RGF: Reports Second Quarter 2023 Financial Results

Cherry Hill / NJ. (rgfc) The Real Good Food Company Inc., an innovative health- and wellness-focused frozen food company, reported financial results for its second quarter ended June 30, 2023.

Management Commentary

Executive Chairman Bryan Freeman: «I am pleased to report a significant acceleration in sales growth this quarter, led by the unmeasured channel, which was up 61 percent 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.»

Chief Executive Officer Gerard Law: «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 USD 35.4 million, up 14.8 percent year-over-year and 89 percent on a 2-year basis
• Gross profit margin grew to 13.6 percent of net sales, up 598 bps year-over-year
• Household penetration totaled approximately 8.3 percent as of June 2023, as compared to 8.3 percent in March 2023

Financial Results for the Quarter

Net sales increased 14.8 percent to USD 35.4 million in the second quarter of 2023, as compared to USD 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 USD 2.5 million to USD 4.8 million, or 13.6 percent of net sales, in the second quarter of 2023, as compared to USD 2.4 million, or 7.6 percent 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 USD 3.2 million to USD 10.0 million, reflecting an adjusted gross margin of 28.2 percent of net sales, in the second quarter of 2023, as compared to USD 6.8 million, or an adjusted gross margin of 22.0 percent 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 USD 3.3 million to USD 15.5 million in the second quarter of 2023, as compared to USD 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 USD 1.9 million in the second quarter of 2023, as compared to a loss of USD 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 USD 0.8 million to USD 10.6 million in the second quarter of 2023, as compared to a loss from operations of USD 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 USD 3.5 million to USD 14.6 million in the second quarter of 2023, as compared to USD 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 USD 3.0 million (which includes USD 2.3 million of restricted cash) and total debt was USD 102.1 million.

Outlook for the Year

For the year ending December 31, 2023:

• Net sales of at least USD 200 million
• Adjusted gross margin of at least 24 percent
• 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 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, may vary significantly between periods and could significantly impact future financial results.