Better Choice Company, Inc. Announces Fourth Quarter and Full Year 2023 Results

Rhea-AI Summary

Better Choice Company, Inc. reported strong financial results for the fourth quarter and full year 2023, with significant improvements in gross margin, adjusted EBITDA, and EPS. The company focused on operational discipline, strategic pricing initiatives, and profitability. Despite a decline in topline due to strategic shifts, Better Choice remains optimistic about future growth and brand equity enhancement.

Positive

• Gross margin improved by 300 basis points to 31% year-over-year.
• Adjusted EBITDA grew by 30% year-over-year.
• EPS increased by 45% year-over-year.
• Operating loss improved by 47% year-over-year to $(12.7) million in the fourth quarter of 2023.
• Net loss improved by 40% year-over-year to $(14.7) million in the fourth quarter of 2023.
• Full-year 2023 financial highlights include a 45% improvement in operating loss, a 42% improvement in net loss, and a 32% improvement in adjusted EBITDA.
• Better Choice Company Inc. reported a net loss per share of $(32.29) for the full year 2023.
• The company's strategic pivot in digital and marketing investment allocation aims to drive brand growth and discoverability in 2024.

Negative

• None.

Insights

Financial Analyst

The reported growth in Adjusted EBITDA and EPS, alongside improvements in gross margin, indicate a strengthening operational efficiency within Better Choice Company. These metrics are important for investor confidence, especially in a sector where the cost of goods and operational expenses can significantly influence profitability. The shift towards higher-margin products and the streamlining of operations to reduce cash burn are positive signs that the management is effectively executing its turnaround strategy.

However, investors must consider the company's operating loss and net loss improvements in the context of a topline decline. This could suggest that while the company is becoming more efficient, it may also be facing challenges in growing or maintaining its sales revenue, potentially impacting future profitability and market share. Furthermore, the decline in topline could be symptomatic of deeper market penetration issues or competitive pressures. The strategic pivot in digital and marketing investment strategies will be key to monitoring as they are intended to drive brand growth and discoverability.

Market Research Analyst

The reported strategic exits from unprofitable accounts and the brand migration from TruDog to Halo indicate a shift in the company's market approach. This could lead to a short-term contraction in sales volume but potentially improve long-term profitability if the Halo brand gains traction. The pet health and wellness industry is competitive and driven by brand loyalty; therefore, brand perception and market acceptance of Halo will be pivotal. The pivot to enhanced digital and marketing strategies may also suggest a realignment towards e-commerce, which has been growing significantly in the pet industry.

The emphasis on product quality and continuous improvement initiatives hints at a long-term strategy aimed at establishing a solid competitive position. It will be important to evaluate customer reception to these initiatives and how they translate into sustained sales momentum.

Economist

The overall economic landscape and consumer spending patterns can greatly impact the pet industry's performance. An improvement in operational discipline and a focus on profitability are commendable, yet it is vital to assess whether the topline decline reflects a broader economic downturn or sector-specific trends. If the latter, the company's efforts to realign its strategy could buffer it against such headwinds. It's essential to monitor if the brand equity built can lead to stronger pricing power in a marketplace where consumers are often willing to spend more on premium pet products.

Moreover, the supply chain adjustments and improved input cost management that contributed to the gross margin expansion are reflective of adaptive operational strategies. These strategies may yield further benefits if input cost pressures subside in the future, which is often subject to market dynamics and global supply chain conditions.

Gross Margin Improved 300 basis points to 31% Year-Over-Year

Adjusted EBITDA Grew 30% Year-Over-Year

EPS Grew 45% Year-Over-Year

TAMPA, Fla., April 12, 2024 (GLOBE NEWSWIRE) -- 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 fourth quarter and year ended December 31, 2023.

Kent Cunningham, CEO of Better Choice, stated, “In 2023, we realized significant gross margin improvement to 31%, fueled by strategic pricing initiatives and a 3% YOY improvement of input costs - a reflection of operational discipline and unlocking profit through high production supply volumes. Our further continued focus on financial discipline and a path to profitability is reflected in the 29% adjusted EBITDA growth and significant improvement in cash burn during the year. The topline decline was a primary result of normalizing stock levels in our International markets, purposefully exiting unprofitable accounts, and attrition related to the late 2022 migration of the former TruDog brand to the Halo brand umbrella in our digital channels. Significant strategic shifts were purposefully made across channels to ensure recoverability and long-term viability of the Halo brand. Our 2024 annual operating plan includes a strategic pivot in our digital and marketing investment allocation strategies to drive brand growth and discoverability. Looking forward, we are focused on accelerating topline momentum, keeping product quality at the forefront, and continuous improvement initiatives to fuel our future growth trajectory. We closed the year with a solid footing to build upon brand equity and enhanced profitability further in 2024.”

FOURTH QUARTER 2023 FINANCIAL HIGHLIGHTS

• Operating loss improved 47% YOY to $(12.7) million
• Operating margin improved 3,800 basis points (“bps”) YOY to (-223%)
• Net loss improved 40% YOY to $(14.7) million
• Earnings (loss) per share (“EPS”) improved 40% YOY to ($20.84)
• Adjusted EBITDA improved 30% YOY to $(3.4) million¹
  

FULL YEAR 2023 FINANCIAL HIGHLIGHTS

• Gross margin improved 300 bps YOY to 31%
• Operating loss improved 45% YOY to $(21.2) million
• Operating margin improved 1,600 bps YOY to (-55%)
• Net loss improved 42% YOY to $(22.8) million
• EPS improved 45% YOY to ($32.29)
• Adjusted EBITDA improved 32% YOY to $(8.0) million¹

Better Choice Company Inc. Unaudited Condensed Consolidated Statements of Operations (Dollars in thousands, except share and per share amounts)
	Year Ended December 31,
	2023				2022
Net sales	$	38,592			$	54,660
Cost of goods sold		26,795				39,399
Gross profit		11,797				15,261
Operating expenses:
Selling, general and administrative		24,444				35,430
Impairment of goodwill		—				18,614
Impairment of intangible assets		8,532
Total operating expenses		32,976				54,044
Loss from operations		(21,179	)			(38,783	)
Other expenses:
Interest expense, net		(1,353	)			(551	)
Change in fair value of warrant liability		(236	)			—
Total other expense, net		(1,589	)			(551	)
Net loss before income taxes		(22,768	)			(39,334	)
Income tax expense (benefit)		2				(18	)
Net loss available to common stockholders	$	(27,770	)		$	(39,316	)
Weighted average number of shares outstanding, basic		705,185				667,114
Weighted average number of shares outstanding, diluted		705,185				667,114
Net loss per share available to common stockholders, basic	$	(32.29	)		$	(58.93	)
Net loss per share available to common stockholders, diluted	$	(32.29	)		$	(58.93	)
All share and per share amounts related to the Company's common stock for all periods presented herein have been retroactively adjusted, where applicable, to reflect the Reverse Stock Split.

Better Choice Company Inc. Unaudited Condensed Consolidated Balance Sheets (Dollars in thousands, except share and per share amounts)
	December 31, 2023				December 31, 2022
Assets
Cash and cash equivalents	$	4,455			$	3,173
Restricted cash		—				6,300
Accounts receivable, net		4,354				6,744
Inventories, net		6,611				10,257
Prepaid expenses and other current assets		812				1,051
Total Current Assets		16,232				27,525
Fixed assets, net		230				375
Right-of-use assets, operating leases		120				173
Intangible assets, net		—				10,059
Other assets		155				544
Total Assets	$	16,737			$	38,676
Liabilities & Stockholders’ Equity
Current Liabilities
Accounts payable	$	6,928			$	2,932
Accrued and other liabilities		2,085				2,596
Line of credit		1,741				–
Term loan, net		2,881				–
Operating lease liability		57				52
Total Current Liabilities		13,692				5,580
Non-current Liabilities
Line of credit, net		—				11,444
Operating lease liability		67				124
Total Non-current Liabilities		67				11,568
Total Liabilities		13,759				17,148
Stockholders’ Equity
Common Stock, $0.001 par value, 200,000,000 shares authorized, 729,026 & 668,869 shares issued and outstanding as of December 31, 2023, and December 31, 2022, respectively		32				29
Additional paid-in capital		324,288				320,071
Accumulated deficit		(313,342	)			(298,572	)
Total Stockholders’ Equity		2,978				21,528
Total Liabilities and Stockholders’ Equity	$	16,737			$	38,676

 

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, loss on disposal of assets, impairment of goodwill and intangible assets, change in fair value of warrant liabilities, strategic branding initiatives and product launch expenses, co-manufacturing partner transition, 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 loss, the closest GAAP financial measure, to EBITDA and Adjusted EBITDA for each of the periods indicated (in thousands):

Reconciliation of Net Loss to EBITDA and Adjusted EBITDA (Dollars in thousands)
	Three Months Ended December 31,								Year Ended December 31,
	2023				2022				2023					2022
Net loss available to common stockholders	$	(14,701	)		$	(24,362	)		$	(22,770		)		$	(39,316	)
Interest expense, net		433				227				1,353					551
Income tax expense		2				(22	)			2					(18	)
Depreciation and amortization		417				425				1,678					1,690
EBITDA		(13,849	))			(23,732	)			(19,737		)			(37,093	)
Non-cash share-based compensation (a)		157				515				1,775					2,969
Impairment of goodwill		—				18,614				—					18,614
Impairment of intangible assets		8,532				—				8,532					—
Change in fair value of warrant liabilities		1,575				—				236					—
Loss on disposal of assets		1				3				12					29
Strategic branding initiatives and product launches (b)		44				(480	)			128					1,046
Transaction related (c)		137				—				935					—
Other single occurrence expenses (d)		46				264				149					2,654
Adjusted EBITDA	$	(3,359	)		$	(4,819	)		$	(7,973		)		$	(11,781	)
(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) Single occurrence expenses related to marketing agency and design, strategic re-branding initiatives, Elevate® launch, product innovation and reformulations.
(c) Transaction-related legal fees and professional fees related to single occurrence business matters.
(d) Reflects non-recurring launch expenses related to the Elevate® launch.
(e) Other single occurrence expenses such as legal settlements, employee severance, executive recruitment, transition of our dry kibble co-manufacturing supplier, and other non-recurring 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 kibble, canned food, freeze-dried raw food and treats, vegan dog food and treats, oral care products, toppers and other 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. 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 Communications
Valter Pinto, Managing Director
T: 212-896-1254
Valter@KCSA.com

FAQ

What was the improvement in gross margin year-over-year for Better Choice Company, Inc.?

The gross margin improved by 300 basis points to 31% year-over-year.

How much did the adjusted EBITDA grow year-over-year for Better Choice Company, Inc.?

The adjusted EBITDA grew by 30% year-over-year.

What was the percentage increase in EPS year-over-year for Better Choice Company, Inc.?

The EPS grew by 45% year-over-year.

What was the operating loss improvement year-over-year for Better Choice Company, Inc. in the fourth quarter of 2023?

The operating loss improved by 47% year-over-year to $(12.7) million in the fourth quarter of 2023.

What was the net loss improvement year-over-year for Better Choice Company, Inc. in the fourth quarter of 2023?

The net loss improved by 40% year-over-year to $(14.7) million in the fourth quarter of 2023.

What was the net loss per share for Better Choice Company, Inc. for the full year 2023?

The company reported a net loss per share of $(32.29) for the full year 2023.

What is Better Choice Company Inc.'s focus for 2024?

The company's focus for 2024 includes accelerating topline momentum, maintaining product quality, and continuous improvement initiatives to fuel future growth.