For this evening's call. I'm joined today by the leadership teams of both companies, including Michael Young, Chairman of the Board of Better Choice, Kent Cunningham, Chief Executive Officer of Better Choice, Nina Martinez, Chief Financial Officer of Better Choice, Adesh Vora, Founder, President, and CEO of SRx Health, and David Sohi, Chief Financial Officer of SRx Health. Before we begin, I'd like to remind everyone that statements made during today's conference call may be deemed forward-looking statements within the meaning of the safe harbor of the Private Securities Litigation Reform Act of 1995, and actual results may differ materially due to a variety of risks, uncertainties, and other factors. For a detailed discussion of some of the ongoing risks and uncertainties in the company's business, I refer you to our investor presentation reference this evening, as well as the company's reports filed periodically with the SEC.
The company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, unless otherwise required by law. On September 3rd, Better Choice announced that it signed a definitive agreement to acquire SRx Health in an all-stock transaction for approximately $125 million. During today's presentation, we'll be providing an update on this transaction with each team respectively. At the conclusion of our prepared remarks, we'll host a question and answer session. To ask a question, please use the chat function. If we do not get to your question within the timeframe allotted for this evening's call, please email our team at betterchoice@kcsa.com. With that, please let me turn the call over to Michael Young, Chairman of Better Choice. Mike, over to you.
Thanks, Valter, and thanks everyone for joining this evening. As Valter mentioned, we're in the process of completing the SRx Health acquisition, and we plan to complete the acquisition sometime late Q4, early Q1. For those who don't know, SRx Health is a leading provider of healthcare solutions in Canada, and it operates one of the largest specialty pharmacy networks in Canada. This is a very transformational transaction for Better Choice. Not only will it increase distribution, help drive future growth, we've also estimated an immediate synergy savings of between $1.5 million and $1.7 million, and we believe there's further upside as we integrate the two assets.
Now, following the acquisition, the company will be led by Adesh Vora, who is the CEO and founder of SRx Health, and Kent Cunningham will transition to his new role, and he will be heading up as CEO of the Halo asset. We look forward to closing the transaction in the coming months and look forward to both businesses continuing their significant momentum into twenty twenty-five. With that, I'd like to turn the presentation over to Adesh to take you through the SRx story.
Thanks, Mike. By way of introduction, my name is Adesh Vora. I'm the Founder, President, and CEO of SRx Health. I started SRx Health in twenty thirteen with the mission to try to make healthcare simple. During my tenure, we have successfully grown SRx from one specialty pharmacy into a national comprehensive healthcare provider, with patient-centric approach to full suites of specialty services. Next slide. Our products and services include an all-inclusive pharmacy, specialty pharmacy that provide personalized services and dispense specialty, regular, and compounded medications with advanced clinical support. Number two, our patient support programs, where we work with our partners to facilitate access to new therapies for patients, and focus on exclusive and closed distribution, and high-cost drugs, and work on navigating the nuances of that segment.
We also have a network of 40 clinics and infusion clinics, which allow us to and dispense and infuse some of these innovative drugs. Number four, our wholesale and distribution of wide variety of specialty and generic drugs that is accredited by Health Canada. Number five, our clinical research site, where we pioneer therapeutic treatment options and advance patient care through clinical research, real-world evidence generated, and site collaboration. We are one of five national specialty pharmacy collaborators in Canada with products and services, and the barriers of entry to entering this market are substantially high, in which you need high strong market pharma relations, and high quality of patient care. Next slide. So when you look at... Next slide. Yeah, that, that slide.
When you look at the tailwinds in our industry, we have an aging population where more and more people are on medications, and of that, chronic diseases are prevailing, and people need more medications to support that. With the gaps in care in the Canadian market, pharmacists are become a pivotal part in supporting some of the needs to support pharma and physician collaborations. When you look at the market as a whole, CAD 17 billion or 44% of all drugs spent in Canada were in the specialty space. And with new drugs coming to market at about 60% in the specialty space, we have strong tailwinds to support the organic and inorganic growth for SRx.
Again, our vision right now is we are only 2% of the marketplace in Canada to support specialty. We want to continue to grow that and expand into the US and EU markets, where we have a 10X growth market to support some of our innovative offerings. That's it for me. I'll pass it on to Kent.
Thanks, Adesh, and, thanks again everyone for joining. As many of you know, Kent Cunningham, I've been the Chief Executive Officer of Better Choice for the past eighteen months or so. It's been a great honor to lead this company and also to lead the turnaround efforts to date. As Mike mentioned, at the close of the SRx transaction, I'll assume a new role as CEO of the Halo asset. And I've got to tell you, I'm incredibly proud of the efforts and the work across the team, and the results to not only stabilize the business, but really to reset this business for profitable growth, and also, you know, enable transactions of the type that we're talking about with SRx today. Excited about it. I also feel like, look, we're just getting started with the Halo business.
There is so much opportunity for this brand, both domestically and internationally, and let me give you, in just a few slides, I'll take you through maybe a quick refresher on the brand itself, a little bit about the category, and also a bit on why we're so bullish, so you know, when you think about Halo, at its simplest form, to me, it is a, you know, premium pet nutrition brand that is really anchored in natural and human-grade ingredients, and it's targeted at the, you know, most appealing consumer segments, the most engaged pet parents with the highest levels of household income and the lowest sensitivity to price, so we've got this brand positioned to win now. If you think about it, top line, it's about $50 million.
Again, and it's omni-channel in terms of distribution, but really significant opportunity to grow that both domestically and internationally. And if you kind of look at the top left of the slide here, I think of Halo as a master brand. It's really segmented into three primary product lines. The first is Halo. That's our freeze-dried raw and snacks and treats. This is for the consumer that's looking for the benefit of feeding raw, but they don't want to have to put up with the hassle of refrigeration or cooking from scratch. So the freeze-dried, you know, technology really gives them that convenience of being closest to nature and optimal nutrition, without some of the headaches that's associated with scratch cooking or refrigeration. In the middle is Halo Holistic, and that's really the core of our business.
It's our legacy brand, and it's still, you know, greater than 50% of our top-line sales today, and this is really for the clean food consumer. They want all-natural, minimally processed. They don't want meat meals, and they don't want any byproducts, you know, in their pet's food. So this does a phenomenal job of delivering on that. And then at the bottom is Halo Elevate. That's our newest. It's about 15% of the total sales, and this is really the first all-in-one solution that addresses the top five health concerns that pet parents have. So whether that's skin and coat, digestibility, heart health, immunity, you know, hip and joint, Halo Elevate has industry-leading, efficacious amounts of all of those key actives within the product, so it really delivers on the brand promise. If you go forward a slide, a little bit about the category I mentioned.
Again, it's got great fundamentals. It's big, 130 billion total addressable, and it's growing, right? And it's historically been very resilient throughout time. And, you know, when we look at it, we think that there is, again, really big opportunity for this brand, and we think that it's well-positioned. As brick-and-mortar sales continue to migrate online, our renewed focus on online platforms, particularly Amazon and Chewy, we think are set to pay off in the future. And then one more. If you go forward one slide. Thank you. So look, one of the other reasons that we're so bullish on this brand and where we've got it positioned now is that we really see it sitting at the intersection of two converging macro trends. So the first of those is humanization.
If you think about that, these really highly engaged pet parents think of their pets as babies or children. That sort of naturally dovetails into the other big macro trend that's fueling category growth, and our business, is premiumization of pet food because they naturally want to do the best thing that they can for their dog or for their cat, and that is typically feeding them how they would feed themselves or how they'd feed their own kids.
Where Halo comes into play there is that Halo shares that bond that, you know, those types of engaged pet parents have with their animals, and it really delivers on that mission of, you know, bringing the best possible nutrition for the best possible outcome, not only for the pet, but for people as well. So with that, yeah, I'll pause there, and let me turn it over to Nina, and she can take you through some of the financial highlights.
Great. Thank you, Kent. So moving forward on page 11 here, so this is the most recent publicly available income statement for Better Choice as it sits today with Halo as the sole operating asset. quarter-over-quarter, the business realized double-digit sales growth globally, with the U.S. business showing 11% growth, and our Asia Pacific business growing 12%-27%. That resulted in $16.5 million of net sales for the first half of twenty twenty-four. We've implemented significant channel strategy shifts in the business, and we've gained favorable terms through our co-manufacturing supply agreements, which brought our second quarter gross margin to 38%, which was a 400 basis point improvement year-over-year.
Last quarter, we realized also a $3.6 million gain by retiring our senior debt that drove up shareholder equity value and GAAP net income of $2.7 million, and a positive EPS of $2.98 per share. So the company's efforts to reduce SG&A and carve off unprofitable accounts is really marked by the 60% adjusted EBITDA growth, with Halo having a break-even quarter for the first time in the company's history since being public. We now have immense operating leverage that will continue to be realized as we rapidly scale. So profitability has improved significantly, as you can see, over the last 18 months, and we expect to continue that trajectory on a go-forward basis. Moving forward to slide 12, you'll find the SRx summary income statement, and for reference, this is all in Canadian dollars.
Also today, SRx is on a September 30 year-end, and here we've shown their historical income statement on a December 31 calendar year-end basis. The SRx business has realized 30%-40% organic growth in the quarter and first half of calendar year 2024, with this growth being driven by key pharma collaborations and specialty care partnerships. You can see CAD 107 million of revenue during the first 6 months surpassed more than half of full year 2023 revenue already, and the business is expected to end their fiscal year 2024 sales just north of CAD 200 million. Gross margin grew over 300 basis points in the second quarter to 22%, and bottom line pro forma EBITDA was CAD 10.5 million in 2023, and over CAD 2 million for the first half of 2024.
So I also note that the 2025 pro forma revenue for the combined companies is expected to be $250 million baseline and upwards of $270 million, with an expected EBITDA range of $7-$10 million. And with that, 5%-6.5% margin, we feel is very feasible in the midterm, with a long-term goal to be above 8% margin as the business really starts to realize the full benefit of its historical acquisitions and other strategic investments and changes that were made in key divisions. Moving to slide 13, next page, I'll summarize the pro forma cap table post-merger. So today, pre-close, Better Choice has approximately 3.2 million in fully diluted shares outstanding.
Shares outstanding post-merger will be at roughly 23 million, fully diluted, and with an estimated combined net debt just south of 21 million. Pro forma ownership on a go forward will be three quarters owned by insiders between board and management, so very tightly held and 25% of free float. With that, I'd like to turn the call over to Dave, the CFO of SRx Health. Dave, over to you.
Yeah, thanks, Nina. I'll be taking everyone through some of the highlights and synergies of the deal. As Mike mentioned earlier on, as a combined entity, we're expecting to realize cost synergies of $1.7 million, and as we approach close, we expect those synergies to be north of $2 million between both the entities. In addition, both companies will be able to leverage expertise in each of their respective geographies. Halo will be able to leverage SRx's on-the-ground presence in Canada to bolster its Canadian presence, and more importantly, SRx will be able to leverage Halo's presence in the US market. In particular, SRx will look to enter the US market through its specialty pharmacy platform on its clinical trial platform, and both companies will look to international expansion in FY 2025.
With respect to growth, it's important to note that both companies today have a trailing twelve-month sales figure of $235 million, and SRx is currently growing organically at 25% quarter-over-quarter, which we expect to see moving forward, and as a combined entity, we'll look to grow sales in FY 2025 at over 20%, with SRx continuing its trend of over 20% of sales growth and Halo growing at or just north of 10%. The combined entity will continue to focus on strategic acquisitions. Historically, SRx has acquired 12 pharmacies in the last 24 months, and we will look to acquire 3 to 5 pharmacies in FY 2025 and expand its clinical footprint across Canada in key strategic areas.
With respect to strategic acquisitions in the pet area, that will be a focus in FY 2025, and in particular, in the PetRx space. Both entities have strong industry tailwinds, with a total addressable market of $135 billion. The Canadian prescription market is set to grow at 5.4%, and the pet care market at over 6% or 5%. Both management teams for both companies have bring a wealth of experience with the pharmaceutical, CPG and the capital market spaces. With that, I will turn it over to Valter for questions.
Thank you, Dave, and thank you to both teams for the presentation this evening. We have a large audience, so thank you everyone for participating and submitting the following questions. For the team, our first question, and Dave, you reviewed this a bit in your investment highlights slide, but anything further to add regarding the strategic rationale of combining these two companies?
Yeah, I can take a portion of that, Valter. You know, certainly, you know, the goal is to create a health and wellness, global health and wellness company. You know, certainly with folding in SRx into Better Choice, we can really leverage their experience on the pharmaceutical side as it pertains to both relationships with the pharma companies, as well as distribution, to really take a look at the veterinarian sort of medicine side of the pet healthcare business. That's point one. Point two is, many may or may not know what the cost is to run a public company in the United States, but it's in excess of, you know, $2.5-$3 million.
So by putting in another bringing in another asset with tremendous growth, it really sort of helps us defray that public market cost, to which we can then invest those dollars otherwise spent on regulatory and other back into the CPG brand. Those would be sort of my top sort of highlights, and I can turn it back to you, Valter, for any other questions.
Thanks, Mike. And as a follow-up, probably for you, Mike, and just to remind folks, 'cause you did talk about when you expected the transaction to close at the onset. When do you expect the transaction to close?
Yes, we're in the process right now of working through all the necessary filings. We anticipate to get those done in the coming weeks. If all goes as planned, late Q4, early Q1, we will push to get this done this year, but some of which of these things are out of our control. So we'll keep everyone updated, but the goal is, you know, late Q4, early Q1.
Thank you. The next question is for both companies. In the prepared remarks, we mentioned the combined company trailing twelve-month sales are about $235 million, with quarter-over-quarter growth of over 25%. First, for the SRx team, and then for the Better Choice team, where's the growth coming from in each respective business?
I can take the beginning of that. So for SRx, we've had strategic growth in our patient support program wins with pharmaceutical manufacturers, in which we support them to bring new innovative drugs to Canada. And so with some of the new wins coming into the pipeline for 2025, a lot of our growth will come through that, as well as our business development collaborations with our strategic partners coast to coast. That gives us, you know, that 25% growth year- over- year for 2025.
Yeah, I can. Let me take a shot at the Halo asset. We're in the middle of our annual operating planning process right now, but our initial roll-up is, again, double-digit growth and continuing to improve on the profitability side of things. From a domestic lens, growth will be driven by our online partners, you know, primarily Amazon and Chewy. That's where we'll focus our attention, kind of fishing where the fish are in terms of the $12 billion in annual pet food sales that are going across those two platforms. We'll also increase our investment and improve our storytelling and marketing, and through that, improve our share of voice within the marketplace. So we think that that's gonna have a nice effect and impact on the brand overall.
And then if I look at international, you know, we'll continue to drive China, but also more broadly, Asia-Pac, and look to expansion, within Asia-Pac, but also Latin America. So we're in the process of identifying markets and, you know, looking at what's most attractive and closest in for us today and where we can win.
Thanks, Kent. As a reminder, for all of our participants, any questions that you have, just click the Q&A button on the bottom of your screen. The next question is, again, for both companies. In 2025, you estimate $270 million in sales, approximately $10 million in EBITDA. Is there a room for growth in EBITDA margin as the business scales? And if so, why or why not? We can start again with the SRx team and then turn it over to Better Choice.
Yeah. Thanks, Valter. So on the SRx side of the business, there's certainly room here to grow. It's important to note that over the last few years, there's been a lot of investment made in building up the specialty infrastructure, particularly in divisions like PSP, clinical, and just the overall specialty platform. So as we see sales continue to increase in each of these respective business units, we're obviously gonna see that translate into higher EBITDA margins moving forward. So there's certainly growth, as sales continue to grow, and I'll pass it over to Nina to comment on the combined entity and the Halo asset.
Yeah. So agree with Dave, and it's the same on the Halo business. So as I mentioned earlier, we've already created operating leverage in the business by taking the brand through more profitable platforms and channels. So with the focus, domestically, as Kent mentioned, on our online platforms and our Amazon and Chewy partners, you know, that's how we increased margins over the last twelve to eighteen months, and how we expect to going forward.
Great. Thank you, Nina. And so, our next question, and Kent, you started to talk about the growth opportunities in Asia. For China, specifically, the company realized 37% growth sequentially. International sales are now approximately 28% of total revenue. Just more specifically, what are the dynamics that are driving this, and what do you expect further growth to drive further growth in this region?
Yeah, again, you know, for us, you know, we need to win in China. It's the second largest pet food market singularly outside of the US. It's approximately $20 billion, and it's been growing double digits. And we've got, you know, a brand that is in the top 25 there. So, you know, we see a lot of opportunity while we've developed a beachhead to really continue to maximize that. And the growth that's happening in China is, I think, one, per capita income is increasing, per capita consumption is increasing, and, particularly cat household penetration is increasing. And that's where that's kind of our sweet spot, within China. So we see that as continued opportunity for us going forward.
The other piece that we're excited about, frankly, is that while most, you know, packaged goods penetration in other markets for packaged pet foods, it's around 90% or better in established markets like the U.S. and like, say, Western Europe, that number falls to only about 20% of market penetration for packaged pet foods within China. So you can see that while it's not an emerging market, it's far less mature than the U.S. or Europe, and it gives us really significant opportunity as that penetration improves and increases naturally to go along with that organic growth. So we're incredibly excited about China, in particular, across the Asia-Pacific region.
Thank you. And the next question is for the SRx team regarding expansion into new geographies. What are some of the hurdles that you expect, for the business outside of Canada, and what markets specifically are you prioritizing?
I can take that. So again, we understand Canada and the regulatory environment pretty well. So for us to continue to expand in Canada is not an issue, and we'll continue to drive growth. I think our next strategic move would be to expand specialty services and vet med into the US markets, number one, and then look elsewhere. I think the US market is very similar to the Canadian market in terms of, you know, again, the culture, understanding, you know, patient needs, and ultimately being able to deliver, you know, same quality of care. So it's like speaking the same language between Canada and the US. Regulatory may be a little bit different and has some nuances, but I don't think we'll have an issue figuring that out over time.
Thank you, Adesh. And this question is probably for you again. And so this is in regards to the expansion around veterinary medicine in twenty-five. We alluded in our presentation our plans to go down this path after the closing of this transaction. What specifically is the strategy for this plan after closing?
So, you know, as Kent has alluded to, the pet market is huge. And again, pet meds is just an add-on to some of the services that we already provide as a comprehensive care provider. So, you know, servicing humans and now animals is not a big differentiator because we understand what's required from the pharmaceutical lens. Again, B2C customers and servicing you know, customer needs around that. And again, it's more around delivering that comprehensive care for families. And I think just adding on that service to our current offerings is just one more step to provide more comprehensive care to families.
Thank you, Adesh. And we're just about at the thirty-minute mark of our time allotted for today's call, but just one more question, and it's regarding the stock. Do you believe the stock is undervalued, and why do you feel the stock is trading the way it is post-announcement of the merger?
Yeah, I can take that, and then we'll back it up with some math from Nina. But you know, it's small cap, micro-cap land in any, you know, jurisdiction, whether it be Canada, US, UK. You know, it's a pretty unloved sector. I think, you know, we've got last seen something in the area of about 154 shareholders, so not a lot. And you know, the market from time to time, if you, you know, look at the stock, there's a $0.10 or $0.20 spread between the bid and the offer. So you know, it can create a lot of volatility in the value by a very minuscule amount of dollars.
I think as we get closer to the transaction being closed and the transaction actually closing, I think that a lot of that volatility will go away. But, you know, opinions and words don't mean much. What it actually boils down to is math. So I'll turn it over to Nina, and she can actually run through mathematics, and that's more telling than anything else.
Yes, absolutely, Mike. So, you know, when you look at our balance sheet at the end of the second quarter, our stock is trading well below two pretty simple metrics. So our net tangible book value per share is $4.07 per share. Net CAV, net current asset value per share, $3.94. And both of those metrics essentially mean cash and other tangible assets, less debt. So, you know, just looking at that, $3.94 to $4.07, whichever metric you're focused on, you can see that the stock is truly undervalued.
Thanks, Mike. Thanks, Nina. We're at about the time of our call. If we did not answer any questions today, please email our team at betterchoice@kcsa.com. Want to thank the Better Choice and SRx Health teams and all of our participants today. Have a great evening. Thank you, everyone.
Thanks. Appreciate it.