Better Choice Company Inc. (NYSE American: BTTR) (the “Company” or
“Better Choice”), a pet health and wellness company, today
announced its results for the second quarter ended June 30,
2024 ("Q2 2024").
SECOND QUARTER 2024
FINANCIAL HIGHLIGHTS
- Revenue increased 8% to $8.5 million
from the first quarter 2024
- Gross margin increased 403 basis points
year-over-year (“YOY”) to 38%
- Operating loss improved 72% YOY to
$(0.7) million
- Operating margin improved 1,605 basis
points YOY to (8)%
- Net income increased 190% YOY to $2.7
million
- Earnings per share (“EPS”) improved
170% YOY to $2.98
- $3.6 million one-time gain on
extinguishment of debt
- Adjusted EBITDA increased 98% YOY to
less than $(0.1) million1
SIX MONTHS 2024
FINANCIAL HIGHLIGHTS
- Gross margin increased 114 basis points
YOY to 36%
- Operating loss improved 45% YOY to
$(3.2) million
- Operating margin improved 101 basis
points YOY to (19)%
- Net loss improved 97% YOY to $(0.2)
million
- EPS improved 98% YOY to $(0.21)
- Adjusted EBITDA improved 60% YOY to
$(1.4) million1
"Our second quarter performance demonstrates
that our efforts to stabilize operations, revamp channel strategy,
and instill greater financial governance are taking shape. We
believe there is significant runway for increased Halo growth at
both Chewy and Amazon as we continue to shift our investment, move
to full funnel activation, and improve our storytelling and share
of voice," commented Chief Executive Officer, Kent Cunningham. "We
see increased opportunity for the Halo brand across the roughly $50
billion US & Canada pet food markets and the $30 billion
represented across the Asia-Pacific region. Halo sits at the
intersection of the two megatrends fueling market growth:
Humanization and Premiumization. Whether the pet parent is a clean
food consumer seeking all-natural nutrition that is minimally
processed and responsibly sourced, or seeking a dietary solution to
address allergies, skin and coat issues, digestive or other health
concerns, Halo provides products that deliver visible results."
Nina Martinez, Chief Financial Officer, also
commented, "The company’s positive financial results are a
testament to the strong underlying performance and operating
leverage we are seeing in the business. The sales momentum and
significant adjusted EBITDA1 improvement we saw in the second
quarter truly reflect our strategic pivots are working. Our
International channel generated 27% top line growth from the first
quarter, and 7% year-to-date growth YOY. Our Digital channel,
comprising of our E-commerce platforms and legacy
Direct-to-Consumer channel, generated 11% topline growth as the
Halo brand gains momentum domestically as well. The YOY topline
softness was expected internally as we have made purposeful
strategic exits of several unprofitable brick and mortar customers,
as well as the closing of our legacy Halo Pets Direct-to-Consumer
channel that was trending as a double digit negative EBITDA1
channel. While these actions negatively impacted our YOY topline,
the positive impact to our bottom line was critical as we
significantly improved the financial shape of the business and we
are beating all internal targets. Supplier input costs are coming
down and we are unlocking profit through global volumes, as is
reflected in our gross margin improvement. We've tightened
operating expenses and have unlocked significant profit levers
through the channel strategy shifts. Our ability to improve working
capital, improve margins, and accelerate free cash flow provide
confidence in our ability to deliver on our near and long-term
goals."
1 Adjusted EBITDA is a non-GAAP measure. Reconciliation of
Adjusted EBITDA and to net income (loss), the most directly
comparable GAAP financial measure, is set forth in the
reconciliation table accompanying this release.
Better Choice Company
Inc.Unaudited Condensed Consolidated Statements of
Operations(Dollars in thousands)
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
2024 |
|
|
|
2023 |
|
|
|
2024 |
|
|
|
2023 |
|
Net sales |
$ |
8,542 |
|
|
$ |
10,536 |
|
|
$ |
16,445 |
|
|
$ |
19,773 |
|
Cost of goods sold |
|
5,289 |
|
|
|
6,948 |
|
|
|
10,578 |
|
|
|
12,944 |
|
Gross profit |
|
3,253 |
|
|
|
3,588 |
|
|
|
5,867 |
|
|
|
6,829 |
|
Operating
expenses: |
|
|
|
|
|
|
|
Selling, general and administrative |
|
3,977 |
|
|
|
6,173 |
|
|
|
9,057 |
|
|
|
12,669 |
|
Total operating expenses |
|
3,977 |
|
|
|
6,173 |
|
|
|
9,057 |
|
|
|
12,669 |
|
Loss from operations |
|
(724 |
) |
|
|
(2,585 |
) |
|
|
(3,190 |
) |
|
|
(5,840 |
) |
Other income
(expense): |
|
|
|
|
|
|
|
Interest expense, net |
|
(180 |
) |
|
|
(379 |
) |
|
|
(542 |
) |
|
|
(608 |
) |
Gain on extinguishment of debt |
|
3,561 |
|
|
|
— |
|
|
|
3,561 |
|
|
|
— |
|
Total other income (expense),
net |
|
3,381 |
|
|
|
(379 |
) |
|
|
3,019 |
|
|
|
(608 |
) |
Income (loss) before income
taxes |
|
2,657 |
|
|
|
(2,964 |
) |
|
|
(171 |
) |
|
|
(6,448 |
) |
Income tax expense |
|
3 |
|
|
|
— |
|
|
|
5 |
|
|
|
— |
|
Net income (loss) |
$ |
2,654 |
|
|
$ |
(2,964 |
) |
|
$ |
(176 |
) |
|
$ |
(6,448 |
) |
Weighted average number of
shares outstanding, basic |
|
890,756 |
|
|
|
694,356 |
|
|
|
838,062 |
|
|
|
693,561 |
|
Weighted average number of
shares outstanding, diluted |
|
890,756 |
|
|
|
694,356 |
|
|
|
838,062 |
|
|
|
693,561 |
|
Net income (loss) per share,
basic |
$ |
2.98 |
|
|
$ |
(4.27 |
) |
|
$ |
(0.21 |
) |
|
$ |
(9.30 |
) |
Net income (loss) per share,
diluted |
$ |
2.98 |
|
|
$ |
(4.27 |
) |
|
$ |
(0.21 |
) |
|
$ |
(9.30 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Better Choice Company
Inc.Unaudited Condensed Consolidated Balance
Sheets(Dollars in thousands, except share amounts)
|
June 30, 2024 |
|
December 31, 2023 |
Assets |
|
|
|
Cash and cash equivalents |
$ |
3,293 |
|
|
$ |
4,455 |
|
Accounts receivable, net |
|
4,325 |
|
|
|
4,354 |
|
Inventories, net |
|
3,825 |
|
|
|
6,611 |
|
Prepaid expenses and other
current assets |
|
771 |
|
|
|
812 |
|
Total Current Assets |
|
12,214 |
|
|
|
16,232 |
|
Fixed assets, net |
|
179 |
|
|
|
230 |
|
Right-of-use assets, operating
leases |
|
92 |
|
|
|
120 |
|
Goodwill |
|
405 |
|
|
|
— |
|
Other assets |
|
195 |
|
|
|
155 |
|
Total Assets |
$ |
13,085 |
|
|
$ |
16,737 |
|
Liabilities &
Stockholders’ Equity |
|
|
|
Current
Liabilities |
|
|
|
Accounts payable |
$ |
6,108 |
|
|
$ |
6,928 |
|
Accrued and other
liabilities |
|
1,361 |
|
|
|
2,085 |
|
Credit facility, net |
|
1,582 |
|
|
|
1,741 |
|
Term loan, net |
|
— |
|
|
|
2,881 |
|
Operating lease liability |
|
59 |
|
|
|
57 |
|
Total Current Liabilities |
|
9,110 |
|
|
|
13,692 |
|
Non-current
Liabilities |
|
|
|
Operating lease liability |
|
37 |
|
|
|
67 |
|
Total Non-current
Liabilities |
|
37 |
|
|
|
67 |
|
Total Liabilities |
|
9,147 |
|
|
|
13,759 |
|
Stockholders’
Equity |
|
|
|
Common Stock, $0.001 par value,
200,000,000 shares authorized, 916,329 & 729,026 shares issued
and outstanding as of June 30, 2024 and December 31,
2023, respectively |
|
1 |
|
|
|
1 |
|
Additional paid-in
capital |
|
325,455 |
|
|
|
324,319 |
|
Accumulated deficit |
|
(321,518 |
) |
|
|
(321,342 |
) |
Total Stockholders’
Equity |
|
3,938 |
|
|
|
2,978 |
|
Total Liabilities and
Stockholders’ Equity |
$ |
13,085 |
|
|
$ |
16,737 |
|
|
|
|
|
|
|
|
|
Better Choice Company
Inc.Non-GAAP Measures
Adjusted EBITDA
We define Adjusted EBITDA as EBITDA further
adjusted to eliminate the impact of certain items that we do not
consider indicative of our core operations. Adjusted EBITDA is
determined by adding the following items to net (loss) income:
interest expense, tax expense, depreciation and amortization,
share-based compensation, gain on extinguishment of debt, loss on
disposal of assets, transaction-related expenses, and other
non-recurring expenses.
We present Adjusted EBITDA as it is a key
measure used by our management and board of directors to evaluate
our operating performance, generate future operating plans and make
strategic decisions regarding the allocation of capital. We believe
that the disclosure of Adjusted EBITDA is useful to investors as
this non-GAAP measure forms the basis of how our management team
reviews and considers our operating results. By disclosing this
non-GAAP measure, we believe that we create for investors a greater
understanding of and an enhanced level of transparency into the
means by which our management team operates our company. We also
believe this measure can assist investors in comparing our
performance to that of other companies on a consistent basis
without regard to certain items that do not directly affect our
ongoing operating performance or cash flows.
Adjusted EBITDA does not represent cash flows
from operations as defined by GAAP. Adjusted EBITDA has limitations
as a financial measure and you should not consider it in isolation,
or as a substitute for, or superior to, financial measures
calculated in accordance with GAAP. Because of these limitations,
you should consider Adjusted EBITDA alongside other financial
performance measures, including various cash flow metrics, net
(loss) income, gross margin, and our other GAAP results.
The following table presents a reconciliation of net income
(loss), the closest GAAP financial measure, to EBITDA and Adjusted
EBITDA for each of the periods indicated (in thousands):
Reconciliation of Net Income (Loss) to
EBITDA and Adjusted EBITDA
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
2024 |
|
|
|
2023 |
|
|
|
2024 |
|
|
|
2023 |
|
Net income (loss) |
$ |
2,654 |
|
|
$ |
(2,964 |
) |
|
$ |
(176 |
) |
|
$ |
(6,448 |
) |
Interest expense, net |
|
180 |
|
|
|
379 |
|
|
|
542 |
|
|
|
608 |
|
Income tax expense |
|
3 |
|
|
|
— |
|
|
|
5 |
|
|
|
— |
|
Depreciation and
amortization |
|
34 |
|
|
|
421 |
|
|
|
68 |
|
|
|
845 |
|
EBITDA |
|
2,871 |
|
|
|
(2,164 |
) |
|
|
439 |
|
|
|
(4,995 |
) |
Non-cash share-based compensation
(a) |
|
159 |
|
|
|
284 |
|
|
|
678 |
|
|
|
1,145 |
|
Gain on extinguishment of
debt |
|
(3,561 |
) |
|
|
— |
|
|
|
(3,561 |
) |
|
|
— |
|
Loss on disposal of assets |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
11 |
|
Transaction-related expenses
(b) |
|
131 |
|
|
|
— |
|
|
|
489 |
|
|
|
— |
|
Non-recurring strategic branding
initiatives (c) |
|
43 |
|
|
|
18 |
|
|
|
69 |
|
|
|
33 |
|
Co-manufacturing partner
transition (d) |
|
— |
|
|
|
6 |
|
|
|
— |
|
|
|
6 |
|
Other single occurrence expenses
(e) |
|
327 |
|
|
|
31 |
|
|
|
457 |
|
|
|
189 |
|
Adjusted
EBITDA |
$ |
(30 |
) |
|
$ |
(1,825 |
) |
|
$ |
(1,429 |
) |
|
$ |
(3,611 |
) |
(a) Non-cash
expenses related to equity compensation awards. Share-based
compensation is an important part of the Company's compensation
strategy and without our equity compensation plans, it is probable
that salaries and other compensation related costs would be
higher. |
(b) Legal fees,
professional fees, and other expenses for transaction-related
business matters |
(c) Single
occurrence expenses related to marketing agency and design,
strategic re-branding initiatives, Elevate® launch, product
innovation and reformulations |
(d) Single
occurrence expenses related to the transition of our largest dry
kibble co-manufacturing supplier |
(e) Single
occurrence expenses related to employee severance, executive
recruitment, and other non-recurring professional fees |
|
About Better Choice Company Inc.
Better Choice Company Inc. is a pet health and
wellness company focused on providing pet products and services
that help dogs and cats live healthier, happier and longer lives.
We offer a broad portfolio of pet health and wellness products for
dogs and cats sold under our Halo brand across multiple forms,
including foods, treats, toppers, dental products, chews, and
supplements. We have a demonstrated, multi-decade track record of
success and are well positioned to benefit from the mainstream
trends of growing pet humanization and consumer focus on health and
wellness. Our products consist of kibble and canned dog and cat
food, freeze-dried raw dog food and treats, vegan dog food and
treats, oral care products and supplements. Halo’s core products
are made with high-quality, thoughtfully sourced ingredients for
natural, science-based nutrition. Each innovative recipe is
formulated with leading veterinary and nutrition experts to deliver
optimal health. For more information, please visit
https://www.betterchoicecompany.com.
Forward Looking Statements
This press release contains forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. The words “believe,” “may,” “estimate,”
“continue,” “anticipate,” “intend,” “should,” “plan,” “could,”
“target,” “potential,” “is likely,” “will,” “expect” and similar
expressions, as they relate to us, are intended to identify
forward-looking statements. The Company has based these
forward-looking statements largely on our current expectations and
projections about future events and financial trends that we
believe may affect our financial condition, results of operations,
business strategy and financial needs. Some or all of the results
anticipated by these forward-looking statements may not be
achieved. Further information on the Company’s risk factors is
contained in our filings with the SEC. Any forward-looking
statement made by us herein speaks only as of the date on which it
is made. Factors or events that could cause our actual results to
differ may emerge from time to time, and it is not possible for us
to predict all of them. The Company undertakes no obligation to
publicly update any forward-looking statement, whether as a result
of new information, future developments or otherwise, except as may
be required by law.
Company Contact:Better Choice Company Inc.Kent
Cunningham, CEO
Investor Contact:KCSA Strategic
CommunicationsValter Pinto, Managing DirectorT:
212-896-1254Valter@KCSA.com
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