Simply Better Brands Corp

XTSX:SBBC

Earnings Call Transcript 2023-Q2

[Operator]

Good morning, everyone. Thank you for participating in today's conference call to discuss Simply Better Brands Financial Results for Q2 2023. Before we begin, let me remind everyone of the company's safe harbor disclaimer. Certain portions of our comments today will concern future plans of the company that constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Legislation 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, reject, or targets and similar [Technical Difficulty]

[Kathy Casey, executive]

This is Kathy Casey, the CEO, Simply Better Brands, we seem to have lost connection back with the operator. Please hang on, we'll work through some difficulties here.

Good. I did hear from one of the listeners that although you cannot hear the operator, you can hear me. So we'll just go ahead and we will now that we've had the forward-looking statements we made. We'll just go ahead and start the call.

And again, this is Kathy Casey. Thank you so much for everybody joining us today and I apologize for the difficulties. We'll go ahead and move forward with the content.

During today's call, we really plan on covering 3 topics. One is an overview of Simply Better Brands. The second one is a review of our Q2 '23 financials. And finally, some insight on the back half growth driver in the company. Quickly after taking Simply Better Brands public back in December of '20, we were leisurely and are leisurely focused on both organic and M&A acquisition growth. And the intent was really to diversify our portfolio, expand our capability and acquire top talent to the company. We sit here now less than 3 years later, and I've given a bit of background for the folks that may be new to the company or new to the call.

Three years later, we have concluded 6 acquisitions and operate in 3 core verticals: plant-based wellness, clean-ingredient food, next-generation beauty. Our mandate is to drive growth by relentlessly following the consumer and innovating to be able to solve their problems to wellness space. As a result, we source our growth through consumer-centric innovation, acquisition expansion, both in category and channel and the business model is fueled by buying, starting, building and if at some point, it makes sense so actively selling both brands, brands in both the direct-to-consumer and the B2B environment.

A key growth focus for us is our rapidly growing TRUBAR brand as you see here on the slide, driven by expanded distribution. The brand delivered $10 million in 2022 as forecasted, and this is an updated number for shareholders forecasted to do a minimum of $34 million in 2023, primarily led by, of course, our expanded distribution in COSTCO. One of the drivers of Simply success is the access to strong experienced talent within the company from companies like Procter & Gamble, Kellogg, Mars, R. J. Reynolds that serve both on our leadership and also on our Board of Directors, essentially building brands is in this group's DNA.

In 2000 -- in Q2, I'm pleased to say that we delivered a very strong quarter. Net sales of $23.6 million, compared to $16.9 million in '21 or roughly a 40% growth. Year-to-date, the revenue was now $48.2 million versus $29 million a year ago. We did this all while achieving a 58% gross margin and continue to buy down our debt. After a positive adjusted EBITDA of $800,000 in Q1, we did make some investments, as you saw in our financials, both in marketing and capability in Q2 and drove an adjusted EBITDA loss, while still the operating cash flow positive on a year-to-date basis.

These investments were signaled on our last earnings call, net growth cost money and brands require pressure to grow. We are, however, confident that those investments in acquiring new consumers resulting stronger back half to both growth and profit performance. And I certainly would like to take a moment to thank the people on the team that have helped inspire and actually deliver these types of results. As we look at the back half of '22, we reaffirm our guidance to exceed $80 million of revenue, with an adjusted EBITDA in the range of $3 million to $4 million, even with the proper investment that we made here in Q2.

We're forecasting the following growth drivers: expansion of TRUBAR at Costco and now distribution in BJ's Wholesale. That's new information. We did secure BJ's Wholesale for TRUBAR, and that will be going in here in October. On continued consumer acquisition, on PureKana, No B.S. entering Walgreens, nationally this fall, that will be in 4,400 stores and the portfolio expansion of our new wellness brand, Vibez. [ Newly ] buy, expanded innovation across all of the core brands in the back half.

Net-net, as you see on the slide, the quick highlights, revenue growth, $23.6 million. Our third quarter roll of over $20 million in sales, invested in growth in Q2, but still maintaining our operating cash flow positive year-to-date. We continue to buy down our debt down year-to-date $2.7 million. PureKana clearly is established as the #1 e-commerce brand and working towards becoming the #1 brand in the United States for CBD. But for sure, right now, we hold the #1 e-commerce brand position.

TRUBAR delivered $9.1 million in the quarter. This is in addition to about $10 million in Q1, so getting it to just over $19 million brand in the first half. No B.S. Skincare going into Walgreens, as I mentioned earlier, Vibez momentum, our new wellness brand did $1.7 million in the quarter, getting it close to about $2.7 million halfway through the year. And we also had made an announcement that we've added Acosta nationally. So they will not only support our grocery in our natural business but then we have teams of low working on our mass business and our convenience business as well.

Assisting us to accomplish our mission is an extremely, extremely group of board members. Mike Galloro, Board Manager of Principal at ALOE Finance and a CPA, experienced in M&A; Richard Kellam currently the CEO and Director of Data Communications Management with extensive CPG experience with executive roles at places like Mars, and Advantage Group. Kingsley Ward, a new Board member, Chairman and Managing Partner of VRG Capital and the Chairman of Claurus Securities. Brian Meadows, our channel's CFO, the strong operational experience and both public and start-up experience. Paul Norman, our Board Chairman, with over 30 years of experience at Kellogg, running a $9 billion P&L. And Lastly, myself, CEO and Board member, 30 years' experience at P&G and Kellogg sales marketing and general management across every class of trade, with my last role leading a Kellogg's $2 billion portfolio.

We feel very fortunate to have this team in place that solves problems quickly, solves consumers but does it with an incredible amount of financial diligence. The team leads a portfolio in a variety of big categories. And you'll see here that we participate in 3 large and growing categories: Cosmetics and beauty at $77 billion, the snack bar category at roughly $7 billion and the CBD hub market here at roughly $12 billion.

Not yet on the page, our additional categories that we're entering into 2023 in the category expansion. The $6 billion protein powder category, our protein powder would be out in mid-October, under TRUBAR's brand and then the $400 billion nutritional supplement category with Vibez and as well as our entry into hemp, for PureKana, with our pet constituency.

And we operate in -- really, 3 verticals. Those verticals go into 3 significant brands that are our core focus: PureKana, TRUBAR and No B.S. Skincare. PureKana is our largest plant-based wellness brand to date. And roughly a category of 4,000 brands who performs in the top 2, we believe nearing towards the top 1, due to its active ingredients, transparency and efficiency. TRUBAR, secondly, is our absolutely delicious organic-free vegan bar with 12 grams of protein and only 190 calories. It consistently exceeds category hurdles when it's placed at retail.

No B.S. Skincare bands 1,600 ingredients to garner the reputation as one of the cleanest skincare lines in the category, No B.S. sources from lapsed consumers of large category players that no longer meet the consumers' demand for No Bad Stuff.

Essentially, these 3 brands aligned with an informed consumer who is mindful of what goes in on and around their body. This past year, we also integrated and activated another plant-based wellness brand, Seventh Sense, and launched a new brand called Vibez, that I mentioned earlier. Seventh Sense is currently sold exclusively online and primarily targets young boomers, focused on proactive solutions in the need states of pain in feet. Vibez just launched back November '22, it started with a keto offering, and it targets millennials in their preventive wellness space via subscription model for direct-to-consumers.

Due to our extensive capability in the marketing space, Vibez has already sold $2.7 million year-to-date with an extensive portfolio expansion in place right now. Moving on to revenue. And one of the goals of the companies, of course, has been to diversify our portfolio, while simply originally started to with only the PureKana brand. We have by design and strong intention evolved into a disruptive and innovation-centric consumer products company, focusing on what we call millennials or young millennials and older Gen Zs on their wellness journey.

This mandate is enabling us to access to more consumers and categories, but also to diversify our revenue and our profit sources. As you can see in Q2 of '21, only about 16% of our revenue was outside of PureKana and the rapid expansion of TRUBAR has evolved to nearly half of our revenue here in the past quarter. Essentially, for shareholders that we are not a cannabis company, but a disruptive growing brand incubator of consumer goods. An update here on this page versus last quarter, we shared with folks that TRUBAR was really the current holy grail of the company and the brand that we're most excited about in terms of its upside potential.

So adding a bit of color here. TRUBAR's experienced another breakout year in 2023, our great taste and strict nutritional credentials as a bar, recognized by Health Line as a top protein bar in the category. Expanded distribution at retailers like Costco and 7 Eleven drove sales 10 times fast in 2022. Costco sales velocities and these are updated numbers for you. Are consistently performing above the category threshold. So you can see here that the category hurdles about $1,000 per building per week. That's the metric that Costco uses.

And TRUBAR, if you look at our recent data is at $1,419 per building per week, said another way, exceeding the category hurdle by 40%. It's that momentum that drives the 34-plus call in terms of forecasting for 2022. And actually, due to the stellar performance of Costco in the club channel, we did get attention of and are also expanding into the BJ's Wholesale in the back half. Essentially, that marketing investment of TRUBAR enables us to have the business case that we could then go over and talk to BJ's with substantial information.

Building on our club and convenience channel success, we're also leveraging our new national sales organization with the brokerage relationship with Acosta. They will focus on mass, natural and grocery channels, essentially via Acosta. We are already currently in discussions with 10 regional and national chains for the operating of TRUBAR.

I mentioned last week to folks, there's a couple of times in your career where you have what I call, a genie in the bottle, an opportunity that comes across your desk. It's just a perfect brand positioned with the right consumers at the right time. And the indulgent taste and strict nutritional guidelines of TRUBAR are actually well timed. And can we -- we are running fast to keep up with demand. And we actually have retailers right now reaching out to us to want to put the product line into their set retail environment.

Speaking of retailers, you can see here that we do sell the brands there at Costco, a very, very diverse class of trade. And brands really started primarily online, now enjoying an omnichannel footprint. With roughly 60% of our sales, direct-to-consumer, balanced out with across really virtually every class of trade. And I would envision down in the lower right-hand corner that circle will continue to get more and more balanced to actually the brick-and-mortar business getting even as a larger percentage of the total.

We're notable retailers, right? Like, Costco, Amazon, CVS, 7-Eleven, intellectual food stores, Albertsons as an example. And as we shared earlier this year, TRUBAR has signed a distribution agreement with Sodexo, one of the largest retailers in the world, and we're entering BJ's Wholesale in Q4. NBS has added T.J.Maxx and BJ's Wholesale.com. And this states , of course, as we mentioned, to enter Walgreens later this year.

The opportunity to continue to grow in this retailers is Do We Buy innovation. And as I mentioned earlier, we do an incredible amount of research, and we follow consumers to be able to solve the problems. And we operate really in these main new states here, calm, sleep, pain, immunity, weight loss, local acuity, energy, recreation and hair loss.

Essentially, we have a very agile, asset-light environment that we can listen to consumers can be very much quick movers or first movers in the category, in terms of capitalizing upon what the opportunity is that we think we can have a differentiated offering, but also enable a sustainable solution for consumers. These hunting grounds then drive our innovation for the upcoming next 2 years. This is what's in flight right now that is either already in the marketplace, but will be in the marketplace later this year. The Vibez portfolio, the Seventh Sense portfolio and the Patch portfolio from No B.S. are already all in market.

The additional club packs we have developed for both Costco and BJ's. We'll be putting in, in addition to the base pack that we had at Costco, we'll be looking at other flavor assortments. We already have an incremental and new, so a second item going into one of the regions of Costco, and we're preparing a second, I think, for another region as well. We do believe over time, there's an opportunity to not only have a base SKU, but seasonally, to be able to have a second SKU.

Pet will be moderated throughout the back of the year. The oils will be immediately hip and joint, will be later this year. And calm coming in the market here in October. The protein, 2 protein items under TRUBAR will be out and available here in September and then the natural and all deodorant coming out here in October. So essentially, our back half will certainly be buoyed by incremental innovation within the category.

We referenced the Vibez portfolio last call, what started as a keto offering and then had at least temporarily a CBD offering, although that's not the long-term plan, will be our most diversified nutritional line we have. And the intent would be not only is it focused on preventative plant-based wellness, but it also will be a non-CBD portfolio so that we can grow in the nutritional supplement base agnostic of what happens ultimately with the FDA.

With that said, I'm going to transition here over to Brian, who is going to show you how these strategies come to life financially. Brian?

[Brian Meadows, executive]

Thank you, Kathy, and good morning, everyone. First slide I'll start with, looks at our revenue progression over time. Graph tells the Simply Better Brand sales growth story that really took off starting in the fourth quarter of 2021. See, quarterly sales in 2021 were single digits, were based on PureKana and No B.S. in most of that year. In August of '21, we acquired TRU brands, Inc., and they began to contribute materially to SBBC sales growth starting in the first quarter of 2022.

PureKana's new marketing program starting to produce tremendous top line results in the fourth quarter of 2021 and has been delivering solid sales numbers ever since that launch. In 2022, we also saw No B.S. Skincare launching into 3,200 CVS locations, adding further diversified growth.

And in the fourth quarter of 2022, again demonstrated continued quarterly growth led by PureKana and TRUBAR. Sales in the first 2 quarters of 2023 are significantly higher than the comparable quarters in 2022. You see the last 3 quarters we had were all above $23 million. We are seeing growth spread across more of the brands with TRUBAR representing 40% of 6-month revenues compared to 15% in the fourth quarter of 2022.

In the next slide, looking at our second quarter results. We generated $23.6 million sales with a gross profit of $13.7 million or 58% of sales compared to $16.9 million with a gross profit of $11.7 million or 69% of sales in '22. Revenue increased by $6.7 million or 40% over the prior period's revenues. The company's revenues generated by 4 main subsidiaries: PureKana, TRU, BRN and No B.S.

PureKana's second quarter revenue was $12.2 million compared to $13.8 million in the comparable period. PureKana revenue decrease was driven by a reduction in profitable subscriptions during the quarter. As a result of this, PureKana invested heavily in marketing in the second quarter to increase new sales and subscriptions. Revenues have increased by approximately 50% in the third quarter of '23 to date over the comparable period.

TRU's second quarter revenue was $9 million compared to $2 million for the comparable year in '22, or an increase of $7 million or 350%. TRU's strong sales performance in the second quarter was driven primarily by orders from Costco in the U.S. for a national promotion, a multi-vendor mailer or MVM program.

No B.S.'s second quarter was $0.2 million compared to $0.8 million for the comparable period. The major change or decrease this year was an expected shipment in Q2 has now moved in the third quarter. So you'll see kind of reversal that in the coming quarter.

Vibez and Seventh Sense through the BRN subsidiary, second quarter revenue was $2 million compared to $0.2 million in the second quarter of 2022. So significant growth since the acquisition last year. SBBC's other subsidiaries contributed $0.2 million in the second quarter compared to $0.1 million prior year. Looking at the cost of goods sold, it was $9.9 million in the second quarter which is 42% of revenues compared to $5.2 million or 31% of revenues in '22.

SBBC's cost of sales increased in the second quarter relative to the comparable period by 11 points due to a higher mix of lower margin B2B sales compared to the DTC sales. Cost of goods sold for DTC typically range -- for margins for DTC typically range in the low to mid-70s and B2B gross margins range in the mid-30s to high 40s.

Looking at the gross profit in the second quarter was $13.7 million or 58% compared to $11.7 million or 69% in the second quarter of '22. Gross profit was down 11 percentage points in the second quarter over the gross profit comparable period, again driven by the higher mix of B2B sales, which are lower margin than we saw in '22, which was mainly DTC. That is how we looked at our -- when we set our guidance this year, we were expecting lower gross margin this year compared to last year, driven by the mix of business.

Looking at operating costs for the second quarter came in at $18.4 million, an increase of $4.9 million compared to the prior year at $13.5 million. The majority of the operating cost increase incurred in the second quarter for marketing expenses, which were $13.4 million in the second quarter or 73% of operating expenses and the increased $5.2 million over the previous year, directly related to the increase in revenues for PureKana, BRN, and TRU's sales.

In the second quarter of '23, online advertising accounted for 78% of marketing expenses compared to 82% last year. Market expenses related to DTC were up by $3.5 million in the second quarter compared to the second quarter of '22, due to an increased push in the second quarter to acquire customers who are PureKana and the Vibez brands to rebuild our subscriber base for PureKana and develop its subscriber base for Vibez.

This investment in customer base of PureKana and Vibez did result in increases in subscriber bases for these 2 brands during the second quarter, and the benefits are expected to be seen in the third and fourth quarters. In the second quarter of '23, retail and promotional allowances accounted for 14% of marketing expenses compared to 5% in '22. The increase in this category of $1.5 million was directly related to the national Costco MVM promotion for TRUBAR.

B2B sales increased from $2 million in Q2 of 2022 to $9 million in Q2 '23 or a $7 million increase in B2B sales. The national promotional costs are significantly higher than the regular Costco promotional allowances. The national promotional allowances average is 22%, for example, compared to regular promotional allowance of approximately 10%. The company chose to participate in this program as an expected ex the national promotion of favorable position. For additional Costco regions, we continue to order the product after the national promotion and ended. We also benefited by the increased awareness of the brand, as Kathy had gone over previously, and we are expanding into additional club grocery convenience as a result of this brand.

Customer services support represent 5% of our operating expenses in Q2. These expenses were also directly related to the increase in sales of PureKana and Vibez and represent 2 categories of expenses. Third-party customer services agents; and secondly, information technology used to operate our affiliate marketing programs. First -- category 1 generally increases with the increase in customer orders and sales. However, we are continuing working on automating customer service tasks to reduce the volume of transactions that agents need to directly work on.

So the category 2 actually increased $0.3 million during the second quarter, which is the bulk of the increase in this area. Additionally, the company's strategy to further automate customer service transactions to reduce third-party customer agent expenses. External customer service agents are thus freed up from handling admin tasks and can concentrate on customer sales and customer inquiries that cannot be easily automated. The great thing here is that customer service is now a profit center instead of a cost center. As the contribution from the sales they generate now cover the cost of operating this part of our business. The operating loss for Q2 '23 was $4.7 million compared to a loss of $1.8 million in the prior period.

Other expenses for the second quarter came in at $1.6 million compared to $4 million in '22. We incurred a net loss of $6.3 million in the second quarter of '23, and which increased by $3.6 million over the loss in the second quarter of '22. And this is primarily related to the increase in operating expenses.

The increase in operating expenses was driven by, as we mentioned earlier, an increase in marketing expenses of $3 million on the PureKana, Vibez and TRUBAR brands. Impairment of inventories and accounts receivable of $0.3 million and an increase in customer support costs of $0.3 million. Looking at our adjusted EBITDA loss for the quarter, a few came in at $2.4 million, which is an increase of $3.3 million over the adjusted EBITDA loss of $0.9 million in the comparable period.

Primary driver for the adjusted EBITDA loss in the second quarter of '23 is the increase in cash operating expenses, which were partially offset by increased gross profit of $2 million. The operating expense increase in the second quarter reflected an investment in sales growth and automation of customer services and PureKana and Vibez brands, as we discussed, as well as the TRUBAR brand growth with the MVM program.

Marketing customer service technology investments in the direct-to-consumer brands are expected the result of benefits on the latter half of '23 for PureKana and Vibez. As we see more subscription revenues and lower customer service costs. For the investments in the TRUBAR brand during the second quarter of '23, the MVM benefits are expected to materialize over the next 12 months for the TRUBAR brand. The Costco MVM has brought significant awareness of the TRUBAR brand in mass convenience and grocery categories. The company expects to be delivering TRUBAR beyond the mass store category starting in the third quarter of '23.

Interestingly, when we look at cash used in operating expenses compared to adjusted EBITDA loss was $0.3 million in the second quarter of '23 compared to cash flow used of $2.9 million in the second quarter of '22 or an improvement of $2.6 million, which actually, in fact, funded most of our adjusted EBITDA loss in the quarter.

Looking at the next slide on 6 months results. Revenue for the 6 months -- $0.3 million came in at $48.2 million, an increase of $19.2 million or 66% growth compared to $29 million in the comparable period of '22. PureKana's revenue came in at $24.9 million compared to $23.1 million. TRU's revenue for the 6 months was $19.2 million compared to $4.5 million. No B.S. revenue for the 6 months was $0.5 million compared to $1.1 million. Vibez and Seventh Sense, revenue was $3.4 million compared to $0.2 million in '22. And our other subsidiaries contributed $0.2 million compared to $0.1 million in '22.

Cost of goods sold came in at $20.7 million for the 6 months, 43% of revenues compared to $9.3 million or 32% of revenues and the higher cost of sales, reflecting the mix of the business speed towards B2B this year versus last year, which is mainly DTC. Gross profit for the 6 months of $27.5 million or 57% of sales compared to $19.7 million or 68% of sales in the comparable period. Same story, the drop in gross margin percentage related to the change in mix from -- skewed towards DTC to a good mix of B2B and DTC.

Looking at operating expenses, 6 months of $33.2 million, an increase of $9.2 million compared to $24 million in '22. Again, no different explanation here, the main increase -- the majority of cost was through marketing expenses, $23.8 million, 72% of operating expenses for reasons we explained previously on the quarter, investing in the PureKana and Vibez brands, as well as the TRUBAR brands, resulting in benefits in the back half of the year.

Other expenses for the 6 months were $3.3 million compared to $1.1 million in '22. And we incurred a net loss of $9 million for the 6 months of '23. Our adjusted EBITDA loss as of 6 months is $1.5 million, which is an increase of $1.3 million over the adjusted EBITDA loss of $0.2 million in the comparable period. And the primary driver was the increased investment in TRUBAR brands as well as PureKana and Vibez.

We expect the benefits in the subscription increases customer increases on PureKana and Vibez as well as lower customer service costs to drive better results in Q3 and Q4. And the investment in the MVM, as we say, as Kathy I think, outlined very well, we're really looking at a lot of expanded distribution through mass convenience and grocery categories over the next 12 months with results starting in the third quarter.

Cash generated from operating activities for the 6 months was a positive $0.7 million compared to cash flow used of $2.4 million in '22 for an improvement of $3.1 million. Looking at the next slide on debt reduction. Building on our success of our debt reduction initiatives in '22, where we reduced short-term promissory notes and convertible ventures by $4.5 million. We have further reduced our debt by $2.7 million as of June 30, '23. And you combine those 2 numbers, that's $7.2 million debt reduction over the 1.5 years.

As a reminder, we had a successful cap raise in February '23, where we raised $7 million. Another key area of funding that we've been expanding is the use of short-term lines of credit which is now benefiting both TRU, as well as No B.S. These credit lines typically are tied to large customer purchase orders or receivables. The average life of these credit facilities is 3 to 5 months in length. You'll see that these short-term loans fluctuate on our balance sheet as we finance larger customer POs.

These credit lines are used to support our rapid growth in customers such as CVS, Costco, Walgreens. We have a disciplined approach to using these lines only to finance large customer POs. For example, we have borrowed a total of [ $10.7 ] million for the first 6 months of this year to finance large customer POs and we have repaid over that same period of time, $11.2 million of these facilities.

Next slide is looking at our balance sheet highlights. Cash on hand as of June 30, '23 was $3.9 million, which is up $1.6 million from year-end 2022. Total assets were $33.3 million and total liabilities were $26.5 million. Of note, liabilities were up $1.5 million over Q1 '23, however, if you look at the makeup of our liabilities, $1 million was due to deferred revenue, which was subsequently have been realized in Q3. And we also had an increase in more liabilities of $0.7 million, which is a noncash liability.

As mentioned earlier, we reduced our promissory notes and convertible debt by $2.7 million for the 6 months ended June 30th. Basic shares outstanding $71.8 million, fully diluted is $97.4 million.

Turning to our outlook. As Kathy mentioned, where we're reconfirming our 2023 outlook, revenues to exceed $80 million, gross margin in the 58% to 60% range. Adjusted EBITDA, $3 million to $4 million range. And as we note, revenue for the 6 months came in at $48.2 million in base that $80 million. Our margins are very close to the range, and we're expecting improvements in the back half of our adjusted EBITDA.

As we highlighted on our first quarter conference call, adjusted EBITDA generation would be uneven in '23. And as we reported today, the investments in marketing for PureKana, Vibez, TRU brands in the second quarter, as well as the larger marketing expenses associated with the national promotion of Costco were the primary drivers for the negative adjusted EBITDA in the second quarter.

We do expect lower marketing expenses for PureKana and Vibez in the second half of '23, as well as significantly lower marketing promotional allowances for the Costco business. As a result of the MVM success, we are also seeing additional growth opportunities with grocery and convenience stores, which is higher-margin business for TRU. These developments are expected to positively impact our adjusted EBITDA starting in the third quarter.

Now I'll turn it over to you, Kathy, to wrap up.

[Kathy Casey, executive]

Thank you, Brian. As we wrap up, we will continue to source our growth through incremental categories, expanded channels and disruptive innovation. As you can see, our rate of revenue growth has grown at a much faster rate than our market cap suggests approximately 20% of our annual planned revenue. Our focus is to remain incredibly vigilant on delivering sustainable growth and profit improvement until our stock price rewards the results.

To summarize where we started, strong revenue growth of 40% versus a year ago, third quarter in a row of above $23 million, investing in growth in marketing and capability but also very mindful of year-to-date operating cash flow positive, which is an incredible accomplishment at a nascent company, as young and as emergent as we are. We have bought down $2.7 million in debt, and we will continue to buy down debt throughout the year.

We have a $1.5 million payment on our Main Street loan coming up in Q4 as an example. PureKana will continue to perform and it's seeded to potentially become the #1 brand here in the United States over the back half of the year or early next year. Strong expectations around TRUBAR, $9 million in Q2, $19 million year-to-date and then $34 million for the year. No B.S. Skincare will build upon its success at CVS to enter into Walgreens.

And then we are in conversations with a couple of other large retailers for 2024. Vibez will continue to expand its portfolio online primarily. And as we mentioned, $1.7 million in Q2, but then $2.7 million actually on a year-to-date basis.

And we have yet -- or about $0.8 million here, we have yet to really scratch the surface of the capability of Acosta. They're a national organization of roughly 20,000 employees and have dedicated teams that live in the markets of most of the grocery and national players in the United States, and we will continue to leverage that relationship.

As I mentioned, they -- we are in discussions today with about 10 regional or national players in the market. As we wrap up the call, we delivered strong top line growth, significantly expanded our customer base. and continue to reduce our debt in Q2. We remain confident in our talent, our strategy and our execution to deliver the 2023 outlook.

I'll now turn it over to the operator, and I do apologize, our original operator, Vanessa, for some reason, something happened with our audio. We did lose her on our end, I believe, we'll see, but I believe we have a replacement operator. So I'll turn it over to you, I think, Michelle.

[Operator]

Yes. We do have a couple of questions. The first question that I have came from Noel Atkinson at Claurus Securities.

Brian, what will the company do to reduce costs to achieve the USD 3 million to USD 4 million of adjusted EBITDA in your guidance? That guidance infers that you will be able to generate the $4.5 million to $5 million of the adjusted EBITDA in the second half of 2023. Do you expect to achieve the positive adjusted EBITDA in Q3?

[Brian Meadows, executive]

Thank you, Noel. The company actually has undertaken many steps already for cost reduction initiatives starting late in the second quarter. These are focused on our direct-to-consumer businesses PureKana and Vibez. Initiatives so far included product cost reductions through successful negotiations with our suppliers. We've made a fulfillment and warehousing change for www.purekana.com business, which we will see savings coming to us starting in September as well as additional personnel reductions at PureKana.

Additionally, we also invested in technologies that covered earlier in our customer services processes that effectively automated a lot of manual work our agents were doing. This has freed up their time to focus on higher value-add activities such as outbound sales. Customer services as of Q3 is now a profit center rather than a cost center.

Lastly, and most importantly, we're looking at our marketing costs to generate a better return on sales. And we've got some new initiatives that we expect will be generating positive results starting in September.

In addition to the PureKana and Vibez cost-reduction initiatives, we're also in a position to negotiate reductions in product costs with our significant increase in our TRUBAR business. We expect to see benefits from these reductions from our suppliers starting in the fourth quarter of 2023.

And to your question, do we expect to achieve positive adjusted EBITDA in Q3? We do expect to generate positive adjusted EBITDA in Q3. Couple of important shipments are scheduled late in September, which will have a bearing on achievement of that for both No B.S. as well as TRUBAR. So we're all focused on making that happen. Back to you.

[Operator]

Kathy, the next question I have is for you, and it is what do you see as a market opportunity for TRUBAR and the No B.S. Skincare in the U.S. market.

[Kathy Casey, executive]

Great. No, thank you, Michelle. If you look at the bar category, and particularly if you look at the subcategory wellness bars, which is where we fall, which is positive nutrition and at least 10 grams or more protein, the bar category -- it's a large category, it's about $3.4 billion. It's growing at a tagalong about $6 billion.

And if we delve into where TRUBAR is positioned and look at like items in the category, we envision that there's a line of sight for TRUBAR to achieve 3 to 4 share points of the category, which is roughly $300 million to $400 million. So we're really excited about the upside there. The interesting thing for buyers, for folks that follow the category, about half of the category actually is sold within club stores because if you buy a bar everyday, you want to be able to buy it as inexpensively as you can and most of our consumers are habitual and virtual consumers.

So by virtue of being in club, with Costco and now BJ, as we already participate in almost half the category. Opportunistic, of course, for us now is Sam's Club. So we're incredibly excited about where TRUBAR has already gone and will go. And we -- as I mentioned, we see this as a $300 million to $400 million opportunity.

The beauty and skin care category is even bigger, where bars are $3.4 billion, skin care and beauty is about $17 billion. A much bigger category, I would tell you, it's also a much more crowded category. That $17 billion category is going about 4%. The healthy skin care category within that is growing about 20%. And so we are disproportionately playing in the fastest area of the category. And the retailers are recognizing the need for clean skin care and are actually adding and augmenting their planograms right now to take advantage of this emerging subcut.

And similarly, where we see bars is $300 million to $400 million we actually see No B.S. closer to $500 million looking at other comparable brands in the category. So opportunistically, excited about both the categories in which we play there. Back to you, operator.

[Operator]

Thank you. Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

[Kathy Casey, executive]

Thanks again for everyone who joined us today. We apologize about the delay in technology.