Why Real Good Foods' Shares Are Rising Today

The Real Good Food Company, Inc. RGF reported third-quarter FY23 sales growth of 48% year-on-year to $55.565 million, beating the consensus of $55.436 million. 

This Y/Y increase was due to increases in new distribution points and, to a lesser extent, an increase in units sold in existing distribution points.

Q3 gross profit increased by $9.8 million to $11.6 million, driven by increased sales and improvements in certain manufacturing and raw material costs. Gross margin grew to 20.9% of net sales from 4.7% in the year-ago period.

The company reported EPS loss of $(0.50), missing the street view of $(0.17).

Household penetration increased to 8.8% as of September 2023, as compared to 8.3% in June 2023.

Total operating expenses grew by $8.0 million to $20.5 owing to increased research & development costs and, to a lesser extent, higher distribution costs.

As of September 30, 2023, the company had cash and cash equivalents of $2.0 million ($1.9 million of restricted cash), and total debt was $108.3 million.

Gerard Law, Chief Executive Officer, said, "Although we had some operational challenges in the quarter that led to us under-shipping demand, I am encouraged by the strength of our brand as evidenced by the growth in our household penetration and consumption."

Outlook: Real Good Foods continues to expect Q4 net sales of $65 million-$72 million versus $68.78 million estimate (83%-102% Y/Y growth). The Q4 outlook was updated by the company on Oct. 10 during its preliminary Q3 results.

The company still sees Q4 adjusted EBITDA Of $4 million to $6 million.

RGF expects FY23 revenue of $185 million-$192 million versus the $191.17 million estimate (prior view: $185 million-$194 million). 

The company's FY24 preliminary guidance for revenue stands at least $245 million versus a $243.32 million estimate. Long-term, the company continues to expect net sales of approximately $500 million.

Price Action: RGF shares traded higher by 2.96% at $1.74 on the last check Friday.