Simply Better Brands Corp

XTSX:SBBC

Earnings Call Transcript 2023-Q1

[Operator]

Good morning, everyone. Thank you for participating in today's conference call to discuss Simply Better Brands financial results for Q1 of 2023. Before we begin, let me remind everyone of the company's safe harbor disclaimer. Certain portions of our comments today will concern future expectations, plans and prospects of the company that constitute forward-looking statements for the purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements containing verbs such as aims, anticipates, estimates, expects, believes, intends, plans, predicts, will, may, continue, projects or targets and negatives of these words and similar words or expressions.

Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those indicated by the forward-looking statements. Factors that could affect our actual results include, among others, those that are discussed under the heading Risk Factors in our most recently filed reports with the SEC, including our annual report on Form 10-K, our quarterly reports on Form 10-Q and our current reports on Form 8-K.

In addition, this call includes discussions of certain non-GAAP financial measures, including adjusted EBITDA. The most directly comparable GAAP measures and reconciliations for non-GAAP measures are available in the earnings release and other documents posted on the company's website at simplybetterbrands.com under Investor Relations. I would like to remind everyone that this call will be available for replay through June 14, 2023, starting at 7:30 p.m. Eastern Time tonight. Executing the conference call today is Kathy Casey, Chief Executive Officer; and Brian Metros, Chief Financial Officer of Simply Better Brands Corporation. Subsequent to the formal presentation, we will not be executing a live Q&A session, but answering questions submitted in advance of the call. Should you have additional unresolved questions, we encourage you to reach out to our Investor Relations website. And with that, I would now like to turn the conference call over to the CEO of Simply Better Brands, Kathy Casey. Please go ahead.

[Kathy Casey, executive]

Thank you, Michelle, and thank you to everyone who chose to join us today. We're extremely excited to share our progress over the past quarter. During today's call, we'll plan to cover three topics: first, an overview of Simply Better brands, and some of you are newer to the party; second, a review of our Q1 performance and finally, some insight into our outlook and growth drivers on a year-to-go basis. After taking Simply Better Brands public in December '20, we are and we're laserly focused on growth, both organically and through an aggressive acquisition strategy to diversify our portfolio with the intent to expand our capability and also acquire top talent. Now we sit here less than 3 years later, and we've completed six acquisitions and operate in really three core verticals: Plant-based wellness, clean ingredient food and next-generation Beauty. Our mandate is to drive growth by relentlessly following the consumer and innovating to solve their problems. And as a result, we source the growth through concentric innovation, acquisition and expansion, both in category and in channel.

The business model is fueled by buying and building brands, both in the direct-to-consumer environment and the B2B environment, many of them starting as direct-to-consumer brands that we then ultimately take into omnichannel brands. A key focus of ours is our rapidly growing [indiscernible] byproduct. It's driven by expanded distribution. The brand delivered $10 million in 2022. And is focused to accelerate to achieve a minimum of $25 million here in 2023.

One of the drivers of simple success is the access to strong experienced management and talent from companies, blue-chip companies like Parker & Gamble, Kellogg Myers, R.J. Reynolds that we enjoy and have in our leadership team as well as our Board of Directors. Essentially, decades of folks with building brands as part of our DNA. In Q1 2023, we are pleased to announce that we delivered a record quarter across all of the key metrics.

Net sales of 24.6% compared to 12.1% a year ago, achieving positive adjusted EBITDA of $800,000 versus losing $1.1 million a year ago, all with strong operational and governance to deliver positive operating cash flow of roughly a little -- roughly $1 million. And doing all this while simultaneously continue to buy down our debt. I do and would like to take a moment to thank our entire team for the discipline to deliver and enable these stellar results. As we look into 2023, we reaffirm our guidance. It was and is to exceed $80 million in top line revenue with an adjusted EBITDA of $3 million to $4 million. We are focusing and forecasting the following growth drivers; continued distribution expansion of True Bar, customer acquisition on our [PureKana] brand, [indiscernible] entering Walgreens [indiscernible] fall on top of CVS last year. And the portfolio expansion of our new wellness brand, Vibez as well as category expanding innovation across all of the core brands in the back half of 2023.

[Now], we are seeing momentum across what we call the Fab 4, our strategic growth brands. A quick highlight of a summary of Q1 '23, our revenue, and we're very, very pleased to announce that revenue now we delivered on expectations, but grows 2x a year ago. And you'll remember 2x year ago, and you remember that we grew 4x for the total year of 2022. Our cash flow is positive for the first time in quite some time and very proud of that achievement that we're effectively managing through the cash with great governments and rigor and delivering $1 million in free cash flow.

Adjusted EBITDA, as we said, up $800,000 versus a loss of 1.1 a year ago, all while reducing some of our short-term debt in terms of promissory and convertible debt reduction of $2.6 million. And this is on top of buying down $4.5 million of those two vehicles in 2022. [PureKana], our largest brand, now achieves the #2 rank and we'll chat a little bit later that we believe it's trending to be #1 -- the #1 brand in the category here in 2023, [2 bar] in Q1 grew 4x a year ago. NBS had their second installment of businesses within T.J. Maxx and then as we said, Walgreens later this year. And we continue to see progress and momentum on our Vibez brand. We are very pleased with our financial and commercial progress in Q1, and we're confident in our talent, our strategy and most importantly, our execution going forward.

Let me now transition to an overview of Simply Better Brands and begin ultimately with our mission. Our highest order is to democratize health and wellness authentically every day because we believe that wellness should be accessible to all. And we have this in mind as we create the portfolio that we execute today. We accomplished this mission by building disruptive brands in the emerging plant-based and holistic wellness space. And our focus remains to emotionally connect with millennials and older [Gen z's and] their wellness and active lifestyle journey. Core to our value prop, and this is one of the things that differentiates our company, our value prop is to move with speed and agility. We identify a consumer opportunity or trend in the marketplace, and we're unable to move at a much faster rate than large corporations to solve a consumer problem.

With this agility and flexibility in terms of supply chain, we can win first and secure a disproportionate share in the markets that we choose to enter. Assisting us in this mission is an extremely talented Board of Directors and leadership team. I'll start with the slide from right to left. Board member Michael Galero, Principal at Allo Finance and a CPA with extensive capital markets and M&A experience. Richard Kellam new to our Board, currently CEO and Director of Data Communications Management Corporation, with extensive CPG experience and executive leadership roles globally retailers -- or excuse me, manufacturers like [indiscernible] the Advantage Group brokerage organization. Kings Reward, a newer member to our Board, came on here earlier this year, Chairman and Managing Partner of VRG Capital and the Chairman of Clarus Securities. Brian Meadows, our talented CFO with strong operational experience, both in the public markets and as a significant start-up background.

Paul Norman, our Board with over 30 years of experience at Kellogg, running a $9 billion P&L. And finally, myself, CEO and Board member, 30 years at P&G and Kellogg in sales, marketing and general management working commerce across every class of trade. My last role at Kellogg was leading a $2 billion portfolio across every category and every brand within Kellogg. We use this experienced board to solve for where we see significant growth opportunity in the marketplace. And if you look at this page here, you'll see that we have the opportunity to participate in some extensively large categories. And we're mindful of the categories that ultimately, we go after. We participate in three large and growing categories, cosmetics and beauty at $77 billion, the growing snack bar category at nearly $7 billion and the CBD Hub market at roughly $12 billion. Not yet on this page are some additional markets that we're entering here in 2023, a $6 billion protein powder category with our TruBar brand, and the $40 billion nutritional supplement category with Vibez and on a smaller scale, only about $196 million, but the pet care category with Purekana. You'll see us continue to grow through category and channel expansion, but also look at where our brands can extend into other categories, AKA taking TruBar into protein. Enabling category penetration, as referenced earlier, there are really three core brands: PureKana, TruBar and our [No B.S.] skincare brand. [PureKana] is our largest brand, plant-based wellness brand to date in a roughly a category of about 4,000 brands that performs in the top 2 ranking position. This is really due to our active ingredient formulas, transparency and efficacy, ultimately what we bring to market.

Secondly, TruBar is our absolutely delicious, gluten-free vegan bar with 12 grams of protein and only 190 calories. I would call it a mix between a high protein snack bar or a low protein snack bar, a bit of a hybrid in the category, which allows us to engage consumers from multiple different directions. TRUBAR consistently exceeds category hurdles when placed at retail, and we'll talk a lot more about TRUBAR's success as we get here in the call a little bit later. No B.S. Skincare, [bans] 1600 ingredients, and it garners the reputation as one of the cleanest skincare lines in the category. And if you look at healthy skin care, where the skincare category is currently growing at about 20% or healthy skin care is going about 20%. It's growing at a rate greater than the category, which really is only growing at 7%. So we enjoy lapsed users coming from bigger brands coming into ultimately into consumer into the No B.S. brand because there's a demand for no bad stuff. Essentially, these three big brands align with an informed consumer who's mindful but goes in on and around their body. In addition to these brands, this past year through acquisition, we've also integrated and activated another plant-based brand called [Seventh Sense] and launched our own brand from scratch called Vibez.

Seventh Sense is currently sold online and primarily targets young boomers focused on proactive solutions in the need states of both pain and sleep. Vibez just launched this past November of '22 with a keto gummy offering to start. It targets a little younger, and it targets millennials in the preventative wellness space via subscription model and direct-to-consumer. Due to really our extensive learning and capabilities in this space that we learned through Purekana, Vibez sold $1 million already in Q1 '23, as we manage the balance between growth and profit of that brand and has an extensive portfolio expansion plan in the back half. They'll take you through a little bit later. While simply originally started with only the PureKana brand, we by design and strong intention actually evolved to a disruptive and innovation-centric consumer products company, focusing on millennials and older Gen Zs on their wellness journey. This mandate is now allowing us to access consumers in a variety of different spaces. You'll see that, although early in 2021, PureKana represented 92% of the portfolio of the company or only 8% of our business was done outside of PureKana. You'll see very quickly, if we look at Q1 over year-over-year and get into Q2, that 8% of the business was outside of PureKana, then in '22, 21%, 23% was outside of PureKana. And now you can see roughly half of our business is now outside of the PureKana brand, again, by design.

Based wellness, but we wanted to be able to grow the company agnostic of what happens regulatorily in the CBD space. And even within PureKana, you'll see that we have an offering that actually engages CBD and many offers that actually do not engage CBD at all to solve the wellness problems of consumers. Net-net, we are not a cannabis company. And I think early on because our biggest business was PureKana, folks by nature thought we were a CBD company or a cannabis company, and it's clearly articulated here in Q1 that we're not a cannabis company, but a disruptive and growing brand incubator consumer goods. Also of note, I know there's often questions about how we spend our marketing investment, what that looks like year-over-year, the role that it plays ultimately in our portfolio, but also of note, as our revenue diversified, so does our marketing spend. So as you'll get into the numbers, when you go crush some of the materials, you'll see that in Q1, our marketing spend was reduced 13 full points as a percent of sales. And we'll continue to see our marketing and our revenue diversify beyond what you see here on this page in each of those key metrics play a different role as we go forward. Adding a bit of color to the TruBar number that we shared in the previous page.

TRUBAR's positioned for just another breakout year in 2023. Our great taste and candidly, very strict and crystal guidelines had the party recognized by HealthLine as a top 10 brand in the protein category last year. We continue to expand distribution and new distribution at retailers like Costco who would be one of the, if not the largest bar retailer in the United States of America because about 45% of the buyer category shop within club. If you want to win in [Vibez], you have to win in Costco and ultimately [sand]. But the new distribution of retailers like Costco and 7-Eleven drove sales to 10x in 2022. And we consistently exceeded the category hurdles at Costco, and exceeding that hurdle, it enabled us to secure distribution in every U.S. Costco this early actually earlier in Q2. It's really that momentum that drives the $25 million forecast for 2023. And in early Q2 promotion at Costco delivered, as you'll see down here in the lower left $9.5 million in POS sales through the registered in just 26 days. For reference, when I was at Kellogg and we sold 5 different buyer brands, our largest promotion at Costco ever was $5 million. So in 26 days, we did $9.5 million to the register, exceeding Costco's hurdle rate, which is about $8 million that they expect from these natural promotions. But equally as important, you'll see next to us, we had another bar that was on promotion at the exact same time.

It's one of the leading national bars in the category, and that bar set next to us in a [indiscernible] position while we did $9.5 million, only to $7 million. So without question between the packaging, the position on the pallet, the incredible graphics, the indulgent taste profile and the clean ingredient guardrails of the brand, we believe, without question, we have a breakthrough winner. And if you look at Costco sales, it would suggest that we would be one of the top selling -- top 10 selling protein bars in the United States already with a brand that as you saw just started giving you traction last year in 2022.

Customers. It is a very critical mandate of ours that we take these direct consumer brands. and we put them in omnichannel environments. If you want to drive stickiness and loyalty with consumers, we need to make sure that they can find a product agnostic of where they choose to position it. So our brands, which -- as I stated earlier, started roughly online, now enjoy an omnichannel footprint with roughly 60% for our sales direct-to-consumer and the balance sourced in really virtually every class of trade in the U.S. and Canada.

Mind you, when we showed this graph down the lower left at our last meeting for the year-end 2022 results. About 75% of our business was done in the direct-to-consumer. So we're very, very quickly adjusting the mix of the business and the access to our brand across many outlets, agnostic [mission] and agnostic of shopper occasion. Notable retailers, you'll see include Amazon, CVS, 7-Eleven and select whole food locations. We're in some whole foods now with TruBar and have planned later this year to enter Whole Foods globally with TruBar with four different flavors.

To date, in '23, TruBar signed a distribution agreement with [Sodexo], one of the largest food service retailers in the world. No B.S. has added T.J. Maxx and bjswholesale.com. As I mentioned, is slated to enter Walgreens later this year, the largest drug retailer in the United States, while our PureKana offline business continues to enter C stores and distributors regionally here in the United States.

Enabling this expansion is actually innovation. Not only that we take the brands and we make them fit for purpose agnostic of the channel they go to but being very mindful of the consumer that shops these and what problems we're solving for and how do we bring that innovation to market. So through extensive research, we followed the consumer in their wellness journey. We innovate solutions, solve problems. And as you can see, the following stages on this page: calm, fleet, pain, immunity, weight loss, local acuity, energy, recreation and the latest need state that we're entering here in Q3 around healthy hair or hair loss mitigation.

Those new states are hunting grounds inform where we take the brands going forward and how we extend those brands. We've activated those consumer insights with innovation across our portfolio. The expansion plans are 4 to 5 with not just line extensions, which gives you moderate incrementality, but actual incremental categories, which gives you material incrementality. Vibez will transcend the need state of calm, weight loss, community and hair loss of hair management and local acuity.

TRUBAR expands what originally started as a bar. We believe that we have the right to stretch the brand into the protein powder category. And for reference, the protein powder category is about a $22 billion category with daily use and consumer takeaway. We also be extending with new flavors. We need to refresh not only the flavors and market, but continue to refresh the packs that will go into Costco with line extensions.

And we have [mint] PB&J recently, lemon and orange flavor extensions coming for TRUBAR. While No B.S. will launch later this year, all natural deodorant and a broader set of stronger skin care patches. Seventh sense strengthens their [pain] offering. It expands more broadly to sleep, while PureKana doubles down on this expansion into pet. We believe that roughly 60% of PureKana consumers today have pets in their home, and we see this as an opportunity. If they're going to trust to put PureKana into their bodies, we certainly believe that they would trust to put it on in the bodies of their pets.

Essentially insight-driven innovation drives incrementality and is core to securing consumers' loyalty across our brands. Vibez -- and this is the first time we're showing this. We launched Vibez as we said, back in 2022, late '22 back in November. We wanted to solve consumer problems, but we also want to be in a position that we could do that agnostic of what was happening with CBD regulations. It's been an advantage the company has had, where many of our CBD peers only do CBD. They don't do brands outside of CBD, and they're essentially then mitigated to FDA regulations, which we all know have been very slow to move. Vibez, the essence of Vibez was not to buy a brand. We bought many of our other brands, but actually to launch our own brand with the [indiscernible] experience and background we have. And we want this brand actually not to have CBD in it. So we could enter the $40 billion nutritional supplement business incrementally for us. And as you can see there, over time, expand the portfolio across a variety of specific states. So over the next 12 months, we'll expand the portfolio across a number of innovation areas to include weight management, [gut] health, extremely rapid space for Eastern Wellness coming to the Western in the United States. Brain health, immunity, calm, energy, focus and then healthy hair, skin and ultimately, nails. We will pace this innovation. You won't see all these market immediately. We started with a keto offering. Next comes focal acuity and next comes hair loss. And we will stage as makes sense in terms of bandwidth in the financials and appropriate pacing as we talk to specifically consumers. Now to see how all this comes to life between consumer expansion, channel expansion, category expansion. I'd like to now turn it over to Brian, and Brian will take you through the financials.

[Brian Meadows, executive]

Thank you, Kathy, and good morning, everyone. Looking at our first slide, the financials, revenue progression. The graph tells a Simply Better Brand is a major growth story that really took off starting in the fourth quarter of 2021. Quarterly sales in 2021 were single digits and were based on PureKana and No B.S. for most of the year. In August, we acquired TRU brands and it began to contribute materially to SPBC sales growth starting in the first quarter of 2022. The PureKana's new marketing program started to produce tremendous top line results in the fourth quarter of 2021 and has been delivering solid numbers ever since. No B.S. Skin Care also launched the 3,200 CVS locations in 2022 and adding further diversified growth. The fourth quarter of 2022, again demonstrated continued quarterly growth led by PureKana and Tru. Sales for the first quarter of 2023 are higher by $1.6 million over the fourth quarter of 2022. As a slide, revenue by brand shows, which was presented by Kathy earlier, we are starting to see growth spread across more of the brands with true representing 41% of Q1 revenues compared to 15% in the fourth quarter of 2022. Turning to the first quarter 2023 results. In Q1 2023, the company generated revenue of $24.6 million with a gross profit of $13.9 million or 57% of sales, compared to $12.1 million with a gross profit of $8 million or 66% of sales during the prior period. Revenue increased by $12.5 million over the prior period's revenues. Company's revenues generated by four main subsidiaries PureKana, Tru, [indiscernible] and No B.S. PureKana's first quarter revenue was $12.5 million compared to $9.3 million for the comparable period or an increase of $3.2 million or 34%. TRU's first quarter revenue was $10.2 million compared to $2.5 million in the comparable period in 2022, an increase of $7.7 million. Tru's strong sales performance in the first quarter was driven by orders from Costco in the U.S. for national promotion for the multi-vendor mailers or MVM event. No B.S.'s first quarter was for 2023 was $0.3 million compared to $0.3 million in the comparable period. Revenue from BRN, which is Vibez and Seventh Sense brands for Q1 2023 was $1.4 million compared to [indiscernible] was acquired in the second quarter of 2022.

Again, at the cost of goods sold for the first quarter -- the cost of goods sold -- cost of sales increased in the first quarter relative to the fourth quarter of 2022 by 13 percentage points due to a higher mix of lower margin B2B sales which was 41% of sales in Q1 compared to 15% in the fourth quarter of 2022, which has lower gross margins than DTC sales. Gross margins for D2C typically range in the low to mid-70s and B2B gross margins range in the mid-30s to high 40s. Gross profits for the first quarter of 2023 was $13.9 million or 57% of sales, compared to $8 million or 66% of sales in the first quarter of 2022. The gross profit margin was down 9 percentage points for the first quarter of 2023 over the gross profit in the comparable period, again, driven by the higher mix of B2B sales compared to the prior period.

Important to note, as we look at our 2023 guidance that we do expect gross margin to be reduced in '23 as we do expect to have a higher proportion of our sales generated in the B2B sector with retailers such as Costco and CVS. Operating costs for Q1 2023 were $14.8 million, an increase of $4.3 million compared to $10.5 million in the first quarter of 2022. Majority of earning costs increase that we incurred in the first quarter for marketing expenses, which were $10.7 million or 72% of operating expenses, and they increased $3.7 million over the previous year directly related to the increase in PureKana and TRU sales.

PureKana accounted for some $7.6 million to the $10.7 million in marketing costs and TRU for $2.1 million in Q1 marketing expenses. TRU's marketing expenses were higher in the first quarter, directly related to the National Costco MBM promotion. The national promotional costs are significantly higher than the realer Costco promotional allowances. The national promotion average is 22% compared to regular promotional allowances, which are approximately 10%. And the company chose to participate in the MBM event as is expected to exit the national promotion in a favorable position where additional Costco regions to continue to order the product after the national promotion event had ended. The MDM will run to the company's second quarter and marketing expenses will be higher also in the second quarter. Noncash items of $1.7 million represented 12% of operating expenses and increased $0.4 million from the prior year. [indiscernible] again our share-based payments of $0.7 million and amortization of $1 million. The operating loss in Q1 2023 was $1 million compared to a loss of $2.5 million in the prior period or an improvement of $1.5 million. Other expenses in the first quarter were $1.7 million compared to other expenses of $0.7 million in the first quarter of 2022 or an increase of $1 million. The main components of other expenses were finance costs of $0.7 million and a loss on remeasurement of warrant liabilities of $0.9 million. For the first quarter of 2023, the company reported a net loss of $2.7 million compared to a net loss of $3.2 million in the prior period or an improvement of $0.5 million.

Company generated adjusted EBITDA of $0.8 million in the first quarter of 2023, an increase of $1.9 million over an adjusted EBITDA loss of $1.1 million for the prior period. Moving on to our progress on debt reduction. Building on the success of our debt reduction initiatives in 2022, where we reduced short-term promissory notes and convertible debentures by $4.5 million have further reduced this debt by $1.7 million in the first quarter of 2023. Subsequent to the quarter, we paid down an additional $0.75 million in promissory notes. For year-to-date 2023 total of $2.6 million in debt reduction in convertible debentures and promissory notes. Combining the debt reduction for 2022 adds a total of $7.1 million debt reduction in convertible debenture and promissory notes. We had a successful capital raise in February 2023 when we raised CAD 7 million.

Additionally, we have been increasing our use of short-term lines of credit for a number of our subsidiaries, including TRU brands and No B.S. These credit lines are typically tied to large customer purchase orders or receivables. The average life of these credit loans are 3 to 5 months. You'll see these short-term loans fluctuate in our balance sheet as we continue to finance large customer POs. These credit lines are being used for our rapid growth with customers such as CVS and Costco. We have a disciplined approach to using these lines only to finance large customer POs.

For example, we borrowed a total of $5.3 million to finance large customer POs during the first quarter. And during the same quarter, we repaid $5.5 million of these facilities. Very recent important use of these facilities was to finance the National MBM Costco order for TRU, which provides us up to $6 million in revolving line of credit financing POs. We also have AR factoring with C2FO, which provides us with quick access to cash on large customer receivables at a lower rate than our PO financing. We are thus able to factor large customer receivables and pay down our higher cost PO financing lines of credit.

Moving to our balance sheet. Cash on hand as of March 31, 2023, was $5.7 million, which was up from $2.3 million at year-end 2022. Total assets as of March 31, 2023, were $37.8 million and liabilities were $25 million. Again, we reduced convertible ventures in February 2023 by $1.7 million and an additional $0.75 million promissory notes subsequent to the quarter. Basic shares outstanding were $71.8 million, fully diluted shares outstanding $98.2 million.

Turning to our outlook. Today, as Kathy mentioned, we're reconfirming our 2023 outlook, revenues to exceed $80 million gross margin in the 58% to 60% range, adjusted EBITDA in the $3 million to $4 million range. Our revenue for first quarter 2022 came in strong at $24.6 million with gross margins of 57% and as I discussed earlier on the call, we do expect average gross margin to be lower in '23 than in 2022 due to a higher mix of B2B sales than in 2022. The revenue distribution by brand slide that Kathy spoke to earlier shows, for example, TRU accounted for 41% of Q1 sales compared to 15% in Q4 2022. B2B gross margins range in the low 30s to high 40s compared to PureKana which averages low to mid-70s and is almost 100% online sales. Our outlook for adjusted EBITDA remains on track for the year. However, we do expect to see uneven generation of adjusted EBITDA throughout the year. As we discussed earlier, the large [national] promotion with Costco has much higher marketing expenses associated with the national promotion compared to the everyday allowances on sales or everyday rotations. This will impact our second quarter profitability and adjusted EBITDA in the short term. The good news is that we have had a very successful MBM, as Kathy showed earlier, and we expect to have higher go-forward sales with additional Costco regions in the third and fourth quarter and significantly lower marketing promotional allowances.

As a result of the MBM success, we're also seeing additional growth opportunities with grocery and convenience stores, which is also a higher-margin business for Tru. These developments are expected to positively impact our adjusted EBITDA starting in the third quarter. Additionally PureKana has seen higher churn in the second quarter on its business, and we expect with typical seasonality, sales and profits to improve in the third and fourth quarters supported as well. We therefore expect significantly higher adjusted EBITDA performance in the third and fourth quarters compared to the second quarter. Now I'll turn it back over to Kathy to wrap up.

[Kathy Casey, executive]

Thank you, Brian. On the page here, I just want to give a summary of where revenue is it relates to our market cap. And as we wrap up, we'll continue to source our growth for growth through incremental categories, expanded channels and disruptive innovation.

And as you can see, our rate of revenue growth has grown at a rate much faster than our market cap suggests and our market cap currently is at 1/4 of our annual planned revenue for 2023. Our focus is to remain vigilant on delivering sustainable growth and profit improvement until our stock rewards the results. And Brian and I have significantly increased our attention to Investor Relations, two investor road shows here in the last 3 weeks because we believe, candidly, that the story of the company is strong, the financials continue to improve. But there is an opportunity as it relates to [awareness] and it will be a focus of ours going forward.

To wrap up quickly on just a summary of two pages here. I'll repeat a couple of pages early and certainly not to spend a ton of time on them, but we're extremely proud of Q1 2023. For a company in a very challenging and competitive environment with pricing, headwinds, et cetera, to grow Q1 2x a year ago on top of growing last year 4x, is an outstanding start to the year and [candidly] exceeds their expectations. Equally as important is not only was the revenue growth strong and will continue to be strong as we go throughout 2023, but we did in a very mindful and thoughtful way about how we utilize and how we spend our cash. It's extremely exciting for us to share that cash flow is positive, positive by $1 million, and it speaks to our commitment to balance not only demand and growth with very intelligent decisions about how we utilize the company's assets. That positive cash flow, of course, then drove adjusted EBITDA positive. I believe this is now our fourth quarter in a row where EBITDA was positive versus a year ago. And candidly, some of the net income noise is more paper as it relates to share-based [comp] and amortization that it really is a reflection, ultimately, of the performance of the company financially in terms of true cash burn in terms of true and actualized profit.

We did this growth in cash flow, EBITDA and revenue growth all at the time that we made a choice to continue to decline and reduce our debt. We recognize the healthy balance sheet is extremely important, and we'll continue to be mindful of how we reduce our debt going forward, while balancing the need to be able to utilize our cash effectively. PureKana could and should move into the #1 position this year. If you look at our performance going up versus the leading competitor in the category, we should eclipse them during 2023 and become the #1 PureKana CBD brand in the world of over 4,000 brands in the United States and certainly tens of thousands globally. TRUBAR grew 4x in Q1 and will continue to grow versus a year ago in the back half. No B.S. skincare enters T.J. Maxx and eventually Walgreens all while we continue to put pressure against and continue to drive a diversified portfolio and our own brands started by us, which is certainly a lot less expensive and dilutive than buying other companies, double down really on Vibez. And Vibez will not only be sold in a direct-to-consumer environment. But we will announce formally later this year that we will be launching our own Simply Better Brands marketplace. So you can not only buy Vibez, but you can actually purchase and have access through an informative and educational wellness marketplace owned by the company, the entire company's portfolio going forward.

To wrap up, we're extremely excited to share what we did today. We feel great about 2022. We feel very, very strong about Q1 and our start to 2023. We will, as you know -- we delivered strong top line growth, operating cash flow, all while achieving adjusted EBITDA positive and reducing our debt. And we are absolutely confident in our talent. Our strategy as it is working and our execution going forward to deliver the 2023 outlook. I'm now going to turn it over to Michelle and Michelle, if you could assist us here. We do want to address some questions that have been submitted to us in advance of the call. And for those of you participating for the first time, we don't usually do live Q&A, but anyone that has an interest in submitting a question, Tim, submitted to our Investor Relations line [indiscernible] brands IR. And if you will, Michelle, turn it over to you. I think we had a number of questions that came in from variety sources actually.

[Operator]

Thank you, Kathy. I will now read the questions that were submitted in advance of the call. The first question is for Kathy, and it comes from Noel Atkinson at [indiscernible] Securities. Kathy, PureKana now appears to be the largest CBD e-commerce business by revenues in the U.S. market. Congratulations on that. Do you continue to see the potential for double-digit percentage revenue growth for the brand for 2023? And what should drive that growth?

[Kathy Casey, executive]

Yes. No, thank you, [Noel]. We appreciate that. We -- it has always been our goal, our goal to be the state to go actually to be the #1 in the categories which we compete. I spent 10 years at Procter & Gamble and those that leave in the category, not only influence where the category goes, but they also usually get a disproportionate piece of the profit in the category and it would be actually extreme honor. PureKana has always been somewhere in the top 10 brands in the United States over the [indiscernible] exception. But this will be the first time potentially we move into the #1 position. To your point, we're already there as it relates to e-commerce, but [indiscernible] does have a bigger brick-and-mortar business than us at the state of time. And we do believe as we look at your question about 2023, as you know, PureKana grew 3x in 2022 versus a year ago. And we do, yes. We absolutely see double-digit growth in 2023. We did about $50 million, 5-0 million, in 2022. Our current forecast is to do $55 million plus as it relates to 2023. And that growth will be sourced in two ways: One, we will continue our customer acquisition model that has been so successful for us. As you know, we add about 20,000 consumers a month to PureKana and those consumers go into a subscription model. And then we roughly, at any given time, have anywhere from 25,000 to 30,000 people that live within our subscription model that come back and buy the product repeatedly as it becomes a daily partner for them to use PureKana. So we will continue to acquire customers via this acquisition model. And as I mentioned earlier, we also will be entering the pet category, and we're very excited about the potential opportunity that can be not only in terms of sales, stickiness and loyalty as it relates to PureKana consumers, but we love the idea that we could help our PureKana consumers increase the quality of life for the pet.

[Operator]

Thank you. The next question is for Brian is also from Noel Atkinson at [indiscernible] Securities. Brian, can you talk about the expected scale of marketing expense in Q2 versus Q1, given that the Costco [MVM] campaign appears to have been quite successful?

[Brian Meadows, executive]

Thank you. I can provide directional information here. The [MVM] promotion expenses, as we have previously stated, are significantly higher than the typical promotional allowances for everyday or regional rotations with Costco in the 2.5x higher range. We do expect margin expenses to be significantly higher in the second quarter for Tru that in Q1 has had a significant amount of revenue generated so far from the MVM event in the second quarter. That said, these will be reduced back to the normal level in the third and fourth quarters on a larger expected Costco business than we had in -- prior to the MVM event. Also for PureKana, as I previously stated, we are focusing on growing the customer subscription base in the second quarter, which will also drive up marketing expenses. Thank you.

[Operator]

Thank you. Brian, are there any plans to uplift from Venture?

[Brian Meadows, executive]

We currently trade on the Toronto Venture Board as well as the U.S.-based OTC Board. We absolutely are exploring an uplift. It's a frequent discussion with our Board, [indiscernible] senior Board as well as the NASDAQ are both options for us. We do want to be intentional about timing. However, as there are incremental costs and share price requirements. We want to ensure we do what is best for our financials and for our shareholders.

[Operator]

Thank you. Kathy, where do international business plans currently lie?

[Kathy Casey, executive]

It's a great question. As we've done these calls over the last year, we have had some discussions over time about entering Mexico or entering the U.K. or if legislation on CV change in Canada as one of those markets. As you know, we do enjoy a strong footprint actually in both the U.S. and Canada across TruBar and the source PureKana primarily in the United States. And then No B.S. actually now in the United States but a number of small countries around the world, we do also opportunistically ship our brands upon request and certainly regulatory compliance to a number of countries. We have built and have ready to go and in place partners in both in the U.K. and Mexico. And we are ready to activate those when it makes sense. However, we have delayed any plans and pause in new plans for geographic expansions here in 2023. And the rationale for that very simply is that we're having such incredible success here in the United States and Canada today. And many of the categories that we're in, because of how large categories are, we still only have a 1% or a 2% share of the categories. It's easier to grow in the markets that you're in, where people know your brands. It's more efficient of your resources in terms of people and marketing. So we have made a strategic decision, at least for the back half of '23 to focus on the U.S. market in Canada and take advantage of the upside and the momentum that we see here locally.

[Operator]

The final question will be for Kathy. Kathy, will the company issue an updated projection of anticipated revenue closer to $100 million, can we expect this?

[Kathy Casey, executive]

Yes. As we mentioned earlier, we do reaffirm our current guidance to exceed $80 million in top line revenue and a $3 million to $4 million adjusted EBITDA. Any change that we make in our guidance is always reviewed with a significant amount of rigor as we do not and have not disappointed shareholders. To date, we've never missed guidance I should back on wood when I say this. And we did increase our guidance as the folks on the phone have been following us for a while. We did increase our guidance actually 3x in 2022. With Q4 at 2020 -- Q4 of 2022 at $23 million and certainly Q1 of '23 at $24.6 million, I can see why some external folks that follow our company stock with [indiscernible], doesn't that mean you should just say that you're going to make $100 million this year because you're on that run rate. And I would say to you is that I know externally that can make sense, but as folks that I was dealing with are looking at the financials, the looking at the pressure we have in the marketplace, looking at the commercial plans that we see in the back half of the year, it is actually not -- it's not a run rate business. We're growing quickly -- and we're expanding into brick-and-mortar. And just as an example, some things happen, you fill a store, you could ship $1 million in one store to fill a chain. In the next month, we don't ship anything. For example, the Costco promotional investment in Q2 drives up revenue but also requires incremental investment. So it's just not a linear business quarter-over-quarter. What I would encourage all of us to do is we'll stay close to it like you will. I do believe that we will reassess it here over the next 90 days. And if it's so prudent, we will adjust our guidance. But for right now, we will continue to assess based upon commercial progress and augment the business as it dictates. Thank you.

[indiscernible]

Great. Thank you so much. And Michelle, thank you for taking us through the day, and thank you for everyone to dedicate a little bit of time to spend with us this morning to tell our story or this afternoon, depending upon where you are. Thank you for joining us, and we certainly appreciate your support on our journey upwards. Have a great day.

[Operator]

Ladies and gentlemen, this does conclude your conference call for this morning. We would like to thank you for participating, and you may now disconnect your lines.