The Bubs Australia Ltd (ASX: BUB) share price is rising after the infant formula ASX share revealed a huge FY22 fourth quarter of growth.
Bubs is a fast-growing All Ordinaries (ASX: XAO) ASX share which specialises in goat milk products, but it also has a growing portfolio of toddler snacks and cow milk infant formula.
Strong finish to FY22 for Bubs
The infant formula business revealed record fourth quarter gross revenue of $48.1 million, up 278% year on year and up 174% quarter on quarter. This was the fourth consecutive quarter of growth compared to the prior year.
Bubs boasted that the fourth quarter’s revenue was more than the FY21 total.
The FY22 second half’s gross revenue was $65.7 million, up 168% year on year and up 71% half-on-half.
The strong finish to the 2022 financial year saw total gross revenue reach $104.2 million (up 123% year on year, compared to $46.8 million for FY21).
What drove these numbers?
Bubs explained that there was sustained growth momentum across all of its key product segments (A2, organic grass-fed and goat infant formula) and markets (Australia, China and USA). This is good news for the Bubs share price. It’s not just the US driving things.
Australian revenue was up 15%, contributing 11% of quarterly sales, with domestic retail revenue of infant formula up 31%.
China revenue increased 523%, contributing 64% of quarterly sales. Corporate daigou sales increased 1,201%, while cross-border e-commerce sales rose 20%. Bubs said the Alpha Group equity-linked partnership and these Chinese launch of its A2 Bubs Supreme product were “highly successful” while remaining its most profitable channel.
International sales jumped 265%, contributing 25% of quarterly sales. The USA fourth quarter revenue included two of the six US flights realised in June.
The company is making strong progress in the USA as it aims to help lift the formula shortage there. Over 540,000 tins have been delivered between May and July, funded by the US Government’s ‘operation fly formula’.
Bubs infant formula is now sold in over 5,400 stores across 34 states, including some of the largest infant formula retailers like Walmart, Kroger and Target.
The FDA has committed to regulatory framework so that suppliers like Bubs can keep selling infant formula beyond November 2022. Its infant formula will be imported tariff-free under a trade agreement between the US and Australia.
Capital raising
Bubs completed a $40.1 million oversubscribed institutional placement and entitlement offer (capital raising) on 5 July.
The retail entitlement offer to raise $22.9 million closes on 26 July 2022.
This money will mostly be used to support accelerated expansion, build inventory to mitigate the current logistics environment, build its presence in the USA and triple the capacity of its processing and canning facility.
Final thoughts
I’m not surprised to see that the Bubs share price has risen in response to this. It’s rapidly growing, with progress in Asia as well as the US. While there are risks to building inventory and investing heavily, I think it’s the right move. It just needs to ensure growth and demand continue.
It’s one of the ASX growth shares I’ve got my eyes on. The expectation of positive underlying EBITDA (EBITDA explained) of more than $2.4 million is good news too.
