Candy Club has achieved $2.1M in operating revenue with a 51% GPM for the Q1 FY19

Candy Club’s wholesale division continues seeing growth with 400 new retail partners and division achieving revenue growth of 25% over the prior quarter.


  • The Company was admitted to the ASX on 19 February 2019 providing the Company with $4.37mm in net cash proceeds from the IPO
  • During Q1 2019, the Company achieved operating revenue of $2.1mm with a 51% gross profit margin of $1.08mm and cash receipts of $1.86mm
  • The Company’s wholesale division (B2B) added 400 new retail partners and sees revenue climb by 25% over the prior quarter
  • The Company has made significant investments in inventory, driven by strong B2B demand from 750+ retail partners representing over 2,000 locations, with $2.9mm in inventory at 31 March 2019
  • Prominent retail chains currently carrying the Company’s product line include Hallmark Stores, Francesca’s, Riley Rose (division of Forever 21), Lick, Saks Fifth Avenue and Ace Hardware, with substantial opportunity to expand with each
  • Cash at bank at 31 March 2019 was $1.1mm with availability of up to an additional $1.4mm through a credit facility secured in April 2019
  • Operation of the direct-to-consumer subscription (B2C) business is running efficiently, but with customer acquisition expenses reduced by 40% from the prior quarter, mostly due to a new media buying strategy and partnership programs with partners including mobile carrier Verizon and State Farm Insurance

Initial Public Offering

On 19 February 2019 the Company was admitted to the ASX and secured $4.37mm in net proceeds from the IPO, providing the Company with the working capital required to execute its 2019 operating plan. A key use of the IPO proceeds during Q1 2019 was for significant inventory purchases to meet current and forecasted demand. While total product and manufacturing costs in Q1 2019 were $1.75mm, approximately $1mm were for cost of goods sold (COGS) in Q1 2019 with $450k in COGS representing inventory purchases to meet future demand.

Operating Results and Cash Outflows

Revenue for Q1 2019 was $2.1mm with cash receipts totalling $1.86mm. The Company achieved a 51% gross profit margin equalling $1.08mm in gross profit before distribution and selling expenses resulting in a net contribution margin after all distribution and selling expenses of $586k.

While total cash outflows for all staff ($987k), R&D ($30k), leases ($65k) and administration and corporate expenses ($1.7mm) equalled $2.8mm during Q1 2019, on an operating basis actual expenses were only $1.3mm when certain one-off, non-recurring expenditures like severance or payments of expenses incurred in prior periods were excluded. The Company expects further declines in total operating costs as evidenced by the fact that the total cash outflows for these same expense items only totalled $394k during March 2019.

For Q1 2019, EBITDA loss excluding certain one-off, non-recurring charges was $1.2mm with further decreases expected as revenue grows, expenses decline and margins expand. For example EBITDA loss is forecast to be approximately $250k during the month of April 2019.

While an additional $1.2mm was used in Q1 2019 to repay loans ($1.124mm) and interest ($84k), it should be noted that the Company had no non-trade debt on its Balance Sheet at 31 March 2019.

Wholesale Division (B2B)

Candy Club’s wholesale division (B2B) achieved $380k in revenue during Q1 2019, representing a 25% increase over the prior quarter. The Company added nearly 400 new retail partners in this period, bringing its total retail customers to over 750 acquired in just over two quarters of operations. Candy Club’s products are currently carried in just over 2,000 retail locations across the USA.

As a result of strong product sell through, more than 50% of revenue from the B2B division was generated by customer reorder activity. More significantly, there were several prominent national retailers who tested the Company’s product lines in a limited number of stores, that have now expanded the number of stores offering the product due to strong sell through and consumer demand. Most notable among these retailers was the Hallmark Stores, who initially carried the product in 12 locations and has expanded to nearly 400 outlets out of their total of 2,000 stores throughout the United States. Other multi-location retail operators currently carrying Candy Club’s products include Franchesca’s (52 stores), Lick (12 stores), and Box Lunch (114 stores). Retail partners currently in test markets, with the opportunity to expand nationally, include Riley Rose, Saks Fifth Avenue, Ace Hardware and Bloomingdale’s.

To date, 90% of all multi-location chains which have carried Candy Club’s product line have reordered and expanded the relationship with the Company due to strong retail sales.

It should also be noted that the Company has historically experienced significant seasonality in its business with 70% of all sales occurring in the second half of the calendar year.

Direct-to-Consumer Division (B2C)

The recurring monthly revenue (RMR) for the B2C division during Q1 2019 averaged $580k per month, which equates to a $7mm annualised run-rate. While the RMR has decreased slightly from the prior period, this is in-line with the Company’s operating plan and was achieved with a dramatically reduced customer acquisition expense of $493k (compared to $842k during the prior period) as the Company realigns its focus to move towards profitability as soon as possible.

This was achieved by the Company’s new media buying strategy and by utilising key marketing partnerships with household brand names including mobile carrier Verizon and State Farm Insurance. These resulted in a 38% reduction in average customer acquisition cost (CPA) to $31 per new subscriber compared to the prior quarter.

Gross margins in the B2C division have continued to increase to 58.8% before shipping and selling expenses and a net contribution margin of 43.4% after shipping and selling expenses but before the impact of new member incentives.

The Company also expects to expand its B2C division as it plans to launch a non-subscription based e-commerce offering in Q2 2019. This has the potential to be a highly cost-effective way to re-engage and monetise the roughly 250,000 customers that have purchased a subscription from Candy Club with no incremental marketing expense.


About Candy Club:

Candy Club is a leading speciality market confectionery company which operates a wholesale business and a direct-to-consumer subscription business. Founded in 2015 by serial entrepreneur Keith Cohn, the Company is executing on an omni-channel strategy with a vision to become the world’s leading speciality market candy company. The Company is headquartered in Los Angeles, CA.

Register Interest