Tag: Motley Fool

Douugh Ltd (ASX: DOU) shares are on the rise after the artificial intelligence (AI) driven financial app developer completed its first full quarter since launching in the United States market. At the time of writing, the Douugh share price is trading 3.23% higher at 16 cents.

Let’s take a look at how the company has been performing.

Douugh quarterly highlights 

The Douugh share price is in the green today after the company reported momentum is building for its platform since the US launch in mid-November 2020. The company’s app has experienced a 259% increase in customers from 3,033 in December to 10,877 by the end of March. Douugh’s customers had deposited more than $3 million into their Douugh bank accounts with more than $1.1 million spent through their Douugh cards. 

The company was anticipating more customer growth but this was slowed due to COVID-19-enforced delays on the delivery of new debit cards. According to Douugh, it plans to make up for lost ground in the fourth quarter. 

Despite supply-side challenges, the company is pleased with how customers are interacting with the platform and the value provided by its money management tools. Douugh observes that customers are using their Douugh cards to pay their bills, such as those from Uber and Netflix, and are starting to deposit their salaries directly into their Douugh bank accounts. The company is eyeing new initiatives to further encourage this behaviour. 

Douugh also reported delivering on its development milestones for the third quarter. This included the successful rollout of its proprietary self-driving money management feature, Autopilot. This feature utilises machine learning models to manage a customer’s money, improving over time as it gets to know the user through their financial data. 

The second development was the rollout of the company’s instant virtual card push provisioning in partnership with Mastercard. This allows a customer to seamlessly add their Douugh Mastercard debit card to a digital wallet from within the Douugh app, eliminating the need to input card information manually. 

Douugh share price snapshot 

Despite the company’s achievements over the quarter, including an instant bank account funding feature in partnership with Stripe, the acquisition of social investing app Goodments and a licence to offer wealth management services in the US, there hasn’t been a whole lot going on for the Douugh share price.

Prior to today’s gains, Douugh shares have drifted lower to the 15 cent level, close to a 7-month low. But taking into consideration its listing price of just 3 cents back in October, it might take an extraordinary announcement to drive further upside in the near term. 

More reading

• The Credit Clear (ASX:CCR) share price lower on third quarter update
• Why the Douugh (ASX:DOU) share price will be in the spotlight
• Why the Douugh (ASX:DOU) share price is up 6% today
• Zip (ASX:Z1P) eyes potential stock and crypto trading services
• Douugh (ASX:DOU) share price races 6% on performance update

Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Mastercard and Netflix. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Uber Technologies. The Motley Fool Australia has recommended Mastercard and Netflix. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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ASX mining shares have been running hot and bargain hunters will probably need to start looking among small caps shares to find value.

The bull run in the sector is triggered by the surge in commodity prices. Iron ore, copper and other metals have either broken new records or are close to setting fresh highs.

This is why the Fortescue Metals Group Limited (ASX: FMG) share price, Rio Tinto Limited (ASX: RIO) share price and BHP Group Ltd (ASX: BHP) share price have outperformed the S&P/ASX 200 Index (Index:^AXJO) in the past year.

Smaller ASX miners could provide better value

But most experts are loath to recommend you chase these big miners higher. Talk about FOMO!

On the other hand, those willing to look at the smaller end of the market could still find a nugget or two.

One possible small ASX miner is the BCI Minerals Ltd (ASX: BCI) share price. While the shares have doubled over the past 12-months, Bell Potter reckons it could go much higher.

Salt and fertilizer provides boost

The broker bolstered it 12-month price target on the BCI share price to $0.57 from $0.50 after management provided an update on its projects.

The miner released its Mardie Salt and SOP project Optimised Feasibility Study (OFS) highlighting a 20% increase in plant throughput capacity.

The upgrade will lift steady-state salt production to 5.35 million tonnes per year (Mtpa) from 4.5Mtpa. SOP production is expected to increase to 140,000 tonnes a year (ktpa) from 120ktpa.

“BCI combines an iron ore royalty-like business with a large scale salt and fertiliser project,” said Bell Potter.

“BCI’s current EV is around 4x its 2022 iron ore EBITDA alone. The optimised Mardie Salt and SOP Project has the potential to add significant value.”

Beating on two fronts

Meanwhile, Macquarie Group Ltd (ASX: MQG) is urging investors to buy the Champion Iron Ltd (ASX: CIA) share price after it posted a better-than-expected quarterly production report.

“Production and shipments of ~2.0mt were above our forecasts in 4QFY21, and cash costs also came in 7% lower than our expectations,” said Macquarie.

“Despite the COVID-19 interruptions in 1QFY21, CIA has produced and shipped at a rate higher than the current nameplate capacity of 7.5mtpa.”

The lower costs are noteworthy as many of its peers are struggling with cost inflation.

Macquarie’s 12-month price target on the Champion Iron share price is $8 a share.

More reading

• These ASX 200 shares are tracking the Aussie economy higher in 2021
• Top broker slaps sell rating on Fortescue (ASX:FMG) share price
• 5 things to watch on the ASX 200 on Friday
• ASX 200 rises, Woolworths falls, Fortescue was flat
• Top brokers name 3 ASX shares to sell today

Motley Fool contributor Brendon Lau owns shares of BHP Billiton Limited, Macquarie Group Limited, and Rio Tinto Ltd. Connect with me on Twitter @brenlau.

The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Sezzle Inc (ASX: SZL) share price is on course to end the week with a strong gain.

In morning trade, the buy now pay later (BNPL) provider’s shares are up over 8% to $9.65.

Why is the Sezzle share price charging higher?

Investors have been fighting to get hold of the company’s shares this morning after it released its first quarter update and announced plans for a US listing.

In respect to the former, Sezzle reported underlying merchant sales (UMS) growth of 214.1% to US$375.1 million for the three months ended 31 March.

Sezzle also revealed income of US$29.2 million for the quarter, up 216% on the prior corresponding period. This was driven by UMS growth and a small increase in margins.

What were the drivers of this result?

Sezzle’s strong growth was driven by a 126.6% increase in active customers to 2.6 million and a 27th consecutive month of improvement in its repeat usage metric.

Active consumer repeat usage grew to 90.7% during the quarter. Furthermore, the top 10% of Sezzle’s consumers, on average, now transact 49 times per year.

Also supporting its growth was the addition of over 7,300 active merchants during the quarter. This was the largest quarterly increase in the company’s history, bringing its total to over 34,000 active merchants.

Sezzle’s Executive Chairman and CEO, Charlie Youakim, said: “The strong momentum we ended 2020 with has continued in to 2021. Our 1Q results set new company highs in UMS, Active Consumers, Active Merchants, and Repeat Usage. Our monthly UMS in March 2021 was 30% greater than December 2020. We are also excited about our efforts to attract larger merchant enterprises as evidenced by our recent additions of Market America Global and Lamps Plus.”

US listing

In addition to its results, Sezzle has announced its intention to follow the lead of Afterpay Ltd (ASX: APT) by listing in the United States.

No real details were given, but the company stated that “it intends to file a registration statement with the Securities and Exchange Commission (the “SEC”) for a proposed initial public offering of common stock in the United States. The timing, number of shares of common stock to be offered, use of proceeds, and the price for the proposed initial public offering have not yet been determined. The offering is subject to market and other conditions, including the effectiveness of the registration statement to be filed under the Securities Act of 1933.”

More reading

• ASX 200 rises, Woolworths falls, Fortescue was flat
• The Sezzle (ASX:SZL) share price is rising on new partnership
• ASX 200 falls, BHP rises, Afterpay sinks
• Your handy guide to 5 top ASX BNPL shares
• Why the IOUpay (ASX:IOU) share price is up 15% this week

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Sezzle Inc. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Sezzle Inc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Mesoblast Limited (ASX: MSB) share price is surging this morning after the Aussie company’s latest quarterly results. The cellular medicine manufacturer provided an update for the third quarter ended 31 March 2021 (Q3 2021). 

At the time of writing, the Mesoblast share price is trading at $2.09, up 14.21%. 

Why is the Mesoblast share price rocketing?

The Aussie medicine company this morning announced results from its COVID-19 acute respiratory distress syndrome (ARDS) trial.

Mesoblast CEO Silviu Itescu said, “We are very excited about the top-line results announced today from the trial of remestemcel-L in patients on mechanical ventilation due to COVID-19”.

Results showed that patients receiving remestemcel-L had reduced mortality through 60 days in the pre-specified population under 65 years old. In fact, those using Mesoblast’s drug saw 46% lower mortality through day 50.

The trial also showed mortality reduction from the drug was “accompanied by increased days alive off mechanical ventilation and reduced days in hospital”.

Mr Itescu said the results have “the potential to make a substantial impact in outcomes for this critical patient population”. Investors are driving the Mesoblast share price higher in early trade on the back of this morning’s trial updates.

Mesoblast has now entered into a license and collaboration agreement with Novartis for the development, manufacture and commercialisation of remestemcel-L with an initial focus on treating severe COVID-19.

The company also completed a US$110 million private placement during the quarter. That helped boost the company’s cash balance to US$158.3 million at quarter-end with net cash usage of US$25.8 million. 

The Aussie healthcare group continues to engage with the United States Food and Drug Administration (FDA). Mesoblast is seeking to gain approval to use remestemcel-L in treating steroid-refractory Acute Graft Versus Host Disease.

In further news driving the Mesoblast share price, results from the company’s chronic lower back pain (CLBP) trial were also promising. The results indicated that treatment “may be greatest when inflammation is high and before irreversible fibrosis has occurred in the intervertebral disc”.

Foolish takeaway

The March quarter was another action-packed one for the biotech and has resulted in the Mesoblast share price surging higher this morning. This will come as welcome news for shareholders, with the company’s shares still trading around 20% lower since mid-February. 

More reading

• Why the Mesoblast (ASX:MSB) share price is rising today

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

High-flying electric vehicle leader Tesla (NASDAQ: TSLA) knocked one out of the park during the first quarter of 2021. Total revenue increased 74% from a year ago, and net income hit a new record of $438 million. However, the usual boost to the headline profitability metric (the sale of regulatory credits) was joined by yet another controversial line item: The sale of Bitcoin (CRYPTO: BTC). Nevertheless, the company’s free cash flow operating metric shows this automaker is rapidly approaching a profitable scale even without the aid of any footnotes.  

EV credits and cryptos are only part of the story

First, let’s address the $438 million in net income. Tesla detractors will often point to the company’s sale of regulatory credits as being the primary driver of bottom-line profitability. Indeed, at $518 million in the first quarter, the sale of these credits (which Tesla receives from some governments for renewable energy, and which it can sell to other companies that need the credits to offset their carbon footprint) did the heavy pulling once again on the bottom line. As other automakers ramp up their own EV efforts in the coming years, this source of revenue isn’t likely to be as lucrative as it is now.  

As for Bitcoin, Tesla made waves back in February when it said it used $1.5 billion in cash from its balance sheet to buy Bitcoin. However, before the end of the first quarter, it promptly sold some of it for a net gain of $101 million. Potential legal ramifications aside (owing to CEO Elon Musk’s frequent tweeting about cryptos and a checkered past with the Securities and Exchange Commission), Bitcoin won’t be a sustainable source of income either. It instead used its purchase to jump-start acceptance of the cryptocurrency as a form of payment for cars. 

Personally, I think the sale of regulatory credits and Bitcoin are opportunistic plays on the part of Tesla. I hear the argument that neither source of income is going to last forever, but bear in mind Tesla is still a relatively small manufacturer that is trying to rapidly scale across the globe. It’s getting creative with how it tries to fund the cost of said expansion, and it’s paying off. Free cash flow (which includes income from regulatory credits, excludes Bitcoin proceeds, but also subtracts capital expenditures like the purchase of property and equipment that isn’t fully recognized in net income) was positive $293 million during the first quarter. For the sake of comparison, this basic profitability metric was negative $895 million one year ago. 

What does that imply? It implies Tesla is rapidly reaching a very profitable scale all on its own. When backing out the extra $164 million in regulatory credits it sold ($518 million this year versus $354 million in the first quarter of 2020), Tesla’s operations generated $995 million more free cash flow year over year. More importantly, it’s closing in on break-even, even without the help of regulatory credit sales. 

Metric	Q1 2020	Q1 2021
Regulatory credit sales (included in net cash provided by operating activities)	$354 million	$518 million
Net cash provided by (used in) operating activities	($440 million)	$1.64 billion
Capital expenditures	($455 million)	($1.35 billion)
Free cash flow	($895 million)	$293 million

Data source: Tesla.  

An argument that no longer holds any water

Tesla delivered nearly 185,000 EVs during the first three months of the year, all of which were built at just two factories: One in Fremont, California, and the other in Shanghai, China. The big jump in capital expenditures this last quarter is attributable to new factories under construction in Berlin and Texas, and the ongoing expansion of the factory in Shanghai. These are big projects. Once complete and auto production begins, Tesla’s free cash flow is on track for even more dramatic increases as those capital expenditures ease. No doubt new factory projects will break ground to support future EVs like Cybertruck and Semi, but capital expenditures will nonetheless decrease as a percentage of revenue over time.  

Put another way, the argument that Tesla’s profitability is only attributable to unsustainable sources of income doesn’t hold water. Sure, it’s juicing the bottom line with regulatory credits and Bitcoin, but that’s simply creative and opportunistic activity. Businesses are supposed to make hay when the sun is shining. Perhaps Tesla’s methods are unconventional, but that doesn’t mean its manufacturing business is a slouch. Rather, its young manufacturing operation is simply getting some help while it scales to the point where it can sustain itself. 

Whether all of this warrants Tesla stock’s premium price tag is a different story altogether. But it is time to stop the commentary that Tesla’s EV business isn’t profitable without regulatory help — because it is indeed well on its way.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

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• Tesla’s Bitcoin sale helped boost quarterly profits
• Tesla shares slip after hours despite Q1 earnings beat

Nicholas Rossolillo owns shares of Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Bitcoin and Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Shares in Origin Energy Ltd (ASX: ORG) are climbing this morning following the release of the company’s third-quarter performance results. At the time of writing, the Origin share price is trading 0.73% higher at $4.14.

Origin’s recently updated guidance, released to the market on 16 April, saw its share price close nearly 9% lower than the previous session. 

Let’s take a look at how Origin Energy has performed over the three months ended 31 March.

Third quarter results

The Origin share price is in the green despite a mixed performance from the company’s gas and energy divisions.

Its integrated gas production was 4% less than the previous quarter. The company states this was due to maintenance which resulted in two fewer operating days. Gas sales revenue was also down 6% due to less production and cargo timing issues.

Its commodity revenue was up by 7%, reflecting higher oil and spot LPG prices – though, it was 32% less than the third quarter of 2020.

In Origin’s energy market, sales volumes were down 4% compared to the prior corresponding period, seemingly due to mild weather. Business volumes were also down by the same amount. Origin states that was due to COVID-19 and was offset by new contract wins.

Gas sales decreased 27%, with a 19% decrease in Origin’s business segment from expired contracts and impacts of the pandemic. The amount of gas the company used to generate electricity was also less, caused by lower electricity pool prices.

The company’s figures found weather-related electricity demand was 3% lower than it was prior to the global pandemic. Though, with many of us still working from home, household electricity volumes are slightly above pre-COVID-19 levels.

Commentary from management

Origin CEO Frank Calabria commented on the results published today. He said:

 Due to the lag in the LNG contracts, we expect recent higher oil prices to flow through to contract revenues in the 2022 financial year…

The combination of strong production and operating and cost discipline has helped to reduce the FY2021 distribution breakeven, with full-year cash distributions to Origin expected to be greater than $650 million…

We continue to target significant retail cost savings and are on track to achieve $100 million in savings by the end of FY2021.

Origin Energy share price snapshot

The Origin Energy share price is having a tough 2021 on the ASX. Currently, the company’s shares are trading just 3% higher than their lowest closing price of the last 5 years, which occurred in October 2020.

Origin shares are also down by around 14% year to date and 26% over the last 12 months.

The energy company has a market capitalisation of around $7.24 billion, with approximately 1.7 billion shares outstanding.

More reading

• 7 ASX 200 shares with emission reduction strategies
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• ASX 200 Weekly Wrap: ASX 200 hits new post-COVID high
• Leading broker says the Origin (ASX:ORG) share price is dirt cheap
• 5 things to watch on the ASX 200 on Monday

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned.

The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The PointsBet Holdings Ltd (ASX: PBH) share price is on course to end the week on a very positive note.

At the time of writing, the sports betting company’s shares are up 6% to $13.40.

Why is the PointsBet share price surging higher?

The catalyst for the rise in the PointsBet share price today has been the release of its third quarter update this morning. That update reveals that the company has continued to grow all key metrics at a rapid rate.

For the three months ended 31 March, PointsBet reported a 236% increase in turnover to $905.2 million. This was driven by a 137% jump in Australian turnover to $423.2 million and a 431% increase in US turnover to $482 million.

Also growing strongly was its net win metric. The company recorded a 246% increase in net win to $64.9 million for the quarter. This was the result of a 147% increase in Australian net win to $38.2 million and a 716% jump in US net win to $26.7 million.

At the end of the period, Pointsbet had 285,500 active clients. This is 169% higher than the prior corresponding period and comprises 158,000 Australian clients and 127,500 US clients. The latter is up 461% since this time last year.

Management commentary

Management was pleased with the performance of its Australian operations during the third quarter.

It explained: “Compared to the PCP [prior corresponding period], the Australian Trading business has seen improvement across a number of key KPIs as client behaviour shifts to the higher margin multi segment. Improvements in marketing tech tools also assisted with acquisition and retention compared to the PCP.”

“The performance of the Australia Trading Business remains an excellent blueprint for PointsBet’s aspirations in the United States. PointsBet’s ability to operate a growing, profitable business in the advanced and competitive Australian market, backed by continually improving product and growing brand recognition, provides confidence in the continued execution of its US strategy.”

Speaking of which, management appeared to be pleased with its progress in the US.

It said: “The US business achieved a quarterly Gross Win of $45.8 million, compared to Gross Win of $5.6 million in the PCP, with a Net Win of $26.7 million, compared to Net Win of $3.3 million for the PCP. This quarterly result was assisted by a reversal of the short-term negative variances experienced during the December quarter predominantly in New Jersey. As a result, the US business also achieved a record quarterly Gross Win Margin of 9.5% and a record quarterly Net Win Margin of 5.5%.”

“During the period, the Company had a successful Super Bowl LV, recording 4 times the handle and 12 times the number of first time bettors as compared to the previous year’s Super Bowl. Importantly, unlike some of the Company’s competitors who rely on third party platform providers, PointsBet suffered no technical issues or delays during this high-volume betting event.”

No guidance has been given for the fourth quarter or full year.

More reading

• Why the PointsBet (ASX:PBH) share price can rocket higher
• Why the Pointsbet (ASX: PBH) share price is in focus
• Is the PointsBet (ASX:PBH) share price back on track after this announcement?
• Why the PointsBet (ASX:PBH) share price shot up 7% today
• Why the PointsBet (ASX:PBH) share price was suddenly sold off in March 

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Pointsbet Holdings Ltd. The Motley Fool Australia has recommended Pointsbet Holdings Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Marley Spoon AG (ASX: MMM) share price is on the move on Friday morning.

At the time of writing, the subscription-based meal kit provider’s shares are surging 11% higher to $2.80.

Why is the Marley Spoon share price surging higher?

Investors have been buying the company’s shares following the release of its first quarter update after the market close on Thursday.

That update revealed that Marley Spoon’s strong growth continued during the quarter, resulting in an upgrade to its full year guidance.

According to the release, for the three months ended 31 March, Marley Spoon reported an 81% increase in revenue to 77.4 million euros. This was driven by growth across all regions.

How did its businesses perform?

In the United States, revenue increased 82% thanks to continued demand across both its Martha Stewart & Marley Spoon and Dinnerly brands. Pleasingly, the company delivered a breakeven operating result in the lucrative market.

In Australia, Marley Spoon reported a 65% increase in revenue and also achieved a breakeven operating result.

And in Europe, revenue grew 108% over the prior corresponding period. However, it reported an operating loss of 1 million euros in the region for the period.

Overall, Marley Spoon recorded an operating loss of 5.7 million for the quarter. However, this was driven largely by its seasonal marketing investment.

Pleasingly, the company recorded positive operating cash flow of 5.3 million, leaving it with a cash balance at 38.4 million euros at the end of the period.

Outlook

Following its strong start to the year, management has upgraded its guidance for FY 2021. It is now expecting revenue to increase between 30% and 35% year on year. This compares to previous guidance of 25% to 30%. It continues to expect its contribution margin to be between 30% and 31%.

Marley Spoon’s CEO, Fabian Siegel, said: “We are pleased with this strong start to the year across all our regions. We delivered a record quarter in terms of new customer acquisitions, subscriber numbers and absolute revenue, demonstrating an ability to deliver strong growth during both pandemic-related lockdowns and as markets reopen. We also overcame some operational challenges, notably weather-related headwinds from the floods in Australia and winter storms across the US and Europe.”

“User behavior across the regions has mostly normalized to its pre-COVID state. While COVID19 brought forward the structural shift online, the penetration rate of online grocery is still in its infancy. The dramatic growth we have seen across all e-commerce verticals in 2020 has created some temporary operational challenges in logistics, labor and supply chain infrastructure in the industry. As the consumer switch to online shopping in our categories continues, and as our team grows, we will be focused on managing these operational challenges while we continue to build further scale in our large addressable markets and deliver ongoing growth through strengthening our direct-to-consumer brands.”

Following today’s gain, the Marley Spoon share price is now up 145% over the last 12 months.

More reading

• The Marley Spoon (ASX:MMM) share price is up 686% since the beginning of 2020

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Bubs Australia Ltd (ASX: BUB) share price is pushing higher today following the release of its third quarter update.

In early trade, the goat milk infant formula company’s shares are up 5.5% to 46.5 cents.

How did Bubs perform in the third quarter?

Bubs was out of form during the third quarter, reporting a 40% year on year decline in gross revenue to $11.8 million.

While this was driven largely by a surge in sales in the prior corresponding period due to COVID-19 pantry stocking, it is worth noting that revenue is also down 7.8% compared to its second quarter gross revenue of $12.8 million.

This is despite the company increasing its footprint across leading Australian retailers such as Coles Group Ltd (ASX: COL) and Woolworths Group Ltd (ASX: WOW) during the quarter.

What were the drivers of its result?

Third quarter domestic sales (inc. daigou) were down 52% on the prior corresponding period. These sales account for 51% of its gross revenue.

Also declining during the quarter were its sales to international (ex. China) markets. They fell 4% over the prior corresponding period but rose 1% quarter on quarter.

Offsetting some of this decline was a 42% increase in China sales. These accounted for 30% or ~$3.54 million of gross revenue.

Interestingly, despite posting such a sharp decline in domestic sales, the company notes that it remains the fastest growing infant formula manufacturer across Woolworths, Coles and Chemist Warehouse. Though, it is worth remembering that with domestic quarterly sales of just $6.5 million (including the daigou channel), it is working from a very small base.

Overall, the decline in revenue ultimately led to an operating cash outflow of $3.7 million for the period. This left Bubs with a cash balance of $36.3 million at the end of March.

Beingmate joint venture scrapped

In August last year the company announced a joint venture agreement with China-based Beingmate. Management labelled the agreement a “pivotal breakthrough manufacturing arrangement to support obtaining SAMR registration for Bubs goat infant formula in China.”

This joint venture is now being scrapped and Bubs will go it alone in the China market instead.

It explained: “In order to drive the highest margin for our core products in the channels where we see the highest opportunity for growth, Bubs is simplifying its structure to be under the Company’s direct control. Bubs has reached agreement with Beingmate to unwind the Joint Venture, ‘Bubs Brand Management Shanghai Co. Ltd,’ of which Bubs holds 49% interest, resulting in the termination of the existing Trade Mark Licence Deed and Exclusive Distribution Agreement. Bubs has commenced the process of establishing a wholly owned operating subsidiary in China. Associated costs with the restructure are likely to be immaterial.”

Bubs’s Chairman, Dennis Lin, added: “This move is a direct reflection of the favourable results we have already seen in our direct supply and focus on the cross-border e-Commerce Channel, as well as our Online-to-Offline and General Trade customers. Under the new fully controlled China entity, we will have our own China sales structure and the flexibility to leverage profitable growth opportunities.”

Judging by the Bubs share price performance today, some investors appear to believe this is the right strategy.

More reading

• Will 2021 go down as the year A2 and other milk share prices turned sour?
• Why Bubs, Carbon Revolution, Paradigm, & Tyro shares are sinking
• Why the A2 Milk (ASX:A2M) share price hit a multi-year low today
• China’s dairy stocks rise: What does this mean for the A2 Milk (ASX:A2M) share price?
• 2 exciting small cap ASX shares to buy

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of BUBS AUST FPO. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Woolworths Limited. The Motley Fool Australia has recommended BUBS AUST FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Bigtincan Holdings Ltd (ASX: BTH) share price is under pressure on Friday.

In morning trade, the sales enablement automation platform provider’s shares are down 5% to 94.5 cents.

Why is the Bigtincan share price under pressure?

Investors have been selling Bigtincan’s shares this morning following the release of its third quarter update.

For the three months ended 31 March, the company reported annualised recurring revenue (ARR) of $48.4 million. This was flat on its second quarter ARR. 

While this may have disappointed investors, it is in line with expectations for the full year.

Cash receipts for the quarter came in at $12.2 million. Though, this was offset by cash operating payments of $15.8 million. This reflects the first full quarter for the ClearSlide and Agnitio acquisitions and the payment for VoiceVibes acquired in January.

At the end of the period, Bigtincan had $59.1 million in cash and cash equivalents. It believes this leaves it well funded to continue its growth strategy.

Bigtincan’s CEO and Co-Founder, David Keane, said: “Bigtincan continues its leadership in Sales Enablement globally, with leading technology and a strong focus on execution. The importance of our vision of connecting every customer facing worker with the digital and remote economy has been highlighted through the pandemic and remains more relevant than ever before.”

Outlook

Based on its in third quarter deferred revenue, remaining performance obligations, and anticipated revenue from renewals, Bigtincan currently expects its revenue to be in the range of $43 million to $44 million in FY 2021. This compares to its previous guidance of between $41 million and $44 million.

In addition, management is now forecasting its ARR to be at the top end of its FY 2021 guidance range of $49 million to $53 million. This assumes a stable exchange rate and stable customer retention.

This compares to FY 2020’s ARR of $35.8 million, representing year on year growth of 36.9% to 48%.

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends BIGTINCAN FPO. The Motley Fool Australia has recommended BIGTINCAN FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Why the Bigtincan (ASX:BTH) share price is tumbling lower today appeared first on The Motley Fool Australia.

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