The Real Good Food Company, Inc. (NASDAQ: RGF) (“Real Good Foods”
or the “Company”), a leading health and wellness frozen and
refrigerated foods company, today reported financial results for
its second quarter ended June 30, 2023.
Management Commentary
Bryan Freeman, Executive Chairman, said: "I am
pleased to report a significant acceleration in sales growth this
quarter, led by the unmeasured channel, which was up 61% on a
year-over-year basis driven by strong velocity growth, as well as
new customer wins. Moreover, we gained momentum on the top-line up
each month in the second quarter and growth has continued to
accelerate into the third quarter. We now have eight high velocity
items that participate in seven categories and two temperature
states in the unmeasured channel, making the Real Good Foods brand
a leading brand in the frozen & refrigerated category in the
unmeasured channel. I am encouraged by the continued 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.”
Gerard Law, Chief Executive Officer, added: “Our
operational team and infrastructure are well positioned to
capitalize on our accelerated top-line growth trajectory in the
second half of 2023 and beyond. Our Bolingbrook, Illinois facility
is continuing to ramp up production and we are on track to achieve
our efficiency targets in the second half of the year. I continue
to be very proud of the team and how far we’ve come since opening
the new facility. Bolingbrook enables our entry into exciting new
categories and gives us much needed capacity to meet the growing
demand for our new and existing products.”
Second Quarter 2023
Highlights
- Net sales in the second quarter were
$35.4 million, up 14.8% year-over-year and 89% on a 2-year
basis
- Gross profit margin grew to 13.6% of
net sales, up 598 bps year-over-year
- Household penetration totaled
approximately 8.3% as of June 2023, as compared to 8.3% in March
2023*
(*) June 30, 2023 Numerator report.
Financial Results for the Quarter Ended June 30,
2023
Net sales increased 14.8% to $35.4 million in
the second quarter of 2023, as compared to $30.8 million in the
second quarter of 2022. This increase was primarily due to
increases in sales velocities of our products in the club channel
and to a lesser extent distribution growth in the measured channel.
This was partially offset by the timing of certain promotional
events in the measured channel that boosted sales in the second
quarter of 2022 but did not repeat this year.
Gross profit increased by $2.5 million to $4.8
million, or 13.6% of net sales, in the second quarter of 2023, as
compared to $2.4 million, or 7.6% of net sales, in the second
quarter of 2022. The increase in gross profit was due to decreases
in certain raw material costs and productivity and efficiency
improvements.
Adjusted gross profit, a non-GAAP term,
increased by $3.2 million to $10.0 million, reflecting an adjusted
gross margin of 28.2% of net sales, in the second quarter of 2023,
as compared to $6.8 million, or an adjusted gross margin of 22.0%
of net sales, in the second quarter of 2022. The increase in gross
profit was due to decreases in certain raw material costs and
productivity and efficiency improvements.
Total operating expenses increased by $3.3
million to $15.5 million in the second quarter of 2023, as compared
to $12.2 million in the second 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 $1.9 million in the second quarter of 2023, as compared to a
loss of $3.3 million in the second quarter of 2022. The improvement
in adjusted EBITDA was driven by lower commodity costs and
productivity initiatives.
Loss from operations increased by $0.8 million
to $10.6 million in the second quarter of 2023, as compared to a
loss from operations of $9.8 million in the second quarter of 2022.
The increase was primarily due to increases in operating expenses
in the second quarter.
Net loss increased by $3.5 million to $14.6
million in the second quarter of 2023, as compared to $11.1 million
in the second quarter of 2022. The increase in net loss was
primarily due to increases in operating expenses in the second
quarter.
Balance Sheet Highlights
As of June 30, 2023, the Company had cash and
cash equivalents of $3.0 million (which includes $2.3 million of
restricted cash) and total debt was $102.1 million.
Outlook
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
- And transitioning to positive cash
earnings in the second half of 2023
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 9:30 a.m. Eastern time on Friday, August 11, 2023 to discuss
Real Good Foods’ second 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:
Q2 2023 Conference Call and Webcast
Date: Friday, August 11, 2023Time: 9:30 a.m. Eastern
timeU.S./Canada Dial-in: 1-877-451-6152International Dial-in:
1-201-389-0879Conference ID: 13740393Webcast: RGF Q2 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, August 25, 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 13740393. A webcast replay will also be available by
clicking here: RGF Q2 2023 Webcast.
About Real Good Food Company
Real Good Foods (NASDAQ: RGF) is a leading health and wellness
frozen and refrigerated 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, 2022, 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 |
|
|
June 30, |
|
December 31, |
|
|
|
2023 |
|
|
|
2022 |
|
ASSETS |
|
|
|
|
Current assets: |
|
|
|
|
Cash |
|
$ |
692 |
|
|
$ |
5,279 |
|
Accounts receivable, net |
|
|
22,903 |
|
|
|
20,316 |
|
Inventories |
|
|
51,206 |
|
|
|
39,479 |
|
Other current assets |
|
|
1,898 |
|
|
|
1,026 |
|
Total current assets |
|
|
76,699 |
|
|
|
66,100 |
|
Property and equipment, net |
|
|
36,193 |
|
|
|
38,497 |
|
Operating lease right-of-use assets |
|
|
10,155 |
|
|
|
10,881 |
|
Deferred loan cost |
|
|
804 |
|
|
|
970 |
|
Goodwill |
|
|
12,486 |
|
|
|
12,486 |
|
Restricted Cash |
|
|
2,335 |
|
|
|
2,318 |
|
Other noncurrent assets |
|
|
187 |
|
|
|
187 |
|
Total assets |
|
$ |
138,859 |
|
|
$ |
131,439 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
Accounts payable |
|
$ |
29,195 |
|
|
$ |
23,424 |
|
Operating lease liabilities |
|
|
1,555 |
|
|
|
1,455 |
|
Finance lease liabilities |
|
|
3,291 |
|
|
|
3,310 |
|
Business acquisition liabilities, current portion |
|
|
- |
|
|
|
946 |
|
Accrued and other current liabilities |
|
|
3,102 |
|
|
|
3,719 |
|
Current portion of long-term debt |
|
|
994 |
|
|
|
370 |
|
Total current liabilities |
|
|
38,137 |
|
|
|
33,224 |
|
Revolving line of credit/capex line |
|
|
74,021 |
|
|
|
59,481 |
|
Long-term operating lease liabilities |
|
|
9,223 |
|
|
|
10,030 |
|
Long-term finance lease liabilities |
|
|
22,425 |
|
|
|
24,099 |
|
Term loan |
|
|
20,000 |
|
|
|
10,000 |
|
Equipment loan |
|
|
7,131 |
|
|
|
- |
|
Long-term Business acquisition liabilities |
|
|
- |
|
|
|
2,405 |
|
Other long term liabilities |
|
|
504 |
|
|
|
302 |
|
Total Liabilities |
|
|
171,441 |
|
|
|
139,541 |
|
Commitments and contingencies (Note 11) |
|
|
|
|
Stockholders' Equity/(Deficit): |
|
|
|
|
Preferred stock, $0.0001 par value—10,000,000 shares authorized; no
shares issued and outstanding as of June 30, 2023 and December 31,
2022 |
|
|
- |
|
|
|
- |
|
Class A common stock, $0.0001 par value—100,000,000 shares
authorized; 7,203,851 and 6,424,840 shares issued and outstanding
as of June 30, 2023 and December 31, 2022, respectively |
|
|
1 |
|
|
|
1 |
|
Class B common stock, $0.0001 par value—25,000,000 shares
authorized; and 18,676,781 and 19,377,681 shares issued and
outstanding as of June 30, 2023 and December 31, 2022,
respectively |
|
|
2 |
|
|
|
2 |
|
Additional paid-in capital |
|
|
60,043 |
|
|
|
56,273 |
|
Accumulated deficit |
|
|
(28,992 |
) |
|
|
(21,126 |
) |
Total stockholders' equity attributable to The Real Good Food
Company, Inc. |
|
|
31,054 |
|
|
|
35,150 |
|
Non-controlling interest |
|
|
(63,636 |
) |
|
|
(43,252 |
) |
Total stockholders' deficit |
|
|
(32,582 |
) |
|
|
(8,102 |
) |
Total liabilities and stockholders' equity |
|
$ |
138,859 |
|
|
$ |
131,439 |
|
UNAUDITED CONSOLIDATED STATEMENTS OF
OPERATIONS |
|
(In thousands, except share and per share
data) |
|
|
THREE MONTHS ENDED |
|
SIX MONTHS ENDED |
|
JUNE 30, |
|
JUNE 30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Net sales |
$ |
35,363 |
|
|
$ |
30,809 |
|
|
$ |
65,161 |
|
|
$ |
68,385 |
|
Cost of sales |
|
30,551 |
|
|
|
28,458 |
|
|
|
55,361 |
|
|
|
61,787 |
|
Gross profit |
|
4,812 |
|
|
|
2,351 |
|
|
|
9,800 |
|
|
|
6,598 |
|
Operating expenses: |
|
|
|
|
|
|
|
Selling and distribution |
|
4,670 |
|
|
|
4,909 |
|
|
|
10,094 |
|
|
|
10,236 |
|
Marketing |
|
1,509 |
|
|
|
1,172 |
|
|
|
3,143 |
|
|
|
2,958 |
|
Administrative |
|
9,270 |
|
|
|
6,089 |
|
|
|
17,943 |
|
|
|
11,867 |
|
Total operating expenses |
|
15,449 |
|
|
|
12,170 |
|
|
|
31,180 |
|
|
|
25,061 |
|
Loss from operations |
|
(10,637 |
) |
|
|
(9,819 |
) |
|
|
(21,380 |
) |
|
|
(18,463 |
) |
Interest expense |
|
3,949 |
|
|
|
1,291 |
|
|
|
7,231 |
|
|
|
2,181 |
|
Other income |
|
- |
|
|
|
- |
|
|
|
(348 |
) |
|
|
- |
|
Loss before income taxes |
|
(14,586 |
) |
|
|
(11,110 |
) |
|
|
(28,263 |
) |
|
|
(20,644 |
) |
Income tax expense |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Net Loss |
$ |
(14,586 |
) |
|
$ |
(11,110 |
) |
|
$ |
(28,263 |
) |
|
$ |
(20,644 |
) |
Less: net loss attributable to non-controlling interest |
|
(10,413 |
) |
|
|
(8,449 |
) |
|
|
(20,397 |
) |
|
|
(15,689 |
) |
Net loss attributable to The
Real Good Food Company, Inc. |
$ |
(4,173 |
) |
|
$ |
(2,661 |
) |
|
$ |
(7,866 |
) |
|
$ |
(4,955 |
) |
NON-GAAP FINANCIAL MEASURES – RECONCILIATION |
|
|
THREE MONTHS ENDED |
|
June 30, |
|
|
2023 |
|
2022 |
|
Gross Profit |
$ |
4,812 |
|
|
$ |
2,351 |
|
Start-up and idle capacity costs (1) |
|
5,029 |
|
|
|
3,563 |
|
Costs related to the COVID-19 pandemic (2) |
|
- |
|
|
|
871 |
|
Other (3) |
|
135 |
|
|
|
- |
|
Adjusted Gross Profit |
$ |
9,976 |
|
|
$ |
6,785 |
|
Adjusted Gross Margin |
|
28.2 |
% |
|
|
22.0 |
% |
|
(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) Non-recurring
distribution cost incurred as a result of a strategic decision to
consolidate network & commissions |
|
THREE MONTHS ENDED |
|
June 30, |
|
|
2023 |
|
2022 |
|
Net Loss |
$ |
(14,586 |
) |
|
$ |
(11,110 |
) |
Depreciation and amortization |
|
1,626 |
|
|
|
404 |
|
Provision for income tax |
|
- |
|
|
|
- |
|
Interest expense |
|
3,949 |
|
|
|
1,291 |
|
Other Income |
|
- |
|
|
|
- |
|
Start-up and idle capacity costs (1) |
|
5,029 |
|
|
|
3,563 |
|
Costs related to the COVID-19 pandemic (2) |
|
- |
|
|
|
871 |
|
Share-based compensation (3) |
|
1,994 |
|
|
|
1,735 |
|
Other (4) |
|
135 |
|
|
|
- |
|
Bolingbrook start-up administrative costs (5) |
|
- |
|
|
|
- |
|
Adjusted EBITDA |
$ |
(1,853 |
) |
|
$ |
(3,246 |
) |
Adjusted EBITDA Margin |
|
(5.2 |
)% |
|
|
(10.5 |
)% |
|
(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) Non-recurring
distribution cost incurred as a result of a strategic decision to
consolidate network & commissions |
(5) Represents
administrative costs incurred in connection with start-up of the
new Bolingbrook Facility. |
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