Innovative Food Holdings: Reports Q3-2020 Results

Bonita Springs / FL. (ifh) Innovative Food Holdings, an interconnected data driven platform of specialty food companies that provides chefs and consumers direct access to the highest quality unique specialty food products across the U.S., reported its financial results for the third quarter and first nine months of 2020.

«The third quarter represents the culmination of two years of integrating, planning, and investing in our e-commerce platform. During the quarter, we launched our new igourmet.com website, modernized our corporate website, transitioned to a new warehouse, and re-aligned our e-commerce structure. We were able to achieve record third quarter e-commerce sales as a result of strong customer demand, while undertaking significant structural changes throughout our organization to support our compelling growth dynamics and optimize our platform driven cost structure,» stated Sam Klepfish, CEO of Innovative Food Holdings.

«The Covid-19 crisis continues to affect our specialty foodservice business, which has had a material impact on total sales and overall profitability throughout 2020. We are working hard to support our foodservice customers during this period, but we continue to see challenging market conditions within our foodservice business.»

«While trends within our foodservice business remain difficult, we are focusing on driving top- and bottom-line growth through our e-commerce platform. This includes leveraging the marketing and customer acquisition experience of our team at Mouth, while also expanding new channel relationships and growing our e-commerce product lines. I am pleased with how our teams have responded and I am extremely excited by our enhanced position heading into the seasonally strong fourth quarter,» concluded Mr. Klepfish.

Record E-Commerce Activity

For the 2020 third quarter, e-commerce revenue increased over 165 percent, compared to the same period last year, to a third quarter record of USD 4.2 million. Year-to-date, e-commerce revenue has increased approximately 166 percent from USD 5.5 million to USD 14.5 million. IVFH had over 20,000 active e-commerce customers in the third quarter, which is an increase of over 150 percent from the same period last year. Mouth.com continued to experience particularly strong demand as third quarter sales at Mouth.com increased over 500 percent, driven in part by investments in digital marketing.

E-commerce Realignment

As part of IVFH’s ongoing e-commerce transformation, the experienced digital marketing team at Mouth.com is now managing the entire e-commerce front end of IVFH’s platform including igourmet.com, and the Company’s brand strategy and branding, marketing strategy and execution, content, and photography. igourmet’s best-in-class operating team and platform will now support the Company’s procurement, inventory management and tracking, warehousing and warehouse management, fulfillment, logistics and customer service capabilities. The team at Mouth is now focused on developing successful digital marketing strategies at igourmet.com for the 2020 holiday season, and both Mouth and igourmet.com are well positioned for strong consumer and corporate demand.

New igourmet.com Website Successfully Launched

The new igourmet.com website was launched in September 2020 and provides epicurean customers with direct access to over 5,000 specialty food and specialty grocery products. Igourmet.com was built from the ground up on Shopify’s e-commerce platform, which supports leading digital, data, and marketing capabilities, and provides users with an intuitive, user friendly, and visually pleasing online gastronomic experience. This is the first major relaunch and re-platform of igourmet.com since it was founded in 1997.

Transition to New Mountain Top, Pennsylvania Warehouse Complete

During the 2020 third quarter, IVFH opened its new warehouse in Mountain Top, Pennsylvania. The warehouse is located on approximately 15 acres and includes over 200,000 square feet of useable warehouse space, providing capacity for significant volume expansion at a minimal cost. The new facility features a modern and efficient layout and includes freezer and refrigeration space to support the Company’s entire product line. As part of our operational improvement and e-commerce initiatives, we have enhanced our warehouse management system, added new logistics technologies, and created new processes. We believe these efforts will increase operating efficiencies and enhance overall profitability in the coming quarters.

Financial Results

IVFH’s revenue were USD 11.2 million during the three months ended September 30, 2020, compared to USD 13.5 million for the three months ended September 30, 2019. E-commerce revenue increased over 165 percent, driven by the Company’s ability to increase customers, conversion and sales at its e-commerce properties and partially offset a 42 percent decline in specialty foodservice revenues. The decline in foodservice revenue was driven by the continued impact the Covid-19 pandemic has had on the Company’s foodservice customers. For the 2020 nine months ended September 30, 2020, total revenue was USD 36.5 million, compared to USD 40.3 million last year.

The following tables set forth IVFH’s revenue by business category for the three and nine months ended September 30, 2020, and September 30, 2019 (unaudited):

Three Months Ended …

	2020-09-30			% of Net Sales			2019-09-30			% of Net Sales			Change
Specialty Foodservice	USD	6,733,000		60	%		USD	11,575,000		86	%		-42	%
E-commerce		4,158,000		37	%			1,572,000		12	%		165	%
National Brand Management		254,000		2	%			319,000		2	%		-21	%
Logistics		90,000		1	%			–		–			–
Total IVFH	USD	11,235,000		100	%		USD	13,466,000		100	%		-17	%

Nine Months Ended …

	2020-09-30			% of Net Sales			2019-09-30			% of Net Sales			Change
Specialty Foodservice	USD	20,751,000		57	%		USD	33,542,000		83	%		-38	%
E-commerce		14,490,000		40	%			5,452,000		14	%		166	%
National Brand Management		787,000		2	%			1,256,000		3	%		-37	%
Logistics		510,000		1	%			–		–			–
Total IVFH	USD	36,538,000		100	%		USD	40,250,000		100	%		-9	%

For the 2020 third quarter, selling and administrative (SG+A) expenses were USD 4.5 million, compared to USD 3.8 million for the same period last year, and USD 4.8 million for the 2020 second quarter. The year-over-year increase, which included costs associated with Covid-19, was primarily due to an increase in payroll related costs, higher advertising costs, and increased IT and computers expenses, credit card fees, and other operating expenses. For the 2020 nine months, SG+A expenses were USD 14.0 million, compared to USD 11.6 million in the prior year period.

The Company reported a net loss for the 2020 third quarter of USD (1.6 million), or USD (0.05) per share, compared to a net loss of USD (158,000), or USD (0.00) per share, in the prior year’s third quarter. For the first nine months of 2020, the Company reported a net loss of USD (6.6 million), or USD (0.19) per share, compared to net income of USD 28,000, or USD 0.00 per diluted share, for the first nine months of 2019. The net loss of the 2020 nine-month period included a non-cash USD 1.7 million impairment charge recorded during the 2020 first quarter.

Net income adjusted for non-core items for the 2020 third quarter was a loss of USD (1.5 million), or USD (0.042) per share, compared to adjusted net income of USD 149,000, or USD 0.004 per diluted share, for the same period last year. For the nine months ended September 30, 2020, adjusted net income was a loss of USD (4.0 million), or USD (0.116) per share, compared to adjusted net income of USD 1.0 million, or USD 0.030 per diluted share, for the same period last year

Cash Ebitda, a non-GAAP metric (see tables below), for the 2020 third quarter was a loss of USD (1.3 million), compared to Cash Ebitda of USD 234,000 in the prior year third quarter. For the nine months ended September 30, 2020, Cash Ebitda was a loss of USD (3.5 million), compared to Cash Ebitda of USD 1.3 million for the same period a year ago.