Tattooed Chef, Inc.

Q1 2023 net revenue declined 12.7% to $59.1 million from $67.7 million in Q1 2022, driven mainly by a $7.3 million decrease in Tattooed Chef branded products at Walmart and higher trade promotion spend. Gross loss was $4.1 million versus gross profit of $4.1 million a year ago; operating expenses fell 37% to $14.7 million from $23.3 million. Net loss narrowed to $19 million, or negative $0.23 per share, from $20.2 million, or negative $0.25 per share, and adjusted EBITDA loss narrowed to $15.3 million from $16 million. Cash at December 31, 2022 was $3.5 million, net borrowings against the line of credit were about $4 million, and Q1 operating cash burn was $5.7 million versus $26.4 million a year ago. Capital expenditures were about $500,000. For 2023, management expects sales of $200 million to $205 million, annual cost savings of approximately $40 million, and gross margin to improve on a consecutive quarterly basis as the year progresses; longer term, the company is targeting breakeven adjusted EBITDA and cash flow neutrality.

Sam Galletti emphasized that the company is pivoting from growth at any cost to profitability, and said he is determined to make Tattooed Chef “the plant-based company of the future.” He highlighted lower operating costs, reduced cash burn, new products with higher margins, and expanded distribution at Albertsons, Walmart, and CVS. His tone was confident and corrective, stressing that the company is now being more realistic and conservative after a period of market and category volatility.

Stephanie Dieckmann walked through the quarter’s financial decline and the cost actions behind the improved loss profile. She cited the drop in revenue to $59.1 million, gross loss of $4.1 million, opex down to $14.7 million, net loss of $19 million, and adjusted EBITDA loss of $15.3 million, while also noting cash of $3.5 million at year-end, $4 million drawn on the revolver, and $5.7 million of operating cash use in Q1. She said the company expects about $40 million of annual cost savings, sequential gross margin improvement through 2023, and is still pursuing debt or equity capital while maintaining its relationship with UMB.

Analysts focused on the Q2 impact from a cold-storage vendor outage, and management said the issue has lasted about 2.5 weeks, affects multiple customers nationwide, and is expected to hit Walmart, West Coast Kroger, and Whole Foods. Management did not quantify the revenue hit yet, but said they hope the vendor is back up within a week or two. Questions also pressed on whether new product innovation and retail expansion are necessary to reach profitability; Sam Galletti said the new items carry margins about 2.5 times typical frozen margins and that innovation should help, not hurt, the path to profit and positive cash flow.