The Real Good Food Company, Inc. (NASDAQ: RGF) (“Real Good Foods”
or the “Company”), a leading health and wellness frozen foods
company, today reported financial results for its first quarter
ended March 31, 2023.
Management Commentary
Bryan Freeman, Executive Chairman, said: "I am
pleased to report another quarter of significant improvements in
gross margins, which were the highest in the past eight quarters.
Our adjusted gross margin of 33.5% this quarter reflects the
earnings power of our business once our plants are fully utilized.
Our top line results this quarter were negatively impacted by
promotional timing and mask the underlying momentum behind our
brand. To that end, I am excited to report that we have recently
confirmed nationwide and full distribution of several of our core
products in the back half of this year. This gives us strong
conviction in our 2023 outlook of $200 million in revenue with
positive cash flow from operations for the full year. We are
committed to providing our customers with the best possible
products and are excited about our company's future."
Gerard Law, Chief Executive Officer, added: “We
remain maniacally focused on driving profitable growth and
generating positive cash flow from operations. Since we went public
18 months ago, we have brought forward our profitability agenda by
over a year. We have spent the last year investing in capacity and
preparing to fulfill demand. These efforts have put us in a
position where we can not only fulfill demand but do so
efficiently. I am excited by the strength of our brand and have
confidence in the ability of our dedicated team to continue to
deliver upon our brand promise to consumers and unlock significant
value for all our stakeholders over the long-term.”
First Quarter 2023
Highlights
- Net sales in the first quarter were
$29.8 million, up 70% on a 2-year basis
- Gross profit margin grew to 16.7% of
net sales, up 300 bps sequentially
- Household penetration totaled 8.3%
as of March 2023, as compared to 8.4% in December 2022*
(*) March 31, 2023 Numerator report.
Financial Results for the Quarter Ended March 31,
2023
Net sales decreased 20.7% to $29.8 million in
the first quarter of 2023, as compared to $37.6 million in the
first quarter of 2022. This decrease was primarily due to the
timing of certain promotional events, which positively impacted net
sales during the first quarter of 2022, that did not reoccur during
the first quarter of 2023. The Company expects these promotional
events to occur in the later part of 2023.
Gross profit increased by $0.7 million to $5.0
million, or 16.7% of net sales, in the first quarter of 2023, as
compared to $4.3 million, or 11.3% of net sales, in the first
quarter of 2022. The increase in gross profit was due to decreases
in certain raw material costs and productivity improvement,
partially offset by lower sales volume of our products.
Adjusted gross profit, a non-GAAP term,
increased by $3.5 million to $10.0 million, reflecting an adjusted
gross margin of 33.5% of net sales, in the first quarter of 2023,
as compared to $6.5 million, or an adjusted gross margin of 17.2%
of net sales, in the first quarter of 2022. The increase in
adjusted gross profit was primarily driven by lower commodity costs
and productivity initiatives.
Total operating expenses increased by $2.8
million to $15.7 million in the first quarter of 2023, as compared
to $12.9 million in the first quarter of 2022. The increase was
primarily driven by research and development costs to support new
product development, as well as by an increase in equity
compensation expense.
Adjusted EBITDA, a non-GAAP term, totaled a loss
of $1.1 million in the first quarter of 2023, as compared to a loss
of $3.3 million in the first quarter of 2022. The decreased loss in
adjusted EBITDA was driven by lower commodity costs and
productivity initiatives.
Loss from operations increased by $2.1 million
to $10.7 million in the first quarter of 2023, as compared to a
loss from operations of $8.7 million in the first quarter of 2022.
The decrease was primarily due to decreased sales and increases in
operating expenses in the first quarter.
Net loss increased by $4.1 million to $13.7
million in the first quarter of 2023, as compared to $9.6 million
in the first quarter of 2022. The decrease in net loss was
primarily due to decreased sales and increases in operating
expenses in the first quarter.
Balance Sheet Highlights
As of March 31, 2023, the Company had cash and
cash equivalents of $2.9 million (which includes $2.3 million of
restricted cash) and total debt was $87.4 million.
Outlook
The Company is maintaining its guidance for the year ending
December 31, 2023:
- Net sales of at least $200
million
- Adjusted gross margin of at least
24%
- Adjusted EBITDA in the mid-to-high
single-digit millions range
- Positive cash flow from
operations
Long-term, the Company continues to expect:
- Net sales of approximately $500
million
- Adjusted gross margin of 35%
- Adjusted EBITDA margin of 15%
The Company is not providing guidance for gross
margin or net loss, the most directly comparable GAAP measures, and
similarly cannot provide a reconciliation between its forecasted
adjusted gross margin and GAAP gross margin and adjusted EBITDA and
net loss without unreasonable effort due to the unavailability of
reliable estimates for certain items. These items are not within
the Company’s control, may vary significantly between periods and
could significantly impact future financial results.
Conference Call and Webcast Details
Management will host an investor conference call
at 8:30 a.m. Eastern time on Friday, May 12, 2023 to discuss Real
Good Foods’ first quarter 2023 financial results, provide a
corporate update, and conclude with a question and answer session
with telephone participants. To participate, please use the
following information:
Q1 2023 Conference Call and Webcast
Date: Friday, May 12, 2023Time: 8:30 a.m. Eastern
timeU.S./Canada Dial-in: 1-877-451-6152International Dial-in:
1-201-389-0879Conference ID: 13738353Webcast: RGF Q1 2023
Webcast
Please dial in at least 10 minutes before the start of the call
to ensure timely participation.
A telephone playback of the call will be
available through Friday, May 26, 2023. To listen, call
1-844-512-2921 within the United States and Canada or
1-412-317-6671 when calling internationally. Please use the replay
pin number 13738353. A webcast replay will also be available by
clicking here: RGF Q1 2023 Webcast.
About Real Good Food Company
Real Good Foods (NASDAQ: RGF) is a leading
health and wellness frozen foods company, providing a better way to
enjoy your favorite foods. The Company’s mission is to provide
“Real Food You Feel Good About Eating”, making delicious,
nutritious foods that are low in sugar, low in carbohydrates and
high in protein. The Real Good Foods family of products includes
breakfast, lunch, dinner, and snacks – available in over 16,000
stores nationwide with additional direct-to-consumer options.
To learn more, please visit our website at
realgoodfoods.com or join us on social media @realgoodfoods – where
we maintain some of the largest followings in the frozen food
industry today.
Non-GAAP Financial Measures
In addition to the Company’s financial results
determined in accordance with generally accepted accounting
principles in the United States (“GAAP”), the Company believes that
adjusted gross profit, adjusted gross margin, and adjusted EBITDA,
each of which is a non-GAAP financial measure, are useful
performance measures and metrics for investors to evaluate current
trends in its operations and compare the ongoing financial and
operating performance of our business from period to period. In
addition, management uses these non-GAAP financial measures to
assess our operating performance and for internal planning
purposes. The Company also believes these measures are widely used
by investors, securities analysts, and other parties in evaluating
companies in our industry as measures of financial and operational
performance. However, the non-GAAP financial measures included in
this press release have limitations and should not be considered in
isolation, as substitutes for, or as superior to, performance
measures calculated in accordance with GAAP. Other companies may
calculate these measures differently, or may not calculate them at
all, which limits the usefulness of these measures as comparative
measures. Because of these limitations, the Company considers, and
you should consider, these non-GAAP financial measures with other
operating and financial performance measures presented in
accordance with GAAP. To the extent the Company utilizes such
non-GAAP financial measures in the future, it expects to calculate
them using a consistent method from period to period.
Forward-Looking Statements
This press release contains "forward-looking
statements" within the meaning of the safe harbor provisions of the
U.S. Private Securities Litigation Reform Act of 1995, which
statements are subject to considerable risks and uncertainties.
Forward-looking statements include all statements other than
statements of historical fact contained in this press release,
including statements regarding its projected financial results,
including net sales, adjusted gross margin, and adjusted EBITDA and
its ability to increase production at its new facility, improve
profitability and meet its long-term growth objectives. The Company
has attempted to identify forward-looking statements by using words
such as "believe," "estimate," "expect," "intend," "may," "plan,"
"predict," "project," "should," "will," or "would," and similar
expressions or the negative of these expressions.
Forward-looking statements represent
management's current expectations and predictions about trends
affecting the Company’s business and industry and are based on
information available as of the time such statements are made.
Although the Company does not make forward-looking statements
unless it believes it has a reasonable basis for doing so, it
cannot guarantee their accuracy or completeness. Forward-looking
statements involve numerous known and unknown risks, uncertainties
and other factors that may cause its actual results, performance or
achievements to be materially different from any future results,
performance or achievements predicted, assumed or implied by the
forward-looking statements. Some of the risks and uncertainties
that may cause its actual results to materially differ from those
expressed or implied by these forward-looking statements are
described in the section entitled "Risk Factors" in its Annual
Report on Form 10-K for the year ended December 31, 2021, and other
documents filed with or furnished to the Securities and Exchange
Commission by the Company from time to time.
In addition, readers are cautioned that the
Company may make future changes to its business and operations in
response to the impacts of the COVID-19 pandemic, supply chain
disruptions and macroeconomic challenges, or in response to other
business developments, which changes may be inconsistent with the
Company’s prior forward-looking statements, and which may not be
disclosed in future public announcements.
Investor Relations ContactAkshay Jagdale (856)
955-1453 ir@realgoodfoods.com
UNAUDITED CONSOLIDATED BALANCE SHEET(In
thousands, except share data) |
|
|
As of |
|
March 31, |
|
December 31, |
|
|
2023 |
|
|
|
2022 |
|
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash |
$ |
550 |
|
|
$ |
5,279 |
|
Accounts receivable, net |
|
19,906 |
|
|
|
20,316 |
|
Inventories |
|
45,360 |
|
|
|
39,479 |
|
Other current assets |
|
1,278 |
|
|
|
1,026 |
|
Total current assets |
|
67,094 |
|
|
|
66,100 |
|
Property and equipment,
net |
|
37,590 |
|
|
|
38,497 |
|
Operating lease right-of-use
assets |
|
10,522 |
|
|
|
10,881 |
|
Deferred loan cost |
|
887 |
|
|
|
970 |
|
Goodwill |
|
12,486 |
|
|
|
12,486 |
|
Restricted Cash |
|
2,326 |
|
|
|
2,318 |
|
Other noncurrent assets |
|
187 |
|
|
|
187 |
|
Total assets |
$ |
131,092 |
|
|
$ |
131,439 |
|
LIABILITIES AND
STOCKHOLDERS' EQUITY/MEMBERS’ DEFICIT |
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
22,906 |
|
|
$ |
23,424 |
|
Operating lease
liabilities |
|
1,504 |
|
|
|
1,455 |
|
Finance lease liabilities |
|
3,229 |
|
|
|
3,310 |
|
Business acquisition
liabilities, current portion |
|
- |
|
|
|
946 |
|
Accrued and other current
liabilities |
|
2,472 |
|
|
|
3,719 |
|
Current portion of long-term
debt |
|
479 |
|
|
|
370 |
|
Total current liabilities |
|
30,590 |
|
|
|
33,224 |
|
Revolving line of credit/capex
line |
|
59,768 |
|
|
|
59,481 |
|
Long-term operating lease
liabilities |
|
9,632 |
|
|
|
10,030 |
|
Long-term finance lease
liabilities |
|
23,269 |
|
|
|
24,099 |
|
Term Loan |
|
20,000 |
|
|
|
10,000 |
|
Equipment Loan |
|
7,645 |
|
|
|
- |
|
Long-term Business acquisition
liabilities |
|
- |
|
|
|
2,405 |
|
Other long term
liabilities |
|
191 |
|
|
|
302 |
|
Total Liabilities |
|
151,095 |
|
|
|
139,541 |
|
Commitments and contingencies
(Note 11) |
|
|
|
Stockholders'
Deficit/Equity: |
|
|
|
Preferred stock, $0.0001 par
value—10,000,000 shares authorized; no shares issued and
outstanding as of March 31, 2023 and December 31, 2022 |
|
- |
|
|
|
- |
|
Class A common stock, $0.0001
par value—100,000,000 shares authorized; 7,187,951 and 6,424,840
shares issued and outstanding as of March 31, 2023 and December 31,
2022, respectively |
|
1 |
|
|
|
1 |
|
Class B common stock, $0.0001
par value—25,000,000 shares authorized; 18,677,681 and 19,377,681
shares issued and outstanding as of March 31, 2023 and December 31,
2022, respectively |
|
2 |
|
|
|
2 |
|
Additional paid-in
capital |
|
58,049 |
|
|
|
56,273 |
|
Accumulated deficit |
|
(24,819 |
) |
|
|
(21,126 |
) |
Total stockholders' equity
attributable to The Real Good Food Company, Inc. |
|
33,233 |
|
|
|
35,150 |
|
Non-controlling interest |
|
(53,236 |
) |
|
|
(43,252 |
) |
Total stockholders'
equity/members’ deficit |
|
(20,003 |
) |
|
|
(8,102 |
) |
Total liabilities and
stockholders' equity/members’ deficit |
$ |
131,092 |
|
|
$ |
131,439 |
|
|
|
|
|
UNAUDITED CONSOLIDATED STATEMENTS OF
OPERATIONS(In thousands, except share and per
share data) |
|
|
Three Months Ended |
|
March 31, |
|
|
2023 |
|
2022 |
|
Net sales |
$ |
29,798 |
|
|
$ |
37,576 |
|
Cost of sales |
|
24,810 |
|
|
|
33,329 |
|
Gross profit |
|
4,988 |
|
|
|
4,247 |
|
Operating expenses: |
|
|
|
Selling and distribution |
|
5,424 |
|
|
|
5,327 |
|
Marketing |
|
1,634 |
|
|
|
1,786 |
|
Administrative |
|
8,673 |
|
|
|
5,801 |
|
Total operating expenses |
|
15,731 |
|
|
|
12,914 |
|
Loss from operations |
|
(10,743 |
) |
|
|
(8,667 |
) |
Interest expense |
|
3,282 |
|
|
|
890 |
|
Other income |
|
(348 |
) |
|
|
- |
|
Loss before income taxes |
|
(13,677 |
) |
|
|
(9,577 |
) |
Income tax expense |
|
- |
|
|
|
- |
|
Net Loss |
$ |
(13,677 |
) |
|
$ |
(9,557 |
) |
Less: net loss attributable to non-controlling interest |
|
(9,984 |
) |
|
|
(7,263 |
) |
Net loss attributable to The
Real Good Food Company, Inc. |
$ |
(3,693 |
) |
|
$ |
(2,294 |
) |
|
|
|
|
Net loss per common share
(basic and diluted) |
$ |
(0.53 |
) |
|
$ |
(0.37 |
) |
Weighted-average common shares
outstanding (basic and diluted) |
|
6,992,101 |
|
|
|
6,169,885 |
|
NON-GAAP FINANCIAL MEASURES – RECONCILIATION |
|
|
|
THREE MONTHS ENDED |
|
MARCH 31, |
|
|
2023 |
|
2022 |
|
Gross Profit |
$ |
4,988 |
|
|
$ |
4,247 |
|
Start-up and idle capacity costs(1) |
|
4,985 |
|
|
|
1,310 |
|
Costs related to the COVID-19 pandemic(2) |
|
0 |
|
|
|
900 |
|
Adjusted Gross Profit |
$ |
9,973 |
|
|
$ |
6,457 |
|
Adjusted Gross Margin |
|
33.5 |
% |
|
|
17.2 |
% |
(1) Represents start-up costs associated with commencing operations
at our City of Industry and Bolingbrook facilities and other costs
associated with temporary manufacturing capacity at our City of
Industry and Bolingbrook facilities, including indirect labor
costs, utility costs, and rent. |
(2) Represents direct costs incurred in connection with the
COVID-19 pandemic, including freight rush charges, labor costs,
tolling upcharges, and storage. |
|
|
THREE MONTHS ENDED |
|
MARCH 31, |
|
|
2023 |
|
2022 |
|
Net Loss* |
$ |
(13,677 |
) |
|
$ |
(9,557 |
) |
Depreciation and amortization |
|
1,591 |
|
|
|
400 |
|
Provision for income tax |
|
- |
|
|
|
- |
|
Interest expense |
|
3,282 |
|
|
|
890 |
|
Other Income |
|
(348 |
) |
|
|
- |
|
Start-up and idle capacity costs(1) |
|
4,985 |
|
|
|
1,310 |
|
Costs related to the COVID-19 pandemic(2) |
|
- |
|
|
|
900 |
|
Share-based compensation(3) |
|
1,943 |
|
|
|
1,698 |
|
Other(4) |
|
1,043 |
|
|
|
25 |
|
Bolingbrook start-up administrative costs(5) |
|
- |
|
|
|
1,017 |
|
Adjusted EBITDA |
$ |
(1,181 |
) |
|
$ |
(3,317 |
) |
Adjusted EBITDA Margin |
|
(4.0 |
)% |
|
|
(8.8 |
)% |
(1) Represents start-up costs associated with commencing operations
at our City of Industry and Bolingbrook facilities and other costs
associated with temporary manufacturing capacity at our City of
Industry and Bolingbrook facilities, including indirect labor
costs, utility costs, and rent. |
(2) Represents
direct costs incurred in connection with the COVID-19 pandemic,
including freight rush charges, labor costs, tolling upcharges, and
storage. |
(3) Represents
equity-based compensation expense. |
(4) Represents
other non-recurring administrative costs incurred during the
period. |
(5) Represents
administrative costs incurred in connection with start-up of the
new Bolingbrook Facility.* Represents the net loss before
taking into effect the loss attributable to
non-controlling interests. |
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