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Bubs (ASX:BUB) share price soars on HUGE Q1 growth

The Bubs Australia Ltd (ASX: BUB) share price is up 16% this morning after announcing a large amount of growth in the first quarter of FY22.

Bubs quarterly update

The goat infant formula business revealed how it had performed in the first three months of FY22 to September 2021.

Bubs said that total gross revenue nearly doubled to $18.5 million, which was up 96% year on year and up 45% quarter on quarter.

The business reported revenue growth across its key business segments, overcoming the difficult disruption caused by COVID-19 impacts.

Bubs infant formula gross revenue surged 124% year on year, and it grew 64% quarter on quarter.

Adult goat milk powder total gross revenue doubled year on year, and went up 61% quarter on quarter.

It also said that B2B Deloraine Dairy Solutions saw 16-fold growth, contributing 17% of the revenue in the first quarter.

The business also generated positive cashflow of $490,000 during the quarter.

Geographic growth

Bubs said that it remains the fastest growing infant formula manufacturer across Australian supermarkets and pharmacies, with infant formula scan sales up 35%.

The company also reported a strong rebound in its China-facing business, with revenue up 156% year on year and 98% quarter on quarter. The daigou infant formula sales were up 648% year on year and 265% quarter on quarter. Cross-border e-commerce infant formula sales went up 49% year on year and 19% quarter on quarter.

International gross revenue, excluding China, rose by 489% year on year and 35% quarter on quarter.

The global expansion strategy has been advanced, with entities established in New Zealand, China and USA.

However, domestic revenue (excluding daigou) declined 13%, with domestic revenue being 23% of quarterly sales, mostly due to a “discontinued revenue stream of fresh milk to a business customer”.

Outlook for Bubs and the share price

Management said that it continues to explore opportunities to stretch the Bubs brand to cater to new market segments, adjacent categories and consumer groups.

Bubs Executive Chair Dennis Lin said:

We are confident that our vision to take Bubs to a global stage is becoming reality. We are investing in our manufacturing capabilities at our facility in Victoria and have extended the Bubs family to have local representation in New Zealand, China and North America, as we continue to diversify our business model.

Having recovered the ground lost due to COVID-19 disruption, we expect to be able to sustain continued growth momentum, to the extent our go forward approach does not depend on a material improvement in the pandemic setting. That being said, effects of the pandemic on our sector may continue to create a degree uncertainty on future demand.”

Bubs seems to be through the worst of it, so it could be worth considering, but it would certainly be a higher-risk choice compared to some other ASX growth shares. It will be interesting to see how A2 Milk Company Ltd (ASX: A2M) has performed in the first quarter.

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At the time of publishing, Jaz does not have a financial or commercial interest in any of the companies mentioned.

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