Bonita Springs / FL. (ifh) Innovative Food Holdings, a leading end-to-end DTC e-commerce platform and direct-to-chef platform that provides unique specialty foods through e-commerce offerings and multichannel partnerships, reported its financial results for the first quarter of 2023.
«I am pleased with the strong start to the year as we achieved record first-quarter revenue. The reopening of restaurants, hotels, and other travel related foodservice customers post-COVID has continued to provide us with a tailwind, enabling us to serve our customers and drive our business forward. As many of these positive trends are normalizing, we are focused on leveraging our recent success as a springboard to build a more resilient and adaptable business model, as evidenced by the year-over-year improvement in gross margin and reductions in SG+A expenses. Overall profitability during the quarter was impacted by approximately USD 1.9 million of one-time employee severance as a result of our recent leadership transition. Backing out these one-time expenses, our first quarter adjusted net loss would have improved by 49 percent, reflecting the third consecutive quarter of improved adjusted profitability. In addition, our first quarter cash flow used by operating activities, adjusted for payments made on the USD 1.9 million one-time charge for employee severance, improved over the prior year period,» stated Bill Bennett, CEO of Innovative Food Holdings.»
Bennett continued, «As we look forward, improving near-term profitability and operating cash flow are top priorities. This includes delivering continued improvements to our gross margin, returning to pre-inflation levels by enhancing our product mix, building a more strategic pricing and promotional plan with supplier support, and reducing shipping expenses. We also remain committed to establishing a new lower baseline in SG+A expenses as we optimize our corporate structure, and proactively reduce spending on digital marketing programs. While this strategy continues to impact eCommerce sales, it has significantly increased eCommerce profitability. Programs are also underway to enhance our eCommerce customer experience and retention, and we are currently targeting 2024 to re-accelerate marketing spend to drive eCommerce growth. In addition, we expect approval of our previously announced loan guarantee from the USDA shortly. If approved, this will provide IVFH with over USD 3 million of additional borrowings, improve working capital levels, and extend the maturity on our credit facilities.»
«Over the past three months, I have had the pleasure of engaging with our customers, vendors, team members, and partners across the country as my tenure as CEO develops. IVFH has a solid foundation and committed team that is passionate about connecting the world’s best artisan food makers with top professional chefs and gourmet home chefs. The tremendous long-term potential in our industry is evident, and we are excited about the future ahead. We recognize the importance of maintaining a laser focus on our top priorities in a complex economic environment to create a robust, profitable, and sustainable business model. Additionally, we remain dedicated to promoting a culture of continuous improvement and attracting top talent to drive our growth initiatives forward. As we navigate the ever-changing landscape of the food industry, we are confident in our ability to adapt, innovate, and capitalize on opportunities that will drive long-term shareholder value,» concluded Bennett.
Revenues in the 2023 first quarter increased 8.6 percent to a first-quarter record of USD 17.0 million, compared to USD 15.6 million for the three months ended March 31, 2022. First-quarter revenue benefitted from a 19.6 percent increase in specialty foodservice revenue, which was primarily driven by the nationwide opening of restaurants and other foodservice establishments as well as increases in travel related foodservice and restaurant dining. First-quarter eCommerce revenue was down 27.3 percent to USD 2.6 million from USD 3.6 million for the same period last year, as the Company continues to proactively reduce spending on digital marketing and improve the customer experience to drive marketing efficiency.
For the 2023 first quarter, gross margin as a percentage of sales was 24.0 percent, compared to 23.8 percent for the same period last year, primarily due to reduced fuel surcharges and lower shipping costs.
For the 2023 first quarter, selling, general, and administrative (SG+A) expenses were USD 4.8 million, or 28.2 percent of revenue, compared to USD 5.2 million, or 33.1 percent of revenue for the same period last year. The USD 0.4 million, or 7.2 percent year-over-year reduction in SG+A expense was the result of overall cost-cutting efforts as well as restructuring the Company’s marketing and advertising programs.
During the three months ended March 31, 2023, the Company incurred USD 1.9 million of separation costs with certain executive officers including the Company’s prior CEO and current board member, and Director of Strategic Acquisitions and former board member.
The Company recorded GAAP net loss for the 2023 first quarter of USD (2.8 million), or USD (0.06) per share, compared to a GAAP net loss of USD (1.2 million), or USD (0.03) per share, in the prior year’s first quarter, which included a USD 0.3 million pre-tax gain on an interest rate swap.
Adjusted net loss, a non-GAAP metric (see tables below), for the 2023 first quarter was USD (0.7) million, or USD (0.014) per share, compared to an adjusted net loss of USD (1.4) million, or USD (0.029) per share, for the same period last year. Adjusted net income for the 2023 first quarter accounts for the impact of non-core items including an addback for separation costs with executive officers, amortization expense, and stock related expenses, and for the 2022 first quarter includes an addback for amortization expense, a gain on the interest rate swap, and stock related expenses.