Mad Paws Surges to Positive Cash EBITDA with 16% Marketplace Revenue Growth

Strong Financial Performance Amid Market Challenges

Mad Paws Holdings Limited (ASX: MPA), Australia's leading online pet ecosystem, has delivered a robust set of results for the quarter ended 31 December 2024. The company reported group operating revenue of $7.7 million, marking a 2% increase on the prior corresponding period (pcp), or a more impressive 12% rise when excluding the underperforming Sash and Waggly brands. This growth was largely driven by a 16% increase in marketplace revenue, which reached $2.8 million and demonstrated a healthy 49% EBITDA margin.

Despite a challenging consumer environment marked by a 9% year-on-year decline in Google search volumes, Mad Paws has successfully leveraged its first-ever above-the-line (ATL) marketing campaign launched in August 2024. The campaign, broadcast across television and social media, has accelerated growth momentum in the pet services marketplace, with gross merchandise value (GMV) increasing at a mid-teen percentage rate compared to 6% in the 24 weeks prior to the campaign.

Profitability Milestones and Operational Efficiencies

Mad Paws achieved a significant milestone by reporting a positive group cash EBITDA of $0.3 million for the quarter, a 328% improvement on the prior corresponding period. This marks the first half of FY25 in which the group has been cash EBITDA positive, underscoring the company’s focus on profitable revenue growth and margin enhancement. Segment cash EBITDA rose 86% to $1.4 million, with the marketplace segment alone contributing $1.4 million in operating EBITDA.

Operational efficiencies have played a key role in this turnaround. The company rationalised product and technology employment costs in Q1 FY25 as its platform matured, allowing a shift from large-scale builds to innovation and optimisation. Notably, a new search infrastructure powered by machine learning and AI reduced average search times by 52%, enhancing user experience and likely contributing to improved conversion rates.

Ecommerce Segment and Brand Challenges

The ecommerce division reported revenues of $4.9 million, down 4% on pcp but up 10% when excluding Sash and Waggly. Pet Chemist, a key ecommerce brand, showed strong revenue and EBITDA growth, supported by media partnerships, in-box sampling, and rebate revenue initiatives that boosted margins. However, the Waggly brand’s revenue halved due to a strategic focus on profitability and reduced marketing spend, while Sash faced increased competition leading to a 37% revenue decline and conversion volatility.

Cash Flow and Financial Position

Operating cash flow before sitter liability movements was positive $0.3 million, with total operating cash flow including sitter liability movement reaching $1.7 million, an 81% increase on pcp. The company ended the quarter with $3.993 million in cash and cash equivalents and has $2 million in loan facilities drawn. Capex spending was reduced by 59% compared to pcp, reflecting the shift to platform optimisation rather than expansion.

Outlook and Strategic Priorities

Looking ahead, Mad Paws plans to deploy the majority of its remaining $1.9 million media contra budget before the Easter holidays to sustain growth momentum. The company aims to leverage data and a centralised CRM to enhance cross-selling and customer acquisition, expand new social channels, and improve user journeys for new customers. In ecommerce, focus areas include automating prescription processes, boosting customer retention through improved AutoShip offerings, and refining on-site recommendation algorithms to increase basket size.

CEO Justus Hammer highlighted the company’s strong positioning entering the second half of FY25, emphasizing the team’s dedication to profitable growth despite market headwinds. The appointment of Highbury Partnership as financial adviser to explore third-party interests signals potential strategic developments ahead.