The Real Good Food Company (RGF) Announces Q3 Preliminary Results
The Real Good Food Company, Inc. RGF, or Real Good Foods, has been making efforts to boost its presence in the health and wellness food industry. Recently, the company announced preliminary results for third-quarter 2023.
The Zacks Rank #3 (Hold) company’s price performance shows that its shares have increased 2.5% over the past three months against the industry’s 15.6% decline.
Results in Detail
Management projects preliminary net sales for the third quarter to increase 46-52% year over year in the range of $55-$57 million. The adjusted gross margin is likely to increase by 7-11% year over year. Moreover, the company predicts preliminary adjusted EBITDA to increase in the band of $0 million and $2 million versus a loss of $3.8 million for the same quarter of the prior year.
Real Good Food Company, Inc. Price and EPS Surprise
Real Good Food Company, Inc. price-eps-surprise | Real Good Food Company, Inc. Quote
For the three months ended Sep 30, 2023, preliminary estimated net sales are likely to be between $55 million and $57 million, which suggest growth of nearly $17.5-$19.5 million, or 46-52%, versus net sales of $37.6 million for the three months ended Sep 30, 2022. This is lower than the previously announced guidance for third-quarter 2023 net sales view of $60 million to $65 million.
We note that the company’s quarterly sales growth was not equivalent to the consumption growth due to the sharper-than-expected increase in consumption. For the aforementioned three-month period, total consumption of the company’s branded products rose 90% year over year and 76% quarter over quarter, exceeding shipment growth of 50-58% in the corresponding period, respectively. Customer order activity was largely weighted toward the back-end of the quarter with open orders in September 2023, which accounted for three-times growth over July 2023.
For the three months ended Sep 30, 2023, preliminary anticipated adjusted gross margin is projected to grow 7-11% year over year, owing to better plant operating efficiency, reduced labor costs and, to a lesser extent, lower certain commodity prices. Preliminary adjusted EBITDA for the three months is forecast between $0 million and $2 million, which is an increase, versus a loss of $3.8 million in the year-earlier quarter.
Preliminary cash flow before debt service is likely to be $(2.2) million, an $8.6 million improvement, versus the same period in 2022. Real Good Foods estimates that, as of Sep 30, 2023, it will have a cash balance of about $2 million.
Outlook
Management revised its guidance for the three months and full year ending Dec 31, 2023. Net sales for the three months ending Dec 31, 2023, are likely to be $65-$72 million compared with the earlier disclosed guidance of $70-$77 million or about 83-102% growth versus the corresponding quarter in 2022. Adjusted EBITDA for the three months is expected to be $4-$6 million. Management currently anticipates reaching positive operating cash flow starting fourth-quarter 2023, and this trend is likely to continue into 2024.
For 2023, net sales are predicted to be $185-$194 million, down from the previously announced guidance of at least $200 million, or about 31-37% growth, versus the last year. The adjusted gross margin for the year is forecast to be at least 24%, which is in line with the earlier guidance. Adjusted EBITDA for 2023 is expected to be in the low-to-mid single-digit millions range, down from the prior disclosed guidance of mid-to-high single-digit millions range.
Further, management issued preliminary results for 2024. Management expects preliminary net sales to be at least $245 million and adjusted gross margin to rise 1-2% from the prior year during 2024. It expects adjusted EBITDA to be at least $15 million for 2024.
For the long haul, Real Good Foods projects net sales of roughly $500 million, adjusted gross margin of 35% and adjusted EBITDA margin of 15%.
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