.
To meet increased demand during the busy December quarter, the team focused on boosting sitter supply by redesigning the mobile app and streamlining the sitter application process.
The revamped app, launched in October, led to a 77% increase in approved sitters compared to the previous period and a 90% increase compared to Q1 FY24. Simultaneously, the cost per approved sitter decreased by 77%. This contributed to higher platform conversion rates and increased messaging within the platform. The mobile app showed significantly higher conversion rates compared to desktop bookings.
Hammer concluded, “We remain confident in delivering long term shareholder value as the pet sector continues to be very active, with the recent Woolworths investment into Petstock and the proposed US$2.3 billion acquisition by Blackstone of our largest comparable, Rover, Inc.”
Going forth, Mad Paws’ key focus areas for growth include brand consolidation by integrating verticals under the Mad Paws brand, cross-sell expansion through personalised offers, and the introduction of a loyalty program. Moreover, the Company wants to scale private label products, with the first product for Pet Chemist set to launch.
There’s a strategic refocus on higher-margin categories within Pet Chemist AutoShip, emphasising health, specialty food, and supplements.
Instead of spending big bucks on marketing, Mad Paws is focusing on growing its marketplaces and pressing paws on underperforming products. This streamline appears to be working in its favour.
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