RGF - Earnings call transcript Q2 2022 | Real Good Food Company, Inc.

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Operator

Ladies and gentlemen. Greetings, and welcome to The Real Good Food Company Second Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator instructions].

conference recorded. this reminder, a is being As I’ll VP of the conference Chris Bevenour, over to Investor now turn Relations. Please go ahead, sir.

Chris Bevenour

Good conference The quarter morning, Real Good Food to and Company's XXXX call. earnings welcome second

Bryan On the Executive and Jagdale, Akshay Executive Jerry Financial Law, Officer, Officer. Freeman, Chief call Chief Chairman, are today

we today. may You which our X:XX approximately quarter second at access a.m. release earnings published Eastern Time

on website a have to review available not at it's our of had chance the you portion If release, Investors www.realgoodfoods.com. the

statements like everyone federal These other within established statements to that I'd and historical XXXX. made forward-looking to this Harbor call statements All qualify and Private statements than Safe subject on Act the begin, from by call this forward-looking on the statements of intended we made Before uncertainties. remind liability considerable risks are securities of today, are certain are Securities of to for meaning the Litigation increase and laws, net to and projected as statements, gross our margin as include compete our manufacturing industry, adjusted in regarding profit, from forward-looking net gross adjusted adjusted our acquire ability expand our implement successfully gross effectively strategy are margin, growth well sales, fact, and our and introduced new production customers profit, statements new our including EBITDA, results and customers, sales capacity. products, financial existing gross Reform

from the future That in as that or or update or statements undertakes unknown are Important made. and law, new and expectations, that statements obligation differences based here and cause forward-looking achievements results, on are or or Securities of are the by which any forward-looking or management's involve factors a to information future with company of Exchange whether in the and performance significantly and made the statements. achievements company's statements of such such company's Except by outside current call information, expressed required at events time Commission. could this performance other filings control cause as many differ Forward-looking such risks are represent on detailed no a can results uncertainties, available the known contribute statements result number implied to otherwise.

In discussion, believe time to refer certain are performance non-recurring better before not charges the taking which certain results to financial business this account ongoing non-GAAP measures, addition, into basis. reflect we and or ongoing results our an on core refer we which throughout one of our that operating to

earnings financial A over XQ measures it’s release, Bryan Freeman. which directly financial of adjusted most margin the including are referenced. to each is available its non-GAAP comparable EBITDA tab. measure turn that Our GAAP adjusted investors on and our to included the reconciliation is to in pleasure call Company’ financial Food measure gross Executive our Good our website Real under non-GAAP Chairman, my With

Bryan Freeman

you detail. And operations believe Hey, more cover growth. last briefly to in After thanks, will quarter we'll us to joining I compared million we financial for for the well $XX.X Starting net our then questions. calls. that, million with long-term quarter, second reasons will results today second in highlights thank morning. review Jerry second Akshay XX% for increased financial the our second outlook the sales $XX.X open quarter review and call highlights year. discuss Chris. the on earnings and for and will our Good positioned we're quarter our

are XXXX raising guidance pleased expect sales of are our second half the million. and such, our a to range we And previous performance second stronger to be quarter we of sales sales expectations. as our in We $XXX to with $XXX XXXX than million

our quarter up disciplined the XXXX managing of new facility. EBITDA through in adjusted fourth of positive Importantly, Bolingbrook ramp our costs we still expect to to approach be the and

compared core and acceleration two compared to a customers. generally grew in this on is XX% period, or the an expectations. quarter. channel in unmeasured and to in full slowed products events increased extent with due XXX% velocity same and channel to timing basis. Growth by line gains the of Second new our quarter the a XXX% the year channel retail XX% by new lesser in The XXXX products of grew our measure Sales sales stacked promotional a quarter, to growth prior year was on shipments year second which the driven basis, in strong

secured upcoming distribution of on remainder unmeasured have XXXX. in We for events promotional have the channel incremental clear visibility and

the we better result, a and expectations. be second previous channel our As unmeasured to expect to in than half significantly accelerate growth sales

expect items addition expected distribution XXXX, feel to and start for unmeasured now shelf poultry the regionally breaded of in channel towards We we QX. on good In back to strong get in continued channel the see to unmeasured current velocity the of acceptance the greater are end our the retailer positive half early about will of labs we is and measured strong a in where I by rollout our scores, detail today optimism innovation and in poultry minutes. testing with underpinned and on into velocity go strong reads few RGF breaded that the our channel our feedback

how take and wellness resonating with look consumer health broad our base. brand step the the at back a current and of market, our let's addressable market, this positioning total Next, state and is

Stan’s year overall and $XXX three a X% outpace health Our a an according which at and to The three X% year-over-year subcategory CAGR. industry and health X.X% wellness approximately to year and wellness, total with X% continues growing frozen addressable grew CAGR billion market year-over-year. wellness is health

sugar, clean overall tam. well size no recession. growing of slowdown high and/ strong brand has are in with relevant growth Products low primary carbohydrates or evidenced their attributes an these the profile. there the in Our promise our and and above lapping to as All bump a claims, remain categories considered the three ingredients. highly economic compete by large little pandemic we of are despite and the growth Moreover, signs protein no

our penetration engagement with household and numerator brand ourselves we year, Real indicators. to is rates, over community wellness all according $XXX you're track brand our health, continues broad resonates X.X% consumer how brands only ranked household is brand and Increasing our June growth frozen repeat Starting which have and last against X.X%, health penetration, we probably data XX, as behind with aware Household demonstrates for household second up the XXXX, brand as base. X.X% connected at March from velocity. and four how Good of million Amy's in in penetration, of July As a and penetration penetration a Foods social amongst household retail. position quickly

to data XX from year-over-year most averages of weeks July in recent the the they XX% XX, XX% Turning continue and as with industry rates, latest to accelerate growing repeat in of XXXX. line

the community second brand our in been continue we growth, social social community. million outperform. Foods and impressions. successful Regarding to Good XX digital We Real teams impressions over total the quarter, have generated X.X organic growing and million In

text XX,XXX acquired and followers also on Instagram, Instagram to SMS New total We subscribers XX,XXX our bringing XXX,XXX added followers. over

to parties returns strong it it's and spending, that influencers can average. on believe six is on marketing peers on conversations third advertising. subscribers. times average we ad are returns measured and four the efficient. by use peer-to-peer and higher We spark micro reflected of better get ad to our of is than which our significantly This nano say spending is in our I to is dollars number working followers a using continue traditional Based on than our

how retailer to grows new share. Our we categories consumers appreciate partners in. rather participate taking we And categories drive the than this

but leads greater Our products they new our also connection to launch to shelf. for on us us, before our household test to This incremental also growth and efficiently enables consumers category partners. demand only retail for not penetration

focus purchasing Illinois, channel to shortly. and our introduced make million indicators to year strong productively. new health to frequently to XX newly versus competence grew term What's prior and increase Real is increased a products our touch signal on and our Bolingbrook, let's which XX% investment facility baseline in Jerry compared XX% production is weeks sales over the more velocity on year brand our XXXX. Good capacity long more XX, over with period. are in measured Lastly, what Stan's are brand more achieving also July This Foods gave the will a velocity velocity, in the ago. underpin consumers The our even $XXX us confidence a last encouraging ending products that According working our

and bigger, low Moving be fewer characterized to launched nuggets better strips In innovation, multi bites most faster. chicken Asian and XXXX, crispy and serve bowls carb crispy as protein, we have and breakfast high and strategy our can shell recently, tacos, entrees. tots, chicken

protein breakthrough breaded form carb innovation chicken tots can used with Our and multiple low in factors. high be

our we excited about So launch. are initial

ripe retail approximately little healthy, for sales brand into large the are velocity options extend there market categories billion are because these that dense also today can We innovation to $X on aggregate. craveable. believe are in in categories Our the disruption no nutrient very representing high

as little retailer and favorites and carbs pleased far chicken encouraging. is I'm the protein. on are with of Thus in versions orange such early very Our acceptance read sugar velocities has higher and

our and was to velocities We new from is all and the in includes large activate products that wellness retailer multi set days. from that the our launch reset, are to as breaded and high for carb, begin and low seeing total velocities producers other shelves. competitive This from health where such and we poultry But were Tyson meat times today can Asian category distribution our shelf and conventional digital QX one of have serve retailer item products filling points of protein early year. the In push have nuggets campaign XX,XXX in the the our two and coming report Asian We're into poultry the conventional that have quartile breaded this two of commitments only It's upper top of in through expectation items. are I brands. are we just had now are community in know similar a to my Perdue. onto later the national end available. innovation let are we that week multiservice entrees weeks includes in poultry our and this we QX three and this last the room that We new as grow broader entrees quartile breakfast frozen base two chicken month retailers, now resets our and very number

points gives the commitments XX,XXX category in got this we've growth a us customer aforementioned XXXX in and channel, the meaningful beyond. unmeasured secured channel total confidence to our from addition measured recently a of will we to be In also that contributor distribution in that

over an to I'd update CEO. our on the Law broadly. Now, and more call our Bolingbrook Jerry to turn operations to like provide

Jerry Law

$XXX to $XXX significantly million margin and within to on is short- its budget. I'm everyone. efforts. of our and ramp approximately report pleased size with you the us good I'm capacity call. proud the the growing will also demand team existing facility our of expected phase is products, year, morning, Thanks, accelerate enable of revenue into will and in Bryan. match million million products. opening the up we've meet the on for Bolingbrook of twice will add term Hey, city produce production in At Bolingbrook Bolingbrook gives categories, in startup, how at much enables Thank industry to the long $XXX and needed our and This incremental entry existing for our capacity today's full capacity us March. new joining approximately our since have very for capacity the come schedule improvement us continuing to far and to facility, to demand end by capacity.

XXXX. our continue of As Today, ahead year Bryan investment. and we EBITDA be to and remain track have on Bolingbrook our lines of schedule, fourth in the to positive a XXXX, final end mentioned, by up of the owing we quarter to to complete adjusted largely full phase running we expect four the

linear As greatest not and phase the yield a reminder, the will ramp last up efficiencies. is

driven of made the and and have vast our puts producing goal raw distribution We is as items. major margin will our improvement. design hub. million the flexibility supplies new our as labor, revenue of as proximity into throughput we achieving by significantly lower well that new built Products the materials, have in a this majority cost new products, in long-term capable Overall, the in plant's $XXX lower to higher us position accelerates innovation believe well plant facility meet structurally to as facility of a such existing our cost our

has year. utilization of Bolingbrook Industry this second impact relieve We have successfully facility, of seen on already into was pressure the City had which through first above operating quarter quarter XXX% to the and the the capacity

normal and more operational running With Industry it City at and level, in yields the we will continuous to to turn, improve drive efficiencies plant us on expect of focus there. a allow improvement

would touch over for environment. XXXX. inflationary on Akshay, get our light this like of I turned I Especially drivers to Before margin to in

now expect in be low We digits XXXX. direct material inflation the to in double

initiatives in these initiatives. productivity higher including productivity, cost several optimization. and have and offset place We offset is optimization, costs, followed by higher pricing to The trade pricing, trade biggest

guidance have both have I'm very savings Given to to growth XX% and to on in how in early enable in supply very represent productivity. well our margin initiatives in which two on stage share in XX% of XX% the support early XXXX. productivity to compete. demand. long exciting we frozen is in XXXX order I progress It's productivity still identified cost gross We are our made we at growing the believe a approximately we of of market time chain along positioned with that believe and we agenda, an are place capture base the Foods operations innings X% we've excited the the Good target for us in a categories term and deliver pricing Real we our growth for times our which will revised

Akshay, Now who second our you to the quarter I'd walk to turn like Financial our over call through Chief financial. will Officer

Akshay Jagdale

and morning, you, everyone. Thank good Jerry

quarter expansion a continued net products XX% sales with growth by the channel, delay compared our driven In growth growth the due core increase growth growth were in new The compared quarter national last products. a second and year. momentum measured continued core Sales major retail in last results, financial in retail being strong the growth $XX.X quarter year. strong primarily the of velocities XX% to and channel. customers, growth is second our at million, retailer. in to wins, second the to strong existing recent Turning the achieved in quarter shelf this in the an was to despite customer We resets in strong with channel second

velocities We products on are acceptance for retail of are new pleased positive, reads chicken. especially with early and breaded

quarter. second for growth aforementioned channel, quarter Our the remained national major at In channel remain retailer. it out included quarter expectations unmeasured channel significantly Albeit in plan timing by delays shelf full channel our guidance, the of this compared basis, point the sales the year sales this important retail resets second XX On of unmeasured driven to despite year internal strong distribution events gains. a growing with the year, impacted in to a and is unchanged XX% that the fold. in two promotional growth grew in over last

we secured distribution visibility and in this promotional channel. upcoming have events, Bryan clear incremental As mentioned, in recently have

our sales expect the we in and significantly second half previous expectations. channel As be such, unmeasured to growth better than to accelerate

second in $X.X net profit The net was gross XX.X% million new of to due up costs. to a an quarter primarily related the million X.X% sales, of in raw Bolingbrook, ramp gross higher or second facility the of gross year. gross gross sales profit of margin and last Our $X.X Illinois, reflecting of to of plant margin a in manufacturing material increase decrease our costs quarter was in compared margins

compared ‘XX. the XX.X% reported perspective, our the in gross quarter up the ‘XX. X.X% quarter And second compared early net Bolingbrook cost phase. plant net the which XXX XX% in in this adjusted quarter gross of driven last basis the by Adjusted sequentially manufactured a was sales, quarter, points XX.X% roughly primarily $X.X we that was we quarter, in been which Bolingbrook excluding XQ sequential margin margin to to margin million would improved margin better in price of million, For Sales is million of $X.X compared in products were to have during improvement sales first or this year. of Adjusted ramp was our gross still profit expectations, and given XQ the reflecting in $X.X XX.X% reported realization. ahead gross manufacturing XX.X%, margins minimal gross of

from continue as driven measures, gross costs. as adjusted greater half, margins in productivity contribution lower primarily improve well We sequentially second by expect our to to the labor

We expect especially structurally labor. exit to with lower costs, on XXXX

drive of that we net at that percentage Recall points savings to that expansion. have we margin a points long productivity least line gross at and percentage two of we five incremental time Beyond expect XXXX, this inflation. least generate will the expect over runway productivity savings to bottom believe of we'll able be annually drop to off

on of as stages the of productivity other the COGS short brand right offset heavily inflation, term, mentioned, at in In term. we're we in strategy pricing productivity for more which we productivity digits in to be believe savings the are Moreover, double seems As stage. and Jerry percent words, be our to our the is working. to the initiatives than relying expect in a early strategy harvesting short a gross

by portfolio, share to compared $X.X to offset improvements increase quarter the compared EBITDA driven operating XXXX. administrative million adjusted velocity by second in and in of first second Given to in compared of in in quarter sequential expenses. support primarily business, Adjusted loss The we're million. $X.X a million narrowed build the strong expenses million an research teams, The of gross by out loss and in of quarter leadership and and growth development. a to approximately $XX.X million $X.X of of expenses across driven the the operating million of EBITDA marketing second $XXX,XXX. XXXX, seeing despite by as million loss partially the $X.X $X.X margins, the to company's and increased XXXX, compared the expenses increase EBITDA to Adjusted the prices was and to expenses up. distribution of Sequentially, quarter increase operating adjusted the grains were the related operations, improvement is Total $XX.X taking investments our expenses were personnel was or growth selling in finance in increase XXXX.

second labor mentioned expected fixed We savings, lower in including of continued EBITDA productivity costs improvement half by the the leverage. earlier, factors higher year, and adjusted costs driven

Now shifting to flow. our balance and sheet cash

of equivalents As total cash million. of we cash $XX and June had debt million, XX, of $XX.X and XXXX,

was roughly planned capital disruptions a supply for of potential $XX Our the working transition help in increase majority major the inventory our with the of million to sequentially, ramp and driven working capital vast The increased during increases $XX up a related to revolver or our by increase growth. by fund balance minimize to increase plant in million production.

We and expect to amended our progresses. provide us more increase million year revolver as our the come XX inventory down normalize even we the to to credit levels the facility our quarter with capacity of Subsequent flexibility. to to$ end,

cash enough more $XX capacity without future foreseeable million balance our to of of with with revolver provides million $XX.X than we for us which Our million, to the unused needing capital. of for our business fund is liquidity more us believe $XX combined raise

As with spending leased no through the it's the equipment a being there's and and that CaPex important P&L facility plant. associated costs with reminder, is note Bolingbrook that flowing

current the continue to CaPex We expect requirements. XXXX our with we have liquidity ’XX out. considered EBITDA in to XQ laid and fund to we've limited needs, be and in ample execute positive plan adjusted positive All EBITDA

net XX%. Long adjusted reflecting expect margins gross adjusted margins to our to of of million, our gross approximately million. to million XX% are narrowing is now to an of for We expected and And approximately XX% now be and guidance in EBITDA that, of XX% EBITDA. on million adjusted available range million, Turning We're alas the take our to adjusted Operator? net to sales Adjusted EBITDA $XXX net questions. of in we expected of gross be increase ranges XXXX. $XXX range sales a sales of and margin we're margins $X With term, continue to XX% outlook $XXX XXXX. your expect compared to $X raising to adjusted XX%. and

Operator

William Our Andersen question [Operator from from first Blair. Instructions] the of line is Jon

Jon Andersen

the today good Hey, pointed out sales relative to an new quarter. guidance, acceleration half question. of in everybody. implies Thanks year should morning, second sales you second The the for the raised you the in growth which

the You in touched in I the on that? understand. do second to acceleration And and thus this driving of half? But sure in I prepared comments. confidence your your level visibility What's want make

Bryan Freeman

really And And of QX, like good good Hi, Yes. and we're and really the appropriate then it coming degree back to what measure terms a to our channel. seeing the a regard was from lot the with in do unmeasured felt QX expanded Jon. morning, We standpoint. this raise, that's raise. year, of on that's of the in distribution, we why have confidence, visibility we this for half velocity

Jon Andersen

in in your acceptance the sounds the due at part least channels unmeasured distribution of of It is like expanded to some innovation.

kind a Is statement? early. poultry. you some And it's breaded significant, on poultry. either the own yet did of think I of I Or for But promotional kind know, of still you velocities that that there that efforts I'm seeing initial in been that? on I'm little stores touch is you driven your mentioned around any, digital breaded merchandising fair activity, Or super that bit, you're a come? to have wondering, is touched activity velocities launch? wondering,

Bryan Freeman

I we're promoted. And shelf again, That's the to in encouraged very early, comments. it, products that's right, my being referenced we're the Still And only prepared so you're why, not weeks velocities in. come. by that on two

with to so before community right in it’s those, of cap really the that as kind read, well. velocity, our gate we've read also leaned It's out of And encouraging. very

So we still to that's stage. what grow seeing look, like where we're I have think And this why we from early today. I at room are

Jon Andersen

of the that I item know breakfast enhancements. And some

platform XXXX all Yes, the I'd making for more moment? in. efforts cases, do of Asian sit about the be at of respect certain interested I that poultry, that thinking it, of seen with to it think, the where things of kind we entree platform? market, be other kind noted given should in that an we've Is breaded you've noted we've the on particular in kind just something you're update

Bryan Freeman

will we're to now serve We're believe a as well. good there. a entrees well. on those But growth are XXXX. coming shelf velocities seeing nice significant I just multi with as driver Asian items off in be Yes, start

Jon Andersen

think think Jerry in I of terms was up the ramping have kind production XQ. the maintaining I sort of And supporting obviously, and quarter? limited distribution, where productivity very of that's levels productivity, but the coming was to begin not in very pretty mentioned volume innovation, limited quickly on and service of the out about to that front. volume of that Bolingbrook high only contribution you that? Will ramp also third that How expanding plant should think the may or here out in are facility? the we immaterial,

Bryan Freeman

We Yes, And utilization QX Bolingbrook wanted approximately industry turn do, the in benefit down. before it our us from has rate changed in that's $X to revenue QX. million to that Jerry out right. that take comments it's accurate. but Bolingbrook is of I of other a I'll mention are dramatically to allowing your coming only over in had I

give coming And out of the we pass of Jerry? of and to in Jerry a kind it today. But to Industry greater start so City improvement over to see going of view I'll what's Bolingbrook performance you on margin plant.

Jerry Law

Jon. Yes, Thanks, Good Bryan. morning,

was a four -- now. which So have in plant, shifts two and us. for in lines we Last the we're up week, running we to moved the big step spirals two yes, plant

We lines being next commissioned in about of XX have the set last the days.

are not for sign way. week, come each months in certainly this this couple I've thing I'm our on uptick, the plant, out produced being we're of the been getting ground. there the we're the that in Bolingbrook of most yields as is week. on and of which as a far the last part the to living improving big So efficiencies panels

sign to have majority move. team seeing making starting they're of the proud own commercialized And there. now commissioned, what our have of for things starting we're really chicken gel We’ve to that's So the are together. enchiladas, hired, we're we're that the enchiladas, kitchen we and a there, tortillas we

significant throughput agenda. both you'll step our a of next So and in the see productivity handful our change months,

So has future we're way. well And excited about the on there. we're what our

Jon Andersen

the the assumption confident at, you're kind we growth the for And Akshay, read in an the cash around on are the near to increased should Great. capacity fund of for One there that term? here can said, looking last for internally increase the say you one, you should I of decision or you time maybe how that is sake upgrade, being? the revolver, consumption

Akshay Jagdale

morning. Jon. Thanks, Good

so just view is, increases good flexibility way significantly it The yes, question. are. from you So, should it our we where

So think you consensus have second cushion, the zero, $XX so liquidity. for the of capital remainder And cash, $X it's, year. the usage more through the flow it neutral them right, and cash you it of about of estimates half, as with have take we million for just million if of working drag, flow free implies

as we've going in expecting, million of usage. So then million about said guess we have is street we're EBITDA ‘XX, $XX in liquidity. I And to positive. And you could be the say $X

that have we're in. this where we don't that is that for are, about feel nice good liquidity to We close from so And especially, need a created we environment anywhere very liquidity we to have, But standpoint. in that's cushion the ourselves.

So needs chest, relative we've a call war to are. built I what our would what

Operator

Truist. question from Our Bill line of next is from Chappell the

Bill Chappell

Thanks. what morning. XQ? Hey, housekeeping, to Good in a the can -- rollout just XQ national quantify from you impact from the the

Bryan Freeman

I'm for the up a question? minute there. sorry, Bill, broke What's you

Bill Chappell

Sorry.

quarter, a push one. the contract there quantify alluded of to from the or XQ. you if impact you distribution XQ to on was out I gain a know I could didn't if think a

Bryan Freeman

of in couple a was dollars. the million Yes. It range

Bill Chappell

second orders half. back the know supply then for And kind it. chain. of That's acceleration. the I you Got Obviously, into the on have visibility good

of Now those getting to state you that not in expectations risk or bottlenecks there terms most of back manufacturing, you? of chain what's like and meeting your risk half? into feel any supply is Do are kind issues the the with behind the but distribution in doors? Or of your kind of

Bryan Freeman

What we've our done levels, on balance happen service our in inventory what to increase sheet mitigate our is QX. saw which that you risk in and customers is

as well. customer the have also goods finished the forward to We deployed closer

as requires finished opened we've goods. our supply packaging, increase environment, in of as and done. of up And helps day inventories goods what well. the chain the hub materials, So end this it obviously for But raw that finished the an to at well. additional we've And that's manufacturers

kind the We QX startup because in Bolingbrook. that long and your QX. you'll as just see to and extremely said of Akshay also start Bill? Is come QX his comments, went And answer had of at kind question, normalize prior in down that of plant in

Bill Chappell

looking then to And absolutely. of innovation. kind Yes,

of launch robust a a of is ‘XX obviously, So lot things.

big you've I to should -- of and And know just there. to launches of expect a move kind rollout to and into be But thinking big do more items pushing it's so kind trying I looking indoors? of to and announce kind we some things here of yet ‘XX? backfilling different it of new type ‘XX Or ‘XX. really get of you as be similar

Bryan Freeman

it community. Well, company, our innovative drives we are

We pretty innovation robust have pipeline. a

Now said us, going about we probably think the sure access expect some be from to support doors hear you having our just is that having QX, team that you're as want I folks spot are when these start talking for to but velocities. said in on, for that, XXXX. making sales products that new available stuff to it, and now driving The XXXX, focus encouraging especially see XXXX

Operator

Our next of Jefferies. question comes from Rob line from the Dickerson

Rob Dickerson

it where was in so going much. come Akshay. QX, Great, kind to nicely first pretty ahead margin in. obviously just question of maybe for Gross thought we thanks I guess came of

was pricing. said driven You it by

I better came just like minute you to pricing the on then tied kind of guide why in a the would a potential spent maybe And that year, bit look secondly, expected. some But little at you're that kind when that, than So to does fourth seem is the you might tighten alluding the there's also for in quarter positive uptick which to. like EBITDA it of guide, get you've it’s great.

I think said margin you've in the to also improve back expect half. you'd sequentially

real back to So to are you that what That's it margins size, margin? then just risk of the hitting I there. trying frankly, quarter mean gross And gross in a challenger, seems am guide the better right the doesn't like I first improving you be the that get to tighten if seem margin half, kind happened tremendous question. in

Bryan Freeman

Akshay?

Akshay Jagdale

question. multi, Yes. those. question. there. question. morning nice love like I it's my to, of Thanks, Bryan. type It's And segmented Good Hey, multi a good

So gross margins.

gross sequentially. improved So reason margins the

out You call perfectly. it

this It has certainly City the yes, But of improvement. a our necessarily quarter believe. had as in the I'd as pricing in tackling and really better. better comments be Our price than the drove happened better margins plan. generally drove to execution had that say, realization on and Jerry his much major Bryan bringing Industry last But And expected. see we're what blocking we production positively. pretty in that quarter. than And higher to there's the was just plants mention, starting than Bolingbrook that I in in wasn't impacted It was the expectations. mentioned expectations is sequential our cost slightly inflection came

So would I think that was call, our I better quarter. slightly than what expectations this

gross and midpoint same. margin The we far margins, the the there's of change, is for guidance right, our we, guidance. the trajectory shape narrowed going our forward as As exactly overall, no

lot there's in expectations. we high no as as relatively I’ll change a cadence, inventory, right. is cost our you So really out, point of just But inventory. we saw, built have, And far that as material

going out are we that this in to quarter. So flush

But much, if our XQ operating are on impact are look structurally every So we cash that structurally and cost margins. lower, today, where getting at an single day from as efficiencies standpoint, costs day. you with on basis, will already much of our higher we with as Bolingbrook lower plan continues even a to City every of being happens, Industry part execute that production mix. operate, bigger our And

of a that XQ, better currently margins structurally the experiencing that we the as that's see have. the more higher we the see fully So year through COGS through flow then, with But impact residual we're progresses. costs inventory flowing you should will

did -- questions? cover that was your So that a of most

Rob Dickerson

Yes, that was great. then I it. two And quick appreciate questions.

given other the was catch I question your reason, maybe comment, had at a that increased in on a little a if measured just, major delay retailer. already point I fully remarks a shelf you're still The expected some distribution or in delay guide, you wins reset and there's original within revenue second that. that for is around, sure was but whatever upping the in the wasn't channels? guide, didn't

Bryan Freeman

right a more it if color way. to Akshay, provide you're Rob, wanted Yes. you little about thinking Rob? for the

Akshay Jagdale

Yes.

in was it. it not large retailer quarter, we there guide, included our a So the a wasn't this delay particular significant at delay. the was resets in expect did right, And pretty

So a it was negative surprise.

basically remain retail expectations is which implied And particular the timing It’s, sales is shifted, by that one items this it let's new offset worth are what's impact. our we of the to channel negative a expected, of call measured quarter’s that for our business means, which had And However, but retailer. same, other parts doing better. shelf periods. impact, that are velocities on future we our as are with

Rob Dickerson

channels, of already the the guess, velocities I mean, that's if then kind SKUs -- viewing on to, maybe the channels kind relative maybe much, And more majority taken. surface, pricing I'm in are the Perfect. how really club. the higher you're maybe despite it skews of changed in of the or you've discount the velocities that kind of for consumers Okay. your differential and I on we like more is, on if pricing, not lastly, sounds sure just at certain broadly speaking, there's Bryan, to like keep least to hearing headline haven't shifting more

to in all. to kind gauge side That's trying may channels And Thanks. on certain to of saw bit quarter what if a in relative get others. the see, just more strength did than velocity as So little a you the there be pricing. you

Bryan Freeman

the Rob, pricing Yes. at XX%. nice time, you about accelerate flow the this through, thing measured velocities channel over net I saw same in you realization our as and saw and our quarter, baseline mean,

a of the how thinking that general. in regard about of clear just to With So we're I think kind signal consumer elasticity. is

well one, the it's really benefits expect to environment, really you we're this three great know, Real value from if under frozen place be. think type a of as continue consumer come financial positioned to you that, and I think for pressure is I more to the positioned more for, Good uniquely Foods just food consumer basis, a always economic to in from ways,

Real Second, brand retailers And channel consumer promise and over really Foods Good the distribution the the high being that the when deliver and feed greatest you really what seeks is of their consumer. index in families. value to product design footprint, we finally, unmeasured look to with protein at providers

we're in, as I well we continue as very view positioned. Real being So Good the through actually environment macro that

Operator

of Our comes George from line next from ROTH question Kelly the Capital Partners.

George Kelly

Hi, guys, thanks for taking my questions.

of curious just I'm to secondly, And split. of the additional us you're a on with revenue XQ, you with the XQ half. questions. second between then bolster Just on pricing taking couple curious and planning modeling general could help if pricing, sort breakdown if of a in

Bryan Freeman

good George, to I'll not over any we have price. plans further morning, Akshay. Yes, regard question with today pass But pricing, modeling do to the to take

However, hesitate if expectations hesitated no time, to take to input not have past change, the and in of the plan our at have price. future we QX we take costs as the with will want the just you if not through Akshay, environment this differences or we pricing. roll to George? But QX,

Akshay Jagdale

that's a George. morning. Yes, question. Good Thanks, great

more evenly I the of year the remainder So distributed. be going to think is

revenue, full year XX:XX. take just quarters guidance next will be correctly, year-to-date our the you if So two

that's including expectations. seen. we've So et distribution quarter than factors and impacting is factored fourth the that it discussed, evenly other we more into that that delays, cetera our is And the new the what's previous distributed

So the two what's quarters. next for even between guidance our break remaining on revenue

George Kelly

question. great. year? do quick Did Okay, then And another where you expect inventory, the modeling to end

Akshay Jagdale

Yes, great question.

the took of having bringing a amount manage any this of and while on move not so right. tactical in we half We supply on significant first strategic made disruptions, that Bolingbrook transition some, we was a have to inventory

our that about and So range. made, we it strategic days we move a to should the took be was in days, end XX the, on in to XX XXX tactical that we days targeting

of, reduction inventory, And in at So it that working the especially cash of is form in expect earlier the to it's a assumption. context was that cash going a in do looking you're flow, to source in the capital. flow COGS. what working -- as will of street there's comment my we going overall assuming terms And free of neutral that expecting to about on be a significant capital through

significant to be going to inventory is we and free a come on it we by So flow our XX-XX half. second the for to going come think is targeting amount, which a cash days, down, impact should dollar do positive material have down are

George Kelly

just then last great, two Okay, questions. quick,

challenges club? Is -- of retail how facing. around and First, half that resets which is [Inaudible] with question commented just one some curious, products there's resets? the risk And you labor is bit into your new comfortable that you that of the just innovation because second are curious then going of are issues a which all second

Bryan Freeman

XX,XXX the for got And, remainder Hi, QX. year. my I for George. the point, of really we've that No, remarks in the this confirmed visibility rolls good about prepared innovation at QX, TPDS through talked

remainder I don't So issues for of really additional see year. reset the the timing

feel What about that. So your George? good was question, second

George Kelly

the are recent going are which products launches Just the big new launch that club? into

Bryan Freeman

seeing we product The chances. what QX. see in on you velocities there we And to we Oh, said, our you'll performing accepted And excited as poultry see shelf as happens the we see are that liked We're there. well. in overlay there. breaded being the when measured channel,

Operator

the answer we and session. of have end Ladies you. the and reached gentlemen, Thank question

for like back would to conference turn I Now comments. Freeman, to the closing Mr. Bryan

Bryan Freeman

you. call. Thank reporting look November. you to thank again we And forward for Well, joining in the

Operator

Thank you.

The of for participation. Conference you Food now has concluded. the Company So Thank Real Good your

You may your disconnect now lines.

Real Good Food (RGFC) 12 Aug 222022 Q2 Earnings call transcript