A Better Choice Co. executive said the company is confident about its future following after posting a sharp increase in second-quarter sales.
Net sales were $16.5 million, up 50 percent from $11 million in the same quarter a year earlier. Better Choice sells products including foods, treats, toppers, chews and supplements under its Halo brand.
Rob Sauermann, chief operating officer, expressed a positive outlook for the company in an interview with PETS+ on Friday, noting: “We feel confident about a bright future.”
Language the company used in an Aug. 11 filing with the U.S. Securities and Exchange Commission “seemed to suggest the company saw risk in their ability to continue as an ongoing concern due to the potential to trip some debt covenants, and that this would necessitate a dilutive capital raise,” third-party investment research firm DA Davidson firm wrote in an Aug. 15 report.
The filing led to a drop in the company’s stock price on high trading volume. Better Choice trades under the symbol BTTR on the NYSE American exchange.
But DA Davidson noted that after talking with Better Choice’s management, “Our take from the conversation is that the company actually sees no risk of failing as an ongoing concern, does not see the need to raise additional capital and was quite confident in their future outlook. The biggest risk related to this issue is the potential to refinance some debt at a higher rate.” The report was written by Michael Baker, senior research analyst.
Better Choice said in a statement that the language from the filing “pertains to a disclosure statement in [the company’s] corporate filings regarding a cash covenant on a very attractive credit facility, not the ability to operate.”
“We made the strategic decision to purchase incremental inventory to ensure they were in stock while the rest of the industry experienced significant supply chain challenges,” Better Choice stated. “This was all possible because of Better Choice’s strong cash position.”
Better Choice’s second-quarter sales increase was driven by by a 133 percent increase in brick-and-mortar sales and a 75 percent increase in international sales. The company reported a net loss of $4.4 million.
Scott Lerner, CEO of Better Choice, said in an earnings press release: “While our International business continues to grow rapidly, we are making great progress in pet specialty. We have already launched Halo Elevate in over 1,500 pet specialty stores including Petco, Pet Supplies Plus and key independent retailers, and have observed consistent week-over-week growth of POS sales, coupled with strong repeat customer purchase rates at key accounts.”
Lerner added: “We also have a lot of exciting new developments planned, including the continued distribution of Halo Elevate nationwide and the rebrand of Halo Holistic and Trudog. We believe our second quarter cash position is sufficient to support our plan to achieve profitability, particularly since we expect to benefit from positive changes to net working capital in the second half of 2022. While we are very excited by our sales growth in the first half of this year, we remain laser focused on driving continued margin improvements across our portfolio.”