Simply Better Brands Revenue Jumps 254%

Company says sales will exceed $80 Million in 2023.

Simply Better Brands Corp. (TSXV: SBBC) (OTCQB: PKANF) released its unaudited financial results for the fourth quarter and year ending December 31, 2022. Simply Better increased revenue in the quarter by 254% to $16.5 million. The company also reported a net loss of $4.2 million flat from last year’s net loss of the same amount for the same time period in 2021. The operating costs for the quarter were $19.9 million, an increase of $13.0 million (188%), compared to $6.9 million for the same quarter in 2021.

In 2022, Simply Better saw its revenue grow by 319% to $65.4 million.  The company reported a net loss of $11.1 million, slightly better than 2021’s net loss of $12.8 million. Operating costs for the year were $54.3 million, an increase of $34.8 million (178%), compared to $19.5 million for 2021.

“As our strong 2022 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.

Balance Sheet

Simply Better said it had a cash balance of $2.3 million as of December 31, 2022, which will provide capital to support the planned business growth and for general corporate working capital purposes. The company’s working capital deficiency decreased from $11.8 million in 2021 to $9.3 million at the end of 2022. The working capital deficiency included the Mainstreet loan ($10.3 million) which is classified as current whereas the term is for 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 said it 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. Simply Better also told investors that it had not been told it was in default and is current on its interest payments.

Following the end of 2022, the company raised an additional C$7m million in equity to be used for further debt reduction, working capital, and growth initiatives in 2023.

Looking Ahead

Simply Better is forecasting its consolidated net sales to exceed $80 million in 2023. It also expects gross margin as a percentage of net sales to be between 58% and 60% and to achieve positive Adjusted EBITDA in the range of $3-4 million.

The company also reported on preliminary sales for the first quarter of fiscal 2023 of $24.8 million compared to $12.1 million in Q1 2022 or a 205% increase. Preliminary gross profit for the first quarter of 2023 is 55% compared to 66% in the first quarter of 2022. The lower gross margin is due to the sales channel mix as a larger portion of sales to retailers compared to the prior year’s predominantly online sales delivery.

Debra Borchardt

Debra Borchardt is the Co-Founder, and Executive Editor of GMR. She has covered the cannabis industry for several years at Forbes, Seeking Alpha and TheStreet. Prior to becoming a financial journalist, Debra was a Vice President at Bear Stearns where she held a Series 7 and Registered Investment Advisor license. Debra has a Master's degree in Business Journalism from New York University.

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