Executive Summary

Q4 2022 revenue was $35.7M (+39% YoY), but sales were below internal plans due to an intra‑quarter decision to pull back a low‑margin promotion; gross margin inflected to 13.7% (from 4.7% in Q3), and adjusted gross margin reached 27.7% (vs 15.8% in Q3) on commodity normalization and improving plant efficiencies .
Management reaffirmed 2023 guidance: at least $200M revenue, ≥24% adjusted gross margin, mid‑to‑high single‑digit millions of adjusted EBITDA, and positive cash flow from operations; cadence is back‑half weighted due to shelf resets and promotion timing .
One‑time distributor transition costs hit Q4 margins by ~300 bps (≈$1M EBITDA); excluding this, adjusted EBITDA would have exceeded internal expectations; Q4 adjusted EBITDA loss narrowed to $0.7M from $3.8M in Q3 .
FY22 revenue was $141.6M, below the Q3‑stated 2022 guidance range of $155–$160M as start‑up and promotional decisions weighed; management emphasized prioritizing margin/profitability over lower‑quality volume .
Stock catalysts: margin inflection, reaffirmed 2023 outlook, and visible distribution wins (~50k new TPDs) in higher‑velocity SKUs (3–8x base), with plant capacity in place to support growth .

What Went Well and What Went Wrong

What Went Well

Sequential margin inflection: GAAP gross margin rose to 13.7% (up ~9 pts QoQ), and adjusted gross margin to 27.7% (best in six quarters), driven by commodity normalization and improving efficiencies at Bolingbrook .
Strong distribution/velocity setup for 2023: ~50,000 new distribution points secured (≈38% YoY increase), with new items showing 3x–8x base velocities; back‑half weighted ramp via resets .
Management conviction and quotes: “We are re‑iterating our revenue guidance of at least $200 million in 2023” and “Bolingbrook…allowed us to significantly increase production and labor efficiencies” .

What Went Wrong

Revenue shortfall vs prior expectations: Q4 sales came in below plans after pulling a promotion; management confirmed the shortfall was due to this intra‑quarter decision to prioritize margins .
One‑time logistics/distribution reset costs: transition to a new strategic partner cost ~300 bps of margin (≈$1M EBITDA), depressing Q4 profitability despite operational progress .
FY22 guidance miss: FY22 net sales were $141.6M vs Q3 guidance of $155–$160M; the miss reflects start‑up inefficiencies (Q3 “start‑up blues”), higher commodity costs earlier in the year, and the Q4 promotional pullback .

Financial Results

Quarterly performance (oldest → newest):

Metric	Q4 2021	Q2 2022	Q3 2022	Q4 2022
Revenue ($USD Millions)	$25.6	$30.8	$37.6	$35.7
Gross Margin % (GAAP)	5.0%	7.6%	4.7%	13.7%
Adjusted Gross Margin %	17.4%	22.0%	15.8%	27.7%
Adjusted EBITDA ($USD Millions)	$(3.9)	$(3.2)	$(3.8)	$(0.7)

Additional P&L/balance sheet highlights:

Q4 2022 net loss: $(11.9)M; loss from operations: $(9.3)M .
FY 2022 net sales $141.6M; FY 2022 diluted EPS $(1.77) .
Cash & equivalents $7.6M; total debt $73.2M; available liquidity $37.6M at 12/31/22 .
Cash burn improved: ~$8M in Q4 vs $19M in Q3 and $24M in Q2; ~$1M related to core working capital in Q4 .

Channel and KPI snapshots:

KPI / Channel Metric	Q2 2022	Q3 2022	Q4 2022
Household Penetration	8.3% (July 2022)	8.6% (Oct 2022)	8.4% (Jan 1, 2023)
New Distribution Points Secured (Cumulative)	—	39,000	~50,000 (+38% YoY footprint)
Measured Channel Growth (YoY)	—	—	1% (lap of +105% in Q4’21); 2‑yr +107%
Unmeasured Channel Growth (YoY)	—	~77%	~81%
Bolingbrook Capacity/Lines	Ramp to add ~$200M capacity by YE22	“Final…start‑up phase”	8 lines; capacity ≈$200M, expandable by $50–$70M with limited capex

Notes:

Q4 gross margin improvement (~+9 pts QoQ) reflects normalization in chicken/cheese/bacon and operational gains; adjusted gross margin benefited from start‑up/idle cost add‑backs .
Distributor transition reduced margin ~~300 bps (~~$1M EBITDA) in Q4; one‑time .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Sales	FY 2022	$155–$160M (at lower end)	Actual: $141.6M	Below prior guidance
Net Sales	FY 2023	≥$200M (prelim)	≥$200M (maintained)	Maintained
Adjusted Gross Margin	FY 2023	≥24% (prelim)	≥24% (maintained)	Maintained
Adjusted EBITDA	FY 2023	Mid‑to‑high single‑digit $M (prelim)	Mid‑to‑high single‑digit $M (maintained)	Maintained
Cash Flow from Operations	FY 2023	Positive (prelim)	Positive (maintained)	Maintained

Management added that FY23 growth is “at least 41%” to reach ≥$200M, clarifying a prior “30%” phrasing; cadence back‑half weighted given resets/promotions .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q2 & Q3 2022)	Current Period (Q4 2022)	Trend
Bolingbrook ramp/efficiency	Q2: ramp to add ~$200M capacity by YE22 ; Q3: “start‑up blues,” moving to final efficient phase	8 lines running; ≈$200M capacity with additional $50–$70M available; sequential efficiency gains	Improving execution
Commodities & costs	Q2/Q3: elevated raw materials; margin pressure	Chicken/cheese/bacon normalized; 600–1,000 bps margin tailwind if at spot	Favorable tailwind
Distribution & velocities	Q3: 39k new TPDs; strong velocities	~50k new TPDs; new items 3x–8x base velocities; back‑half resets	Accelerating setup
Channel mix	Q3: strong unmeasured growth (~77%)	Q4 unmeasured +81% YoY; measured +1% YoY; 2‑yr measured +107%	Unmeasured outperforms
Profitability focus	Q2/Q3: aim for positive CFO in 2023	Pulled low‑margin promo; absorbed one‑time logistics cost to lower run‑rate; reiterate positive CFO in 2023	Discipline heightened
Product expansion	Q2/Q3: breaded poultry momentum; new items	Refrigerated flautas launch (> $2k/PD/week velocity), burritos in April; enchilada 2.0 rollout	Broadening platforms

Management Commentary

“We are re‑iterating our revenue guidance of at least $200 million in 2023…our distribution gains are tracking ahead of plan, baseline velocities remain strong and new product velocities are exceeding base.” — Bryan Freeman, Executive Chairman .
“Bolingbrook…has allowed us to significantly increase production and labor efficiencies…helped to grow our gross margin profile to 13.7%…I believe we are well positioned to achieve…positive operating cash flow in 2023.” — Gerard Law, CEO .
“Adjusted EBITDA was a loss of $700,000…below our internal expectations, but…this decision [distribution transition] will pay dividends in 2023…we expect adjusted EBITDA in the mid‑to‑high single‑digit range…Cash flow from operations…positive in 2023.” — Bryan Freeman .
“If you were to lock in our commodities at current spot rates, our margins in 2023 would be 600 to 1,000 bps higher.” — Akshay Jagdale, CFO .

Q&A Highlights

Q4 revenue shortfall: Management confirmed the miss vs prior expectations was entirely due to pulling a low‑margin promotion intra‑quarter to prioritize profitability .
2023 growth math: CFO clarified the ≥$200M revenue outlook implies ≥41% growth, correcting prior wording that suggested ~30% .
One‑time logistics cost: Distributor transition was a one‑time cost (~$1M) tied to moving finished goods and simplifying the network; expected to structurally lower logistics costs in 2023 .
Cadence and scanner data: Measured‑channel consumption appears subdued early in the year, but management expects a “massive” uptick as ~50k high‑velocity TPDs come on in May/June resets .
Liquidity/debt: Cost of debt in low double digits; revolver is PIK; recent amendment added ≥$20M liquidity; aiming for operating cash flow positive from May/June and for full‑year 2023 .

Estimates Context

S&P Global (Capital IQ) consensus estimates were not available for RGF at this time due to a mapping limitation; therefore, EPS/revenue estimate comparisons and beat/miss analysis could not be performed. Values retrieved from S&P Global are unavailable for this ticker at this time.

Key Takeaways for Investors

Margin inflection is underway: Q4 GAAP gross margin 13.7% (vs 4.7% in Q3) and adjusted gross margin 27.7%; commodity normalization and operational efficiencies provide a credible path to ≥24% adjusted gross margin in 2023 .
2023 setup is distribution‑driven and back‑half weighted: ~50k TPDs in higher‑velocity SKUs (3–8x base) support ≥$200M revenue; watch May/June resets for consumption acceleration .
One‑time costs masked underlying EBITDA progress: Q4 adjusted EBITDA loss narrowed to $(0.7)M despite ~300 bps headwind from distribution transition; run‑rate profitability should benefit in 2023 .
Liquidity adequate for plan: $37.6M liquidity at year‑end, revolver PIK, and expanded facilities provide runway to execute the 2023 plan while targeting operating cash flow positivity .
Execution risks: FY22 guidance miss (actual $141.6M vs $155–$160M guided) and continued reliance on back‑half resets elevate timing risk; monitor plant utilization, logistics cost realization, and promo cadence .
Product breadth expanding: Refrigerated entry (flautas, burritos) shows strong velocities (> $2,000/PD/week), adding incremental growth vectors beyond frozen .
Near‑term trading lens: Evidence of sustained margin traction and confirmation of back‑half consumption lift (scanner trends) are likely the key stock drivers into mid‑year resets .

Real Good Food Company, Inc. (RGF)·Q4 2022 Earnings Summary