Cherry Hill / NJ. (rgfc) The Real Good Food Company Inc., a health- and wellness-focused frozen food company, reported financial results for its fourth quarter and fiscal year ended December 31, 2022.
Bryan Freeman, Executive Chairman, said: «The fourth quarter was reflective of the growing strength of our brand, helping to meet increasing demand for healthier frozen food options with innovative new products such as our Breaded Poultry, Breakfast Flautas and Creamy Poblano Enchiladas. While sales came in below our original expectations, this was driven by the strategic dialing back of promotional expenses on a non-core product in the unmeasured channel that would have diluted margins. Moreover, our distribution gains are tracking ahead of plan, baseline velocities remain strong and new product velocities are exceeding base. As such, we are reiterating our revenue guidance of at least USD 200 million in 2023. Looking ahead to 2023 and beyond, I firmly believe that our continued focus on innovation in incremental categories – as reflected by the success of our launch into the refrigerated category as well as frozen breaded poultry – that will underpin our future sales growth.»
Gerard Law, Chief Executive Officer, added: «We are pleased to report that the Bolingbrook facility has reached its final start-up phase, which has allowed us to significantly increase production and labor efficiencies across the business. These improvements, paired with commodity cost normalization, helped to grow our gross margin profile to 13.7 percent of net sales in the fourth quarter, as compared to 5.0 percent in the same year-ago quarter. As we complete the final start-up phase and Bolingbrook begins to realize its full potential, I believe we are well positioned to achieve our expectation of reaching positive operating cash flow in 2023. I look forward to continued operational execution in the months ahead as we strive to create sustainable, long-term value for our shareholders.»
Fourth Quarter and Fiscal Year 2022 Highlights
- Net sales increased 39 percent in the fourth quarter to USD 35.7 million and 68 percent in the full year to USD 141.6 million
- Gross profit margin grew to 13.7 percent of net sales in the fourth quarter of 2022, as compared to 5.0 percent of net sales in the fourth quarter of 2021
- Household penetration increased to 8.4 percent as of January 2023, as compared to 7.6 percent in January 2022
Financial Results for the Fourth Quarter 2022
Net sales grew 39.2 percent to USD 35.7 million in the fourth quarter of 2022, as compared to USD 25.6 million in the fourth quarter of 2021. The increase was primarily due to strong growth in sales volumes of the Company’s core products, driven by greater demand from existing retail and club customers, and to a lesser extent new customers.
Gross profit increased by USD 3.6 million to USD 4.9 million, or 13.7 percent of net sales, in the fourth quarter of 2022, as compared to USD 1.3 million, or 5.0 percent of net sales, in the fourth quarter of 2021. The increase in gross profit was primarily driven by a decrease in the cost of raw materials, improved price realization, productivity initiatives and to a lesser extent improved efficiencies across our plant network.
Adjusted gross profit, a non-GAAP term, increased by USD 5.4 million to USD 9.9 million, reflecting an adjusted gross margin of 27.7 percent of net sales, in the fourth quarter of 2022, as compared to USD 4.5 million, or an adjusted gross margin of 17.4 percent of net sales, in the fourth quarter of 2021. The increase in adjusted gross profit was primarily driven by lower commodity costs, productivity initiatives, and to a lesser extent, improved price realization.
Total operating expenses decreased by USD 28.2 million to USD 14.1 million in the fourth quarter of 2022, as compared to USD 42.3 million in the fourth quarter of 2021. The decrease was primarily due to USD 28 million in equity compensation expense recognized at the time of our IPO in the fourth quarter of 2021.
Adjusted Ebitda, a non-GAAP term, totaled a loss of USD 0.7 million in the fourth quarter of 2022, as compared to a loss of USD 3.9 million in the fourth quarter of 2021. The decreased loss in adjusted Ebitda was driven by lower commodity costs, better price realization and efficiencies related to the Bolingbrook ramp-up.
Loss from operations decreased by USD 31.8 million to USD 9.3 million in the fourth quarter of 2022, as compared to USD 41.1 million in the fourth quarter of 2021. The decrease was primarily due to the aforementioned reduction in equity compensation expense.
Net loss decreased by USD 33.0 million to USD 11.9 million in the fourth quarter of 2022, as compared to USD 44.9 million in the fourth quarter of 2021. The decrease in net loss was primarily due to the aforementioned reduction in equity compensation expense.
Balance Sheet Highlights
As of December 31, 2022, the Company had cash and cash equivalents of USD 7.6 million (which includes USD 2.3 million of restricted cash) and total debt was USD 73.2 million. The Company had USD 37.6 million in available liquidity.
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.