Mr. Brian Meadows reports

SIMPLY BETTER BRANDS CORP. ANNOUNCES RECORD THIRD QUARTER REVENUE AT $19.4 M OR 45% YEAR OVER YEAR GROWTH WHILE ACHIEVING $4.3 OPERATING EXPENSE REDUCTIONS VERSUS Q2 2023

Simply Better Brands Corp. has released its interim financial results for the three and nine months ended Sept. 30, 2023. The company's third quarter 2023 revenue delivered a record $19.4-million or 45-per-cent year-over-year growth, while maintaining essentially flat gross margin versus year ago. The strong revenue growth in Q3 2023 was achieved while simultaneously reducing operating expense by $4.3-million compared with the previous quarter and recording a positive adjusted EBITDA. The Q3 year-to-date revenue of $67.6-million already exceeds full year 2022 at $65.4-million. All amounts are expressed in United States dollars unless otherwise noted. Certain metrics, including those expressed on an adjusted basis, are non-international financial reporting standards (IFRS) measures.

2023 third quarter key commercial achievements:

• Trubar protein bar: Supporting Trubar's continued expansion are four initiatives: confirmed manufacturing capacity expansion, material COGS (cost of goods sold) reduction, continued omnichannel distribution in the club, convenience and grocery channels, and category expansion into the protein powder category. Q3 2023 represented expansion in Costco with a second item in rotation of a Mint to be Chip and Get in my Belly, PB & Jelly dual pack, BJ's Wholesale, Sodexo, Andretti Oil, and Circle K. This growth trend continues with planned Q4 expansion into Longo's, Sobey's and Sheetz. The 2023 revenue forecast is three times more than the previous period at $30-million-plus versus $10-million in 2022.
• PureKana Wellness: PureKana, a leading plant-based wellness brand, remained focused on its customer acquisition initiative, adding over 60,443 customers during the quarter and replenishing the sales funnel into a subscription model. PureKana's strong D2C (direct-to-consumer) models based on review of its publicly traded competitors financial statements earns it the top share position in e-commerce hemp/CBD (cannabidiol). To expand beyond human consumption, PureKana commenced its pet offering in the $196-million hemp-based pet category (per Grandview Research) with planned offerings in with calming chews, hip and joint chews, and hair and coat drops. As an estimated 60 per cent of PureKana's loyal customers have pets, the growth opportunity is expected to be sizable.
• No B.S. skincare: Originally, the No B.S. brand was sourced exclusively on-line on the livenobs platform and on Amazon. In 2022, the brand entered 3,200 CVS Health stores for a back-to-school event and continues to maintain an on shelf presence in CVS's healthy skin section. Initial bricks and mortar success enabled the brand to enter TJ Maxx in Q2, a national launch into Walgreen's in Q4 2023 in 3,400 locations, as well as placement on the BJ's platform. Sources of growth include omnichannel expansion supported by insight-driven innovation with an expanded facial acne patch portfolio (overnight pimple patch and acne patch plus retinol night cream) and a natural deodorant category entry.
• Vibez Wellness: The Vibez Wellness line was launched in November, 2022, to capture incremental millennial consumers on their preventative wellness journey. With an initial keto gummy supplement offering, the new brand has achieved $3.7-million in revenue year to date 2023. Vibez's primary focus is non-CBD solutions into the weight management, gut health, calm, focal acuity and healthy hair consumer need states.

"As our Q3 2023 financial and commercial results illustrate, we are positioned for continued revenue growth, profit optimization 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 omnichannel expansion. Our clean ingredient wellness brands are resonating with our targeting generation Z and millennial consumers and retailers as we innovate to solve their daily challenges. This commercial relevancy has all four of strategic brands in growth mode, while focusing on cost reduction to fuel the continued momentum. As we assess all opportunities, our highest priority is keeping up with the relentless demand on the unicorn of Trubar," says company chief executive officer Kathy Casey.

Third quarter ended Sept. 30, 2023 -- revenue

The company's revenue is generated by one segment -- consumer products -- and within that segment by four main subsidiaries, PureKana, Tru, BRN (Vibez and Seventh Sense) and No BS, and other subsidiaries that do not generate material revenue currently. Revenue for the third quarter of 2023 was $19.4-million, an increase of $6.0-million or 45-per-cent growth compared with $13.4-million in the third quarter of 2022. PureKana's third quarter revenue for the three months ended Sept. 30, 2023, was $13.0-million, compared with $9.3-million for the comparable period in 2022 (increase of $3.7-million or 40 per cent). PureKana's revenue increase was driven by PureKana's marketing investments made in the later part of the second quarter to increase new sales and subscriptions. Tru's third quarter revenue for the three months ended Sept. 30, 2023, was $4.5-million, compared with $2.8-million for the comparable period in 2022 (increase of $1.7-million or 62 per cent). No BS's third quarter revenue for the three months ended Sept. 30, 2023, was $800,000, compared with $700,000 for the comparable period in 2022. BRN's third quarter revenue for the three months ended Sept. 30, 2023, was $1.1-million, compared with $400,000 in the third quarter of 2022. Simply Better's other subsidiaries contributed $0.0-million in the third quarter, compared with $200,000 in the prior period.

Simply Better's cost of sales in the third quarter (35 per cent) was comparable with the prior period 2022 (34 per cent). The company continues to manage its finished goods costs with co-manufacturers with the higher order volumes it has been able to place. Cost of goods sold for on-line sales (DTC) typically ranges in the low to mid-70s and retailer (business to business (B2B)) gross margins range in the mid-30s to higher 40s. Cost of goods sold was $6.7-million in the third quarter of 2023 (35 per cent of revenues), compared with $4.6-million (34 per cent of revenues) in the comparable period.

Gross profit for the third quarter of 2023 was $12.7-million (65 per cent), compared with $8.8-million (66 per cent) in the third quarter of 2022. The gross profit margin was flat in the third quarter of 2023 over the gross profit in the comparable period. There was a higher mix of on-line sales in the third quarter of 2023, compared with the second quarter of 2023, which had a higher percentage of lower-margin B2B sales.

Operating costs for the third quarter of 2023 were $14.2-million, an increase of $3.7-million (or 35 per cent), compared with $10.5-million in the third quarter of 2022. The majority of the operating costs increase incurred in the three months ended Sept. 30, 2023, were marketing expenses ($9.8-million for Q3 or 69 per cent of operating expenses) and they increased $3.6-million over the previous year directly related to the increase in revenues for PureKana, BRN and Tru. Marketing was down $3.6-million from the second quarter in 2023. There are three main categories of marketing expenses. They are (1) on-line advertising, (2) e-mail marketing and social media, and (3) retailer promotional allowances. The first two categories of marketing expenses are directly related to DTC sales, whereas the retailer promotional allowances are related to B2B sales. In the third quarter of 2023, on-line advertising accounted for 82 per cent of the marketing expenses, compared with 83 per cent in the comparable period in 2022. In the third quarter of 2023, e-mail marketing and social media accounted for 7 per cent, compared with 7 per cent in the comparable period in 2022. DTC sales in the third quarter of 2023 were 45 per cent higher than DTC revenues in the comparable period 2022. Marketing expenses related to DTC were up by $3.3-million in the third quarter of 2023, compared with those in the third quarter of 2022, due to higher advertising and e-mail marketing activities related to the 45 per cent higher DTC sales in the third quarter of 2023, compared with the prior period. In the third quarter of 2023, retailer promotional allowances accounted for 13 per cent of marketing expenses, compared with 8 per cent in the comparable period in 2022. The increase in this category of $200,000 in the third quarter was directly related to the higher sales of Trubar and No BS bricks and mortar sales in the third quarter of 2023, compared with the prior period. B2B sales increased from $3.0-million in Q3 2022 to $5.1-million in Q3 2023 ($2.1-million increase in B2B sales). Customer services support represented 10 per cent of operating expenses for the three months ended Sept. 30, 2023 ($1.4-million), and increased $900,000 or 180 per cent over the prior year ($500,000). These expenses were also directly related to the increase in sales at PureKana and BRN. Salaries and wages were $900,000 in the third quarter of 2023, representing 6 per cent of total expenses, and decreased $100,000 from the prior year ($1.0-million) as a result of head count reductions made in the Herve and BRN acquisitions as the company sought operating synergies postacquisition. Professional fees reduced $300,000 to $300,000 for the three months ended Sept. 30, 2023, compared with the prior year ($600,000). The $300,000 reduction was driven by lower audit fees ($100,000) and lower consulting fees ($200,000).

Other income for the third quarter 2023 was $1.0-million, compared with other income of $200,000 in the third quarter of 2022 or an increase of $800,000. The main components in the third quarter of 2023 for other income and expenses were finance costs of $500,000 and gain on remeasurement of warrant liabilities of $1.3-million.

The company incurred a net loss of $600,000 for the third quarter of 2023, which decreased by $5.7-million over the loss in the second quarter of 2023. The decrease in the third quarter loss is primarily related to the decrease in operating expenses ($4.2-million) in the third quarter of 2023, compared with the second quarter of 2023. The decrease in operating expenses was driven by a decrease in marketing expenses of $3.6-million on the PureKana and Trubar brands, decrease in impairment of inventories and A/R of $300,000, and decrease in amortization costs of $200,000.

Non-IFRS (international financial reporting standards) measures -- earnings before interest, taxes, depreciation and amortization (EBITDA), and adjusted EBITDA

EBITDA and adjusted EBITDA are non-GAAP (generally accepted accounting principles) measures used by management that are not defined by IFRS. EBITDA and adjusted EBITDA do not have a standardized meaning prescribed by IFRS and therefore may not be comparable with similar measures presented by other issuers. Management believes that EBITDA and adjusted EBITDA provide meaningful and useful financial information as these measures demonstrate the operating performance of a business, excluding non-cash charges.

The most directly comparable measure to EBITDA and adjusted EBITDA calculated in accordance with IFRS is net loss. An attached table presents the EBITDA and adjusted EBITDA for the three months ended Sept. 30, 2023, and Sept. 30, 2022, and a reconciliation of same to net income (loss).

The company generated positive adjusted EBITDA of $100,000 for the three months ended Sept. 30, 2023, a $2.5-million improvement over the adjusted EBITDA loss incurred in the second quarter of 2023. Q3 adjusted EBITDA of $100,000 was an increase of $100,000 over the adjusted EBITDA of $0.0-million for the comparable period in 2022. The primary driver for the positive adjusted EBITDA of $100,000 for the third quarter of 2023 is due to the increase in cash operating expenses ($3.7-million), which were offset by increased gross profits ($3.8-million) compared with the prior period in 2022.

Conference details

A conference call to discuss the results is scheduled for the following day on Nov. 30, 2023, at 10 a.m. EST.

About Simply Better Brands Corp.

Simply Better leads an international omnichannel platform with diversified assets in the emerging plant-based and holistic wellness consumer product categories. The company's mission is focused on leading innovation for the informed millennial and generation Z generations in the rapidly growing plant-based, natural and clean ingredient space. The company continues to focus on expansion into high-growth consumer product categories, including plant-based food, clean ingredient skincare and plant-based wellness.

We seek Safe Harbor.