Solid (but not excellent) numbers in my opinion. Suggests that...

Solid (but not excellent) numbers in my opinion.

Suggests that there may have been a leaky ship today with buying volume significantly up. Let's see if the buy side builds over the weekend / pre-market open on Monday. The THM numbers are largely* where they were reported to be pre-acquisition even though the market appeared to write the business off entirely; with the share price declining more than 55% post-acquisition. So in that context, I think this is a good result relative to expectations.

• The contract manufacturing business appears to be continuing to scale at $15.9m revenue for the quarter (run rate of ~$63.6m p.a.).
• There's no mention of EBITDA except for the fact that the brands division is now EBITDA positive, following a re-structure
• Overall adjusted net cash from operating activities is positive at +$0.6m (-$4.7m + $1m one-off professional service fees relating to the acquisition + $4.3m due payments the majority of which have now been collected). That's only marginally CF+ though, it is important that we see net CF continue to improve next quarter.
• (*) Revenue for THM is $4.2m. If you annualise that you get to ~$16.8m which is a significant shortfall from the $25m which was forecasted for FY22. This is because the Winter quarter is a seasonally low quarter. That explanation makes sense to me (and aligns with historical website visitor data), but is something to monitor going forward. It is important that we as shareholders see THM revenue increase in the next quarter as we enter the higher performing (warmer) months of the year and particularly the Q4-CY22 (Oct, Nov, Dec) quarter, which should be a bumper quarter for sales.

In the F&B sector, where you have ~50% of all of the ASX listed entities unprofitable (many burning significant amounts of cash) yet many at much higher valuations, this result to me reflects the asymmetric risk/reward opportunity with HLF. However, it is important that i) Halo continues to be net cash generative going forward, ii) pays down its debt and iii) can continue to profitably grow, with operating leverage. If that happens, the business has a bright future. Not out of the woods yet but this is hopefully enough for the market to regain confidence that the THM business is not a fad and is instead a genuine cash-flow generative business.

$20m market cap. $83m sales run rate. Marginally CF+ (if adjusted for late payments) — it will be very interesting to see what Mr Market makes of this, come Monday, relative to the expectations that are baked into the share price. As a very rough back-of-the-envelope calc, assuming a 10% EBITDA margin and 6x EBITDA multiple; I get a fair value revenue multiple of 0.6x.