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BC

Better Choice Co Inc. (BTTR)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 delivered a meaningful sequential step-up: revenue rose 33% QoQ to $11.40m, gross margin improved to 40% (+165 bps QoQ; +600 bps YoY), and the company posted its first profitable quarter in years with adjusted EBITDA “just over” $0.20m (2% margin) and GAAP net income of $1.5m ($0.74 EPS) .
  • 9M 2024 net sales were $28m vs $33m in 9M 2023 as management exited unprofitable channels and closed legacy DTC; digital momentum and APAC strength are now offsetting the purposeful revenue reset .
  • International/APAC was the primary driver (APAC +92% QoQ; +9% YoY), while domestic digital grew ~10% YoY, supported by improved fill rates (97%) and better S&OP execution .
  • No formal quantified guidance was provided; management emphasized durable margin/FCF improvement and operating leverage, and highlighted pending SRx Health acquisition (expected close early Q1’25) as a broadened health/wellness platform catalyst .

What Went Well and What Went Wrong

What Went Well

  • Margin and profitability inflection: gross margin reached 40% (+600 bps YoY; +165 bps QoQ) on improved co-supply terms and scale; adjusted EBITDA turned positive (“just over” $0.20m, 2% margin), marking the first profitable quarter in years; GAAP net income was $1.5m, EPS $0.74 .
  • Channel execution improved: APAC sales +92% QoQ and +9% YoY; domestic digital +10% YoY; new-to-brand consumers +23% QoQ and repeat units +20% QoQ on the largest e-commerce platform; average fill rate reached 97% .
  • Working capital and liquidity strengthened: net working capital improved to $9.5m vs $3.1m last quarter; the company raised just under $5m net via a public offering, supporting growth and flexibility .

Selected quotes:

  • “We generated 33% quarter-over-quarter sales growth to $11.4 million, improved gross margin … to 40% and achieved the company’s first profitable quarter in years” .
  • “Our ability to achieve favorable terms on our co-supply agreement resulted in gross margin accretion of 600 basis points to 40%” .
  • “Our $9.5 million net working capital position compared to $3.1 million last quarter … we raised just under $5 million of net proceeds” .

What Went Wrong

  • Year-to-date revenue still below prior year: 9M 2024 net sales were $28m vs $33m as the company intentionally exited unprofitable brick-and-mortar and closed legacy DTC, pressuring YoY top line .
  • Profitability aided by non-operational items in prior quarter: Q2 GAAP net income ($2.65m) and EPS ($2.98) benefited from a $3.6m gain on debt extinguishment; adjusted EBITDA in Q2 remained slightly negative (≈–$0.03m) before the Q3 inflection .
  • Seasonality and concentration risks: management noted the cyclical nature of international/APAC volumes with higher expected Q3 volumes, implying seasonality and potential quarter-to-quarter variability .

Financial Results

P&L snapshot (sequential comparison)

MetricQ2 2024Q3 2024
Revenue ($USD Millions)$8.54 $11.40
Gross Margin %38% 40%
Net Income ($USD Millions)$2.65 $1.50
Diluted EPS ($USD)$2.98 $0.74
Adjusted EBITDA ($USD Millions)-$0.03 >$0.20
Adjusted EBITDA Margin %N/A2%

Notes: Q2 net income/EPS include a $3.6m one-time gain on extinguishment of debt .

YTD revenue trend

Metric9M 20239M 2024
Net Sales ($USD Millions)$33.00 $28.00

Operating/Channel KPIs

KPIQ2 2024Q3 2024
Average Fill Rate95% 97%
Inventory Reduction (YoY)-57% -48%
APAC Sales Growth (QoQ)+27% (International channel overall) +92%
APAC Sales Growth (YoY)7% YTD YoY (International) +9% YoY
Domestic Digital Growth (YoY)+11% (digital topline) +10%
New-to-Brand Consumers (QoQ)N/A+23%
Repeat Units (QoQ)N/A+20%
Net Working Capital ($m)$3.10 (last quarter) $9.50

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY 2024Not providedNot providedMaintained (no formal guidance)
Gross MarginFY 2024Not providedQualitative: continued improvement and operating leverage focusMaintained qualitative
Adjusted EBITDAFY 2024Not providedQualitative: continued margin expansion expectedMaintained qualitative
Capex/OpEx/TaxFY 2024Not providedNot providedN/A

No quantified financial guidance was disclosed in Q3 materials reviewed .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q1 2024)Current Period (Q3 2024)Trend
Digital channel momentum (Chewy, Amazon)Shifted investments; +11% digital topline; subscription growth Not located in retrieved filings –Domestic digital +10% YoY; +23% new-to-brand QoQ; +20% repeat units QoQ Improving
International/APACInternational +27% QoQ; 7% YTD YoY Not located –APAC +92% QoQ; +9% YoY; noted seasonal pattern Strong, seasonal
Margins/Operating leverageGM 38% (+400 bps YoY); adj. EBITDA ~breakeven Not located –GM 40% (+600 bps YoY); adj. EBITDA >$0.20m (2% margin) Improving
Supply chain/Fill ratesFill rate 95%; inventory -57% YoY Not located –Fill rate 97%; inventory -48% YoY; better S&OP Improving
Capital structure/Working capitalDebt reduced by $5.5m; planned AP reduction; offering ~$4.5m net post-Q2 Not located –Net working capital $9.5m vs $3.1m last quarter; raised just under $5m net Strengthening
Brand/MarketingFull-funnel activation; elevate brand; Chewy Halo Elevate launch Not located –Continued shift paying off in digital KPIs Positive

Management Commentary

  • CEO: “We generated 33% quarter-over-quarter sales growth to $11.4 million [and] improved gross margin … to 40% and achieved the company’s first profitable quarter in years at just north of $200,000 of adjusted EBITDA.”
  • CFO: “Our ability to achieve favorable terms on our co-supply agreement resulted in gross margin accretion of 600 basis points to 40% and 165 sequential basis point growth since the second quarter.”
  • CEO on APAC: “We’re excited about this once-in-a-generation demographic shift … where the pet food market is experiencing rapid growth … [which] represents a tremendous opportunity.”
  • CFO on liquidity: “Our $9.5 million net working capital position compared to $3.1 million last quarter … we raised just under $5 million of net proceeds … We remain bullish on the substantial flexibility that this improved working capital will continue to afford us.”
  • Strategy/M&A: “We’re in the process of completing our acquisition of SRx Health … expected to close in early Q1 of 2025.”

Q&A Highlights

  • The retrieved transcript ends before the Q&A session content. No Q&A exchanges were available in the retrieved document beyond management’s prepared remarks and the transition to questions .

Estimates Context

  • Wall Street consensus (S&P Global) for Q3 2024 EPS, revenue, and EBITDA was not available due to missing CIQ mapping for BTTR. As such, we cannot provide a estimates vs. actuals comparison. S&P Global consensus was unavailable.

Key Takeaways for Investors

  • Profitability inflection appears real: gross margin at 40% and positive adjusted EBITDA for the first time in years, pointing to improved operating discipline; watch for sustainment into seasonally different quarters to validate durability .
  • Digital channel KPIs (new-to-brand +23% QoQ, repeat units +20% QoQ) coupled with 97% fill rates suggest improving brand health and execution on priority platforms (Chewy, Amazon) .
  • APAC is a growth lever, but seasonal: +92% QoQ in Q3 and +9% YoY underscores opportunity—and reliance—on international cycles; plan for quarterly variability even as full-year trends improve .
  • Liquidity improved: net working capital rose to $9.5m (from $3.1m), supported by the equity raise; this should fund inventory and marketing to support growth while maintaining margin gains .
  • YoY sales still down (9M: $28m vs $33m) as unprofitable channels were exited—near-term recovery relies on digital/APAC scaling and margin retention to offset the reset base .
  • Prior quarter GAAP profitability benefited from a one-time debt extinguishment gain; Q3 shows cleaner operating improvement—track adjusted EBITDA/margin trajectory through Q4 and into 2025 .
  • SRx Health acquisition is a 2025 catalyst, potentially diversifying scale and improving operating leverage across a broader health/wellness platform; closure targeted for early Q1’25 .

Appendix: Additional Context from Prior Quarter

  • Q2 2024 headline results: revenue $8.54m, gross margin 38%, net income $2.65m (EPS $2.98) aided by $3.6m gain; adjusted EBITDA ≈ –$0.03m .
  • Q3 2024 headline results: revenue $11.40m, gross margin 40%, net income $1.50m (EPS $0.74), adjusted EBITDA “just over” $0.20m (2% margin) .