40% growth compared to the second quarter 2022
capturing channel, category, and innovation expansion in
clean-ingredient food, next generation skincare, and plant-based
wellness
VANCOUVER, BC, Aug. 29,
2023 /CNW/ - Simply Better Brands Corp. ("SBBC"
or the "Company") (TSXV: SBBC) (OTCQB: PKANF) is pleased to
announce its interim financial results for the three and six months
ended June 30, 2023. All amounts are
expressed in United States dollars
unless otherwise noted. Certain metrics, including those expressed
on an adjusted basis, are non-International Financial Reporting
Standards ("IFRS") measures, see "Non-IFRS Measures"
below.
2023 SECOND QUARTER KEY COMMERCIAL
ACHIEVEMENTS
- TRUBAR Protein Bar: As a result of TRUBAR exceeding the
bar category sales velocities at Costco, TRUBAR was able to access
national distribution at Costco during the quarter. Supporting the
brands' continued expansion are four initiatives: manufacturing
capacity expansion, continued omni-channel distribution growth with
retailers like Sodexo, bar flavor extensions, and the entry into
the $21.5 billion protein powder
category in 2023, per Global Market Insights. Back half 2023
commitments reflect a planned regional placement of a second and
additional item in select Costco regions, as well as expansion into
BJ's Wholesale, Circle K, and Andretti Oil.
- PureKana Wellness: PureKana, a leading plant-based
wellness brand, remained focused on its customer acquisition
initiative, adding over 61,925 customers during the quarter and
replenishing the sales funnel into a subscription model. To expand
beyond human consumption, PureKana announced its 2023 entry into
the $196 million hemp-based pet
category (per Grandview Research) with offerings in with
calming chews, hip & joint chews, and hair & coat drops. As
an estimated 60% of PureKana's loyal customers have pets, the
growth opportunity is expected to be sizeable.
- No B.S. Skincare: Originally, the No B.S. brand was
sourced exclusively online at livenobs.com and Amazon. In 2022, the
brand entered 3,200 CVS Health stores for a Back-to-School Event
and continues to maintain a on shelf presence in CVS's healthy skin
section. Initial brick and mortar success had the brand enter TJ
Maxx in Q2, with a planned national launch into Walgreen's in Q4
2023. Sources of growth include omni-channel expansion supported by
insight-driven innovation with an expanded facial acne patch
portfolio (overnight pimple patch and acne patch plus retinol night
cream) and a natural deodorant category entry.
- Vibez Wellness: The Vibez Wellness line was launched in
November 2022 to capture incremental
millennial consumers on their preventative wellness journey. With
an initial keto gummy supplement offering, the new brand has
achieved $1.7M in revenue with a
gross margin of 73% year-to-date 2023. Vibez's primary focus is
non-CBD solutions into the weight management, focal acuity, and
healthy hair consumer need states. Through portfolio and channel
expansion, Vibez is forecasted to exceed $7.0M with an expected gross margin of 73% in
2023.
"As our Q2 2023 financial and commercial results illustrate, we
are positioned for continued revenue growth, profit improvement,
and debt reduction in 2023. Our strategic priorities remain to lead
consumer-centric innovation and relentlessly acquire customers to
these emerging brands by driving category and channel expansion.
Even with our marketing and capability investments in Q2, we remain
confident in delivering the current 2023 outlook of $80 million in revenue and $3-4 million in adjusted EBITDA at a gross margin
target range of 58-60%." says SBBC CEO, Kathy Casey.
FINANCIAL HIGHLIGHTS FOR THE THREE
MONTHS ENDED JUNE 30, 2023
|
For the three months
ended
|
|
|
|
June 30,
2023
|
June 30,
2022
|
Change
|
expressed in
millions *
|
$
|
% (in terms
of
revenue)
|
$
|
% (in terms
of
revenue)
|
$
|
%
|
Revenue
|
23.60
|
100 %
|
16.90
|
100 %
|
6.70
|
40 %
|
Cost of goods
sold
|
(9.90)
|
(42 %)
|
(5.20)
|
(31 %)
|
(4.70)
|
90 %
|
Gross profit
|
13.70
|
58 %
|
11.70
|
69 %
|
2.00
|
17 %
|
Revenue for the second quarter of 2023 was $23.6 million, an increase of $6.7 million or 40% growth compared to
$16.9 million in the second quarter
of 2022. PureKana's second quarter revenue for the three months
ended June 30, 2023, was $12.2 million compared to $13.8 million for the comparable period in 2022
(decrease of $1.6 million or 11%).
PureKana's revenue decrease was driven by a reduction in profitable
subscriptions during the quarter. PureKana invested heavily in
marketing in the later part of the second quarter to increase new
sales and subscriptions. Revenues have increased by approximately
50% in the third quarter 2023 to date over the comparable prior
period. Tru's second quarter revenue for the three months ended
June 30, 2023, was $9.0 million compared to $2.0 million for the comparable period in 2022
(increase of $7.0 million or 350%).
Tru's strong sales performance in the second quarter was driven
primarily by orders from Costco in the US for a national promotion
(Multi-Vendor Mailers "MVM") and from major retailers in
Canada. No BS's second quarter
revenue for the three months ended June 30,
2023, was $0.2 million
compared to $0.8 million for the
comparable period in 2022. The major decrease was due to a later
shipment planned to a large retailer for the third quarter of 2023
compared to a larger retailer product fill that occurred in the
second quarter of 2022. BRN's (Vibez and Seventh Sense) second
quarter revenue for the three months ended June 30, 2023, was $2.0
million, compared to $0.2
million in the second quarter of 2022. SBBC's other
subsidiaries contributed $0.2 million
in the second quarter compared to 0.1 million.
SBBC's cost of sales increased in the second quarter relative to
the comparable period 2022 by 11 percentage points due to a higher
mix of lower margin retails sales (38% of Q2 sales compared to 12%
of sales in Q2 2022) which has lower gross margins than online
sales. The Company continues to manage its finished goods costs
with co-manufacturers with the higher order volumes it has been
able to place. Cost of goods sold for online sales (Direct to
Consumer "DTC") typically range in the low to mid 70's and retailer
(Business to Business "B2B") gross margins range in the mid 30's to
higher 40's. Cost of goods sold was $9.9
million in the second quarter of 2023 (42% of revenues)
compared to $5.2 million (31% of
revenues) in the comparable period.
Gross profit for the second quarter of 2023 was $13.7 million (58%) compared to $11.7 million (69%) in the second quarter of
2022. The gross profit margin was down 11 percentage points in the
second quarter of 2023 over the gross profit in the comparable
period driven by a higher mix of B2B sales in the second quarter of
2023 (B2B was 41% of Q1 2023 sales) compared to the second quarter
of 2022 (B2B was 15% of Q1 2022 sales).
Operating costs for the second quarter of 2023 were $18.4 million, an increase of $4.9 million (or 36%), compared to $13.5 million in the second quarter of 2022. The
majority of the operating costs increase incurred in the three
months ended June 30, 2023, were
marketing expenses ($13.4 million for
Q2 or 73% of operating expenses) and they increased $5.2 million over the previous year directly
related to the increase in revenues for PureKana, BRN and Tru
sales. There are three main categories of marketing expenses. They
are (1) online advertising, (2) email marketing and social media
and (3) retailer promotional allowances. The first two categories
of marketing expenses are directly related to DTC sales whereas the
retailer promotional allowances are related to B2B sales. In the
second quarter of 2023, online advertising accounted for 78% of the
marketing expenses compared to 82% in the comparable period in
2022. In the second quarter of 2023, email marketing and social
media accounted for 6% compared to 9% in the comparable period in
2022. DTC sales in the second quarter of 2023 were roughly flat
with DTC revenues in the comparable period 2022. Marketing expenses
related to DTC were up by $3.5
million in the second quarter of 2023 compared to those in
the second quarter of 2022 due to an increased push in the second
quarter to acquire customers for PureKana and Vibez brands to
rebuild its subscriber base for PureKana and to develop its
subscriber base for Vibez. This investment in the customer base for
PureKana and Vibez did result in increases in subscribers bases for
these two brands during the second quarter and the benefits are
expected to be seen in the third quarter.
Other expenses for the second quarter 2023 were $1.6 million compared to other expenses of
$0.4 million in the second quarter of
2022 or an increase of $1.2 million.
The main components in the second quarter of 2023 for other income
and expenses were finance costs of $0.4
million and losses from the remeasurement of warrant
liabilities of $0.7 million.
The Company incurred a net loss of $6.3
million for the second quarter of 2023 increased by
$3.6 million over the loss in the
first quarter of 2023 and is primarily related to the increase in
operating expenses ($3.6 million) in
the second quarter of 2023.
Non-IFRS Measures (Earnings before
Interest, Taxes, Depreciation, and Amortization ("EBITDA") and
Adjusted EBITDA)
EBITDA and Adjusted EBITDA are non-GAAP measures used by
management that are not defined by IFRS. EBITDA and Adjusted EBITDA
do not have a standardized meaning prescribed by IFRS and therefore
may not be comparable to similar measures presented by other
issuers. Management believes that EBITDA and Adjusted EBITDA
provide meaningful and useful financial information as these
measures demonstrate the operating performance of a business
excluding non-cash charges.
The most directly comparable measure to EBITDA and Adjusted
EBITDA calculated in accordance with IFRS is net loss. The
following table presents the EBITDA and Adjusted EBITDA for the
three months ended June 30, 2023, and
2022, and a reconciliation of same to net income (loss):
|
For the three months
ended
|
|
|
|
June 30,
2023
|
June 30,
2022
|
Change
in
|
|
$
|
$
|
$
|
%
|
Net
loss
|
(6.30)
|
(2.30)
|
(4.00)
|
63 %
|
Amortization
|
1.00
|
0.60
|
0.40
|
40 %
|
Finance
costs
|
0.40
|
0.20
|
0.20
|
50 %
|
EBITDA
|
(4.90)
|
(1.50)
|
(3.40)
|
153 %
|
Acquisition-related
costs
|
-
|
(0.10)
|
0.10
|
100 %
|
Acquisition costs paid
by common shares
|
-
|
0.20
|
(0.20)
|
100 %
|
Fair value adjustment
of derivative liability
|
0.10
|
-
|
0.10
|
100 %
|
Impairment of
intangible assets
|
0.20
|
-
|
0.20
|
100 %
|
Impairment of
inventories
|
0.20
|
-
|
0.20
|
100 %
|
Impairment of
receivable
|
0.10
|
-
|
0.10
|
100 %
|
Loss on remeasurement
of warrant liabilities
|
0.70
|
-
|
0.70
|
100 %
|
Share-based
payments
|
0.50
|
1.60
|
(1.10)
|
(220 %)
|
Shares issued for
services
|
-
|
0.30
|
(0.30)
|
100 %
|
Write-off of advance
payments
|
-
|
0.40
|
(0.40)
|
100 %
|
Non-recurring
expenses
|
0.70
|
-
|
0.70
|
100 %
|
Adjusted
EBITDA
|
(2.40)
|
0.90
|
(3.30)
|
933 %
|
The Company had an adjusted EBITDA loss of $2.4 million for the three months ended
June 30, 2023, a decrease of
$3.3 million over the adjusted EBITDA
of $0.9 million for the comparable
period in 2022. The primary driver for the adjusted EBITDA loss of
$3.3 million for the second quarter
of 2023 is the increase in cash operating expenses ($5.3 million) which were offset by increased
gross profits ($2 million) compared
to the prior period in 2022. The operating expense increase
for the second quarter reflected investment in sales growth and
automation of customer services in the PureKana and Vibez brands as
well as the Tru brand to drive sales growth. The marketing and
customer services technology investments in the DTC brands are
expected to result in benefits in the latter half of 2023 for
PureKana and Vibez (more subscription revenues and lower customer
services costs). For the investments in the Tru Brand during the
second quarter of 2023 (e.g., Costco MVM), the benefits are
expected to materialize over the next twelve months for the Tru
brand. The Costco MVM has brought significant awareness of the
TRUBAR brand in mass, convenience, and grocery categories. The
Company expects to be delivering TRUBAR beyond the mass category
starting in the third quarter of 2023.
2023 OUTLOOK
Our 2023 Outlook remains unchanged:
1. The Company's expectation for
consolidated net sales to exceed $80
million.
2. The Company expects gross margin
as a percentage of net sales to be between 58% and 60%.
3. The Company expects to achieve
positive Adjusted EBITDA in the range of $3-4 million.
CONFERENCE DETAILS
A conference call to discuss the results is scheduled for the
following day on August 30, 2023, at
10:00 a.m. EST.
About Simply Better Brands
Corp.
Simply Better Brands Corp. leads an international
omni-channel platform with diversified assets in the emerging
plant-based and holistic wellness consumer product categories. The
Company's mission is focused on leading innovation for the informed
Millennial and Generation Z generations in the rapidly growing
plant-based, natural, and clean ingredient space. The Company
continues to focus on expansion into high-growth consumer product
categories including plant-based food, clean ingredient
skincare and plant-based wellness. For more information on
Simply Better Brands Corp., please visit:
https://www.simplybetterbrands.com/investor-relations.
Neither the TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
Forward-Looking
Information
Certain statements contained in this news release constitute
"forward-looking information" and "forward looking statements" as
such terms are used in applicable Canadian securities laws.
Forward-looking statements and information are based on plans,
expectations and estimates of management at the date the
information is provided and are subject to certain factors and
assumptions, including, among others, that the Company's financial
condition and development plans do not change as a result of
unforeseen events, the impact of the COVID-19 pandemic, the
regulatory climate in which the Company operates, and the Company's
ability to execute on its business plans. Specifically, this news
release contains forward-looking statements relating to, but not
limited to: entry into the $21.5
billion protein powder category in 2023, expansion plans for
Tru Brands products, size or
PureKana's pet segment, No BS's planned launch in Walgreens in Q4
and expansion of its facial acne patch portfolio (overnight pimple
patch and acne patch plus retinol night cream) and a natural
deodorant category entry, 2023 guidance and results of operations,
growth of the Company's brands, and, success of the Company's
marketing efforts.
Forward-looking statements and information are subject to a
variety of risks and uncertainties and other factors that could
cause plans, estimates and actual results to vary materially from
those projected in such forward-looking statements and information.
Factors that could cause the forward-looking statements and
information in this news release to change or to be inaccurate
include, but are not limited to, the risk that any of the
assumptions referred to prove not to be valid or reliable, that
occurrences such as those referred to above are realized and result
in delays, or cessation in planned work, that the Company's
financial condition and development plans change, ability to obtain
necessary regulatory approvals for proposed transactions, as well
as the other risks and uncertainties applicable to the plant-based
food, clean ingredient skincare and plant-based wellness or
broader wellness industries and to the Company, and as set forth in
the Company's annual information form available under the Company's
profile at www.sedar.com.
The above summary of assumptions and risks related to
forward-looking statements in this news release has been provided
in order to provide shareholders and potential investors with a
more complete perspective on the Company's current and future
operations and such information may not be appropriate for other
purposes. There is no representation by the Company that actual
results achieved will be the same in whole or in part as those
referenced in the forward-looking statements and the Company does
not undertake any obligation to update publicly or to revise any of
the included forward-looking statements, whether as a result of new
information, future events or otherwise, except as may be required
by applicable securities law.
Financial Outlook
This press release contains future-oriented financial
information and financial outlook information (collectively,
"FOFI") about the financial results the quarter ended
June 30, 2023, and the year ended
December 31, 2023, including net
sales, gross margin, and Adjusted EBITDA, all of which are subject
to the same assumptions, risk factors, limitations, and
qualifications as set out under the heading "Forward-Looking
Information". The actual financial results of the Company may vary
from the amounts set out herein and such variation may be material.
The Company and its management believe that the financial outlook
has been prepared on a reasonable basis, reflecting management's
best estimates and judgments and the FOFI contained in this press
release was approved by management as of the date hereof. However,
because this information is subjective and subject to numerous
risks, it should not be relied on as necessarily indicative of
future results. Except as required by applicable securities laws,
the Company undertakes no obligation to update such FOFI. FOFI
contained in this press release was made as of the date hereof and
was provided for the purpose of providing further information about
the Company's anticipated future business operations on a quarterly
and annual basis. Readers are cautioned that the FOFI contained in
this press release should not be used for purposes other than for
which it is disclosed herein.
SOURCE Simply Better Brands Corp