Bubs share price on watch as full-year revenue blasts 127% higher

What helped Bubs to a record year in FY22?

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Key points

  • The Bubs share price will be on watch this morning amid a record result in FY22
  • Revenue reached a new annual record of $89.3 million, increasing 127% from FY21
  • The US and China will remain key regions of focus for future growth

The Bubs Australia Ltd (ASX: BUB) share price will be in the spotlight today after the company published its FY22 annual results this morning.

Prior to the market opening, shares in the infant formula company are set at 60.5 cents apiece. Yesterday, investors bid the Bubs share price 4.3% higher in anticipation of today's release. But will the excitement be validated in today's trading session?

Bubs share price in focus amid record result

  • Record gross revenue up 123% from FY21 to $104.2 million
  • Revenue of $89.3 million, up 127% from the prior corresponding period
  • China revenue up 166%, representing 55% of group revenue
  • Record Australian infant formula market share of 4.7%
  • Underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) of $4.8 million
  • Loss after tax narrowed to $11.4 million from $74.7 million

Much like what A2 Milk Company Ltd (ASX: A2M) reported yesterday in its own set of results, FY22 was a year of recovery for Bubs. The two main tailwinds boosting the business during the year were growth in China sales and the supply deal in the United States.

Remarkably, gross revenue in the second half of FY22 was 40% more than all of FY21. It was during the second half that the United States experienced its infant formula shortage. Clearly, this event supported stronger performance for Bubs in the process.

What else happened in FY22?

For Bubs, a pivotal moment during the financial year was the United States 'Operation Fly Formula' mission. This government initiative has enabled the Aussie infant formula company to make a splash in the much larger US market — helping the Bubs share price at the same time.

Ultimately, the operation led to Bubs partnering with major retailers including Albertsons Safeway, Walmart, Kroger, and Target. The outcome — other international sales increased 202% from the prior year, now making up 28% of revenue, formerly 21%.

What did management say?

Commenting on the record year, Bubs founder and CEO Kristy Carr stated:

Gross margins increased significantly over the year to 32% for the group. Bubs Goat Infant Formula product margin increased to 40%. This was driven primarily by increased scale, a growing proportion of sales derived from higher margin infant formula, optimisation of product and channel mix, and improved supply-side economics inherent in our vertically integrated manufacturing model.

Furthermore, Carr noted the agility demonstrated by the business amid a confluence of macroeconomic headwinds. Despite inflation, supply chain issues, and a precarious economy, Bubs delivered an impressive result.

What's next?

Turning to what lies ahead, Bubs' management refrained from providing precise guidance. However, Carr described a further focus on margin expansion and earnings growth. This will likely be music to the ears of shareholders.

For context, Bubs is yet to turn profitable on the bottom line. Hence, keeping the focus on earnings growth would be essential for long-term shareholders.

Finally, the company's main efforts will stay on growing in the US and China markets.

Bubs share price snapshot

The Bubs share price has been a winner for those who have stuck around. In the past year, the company's shares have appreciated 47.5% in value. Meanwhile, the S&P/ASX 200 Index (ASX: XJO) is yet to break even.

Currently, Bubs trades on a price-to-sales (P/S) multiple of approximately five times.

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended A2 Milk and BUBS AUST FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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