NEW YORK — Better Choice Company on March 28 shared its fourth-quarter and full-year financial performance for the three months and year ended Dec. 31, 2022, following news earlier this month that the company is reducing its workforce and entertaining “strategic alternatives” for the business.
For the fourth quarter, the company reported a loss from operations of $24.2 million, up roughly 385% from the previous fourth quarter, and net sales of $9.3 million, down nearly 19% year-over-year. The company’s gross margin was 17.9% and adjusted EBITDA came to a loss of 4.8 million.
International sales for the fourth quarter accounted for $2.2 million (23.7%) of total net sales, e-commerce for $3.5 million (37.6%), brick-and-mortar for $2.0 million (21.5%), and direct-to-consumer (DTC) for $1.6 million (17.2%). Fourth-quarter gross sales totaled $12 million, according to the company.
Better Choice reported a net loss available to common stockholders of $24.4 million for the fourth quarter 2022.
For the full year, Better Choice reported a loss from operations of $38.8 million, up roughly 124% from 2021, and net sales of $54.7 million, up nearly 19% year-over-year. The company’s gross margin was 27.9% and adjusted EBITDA came to a loss of $11.8 million.
International sales for the full year accounted for $21.9 million (40.0%) of total net sales, e-commerce for $14.6 million (26.7%), brick-and-mortar for $11.6 million (21.2%), and DTC for $6.6 million (12.1%). Gross sales were $65.7 million for the full year, according to the company.
Better Choice reported a net loss available to common stockholders of $39.3 million for the full year 2022.
“During the fourth quarter, net sales were $9.3 million resulting in full year 2022 net sales of $54.7 million, a 19% increase versus the prior year,” said Lionel F. Conacher, interim chief executive officer at Better Choice. “Our International channel delivered year-over-year net sales growth of 48% and Brick-and-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%.”
Better Choice Company first introduced Halo Elevate, a super-premium natural pet food line, in Pet Supplies Plus stores in March 2022. The company acquired the Halo brand in December 2019.
“We anticipate our ability to reach a growing base of diverse customers online will continue to improve as e-commerce penetration increases,” the company stated in its 10-K annual report filed with the Securities and Exchange Commission (SEC). “At the same time, we believe that our long-established relationships with key brick-and-mortar customers such as Petco and Pet Supplies Plus will enable us to jointly launch new products that are designed for in-store success, such as the national launch of Halo Elevate® in more than 2,000 brick-and-mortar locations 2022.”
Key Asian markets are driving Better Choice sales abroad, according to the company, with China “representing the largest market opportunity for growth and 81% of Better Choice’s $21.9 million of international sales in 2021,” the company stated. The company also shared it has more than $70 million of contracted minimum sales with its Asian distribution partners on the books through 2025.
According to the SEC filing, new product innovation will remain “the cornerstone” of the company’s growth strategy. The company has partnered with network of co-manufacturers for several years and added two new co-manufacturing partnerships to its roster in 2022.
Better Choice also shared on March 31 sales success of its Halo Elevate product line, which improved 15.6% at Petco in the recent 12-week period, year-over-year. According to the company, Petco’s comparable sales growth was 5% in the fourth quarter of 2022, suggesting Halo Elevate is outpacing the retailer’s average growth in terms of sales. Better Choice also noted its pet specialty sales were up 9.3% year-to-date compared to the previous 12-week period.
"We are thrilled with the strong sales growth that Halo Elevate has achieved," said Donald Young, chief sales officer of Halo Pet Food. "This success is a testament to the high nutritional value of our products, the trust that our pet owners have in our brand, and the strong partnerships we have formed in the pet specialty channel. We remain committed to providing pets with the best possible nutrition and are proud to be a trusted partner of our strategic retail partners."
According to the company, supply chain disruptions and challenges “could have an adverse effect on our business, financial condition, and operating results,” including inflation seen among raw materials and logistics and interruptions to sourcing operations.
“We continue to actively work with our co-manufacturing and freight partners to generate future cost savings and have successfully transitioned some of our primary suppliers to help realize improved gross profit margins in future periods,” Better Choice stated. “Additionally, we began implementing price increases to our customers to help cover these cost increases beginning late in the third quarter of 2021. We implemented additional price increases during 2022, which became effective in the second and third quarters of 2022.”
The company also shared its recurring losses and “significant accumulated deficit” have raised “substantial doubt” in terms of its ability to go on as a successful business.
Better Choice is currently exploring options to grow the business through acquisitions, investments and/or “strategic alliances.”
“We expect to consider opportunities to acquire or make investments in new or complementary businesses, facilities, technologies or products, or enter into strategic alliances, which may enhance our capabilities, expand our network, complement our current products or expand the breadth of our markets,” the company stated.
The company also shared concerns about maintaining its stock listing on the American New York Stock Exchange (NYSE). A de-listing would make it harder for the business to raise capital going forward, Better Choice noted. The company first went public under the NYSE in July 2021. In its fourth-quarter and full-year earnings report, the company shared total net proceeds from the IPO totaled roughly $6.1 million.
“There can be no assurance that we will be successful in maintaining the listing of NYSE American as it is possible we may fail to satisfy the continued listing requirements, such as the corporate governance requirements or the minimum stock price requirement,” Better Choice stated.
Better Choice reported it had 46 full-time employees and one part-time employee as of Dec. 31, 2022. The company announced on March 2 plans to reduce its workforce by 25% in an effort to streamline operations. The move is expected to save the company approximately $2.2 million annually.
“Looking to 2023, we continue to be focused on the execution of our growth plans and reduction of quarterly cash burn,” Conacher added.
Moving forward, Better Choice’s growth strategy will continue to revolve around four key tenants: strong innovation, leveraging a differentiated omni-channel approach, capitalizing on trends toward humanization, and taking advantage of a generational shift among pet owners in Asian markets.
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