Better Choice Company Inc. (NYSE American: BTTR) (the “Company” or
“Better Choice”), a pet health and wellness company, today reported
its financial results for the second quarter ended June 30,
2022.
“In spite of unprecedented supply chain disruptions felt across
the consumer-packaged goods industry, during the second quarter of
2022 we were able to deliver sequential adjusted gross margin
improvement of approximately 300 basis points and 50% growth in net
sales relative to the second quarter of 2021, driven by growth of
75% in International sales and 133% in Brick & Mortar sales.
The $19.8 million of gross sales generated in this quarter
represents an all-time high for Better Choice, surpassing the $19.7
million generated in the first quarter of 2022. While our
International business continues to grow rapidly, we are making
great progress in pet specialty. We have already launched Halo
Elevate® in over 1,500 pet specialty stores including Petco, Pet
Supplies Plus and key independent retailers, and have observed
consistent week-over-week growth of POS sales, coupled with strong
repeat customer purchase rates at key accounts,” said Scott Lerner,
CEO of Better Choice.
“In addition to delivering record gross sales, we also realized
meaningful sequential gross margin improvement, achieving a gross
margin of 29% in Q2 2022 vs. 28% in Q1 2022. Adjusting for one-time
pet specialty launch expenses, we achieved an adjusted gross margin
of 31% in Q2 2022. This improvement in Q2 2022 was driven by
several key factors, including the shift of domestic kibble
production to a new co-manufacturer, the consolidation of
production runs across our portfolio and the implementation of
domestic and international price increases. In the second half of
2022 we expect to realize continued gross margin improvements,
driven primarily by the transition of our international dry kibble
diets to a new co-manufacturer. This transition was completed in
mid-June and resulted in an immediate 1,500 to 2,000 basis point
improvement to gross margin. Prior to the transition, these diets
represented approximately $10 million of net sales in the first
half of 2022. We also have a lot of exciting new developments
planned, including the continued distribution of Halo Elevate®
nationwide and the rebrand of Halo Holistic™ and Trudog. We believe
our second quarter cash position is sufficient to support our plan
to achieve profitability, particularly since we expect to benefit
from positive changes to net working capital in the second half of
2022. While we are very excited by our sales growth in the first
half of this year, we remain laser focused on driving continued
margin improvements across our portfolio,” concluded Mr.
Lerner.
Second Quarter 2022 and Subsequent Operational
Updates
- Launched Halo Elevate® in 1,000+ Petco retail locations.
- Launched Halo Elevate® in 600+ Pet Supplies Plus retail
locations.
- Launched global marketing campaign to coincide with pet
specialty launch, generating more than 42 million impressions and
22 million video views in the first six weeks post-launch.
- Completed co-manufacturing transition of key international
diets in mid-June, resulting in an immediate 1,500 to 2,000 basis
point gross margin improvement for these diets. Prior to the
transition, these diets represented approximately $10 million of
net sales in the first half of 2022 (approximately 70% of total
international net sales).
- Completed integration of TruDog Brand and launched Halo®
branded freeze-dried raw meals, treats and toppers.
- Implemented Domestic and International price increases
effective April 2022 to address inflationary pressures.
Second Quarter 2022 Corporate Updates
- Promoted Robert Sauermann to Chief Operating Officer and Donald
Young to Chief Sales Officer.
- Certain members of the Board of Directors and Management team
purchased 566,269 common shares led by Donald Young, representing
approximately 2% of the basic common shares outstanding.
- Joined the Russell Microcap® Index,
effective June 27, 2022.
Conference Call and Webcast Information
The Company will host a conference call and audio webcast on
Thursday, August 11, 2022 at 8:30 am (Eastern Time) to answer
questions about the Company's operational and financial highlights
for the second quarter of 2022.
Event: |
Better Choice Second Quarter 2022 Earnings Call |
Date: |
Thursday, August 11, 2022 |
Time: |
8:30 a.m. Eastern Time |
Live Call: |
+1-844-825-9789 (U.S. Toll-Free)
or +1-412-317-5180 (International) |
Webcast: |
https://viavid.webcasts.com/starthere.jsp?ei=1561045&tp_key=cb321c959e |
For interested individuals unable to join the conference call, a
dial-in replay of the call will be available until August 25, 2022
and can be accessed by dialing +1-844-512-2921 (U.S. Toll Free) or
+1-412-317-6671 (International) and entering replay pin number:
10169599.
Better Choice Company
Inc.Unaudited Consolidated Statements of
Operations(Dollars in thousands, except share and per
share amounts)
|
|
Three Months EndedJune 30, |
|
Six Months EndedJune 30, |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
Net sales |
|
$ |
16,515 |
|
|
$ |
10,989 |
|
|
$ |
33,529 |
|
|
$ |
21,819 |
|
Cost of goods sold |
|
|
11,788 |
|
|
|
7,088 |
|
|
|
24,095 |
|
|
|
13,644 |
|
Gross profit |
|
|
4,727 |
|
|
|
3,901 |
|
|
|
9,434 |
|
|
|
8,175 |
|
Operating
expenses: |
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
8,187 |
|
|
|
6,766 |
|
|
|
15,764 |
|
|
|
13,653 |
|
Share-based compensation |
|
|
801 |
|
|
|
332 |
|
|
|
1,892 |
|
|
|
2,857 |
|
Total operating expenses |
|
|
8,988 |
|
|
|
7,098 |
|
|
|
17,656 |
|
|
|
16,510 |
|
Loss from operations |
|
|
(4,261 |
) |
|
|
(3,197 |
) |
|
|
(8,222 |
) |
|
|
(8,335 |
) |
Other (expense)
income: |
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
(106 |
) |
|
|
(2,234 |
) |
|
|
(182 |
) |
|
|
(3,069 |
) |
Gain on extinguishment of debt, net |
|
|
— |
|
|
|
851 |
|
|
|
— |
|
|
|
457 |
|
Change in fair value of warrant liabilities |
|
|
— |
|
|
|
29,356 |
|
|
|
— |
|
|
|
22,873 |
|
Total other (expense) income,
net |
|
|
(106 |
) |
|
|
27,973 |
|
|
|
(182 |
) |
|
|
20,261 |
|
Net (loss) income before income
taxes |
|
|
(4,367 |
) |
|
|
24,776 |
|
|
|
(8,404 |
) |
|
|
11,926 |
|
Income tax expense |
|
|
— |
|
|
|
— |
|
|
|
3 |
|
|
|
— |
|
Net (loss) income available to
common stockholders |
|
$ |
(4,367 |
) |
|
$ |
24,776 |
|
|
$ |
(8,407 |
) |
|
$ |
11,926 |
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares
outstanding, basic |
|
|
29,364,712 |
|
|
|
11,126,909 |
|
|
|
29,327,316 |
|
|
|
10,361,462 |
|
Weighted average number of shares
outstanding, diluted |
|
|
29,364,712 |
|
|
|
21,389,413 |
|
|
|
29,327,316 |
|
|
|
20,498,829 |
|
Net (loss) income per share
available to common stockholders, basic |
|
$ |
(0.15 |
) |
|
$ |
2.23 |
|
|
$ |
(0.29 |
) |
|
$ |
1.11 |
|
Net (loss) income per share
available to common stockholders, diluted |
|
$ |
(0.15 |
) |
|
$ |
1.19 |
|
|
$ |
(0.29 |
) |
|
$ |
0.56 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Better Choice Company
Inc.Unaudited Condensed Consolidated Balance
Sheets(Dollars in thousands, except share and per share
amounts)
|
|
June 30, 2022 |
|
December 31, 2021 |
Assets |
|
|
|
|
Cash and cash equivalents |
|
$ |
10,860 |
|
|
$ |
21,729 |
|
Restricted cash |
|
|
6,963 |
|
|
|
7,213 |
|
Accounts receivable, net |
|
|
8,691 |
|
|
|
6,792 |
|
Inventories, net |
|
|
10,489 |
|
|
|
5,245 |
|
Prepaid expenses and other
current assets |
|
|
2,948 |
|
|
|
2,940 |
|
Total Current Assets |
|
|
39,951 |
|
|
|
43,919 |
|
Fixed assets, net |
|
|
480 |
|
|
|
369 |
|
Right-of-use assets, operating
lease |
|
|
31 |
|
|
|
56 |
|
Intangible assets, net |
|
|
10,823 |
|
|
|
11,586 |
|
Goodwill |
|
|
18,614 |
|
|
|
18,614 |
|
Other assets |
|
|
101 |
|
|
|
116 |
|
Total Assets |
|
$ |
70,000 |
|
|
$ |
74,660 |
|
Liabilities &
Stockholders’ Equity |
|
|
|
|
Current
Liabilities |
|
|
|
|
Accounts payable |
|
$ |
4,004 |
|
|
$ |
4,553 |
|
Accrued and other
liabilities |
|
|
2,215 |
|
|
|
1,879 |
|
Term loan, net |
|
|
1,130 |
|
|
|
855 |
|
Operating lease liability |
|
|
33 |
|
|
|
54 |
|
Total Current Liabilities |
|
|
7,382 |
|
|
|
7,341 |
|
Non-current
Liabilities |
|
|
|
|
Term loan, net |
|
|
3,866 |
|
|
|
4,559 |
|
Line of credit, net |
|
|
7,368 |
|
|
|
4,856 |
|
Deferred tax liability |
|
|
24 |
|
|
|
24 |
|
Operating lease liability |
|
|
— |
|
|
|
5 |
|
Total Non-current
Liabilities |
|
|
11,258 |
|
|
|
9,444 |
|
Total Liabilities |
|
|
18,640 |
|
|
|
16,785 |
|
Stockholders’
Equity |
|
|
|
|
Common Stock, $0.001 par value,
200,000,000 shares authorized, 29,364,712 and 29,146,367 shares
issued and outstanding as of June 30, 2022 and
December 31, 2021, respectively |
|
|
29 |
|
|
|
29 |
|
Series F Preferred Stock, $0.001
par value, 30,000 shares authorized, 0 shares issued and
outstanding as of June 30, 2022 and December 31, 2021,
respectively |
|
|
— |
|
|
|
— |
|
Additional paid-in capital |
|
|
318,994 |
|
|
|
317,102 |
|
Accumulated deficit |
|
|
(267,663 |
) |
|
|
(259,256 |
) |
Total Stockholders’ Equity |
|
|
51,360 |
|
|
|
57,875 |
|
Total Liabilities and
Stockholders’ Equity |
|
$ |
70,000 |
|
|
$ |
74,660 |
|
Better Choice Company
Inc.Non-GAAP Measures(Dollars in
thousands)
Adjusted EBITDA
Better Choice Company defines 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, warrant expense, loss on disposal of
assets, change in fair value of warrant liabilities, gain or loss
on extinguishment of debt, equity and debt offering expenses and
other non-recurring expenses.
The Company presents 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, gross
margin, and our other GAAP results.
The following table presents a reconciliation of net (loss)
income, the closest GAAP financial measure, to EBITDA and Adjusted
EBITDA for each of the periods indicated:
Reconciliation of Net (Loss) Income to
EBITDA and Adjusted EBITDA
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
Net (loss) income available to
common stockholders |
|
$ |
(4,367 |
) |
|
$ |
24,776 |
|
|
$ |
(8,407 |
) |
|
$ |
11,926 |
|
Interest expense, net |
|
|
106 |
|
|
|
2,234 |
|
|
|
182 |
|
|
|
3,069 |
|
Tax expense |
|
|
— |
|
|
|
— |
|
|
|
3 |
|
|
|
— |
|
Depreciation and
amortization |
|
|
430 |
|
|
|
413 |
|
|
|
839 |
|
|
|
824 |
|
EBITDA |
|
|
(3,831 |
) |
|
|
27,423 |
|
|
|
(7,383 |
) |
|
|
15,819 |
|
Non-cash share-based compensation
and warrant expense (a) |
|
|
801 |
|
|
|
313 |
|
|
|
1,892 |
|
|
|
2,903 |
|
Loss on disposal of assets |
|
|
1 |
|
|
|
210 |
|
|
|
3 |
|
|
|
265 |
|
Non-cash change in fair value of
warrant liability and warrant derivative liability |
|
|
— |
|
|
|
(29,356 |
) |
|
|
— |
|
|
|
(22,873 |
) |
Gain on extinguishment of debt,
net |
|
|
— |
|
|
|
(851 |
) |
|
|
— |
|
|
|
(457 |
) |
Offering relating expenses
(b) |
|
|
— |
|
|
|
14 |
|
|
|
— |
|
|
|
210 |
|
Non-recurring strategic branding
initiatives (c) |
|
|
365 |
|
|
|
— |
|
|
|
671 |
|
|
|
— |
|
Launch expenses (d) |
|
|
480 |
|
|
|
— |
|
|
|
480 |
|
|
|
— |
|
Non-recurring and other expenses
(e) |
|
|
50 |
|
|
|
449 |
|
|
|
185 |
|
|
|
1,305 |
|
Adjusted
EBITDA |
|
$ |
(2,134 |
) |
|
$ |
(1,798 |
) |
|
$ |
(4,152 |
) |
|
$ |
(2,828 |
) |
(a) Reflects
non-cash expenses related to equity compensation awards. 2021
additionally includes non-cash expenses related to stock purchase
warrants issued for third-party services provided. 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) Reflects
administrative costs associated with the registration of common
shares and other debt and equity financing transactions. |
(c) Includes
one-time marketing agency and design fees for our strategic
re-branding initiatives. |
(d) Reflects
non-recurring launch expenses related to the Elevate® launch. |
(e) For the three
and six months ended June 30, 2022, includes non-recurring
severance costs and non-recurring professional fees. For the three
months ended June 30, 2021 includes non-cash third party
share-based compensation of $0.3 million and non-recurring
consulting costs of $0.2 million. The six months ended June 30,
2021 additionally includes non-recurring severance costs of $0.7
million and director fees of $0.1 million, partially offset by a
$0.5 million reduction to sales tax liability. |
Adjusted Financial Performance Measures
The "Adjusted Financial Performance Measures" present non-GAAP
financial information and should not be considered a measure of
financial performance under GAAP. These measures are presented as
an alternative method for assessing the Company’s operating results
by adjusting for the impact of certain non-recurring, infrequent or
unusual items in a manner that is focused on the performance of our
underlying operations. Each of these measures are intended to
provide greater consistency, comparability and clarity of our
results. Management uses this non-GAAP financial information to
assess the Company's core operating results and consequently,
management believes it is similarly useful information to
investors.
Reconciliation of Net Sales and Gross
Profit to Adjusted Net Sales and Gross Profit
|
|
Three Months Ended June 30, 2022 |
|
|
As Reported(GAAP) |
|
Adjustments |
|
As Adjusted(Non-GAAP) |
Net sales |
|
$ |
16,515 |
|
|
$ |
480 |
(a) |
$ |
16,995 |
|
Cost of goods sold |
|
|
11,788 |
|
|
|
— |
|
|
11,788 |
|
Gross profit |
|
$ |
4,727 |
|
|
$ |
480 |
|
$ |
5,207 |
|
Gross profit % |
|
|
29 |
% |
|
|
|
|
31 |
% |
(a) Reflects
non-recurring launch expenses related to the Elevate® launch. |
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2022 |
|
|
As Reported(GAAP) |
|
Adjustments |
|
As Adjusted(Non-GAAP) |
Net sales |
|
$ |
33,529 |
|
|
$ |
480 |
(a) |
$ |
34,009 |
|
Cost of goods sold |
|
|
24,095 |
|
|
|
— |
|
|
24,095 |
|
Gross profit |
|
$ |
9,434 |
|
|
$ |
480 |
|
$ |
9,914 |
|
Gross profit % |
|
|
28 |
% |
|
|
|
|
29 |
% |
(a) Reflects
non-recurring launch expenses related to the Elevate® launch. |
About Better Choice Company Inc.Better Choice
Company Inc. is a rapidly growing 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.Scott
Lerner, CEO
Investor Contact:KCSA Strategic
CommunicationsValter Pinto, Managing DirectorT:
212-896-1254Valter@KCSA.com
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