Bubs Shares Rise on Record Q4 Sales

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Bubs Australia [ASX:BUB] reported record Q4 gross revenue, which rose 278% year-on-year, and 174% quarter-on-quarter, to hit $48.1 million.

The June quarter revenue was so strong it surpassed BUB’s FY21 total revenue.

The quarterly results saw BUB shares rise over 6% on Wednesday.

Despite the spike today, the infant formula stock is down 10% in the past month.

ASX:BUB stock prices chart 2022

Source: Tradingview.com

Bubs quarterly activities — the numbers

Today was not another BUB supplier announcement.

Nor did Bubs notify the market of another plane stocked with bottles of infant formula.

Today, the toddler nutrition producer released its Q4 FY22 results and the market could finally see the impact of its emergency supply arrangement with the US.

Bubs reported record gross revenue for the quarter, a total of $48.1 million.

For the half year gross revenue turned over $65.7 million, an increase of 168% year-on-year.

For the financial year, gross revenue totalled $104.2 million, up 123% year-on-year.

But what would a Bubs update be without mention of its ongoing success in America?

Bubs announced that 540,000 tins of its baby formula has been delivered since May.

The company affirmed that its infant formula products now appear on shelves in over 5,400 stores in 34 US States.

22 of those States have allowed families to purchase Bubs’ baby products under the subsidised WIC Program.

Despite the record revenue, the infant formula stock still ended the quarter and the year with negative free cash flow.

In the June quarter alone, net cash outflows totalled $6.7 million as receipts from customers ($30 million) could not outweigh operating costs (product manufacturing costs alone came in at $28.2 million).

Bubs share prices outlook

CEO Kristy Carr commented on BUB’s strong sales:

The last quarter has seen the business reach critical mass following exceptional growth across Australia, China, and rapid expansion in the USA with our involvement in the Biden-Harris Administrations’ Operation Fly Formula initiative aimed at helping to mitigate the ongoing infant formula shortage crisis. This business diversification and increased scale of our most profitable products and channels has flowed through to our operating margins, delivering profitability for the full year (excluding non-cash equity compensation expenses).

The quarter demonstrates initial success of our comprehensive business strategies, led by our clean label infant formula products experiencing high growth in all three key market segments. This was achieved despite a challenging macro environment.

We are confident of the long-term growth prospects for the USA now that the Food and Drug Administration has committed to a framework for suppliers like Bubs, who have already been approved to import infant formula products, to remain on shelf beyond November 2022. As a result, we envisage the USA will become a lead export market opportunity on par with China in the future.’

Now, despite BUB’s revenue growth success this year, it has been quite challenging for many stocks out there.

Rising costs and slowing consumption are hurting margins.

Volatility is unsurprisingly high, and any rally is quickly snuffed out by a string of red days as the market digests the uncertainty surrounding the global economic outlook.

But the stock market is not homogenous — opportunities can still present themselves…provided you know where to look.

Our small-cap expert, Callum Newman, has a knack for sniffing out under-the-radar opportunities.

His latest report focuses on three battery stocks he believes have the potential to be the next ‘chosen ones’ for leading battery mineral supply partners.

You can find out more by reading the report ‘Elon’s Chosen Ones’.


Kiryll Prakapenka,

For Money Morning

About Kiryll Prakapenka

Kiryll Prakapenka is a research analyst focusing on investigating the biggest trends in investments. Kiryll brings sound analytical skills to his work, courtesy of his Philosophy degree from the University of Melbourne. A student of legendary investors and their strategies, Kiryll likes to synthesise macroeconomic narratives with a keen understanding…

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