Cherry Hill / NJ. (rgfc) The Real Good Food Company Inc., an innovative health- and wellness-focused frozen food company, reported financial results for its first quarter ended March 31, 2023.
Bryan Freeman, Executive Chairman, said: «I am pleased to report another quarter of significant improvements in gross margins, which were the highest in the past eight quarters. Our adjusted gross margin of 33.5 percent this quarter reflects the earnings power of our business once our plants are fully utilized. Our top line results this quarter were negatively impacted by promotional timing and mask the underlying momentum behind our brand. To that end, I am excited to report that we have recently confirmed nationwide and full distribution of several of our core products in the back half of this year. This gives us strong conviction in our 2023 outlook of USD 200 million in revenue with positive cash flow from operations for the full year. We are committed to providing our customers with the best possible products and are excited about our company’s future.»
Gerard Law, Chief Executive Officer, added: «We remain maniacally focused on driving profitable growth and generating positive cash flow from operations. Since we went public 18 months ago, we have brought forward our profitability agenda by over a year. We have spent the last year investing in capacity and preparing to fulfill demand. These efforts have put us in a position where we can not only fulfill demand but do so efficiently. I am excited by the 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.»
First Quarter 2023 Highlights
- Net sales in the first quarter were USD 29.8 million, up 70 percent on a 2-year basis
- Gross profit margin grew to 16.7 percent of net sales, up 300 bps sequentially
- Household penetration totaled 8.3 percent as of March 2023, as compared to 8.4 percent in December 2022*
Financial Results for the Quarter Ended March 31, 2023
Net sales decreased 20.7 percent to USD 29.8 million in the first quarter of 2023, as compared to USD 37.6 million in the first quarter of 2022. This decrease was primarily due to the timing of certain promotional events, which positively impacted net sales during the first quarter of 2022, that did not reoccur during the first quarter of 2023. The Company expects these promotional events to occur in the later part of 2023.
Gross profit increased by USD 0.7 million to USD 5.0 million, or 16.7 percent of net sales, in the first quarter of 2023, as compared to USD 4.3 million, or 11.3 percent of net sales, in the first quarter of 2022. The increase in gross profit was due to decreases in certain raw material costs and productivity improvement, partially offset by lower sales volume of our products.
Adjusted gross profit, a non-GAAP term, increased by USD 3.5 million to USD 10.0 million, reflecting an adjusted gross margin of 33.5 percent of net sales, in the first quarter of 2023, as compared to USD 6.5 million, or an adjusted gross margin of 17.2 percent of net sales, in the first quarter of 2022. The increase in adjusted gross profit was primarily driven by lower commodity costs and productivity initiatives.
Total operating expenses increased by USD 2.8 million to USD 15.7 million in the first quarter of 2023, as compared to USD 12.9 million in the first 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 1.1 million in the first quarter of 2023, as compared to a loss of USD 3.3 million in the first quarter of 2022. The decreased loss in adjusted Ebitda was driven by lower commodity costs and productivity initiatives.
Loss from operations increased by USD 2.1 million to USD 10.7 million in the first quarter of 2023, as compared to a loss from operations of USD 8.7 million in the first quarter of 2022. The decrease was primarily due to decreased sales and increases in operating expenses in the first quarter.
Net loss increased by USD 4.1 million to USD 13.7 million in the first quarter of 2023, as compared to USD 9.6 million in the first quarter of 2022. The decrease in net loss was primarily due to decreased sales and increases in operating expenses in the first quarter.
Balance Sheet Highlights
As of March 31, 2023, the Company had cash and cash equivalents of USD 2.9 million (which includes USD 2.3 million of restricted cash) and total debt was USD 87.4 million.
The Company is maintaining its guidance 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
- Positive cash flow from operations
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.