Else Nutrition Reports Third Quarter 2023 Financial Results and Provides Fourth Quarter Outlook

• Reports favorable outlook with revenue guidance in the range of $2.7 million to $3.0 million for the fourth quarter of 2023 from growth in the retail network, high retail follow-on orders and expanding online distribution
• Entered into a binding multi-stage collaboration with Danone, a leading global food and beverage company

Conference call to be held today at 10:00 AM Eastern Time

VANCOUVER, British Columbia, Nov. 14, 2023 (GLOBE NEWSWIRE) — ELSE NUTRITION HOLDINGS INC (BABY) (BABYF) (0YL.F) (“Else” or the “Company”) the Plant-Based baby, toddler, and children nutrition company, today reported its third quarter 2023 financial results for the period ending September 30, 2023. The financial statements and MD&A are available on SEDAR under the Company’s profile.

Financial Highlights

• Total revenues were $1.7 million CAD for the third quarter of 2023, versus $2.2 M for the same period last year, due to a deliberate shift of limited inventory earlier this year, away from e-commerce channels, towards new retail channels.
• Outlook for a strong return to growth beginning in the fourth quarter of 2023, as manufacturing ramps up and retailers that placed high initial stocking orders in earlier quarters are selling through inventory and have begun placing follow-on orders.
• Revenue outlook in the range of $2.7 million to $3.0 million for the fourth quarter of 2023, representing growth of 58-75% compared to the third quarter of 2023.
• Sales to brick-and-mortar retailers in the US and Canada during the third quarter increased by 8%, compared to the third quarter of 2022.
• As of September 30, 2023, Else products were listed in nearly 13,000 stores in North America, compared with 3,000 stores for the same period last year—management expects to reach over 15,000 listed stores and over 40,000 points of distribution by the end of 2023.
• Total e-commerce sales during the third quarter of 2023 decreased by 40% compared to the same period last year, as a result of management’s decision in the first quarter of 2023 to divert products from e-commerce channels to brick-and-mortar retailers due to limited inventory at the time.
• The Company is rebuilding its sales velocity on Amazon and its own e-commerce store and expects these channels to return to growth in 2024.   
• Cash position as of September 30, 2023, was $4.2 million CAD, including restricted cash and short-term bank deposits.

Recent Business Highlights

• Entered into a multi-stage collaboration agreement with Danone S.A., commencing with Danone licensing Else’s products and including them in its specialized nutrition portfolio.
• Expanded distribution to more than 7,000 CVS stores, more than 1,100 Walmart stores, 900 Shoppers Drug Mart locations across 11 provinces and territories, over 440 Loblaws stores, over 600 Sobey’s stores, 161 Giant Food Stores, and 110 Schnucks Supermarkets.
• Launched kids ready-to-drink products in the USA and Canada, and planning to launch adult ready-to-drink products in 2024.
• Expanded production capacity by adding a second manufacturing facility in the US and launching first production facility in Europe, which will increase the Company’s production capacity by approximately threefold.  
• Entered the Western European market during the fourth quarter of 2023, initially launching in the UK via Amazon and natural food distributors, with other European countries to follow.
• Planning to enter the Australian market during the fourth quarter of 2023, with an initial launch via Amazon to be followed by drug and grocery chains.
• Received key approval by the Institutional Review Board (IRB) of the infant growth study protocol for the testing of the Else Infant Formula.

Hamutal Yitzhak, CEO of Else Nutrition, commented, “We continue to make progress on our growth objectives and have advanced Else Nutrition as a national brand in North America. Over the past year we have focused on expanding our North American distribution to over 13,000 retail locations including Walmart, CVS, and many more leading retailers. The feedback from these retailers and their customers has been overwhelmingly positive. We are now at an exciting point in time where many of these retailers have sold through the initial orders and are starting placing follow-on orders—a significant validation of our products and overall retail strategy. As a result, we expect sales to meaningfully accelerate in the coming quarters.”

“Importantly, we have more than tripled our manufacturing capacity to support the anticipated growth. Our two new manufacturing facilities in the US and Europe are now operational, allowing us to properly meet our customers’ growing demands and mitigating the risk of out-of-stock situations. In addition, our new facilities have made our production more efficient and cost-effective, and we now expect our manufacturing costs to decline by 50-60% beginning in the fourth quarter of 2023 and beyond, which should lead to increased gross margins.”

“We also continue to rapidly expand our global footprint. Most recently, we announced our multi-stage collaboration with Danone, a leading global food and beverage company. During the initial stage of the collaboration, Danone will license Else’s products and include them in its specialized nutrition portfolio. This is a monumental event for Else as it not only opens many doors for our products, but also substantiates Else’s unique plant-based formulation. We look forward to working closely with Danone and entering additional stages of this agreement. At the same time, we are excited about our recent launch into Western Europe, beginning with United Kingdom. In the UK we are seeing increasing demand from parents for infant and children plant-based nutrition, as many children are exhibiting increasing sensitivities and intolerances to existing formulas. We are also excited about our planned launch into Australia, an important geography for us as it not only boasts a healthy eating consumer base, but also serves as a cross border gateway into China and other Southeast Asian markets.”

“We continue to focus on product innovation as we recently launched our highly anticipated ready-to-drink kids shakes. Our retail partners are very enthusiastic about this product, and we expect initial shipments to over 600 stores in North America. Our adult ready-to-drink shakes are expected to roll out during the first half of 2024.

“While we have now rightsized our production and inventory levels, there is still work to do to remedy the effects caused by our production issues. After approximately one year of diverting inventory from e-commerce channels in favor of brick-and-mortar customers, we are now in the process of rebuilding our sales velocity in e-commerce channels which should lead to increased growth in 2024.”  

“Finally, I’d like to address everyone’s concerns regarding the recent events in Israel. Our team in our home office in Tel Aviv is resilient and we continue to focus on our business. Over 95% of our production is located outside of Israel and, thankfully, we have not witnessed any disruptions and do not foresee any issues with operations,” concluded Ms. Yitzhak.  

FDA Update

As part of the pathway to bring its infant formulation to market under FDA and other authorities’ approvals, Else concluded two successful preclinical safety studies on its plant-based infant formula, to demonstrate safety and nutrient bioavailability of the infant formula and its ingredients. The results demonstrated proper growth, similar to dairy-based infant formula, in a neonatal preclinical model, as well as the infant formula protein efficiency and quality. Those steps represent key milestones on the path to obtaining the FDA and other regulatory permits to bring the product to market.

In February 2023, the Company announced that the Institutional Review Board (the ethical committee) approved the infant growth study protocol for the testing of the Else Infant Formula. As a final step before initiating the study, the Company has now submitted the preclinical study results as well as the infant growth study protocol to the FDA for review and is in discussion with the FDA for the infant formula optimization prior to the clinical study initiation, in parallel to continuously seeking for a comparator formula which is currently unavailable due to the continuous infant formula shortage followed by several recent product recalls in the US.

Conference Call

The Company will host a conference call to discuss the quarter’s financial results today at 10:00 a.m. Eastern Time.

Interested parties can listen via a live webcast, from the link available in the Investors section of the Company’s website or at https://app.webinar.net/PmpXNAn81qR.

A replay will be available after the call, in the Investors section of the Company’s website or at https://app.webinar.net/PmpXNAn81qR.

About Else Nutrition Holdings Inc.

Else Nutrition Holdings Inc. is a food and nutrition company in the international expansion stage focused on developing innovative, clean, and plant-based food and nutrition products for infants, toddlers, children, and adults. Its revolutionary, plant-based, non-soy formula is a clean-ingredient alternative to dairy-based formula. Else Nutrition (formerly INDI) won the “2017 Best Health and Diet Solutions” award at Milan’s Global Food Innovation Summit. The holding company, Else Nutrition Holdings Inc., is a publicly-traded company, listed on TSX Venture Exchange under the trading symbol BABY and is quoted on the US OTC Markets Q.X. board under the trading symbol BABYF and the Frankfurt Exchange under the symbol 0YL. Since launching its Plant-Based Complete Nutrition for Toddlers, made of whole foods, almonds, buckwheat, and tapioca, the brand has received thousands of powerful testimonials and reviews from parents and gained national retailer support from Sprouts Farmers Market, and achieved rapid sales growth. Else became the #1 Best Seller on Amazon in the Fall of 2020 in the New Baby & Toddler Formula Category. It recently won the ‘Best Dairy Alternative’ Award 2021 at World Plant-Based Expo and was a Nexty Award Finalist at Expo West 2022 in the Plant-Based lifestyle category.

Investor Relations Contact:
Crescendo Communications, LLC
Alexandra Schilt
Office: (212) 671-1020 Ext: 305
Email: baby@crescendo-ir.com

Lytham Partners, LLC
Ben Shamsian
New York | Phoenix
E: shamsian@lythampartners.com
P: 646-829-9701

Toronto Stock Exchange

Neither the Toronto Stock Exchange nor its regulation services provider (as that term is defined in the policies of the Toronto Stock Exchange) a responsibility for the adequacy or accuracy of this release.

Caution Regarding Forward-Looking Statements

This press release contains forward-looking information within the meaning of applicable securities legislation, which reflects the Company’s current expectations regarding future events as of the date hereof. Such forward-looking information may include but are not limited to statements regarding revenue guidance information for Q4 2023, e-Commerce growth due to a resumption of focus on e-Commerce channels, expectations regarding re-orders and its effects on sales growth, production capacity and demand for that capacity, manufacturing cost decreases and benefits of strategic collaborations. Forward-looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond the Company’s control, that could cause actual results and events to differ materially from those that are disclosed in or implied by such forward-looking information. Such risks include the factors discussed under the “Risk Factors” section in the Company’s Annual Information Form for the year ended December 31, 2022 and subsequent MD&A and other filings publicly available on SEDAR+. Other factors that could cause actual results or events to differ materially include the inability of the Company to rebuild sales and maintain growth from e-Commerce channels, expand its product distribution in retail locations, achieve or maintain growth from follow-on orders by existing customers and retailers, successfully obtain FDA approvals of its infant formulation, maintain sufficient production capacity to support existing and future growth outlooks, reduce manufacturing costs to achieve increased margins, to complete collaboration agreements with strategic partners and achieve anticipated benefits therefrom, the impact of inflation and rising costs of goods and services on the Company’s business model, the Company’s ability to maintain sufficient capital to support growth and FDA processes. Accordingly, readers should not place undue reliance on forward-looking information. The purpose of guidance contained in this news release is to provide an update to financial results based on management’s latest expectations. Readers are cautioned that such guidance is not appropriate for any other purpose. The Company does not undertake any obligation to update such forward-looking information, whether as a result of new information, future events or otherwise, except as expressly required by applicable law.