Better Choice Company Inc. (BTTR) is a rapidly growing pet health and wellness company committed to leading the industry shift towards products and services that help dogs and cats live healthier, happier, and longer lives. With a focus on premium and super-premium pet products, the company has established a strong presence in the pet care market, leveraging its broad portfolio of offerings and strategic partnerships to drive consistent growth.
Company History and Business Overview Better Choice was founded in 2019 with the goal of disrupting the pet food industry by providing high-quality, thoughtfully sourced products that prioritize the well-being of pets. The company's flagship brand, Halo, has gained significant traction in the market, known for its innovative recipes formulated with leading veterinary and nutrition experts to deliver optimal health benefits.
In 2019, Better Choice underwent a reverse stock split and completed several acquisitions and mergers, including the acquisition of the TruDog brand, which was later rebranded and integrated under the Halo brand. The company's portfolio expanded to include a wide range of pet health and wellness products for dogs and cats, including foods, treats, toppers, dental products, chews, and supplements.
Throughout 2020 and 2021, Better Choice faced financial challenges, raising capital through private placements to retire outstanding debt obligations but continuing to incur significant losses. The company's struggles persisted into 2022, with impairment charges and asset write-offs contributing to continued net losses. In response, Better Choice implemented various strategies to improve profitability, including streamlining operations, consolidating manufacturing, and optimizing pricing and ingredient profiles.
In 2023, the company underwent significant leadership changes, appointing a new CEO and CFO. Better Choice made strategic decisions to exit unprofitable sales channels and its direct-to-consumer business, focusing instead on its core Halo brand and key retail and international partnerships. These actions, combined with improved supply chain management and operational discipline, began to yield positive results in the company's financial performance in 2024.
In 2024, Better Choice made a strategic move to expand its footprint in the health and wellness space through the acquisition of SRx Health Solutions, a leading provider of specialty pharmacy services in Canada. This transformative deal positioned Better Choice as a global health and wellness company, providing a comprehensive suite of products and solutions for pets, people, and families.
Financial Performance and Operational Highlights Better Choice's financial performance has been marked by a focus on profitability and operational efficiency. In the third quarter of 2024, the company reported impressive results, including:
- Net sales of $11.4 million, representing a 33% quarter-over-quarter growth - Gross margin expansion to 40%, a 600 basis point increase year-over-year - Adjusted EBITDA of over $200,000, the company's first profitable quarter in years - Net income of $1.5 million, or $0.74 per share
The company's digital channel and international segments have been the primary drivers of this growth, with the Asia-Pacific region in particular showcasing a 92% quarter-over-quarter and 9% year-over-year sales increase. Better Choice's strategic focus on strengthening its operational capabilities, optimizing its product portfolio, and expanding its global reach has been a key factor in its improved financial performance.
For the full fiscal year 2023, Better Choice reported revenue of $38.59 million and a net loss of $22.77 million. The company generated positive operating cash flow of $97,000 and free cash flow of $79,000 in 2023. However, the most recent nine-month period ending September 30, 2024, saw net sales decrease by 15% to $27.82 million compared to the same period in 2023. This decline was primarily attributed to the strategic exit from unprofitable customers in the Brick Mortar channel and the shutdown of the direct-to-consumer revenue stream in the second quarter of 2024.
Liquidity and Capital Structure As of September 30, 2024, Better Choice reported a strong liquidity position, with $4.74 million in cash and cash equivalents and a net working capital of $9.5 million. This enhanced financial flexibility has been further bolstered by the company's successful $5 million public offering in the third quarter, which provided additional resources to support its growth initiatives.
The company's capital structure has also been streamlined, with the recent forgiveness of its $5.5 million term loan and associated warrants, eliminating a significant portion of its debt obligations. This strategic move has strengthened Better Choice's balance sheet and positioned the company for continued investment in organic growth and strategic acquisitions.
Better Choice's financial health is further evidenced by its solid liquidity ratios, with a current ratio of 2.38 and a quick ratio of 1.81 as of September 30, 2024. The company maintains a low debt-to-equity ratio of 0.0047, indicating a conservative approach to leverage. Additionally, Better Choice has access to a $4.75 million receivables-based credit facility with Wintrust, of which $1.9 million was outstanding as of September 30, 2024.
Growth Strategies and Outlook Better Choice's growth strategy revolves around three key pillars: Organic growth, international expansion, and strategic acquisitions. The company's focus on new product innovation, brand positioning, and e-commerce optimization has driven consistent performance in its core digital and international channels.
In the international markets, the company has identified significant opportunities, particularly in the Asia-Pacific region, where the pet care industry is experiencing rapid growth driven by rising pet ownership and premiumization trends. Better Choice's established partnerships and scalable go-to-market strategy position it well to capitalize on this expanding market. The International channel generated 62% of net sales in Q3 2024, up from 49% in the prior year period, underscoring the success of the company's global expansion efforts.
Furthermore, the company's acquisition of SRx Health Solutions has opened up new avenues for growth, allowing Better Choice to leverage its expertise in specialty pharmacy services and expand its reach within the broader health and wellness ecosystem. The integration of SRx's operations is expected to generate significant synergies and drive long-term value creation for shareholders. The acquisition is anticipated to close in early Q1 2025, with SRx Health having generated approximately CAD$180 million in revenue and positive adjusted EBITDA in 2023.
Better Choice is confident in its ability to continue its upward trajectory and deliver on its near- and long-term goals into 2025. The company's focus on building the Halo brand through improved positioning, storytelling, and innovation, coupled with its efforts to capture a larger share of the online market and expand omnichannel distribution, are expected to drive sustainable organic growth.
Industry Trends and Market Opportunity Better Choice operates in a rapidly growing and evolving pet care industry. The U.S. pet food and treat market was valued at approximately $64 billion in 2023 and is forecasted to grow at a 15% CAGR between 2020-2024. The global plant-based pet food market is expected to expand at a 9.2% CAGR, reaching $57.43 billion in revenue by 2032. Of particular interest is the Chinese premium pet food market, which is projected to grow at an impressive 20-28% CAGR from 2015-2025, presenting significant opportunities for Better Choice's international expansion efforts.
Product Portfolio and Brand Strategy Better Choice's core products are sold under the Halo brand, which offers a variety of platforms for innovation, including Halo Holistic, Halo Elevate, and Halo Freeze Dried Raw. These product lines are designed to address specific pet health concerns and preferences:
- Halo Holistic focuses on complete digestive health with prebiotics, probiotics, and postbiotics, using only whole animal proteins and no meat meals. - Halo Elevate features leading nutrient levels supporting the top five pet parent health concerns, including digestive health, heart and immunity support, healthy skin and coat, hip and joint support, and strength and energy. - Halo Freeze Dried Raw preserves the natural flavor and nutrition of raw food with 100% protein from natural sources.
The company's commitment to high-quality, thoughtfully sourced ingredients and science-based nutrition has resonated with pet owners seeking premium and super-premium products for their pets.
Risks and Challenges Despite the company's impressive progress, Better Choice is not without its challenges. The pet care industry is highly competitive, with established players and emerging brands vying for market share. The company's ability to maintain its competitive edge and continue to innovate its product portfolio will be crucial to its long-term success.
Additionally, the company is subject to regulatory oversight and potential changes in consumer preferences, which could impact its operations and financial performance. Better Choice's reliance on third-party manufacturing and distribution partners also introduces operational risks that the company must carefully manage.
Conclusion Better Choice Company Inc. has demonstrated its ability to navigate the dynamic pet health and wellness landscape, leveraging its premium brand portfolio, operational expertise, and strategic acquisitions to drive consistent growth and profitability. With a focus on organic expansion, international market penetration, and strategic M&A, the company is well-positioned to capitalize on the industry's favorable trends and deliver long-term value to its shareholders. As Better Choice continues to execute its growth strategy and integrate the SRx Health Solutions acquisition, investors will be watching closely to see if the company can maintain its positive momentum and achieve sustainable profitability in the competitive pet care market.