Good afternoon, everyone, and thank you for joining today's FY2024 full year results presentation. My name is Reg Weine, and I am the CEO and Managing Director, and I have been in the role for just on 12 months, leading the Bubs turnaround. Today, we will be sharing our full year results, following the release earlier today of our 4E preliminary final report. Before we get into the slide presentation, I would like to draw your attention to the disclaimer on page two of the presentation, and now on the screen. Joining me on the results presentation today are members of the Bubs executive leadership team, including Robin Johnston, Chief Financial Officer, Richard Paine, Chief Operating Officer, Chris Lotsaris, General Manager, USA, and Jackie Lin, Bubs General Manager, China.
Today's presentation will cover the Bubs investment proposition, or as I like to call, our investment thesis, the FY2024 highlights and how we are executing on our strategy. We will then step through the FY2024 financial overview, and then we'll bring it all together with our very positive outlook for FY2025. These are the six ingredients that I feel make Bubs a strong investment proposition and that contribute towards our competitive moat. We have a very large and growing addressable market, worth more than $100 billion globally. We remain a capital-light business with significant operating leverage. Australian provenance and access to high-quality dairy ingredients remains a core strength. Our Bubs portfolio is differentiated and distinctive.
Bubs' revenue is growing 46% year-on-year in the USA, where penetration of goat infant milk formula is very low at just 1.4% of the category, providing a long runway for sustained growth. We are the only Australian FDA-approved infant formula manufacturing facility with permanent access to the US, expected in 2025. Moving on to the FY2024 highlights and the significant progress we have made in the first year of our turnaround. Firstly, we achieved net revenue of AUD 80 million, in line with guidance, and 33% up on prior corresponding period. We exceeded our gross margin target of greater than 40%, in line with guidance, and we believe we can build this out in the coming years. Our US growth engine is delivering, which will provide a sustainable runway for growth for many years to come.
We continue to make meaningful progress on the US FDA clinical trial, and we remain on track for permanent FDA approval in October 2025, with more than 95% of the target patients now enrolled in our growth monitoring study. Richard will share more on that later. Our China reset is gaining traction, with year-on-year revenue growth of 27%, and we exited the year strongly, with H2 growing 38% over H1 . Our normalized cash burn of AUD 1.2 million per month was in line with guidance, and despite the lumpiness of our cash flows, we are confident in our cash flow forecast for FY2025. Newer high-margin tins, new variants, and new contemporary packaging were successfully launched in the USA and China market, with early sales data and retailer and consumer feedback being very positive.
Our state-of-the-art Deloraine canning asset is currently running at 85% utilization on a five-day double shift basis and has done so since January this year. This global rebranding, reformulation, and repackaging project has been a very significant upgrade to our portfolio and a huge undertaking. I'm very pleased to say that it has been incredibly well executed by our teams in Australia, China, and the US. Our new brand portfolio is margin accretive, it's more distinctive and different. It will encourage greater trial, and will help our sales team gain and win more distribution points in their markets. Over time, these necessary important upgrades, we think, will lead to greater share of the U.S., China, domestic, and rest of world markets.
There is always an inherent risk with any major brand and packaging change, but as I said earlier, the early scan sales data and retailer and consumer feedback is very positive, and on that very positive note, I'll now hand over to our Bubs General Manager, USA, Chris Lotsaris. Over to you, Chris.
Thank you, Reg. Good afternoon, everyone. I'll now take you through the U.S. business. In some exciting news, our newest infant formula, Bubs Essential, was last week awarded the 2024 Good Housekeeping Parenting Award. Founded in 1885, Good Housekeeping is one of the most iconic and long-standing publications in the United States, and it is renowned for its rigorous product testing and ethical stance. The magazine is known for featuring expert advice from various fields, including nutritionists and other healthcare professionals. The Good Housekeeping seal, first introduced in 1909, has become a mark of quality and reliability, giving consumers confidence in the products they purchase. Now, Bubs Essential is the proud recipient of this prestigious badge. On to our performance.
Our strong momentum continued in FY2024, with the US gross revenue seeing an impressive 48% growth, reaching $47.3 million. We achieved a record Q4 scan revenue of $11.2 million, with over 280,000 tins sold. In June 2024, we also set new records with over $1 million in weekly scan sales and more than 27,000 tins sold in a single week. This significant sales growth has been fueled by strong consumer demand, endorsements from healthcare professionals, social media advocacy, and robust trial and repeat purchases. To continue meeting the rising consumer demand in the US, we're investing in working capital in H2 of the year, which will prevent future stock shortages. Our Goat Stage One product is now the number one selling IMF product on Amazon.
Additionally, Bubs is closely following the FDA's guidelines to secure permanent access to the US infant formula market, with over 95% patient enrollment in the growth monitoring study as of August 23, 2024. Bubs is now available in over 5,800 stores across 42 U.S. states, reaching all major channels, including grocery, mass, pharmacy, and e-commerce. Our strong presence in the top four retailers, Walmart, Target, Kroger, and Albertsons Safeway, has been instrumental in ensuring our products are widely accessible to our consumers. The U.S. has a total addressable market of $8.1 billion, with a compound annual growth rate of 3.9%. There are significant regulatory barriers to new entrants, with most innovation coming from existing brands. Adjacent markets, such as Canada and Mexico, present attractive opportunities as we look to grow our business.
Bubs was the first to introduce goat infant milk formula to the US and now holds a 48% market share. Although goat formula penetration is currently at 1.44%, it is growing rapidly, offering a long runway for sustained growth in the years ahead. We've made great strides in e-commerce and are now expanding our physical store presence and distribution with existing partners like Walmart and Target. We're also entering new retailers, such as Weis Markets and Kinney Drugs, and exploring new channels to sustain our growth momentum. FY2025 forecasts gross margin at over 40% and a growing trend towards specialty formulas. I will now hand over to Bubs' Chief Operating Officer, Richard Paine, to provide the regulatory update.
Thank you, Chris. The clinical trial has continued with a consistent pace of enrollment. Bubs has continued to closely monitor actions and activities aimed at boosting enrollment and maintaining this momentum. This active oversight has seen the number of recruitment sites increase significantly throughout the duration of the trial. The study has now enrolled some 384 patients out of a study protocol target of 400 . Bubs has continued to fully inform the US FDA regularly around its meaningful progress on the clinical trial. Additionally, we have lodged a GRAS, or a Generally Recognized as Safe application, for goat full cream milk powder, which is currently under evaluation with the U.S. FDA also. This is important, given it's a key ingredient in our formulation.
As part of the formal transition guidance, Bubs is on track to provide the U.S. FDA clinical trial update due on September 6th. We anticipate lodging the fully completed clinical trial in H1 of 2025 . To this end, Bubs' technical consultants in the US are proactively undertaking as much pre-work and data review as is possible now. This preparatory work is made possible by the efficient digital data capture model methodology that the Bubs clinical trial has utilized. Given the meaningful progress Bubs has demonstrated throughout the regulatory process, we remain on track to obtain permanent access into this strategically important market. Pleasingly, Bubs has now obtained authorization to sell Bubs Goat and Bubs Essential infant formulas in Canada under Health Canada's interim policy for infant formula. Accordingly, on August 16th, Bubs was added to the enforcement discretion official listing, as published by Health Canada.
The interim policy process remains in place until December 31st 2025 , with a permanent access regulatory process running in parallel. Bubs is fully utilizing the USA-based clinical trial in this full Canadian application and participation in the permanent pathway process. In the meantime, Bubs has liaised with Health Canada directly around developing a dual language label specifically for the Canadian market, which is now also approved. It is planned for a soft market entry during the early part of 2025 , which will leverage learnings from the USA market success. I'd now hand over to Bubs' General Manager for China, Jackie Lin, to share the great progress we are making in China.
Thank you, Richard. Good afternoon. Now I'll run through China business in the FY2024. Bubs China business demonstrated a strong performance across key financial metrics and great momentum of healthy business growth, showing accomplishment of our China business reset. The distribution restructuring and product upgrades support our sales growth by 27% year- on- year to AUD 17 million in FY24. We are also able to restore premium price architecture and healthy value chain in the market through Bubs' core goat range. The second half sales grew 38% over H1 in FY2024, driven by business restructuring and restore of confidence from both customer and distribution network and seeing an impressive GMV growth over 90% from overall CBEC business in the second half compared to our H1 of FY2024.
Also, profitability was improved dramatically in FY2024 through optimization of product portfolio and our focused marketing strategy, along with cautious management to ensure sustainable sales performance. Marketing expense was improved from 41% to 14% of revenue, leading Bubs to a clean pathway of profitability in China market. After resolving aging inventory issue left by previous distributor, our new upgraded goat infant formula range and Supreme Bovine Infant Formula are very welcome by both customers and distribution network during our recent launch. These developments will continue to accelerate our growth trend in both sales and profitability. We anticipate 50% revenue growth in China in FY2025. We designed a strong foundation of portfolios to fill customer demands on high quality specialty products in both goat and bovine categories.
In addition, to capture the growing trend of adult nutrition, our CapriLac brand developed well, also allow us to grow further in Chinese customers' journey by introducing new products and entering new channels. Over 15% improvement of Bubs' average retail price was also achieved in China, driven by distribution and portfolio reset, while attractive growth margin of over 39% was stabilized with our upgraded portfolio. This will provide solid base for Bubs to grow, to stay in premium and profitability. It's a way to grow sustainably in China. We continue to invest in CBEC channel, such as Alibaba, JD.com as a whole. Strategically, we also enter O2O channel. This will fill Bubs' new growth and boost awareness in China, especially in exciting and vibrant lower tier cities.
O2O, as referred to as an online-to-offline model, is a channel and also a business model under cross-border e-commerce to provide customer in-store experience and also convenience. Bubs is now available in over 300 stores across major cities and strategically collaborating with Mum Time, which is one of the largest O2O store chains in China. We expect to expand to over 1,000 stores across 30 cities in the coming financial year. The growth of O2O will be supported by focused trade and marketing activities to ensure customer acquisition and sales growth. After all, China JV dissolution with Heilongjiang partner has been all set. Now is our time to 100% focus on investment in growth and penetration. That's all for me on China. I will now hand back to Bubs' CEO and Managing Director, Reg Weine.
Thanks, Jackie. As we've heard today, we are growing really, really strongly in our two strategic markets, being the USA and China. But I'm really pleased to say that domestically, we're also doing incredibly well. As you can see, our full year Australian revenue of AUD 21.6 million was up 24% on prior corresponding period, with the number one goat formula brand in the Australian market, with 52% share, and we're growing 6x faster than the category. Our Hero Goat brand is growing by 17% on an MAT basis. And for context, overall, Bubs remains a bigger brand than Bellamy's in the Australian infant milk formula market. I'll now move on to Bubs' rest of the world performance and update. I'll start this segment update with our ambition.
Bubs' goal is to be the market leader in goat infant milk formula in seven of the world's ten largest IMF markets by 2030. We are currently in three of those markets today, and we aim to enter one or two strategic new markets each year. The seven of the top ten IMF markets that we are not present in represent an addressable market of approximately $9.3 billion, and we feel we can enter and win in most of those markets in a low investment and low risk way. Looking at our rest of world performance, our revenue has grown 20% CAGR over the last five years, and the growth in Bubs' rest of the world operating segment has been driven by our growth in Japan and Vietnam.
As Richard said earlier, Bubs is now exploring strategic opportunities in North America, and we plan to enter Canada in half two, and we will have further news on other markets in due course. Our five-year revenue CAGR in Japan is 78%, and we are achieving a better than 40% gross margin in that market. We don't often go into market-specific performance within our rest of world segment. However, I wanted to include our Japan performance to demonstrate how Bubs' new market entry model and success can be replicated in other markets....
We feel we have developed a core competency in entering new markets, and feel we can continue our international expansion and success in a very considered and deliberate way that doesn't require us to bet the farm, in a way that builds the brand's global footprint and generates a positive return on investment within three years of entering a new market. On that note, I'll now hand over to Robin, our CFO, to speak to our FY2024 financial overview. Robin?
Thanks, Reg. Good afternoon, all. Pleasing to have the opportunity, really, to present a set of financial results, which I think demonstrably show that Bubs' turnaround is well underway. Just talking through the FY2024 P&L lines. As you've heard, we have revenue of AUD 80 million, gross margin AUD 39 million, and that's at 49%, but within that, there's an underlying gross margin of 41%, and I'll come back to that in a couple of slides' time. Pleasingly, with the 34% increase in revenue, when we look at our distribution, marketing, and employee costs, they've been maintained within the previous year. So we're showing that we have the scale to be able to support additional growth on that pathway to profitability. We have a statutory EBITDA loss for the year of AUD 20 million and a net loss after tax of AUD 21 million.
Noting those results of AUD 21 million also include AUD 11 million in non-recurring costs. Growth across all the regions, we're seeing. This is a gross revenue slide, which sales effectively before trade spend and the like for retailer allowances. The bridge shows that the dollar growth in each market has contributed to the AUD 25 million growth revenue increase on the prior year, and in every market, we're seeing double-digit growth. It's pleasing to say, and as time goes by, it's becoming more challenging for many businesses. So pleasing to see Bubs is well underway. This slide not only shows that every market provides a meaningful contribution to the group, but it's 73% or 58% of the group's AUD 80 million revenue is now earned internationally.
This shows the importance, with $80 million and a 33% growth, this shows the importance of the USA revenue, now 44% of the group's revenue. The China reset, as Jackie touched on before, is well underway, and H2 revenue was up 38% over the H1 . Domestic growth is at 6x faster than the average in the category, and Japan is another key focus, with sales increasing at 50% over last year. The gross margin bridge that has been prepared is to show the underlying margin. As you can see, the financial reports report a gross margin was at 49%. However, this one doesn't tell the complete story. Last year, in June 2023, Bubs set aside $25 million to address inventory concerns resulting from a failed strategy.
During the year, these concerns were addressed, and a much-reduced provision was required at the end of June 2024. This reduction was released into the June 2024 results, resulting in the rate of 49%. But once this is excluded, and look at the underlying performance of the key categories, the rate is 41% going forward. On to the balance sheet, the cash and cash equivalent in June 2024 of AUD 18 million. We had trade receivables of AUD 9 million, inventories of AUD 28 million, so current assets totaling AUD 60 million. In liabilities, we had trade and other payables of AUD 18 million, borrowings of AUD 5 million, so current liabilities of AUD 30 million, and net assets effectively of AUD 36 million. The increase in trade receivables really reflects the revenue increases, and it's important to note that our debtors' book consists of high-quality major retailers.
The revenue growth also required increase in inventory from AUD 21 million to AUD 28 million dollars to increase demand and the change in can sizes and so on, that Chris talked about earlier. It's important to note that these amounts are net of inventory provisions, and once these are considered, there's in fact a 28% reduction in inventory from June last year to June this year, reflecting the improvement in the operational management of inventory and the focus that that has on releasing cash. Onto cash flow. Bubs finished with AUD 18 million in cash for the end of the period, and operating cash flow at a 45% reduction on the previous year. If we go through the thing, we have a AUD 26 million dollar use of operating activity, well down on the previous year of 47%.
Within that AUD 26 million, we have AUD 12 million of non-recurring costs. So normalized, that brings that down to AUD 14 million for the year. So again, we've talked about it before, and we're well on our way to getting that cash burn back to breakeven. Thank you. I'll now hand back to Reg for the outlook and the path to profitability.
Thanks, Robin. Okay, so what to expect in FY2025? First, I'm pleased to say we delivered on what we said we would do in FY204 and in the first year of our turnaround, as we track towards a positive EBITDA result in FY2025 before share-based payments. In FY2025, we are forecasting net sales revenue of AUD 102 million, or AUD 130 million in gross sales. That's a 28% uplift over FY2024, and reminding the audience that our strategic markets, the USA and China, are expected to grow by 50% year-on-year. We expect gross margin, as Robin said, to remain above 40% and hopefully a little higher.
You heard from Richard around our meaningful progress on the FDA regulatory pathway, and we remain on track for permanent access to the US market from October 2025, and you can anticipate Bubs launching into the Canadian market early in H2 of this financial year. Our delivered gross margin and strong top-line momentum do help us solve for a positive EBITDA result in FY 2025, but it will require us to be very disciplined, as Robin said, around costs. To illustrate that point, this bridge highlights the key drivers of the expected improved profit delivery from FY 2024 to FY 2025. As you can see, the additional AUD 22 million of revenue forecast in FY 2025 will provide AUD 9 million of gross profit at a 40%+ gross margin. I mentioned cost discipline and the team.
You know, we feel we've got a very good fix on our costs, our operating expenses and known costs. So please don't take prior expenses and extrapolate them, as there are far too many one-offs, including AUD 7 million of FDA regulatory costs that we incurred in FY 2024 to obtain permanent access to the U.S. market, along with AUD 5 million of FY 2024 litigation costs, which are non-recurring. The way we are modeling our internal forecast EBITDA in FY 2025 is that we are assuming some product margin improvements. We do have some further cost-out initiatives. We expect continued revenue growth, and when you consider those things in combination with the above one-off non-recurring costs, it does provide a clear pathway to a positive EBITDA number before share-based payments in FY 2025. Moving to the next slide.
This slide is intended to give shareholders a short, medium, and longer term view of Bubs' path to profitability and what we're focused on. Short term is really what we've already baked into our FY2025 plans, and most of which we've covered today. Medium term are the things we are working on now. For example, we're working with our bank on a larger, more flexible trade finance facility to support our working capital requirements and support our future growth. Our marketing investment needs to be at least 15% of net sales. Last year, we invested heavily in brand building, activity, and spent approximately 15.5% of net sales. So we'll closely monitor and manage our marketing investment and return on investment.
Longer term are the things we are working on or considering in a two to five-year horizon, including capacity planning for Deloraine, SAMR registration for China, and of course, we want to be self-funding within the next, two years, if not sooner. So that completes the FY2024 results presentation. I'd like to thank our shareholders who have joined the call today, and we'll now move to the Q&A. We did get a couple of questions that came in, overnight and this morning. I've got those questions in front of me, so I might read them out for the audience, and then I'll ask the team or I'll respond to each one in turn. The first question was: "Just wondering if dividends are a goal of your company. If they are, how long before they arrive as an estimate?"
I'll answer this one. There are currently no plans to pay dividends. We're very focused on getting to positive EBITDA this year in FY2025, and to be self-funding as soon as possible, as I mentioned. Certainly, down the track, when Bubs is profitable and generating free cashflow, I'm sure the board will consider dividends as part of the company's capital management plan. The second question: "Can you please advise whether Bubs will be cashflow positive in FY2025?". Great question. Again, I'll do this one. Robin, as we discussed in today's presentation, our FY2025 guidance is for Bubs to be EBITDA positive before share-based payments. So this year, operationally, we'll cover our costs from a cashflow perspective.
If we do need to invest in inventory in H2 of FY2025 to support growth into next year, we would look to use our trade finance or debt facility to fund that. A couple more questions that came in and received from John: " Does the rest of the world include India? With its increase in middle-class population, the fact they drink goat's milk, should it be included in a trial period?" India, Richard, I might throw to you.
Thanks, Reg. Great question. So thanks for that question. India certainly a unique market, and it does represent some challenges. There's certainly been some significant commercial and trade barriers, although that's progressively coming down. It's a market that we've had a good look at, but I think at the moment it would be fair to say that with some of the unique purchasing patterns and methods of purchasing, we're seeing that it's not a market that we've got a line of line of sight on success in the short term, so we're just keeping that one under a watching brief at this stage, would be my comment, Reg. Thank you.
Thank you, Richard. A question here from John in relation to the US Food and Drug Administration costs in FY2024 and managing expenses to obtain it. Are there any other more material amounts of expense anticipated in FY2025? No, John. Most of the costs related to the FDA are behind us, and as we said in Robin's section of the presentation, all of those one-offs are really non-recurring. So it's very much business as usual. We know what the costs are, we've got a good handle on those things. So no, not expecting any material one-offs in FY2025. Next question: "What is the price comparison between the old style tins and the new style tins? What is the expected difference in product being sold?
will smaller tins mean the same level of production cost, or will production costs stay the same?" Well, there's about three questions in that, and I might throw that one to you, Richard, if I could.
Yeah, sure, Rich. I guess, the move from the larger 800g tin to the smaller, approaching 600, just less than 600g tin really means that this it's gonna retain a premium positioning, but at a more affordable price point. So we think that that really brings it in line to the standard US tin size, if I can put it that way. The price has come down relatively proportionately, I'd suggest. But to answer one of the other elements of that question, the product itself is largely the same, and the reason for that is that you know, it's a highly regulated market, and we're undergoing the clinical trial and so forth. So that means that the formulation can't change too much.
And, in line with that, we see some improvements in purchasing, ingredients purchasing, which will probably offset a little bit of the line efficiency loss in moving to that smaller tin. So, I hope that answers the question.
Again, answers the question very well. Thank you, Richard. And the last question relates to the preliminary final report, page 15, Short-Term Incentives or STI performance rights. Two point five million share rights will be issued if the group achieves the budget trading EBITDA. The question from the shareholder is: "Was it necessary to give out performance rights when making a loss?" The answer to that question, for that shareholder is, if you look at page 15 of the preliminary final report, there is a note there that says, "Due to the trading EBITDA hurdles not being met, no STI performance rights were vested in 2024." Hopefully that answers that question. That's all the questions that we received. However, we do encourage our shareholders to always reach out and interact with the company and management.
Just a reminder, the email address for investors is investors@bubsaustralia.com, now displayed on the screen, and we always endeavor to get back to shareholders within sort of 48 hours. So we'd encourage any questions that come out of today's presentation to be sent through, and best endeavors to get back to you as quickly as we can. Thank you to the presenters today. Appreciate being on the call with me, and thank you again to all of our wonderful shareholders, and we look forward to further updates. Thank you.