Bubs Australia : Appendix 4D - Half Year Results

For personal use only

Bubs Australia Limited (ASX: BUB)

ACN 060 094 742

2-4/6 Tilley Lane, Frenchs Forest

NSW 2086 Australia

1800 2827 2878 (1800 BUBS AUST) [e-mail] investor.bubsaustralia.com

1H FY22 HALF YEAR RESULTS

FIRST EBITDA PROFIT WITH RECORD REVENUES AND SIGNIFICANT MARGIN GAINS

• Positive underlying EBITDA Profit: $1.2 million.
• Record gross revenue¹: $38.5 million, up 73% prior corresponding period (pcp), up 57% on 2H21.
• Group revenue: $33.6 million, up 84% pcp and up 60% on 2H21
• Significant improvement on Group Gross Margin²: increased to 38%
• Bubs® Infant Formula group gross revenue¹ doubled pcp.
• Fastest growing infant formula manufacturer in Australian retail⁴ with 31% uplift in scan sales.
• Corporate Daigou gross revenue¹ at record high, up 276% pcp, now exceeding pre-COVID levels.
  Complemented by a strong growth trajectory in China CBEC gross revenue¹, up 53% pcp.
• USA in-store penetration underway with secured ranging in Ralphs, Southern California's largest food retailer⁷, and listed with the three largest national food distributors; DPI, KeHE, and UNFI.
• Continued innovation with 16 new products launched across 3 product categories in 8 markets.
• Robust balance sheet with $30.6 million in cash reserves as at 31 Dec 2021, following two consecutive quarters of positive cashflow.

Melbourne, 23 February 2022: Bubs Australia (ASX: BUB), producer of Bubs® Australian made specialty infant formula, children's nutritional products and family dairy products, submits the Half Year Activities Report and auditor reviewed financial results for the six months ended 31 December 2021.

Bubs Founder and CEO Kristy Carr, commenting on the record financial performance, said: "Bubs is pleased to report its first half year to realise an underlying EBITDA profit. This was a product of management's uncompromising focus and ability to execute on strategic initiatives with precision, notwithstanding challenging macro-economic conditions.

"The fact we have been able to return to a growth trajectory speaks to our corporate DNA and our ability to navigate ways forward in a volatile environment. We see potential upside in Australia's borders reopening with the return of Chinese students, although continuing challenging market conditions are expected to remain for some time."

Mrs Carr said that the Company's financial turnaround was the result of a strong revenue performance across all key business segments. Importantly, Bubs® infant formula gross revenue¹ doubled across all channels during the period and remains the key margin driver within our portfolio.

"Reformed channel strategies put in place in the wake of the COVID-19 pandemic have driven record group gross revenue¹ of $38.5 million for the half-year, resulting in a 73% uplift on the prior corresponding period and up 57% on the second half of FY21. In addition to increased scale, the Company delivered groupwide gross margin² of 38 percent, ahead of expectations for this stage of our development. This significant improvement in gross margin was gained by proactive optimisation of our product and channel mix, more effective trade spend execution, reengineering our supply chain operations to be more efficient, disciplined OPEX management, and inventory provision reversal.

For personal use only

Bubs Australia Limited (ASX: BUB)

ACN 060 094 742

2-4/6 Tilley Lane, Frenchs Forest

NSW 2086 Australia

1800 2827 2878 (1800 BUBS AUST) [e-mail] investor.bubsaustralia.com

"As a brand-led business, we have maintained a continuous innovation pipeline. During the first half, as part of our strategy to widen points of engagement with our target consumers, we have successfully launched sixteen new products across three product segments in eight markets.

"Aussie BubsTM Goat and Grass-fed Toddler formula products were launched in North America. Bubs® Family Nutrition milk powders were exported to Singapore, China, Seychelles and Pacific Islands. And Bubs Organic® Plant Burst® refreshed baby food pouches, which are now available in Chemist Warehouse stores in Australia and New Zealand, were also exported to the Middle East, Taiwan, China and Singapore.

"It is this spirit of innovation, be it new product or new market development, that we believe underpins our capacity to accelerate growth and sustainable long-term earnings," Mrs. Carr said.

Fastest growing infant formula manufacturer in Australian retail⁴

Bubs Australia continues to be the fastest growing infant formula manufacturer⁴ across Woolworths, Coles, and Chemist Warehouse, outperforming the category which remains heavily impacted due to the disruption caused by border closures, with most infant formula brands in decline.

Bubs® Infant Formula scan sales at the checkout increased 31 percent on a moving annual total basis⁴ with Bubs® total market share now at an all-time high of 3.9 percent⁵. Pleasingly this growth is supported by the rapid uplift of the organic grass-fed range, which grew 93% in domestic gross revenues¹ over the period, demonstrating Bubs® brand ability to stretch across multiple category segments.

Corporate Daigou Channel returns to high growth

As Bubs continue to focus on China as its lead export market, recovery in the Daigou channel has been paramount to delivering the first half financial turnaround. International border closures triggered a radical change in Bubs approach to supplying channel partners, which led to the pivotal Daigou 2.0 strategy. This new supply model has been validated with Corporate Daigou gross revenue at a record high, increasing 276% compared to the prior period, now exceeding pre-COVID levels.

In the same way the strategic collaboration with Chemist Warehouse propelled Bubs® into the Pharmacy channel, Bubs has partnered with AZ Global to navigate complexities of the Daigou ecosystem. This alignment between Bubs® brand power and the channel's deep understanding of Chinese consumers, provides the Company with more direct identification of the target consumer groups and their product needs in real time with seamless supply chain delivery.

USA the standout opportunity internationally for online and in-store distribution

During the reported period, Aussie BubsTM went live on USA's two largest eCommerce retailer platforms; Walmart.com and Amazon. Aussie BubsTM products were also launched on Thrive Market, a subscription- based e-commerce retailer offering natural and organic food products with over one million members.

Bubs has secured its first in-store ranging contract with South California's largest food retailer, Ralphs, and will roll out to its 177 supermarkets from March 2022. Ralphs is a subsidiary of Kroger, USA's largest supermarket chain, operating over 2,700 grocery outlets⁷ nationwide. As the State with the highest number of births (c. 400,000 in 2020)⁶ within USA, California is an important lead-in for Bubs' offline retail strategy. South California is a key demographic sub-region that underpins Bubs USA market entry, with population of c. 24 million⁸ and a diverse range of premium and ethnic communities.

For personal use only

Bubs Australia Limited (ASX: BUB)

ACN 060 094 742

2-4/6 Tilley Lane, Frenchs Forest

NSW 2086 Australia

1800 2827 2878 (1800 BUBS AUST) [e-mail] investor.bubsaustralia.com

Bubs has also entered agreements with three of USA's largest food distributors; DPI, KeHe and UNFI, effectively allowing for supply of Aussie Bubs™ Toddler formula products to virtually any of the 63,000⁹ grocery, natural, mass, or specialty retailers in the USA.

1H FY22 PERFORMANCE HIGHLIGHTS

Continuing strong sales growth across key markets and product groups into the second quarter leading to record performance for the first half, consolidating the turnaround evidenced in the first quarter.

Key outcomes include:

• Positive underlying EBITDA Profit: $1.2 million
• Record group gross revenue¹: $38.5 million, up 73% pcp and up 57% on 2H21
• Group revenue: $33.6 million, up 84% pcp and up 60% on 2H21
• Group gross margin² increased to 38%
• • Goat Infant Formula Product Margin³ increased to 38% (vs. 34% in FY21)
  • Product margin³ of all branded products increased to 30% (vs. 21% in FY21)

Performance Overview by Product Category (Gross revenue¹)

• Bubs portfolio: up 81% pcp, and up 65% on 2H21, contributing 62% of 1H gross revenue¹
• • Bubs Infant Formula gross revenue¹ doubled, up 100% pcp, and up 70% on 2H21
• Adult goat dairy portfolio: up 8% pcp, and up 42% on 2H21, contributing 24% of 1H gross revenue¹
• • Adult goat powder revenue was up 41% pcp, and up 44% on 2H21
• B2B Deloraine Dairy Solutions: up 834% pcp, and up 49% on 2H21, contributing 14% 1H gross revenue¹

Performance Overview by Channel (Gross revenue¹)

• Domestic: down 12% pcp (driven by a discontinued revenue stream of raw milk in corresponding period), and up 19% on 2H21, contributing 23% of 1H gross revenue¹
• • Gross revenue from branded products in Australian retail increased 8% pcp, and were up 26% on 2H21
• China: up 137% pcp, and up 88% on 2H21, contributing 56% of 1H gross revenue¹
• • Corporate Daigou Channel: up 276% pcp and up 173% on 2H21
  • CBEC Channel: up 53% pcp and up 18% on 2H21
• International: up 164% pcp, and up 42% on 2H21, contributing 21% of 1H gross revenue¹

BALANCE SHEET / CAPITAL STRENGTH

Following two quarters of positive cashflow, Bubs maintains a robust balance sheet with $30.6 million in cash reserves at 31 December 2021.

For personal use only

Bubs Australia Limited (ASX: BUB)

ACN 060 094 742

2-4/6 Tilley Lane, Frenchs Forest

NSW 2086 Australia

1800 2827 2878 (1800 BUBS AUST) [e-mail] investor.bubsaustralia.com

OUTLOOK

Reflecting on progress in the half-year, Bubs Executive Chair Dennis Lin said: "As we go into the second half it's important to understand that successfully executing key strategic initiatives, such as Bubs Daigou

2.0 channel strategy into China and building a solid bridgehead into USA, while continuing to develop new products at pace, see us growth-focused and finding ways to innovate and thrive in an otherwise volatile environment through actionable outcomes.

"Meanwhile, we have also achieved our planned operational objectives with regard to our COVID response plan, including stabilising pricing to improve the channel value chain and rebalancing channel inventory with fresh dated product ahead of time.

"In light of the progress made, management expects 2H22 to deliver modest Half on Half growth in Revenue, and underlying EBITDA (excluding non-cash equity compensation expenses, ie. share based payments) with revenue realisation from earlier new business development coming through in Q4 and after taking into account the seasonally quieter Q3.

"While our forward plans aren't contingent on COVID dislocations resolving quickly, we continue to exercise caution as pandemic related effects and macro-economic uncertainties remain that could result in transitory variability," Mr. Lin said.

Reconciliation of loss before tax to the underlying EBITDA
	1HFY22	1HFY21
	$	$
Loss before tax	(572,592)	(17,072,174)
Interest income	65,256	73,255
Finance cost	(482,240)	(882,604)
EBIT Loss	(155,608)	(16,262,825)
Depreciation and amortisation	(1,309,759)	(1,862,181)
Underlying EBITDA Profit / (Loss)	1,154,151	(14,400,644)

FOOTNOTES

• Gross revenue is a non-IFRS measure. Non-IFRS measures have not been subject to audit or review. Gross revenue represents the revenue recognised without rebates and marketing contribution.

• Gross margin is calculated as (Revenue - Cost of Sales) / Revenue.

• Product margin is calculated as (Revenue - Production Costs) / Revenue.

• IRI Scan value scan sales growth % YA. Dollars ($000's) Moving Annual Total (MAT) 26.12.2021.

• IRI Scan value sales, Dollars ($000's) share of total Baby Formula , Coles, Woolworths and Chemist Warehouse combined Quarter to 26.12.2021

• CDC, National Centre for Health Statistics, Births: Final Data for 2020

• KROGER Fact Book 2020 + thekrogercompany.com company website, and Statistica "Leading Supermarkets in the US 2020, based on retail sales.

• United States Census Bureau, Quick Facts California 2021.

• IBIS World Industry Statistics Supermarkets & Grocery Stores in USA, 2002-2027

This release is approved by the Board of Directors.

For personal use only

Bubs Australia Limited (ASX: BUB)

ACN 060 094 742

2-4/6 Tilley Lane, Frenchs Forest

NSW 2086 Australia

1800 2827 2878 (1800 BUBS AUST) [e-mail] investor.bubsaustralia.com

Media and Investor Inquiries

Deanne Curry

Ph. [phone]

[e-mail]

[e-mail]

About Bubs Australia

Founded in 2006 in Sydney, Bubs Australia's vision is to create new generations of happy, healthy bubs and families through its range of premium Australian infant nutrition and goat dairy products, including specialty and nutritional milk powder products for the whole family. Bubs® Goat Milk Infant Formula and Bubs Organic® Grass-fed Cow's Milk Infant Formula, along with organic baby food, cereals, toddler snacks, and Vita Bubs® infant and children's vitamin and mineral supplements, cater for all feeding occasions and stages of development from newborn through to childhood.

Bubs Australia is the leading producer of goat dairy products in Australia with exclusive milk supply back to the farm gate. Bubs® is proudly the only infant formula in the world to be based on Australian goat milk.

Bubs® products are widely sold in major supermarkets and pharmacies throughout Australia, as well as exported to China, Southeast Asia, the Middle East and USA.

Consumer Website: bubsaustralia.com

Investor Centre: investor.bubsaustralia.com