RGF — The Real Good Food Company, Inc.

Summary of RGF Q3 2023 Earnings Call

1. Key Financial Results and Metrics

• Net Sales: $55.6 million, up 48% year-over-year and 141% on a two-year stack basis.
• Gross Profit: $11.6 million with a gross margin of 20.9%, a significant improvement from 4.7% in Q3 2022.
• Adjusted Gross Profit: $15.5 million, adjusted gross margin at 27.8%.
• Adjusted EBITDA: $1.2 million, compared to a loss of $3.8 million in Q3 2022.
• Cash Burn: Pre-debt service cash burn was $2.2 million, the lowest in company history.
• Distribution Points: Increased to 187,000, with an additional 17,000 expected in Q4 2023.

2. Strategic Updates and Business Highlights

• Strong growth driven by the unmeasured channel, with branded sales up 90% year-over-year.
• New product introductions are performing well, particularly in the breaded poultry and entrees categories.
• Expansion into the frozen fish category with new products accepted in 1,700 stores, shipping in December.
• Plans to enhance production capacity at the Bolingbrook facility to meet demand surges, including new fryers and operational improvements.
• Continued focus on low-glycemic products aligns with consumer trends away from high-sugar foods.

3. Forward Guidance and Outlook

• Q4 2023 Sales Guidance: Expected to be between $65 million and $72 million, representing 83% to 102% growth year-over-year.
• Full Year 2023 Sales Guidance: Anticipated in the range of $185 million to $192 million, a 31% to 36% increase from 2022.
• 2024 Outlook: Projected sales of at least $245 million with adjusted EBITDA of at least $15 million. Long-term goal remains at $500 million in sales.

4. Bad News, Challenges, or Points of Concern

• Production shortfalls in Q3 due to inability to fill orders on time, impacting sales growth.
• Transitioning to new distribution arrangements caused inefficiencies, which are expected to reverse in Q4.
• Competitive pressures from other frozen food brands, particularly those with higher sugar content, may pose risks to market share.

5. Notable Q&A Insights

• Management emphasized the importance of increasing production capacity to meet demand, with specific references to operational improvements at the Bolingbrook facility.
• Discussion on expanding SKU offerings in existing high-velocity categories, indicating strong retailer interest in additional products.
• Confirmation that new product launches, including fish items, are expected to hit shelves in early 2024, with potential for significant growth based on initial acceptance.
• Management highlighted a recent debt deal aimed at reducing cash interest costs and increasing liquidity, which is seen as a positive development for the company’s financial health.

Overall, RGF demonstrated strong growth metrics and strategic initiatives, while also acknowledging challenges in production and competitive pressures. The outlook remains optimistic with significant expected growth in the upcoming quarters.