The Bubs Australia Ltd (ASX: BUB) share price is crashing on Tuesday morning following the release of the company's quarterly update.
At the time of writing, the junior infant formula company's shares are down almost 13% to 31 cents.
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Bubs share price crashes on disappointing update
- Quarterly revenue down 28% year over year to $14.3 million
- Half year revenue down 1% to $37.9 million
- Operating cash outflow of $13.5 million
What happened during the quarter?
For the three months ended 31 December, Bubs reported a disappointing 28% decline in revenue to $14.3 million. This reflects a massive 66% decline in China revenue, which offset a 28% lift in Australia revenue and a 26% increase in International revenue.
Management blamed this poor performance on slower than expected consumer offtake in key markets and lockdowns in China causing a delay to its transition to a new manufacturer to consumer operating model in the country.
This ultimately led to first half revenue falling 1% on the prior corresponding period to $37.9 million.
While no earnings data was provided, Bubs' cash flow statement doesn't paint a pretty picture.
For the second quarter, Bubs recorded cash receipts of $14 million and a cash outflow of $13.5 million. This means for every dollar the company received, it spent approximately two dollars to generate it.
Unsurprisingly, this has led to Bubs recording an unspecified underlying EBITDA loss during the first half. It has also reduced the company's cash balance from $64.6 million to $51.4 million at the end of December.
Management commentary
Bubs' under-fire CEO, Kristy Carr, commented:
As foreshadowed at the Company's Annual General Meeting in November, group gross revenues for the first two quarters are largely consistent with the first half of last year, arising from strong year-on-year growth in Australia and the United States being offset by the impacts of China's now abandoned COVID-zero policy on channel dynamics and consumer purchasing activity.
China's prolonged lockdowns during the quarter delayed our transition to Bubs' new 'Manufacturer to Consumer' (M2C) model in partnership with AZ Global, as we continue to sell through initial pipe-fill orders from previous quarters, leading to a 66 percent fall in gross revenues compared to the prior corresponding period.
Nonetheless, the impact on group gross revenues from infant formula was limited to 10 percent for the quarter compared to the prior corresponding period, and strong pricing discipline was maintained across all markets. Group gross revenue for branded products in the first half of FY23 (excluding B2B and low margin bulk powder sales) was up 16 percent compared to the prior corresponding period.
The Bubs share price is now down by approximately a third over the last 12 months and is trading within sight of a multi-year low.
