Better Choice Company Reports Fourth Quarter and Full Year 2022 Financial Results


Year-to-Date Net Sales Totaled $54.7 million, an Increase of 19% Year-over-Year

Year-to-Date Gross Margin of 28%, or 31% Excluding the Impact of Inventory Rationalization

NEW YORK, March 28, 2023 (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, 2022.

Lionel F. Conacher, Interim CEO of Better Choice, stated, “During the fourth quarter, net sales were sales were $9.3 million resulting in full year 2022 net sales of $54.7 million, a 19% increase versus the prior year. Our International channel delivered year-over-year net sales growth of 48% and Brick & Mortar net sales grew 72% in 2022 versus the prior year fueled by the Halo Elevate launch. Driven by channel partner dynamics and brand migration in our online businesses, E-commerce net sales for 2022 were down 3% versus the prior year and DTC declined 30%. Looking to 2023, we continue to be focused on the execution of our growth plans and reduction of quarterly cash burn."

Year-to-Date 2022 Financial Highlights

  • Gross Sales of $65.7 million.
  • Net Sales of $54.7 million.
  • International net sales of $21.9 million.
  • E-commerce net sales of $14.6 million.
  • Brick & Mortar net sales of $11.6 million.
  • Direct to Consumer net sales of $6.6 million.
  • Gross margin of 27.9%, reflecting impact of one-time rationalization of inventory. Excluding inventory reserve expense, gross margin was 31.3%.
  • Loss from operations of $38.8 million.
  • Adjusted EBITDA loss of $(11.8) million.
  • Net loss available to common stockholders of $(39.3) million.

Fourth Quarter 2022 Financial Highlights

  • Gross Sales of $12.0 million.
  • Net Sales of $9.3 million.
  • International net sales of $2.2 million.
  • E-commerce net sales of $3.5 million.
  • Brick & Mortar net sales of $2.0 million.
  • Direct to Consumer net sales of $1.6 million.
  • Gross margin of 17.9%, reflecting impact of one-time rationalization of inventory. Excluding inventory reserve expense, gross margin was 31.9%.
  • Loss from Operations of $24.2 million.
  • Adjusted EBITDA loss of $(4.8) million.
  • Net loss available to common stockholders of $24.4 million.

Better Choice Company Inc.
Consolidated Statements of Operations
(Dollars in thousands)

  Three months ended
December 31,
 Year ended
December 31,
  2022   2021   2022   2021 
Net sales $9,266  $10,987  $54,660  $46,006 
Cost of goods sold  7,604   8,231   39,399   30,638 
Gross profit  1,662   2,756   15,261   15,368 
Operating expenses:        
Selling, general and administrative  6,690   7,110   32,461   28,507 
Share-based compensation  515   623   2,969   4,140 
Impairment of goodwill  18,614      18,614    
Total operating expenses  25,819   7,733   54,044   32,647 
Loss from operations  (24,157)  (4,977)  (38,783)  (17,279)
Other (expense) income:        
Interest expense, net  (227)  (69)  (551)  (3,217)
Gain on extinguishment of debt, net           457 
Change in fair value of warrant liabilities           23,463 
Total other (expense) income, net  (227)  (69)  (551)  20,703 
Net (loss) income before income taxes  (24,384)  (5,046)  (39,334)  3,424 
Income tax (benefit) expense  (22)  37   (18)  37 
Net (loss) income available to common stockholders $(24,362) $(5,083) $(39,316) $3,387 
 
 

Better Choice Company Inc.
Consolidated Balance Sheets
(Dollars in thousands, except share amounts)

 December 31, 2022 December 31, 2021
Assets   
Cash and cash equivalents$3,173  $21,729 
Restricted cash 6,300   7,213 
Accounts receivable, net 6,744   6,792 
Inventories, net 10,257   5,245 
Prepaid expenses and other current assets 1,051   2,940 
Total Current Assets 27,525   43,919 
Fixed assets, net 375   369 
Right-of-use assets, operating leases 173   56 
Intangible assets, net 10,059   11,586 
Goodwill    18,614 
Other assets 544   116 
Total Assets$38,676  $74,660 
Liabilities & Stockholders’ Equity   
Current Liabilities   
Accounts payable$2,932  $4,553 
Accrued and other liabilities 2,596   1,879 
Term loan, net    855 
Operating lease liability 52   54 
Total Current Liabilities 5,580   7,341 
Non-current Liabilities   
Line of credit, net 11,444   4,856 
Term loan, net    4,559 
Deferred tax liability    24 
Operating lease liability 124   5 
Total Non-current Liabilities 11,568   9,444 
Total Liabilities 17,148   16,785 
Stockholders’ Equity   
Common Stock, $0.001 par value, 200,000,000 shares authorized, 29,430,267 & 29,146,367
shares issued and outstanding as of December 31, 2022 and 2021, respectively
 29   29 
Additional paid-in capital 320,071   317,102 
Accumulated deficit (298,572)  (259,256)
Total Stockholders’ Equity 21,528   57,875 
Total Liabilities and Stockholders’ Equity$38,676  $74,660 
 
 

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, warrant expense, impairment of goodwill, 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.

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) income, the closest GAAP financial measure, to EBITDA and Adjusted EBITDA for each of the periods indicated (in thousands):

Reconciliation of Net (Loss) Income to EBITDA and Adjusted EBITDA

  Three Months Ended
December 31,
 Year Ended
December 31,
   2022   2021   2022   2021 
Net (loss) income available to common stockholders $(24,362) $(5,083) $(39,316) $3,387 
Interest expense, net  227   69   551   3,217 
Income tax (benefit) expense  (22)  37   (18)  37 
Depreciation and amortization  425   409   1,690   1,664 
EBITDA  (23,732)  (4,568)  (37,093)  8,305 
Non-cash share-based compensation and warrant expense (a)  515   623   2,969   4,186 
Impairment of goodwill  18,614      18,614    
Loss on disposal of assets  3   1   29   276 
Non-cash change in fair value of warrant liability and warrant derivative liability           (23,463)
Gain on extinguishment of debt, net           (457)
Offering relating expenses (b)           220 
Non-recurring strategic branding initiatives (c)     357   948   524 
Launch expenses (d)  (480)     98    
Non-recurring and other expenses (e)  264   557   2,654   3,329 
Adjusted EBITDA $        (4,816) $        (3,030) $        (11,781) $        (7,080)
 
(a) Reflects non-cash expenses related to equity compensation awards. 2021 additionally includes non-cash expenses related to stock purchase warrants issues 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 as well as other charges related to our strategic re-branding initiatives.
(d) Reflects non-recurring launch expenses related to the Elevate® launch.
(e) For the three months ended December 31, 2022, includes non-recurring severance costs of $0.1 million, non-recurring executive recruitment costs of $0.1 million and other non-recurring charges of $0.1 million. The year ended December 31, 2022 includes non-recurring severance costs of $0.3 million, non-cash third party share-based compensation of $2.1 million issued in 2020 as part of a multi-year contract, non-recurring professional fees of $0.1 million, non-recurring executive recruitment costs of $0.1 million and other non-recurring charges of $0.1 million, partially offset by $0.1 million of non-recurring customer refunds related to prior year periods included in cost of goods sold. The three months ended December 31, 2021 includes non-cash third party share-based compensation of $0.2 million, non-recurring severance costs of $0.1 million, director costs of $0.1 million and non-recurring costs related to a co-manufacturer change of $0.2 million, partially offset by a $0.1 million reduction to sales tax liability. The year ended December 31, 2021 includes non-cash third party share-based compensation of $2.1 million, non-recurring severance costs of $0.8 million, non-recurring consulting costs of $0.4 million, director fees of $0.4 million and $0.2 million of non-recurring costs related to a co-manufacturer change, partially offset by a $0.6 million reduction to sales tax liability.

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.
Lionel F. Conacher, Interim CEO

Investor Contact:
KCSA Strategic Communications
Valter Pinto, Managing Director
T: 212-896-1254
Valter@KCSA.com