The Real Good Food Company, Inc.

Q3 2023 net sales were $55.6 million, up 48% year over year and up 141% on a two-year stack basis. Gross profit was $11.6 million, with gross margin of 20.9% versus 4.7% in the prior-year quarter; adjusted gross profit was $15.5 million, with adjusted gross margin of 27.8% versus 15.8% a year ago. Adjusted EBITDA was $1.2 million, compared with a loss of $3.8 million last year. For Q4 2023, the company expects net sales of $65 million to $72 million and adjusted EBITDA of $4 million to $6 million. For full-year 2023, it expects net sales of $185 million to $192 million, adjusted gross margin of at least 24%, and adjusted EBITDA in the low to mid single-digit millions. For full-year 2024, it expects net sales of at least $245 million, adjusted gross margin up 1 to 2 percentage points versus 2023, and adjusted EBITDA of at least $15 million. Management also reiterated a long-term target of approximately $500 million in sales, 35% adjusted gross margin, and 15% adjusted EBITDA margin.

Bryan Freeman emphasized that sales momentum is broadening across channels, especially the unmeasured channel, where branded sales rose 90% year over year and distribution doubled sequentially. He framed the company’s strategy as working because it is expanding into new categories and temperature states, and he highlighted a pipeline of new items including fish, refrigerated handhelds, and barbecue pulled pork. His tone was constructive and confident, with repeated references to long-term profitable growth and at least $500 million in sales over time.

Akshay Jagdale focused on the financial turnaround: gross profit reached $11.6 million, adjusted gross profit was $15.5 million, and adjusted EBITDA was $1.2 million. He said higher revenue is improving fixed-cost absorption, while lower commodity prices, productivity initiatives, and better plant utilization are driving margin expansion. He also noted cash burn pre debt service was $2.2 million, the lowest in company history, and that the company raised $15 million of net proceeds from a public offering to support working capital and growth. He reiterated that positive cash earnings are expected beginning in Q4 2023 and continuing into 2024.

Analysts focused heavily on Bolingbrook execution, asking about the plant ramp, the new fryer, and utilization. Management said the issue was that demand surged late in Q3 and the plant was pushed too hard, but they are adding redundancy and extra fryers, with one fryer coming online soon and another before year-end. Questions also centered on customer SKU demand and new distribution, and management said retailers want more SKUs in breaded poultry, single-serve entrees, multi-serve entrees, and refrigerated handhelds; on the fish launch, they said shipping starts in December with shelf placement expected in January, and any reset for expansion would likely be in the back half of next year.