The Bubs Australia Ltd (ASX: BUB) share price has rocketed higher following the release of its third quarter update.
At the time of writing the goat milk infant formula company's shares are up 14% to an all-time high of $1.32.
How did Bubs perform in the third quarter?
During the third quarter Bubs posted gross revenue of $11.8 million, which was a 103% increase on the prior corresponding period.
Whilst this is undoubtedly strong growth, it is worth noting that it is slower than during the first half when the company's gross revenue increased 465%.
A key driver of its growth was its Bubs goat milk infant formula products. Gross sales increased 302% on the prior corresponding period, representing 41% of its third quarter revenue.
The other major contributor to its third quarter sales growth was its CapriLac goat milk powder, which grew gross sales by 119%. This represented 40% of quarterly revenue.
The company's founder and CEO, Kristy Carr appeared to be very pleased with the company's performance during the quarter.
She said: "Business momentum has remained strong and our overall strategic direction has delivered excellent volume growth in Bubs premium infant nutrition segments, with 302% increase in infant formula sales year-on-year. Our March sales were the highest on record contributing to a strong third quarter, notwithstanding the seasonal variations in the China facing parts of our business due to festivals and holidays falling early in the quarter."
She added: "Cross-border eCommerce has continued to grow with our overall direct sales to China increasing 884% year-on-year, demonstrating our route-to-market strategy is being well executed. As well, activation of the Corporate Daigou outbound distribution and engagement with the Australian Chinese community via events, influencers and social media, has contributed to our rapid growth."
Despite the strong sales growth the company still posted a $13.7 million cash outflow from operating activities. Whilst $7.8 million of this related to consideration payments to Nulac vendors, even after taking this out of the equation the company is spending more selling its products than it is bringing in for them.
Bubs certainly has a lot of hard work to do before it will enjoy the same level of profitability as the likes of A2 Milk Company Ltd (ASX: A2M) and Bellamy's Australia Ltd (ASX: BAL).
Whether it will get there, only time will tell. But with its market cap now nearing $700 million, I intend to watch its development from the safety of the sidelines.
