Mad Paws : Quarterly Activity Report and Appendix 4C

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ASX Announcement

Mad Paws Holdings Limited (ASX:MPA)

19 January 2022

December 2021 Quarterly Update and Appendix 4C

Mad Paws Holdings Limited is pleased to provide its Appendix 4C cash flow and activity report for the quarter ending 31 December 2021.

Highlights

• Q2 FY22 GMV of $6.1 million up 74% on Q2 FY21
• Q2 FY22 LTM GMV of $16.6 million up from $8.2 million in Q2 FY21
• Over 133,000 paying pet customers and over 30,000 pet sitters on the platform
• Q2 FY22 Operating Revenue (unaudited) of $2.0 million an increase of 199% ($0.67m) compared to Q2 FY21
  o Marketplace revenues of $1.0 million up from $0.6 million in Q2 FY21 o Subscription revenues of $0.8 million up from $77k in Q2 FY21
  o Ecommerce revenues of $0.3 million, a new revenue source following the Waggly acquisition in Q4 FY21 and Sash Beds acquisition in Q2 FY22
• Cash at the end of the quarter of $8.9 million
• Positive outlook for 2H FY22 with enhancements to the product offering and ongoing growth in GMV and subscribers

Justus Hammer, Co-Founder & CEO highlighted, "I am pleased to report Mad Paws performed strongly in the quarter. We delivered 199% revenue growth on the prior corresponding period. As COVID restrictions eased we delivered record GMV in our marketplace as well as continued growth in subscription verticals. We continue to make good progress in executing on our growth strategy to broaden our product offering and build complementary subscription revenues.

"In our subscription verticals we have experienced accelerated growth over the last 12 months, through the launch of three dog food products and entering of the toys and treats market through the Waggly acquisition. During the quarter we commenced a number of operational initiatives to set these businesses up for scale and to drive margin improvements over the medium term."

"2H FY22 has started positively despite operational challenges associated with Covid. We are focused on executing our vision to provide a broad range of pet services and products to make pet owners' lives and, more importantly, their pets lives' more enjoyable. In 2H we expect to broaden the product offering, increase GMV and continue to build our subscriber base."

Key performance metrics for Q2 FY22

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Bookings/transactions in 000s
							COVID Lockdowns				53
											40	35
					30					32
								28
				25
					22
			20
		15					16
12	14
					9
Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2
2019	2019	2019	2019	2020	2020	2020	2020	2021	2021	2021	2021	2022	2022

Bookings/transactions increased 81% on the prior corresponding quarter, with growth from subscription and ecommerce verticals delivering 70% of the growth. Furthermore, Marketplace bookings increased by 25% on the prior corresponding quarter to 34,000.

Gross Merchandise Value (GMV¹) in $ millions

							COVID Lockdowns				6.1
					4.0				3.5	3.6	4.1
				3.0						2.9
	2.3		2.6		2.5
	2.0
1.8
						1.5
							0.7
Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2
2019	2019	2019	2019	2020	2020	2020	2020	2021	2021	2021	2021	2022	2022

GMV increased by 74%, or $2.6 million, on prior corresponding period to $6.1 million with growth coming across all verticals. Marketplace GMV increased 46% or $1.5 million, to $4.9 million with half of the increase driven from bookings growth, with the balance coming from higher length of booking as well as sitter rate increases.

1GMV is a non-IFRS measure, it represents the total value of transactions processed by All Mad Paws businesses, on a cash basis, before deducting pet service provider payments, cancellations and refunds, chargebacks, discounts and GST.

New customers in 000s

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											15.9		15.8
							COVID Lockdowns
					8.8				10.0	8.5
										7.1
	5.7		6.1	6.5		5.8
	5.2
4.2				4.2
							1.5
Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2
2019	2019	2019	2019	2020	2020	2020	2020	2021	2021	2021	2021	2022	2022

New customers increased 57% in Q2 FY22 vs Q2 FY21 returning to levels seen in Q4 FY21 prior to the COVID-19 second wave lockdowns. All Mad Paws verticals have taken a measured approach to customer acquisition via performance marketing channels in the period, with performance marketing CAC decreasing 32% for Marketplace and 19% for subscription compared to the prior corresponding period in Q2 FY21. In addition, we have seen similar improvements in performance marketing CAC compared to Q4 FY21.

Operating Revenue (unaudited) in 000s

													2.0
											1.2	1.3
				0.6	0.8				0.7	0.8
	0.4		0.5		0.5
0.3	0.4				0.3
							0.0
Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2
2019	2019	2019	2019	2020	2020	2020	2020	2021	2021	2021	2021	2022	2022

Revenue increased 199% from $0.7 million to $2.0 million in Q2 FY22, reflecting our entry into complementary revenue streams as well as a strong rebound in Marketplace revenues. Marketplace revenues were $1.0 million in Q2 FY22 an increase of 48% vs Q2 FY21 reflecting the strong new customer acquisition and consistent customer repeat rates. Subscription revenues grew by 873% to $0.8 million for Q2 FY22 reflecting the contribution from the Waggly acquisition in June 2021 as well subscriber growth in Dinner Bowl over the last 12 months. The Waggly subscription business has performed well since acquisition with Q2 FY22 subscription revenue increasing by 51% compared to Q2 FY21(period prior to Mad Paws ownership) and 25% compared to Q1 FY22. Ecommerce

revenues from the Waggly shop and the Sash Beds acquisition total $0.3 million in the period and now represent 14% of overall operating revenue.

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Total Subscribers in 000s

					4.9
				4.2
			3.0
0.1	0.2	0.3
Q1 2021	Q2 2021	Q3 2021	Q4 2021	Q1 2022	Q2 2022

Subscription ARR in $ millions

				3.2	3.3
			2.4
		0.7
0.2	0.4
Q1 2021	Q2 2021	Q3 2021	Q4 2021	Q12022	Q2 2022

Total subscribers increased 16% on a quarter-on-quarter basis with 668 net subscriber additions in the period. Subscriber growth in the quarter was less than management's expectation due to a number of factors affecting our pet food subscription business Dinner Bowl. Our focus on launching our lightly cooked offering exceeded expectations, however this resulted in growth in excess of our current production facilities. This coupled with post lockdown staffing challenges meant we needed to slow customer acquisition at the end of the quarter. In addition, we have reviewed our definition of active subscribers and removed subscribers who had skipped for more than 2 months. During Q3 FY22 we will move our lightly cooked kitchen operations into a larger space near our Melbourne distribution centre which will support the next phase of growth. This will improve gross margins and increase operational capacity to support customer acquisition from the start of Q4. Waggly subscribers increased 22% on a quarter-on-quarter basis.

As a result of these effects ARR was flat quarter on quarter increase of 3% to $3.3 million

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Cash flow

Q2 FY22 Cash flow bridge in $ millions

FCF before

Inventory build

Distribution

Opening

Sitter

Sash

New Sash

Subscription

Closing

cash

strategic

liability Mvt

to manage

Centre setup

acquisition

cash

investments

supply chain

payment

product

enhancements

disruption

Free cash outflow before strategic growth investments was $2.1 million for the quarter, with the rebound of the marketplace this was substantially offset by a favourable movement in the sitter liability.

As previously highlighted our marketplace business has a favourable working capital cycle with the customer paying for the service up front and payment to the pet sitter happening after the service has taken place. There was a favourable cash flow in the quarter from the rebasing of the sitter liability due to bookings made in Q2 FY22 that will settle in Q3 FY22. This will partially normalise in Q3 due to the seasonal booking peak in Q2 FY22.

As a result of the supply chain disruptions affecting many businesses, we increased our inventory in our Waggly business to secure supply coming into Q3 FY22. We will continue to closely manage delivery timelines for key products for the balance of FY22.

As previously announced, we acquired Sash Beds during the quarter, being our first entry into Mad Paws Home. The initial acquisition payment as well as the investment in inventory for new product launches resulted in a $0.2 million cash outflow in the quarter.

As detailed in Item 6.1 of the accompanying Appendix 4C, the Company paid $78k in relation to CEO remuneration, Directors' fees since listing and capital raising costs.

At the end of the quarter Mad Paws is well capitalised to invest in strategic growth initiatives with a cash balance of $8.9 million.

Use of funds

In accordance with ASX Listing Rule 4.7C.2, Mad Paws provides the following update on its use of funds (unaudited) below.