$111.9 million revenue and $5.3 million underlying EBITDA for Bubs

US growth improves earnings, but cash remains under pressure

Bubs Australia Limited (ASX:BUB) has produced the kind of headline earnings recovery that can make a difficult year look tidier than it was. Revenue rose 9.2% to $111.9 million, while underlying EBITDA increased to $5.3 million from $1.2 million. Yet the infant-formula company still reported a $4.6 million statutory loss, and operating activities consumed $15.1 million of cash after generating $6.1 million in FY25.

The United States supplied most of the momentum. Revenue grew 24% to $65.8 million as Bubs expanded from about 4,000 stores to more than 10,000 locations, including national availability through Amazon, Walmart, Target and Sam’s Club. The US accounted for 58.8% of group revenue, making the market both the company’s clearest growth engine and its most important execution test.

That expansion was not cheap. Gross margin fell to 39.8% from 47.8%, with the company citing $3.0 million of US airfreight, $3.9 million in regulatory reset costs and $1.0 million in non-Australian US tariffs. Inventory rose to $36.3 million from $20.1 million as Bubs rebuilt supply, contributing materially to the working-capital outflow.

Permanent FDA authorisation removes a key operating assumption

The report records permanent US Food and Drug Administration authorisation for Bubs’ infant formula products after year end. That milestone had been the central regulatory objective behind the company’s US push, with the permanent FDA authorisation subsequently reported as covering three infant formula products. Bubs says the approval provides greater certainty for distribution, innovation and further commercial opportunities, although the report does not quantify the financial benefit.

The timing matters because the FY26 going-concern assessment was prepared on the assumption that permanent approval would be secured. KPMG issued an unmodified audit opinion but separately highlighted a material uncertainty related to going concern. The directors’ forecasts also assume the company’s bank facility will be extended beyond its current 31 August 2027 expiry date.

Australia and smaller markets need a recovery

Outside the US, the picture was less forgiving. China revenue was broadly flat at $21.4 million as healthy consumer sell-out was offset by lower customer orders while excess inventory was consumed. Australia fell 7% to $18.3 million amid weaker brand visibility, competition and temporary Stage 2 Goat supply disruption, while Rest of World revenue dropped 25% to $6.4 million after regulatory changes disrupted availability in Vietnam and Singapore.

Bubs says Australia’s second-half marketing investment helped lift brand awareness by 10 percentage points to 87%, with market-share trends stabilising. It is also targeting more than 1,800 China online-to-offline stores and has launched CapriLac adult nutrition products. Those initiatives offer potential avenues for recovery, but the FY26 figures show that the US currently carries the burden of group growth.

Liquidity and inventory are the next financial test

Bubs ended June with $9.4 million in cash and $10.0 million drawn under a $20.0 million National Australia Bank facility, leaving a further $10.0 million available. The facility was extended to August 2027, but the combination of cash burn, higher inventory and lease obligations leaves less room for operational missteps than the EBITDA improvement alone might suggest.

The company enters FY27 with a regulatory barrier removed and a broader US retail footprint, but it must now convert distribution into sales, margins and cash. The unresolved question is whether the FDA milestone can accelerate that conversion before inventory investment and financing requirements again dominate the financial statements.