Why is the Bubs share price under pressure on Monday?

The Bubs Australia Ltd (ASX: BUB) share price is starting the week in the red.

In morning trade, the infant formula company’s shares were down as much as 5% to 19 cents.

Why is the Bubs share price falling?

Investors have been hitting the sell button today after the company reported a sizeable decline in revenue for the fourth quarter. Here’s a summary of how Bubs performed for the three months ended 30 June:

• Gross revenue down 59% to $20 million
• Infant formula revenue down 52%
• Operating expenses up 110%
• Quarterly operating cash outflow of $13 million
• FY 2023 revenue down 29% to $73.7 million
• FY 2023 operating cash outflow of $46.6 million

What happened during the quarter?

For the three months, Bubs reported a 59% decline in revenue over the prior corresponding period to $20 million. This reflects a whopping 96% decline in China revenue to just $1.4 million, which comfortably offset a 97% increase in USA revenue.

Management advised that its China revenues have been impacted by excess stock in trade and the ongoing dispute with Willis and Alice. Full-year revenue came in at $13.6 million, which was down 75% from $53.6 million in FY 2022.

In Australia, the company’s revenue was up 7% during the fourth quarter to $5.1 million. This led to full-year revenue in the home market growing 19% to $15.2 million in FY 2023.

Management notes that the US business continues to build momentum in all go-to-market channels. This led to a 97% increase in revenue to $11.8 million for the fourth quarter and a 95% increase in FY 2023 revenue to $23.8 million. The company also highlights that it is on track to meet all regulatory milestones for permanent access to the USA market.

Bubs’ cash burn continued during the quarter, with the company continuing to spend more producing its infant formula than it receives from customers. This led to an operating cash outflow of $13 million for the quarter and $46.6 million for FY 2023. However, the company’s new management team expects to reduce its monthly cash outflow by half by the second quarter of FY 2024.

At the end of the period, the company had cash of $26.1 million. Including unused finance facilities, its funding increases to $34 million.