Mad Paws Holdings Ltd
ASX:MPA
Mad Paws Holdings Ltd
Mad Paws Holdings Ltd. operates as a holding company with interest in providing pet care services through its online marketplace sitting, walking, day care and grooming. Mad Paws has built a technology focused online marketplace platform that provides pet owners with a user-friendly experience. The firm's marketplace offers pet owners easy and convenient access to a range of pet walking, pet sitting, and pet care services through its community of approximately 19,000 pet service providers registered on the Mad Paws marketplace. Its pet care services include At sitter's home, At pet’s home, Dog sitting, Cat sitting, Puppy sitting, Rabbit sitting, Guinea Pig sitting, House sitting, Pet day care, Bird sitting, Dog grooming, Dog training, Dog kennels and Dog boarding. The firm operates in one segment: Pet Services Market in Australia. Its pet sitting cities include Sydney, Melbourne, Brisbane, Perth, Adelaide, Canberra, Gold Coast, Newcastle, Geelong, Bendigo, Toowoomba and Hobart.
Earnings Calls
In the recent earnings call, Mad Paws reported Q3 operating revenue of $6.1 million, reflecting a 6% decline YOY; however, excluding Sash and Waggly, revenue increased 1%. The Marketplace segment grew by 16% during March-April due to strong demand, despite a 10% decrease in e-commerce revenue overall. Positive cash EBITDA showed an 8% improvement YOY, with Marketplace EBITDA growing 32%. Looking ahead, April showed a remarkable 41% growth in Marketplace performance, with forward bookings for May looking promising, setting up for Q4's traditional growth period.
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All right. I think we're good to start. Good morning, everyone, and welcome to the Q3 FY '25 Quarterly Results Presentation for Mad Paws. Thank you so much for joining us again today.
As always, we have Graham Mason, our CFO; as well as myself, Justus Hammer, the CEO and Co-Founder of Mad Paws on the call today. We'll go through our results, as always, for the quarter, and Graham will give you some more details on the financial performance for the quarter, and we will also have time at the end of the presentation for questions. [Operator Instructions]
With that, I think we can jump straight in. A quick refresher on kind of what Mad Paws is doing. We exist to enable pets to live their lives to the fullest. And that's what we've been working on for the last couple of years. We've now built some of the biggest pet services and product companies in Australia, mainly Mad Paws, which is the Australia's #1 pet services marketplace with over 60,000 pet sitters on the site now, and we're doing around 15,000 to 20,000 transactions on the site -- bookings on the site per month.
And then also notable Pet Chemist, #1 in Australia in terms of online pet pharmacy, where you can find anything for your pets from medication, to supplements, to food with a clear focus now on anything that keeps your pet as healthy as possible, in particular, also prescription medication, which has been a clear focus for the business for the last couple of quarters.
A couple of words on the industry. Obviously, a feel good industry that we actually love to work in every single day. We feel we're doing something really good for our customers and particularly also for their pets. But not only a feel good industry, it's also a very interesting industry from an investor perspective. There's more and more pets in Australia, particularly after the COVID break, but still numbers are going up, and we're not only having more and more pets, but we're also spending more and more on our pets, as you can see on the bottom of the screen, now over $3,000 for adults and over $2,000 for cats. And all that is obviously a result of the premiumization and humanization that we've seen developing over the last couple of years, and it's a trend that's only accelerating if you listen to any of our customers.
Now what makes us special and why we're different to kind of your traditional retail businesses, and certainly, that is data and kind of how we interact with data and how obsessed we are with data. I always say you can't build a pet services, particularly a hyperlocal pet services marketplace without being data obsessed. And that's what we've kind of been working on for the last couple of years, and we've used our knowledge in the marketplace to also now drive the flywheel for our retail businesses in the same fashion.
And I think the biggest advantage that we have here against kind of traditional retail businesses is the openness of our customers to give us data about their pets. As you can imagine, if you're looking for the perfect pet sitter, you make sure that you find the perfect pet sitter for your family member. And we've got customers sitting through our pet profile, sometimes giving us over 100 different data points about their pets. And that is something that we can use, obviously, to drive not just the marketplace, but also to kind of cross-sell into any of our other offerings like Pet Chemist, Sash beds or Waggly. That was a bit quick, sorry.
I think one thing that's really important to look at, particularly if you look at the results this quarter, is kind of really understanding the timing impact that holidays have, in particular, for the marketplace business. And so, most holidays kind of fall in the middle of a quarter, particularly the Easter holiday can be a little bit tricky around that, especially if you consider how we recognize our revenue, we recognize our revenue at the beginning, at the start date of a booking.
So as you can imagine, if a -- if Easter holidays, as you can see here in 2024, Easter weekend, Queensland school holidays, as well as Victoria school holidays all started at the end of March, a lot of those bookings would have started still in March and a lot of that revenue would have been recognized in March, so falling into Q3, where this year, we had a big shift, kind of one of the biggest shifts we've seen in terms of timing from 1 year to the next, where the long Easter weekend kind of moved into April pretty much at the same time, as most of the school holidays and also Queensland and Victoria school holidays moved into April start dates. So that had, as you can imagine, a big impact on the revenue recognition. And I think that's particularly important if you look at the results to kind of keep that in mind how that impacted the quarterly numbers.
Because if you look at those numbers in combination, so if you look at the overall period in terms of March and April, we've actually seen a very strong result for the marketplace, a clear acceleration in terms of growth, which ultimately is a result of all the work the team is doing, but also obviously that the above-the-line campaign, which I'll talk about a little bit later. But we've seen some very strong results here, particularly for the marketplace. March, only 7% growth. But again, if you look at that in terms of the timing shift, still, I think, a very good result. And then April with 41% up in terms of GMV, a great result for the business and getting us to an overall kind of mixed result of 22% up for the March, April time frame, which again is a huge result for the business.
And so again, I think if you look at the quarterly numbers in isolation, -- it is good to keep that in mind that a lot of that revenue shifted into Q4. But nevertheless, the business still performed very well in that quarter itself as well, $17.1 million in terms of group GMV, up 6%, $6.1 million in operating revenue, which is slightly down.
But if you take out Waggly and Sash, which are businesses that we've seen a little bit of weakness, and we've invested significantly less over the last year, we're actually plus 1%. We've deployed $800,000 of the Seven West Media marketing contra over that period, which again, I think shows in the strong results of the marketplace, in particular, over the March and April period. And then also still a 53% increase in terms of the segment cash EBITDA, up to $0.5 million for the quarter.
Now I've mentioned the above-the-line campaign already, and we've actually gotten a lot of good feedback from customers, but also from investors, who've now seen the campaign. And I think it's really done what we wanted it to do, and you can see that on the same -- on the next slide here, which is, a, drive our instant sessions. So you can see the marketplace site sessions up here, particularly in that time around the Easter period. So that has obviously helped us to have that strong result that we had over the March, April period.
But what it also did, and I think that's the positive sign of what's to come, it's really helped us in terms of brand awareness, getting the brand out there. And you can see that on the right-hand side, we're tracking the brand awareness with a tool called Tracksuit. And our brand awareness has gone up from 18% to 23%. And that is something that, particularly going forward, will significantly help us not just directly driving customers, but obviously in our performance marketing channels and also some of the new performance marketing channels that we're currently testing on, we see some great results there and some great uplift in terms of performance, which we believe is driven by that brand awareness increase.
Now a couple of words around what we've been up to in the last quarter. I think one of the key things was obviously preparing for peak trade and that Easter period. And I think the team has done an outstanding job in getting that right, getting the timing right, getting our spend right in terms of the performance marketing, but also the above-the-line campaign, which ultimately resulted in a 22% uplift that we've seen. We've also done, I think, the best job up until now in terms of sitter supply, warming up the sitter supply, making sure that our sitters are available throughout the Easter and holiday periods. So there's a lot of stuff and a lot of work has gone into that to make sure that we've gotten the result that we've seen now.
Now what we've also seen is some of the work kind of really paying off, some of the features that we've released over the last quarter or even before, one of them being the seasonal pricing feature. So this is a feature, where the pricing for peak period is automatically lifted if a sitter signs up to it, and we've seen a 14% increase for those sitters that have taken up that feature. So a really measurable result for sitters using that tool that obviously ultimately, again, helped us and the sitters to increase our take over the peak periods.
And then the product and tech team, even though it's a smaller team now after the reduction that we went through last year. But I think the great thing to see is that the velocity that we get from the team is still very, very high in terms of pushing out new features. As we said before, our kind of core platform is very much built, and we can focus really now on pumping out new features, making sure that our UX, our search is getting better.
We're very close to kind of releasing a new version of the search algorithm, which again is going to make it easier for customers and faster for customers to find their perfect sitters and at the other end, always helps us and make sure that we are connecting our customers with sitters that are doing the right thing with us, which means keeping customers on the platform, which ultimately helps us to drive the marketplace.
From an e-commerce perspective, I think the -- we've done a couple of really good changes, particularly to the front end. There's changes, for example, like the log-in screen. We've made changes to make sure we encourage more customers to check to create an account rather than just checking out as a guest. That has a huge impact on retention and lifetime value, and the team has a great -- has done a great job in kind of pushing that.
On top of that, we've done what we've done over the last couple of quarters quite successfully, which is operational improvements. And so, we're doing a lot more with a lot of less people now, even though we've seen significant increases, for example, for our medication orders, we can fulfill that now with a smaller staff. It also helped us to push some of those jobs overseas, which again is a cost saving for us. And so, the overall automation has really helped us to kind of put us in the best place -- spot possible here for future growth and to fulfill that growth as efficiently as possible.
And last but not least, AutoShip, we've seen, again, a great amount of growth here, 24% up in Q3 compared to last year. And that is important for us because we know, AutoShip customers are very much twice the lifetime value than non-AutoShip customers. So the more we can push that, the better for the bottom line of the business.
And with that, I'll pass it over to Graham for some more details on the financial performance.
Thanks, Justus, and good morning, everyone. I'm Graham Mason, Group CFO of Mad Paws, and I'll be providing an overview of our group financial performance for Q3 FY '25.
The group operating revenue came in at $6.1 million, representing a 6% decline on the prior corresponding period. However, when excluding Sash and Waggly revenue was up 1%, indicating stable underlying performance across our core operations. So [ Justus is ] sharing a bit of his screen. Thanks.
Our Marketplace segment delivered operating revenue of $1.9 million, up 5% year-over-year. Notably, growth was impacted by the timing of Easter, which fell later this year in April. Adjusting for the March, April period, Marketplace revenue was up 16%, highlighting strong underlying demand.
E-commerce segment reported revenue of $4.2 million, a 10% decrease on the prior year. Our performance was flat when adjusted to exclude Sash and Waggly reflecting a more stable trend in the ongoing core e-commerce businesses. It is worth noting that Q3 FY '25 is typically the group's seasonally lower revenue period, which provides important context for the quarterly comparison.
On the earnings front, group cash EBITDA was negative $0.4 million, an 8% improvement year-over-year, reflecting our ongoing focus on cost discipline and margin management.
Looking at the segment performance, segment cash EBITDA was $0.5 million positive, a 53% improvement versus the prior year, but the Marketplace delivered cash EBITDA of $0.7 million, up 32% with an EBITDA margin of 36% despite that headwind from the Easter calendar shift timing that Justus mentioned before.
Turning to the group cash flow for the quarter. Operating cash flow before the movement in the sitter liability was an outflow of $0.4 million, reflecting the seasonally lower trading period for the group. The Marketplace benefits from a favorable working capital cycle with customers paying upfront for services and payments to pet sitters made after the services are delivered. The third quarter of any financial year for Mad Paws typically reflects higher sitter payments following the peak December booking period and cash outflows during the quarter were in line with our expectations.
The movement in the sitter liability resulted in a net outflow of $1.4 million for the quarter, leading to a total negative operating cash flow of $1.8 million for the period. Looking ahead, we anticipate a favorable net change in the sitter liability over the next 3 quarters, as bookings build towards the next summer holiday peak. Accordingly, operating cash flows are not expected to remain at current levels in the future period. Encouragingly, the group returned to positive operating cash flow in March and April 2025, in line with our expectations.
From a financing investing activity perspective, during Q1 FY '25, the Mad Paws rationalized the product and technology employment costs as the platform reached a level of maturity to allow this, and the group focused on innovating the current platform rather than undertaking larger platform builds. As a result, CapEx cash flows continue to trend lower to $0.1 million, a 60% reduction versus the prior corresponding period. During the quarter, the group made $0.2 million in debt repayments and $0.1 million in lease repayments.
Turning now to the performance across our key business segments for the quarter. Marketplace revenue increased 5% on the prior corresponding period, although total revenue was impacted by the timing shift of Easter, Victorian and Queensland holidays into April FY '25. We estimate the revenue impact for the Easter date to be $0.2 million in additional revenue for this period in March 2024 compared to March '25. Encouragingly, Marketplace GMV is tracking approximately 22% ahead of the prior corresponding period across March and '25. The recognized revenue for March and April combined is trending towards [ 16% ] up versus the prior year.
Marketplace cash EBITDA was $0.7 million, up 32% on the prior corresponding period, while performance was impacted by the timing shift of Easter and school holidays, the Marketplace segment still delivered a strong EBITDA result. Importantly, early indicators suggest that April EBITDA performance will be even stronger, supported by the normalization of trading patterns and Easter campaign activity.
Moving to our E-commerce segment. Pro forma e-commerce revenue was $4.2 million, down 10% year-on-year and flat when excluding Waggly and Sash. Pet Chemist revenues grew by 1% compared to the prior corresponding period, with growth driven by our strategic focus on medication orders, which delivered an 11% increase in medication revenue. OTC revenue, however, was negatively impacted by Cyclone Alfred, which disrupted customer traffic and warehouse operations in March. Additionally, Q3 FY '25 had 1 fewer trading days compared to the prior year.
An additional impact was media revenue for the E-commerce segment had a strong sales quarter with 0.1 million campaign signed during Q3. However, revenue recognition would occur in April FY '25 upon campaign delivery. Media represents a high-growth, high-margin opportunity for the group, which leverages both Marketplace and E-commerce assets.
Waggly revenue declined 42% year-on-year, reflecting our strategic shift towards profitability, including reduced marketing investments. Similarly, Sash revenue declined 42% on the prior corresponding period, impacted by increased competition in the calming bed category. We are reviewing the performance of these e-commerce assets in light of their underperformance with the aim of improving their contribution to segment and group EBITDA going forward.
E-commerce cash EBITDA improved by 8% on prior corresponding period to negative $0.2 million. Performance was influenced by the Waggly and Sash performance I mentioned above, the timing of the media sales revenue, as well as operational disruptions related to Cyclone Alfred. Despite the operational challenges experienced by the Pet Chemist business specifically in the quarter, we are seeing strong improvements in operating performance with cash EBITDA improving by 57% to $0.1 million, driven by improvements in gross margin and a 17% improvement in operating expenses.
I will now hand back to Justus for an update on our strategy and outlook.
Thanks, Graham. Yes, from a strategy perspective, I think it's clear to say that we're still well on track to kind of where we want to get to is building Australia's #1 destination for pet parents, and we're very kind of well-established now in kind of our Horizon 2. We've done a lot of work on the single destination home brands, as well as media partnerships and obviously, cross-sell between the different businesses that we have. And so, kind of we're putting our eye now towards kind of Horizon 3, particularly kind of the data commercialization piece, as well as covering more stages of the pet life cycle.
But looking ahead, just kind of in this next quarter, I think the key thing for us is that we're positioned really well from a Q4 perspective. You've seen the numbers before. We've had 41% growth already for the Marketplace in April. Forward bookings for May currently look very, very promising. So we think that we can accelerate the growth that we've seen so far going forward. And we're going into our biggest growth quarters traditionally Q1 and Q2 going into the Christmas holidays.
So we're kind of really well positioned in that sense for additional growth, particularly if you look at the results from the above-the-line campaign. I think the great results that we've seen from a brand awareness perspective, which puts us into a position to further grow new marketing channels. We've always been great, I think, in terms of performance marketing, but now that gives us the opportunity to actually attack some of those channels and drive new growth in those channels.
And then if you consider that we're well on track to kind of getting more and more towards cash flow positive, that should give us also the opportunity to use and reinvest some of that cash, the business [ will throw out ] at some stage into some of those performance channels, which ultimately will help us to accelerate growth even further. So I think we're quite excited about what's to come for the business.
I think last but not least, it is worthwhile also mentioning the [indiscernible] strategic review that we've announced last year. We're still very much engaged on [ IRIS ] very much engaged in a couple of conversations, and we're kind of pushing hard to bring this to a close, where we can update the market on the results of that strategic review.
And with that, I think we're going to questions.
So we've got one question here from Matt Harper from Taylor Collison saying, looking at the Marketplace trading pre and post brand campaign, very strong uplift, though third quarter obviously impacted by Easter. What do you think market growth has been? In example, if the market is going backwards, your performance in this period is even better from a market share perspective. Any info you have on how competitors are going?
So I mean, we don't have data about competitors because our competitors are obviously all private. But what we do see is some of the web data, and we certainly can see that we've fared very well in that period, and we've kind of put a little bit more room between us and our competitors. I think also from a brand awareness perspective, we definitely have seen a massive uplift here. So I think if you look at it from that sense, we've done very, very well.
Now considering the market, most certainly, I think that's a good call out. The overall market has probably been still slightly weaker than what we've seen before just from a kind of year-on-year perspective. We are kind of tracking some of our kind of keywords around pet sitting and so forth, and we've seen some weakness in that. So if you look at that and kind of put the performance of the business against that, we certainly have outperformed the market here quite significantly.
Graham, is there anything else you might want to add on?
No, I think you covered the most points. I think it's really encouraging the performance we've seen. I think the awareness is a key growth lever we saw when we're so fairly early in the journey around penetration of the Marketplace services market, and it's performing as we expected. I think there is -- when you look at those sort of search terms, metrics that sort of are declining.
I think there is a bit of a shift in terms of where customers are searching or consuming these services [indiscernible] away from sort of your traditional search into more other channels, which I think the -- firstly, the above-the-line campaign was the right move to go after that, but also gives us assets that we can further leverage going into those other new channels as well. So I think the way that Q4 is playing out and beyond looks quite exciting.
Yes. I think fair to say also that we would certainly benefit from any kind of relief from a cost-of-living perspective here, where numbers -- if we get any relief there or customers get any relief, they would certainly get quite a bit of benefit here as well.
I've got one more question here. Just can you give us a little bit more detail on the above-the-line media campaign?
So kind of as I said, I think the results have been very positive for us from what we kind of expected. And again, it's kind of we were hoping for the 2 things and kind of we've seen those 2 things happen. One is direct impact on performance. And I think we've seen the biggest -- if we look at March, April combined, we've certainly seen the biggest growth from that perspective, not just from a GMV perspective, but also from a new customer perspective. So we've driven a lot of new customers to the business, which ultimately long term will really help us.
And so, I think now we're in that phase, where we want to take full -- sorry, the other part is the brand awareness piece, right? And so, that's kind of the phase, where we're going into now, where we've seen that kind of lift in brand awareness. And I think that gives us really the opportunity now to, like I said, drive some of those new channels that we haven't really tackled up until now, find some new kind of customers in that space and get that kind of uplift in the performance marketing that we've always been waiting for from the above-the-line campaign. So we're in a really, really good position to kind of benefit from that.
I've got one more question here around if we can give a little bit more detail on the [indiscernible] process.
I mean, as you can imagine, unfortunately, I can't say much more than I've already said. As I said, we're highly engaged in that process at the moment. We're obviously pushing hard to kind of get that to close. And at the right time, we'll update the market on any outcome of that process.
I think that's it. Any more questions? No, there's no more questions. So thank you very much. Again, I think we're quite excited and kind of where the business is at. Certainly, Q4 is looking like a very, very good quarter for us. Forward bookings into May, again, are looking extremely positive, and we're getting the benefit of the timing shift in terms of Easter and all that positions us particularly well going into Q1 and Q2, our biggest kind of growth quarters traditionally for the business. So I think we're well placed to drive further growth for the business. And I hope you can join us on that journey over the next couple of quarters. Thanks very much.