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Better Choice Company Reports Second Quarter 2021 Financial Results

12 Aug 2021 Wiz_Merlin Comments Off

NEW YORK, Aug. 12, 2021 — Better Choice Company Inc. (NYSE: BTTR) (the “Company” or “Better Choice”), an animal health and wellness company, today reported its financial results for the second quarter ended June 30, 2021.

“We are pleased to share our second quarter 2021 results with the investor community. Our performance in the second quarter of 2021 continued the momentum from our strong Q1 results, as we delivered 11% quarter-over-quarter net revenue growth driven by our international channel. We continue to make meaningful progress on our medium and longer-term strategic initiatives, and remain well positioned with the anticipation of our expanded Halo brand launch in the pet specialty channel in 2022,” said Scott Lerner, CEO of Better Choice.

“We believe we have created a strong foundation for growth through our diverse omni-channel approach. This strategy allows us to market products purpose-built for success in specific channels while simultaneously building our brand across all channels,” continued Mr. Lerner. “Further, like many of our peers in the pet food industry, we believe we are successfully navigating the challenges of operating in an inflationary environment, and I strongly believe that our multi-channel strategy provides a competitive advantage in this regard. With a line of high-quality brands poised for growth and led by a team of industry veterans, I continue to have a high degree of confidence we’ll achieve our mission to become the most innovative premium pet food company in the world.”

Second Quarter 2021 and Subsequent Operational Updates

  • Successfully completed an uplist to the NYSE American Exchange, raising $40m of gross proceeds at ~3x 2020 net sales and automatically converting $23m of debt into common equity upon listing.
  • Significant incremental investment in innovation and developing a three-year pipeline of new offerings to drive organic growth.
  • Generated $5.2m of online net sales in Q2 2021, with ~51% of online purchases made via recurring subscription.
  • Realized $4.1m International Sales in Q2, representing 72% quarter-over-quarter growth.
  • Continued to navigate the COVID-19 pandemic while minimizing cash burn and establishing a strong base for growth in our core channels: E-Commerce, direct-to-consumer (“DTC”), Brick & Mortar and International.
  • In July, secured an agreement with Pet Supplies Plus, the third largest pet specialty retailer in the United States, to launch Halo Elevate nationally in 2022.

Financial Results for the Second Quarter and Year-to-Date 2021

  • Second Quarter 2021 Gross Sales of $13.1m
  • Year-to-date 2021 Gross Sales of $26.5m
  • Second Quarter 2021 Net Sales of $11.0m
  • Year-to-date 2021 Net Sales of $21.8m
  • Second Quarter 2021 Loss from Operations of $3.2m
  • Year-to-date 2021 Loss from Operations of $8.3m
  • Second Quarter 2021 Net income available to common stockholders of $24.8m
  • Year-to-date 2021 Net income available to common stockholders of $11.9m
  • Second Quarter 2021 Adjusted EBITDA of $(1.8)m
  • Year-to-date 2021 Adjusted EBITDA of $(2.8)m

Conference Call and Webcast Information

The Company will host a conference call and audio webcast at 8:30 a.m. (Eastern Time) to answer questions about the Company’s operational and financial highlights for the second quarter of 2021.

Event: Better Choice Second Quarter 2021 Earnings Call
Date: Thursday, August 12, 2021
Time: 8:30 a.m. Eastern Time
Live Call: +1-855-327-6837 (U.S. Toll-Free) or +1-631-891-4304 (International)
Webcast: http://public.viavid.com/index.php?id=145923

For interested individuals unable to join the conference call, a dial-in replay of the call will be available until August 26, 2021 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: 10015865.

Better Choice Company Inc.
Unaudited Consolidated Statements of Operations and Comprehensive Income (Loss)
(Dollars in thousands, except share and per share amounts)

  Six Months Ended June 30,   Three Months Ended June 30,
  2021   2020   2021   2020
Net sales $ 21,819       $ 22,167       $ 10,989       $ 9,941    
Cost of goods sold 13,645       13,886       7,089       5,817    
Gross profit 8,174       8,281       3,900       4,124    
Operating expenses:              
General and administrative 8,081       19,551       3,530       11,551    
Sales and marketing 5,571       4,258       3,235       2,053    
Share-based compensation 2,857       5,504       332       3,020    
Total operating expenses 16,509       29,313       7,097       16,624    
Loss from operations (8,335 )     (21,032 )     (3,197 )     (12,500 )  
Other expense (income):              
Interest expense 3,069       4,731       2,234       2,430    
Gain on extinguishment of debt, net (457 )           (851 )        
Change in fair value of warrant liabilities (22,873 )     2,095       (29,356 )     3,474    
Total other (income) expense, net (20,261 )     6,826       (27,973 )     5,904    
Net and comprehensive income (loss) 11,926       (27,858 )     24,776       (18,404 )  
Preferred dividends       68             34    
Net and comprehensive income (loss) available to common stockholders $ 11,926       $ (27,926 )     $ 24,776       $ (18,438 )  
               
Weighted average number of shares outstanding, basic 10,361,462       8,122,176       11,126,909       8,156,618    
Weighted average number of shares outstanding, diluted 20,498,829       8,122,176       21,389,413       8,156,618    
Earnings (loss) per share, basic $ 1.11       $ (3.44 )     $ 2.23       $ (2.26 )  
Earnings (loss) per share, diluted $ 0.56       $ (3.44 )     $ 1.19       $ (2.26 )  

Non-GAAP Measures

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 and comprehensive income (loss): depreciation and amortization, interest expense, share-based compensation, warrant expense and dividends, loss on disposal of assets, change in fair value of warrant derivative liability, gain or loss on extinguishment of debt, acquisition related expenses, purchase accounting adjustments, 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 and comprehensive income (loss), the closest GAAP financial measure, to EBITDA and Adjusted EBITDA for each of the periods indicated:

Better Choice Company Inc.
Reconciliation of Net and Comprehensive Income (Loss) to EBITDA and Adjusted EBITDA
(Dollars in thousands)

  Six Months Ended June 30,   Three Months Ended June 30,
  2021   2020   2021   2020
Net and comprehensive income (loss) available to common stockholders $ 11,926       $ (27,926 )     $ 24,776       $ (18,438 )  
Depreciation and amortization 824       866       413       409    
Interest expense 3,069       4,731       2,234       2,430    
EBITDA 15,819       (22,329 )     27,423       (15,599 )  
Non-cash share-based compensation, warrant expense and dividends (a) 2,903       15,557       313       10,444    
Loss on disposal of assets 265             210          
Non-cash change in fair value of warrant liability and warrant derivative liability (22,873 )     2,095       (29,356 )     3,474    
Gain on extinguishment of debt, net (b) (457 )           (851 )        
Acquisition related expenses/(income) (c)       1,293             616    
Non-cash effect of purchase accounting and inventory write-off on cost of goods sold (d)       894                
Offering relating expenses (e) 210       649       14       334    
Non-recurring and other expenses (f) 1,305       1,312       449       215    
Adjusted EBITDA $ (2,828 )     $ (529 )     $ (1,798 )     $ (516 )  
(a) Reflects non-cash expenses related to equity compensation awards three and six months ended June 30, 2021 and 2020. The six months ended June 30, 2021 additionally includes non-cash expenses related to stock purchase warrants issues for third-party services provided. The three and six months ended June 30, 2020 includes non-cash dividends and stock purchase warrants associated with a contract that was subsequently terminated and stock purchase warrants issued in connection with convertible notes. 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 gain on extinguishment of debt resulting from the full forgiveness of $0.9m in PPP loans for the three months ended June 30, 2021. The six months ended June 30, 2021 additionally includes a loss of $0.4m related to the extinguishment of our former term loan and ABL facility.
(c) Reflects costs incurred related to acquisition and integration activities that will not recur and operating expenses that will not recur due to acquisition related synergies.
(d) Reflects non-cash expense recognized in cost of goods sold related to the step-up of inventory required under the accounting rules for business combinations.
(e) Reflects administrative costs associated with the registration of common shares and other debt and equity financing transactions.
(f) Reflects non-cash third party share-based compensation of $0.3 million and non-recurring consulting costs of $0.2 million for the three months ended June 30, 2021. The six months ended June 30, 2021 additionally includes non-recurring severance costs of $0.7 million, non-cash third party share-based compensation of $0.3 million, non-recurring consulting costs of $0.2 million and director costs of $0.1 million, partially offset by a $0.5 million reduction to sales tax liability. Reflects $1.0 million non-recurring contract termination costs for the three months ended June 30, 2020 and $0.1 million and $0.2 million of non-recurring costs for the three and six months ended June 30, 2020, respectively, related to a warehouse facility that was outsourced to a third party logistics facility in Q4 2020.

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

  June 30, 2021   December 31,
2020
Assets      
Cash and cash equivalents $ 2,484       $ 3,926    
Restricted cash 63       63    
Accounts receivable, net 5,189       4,631    
Inventories, net 5,201       4,869    
Deferred IPO costs 882          
Prepaid expenses and other current assets 4,040       4,074    
Total Current Assets 17,859       17,563    
Property and equipment, net 149       252    
Right-of-use assets, operating leases 94       345    
Intangible assets, net 12,350       13,115    
Goodwill 18,614       18,614    
Other assets 114       1,364    
Total Assets $ 49,180       $ 51,253    
Liabilities & Stockholders’ Equity (Deficit)      
Current Liabilities      
Term loans, net $ 704       $ 7,826    
Line of credit 222          
PPP loans       190    
Accrued and other liabilities 2,231       3,400    
Accounts payable 4,758       3,137    
Operating lease liability 56       173    
Warrant liability 16,977       39,850    
Total Current Liabilities 24,948       54,576    
Non-current Liabilities      
Notes payable, net       18,910    
Term loans, net 4,999          
Lines of credit, net 4,935       5,023    
PPP loans       662    
Operating lease liability 38       184    
Total Non-current Liabilities 9,972       24,779    
Total Liabilities 34,920       79,355    
Stockholders’ Equity (Deficit)      
Common Stock, $0.001 par value, 200,000,000 shares authorized, 15,821,559 and 8,651,400 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively 16       9    
Series F Preferred Stock, $0.001 par value, 30,000 shares authorized, 17,294 shares and 21,754 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively          
Additional paid-in capital 263,361       232,530    
Accumulated deficit (249,117 )     (260,641 )  
Total Stockholders’ Equity (Deficit) 14,260       (28,102 )  
Total Liabilities and Stockholders’ Equity (Deficit) $ 49,180       $ 51,253    

The following unaudited pro forma condensed consolidated balance sheet data is presented as if the IPO closed on June 30, 2021, by applying adjustments to the Company’s condensed consolidated balance sheet. It reflects (1) the issuance of 8,000,000 shares of common stock for estimated net proceeds of $36.2 million (of which $0.9 million of offering costs were already included in the June 30, 2021 current asset balance), (2) the conversion of all Series F convertible preferred stock into an aggregate of 5,764,533 shares of common stock and (3) the reclassification of the Series F Warrant liability to equity:

    Actual   Pro Forma
Adjustments
  Pro Forma
  June 30, 2021     June 30, 2021
Assets            
Total Current Assets   $ 17,859       $ 36,168       $ 54,027    
Total Non-Current assets   31,321             31,321    
Total Assets   $ 49,180       $ 36,168       $ 85,348    
Liabilities & Stockholders’ Equity (Deficit)            
Total Liabilities   $ 34,920       $ (16,977 )     $ 17,943    
Common Stock   16       14       30    
Series F Preferred Stock                  
Additional paid-in capital   263,361       53,131       316,492    
Accumulated deficit   (249,117 )           (249,117 )  
Total Stockholders’ Equity (Deficit)   14,260       53,145       67,405    
Total Liabilities and Stockholders’ Equity (Deficit)   $ 49,180       $ 36,168       $ 85,348    

About Better Choice Company Inc.

Better Choice Company Inc. is a rapidly growing animal health and wellness company committed to leading the industry shift toward pet products and services that help dogs and cats live healthier, happier and longer lives. We take an alternative, nutrition-based approach to animal health relative to conventional dog and cat food offerings and position our portfolio of brands to benefit from the mainstream trends of growing pet humanization and consumer focus on health and wellness. We have a demonstrated, multi-decade track record of success selling trusted animal health and wellness products and leverage our established digital footprint to provide pet parents with the knowledge to make informed decisions about their pet’s health. We sell the majority of our dog food, cat food and treats under the Halo and TruDog brands, which are focused, respectively, on providing sustainably sourced kibble and canned food derived from real whole meat, and minimally processed raw-diet dog food and treats. 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 Communications
Valter Pinto, Managing Director
T: 212-896-1254
Valter@KCSA.com        


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