CHERRY HILL, N.J., March 27, 2023 (GLOBE NEWSWIRE) -- 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 fourth quarter and fiscal year ended December 31, 2022.
Management Commentary
Bryan Freeman, Executive Chairman, said: “The fourth quarter was reflective of the growing strength of our brand, helping to meet increasing demand for healthier frozen food options with innovative new products such as our Breaded Poultry, Breakfast Flautas and Creamy Poblano Enchiladas. While sales came in below our original expectations, this was driven by the strategic dialing back of promotional expenses on a non-core product in the unmeasured channel that would have diluted margins. Moreover, our distribution gains are tracking ahead of plan, baseline velocities remain strong and new product velocities are exceeding base. As such, we are reiterating our revenue guidance of at least $200 million in 2023. Looking ahead to 2023 and beyond, I firmly believe that our continued focus on innovation in incremental categories – as reflected by the success of our launch into the refrigerated category as well as frozen breaded poultry – that will underpin our future sales growth.”
Gerard Law, Chief Executive Officer, added: “We are pleased to report that the Bolingbrook facility has reached its final start-up phase, which has allowed us to significantly increase production and labor efficiencies across the business. These improvements, paired with commodity cost normalization, helped to grow our gross margin profile to 13.7% of net sales in the fourth quarter, as compared to 5.0% in the same year-ago quarter. As we complete the final start-up phase and Bolingbrook begins to realize its full potential, I believe we are well positioned to achieve our expectation of reaching positive operating cash flow in 2023. I look forward to continued operational execution in the months ahead as we strive to create sustainable, long-term value for our shareholders.”
Fourth Quarter and Fiscal Year 2022 Highlights
- Net sales increased 39% in the fourth quarter to $35.7 million and 68% in the full year to $141.6 million
- Gross profit margin grew to 13.7% of net sales in the fourth quarter of 2022, as compared to 5.0% of net sales in the fourth quarter of 2021
- Household penetration increased to 8.4% as of January 2023, as compared to 7.6% in January 2022
Financial Results for the Quarter Ended December 31, 2022
Net sales grew 39.2% to $35.7 million in the fourth quarter of 2022, as compared to $25.6 million in the fourth quarter of 2021. The increase was primarily due to strong growth in sales volumes of the Company’s core products, driven by greater demand from existing retail and club customers, and to a lesser extent new customers.
Gross profit increased by $3.6 million to $4.9 million, or 13.7% of net sales, in the fourth quarter of 2022, as compared to $1.3 million, or 5.0% of net sales, in the fourth quarter of 2021. The increase in gross profit was primarily driven by a decrease in the cost of raw materials, improved price realization, productivity initiatives and to a lesser extent improved efficiencies across our plant network.
Adjusted gross profit, a non-GAAP term, increased by $5.4 million to $9.9 million, reflecting an adjusted gross margin of 27.7% of net sales, in the fourth quarter of 2022, as compared to $4.5 million, or an adjusted gross margin of 17.4% of net sales, in the fourth quarter of 2021. The increase in adjusted gross profit was primarily driven by lower commodity costs, productivity initiatives, and to a lesser extent, improved price realization.
Total operating expenses decreased by $28.2 million to $14.1 million in the fourth quarter of 2022, as compared to $42.3 million in the fourth quarter of 2021. The decrease was primarily due to $28 million in equity compensation expense recognized at the time of our IPO in the fourth quarter of 2021.
Adjusted EBITDA, a non-GAAP term, totaled a loss of $0.7 million in the fourth quarter of 2022, as compared to a loss of $3.9 million in the fourth quarter of 2021. The decreased loss in adjusted EBITDA was driven by lower commodity costs, better price realization and efficiencies related to the Bolingbrook ramp-up.
Loss from operations decreased by $31.8 million to $9.3 million in the fourth quarter of 2022, as compared to $41.1 million in the fourth quarter of 2021. The decrease was primarily due to the aforementioned reduction in equity compensation expense.
Net loss decreased by $33.0 million to $11.9 million in the fourth quarter of 2022, as compared to $44.9 million in the fourth quarter of 2021. The decrease in net loss was primarily due to the aforementioned reduction in equity compensation expense.
Balance Sheet Highlights
As of December 31, 2022, the Company had cash and cash equivalents of $7.6 million (which includes $2.3 million of restricted cash) and total debt was $73.2 million. The Company had $37.6 million in available liquidity.
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 Monday, March 27, 2023 to discuss Real Good Foods’ fourth quarter and fiscal year 2022 financial results, provide a corporate update, and conclude with a question and answer session with telephone participants. To participate, please use the following information:
Q4 & FY 2022 Conference Call and Webcast
Date: Monday, March 27, 2023
Time: 8:30 a.m. Eastern time
U.S./Canada Dial-in: 1-877-451-6152
International Dial-in: 1-201-389-0879
Conference ID: 13736835
Webcast: RGF Q4 & FY22 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 Monday, April 10, 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 13736835. A webcast replay will also be available by clicking here: RGF Q4 & FY22 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 Contact
Akshay Jagdale
(856) 955-1453
ir@realgoodfoods.com
UNAUDITED CONSOLIDATED BALANCE SHEET
(In thousands, except share data)
| As of | ||||||||
| December 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | 5,279 | $ | 27,435 | ||||
| Accounts receivable, net | 20,316 | 8,968 | ||||||
| Inventories | 39,479 | 16,622 | ||||||
| Other current assets | 1,026 | 9,927 | ||||||
| Total current assets | 66,100 | 62,952 | ||||||
| Property and equipment, net | 38,497 | 10,289 | ||||||
| Operating lease right-of-use assets | 10,881 | 12,127 | ||||||
| Deferred loan cost | 970 | 818 | ||||||
| Goodwill | 12,486 | 12,486 | ||||||
| Restricted Cash | 2,318 | 2,310 | ||||||
| Other noncurrent assets | 187 | 1,162 | ||||||
| Total assets | $ | 131,439 | $ | 102,144 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY/MEMBERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 23,424 | $ | 15,205 | ||||
| Operating lease liabilities | 1,455 | 1,040 | ||||||
| Finance lease liabilities | 3,310 | 198 | ||||||
| Business acquisition liabilities, current portion | 946 | 8,111 | ||||||
| Accrued and other current liabilities | 3,719 | 6,763 | ||||||
| Current portion of long-term debt | 370 | 328 | ||||||
| Total current liabilities | 33,224 | 31,645 | ||||||
| Revolving line of credit/capex line | 59,481 | 17,501 | ||||||
| Lease line of credit | - | 7,258 | ||||||
| Long-term operating lease liabilities | 10,030 | 11,249 | ||||||
| Long-term finance lease liabilities | 24,099 | 154 | ||||||
| Term Loan | 10,000 | - | ||||||
| Long-term Business acquisition liabilities | 2,405 | 3,352 | ||||||
| Other long term liabilities | 303 | - | ||||||
| Total Liabilities | 139,542 | 71,159 | ||||||
| Commitments and contingencies (Note 12) | ||||||||
| Stockholders' Deficit/Equity: | ||||||||
| Preferred stock, $0.0001 par value—10,000,000 shares authorized; no shares issued and outstanding as of December 31, 2021 | - | - | ||||||
| Class A common stock, $0.0001 par value—100,000,000 shares authorized; 6,424,840 and 6,169,885 shares issued and outstanding as of December 31, 2022 and 2021, respectively | 1 | 1 | ||||||
| Class B common stock, $0.0001 par value—25,000,000 shares authorized; 19,377,681 and 19,577,681 shares issued and outstanding as of December 31, 2022 and 2021, respectively | 2 | 2 | ||||||
| Additional paid-in capital | 56,273 | 49,693 | ||||||
| Accumulated deficit | (21,127 | ) | (10,143 | ) | ||||
| Total stockholders' equity attributable to The Real Good Food Company, Inc. | 35,174 | 39,553 | ||||||
| Non-controlling interest | (43,253 | ) | (8,568 | ) | ||||
| Total stockholders' equity/members’ deficit | (8,103 | ) | 30,985 | |||||
| Total liabilities and stockholders' equity/members’ deficit | $ | 131,439 | $ | 102,144 | ||||
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share/unit and per share/unit data)
| YEAR ENDED | |||||||
| DECEMBER 31, | |||||||
| 2022 | 2021 | ||||||
| Net sales | $ | 141,588 | $ | 84,085 | |||
| Cost of sales | 128,339 | 73,791 | |||||
| Gross profit | 13,249 | 10,294 | |||||
| Operating expenses: | |||||||
| Selling and distribution | 20,607 | 14,965 | |||||
| Marketing | 6,020 | 20,649 | |||||
| Administrative | 25,011 | 27,792 | |||||
| Total operating expenses | 51,639 | 63,406 | |||||
| Loss from operations | (38,390 | ) | (53,112 | ) | |||
| Interest expense | 7,421 | 5,365 | |||||
| Other income | (144 | ) | (309 | ) | |||
| Change in fair value of convertible debt | - | 8,925 | |||||
| Loss before income taxes | (45,667 | ) | (67,093 | ) | |||
| Income tax expense | - | - | |||||
| Net Loss | $ | (45,667 | ) | $ | (67,093 | ) | |
| Less: net loss attributable to non-controlling interest | (34,685 | ) | (32,117 | ) | |||
| Less: net loss prior to the reorganization | - | (24,833 | ) | ||||
| Preferred return on Series A preferred units | - | - | |||||
| Net loss attributable to The Real Good Food Company, Inc. | $ | (10,983 | ) | $ | (10,143 | ) | |
| Net loss per common share/unit (basic and diluted) | $ | (1.77 | ) | $ | (1.64 | ) | |
| Weighted-average common shares units outstanding (basic and diluted) | 6,193,017 | 6,169,885 | |||||
NON-GAAP FINANCIAL MEASURES – RECONCILIATION
| THREE MONTHS ENDED | TWELVE MONTHS ENDED | ||||||||||||||
| DECEMBER 31, | DECEMBER 31, | ||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||
| Gross Profit | $ | 4,883 | $ | 1,264 | $ | 13,249 | $ | 10,294 | |||||||
| Start-up and idle capacity costs(1) | 4,554 | 2,043 | 13,358 | 4,441 | |||||||||||
| Costs related to the COVID-19 pandemic(2) | 434 | 1,140 | 2,455 | 2,315 | |||||||||||
| Adjusted Gross Profit | $ | 9,871 | $ | 4,447 | $ | 29,062 | $ | 17,050 | |||||||
| Adjusted Gross Margin | 27.7 | % | 17.4 | % | 20.5 | % | 20.3 | % | |||||||
| (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 | TWELVE MONTHS ENDED | ||||||||||||||
| DECEMBER 31, | DECEMBER 31, | ||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||
| Net Loss | $ | (11,834 | ) | $ | (44,923 | ) | $ | (45,667 | ) | $ | (67,093 | ) | |||
| Depreciation and amortization | 1,426 | 349 | 3,201 | 1,140 | |||||||||||
| Provision for income tax | - | - | - | - | |||||||||||
| Interest expense | 2,771 | 1,043 | 7,421 | 5,365 | |||||||||||
| Other Income | (144 | ) | 2,825 | (144 | ) | 8,616 | |||||||||
| Start-up and idle capacity costs(1) | 4,554 | 2,043 | 13,358 | 4,441 | |||||||||||
| Costs related to the COVID-19 pandemic(2) | 434 | 1,140 | 2,455 | 2,315 | |||||||||||
| Share-based compensation(3) | 1,583 | 28,725 | 6,751 | 28,725 | |||||||||||
| Transaction expenses(4) | - | 4,617 | - | 8,004 | |||||||||||
| Other(5) | 404 | - | 429 | 0 | |||||||||||
| Bolingbrook start-up administrative costs(6) | $ | 109 | $ | 313 | $ | 1,126 | $ | 313 | |||||||
| Adjusted EBITDA | $ | (697 | ) | $ | (3,868 | ) | $ | (11,070 | ) | $ | (8,174 | ) | |||
| Adjusted EBITDA Margin | (2.0 | )% | (15.1 | )% | (7.8 | )% | (9.7 | )% | |||||||
| (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 costs incurred in connection with pursuing certain strategic and financing transactions, including legal, consulting, and accounting costs. |
| (5) Represents other non-recurring administrative costs incurred during the period. |
| (6) Represents administrative costs incurred in connection with start-up of the new Bolingbrook Facility. |
