203% growth capturing channel, category, and
innovation in clean-ingredient food, next generation skincare, and
plant-based wellness
VANCOUVER, BC, May 30, 2023
/CNW/ - Simply Better Brands Corp. ("SBBC" or the "Company") (TSXV:
SBBC) (OTCQB: PKANF) is pleased to announce its first quarter
interim financial results for the quarter ended March 31, 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 FIRST QUARTER KEY COMMERCIAL ACHIEVEMENTS
- TRUBAR Protein Bar: In addition to supporting U.S. and
Canadian-based retailers, TRUBAR was able to expand into roughly
50% of U.S. and Canadian Costco Clubs throughout 2022. As a result
of TRUBAR exceeding the bar category sales velocities at Costco,
TRUBAR was able to access national distribution at Costco.
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 2022 per Global Market
Insights.
- PureKana Wellness: PureKana, a leading plant-based
wellness brand, remained focused on a its customer acquisition
initiative, adding over 18,600 customers per month and enabling 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 has the brand slotted to
enter an additional large, national chain in expected in summer
2023, as well as TJ Maxx expected in Q2 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 achieved
nearly $1.0MM in revenue in Q1 2023.
Vibez's primary focus is non-CBD solutions into the weight
management, focal acuity, and healthy hair consumer need states.
Through portfolio expansion, Vibez is forecasted to exceed
$7.0M in 2023.
"As our strong Q1 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. With our recent $7 million
finance raise, we are aptly fueled to deliver the 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 MARCH 31, 2023
|
For the three months
ended
|
|
|
|
March 31,
2023
|
March 31,
2022
|
Change
|
expressed in
millions *
|
$
|
% (in terms of
revenue)
|
$
|
% (in terms of
revenue)
|
$
|
%
|
Revenue
|
24.60
|
100 %
|
12.10
|
100 %
|
12.50
|
103 %
|
Cost of goods
sold
|
(10.70)
|
(43 %)
|
(4.10)
|
(34 %)
|
(6.60)
|
161 %
|
Gross
profit
|
13.90
|
57 %
|
8.00
|
66 %
|
5.90
|
74 %
|
For the three months ended March 31,
2023, the Company generated revenue of $24.6 million with a gross profit of $13.9 million (57%) compared to $12.1 million with a gross profit of $8.0 million (66%) during the three months ended
March 31, 2022. Revenue
increased by $12.5 million (103%
increase) over the prior period's revenues. The Company's revenue
is generated by one segment – consumer products and within that
segment by four main subsidiaries, PureKana's, Tru, BRN, No BS and
other subsidiaries which do not generate material revenue
currently. PureKana's first quarter revenue for the three
months ended March 31, 2023, was
$12.5 million compared to
$9.3 million for the comparable
period in 2022 (increase of $3.2
million or 34%). PureKana's revenue increase was driven by
growth of new customers. Tru's first quarter revenue for the three
months ended March 31, 2023, was
$10.2 million compared to
$2.5 million for the comparable
period in 2022 (increase of $7.7
million or 308%). Tru's strong sales performance in the
first 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
first quarter revenue for the three months ended March 31, 2023, was $0.3
million compared to $0.3
million for the comparable period in 2022. Revenue from BRN
(Vibez and Seventh Sense) was $1.4
million compared to nil as BRN was acquired in the second
quarter of 2022. SBBC's other subsidiaries contributed
$0.2 million in the first quarter
compared to 0.0 million.
SBBC's cost of sales increased in the first quarter relative to
the fourth quarter of 2022 by 13 percentage points due to a higher
mix of lower margin retails sales (41% of Q1 sales compared to 15%
of sales in Q4 of 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.
Gross profit for the first quarter of 2023 was $13.9 million (57%) compared to $8.0 million (66%) in the first quarter of
2022. The gross profit margin was down nine percentage points
in the first quarter of 2023 over the gross profit in the
comparable period driven by a higher mix of B2B sales in the first
quarter of 2023 (B2B was 41% of Q1 2023 sales) compared to the
first quarter of 2022 (B2B was 15% of Q1 2022 sales).
Operating costs for the first quarter of 2023 were $14.8 million, an increase of $4.3 million (or 41%), compared to $10.5 million in the first quarter of 2022.
The majority of the operating costs increase incurred in the three
months ended March 31, 2023, were
marketing expenses ($10.7 million for
Q1 or 72% of operating expenses) and they increased $3.7 million over the previous year directly
related to the increase in PureKana and Tru sales. PureKana
accounted for $7.6 million of the
$10.7 million in marketing expenses
in the quarter ended March 31, 2023
(71%). Tru Brand also accounts for
$2.1 million in marketing expenses.
These were higher in the first quarter directly related to the
national Costco MVM promotion. The national promotional costs are
significantly higher than the regular Costco promotional
allowances. The national promotion averages 22% compared to the
regular promotional; allowance of approximately 10%. The Company
chose to participate as it expected to exit the national promotion
in a favorable position where additional Costco regions would
continue to order the product after the national promotion had
ended. The MVM will run through the Company's second quarter and
marketing expenses will be higher also in the second quarter.
Non-cash items of $1.7 million
(Share-based payments of $0.7 million
and amortization of $1.0 million)
represented 12% of the operating expenses and increased
$0.4 million from the prior year.
Operating loss for the three months ended March 31, 2023 was $1.0
million compared to a loss of $2.5
million in the prior period or an improvement of
$1.5 million.
Other expenses for the first quarter 2023 were $1.7 million compared to other expenses of
$0.7 million in the first quarter of
2022 or an increase of $1.0 million.
The main components in the first quarter of 2023 for other income
and expenses were finance costs of $0.7
million and loss on re-measurement of warrant liabilities of
$0.9 million.
During the three months ended March 31,
2023, the Company recorded a net loss of $2.7 million compared to a net loss of
$3.2 million for the three months
ended March 31, 2022 or an
improvement of $0.5 million.
Non-IFRS Measures (Earnings before Interest, Taxes,
Depreciation, and Amortization ("EBITDA") and Adjusted
EBITDA)
EBITDA and Adjusted EBITDA are non-IFRS 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 the 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 March 31, 2023,
and 2022, and a reconciliation of same to net income (loss):
|
For the three months
ended
|
|
|
|
March 31,
2023
|
March 31,
2022
|
Change
in
|
|
$
|
$
|
$
|
%
|
Net
loss
|
(2.70)
|
(3.20)
|
0.50
|
(19 %)
|
Amortization
|
1.00
|
0.20
|
0.80
|
80 %
|
Finance
costs
|
0.70
|
0.30
|
0.40
|
57 %
|
EBITDA
|
(1.00)
|
(2.70)
|
1.70
|
118 %
|
Acquisition-related
costs
|
-
|
0.40
|
(0.40)
|
100 %
|
Fair value adjustment
of derivative liability
|
0.10
|
-
|
0.10
|
100 %
|
Loss on remeasurement
of warrant liabilities
|
0.90
|
-
|
0.90
|
100 %
|
Share-based
payments
|
0.70
|
1.10
|
(0.40)
|
(57 %)
|
Shares issued for
services
|
-
|
0.10
|
(0.10)
|
100 %
|
Non-recurring
expenses
|
0.10
|
-
|
0.10
|
100 %
|
Adjusted
EBITDA
|
0.80
|
(1.10)
|
1.90
|
561 %
|
The Company generated an adjusted EBITDA of $0.8 million for the three months ended
March 31, 2023, an increase of
$1.9 million over the adjusted EBITDA
loss of $1.1 million for the
comparable period in 2022.
Readers are cautioned that EBITDA and Adjusted EBITDA should not
be construed as an alternative to net income as determined under
IFRS; nor as an indicator of financial performance as determined by
IFRS; nor a calculation of cash flow from operating activities as
determined under IFRS; nor as a measure of liquidity and cash flow
under IFRS. The Company's method of calculating EBITDA and Adjusted
EBITDA may differ from methods used by other companies and,
accordingly, the Company's EBITDA and Adjusted EBITDA may not be
comparable to similar measures used by any other company. Except as
otherwise indicated, EBITDA and Adjusted EBITDA are calculated and
disclosed by SBBC on a consistent basis from period to period.
Specific adjusting items may only be relevant in certain
periods.
See also Earnings before Interest, Taxes, Depreciation, and
Amortization ("EBITDA") and Adjusted EBITDA (Non-GAAP Measures) in
the Company's management discussion and analysis for the three
months ended March 31, 2023,
available on SEDAR at www.sedar.com.
Liquidity and Capital Resources
The Company's primary liquidity and capital requirements are for
inventory and general corporate working capital purposes. The
Company had a cash balance of $5.7
million as of March 31, 2023,
which will provide capital to support the planned growth of the
business and for general corporate working capital purposes. The
Company's working capital deficiency decreased from $9.3 million as of December 31, 2022, to a working capital
deficiency of $6.5 million as of
March 31, 2023 ($2.8 million decrease). Working capital
deficiency included the Mainstreet loan ($10.3 million) which is classified as current
whereas the term of the loan is 5 years maturing in December
2025. The Mainstreet loan has a five-year term with principal
repayments due to start in December
2023 with the first $1.5
million principal repayment. This loan has several covenants
including annual and quarterly reporting and debt service coverage.
The Company was not compliant with the debt service covenant as of
December 31, 2022 although it made
progress in improving the Adjusted EBITDA performance of Purekana
LLC during the year. For example, Adjusted EBITDA reported for
Purekana LLC for the year ended December 31,
2022 was $1.4 million compared
to an Adjusted EBITDA loss of $1.4
million for the year ended December
31, 2021 or a $2.8 million
improvement. No notice of default has been received by the Company
as of the date of this MD&A and has been paying the interest on
a regular basis. It has been classified as current as a result of
the noncompliance with the debt service covenant.
The Company continues to focus on improving its working capital
position through a number of initiatives including equity and
convertible debt private placements, issuance of promissory notes
and establishment of lines of credit for its
subsidiaries.
Private Placements
The Company completed a private placement for CAD $7 million in equity to be used for further debt
reduction, working capital and for growth initiatives in 2023.
Convertible Debentures
The Company paid down $1.7 million
in convertible debentures including accrued interest that were due
in February 2023.
Line of Credit Facilities
Additionally, the Company has secured several lines of credit
facilities for three of its subsidiaries to support the financing
of purchase orders from key customers. These lines of credit have
been critical to finance the large retail purchase orders the
Company's subsidiaries have successfully generated during the
quarter ended March 31, 2023.
For more information of the line of credit facilities please refer
to note 8 in the interim financial statements for the three months
ended March 31, 2023. During
the three months ended March 31,
2023, the Company raised over $5.3
million in funds from these lines of credit to finance
purchase orders from its large retail customers. Over the same
period, the Company repaid over $5.5
million of these credit facilities to the lender. TRU was
able to increase its primary line of credit with this lender to
USD 6 million in December 2022. The nature of these loans is to
turnover between 3-5 months from the time the money is advanced to
repayment.
Promissory Notes
During the three months ended March 31,
2023, the Company reduced the balance of promissory notes
outstanding by approximately $0.2
million (see note 10 in the financial statements for the
three months ended March 31, 2023).
All promissory notes paid off during the year had a maturity less
than 12 months. Subsequent to the quarter the Company paid off a
promissory note with accrued interest in the amount of $0.75 million.
2023 OUTLOOK
For our 2023 Outlook:
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.
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
billion protein powder category in 2022, expansion plans for
TRU Brands products, 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
March 31, 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.