Reported Net Revenue Increased by 39% to $15.5
Million and Gross Profit Increased by 26% to $7.2 Million Compared
to Prior Year Period
Company Updates Net Revenue Guidance to be
Between $72 Million to $76 Million for Fiscal Year 2024
Conference Call to be Held at 1:30 p.m. PT
Today
Starco Brands, Inc. (the “Company” or “Starco Brands”) (OTCQB:
STCB), developer and acquirer of behavior-changing technologies and
brands that spark excitement in the everyday, is providing a
business update in conjunction with the filing of its form 10-Q for
the first quarter ended March 31, 2024.
Management Comments
Starco Brands Chairman & CEO Ross Sklar said: “Our first
quarter results highlight the importance of our diversified
consumer products platform. Overall, we are pleased with the
revenue increase over prior year, but remain cautious and recognize
sector, interest rate, sticky inflation and increasing consumer
debt headwinds. We made tremendous strides in integrating our
acquired businesses into our shared service platform while
fostering strong organic growth of Winona, Skylar and Soylent.
Looking forward, this year is about supporting new distribution
expansion and investing in marketing and infrastructure to support
our growth and future public company plans. This past quarter, we
successfully launched new products in every single one of our
portfolio companies: Art of Sport, Winona Popcorn Spray, Soylent,
Whipshots and Skylar. This was a huge technical, marketing, sales,
distribution and financial achievement. The integration, growth and
success we achieved in enhancing our business units over the past
year validate the effectiveness of our shared service model and
platform, focusing only on our core competencies in personal care,
beauty, food and beverage.
Starco Brands’ exceptional rise from inception a couple of years
ago to now with over $80 million in annual gross sales has all been
financed by the generation of free cash and the company has not
raised any outside funds. As we progress through 2024, we
acknowledge the company’s need for growth capital for our scaling
businesses, for SEC preparedness as we look at new stock exchanges
and to grow our shareholder base and liquidity in our stock. We are
energized and well-positioned to continue to over-execute, support
and grow our synergistic portfolio, propelling us closer toward
realizing our vision of building a vertically integrated and
cutting-edge consumer packaged goods powerhouse.”
Year-to-Date Business Highlights
Whipshots®
- Whipshots has landed distribution in Kroger with new
authorizations that will go into effect in the fall of 2024 with
the potential for the brand to be in 57% of Kroger’s
spirits-licensed locations.
- In January 2024, Whipshots announced a nationwide partnership
at Museum of Ice Cream’s three US locations in Austin, Chicago and
New York to celebrate the launch of its limited-edition Strawberry
flavor.
- In February 2024, Whipshots expanded into Maine, Mississippi,
and New Hampshire. This marked a significant milestone as Whipshots
extended its presence across 41 states, reinforcing its position as
a trailblazer in the spirits industry since its national retail
debut in February 2022.
- In April 2024, Whipshots expanded into Alabama, North Carolina
(completing coverage in the Southeastern U.S.) and Pennsylvania.
The brand is now available across 43 states and the District of
Columbia as a result of direct consumer requests for Whipshots
availability in their states.
Skylar
- Skylar bolstered its executive ranks with the hiring of Alex
Alston as Vice President of Sales and Marketing. Alston brings a
wealth of experience honed over two decades in the realms of beauty
and luxury e-commerce. After a distinguished tenure at L’Oreal,
where Alex Alston was groomed for leadership roles, he spearheaded
the successful launches of Charlotte Tilbury and r.e.m beauty
(Ariana Grande). Alston also held senior marketing positions at
NET-A-PORTER and Rose Inc.
- Skylar continues to be successful at Sephora, with new
authorizations to enter the rapidly growing Sephora @ Kohl’s
channel. There are currently over 850 Sephora @ Kohl’s
locations.
- Skylar secured distribution in both Anthropologie’s online and
brick-and-mortar retail locations beginning in June 2024.
- Skylar rolled out the Hair & Body Mist format of its
popular Boardwalk Delight to skylar.com and sephora.com, as well as
Sephora brick-and-mortar retail locations.
Soylent
- In April 2024, Soylent rounded out its protein portfolio with
the launch of Soylent Complete Protein Powder, making the brand a
serious player in the protein supplement market. Industry experts
project this rapidly expanding sector will grow to $47 billion by
2032. The brand’s science-backed nutrition formula debuted in two
flavors, Chocolate and Vanilla, and contains: 30g of complete
protein, 0g of sugar, 28 essential vitamins and minerals, 5g BCAAs
(branch chain amino acids), 3.5g MCT and 65mg DHA supporting muscle
recovery and bone health and contributing to a cholesterol-lowering
diet.
- Soylent executed its first-ever Walmart Featured Space and
Sales (FSS) display program in May 2024.
- Soylent will be rolling out its Complete Meal Ready-to-Drink
and seasonal SKUs to Kroger in the third quarter of 2024.
- AWG shipping new distribution into the corporate Plan-o-Gram
(POG) program, with potential of 4,000 stores.
Winona Popcorn Spray
- Winona Popcorn Spray Butter flavor continues to expand retail
distribution due to its uniqueness, incredible sensory experience,
repeat purchase both online and in store and price point.
Currently, Winona is distributed at Walmart, HEB, Meijer, AWG and
Big Lots. The following depicts the brand’s 2024 growth path
inclusive of the launch of Winona’s new Garlic Butter popcorn spray
flavor, which is scheduled to roll out in the third quarter of
2024:
- Walmart nationwide in 1,800 stores, increasing to storewide
4,200 stores in fourth quarter of 2024 for Garlic Butter popcorn
spray flavor;
- Meijer storewide in 260 stores;
- Albertson nationwide in 1,500 stores in fourth quarter of
2024;
- Target nationwide in almost all 1,900 stores in second quarter
of 2025;
- HyVee chainwide in 280 stores;
- Stater Bros chainwide in 169 stores;
- Big Lots’ 300 stores;
- Sobeys in Canada nationwide in 1,400 stores in fourth quarter
of 2024; and
- American Wholesale Grocers in 500 locations, with the potential
of growing to 4,000 stores.
Art of Sport (AOS)
- The Company re-launched AOS on Amazon in the first quarter of
2024 focusing on the brand’s best-selling personal care SKUs and
scents. The new product line consists of the following SKUs:
Antiperspirant, Deodorant, Shampoo & Body Wash, Daily Face Wash
and Daily Face Lotion.
- In the second quarter of 2024, AOS broke into new categories
launching its cutting edge AOS Sunscreen and AOS Protein Powder.
- AOS Protein Powder will begin distribution chainwide at
Kroger’s 132 Fred Meyer stores in October 2024, with full
distribution in all divisions in 2025, equating to over 1,700
stores.
- In the third quarter of 2024, AOS has plans to launch more
products in the over-the-counter pharma space, furthering the
brand’s goal to “own the locker room”.
First Quarter of 2024 Financial Results
Reported net revenue for the first quarter of 2024 was $15.5
million, compared to $11.1 million in the first quarter of 2023.
The increase in reported net revenue was driven by an increase in
sales for Skylar and Winona Popcorn Spray and by including a full
quarter of sales of Soylent, which was acquired in February of
2023. In addition, the Company recognized revenue for Winona
Popcorn Spray on a royalty-basis in the prior year period before
making an accounting change in March of 2023 to move away from
royalty-based income to standard revenue and cost of goods
recognition.
Gross profit improved to $7.0 million for the first quarter of
2024, compared to $5.7 million in the first quarter of 2023,
primarily due to the impact of a full quarter of sales of
Soylent.
As the Company grows, Marketing, General and Administrative
expenses were $5.3 million, or 34% of reported net revenue in the
first quarter of 2024, compared to $3.3 million, or 30% of reported
net revenue in the first quarter of 2023. Compensation expense was
$2.6 million in the first quarter of 2024, compared to $1.4 million
in the first quarter of 2023. Professional fees were $1.2 million
in the first quarter of 2024, compared to $1.4 million in the first
quarter of 2023.
Reported unadjusted net loss for the first quarter of 2024 was
$4.3 million, as compared to net loss of $1.7 million in the first
quarter of 2023. The increase in reported unadjusted net loss was
due to a non-cash item of a fair share value increase from the
prior year of $0.7 million and to an increase in compensation
expense due to the Company’s three acquisitions in 2023. In
addition, further pressure was due to softer first quarter sales of
Whipshots over the prior year and reduced gross margin due to a
shift in product mix. The Company saw higher sales from its
lower-margin Winona brand compared to the prior year when it had
stronger sales of its higher-margin Whipshots brand. This was
partially offset by higher Winona and Skylar sales and gross profit
dollars from a full quarter of sales of Soylent.
Non-GAAP Adjusted EBITDA
Adjusted EBITDA, which is net loss adjusted for stock-based
compensation, gain on disposal of property and equipment, gain on
settlements, interest and other expense, net, depreciation of
property and equipment, amortization of intangible assets,
(recovery) provision for doubtful accounts, and provision for
income taxes and certain other items that impact the periods
presented. Adjusted EBITDA is provided so that investors have the
same financial data that management uses to assess the Company’s
operating results with the belief that it will assist the
investment community in properly assessing the ongoing performance
of the Company for the periods being reported and future periods.
The presentation of this additional information is not meant to be
considered a substitute for measures prepared in accordance with
U.S. GAAP. Because Adjusted EBITDA excludes some, but not all,
items that affect net income (loss) and is defined differently by
different companies, our definition of Adjusted EBITDA may not be
comparable to similarly titled measures of other companies. For
reconciliation of GAAP Net Income (loss) to Adjusted EBITDA, see
our reports we file from time-to-time with the SEC, which are
available to read at www.sec.gov.
Adjusted EBITDA was a loss of $882,918 for the first quarter of
2024, compared to a gain of $36,734 for the first quarter of 2023.
The year-over-year decrease was due to an increase in Marketing,
General and Administrative expense, compensation expense and
increased professional fees. The compensation expense was due to
the Company’s three acquisitions and a fair share value increase
from the prior year that was a non-cash item. The decrease in
EBITDA was also impacted by lower margins from softer Whipshots
sales over the prior year, product mix, Whipshots sales versus
prior year load in sales and increased revenue of lower-margin
Winona Popcorn Spray.
Adjusted EBITDA is a non-GAAP financial measure. See the
supplementary schedules in this press release for a reconciliation
thereof to the most directly comparable GAAP measure.
Q1 24 Q1 23 Net Income
(4,270,556
)
(1,663,130
)
Interest expense
199,173
97,313
Other expense (income)
76,779
(66,871
)
Depreciation & Amortization
706,271
7,463
Fair value share adjustment loss (gain)
1,921,949
1,179,154
Stock comp
483,466
482,805
Adjusted EBITDA
(882,918
)
36,734
Balance Sheet
As of March 31, 2024, the Company had approximately $1.8 million
of cash, and approximately $11.3 million of inventory on its
balance sheet compared to $1.8 million of cash, and approximately
$10.7 million of inventory on its balance sheet as of December 31,
2023.
First Quarter of 2024 Segment Review
Starco Brands: Segment reported net revenues of $3.9 million for
the first quarter of 2024, compared to $3.5 million for the first
quarter of 2023. Segment gross profit of $2.6 million for the first
quarter of 2024, compared to $2.9 million for the first quarter of
2023. Starco Brands’ segment includes AOS, Whipshots and Winona
Popcorn Spray. The decline in gross profit dollars and percent in
this segment was driven by the mix impact of lower revenue from
Whipshots offset by the increase in revenue from Winona. Whipshots
revenue declined as a result of a softer first quarter mostly due
to distributor and state pipeline fills. Winona revenue increased
due to distribution adds at Walmart, increased velocity on shelf
and onboarding new mass retailers.
Skylar: Segment reported net revenues of $2.1 million for the
first quarter of 2024, compared to $1.9 million for the first
quarter of 2023. The increase was driven by continued Amazon
expansion and by the success of new products. Segment gross profit
of $1.2 million for the first quarter of 2024, compared to $1.1
million for the first quarter of 2023.
Soylent: Segment reported net revenues of $9.4 million for the
first quarter of 2024, compared to $5.7 million for the first
quarter of 2023. The increase was primarily driven by the impact of
a full quarter of sales of Soylent, which was acquired in February
of 2023. Segment gross profit of $3.2 million for the first quarter
of 2024, compared to $1.7 million for the first quarter of 2023.
The increase in gross profit was due to price increases which
occurred in the second half of fiscal year 2023, lower cost of
materials in the first quarter, higher mix of direct-to-consumer
revenues, and cost efficiencies realized through the successful
integration of Soylent onto the Company’s shared service model.
2024 Updated Outlook
The Company projects between $72 million to $76 million in
reported net revenue for fiscal year 2024, representing 10% to 17%
growth compared to fiscal year 2023.
The Company has made the strategic decision to reinvest and
reallocate capital towards further accelerating the growth of its
high-potential brands. This increased investment, along with
bolstering the Company’s operational infrastructure, will
temporarily impact profitability. However, this strategic
reallocation positions the Company for stronger long-term growth.
The Company will provide an updated fiscal year 2024 Adjusted
EBITDA range by the third quarter of 2024 once it has better
visibility into the demand trajectory as it ramps up production and
expands distribution into approximately 10,000 stores cumulatively
across its portfolio.
The Company continues to scale its brands and at this stage of
the Company’s life cycle will be cautious yet deliberate about
investing and focusing its free cash on its businesses in order to
build valuable enterprise and shareholder value versus conserving
growth capital for short term earnings esthetics.
Conference Call
The conference call to discuss these results is scheduled for
today, Wednesday, May 15, 2024, at 1:30 pm Pacific Time (4:30 pm
Eastern Time). Listeners can dial (877) 407-0792 in North America
and international listeners can dial (201) 689-8263. A telephonic
playback will be available approximately two hours after the call
concludes and will be available through Wednesday, May 29, 2024.
Listeners in North America can dial (844) 512-2921 and
international listeners can dial (412) 317-6671; passcode is
13746330. Interested parties may also listen to a simultaneous
webcast of the conference call by logging onto the Company’s
Investor Relations website at http://investors.starcobrands.com and
navigating to the “IR Calendar” section.
Forward-Looking Statements
Any statements in this press release about the Company's future
expectations, plans and prospects, including statements about our
financing strategy, future operations, future financial position
and results, market growth, new product launches and product
growth, total revenue, as well as other statements containing the
words "anticipate," "believe," "continue," "could," "estimate,"
"expect," "intend," "may," "might," "plan," "potential," "predict,"
"project," "should," "target," "will," or "would" and similar
expressions, constitute forward-looking statements within the
meaning of the safe harbor provisions of The Private Securities
Litigation Reform Act of 1995. The Company may not achieve the
plans, intentions or expectations disclosed in the Company's
forward-looking statements, and you should not place undue reliance
on the Company's forward-looking statements. All forward-looking
statements are subject to assumptions, risks and uncertainties that
may change at any time. Therefore, readers are cautioned that
actual results could differ materially from those expressed in
forward-looking statements. The Company undertakes no obligation to
update any forward-looking statements as a result of new
information, future developments or otherwise, except as expressly
required by law. This cautionary statement entirely qualifies all
forward-looking statements in this document.
Actual results or events could differ materially from the plans,
intentions and expectations disclosed in the forward-looking
statements the Company make as a result of a variety of risks and
uncertainties, including risks related to the Company's estimates
regarding the potential market opportunity for the Company's
current and future products and services, the impact of the
COVID-19 pandemic, the competitive nature of the industries in
which we conduct our business, general business and economic
conditions, our ability to acquire suitable businesses, our ability
to successfully launch new products and seize market share, the
Company's expectations regarding the Company's sales, expenses,
gross margins and other results of operations, and the other risks
and uncertainties described in the "Risk Factors" sections of the
Company's public filings with the Securities and Exchange
Commission on Form 10-K for the year ended December 31, 2023.
Copies of our SEC filings are available on our website at
www.starcobrands.com. In addition, the forward-looking statements
included in this press release represent the Company's views as of
the date hereof. The Company anticipates that subsequent events and
developments may cause the Company's views to change. However,
while the Company may elect to update these forward-looking
statements at some point in the future, the Company specifically
disclaims any obligation to do so. These forward-looking statements
should not be relied upon as representing the Company's views as of
any date after the date hereof.
About Starco Brands
Starco Brands (OTCQB: STCB) invents consumer products with
behavior-changing technologies that spark excitement in the
everyday. Today, its disruptive brands include Whipshots®, the
world’s only vodka-infused whipped cream; Art of Sport, the body
care brand designed for athletes and co-founded by Kobe Bryant;
Winona® Pure, the first indulgent theater-popcorn spray powered by
air; Skylar, the only fragrance that is both hypoallergenic and
safe for sensitive skin; and Soylent, the complete non-dairy
nutrition brand. A modern-day invention factory to its core, Starco
Brands identifies whitespaces across consumer product categories.
Starco Brands publicly trades on the OTCQB stock exchange so that
retail investors can invest in STCB alongside accredited
individuals and institutions. Visit starcobrands.com for more
information.
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version on businesswire.com: https://www.businesswire.com/news/home/20240515078639/en/
Investor Relations John Mills ICR 646-277-1254
John.Mills@icrinc.com Deirdre Thomson ICR 646-277-1283
Deirdre.Thomson@icrinc.com