Driving over 283% channel, category and
geographic growth in plant-based food and beverage, health &
beauty while delivering second consecutive quarter of positive
adjusted EBITDA
VANCOUVER, BC, Nov. 29,
2022 /CNW/ - Simply Better Brands Corp. ("SBBC"
or the "Company") (TSXV: SBBC) (OTCQB: PKANF) is pleased to
announce its financial results for the quarter ended September 30, 2022. 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.
FINANCIAL HIGHLIGHTS FOR QUARTER ENDED SEPTEMBER 30, 2022, AND NINE MONTHS ENDED
SEPTEMBER 30, 2022
All amounts are expressed in United
States dollars unless otherwise noted.
|
For the three months
ended
|
|
|
|
September 30,
2022
|
September 30,
2021
|
Change
in
|
expressed in
millions *
|
$
|
%
|
$
|
%
|
$
|
%
|
REVENUE
|
13.4
|
100 %
|
3.5
|
100 %
|
9.9
|
283 %
|
COST OF GOODS
SOLD
|
(4.6)
|
-34 %
|
(1.5)
|
-43 %
|
(3.1)
|
207 %
|
GROSS
MARGIN
|
8.8
|
66 %
|
2.0
|
57 %
|
6.8
|
340 %
|
For the three months ended September 30,
2022, the Company generated revenue of $13.4 million with a gross margin of $8.8 million (66%) compared to $3.5 million with a gross margin of $2.0 million (57%) during the three months ended
September 30, 2021. Third quarter
2022 revenue was up 283% over the same period in 2021 and third
quarter 2022 gross margin was up 340% over the same period for
2021.
|
For the nine months
ended
|
|
|
|
September 30,
2022
|
September 30,
2021
|
Change
in
|
expressed in
millions *
|
$
|
%
|
$
|
%
|
$
|
%
|
REVENUE
|
42.4
|
100 %
|
9.1
|
100 %
|
33.3
|
366 %
|
COST OF GOODS
SOLD
|
(13.9)
|
-33 %
|
(3.7)
|
-41 %
|
(10.2)
|
276 %
|
GROSS
MARGIN
|
28.5
|
67 %
|
5.4
|
59 %
|
23.1
|
428 %
|
For the nine months ended September 30,
2022, the Company generated revenue of $42.4 million with a gross margin of $28.5 million (67%) compared to $9.1 million with a gross margin of $5.4 million (59%) during the nine months ended
September 30, 2021. Nine months
2022 revenue was up 366% over the same period in 2021 and nine
months 2022 gross margin was up 428% over the same period for
2021.
Three months ended September 30,
2022 – Operating expenses
Followings are the breakdown of the major operating expenses in
the presented period:
|
For the three months
ended
|
|
|
|
September 30,
2022
|
September 30,
2021
|
Change
in
|
expressed in
millions *
|
$
|
%
|
$
|
%
|
$
|
%
|
Amortization
expense
|
0.6
|
6 %
|
0.2
|
3 %
|
0.4
|
200 %
|
Customer service
support
|
0.5
|
5 %
|
-
|
0 %
|
0.5
|
100 %
|
General and
administrative expenses
|
0.6
|
6 %
|
0.3
|
4 %
|
0.3
|
100 %
|
Marketing
expense
|
6.2
|
59 %
|
1.4
|
19 %
|
4.8
|
343 %
|
Professional
fees
|
0.6
|
6 %
|
0.4
|
5 %
|
0.2
|
50 %
|
Regulatory and
filing fees
|
-
|
0 %
|
0.1
|
1 %
|
(0.1)
|
-100 %
|
Salaries and
wages
|
1.0
|
10 %
|
0.8
|
10 %
|
0.2
|
25 %
|
Share-based
payment
|
0.8
|
8 %
|
4.5
|
58 %
|
(3.7)
|
-82 %
|
|
10.3
|
100 %
|
7.7
|
100 %
|
2.6
|
34 %
|
*Items in each
presented period with a balance below $0.1M are either combined as
"Other Items" or excluded from the table above.
|
**Other items
including items with a balance below $0.1M and rounding
adjustment.
|
Operating costs for the third quarter of 2022 were $10.3 million, an increase of $2.6 million (or 34%), compared to $7.7 million in the third quarter of 2021.
The majority of the operating costs increase incurred in the
third quarter of 2022 were marketing expenses ($6.2 million for Q3 or 59% of operating
expenses). PureKana accounted for most of the marketing expenses in
the third quarter of 2022 (85%). Share-based payments were
$0.8 million for the third quarter of
2022 which is a decrease of $3.7
million compared to the previous period. Additionally,
customer service support were $0.5million for Q3 accounting for 5% of operating
expenses, professional fees were $0.6
million for Q3 accounting for 6% of operating expenses,
G&A expenses were $0.6 million
for Q3 accounting for 6% of operating expenses and salaries and
wages were $1 million for Q3
accounting for 10% of operating expenses. The increase in marketing
in the third quarter of 2022 were related to the new marketing
programs launched by PureKana which drove the significant increase
in third quarter sales and gross margins. Share-based payments are
related to the options and restricted share units
granted.
Nine months ended September 30,
2022 – Operating expenses
Followings are the breakdown of the major operating expenses in
the presented period:
|
For the nine months
ended
|
|
|
|
September 30,
2022
|
September 30,
2021
|
Change
in
|
expressed in
millions *
|
$
|
%
|
$
|
%
|
$
|
%
|
Amortization
expense
|
1.4
|
4 %
|
0.4
|
3 %
|
1.0
|
250 %
|
Customer service
support
|
1.5
|
4 %
|
0.1
|
1 %
|
1.4
|
1400 %
|
General and
administrative expenses
|
1.5
|
4 %
|
0.7
|
6 %
|
0.8
|
114 %
|
Marketing
expense
|
21.4
|
63 %
|
3.5
|
28 %
|
17.9
|
511 %
|
Professional
fees
|
1.8
|
5 %
|
0.8
|
6 %
|
1.0
|
125 %
|
Regulatory and
filing fees
|
0.2
|
1 %
|
0.3
|
2 %
|
(0.1)
|
-33 %
|
Salaries and
wages
|
3.0
|
9 %
|
2.3
|
18 %
|
0.7
|
30 %
|
Share-based
payment
|
3.5
|
10 %
|
4.5
|
36 %
|
(1.0)
|
-22 %
|
Travel and
entertainment
|
0.1
|
0 %
|
-
|
0 %
|
0.1
|
100 %
|
Other items
**
|
(0.1)
|
0 %
|
0.1
|
0 %
|
(0.2)
|
-251 %
|
|
34.3
|
100 %
|
12.7
|
100 %
|
21.6
|
171 %
|
*Items in each
presented period with a balance below $0.1M are either combined as
"Other Items" or excluded from the table above.
|
**Other items
including items with a balance below $0.1M and rounding
adjustment.
|
Operating costs for the nine months ended September 30, 2022, were $34.3 million, an increase of $21.6 million (or 171%), compared to $12.7 million in the third quarter of 2021.
The majority of the operating costs increase incurred in the
nine months ended September 30, 2022
were marketing expenses ($21.4
million for Q3 or 63% of operating expenses). PureKana
accounted for most of the marketing expenses in the nine months
ended September 30, 2022 (90%).
Share-based payments of $3.5 million
for the 9 months ended September 30,
2022 decreased by $1.0
million. Additionally, customer service support were
$1.5 million in the nine months ended
September 30, 2022 accounting for 4%
of operating expenses, professional fees were $1.8 million in the nine months ended
September 30, 2022 accounting for 5%
of operating expenses, G&A expenses were $1.5 million in the nine months ended
September 30, 2022 accounting for 4%
of operating expenses and salaries and wages were $3 million in the nine months ended September 30, 2022 accounting for 9% of operating
expenses. The increase in marketing in the third
quarter of 2022 were related to the new marketing programs launched
by PureKana which drove the significant increase in nine month
ended September 30, 2022 sales and
gross margins. Share-based payments are related to the
options and restricted share units granted.
The Company had a loss of $1.4
million for the three months ended September 30, 2022. The net loss for the
third quarter decreased by $1.4
million over the loss in the second quarter of 2022. Loss
per share was $0.04 in the third
quarter of 2022.
The Company had a loss of $7.4
million for the nine months ended September 30, 2022 compared to $8.6 million in the prior period in 2021.
Loss per share was $0.23 for the nine
months ended September 30, 2022
compared to a loss of $0.40 per share
in the prior period.
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 and nine months ended September
30, 2022, and 2021, and a reconciliation of same to net
income (loss):
|
For the three months
ended
|
|
|
|
September
30,
|
September
30,
|
|
|
|
2022
|
2021
|
Change
in
|
expressed in
millions *
|
$
|
$
|
$
|
%
|
Loss before income
taxes
|
(1.4)
|
(6.4)
|
5.0
|
-78 %
|
Add
(less):
|
|
|
|
|
Amortization
expense
|
0.6
|
0.2
|
0.4
|
200 %
|
Finance
costs
|
0.3
|
0.6
|
(0.3)
|
-50 %
|
EBITDA
|
(0.5)
|
(5.6)
|
5.1
|
-91 %
|
Add
(less):
|
|
|
|
|
Share-based
payment
|
0.8
|
4.5
|
(3.7)
|
-82 %
|
Acquisition-related
costs
|
-
|
0.4
|
(0.4)
|
-100 %
|
Fair value
adjustment of derivative liability
|
(0.2)
|
(0.2)
|
-
|
0 %
|
Gain on settlement
of the milestone shares
|
(0.4)
|
-
|
(0.4)
|
100 %
|
Impairment of
receivable
|
0.2
|
-
|
0.2
|
100 %
|
Shares issued for
services
|
0.1
|
0.2
|
(0.1)
|
-50 %
|
Non-recurring
expenses
|
0.4
|
-
|
0.4
|
100 %
|
Adjusted
EBITDA
|
0.4
|
(0.7)
|
1.1
|
-157 %
|
The Company generated positive adjusted EBITDA of $0.4 million for the three months ended
September 30, 2022, an increase of
$1.1 million over the adjusted EBITDA
loss for the comparable period in 2021. The positive Adjusted
EBITDA of $0.4 million incurred
during the three months ended September 30,
2022, were due to (1) positive adjusted EBITDA generated by
three of SBBC's subsidiaries PureKana ($0.1
million positive adjusted EBITDA), Tru ($0.4 million positive adjusted EBITDA) and No BS
($0.1 million positive adjusted
EBITDA) which were offset by (2) SBBC corporate ($0.2 million adjusted EBITDA loss). The Company
was successful in implementing its plan to significantly reduce the
negative adjusted EBITDA performance at its other subsidiaries
(Herve and BRN) during the third quarter and the two newer
subsidiaries both had a neutral impact on corporate adjusted EBITDA
for the third quarter of 2022.
|
For the nine months
ended
|
|
|
|
September
30,
|
September
30,
|
|
|
|
2022
|
2021
|
Change
in
|
expressed in
millions *
|
$
|
$
|
$
|
%
|
Loss before income
taxes
|
(7.4)
|
(8.6)
|
1.2
|
-14 %
|
Add
(less):
|
|
|
|
|
Amortization
expense
|
1.4
|
0.4
|
1.0
|
250 %
|
Finance
costs
|
0.9
|
1.8
|
(0.9)
|
-50 %
|
EBITDA
|
(5.1)
|
(6.4)
|
1.3
|
-20 %
|
Add
(less):
|
|
|
|
|
Share-based
payment
|
3.5
|
4.5
|
(1.0)
|
-22 %
|
Acquisition-related
costs
|
0.5
|
0.4
|
0.1
|
25 %
|
Gain (loss) on
remeasurement of loan payable
|
0.6
|
-
|
0.6
|
100 %
|
Fair value
adjustment of derivative liability
|
(0.2)
|
(0.8)
|
0.6
|
-75 %
|
Gain on settlement
of the milestone shares
|
(0.4)
|
-
|
(0.4)
|
100 %
|
Grant and other
assistance
|
(0.4)
|
-
|
(0.4)
|
100 %
|
Impairment of
receivable
|
0.2
|
-
|
0.2
|
100 %
|
Write-off of
advance payments
|
0.4
|
-
|
0.4
|
100 %
|
Shares issued for
services
|
0.5
|
0.2
|
0.3
|
140 %
|
Non-recurring
expenses
|
0.7
|
-
|
0.7
|
100 %
|
Adjusted
EBITDA
|
0.3
|
(2.1)
|
2.4
|
-114 %
|
The Company has an adjusted EBITDA of $0.3
million for the nine months ended September 30, 2022, an increase of $2.4 million over the adjusted EBITDA loss for
the comparable period in 2021. Adjusted EBITDA of $0.3 million for the nine months ended
September 30, 2022, were due to (1)
positive adjusted EBITDA generated by Tru ($1.3 million) and No BS ($0.1 million) which was offset by PureKana
($0.2 million adjusted EBITDA loss),
SBBC corporate ($0.5 million adjusted
EBITDA loss) and $0.4 million
adjusted EBITDA losses by SBBC's other subsidiaries.
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 quarter
ended September 30, 2022 available on
SEDAR at www.sedar.com.
LIQUIDITY AND CAPITAL RESOURCES
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 raise in August of
2022 and raised CA$3,990,844 (USD $3,069,880) in common shares and convertible
debentures. The funds raised were used for debt reduction and
working capital.
Convertible Debentures
During the nine months ended, the Company reduced the balance of
convertible debentures outstanding by $1,053,158 (see note 10 in the interim financial
statements for the nine months ended September 30, 2022).
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 nine months ended September 30, 2022. For more information of
the line of credit facilities please refer to note 9 in the interim
financial statements for the nine months ended September 30, 2022. During the nine months
ended September 30, 2022, the Company
raised $4,455,843 in funds from these
lines of credit to finance purchase orders from its large retail
customers. Over the same period, the Company repaid
$4,003,801 of these credit facilities
to the lender. The nature of these loans is to turnover
between 3-5 months from time the money is advanced to
repayment.
Promissory Notes
During the nine months ended, the Company reduced the balance of
promissory notes outstanding by $4,064,524 (see note 11 in the interim financial
statements for the nine months ended September 30, 2022). All promissory notes
paid off during the nine months had a maturity less than 12
months.
Subsequent to the quarter ended September 30, 2022
- The Company entered into an agreement with the third party to
settle the payment of the assigned portion of the PK Promissory
Notes ($1,166,168). The Company made
an initial payment of $300,000 to the
assigned portion of the PK Promissory Notes. The agreement calls
for monthly payments of $50,000
beginning on December 15, 2022 and
continuing until the $1,166,168
amount is paid in full. The note bears an interest rate of 6%.
- The Company entered into a loan agreement with an amount of
$1,000,000. The loan bears 15%
interest per annum and will be repaid over 42-months starting
November 15th, 2022.
2022 OUTLOOK
As a result of the third quarter and nine month ended
September 30, 2022 interim financial
results, the Company updates its annual guidance as follows
- Expected consolidated net sales are increased from
$50 million-55 million to
$55 million -$60 million
- Expected gross margin as a percentage of net sales is
63%-65%.
- The Company expects to achieve positive Adjusted EBITDA for
fiscal 2022.
"Based upon the momentum of our core brands, we are pleased to
increase our revenue guidance, deliver strong gross margin and
adjusted EBITDA expansion vs. year-ago, while simultaneously
reducing our debt. It is a proof point in our ability to
build and acquire clean ingredient brands and expand them into
omni-channel environments with solid operational fundamentals and
strong financial governance. Our strategic growth priorities remain
to lead consumer-centric innovation and relentlessly acquire
customers to these emerging brands by driving category, channel and
geographic expansion. In parallel, we have successfully integrated
the acquisitions of BRN/Seventh Sense and Hervé into three
growth verticals: plant-based wellness, food and beverage, and
health & beauty. As an example, our new Gen X-oriented wellness
brand called Vibez, within the BRN/Seventh Sense umbrella, is
already contributing to our Q4 result. Leveraging our existing
resources and capability across a broader portfolio is driving
synergies, operational scale and growth" says SBBC CEO,
Kathy Casey.
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 wellness, 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: 2022 guidance and results of operations; growth of the
Company's brands; and integration of recent acquisitions completed
by the Company.
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 CBD, broader
wellness and consumer packaged goods industries and to the Company,
and as set forth in the Company's annual information form and other
filings 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 for the quarter ended
September 30, 2022, and the year
ended December 31, 2022, 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.