- Candy Club (CLB) investors took the sweet with the sour today after the company grew its revenue but deepened its cash burn over the September quarter
- Overall, the consumer discretionary stock brought in US$2.18 million (roughly A$3.05 million) in revenue over the September quarter
- While that’s significantly up on 2019’s third quarter, the result is a slight dip on the US$2.35 million (about A$3.29 million) tabled at the end of June
- Ultimately, the sweets supplier’s operating cashflow balance feel further into negative territory — the company burnt through just shy of $US1.9 million (around A$2.66 million) during the quarter
- However, Candy Club chalks this up to an increase in its inventory balance as it gears up to meet heightened demand in the current quarter
- Looking ahead, the business said it was focussed on becoming a large and speciality candy creator in the near future
- Despite the report, Candy Club shares fell over 8.5 per cent this afternoon to trade for 16 cents
Candy Club (CLB) investors took the sweet with the sour today after the company grew its revenue but deepened its cash burn over the September quarter.
The subscription sweets supplier’s latest financials were peppered with references to challenges in the U.S. market, but Candy Club’s message to investors was that its business was thriving, despite 2020’s hurdles.
Commenting on this year’s headwinds and Candy Club’s performance, CEO Keith Cohn said people were drawn to the company’s sweet offering.
“I was recently asked by one of our retail partners why we are having so much success in this challenging market,” he said. “The answer was simple. Consumers love our products because they are fun, delicious and make people happy. That is especially important in these trying times.”
Despite the sentiment, today’s result was somewhat of a mixed bag: business-to-business (B2B) revenue boomed, while business-to-consumer (B2C) growth fell into negative territory.
From July to September, the confectioner saw B2B revenue spike more than eightfold compared to the same period last year. Next to the last quarter, however, B2B revenue increased by just 3.8 per cent.
On the other hand, Candy Club’s B2C revenue slumped over 20 per cent compared to last years’ result, while the company recorded a near 30 per cent drop on the June quarter’s revenue.
Overall, the consumer discretionary stock brought in US$2.18 million (roughly A$3.05 million) in revenue over the September quarter. While that’s significantly up on 2019’s third quarter, the result is a slight dip on the US$2.35 million (about A$3.29 million) tabled at the end of June.
Operating cash flow deepens
Ultimately, the sweets supplier’s operating cashflow balance feel deeper into negative territory during the September quarter.
Over the period, Candy Club burnt through just shy of $US1.9 million (around A$2.66 million). By comparison, the confectioner went cashflow negative by US$927,000 (roughly A$ ) between April and June.
The business’ September quarter outflows were somewhat offset by US$1.91 million (around A$2.67 million) in customer receipts — however, this was the only operational inflow recorded on the balance sheet. Over US$2.5 million (approximately A$3.5 million) in product manufacturing and operating costs made up Candy Club’s biggest expense.
Speaking to the increase in net operating cashflow, Candy Club said it used the quarter to boost its inventory capacity, positioning it to meet growing demand in the current quarter.
More broadly, the preparation forms part of Candy Club’s vision build to a large and specialty candy brand in the near future.
During the quarter, Candy Club boosted its cash reserves with US$1.7 million (around A$2.38 million) in equity raise proceeds.
It comes after the company completed a A$2.45 million private placement in July, issuing just under 20 million shares to institutional and sophisticated investors.
However, the majority of the cash injection was used to cover this quarter’s cash burn, meaning Candy Club now has just under US$1 million (around A$1.4 million) in the bank.
That figure is only up slightly on the US$640,000 (approximately A$896,320) the company had to begin with.
What’s the outlook?
Considering the company’s cash balance and its net operating cashflow, Candy Club only has enough funding to get by for less than a quarter.
However, the business isn’t concerned: it predicts a spike in cash receipts, a decrease in quarterly cash burn, and access to additional working capital will support it in the quarters to come.
“From a financial and operating standpoint, I could not be happier with Candy Club and the team behind the company,” said Candy Club Chairman James Baillieu.
“We have encouraging tailwinds, and we are turning profitable by the end of the year. This is one of the most exciting times to be an investor and Chairman of a company, as there are exponential growth and lots of energy in this business,” he signed off.
Sadly, investors saw more sour than sweet today, dragging the company’s share price down over 8.5 per cent. Company stock is trading for 16 cents each at 3:19 am AEDT.