Shares of Better Choice Company Inc. (BTTR Quick QuoteBTTR - Free Report) have lost 9.3% since the company reported its earnings for the quarter ended Sept. 30, 2024. This compares to the S&P 500 index’s -0.2% change over the same time frame. Over the past month, the stock moved -3.4% versus the S&P 500’s 3.3% change.

For the third quarter of 2024, Better Choice’s EPS improved 132% year over year to 73 cents.  It reported revenues of $11.4 million, reflecting a decline of 13% from the prior-year quarter. 

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Other Key Business Metrics

The third quarter marked substantial progress in Better Choice’s profitability metrics. Gross profit increased from $4.4 million in third-quarter 2023 to $4.5 million, indicating that the company is effectively managing its costs and achieving higher margins. 

Gross margin rose 591 basis points year over year to reach 40%, while operating margin improved 1,003 basis points year over year. Net income significantly increased, rising 194% year over year to $1.5 million. Additionally, Better Choice achieved a 255% year-over-year increase in adjusted EBITDA, reaching $0.2 million at a 2% margin.

Better Choice’s financial performance benefited from growth in several business channels. The company reported double-digit growth among its primary digital customers, attributing this to successful marketing adjustments that expanded its consumer base and improved repeat customer rates. Notably, the company achieved a 9% year-over-year revenue increase in its International segment, with the Asia-Pacific region performing particularly well. This increase aligns with a demographic trend in Asia, where the pet food market is expanding rapidly.

Management Commentary

Chief executive officer Kent Cunningham highlighted the strong performance, particularly the year-over-year growth in digital and international channels. He emphasized the efficacy of recent marketing initiatives in attracting and retaining customers, which contributed to the company’s robust revenue figures. Chief financial officer Nina Martinez added that the adjusted EBITDA growth to a positive margin reflected Better Choice’s ongoing improvements, including a shift to a healthier working capital position of $9.5 million. Martinez expressed confidence in sustaining this growth trajectory into 2025, underpinned by consecutive quarterly increases in gross margin, net income, and EPS.

Factors Influencing Results

One-time financial activities also bolstered Better Choice’s quarterly results. The company recorded a $2.6 million gain on debt extinguishment, which affected net income. Additionally, Better Choice’s efforts to streamline operating expenses were reflected in a decrease in selling, general, and administrative costs from $7.1 million in third-quarter 2023 to $5.6 million in third-quarter 2024. This reduction supported the company’s enhanced profitability metrics and underscored its commitment to operational efficiency.

Other Developments

Better Choice’s balance sheet saw notable improvements. Cash and cash equivalents increased to $4.7 million, and the company reported a substantial decrease in current liabilities, down from $13.7 million at the end of December 2023 to $6.9 million at the end of September 2024. This shift was driven by a reduction in accounts payable and the elimination of its term loan. The company’s transition to a healthier financial structure is expected to provide additional flexibility for future growth initiatives.

During the quarter, Better Choice focused on bolstering its capital position, which included paying down debt and reducing other short-term liabilities. The company’s shift to a positive working capital position indicates a strategic focus on financial stability and operational efficiency as it plans for future growth.