RGF: Reports Q4 and Full Year 2021 Financial Results

Cherry Hill / NJ. (rgfc) The Real Good Food Company Inc., an innovative, high-growth, branded, health- and wellness-focused frozen food company, reported financial results for its fourth quarter and full year ended December 31, 2021.

«We are pleased with our fourth quarter and full year results which demonstrate the strength of the Real Good Foods brand and the solid momentum we have entering 2022,» said Bryan Freeman, Executive Chairman. «Looking ahead, we remain focused on our mission to make craveable, nutritious comfort foods that are lower in carbohydrates, higher in protein, and made from gluten- and grain-free real ingredients more accessible to everyone and in doing so, help people pursue a healthier lifestyle.»

«We are raising our guidance both for the year and long-term to reflect strong demand for our products, which in part will be fulfilled by our Bolingbrook facility that commences production later this month. We expect this new facility will significantly increase our production capacity, enabling us to meet the rapidly growing demand for our products while meaningfully lowering our costs over time,» said Gerard Law, Chief Executive Officer.

Highlights versus Q4 and FY 2020

• Net sales increased 129 percent in the fourth quarter to USD 25.6 million and increased 116 percent to USD 84.1 million for the full year
• Household penetration increased to 7.4 percent, almost doubling from a year ago
• Bolingbrook facility expected to commence production in March 2022

Financial Results for the Quarter Ended December 31, 2021

Net sales increased 129 percent to USD 25.6 million compared to USD 11.2 million in the fourth quarter of 2020. The increase was primarily due to strong growth in sales volumes of the Company’s core products (Entrees and Breakfast), driven by expansion in the club channel, and greater demand from existing retail customers. The Company expects sales in its retail channel to continue to accelerate and be driven by new customer wins, expanded distribution with existing customers, continued strong velocity growth in core products and product innovation.

Gross profit increased 3 percent to USD 1.3 million, and was 4.9 percent of net sales, for the fourth quarter of 2021, compared to gross profit of USD 1.2 million, or 11.0 percent of net sales, for the prior year period. The increase in gross profit was primarily due to higher sales volume, including the amount of self-manufactured products sold during the period, partially offset by significant increases in raw material, labor and plant overhead costs. The decrease in gross margin was primarily due to the aforementioned increases in raw material, labor and plant overhead costs.

Adjusted gross profit increased USD 2.6 million to USD 4.4 million, reflecting adjusted gross margin of 17.4 percent of net sales, compared to USD 1.8 million, or 16.2 percent of net sales, in the fourth quarter of 2020. The increase in adjusted gross profit and adjusted gross margin was primarily due to the increase in net sales, including in the amount of products sold that were self-manufactured, partially offset by increases in labor and raw material costs.

Total operating expenses increased USD 39.2 million to USD 42.3 million, compared to USD 3.1 million, in the fourth quarter of 2020. Excluding expense related to equity compensation of USD 28.1 million, which was incurred in connection with our IPO, total operating expense increased approximately USD 11.0 million during the fourth quarter of 2021 as compared to the prior year period. The increase in operating expenses was primarily driven by public company readiness costs, selling and distribution expenses to support the growth of the business, and increased investments in marketing and research and development.

Adjusted Ebitda was a loss of USD 3.9 million compared to a loss of USD 0.8 million in the fourth quarter of 2020. The increased adjusted Ebitda loss was primarily driven by higher operating expenses partially offset by higher net sales and gross profit. The higher operating expenses include increased personnel expenses related to the build out of the Company’s operations, finance and leadership teams, higher selling costs to support sales growth and increased investments in marketing to support brand growth.

Loss from operations increased by USD 39.1 million to USD 41.1 million compared to USD 1.9 million in the fourth quarter of 2020. Excluding the aforementioned expense related to equity compensation of USD 28.1 million, total loss from operations increased approximately USD 11.0 million during the fourth quarter of 2021 as compared to the prior year period. The increase in loss from operations was primarily due to higher raw material and labor costs as well as higher operating expenses.

Net loss increased by USD 41.1 million to USD 44.9 million compared to USD 3.9 million in the fourth quarter of 2020. Excluding expense related to equity compensation of USD 28.1 million and USD 2.8 million related to change in fair value of convertible debt, net loss increased approximately USD 10.1 million during the fourth quarter of 2021 as compared to the prior year period.

Balance Sheet Highlights

As of December 31, 2021, the Company had cash and cash equivalents of USD 29.7 million and total debt was USD 22.0 million. The Company’s cash balance of USD 29.7 million combined with its unused revolver capacity of USD 35.8 million, provides it with liquidity of USD 65.5 million, which we believe is sufficient to fund the Company’s business for the foreseeable future.

Outlook

For the first quarter ending March 31, 2022, the Company expects:

• Net sales of approximately USD 33 million to USD 35 million, reflecting an increase of approximately 97 percent to 109 percent compared to the first quarter of 2021
• Adjusted gross margin in-line with the fourth quarter of 2021
• Adjusted Ebitda loss of approximately USD 2.5 million to USD 4.0 million

The Company is updating its guidance for the year ending December 31, 2022 and over the long-term primarily to reflect the anticipated impact of the opening of its Bolingbrook manufacturing facility. The Company now expects:

• Net sales of approximately USD 140 million to USD 150 million, reflecting an increase of approximately 67 percent to 79 percent compared to 2021
• Adjusted gross margin in the range of 17 percent to 23 percent
• Adjusted Ebitda loss of approximately USD 4.0 million to USD 11.0 million

Long-term, the Company now expects:

• Net sales of approximately USD 500 million
• Adjusted gross margin of 35 percent
• Adjusted Ebitda margin of 15 percent

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 and may vary greatly between periods and could significantly impact future financial results.

Adjusted gross profit, adjusted gross margin, and adjusted Ebitda are non-GAAP financial measures. Adjusted gross profit means, for any reporting period, gross profit adjusted to exclude the impacts of costs and adjustments identified by management as affecting the comparability of the Company’s gross profit from period to period. Adjusted gross margin means adjusted gross profit as a percentage of net sales. Adjusted Ebitda means, for any reporting period, net income (loss) before depreciation and amortization, income taxes, and interest expense, adjusted to exclude the impact of transaction expenses, as well as other costs and adjustments identified by management as affecting the comparability of the Company’s operating results from period to period.