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Starco Brands, Inc. (STCB)·Q1 2024 Earnings Summary

Executive Summary

  • Q1 revenue grew 39% year over year to $15.49M, with gross profit of $7.01M and loss per share of $(0.01); royalty revenue represented 15% (≈$2.31M), helped by Whipshots momentum .
  • Sequentially, revenue declined from Q4 2023’s $18.9M as the seasonally strong holiday quarter rolled off; Q4 gross profit was $6.2M versus $7.0M in Q1 2024 .
  • Liquidity remains the key risk: positive operating cash flow of $0.82M in Q1, but a working capital deficit of $(17.41)M and Soylent’s revolving credit facility was in default (forbearance through June 10, 2024); management flagged substantial doubt about going concern pending new financing .
  • FY2024 outlook was maintained: revenue $78–$82M and Adjusted EBITDA $8–$10M, reiterating initial February guidance in the April update; no quarterly guidance provided .
  • Near-term catalysts: continued Whipshots distribution and brand campaigns, and Skylar new launches (e.g., Citrus Reverie) supporting top-line and mix .

What Went Well and What Went Wrong

  • What Went Well

    • 39% YoY revenue growth to $15.49M; gross profit rose to $7.01M; royalty revenue was 15% (≈$2.31M) on Whipshots growth .
    • Positive operating cash flow of $0.82M despite net loss, aided by working capital changes .
    • Management reiterated full-year guidance, citing cost efficiencies and distribution gains (FY24 revenue $78–$82M; Adj. EBITDA $8–$10M) .

  • What Went Wrong

    • Net loss widened to $(4.46)M, driven partly by a $1.92M non-cash fair value share adjustment related to Soylent merger consideration .
    • Working capital deficit of $(17.41)M and a going concern warning; all debt due within one year when filed .
    • Soylent line of credit matured on Feb 10, 2024 and entered forbearance through June 10, 2024; outstanding balance $3.06M with forbearance fees and accrued interest .

Financial Results

  • Income statement trend (prior two quarters and current)
MetricQ3 2023Q4 2023Q1 2024
Revenue ($USD Millions)$17.7 $18.9 $15.49
Gross Profit ($USD Millions)$8.3 $6.2 $7.01
Net Income (Loss) ($USD Millions)$2.33 $(41.15) $(4.27) (consol.) / $(4.46) attributable to STCB
  • EPS (YoY comparison)
MetricQ1 2023Q1 2024
EPS (Basic & Diluted)$(0.00) $(0.01)
  • Margins (calculated from reported figures; percentages approximate)
MarginQ3 2023Q4 2023Q1 2024
Gross Profit Margin %47% (as reported) 32.8% (6.2/18.9) 45.3% (7.01/15.49)
  • Segment breakdown
SegmentQ1 2023 Gross Revenue ($M)Q1 2023 Gross Profit ($M)Q1 2024 Gross Revenue ($M)Q1 2024 Gross Profit ($M)
Starco Brands (incl. AOS, Whipshots Holdings/LLC)$3.51$2.93$3.98$2.61
Skylar$1.91$1.07$2.08$1.23
Soylent$5.72$1.70$9.43$3.17
Total$11.14$5.70$15.49$7.01
  • KPIs and balance sheet/CF highlights
KPIQ1 2024Context
Royalty Revenue ($M)$2.31 (15% of total) Mix benefit from Whipshots royalties
Cash from Operations ($M)$0.82 Positive despite net loss
Cash & Equivalents ($M)$1.77 Low cash balance
Inventory ($M)$11.26 Supports retail/eComm
Working Capital ($M)$(17.41) Deficit vs YE
Soylent LOC ($M)$3.06 outstanding; in default/forbearance Forbearance to 6/10/24

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY 2024$78–$82M (Feb 5, 2024) $78–$82M (Apr 3, 2024) Maintained
Adjusted EBITDAFY 2024$8–$10M (Feb 5, 2024) $8–$10M (Apr 3, 2024) Maintained

Earnings Call Themes & Trends

Note: No Q1 2024 earnings call transcript found.

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q1 2024)Trend
Product performance and mixQ3: strong Whipshots growth (47% GM); Q4: Whipshots royalties +12% YoY; Skylar high margins; Winona expansion Royalties 15% of revenue; segment gross profit gains across Skylar and Soylent YoY Improving mix YoY; seasonal normalization QoQ
Distribution/retailQ3: expanding retail for Soylent and Skylar; Q4: 58k Whipshots PODs and seasonal flavors; Winona +1,700 Walmart doors Ongoing sell-through implied in royalties; no new distribution disclosed in Q1 filing Stable
Liquidity/financingQ4 press release framed strong growth; no liquidity risk flagged there Going concern warning; Soylent LOC default/forbearance; debt due within 1 year Deteriorated
Cost control/synergiesQ3/Q4: price increases and synergies supporting Adj. EBITDA Positive operating cash flow; opex up on acquisitions; fair value adjustment headwind Mixed

Management Commentary

  • “I’m very proud of our team’s success over the past year… continued to grow our in-house Whipshots and Winona brands… Our full year results demonstrate… margins over 40%… deliver another year of profitable operating growth as we advance our goal to be a 21st-century consumer packaged goods powerhouse.” — Ross Sklar, Chairman & CEO (April 3, 2024) .
  • On Whipshots momentum: “The incredible success of Whipshots reflects our commitment to innovation and understanding of consumer desires.” — Ross Sklar (Jan 16, 2024) .

Q&A Highlights

  • No Q1 2024 earnings call transcript located; no Q&A disclosures for the quarter in filings or press releases [ListDocuments, Search window 5/1–6/30/2024 returned no transcript; Q1 2024 10‑Q contains narrative only] .

Estimates Context

  • We attempted to retrieve S&P Global consensus for Q1 2024 EPS and revenue; data were unavailable in this session (request limit exceeded). As a result, we cannot present a vs-consensus comparison for Q1 2024. We found no company-provided quarterly guidance to benchmark the quarter [functions.GetEstimates error].

Key Takeaways for Investors

  • Solid YoY growth with healthier gross margin profile (≈45%) underscores portfolio contribution from Skylar and Soylent; royalties now 15% of mix provide high-margin leverage .
  • Sequential moderation vs the holiday-heavy Q4 is expected; watch for 2H distribution/innovation cadence (Whipshots seasonal flavors; Skylar launches) to support growth reacceleration .
  • Liquidity is the swing factor: positive operating cash flow is encouraging, but the working capital deficit, debt maturities within a year, and Soylent LOC forbearance create execution risk until refinancing is secured .
  • Non-cash fair value share adjustment tied to Soylent consideration can cause P&L volatility; focus on cash metrics and Adj. EBITDA trajectory against maintained FY24 guide .
  • Segment trends remain constructive: Soylent and Skylar show YoY gross profit gains; Whipshots royalties support blended margin; continue tracking retail sell-through and subscription metrics (where disclosed) .
  • With FY24 guidance maintained, delivery on cost controls and financing could be catalysts; conversely, delays in refinancing or unexpected working capital needs could pressure equity value near term .

Appendix: Additional Q1 2024 Operational/Financial Details

  • Selected cash flow items: inventory build of $(0.59)M; accounts receivable decreased $1.77M; accounts payable increased $0.83M .
  • Share count increased due to Soylent share adjustments (133.09M shares issued on Feb 14, 2024); equity consideration issuances also occurred for Soylent opening balance holdback and AOS holdback .
  • Balance sheet: cash $1.77M; inventory $11.26M; total assets $80.71M; total liabilities $40.66M; equity $40.05M (incl. $8.70M NCI) .