Tattooed Chef Reports Second Quarter 2022 Financial Results

·13 min read
Tattooed Chef Inc.
Tattooed Chef Inc.

PARAMOUNT, Calif., Aug. 08, 2022 (GLOBE NEWSWIRE) -- Tattooed Chef, Inc. (Nasdaq: TTCF) (“Tattooed Chef” or the “Company”), a leader in plant-based foods, today announced financial results for the second quarter ended June 30, 2022.  

Second Quarter 2022 Financial Overview Compared to Second Quarter 2021

  • Net revenue rose 15.6% to $58.1 million

  • Tattooed Chef™ branded product net revenue increased to $33.9 million, or 58.4% of total net revenue

  • Net loss was $26.4 million

  • Adjusted EBITDA (1) loss was $20.5 million

(1)    Adjusted EBITDA is a non-GAAP financial measure defined below under “Non-GAAP Measures.” Please see “Adjusted EBITDA Reconciliation” at the end of this press release.

Subsequent to quarter end, we expanded the UMB asset-based lending line from $25 million to $40 million and extended the maturity date to September 2025. Thus far the line remains unused.

Operational Highlights

  • Added more than 35,000 new points of distribution during the second quarter of 2022; strengthened brand presence in traditional grocery stores

  • Integrated a new, 45,000 square foot Tattooed Chef-operated cold storage facility

  • Completed first run of Tattooed Chef refrigerated plant-based oat butter bars at the Belmont facility

  • Increased capacity and streamlined production process at New Mexico Food Distributors facility

  • Completed construction of new in-house food safety laboratory in Paramount facility

“We continued to increase revenue year-over-year, expanded our channel presence, and elevated the Tattooed Chef brand, all while investing in strategic capacity to strengthen our position as a premier, fully-integrated value-added plant-based food company,” said Sam Galletti, President and CEO. “During the second quarter of 2022, we introduced more than 30 new products, invested in a targeted sales and marketing campaign that is attracting new consumers and driving sales, and expanded our retail presence to approximately 17,200 retail locations across the country. We generated a 15.6% increase in sales versus the second quarter of 2021 and remain on the path to profitability. We are confident that we will achieve positive adjusted EBITDA by the end of 2023.”

“We continue to increase household awareness and introduce new consumers into the plant-based world,” said Sarah Galletti, the Tattooed Chef and Chief Creative Officer. “Our nostalgic innovation combined with what the Tattooed Chef brand stands for is attracting new and valuable consumers into retail freezer aisles for our partners. We are confident that this trend will continue and expand into the refrigerated and ambient aisles with the broad availability of our plant-based oat butter bars and dairy and grain-free chips later this year and into early 2023.”

Second Quarter 2022 Results

Revenue increased 15.6% to $58.1 million in the second quarter of 2022 from $50.3 million in the second quarter of 2021. Tattooed Chef™ branded products reflected an approximate $6.0 million reduction in club sales year over year due to timing of promotions in 2021 versus 2022. Excluding this impact, branded product sales in the 2022 second quarter increased 21.4% from the 2021 second quarter.

Cost of goods sold increased 36.7% to $57.4 million in the second quarter of 2022 from $42.0 million in the second quarter of 2021. While the increase in costs of goods sold was driven by higher sales volume, inflationary pressures continued during the 2022 second quarter with an unprecedented rise in supply chain costs, including food, packaging, freight and logistics. Freight on finished goods was roughly $6.7 million and equates to roughly 11.5% of total revenue this quarter.   The Company believes that these cost increases will, over time, be mitigated by a variety of internal initiatives, including the commencement of operations at its dedicated cold storage facility, enterprise-wide equipment upgrades and automation currently underway, increased capacity utilization, and the benefits of vertical integration.

Gross profit was $0.7 million in the second quarter of 2022, or 1.3% of revenue, compared to $8.3 million, or 16.5% of revenue, in the second quarter of 2021. The decline in gross margin was due to the above referenced increase in costs of goods sold. Given the expected revenue growth in the second half of 2022, fixed costs are expected to decline as a percentage of sales, which should lead to improved gross margins.

Operating expenses increased 48.3% to $24.3 million for the second quarter of 2022 from $16.4 million in the second quarter of 2021, reflecting ongoing investments in the Tattooed Chef brand, sales channel expansion, and corporate functions to support public company reporting requirements.

Net loss in the second quarter of 2022 was $26.4 million, or $(0.32) per diluted share, as compared to a net loss of $57.5 million, or $(0.70) per diluted share, in the second quarter of 2021.

Adjusted EBITDA loss was $20.5 million in the second quarter of 2022 compared to Adjusted EBITDA loss of $6.1 million in the second quarter of 2021.

Financial Condition

At June 30, 2022, cash was $27.7 million and long-term debt was approximately $1.4 million. Net cash used in operating activities in the second quarter of 2022 was $23.7 million with $0.8 million in cash consumed by working capital activities as accounts receivables generated $14.4 million, which was fully offset by cash consumed by inventory (which was abnormally high due to the supply chain challenges and our decision to ensure product availability for our customers), prepaid expenses and current liabilities. Capital expenditures in the second quarter of 2022 were $6.8 million and primarily reflected the purchase of new automated manufacturing equipment, the installation of the chip line, and the construction of the in-house laboratory in Paramount. Prepaid marketing activities total $15.8 million in the second quarter of 2022.

Full Year 2022 Outlook

Based on the current business environment and outlook for the remainder of the year, the Company is reiterating guidance on revenue, marketing and capital expenditures, and lowering guidance with respect to gross margin:

  • Revenue of $280-$285 million, unchanged from prior guidance.

  • Gross margin of 8-10%, down from prior guidance of 10-12%, due to continued cost inflationary pressures and the timeline for implementation of automation initiatives at our facilities.

  • Marketing expenses of $27-$32 million. Marketing expenses in the first six months of 2022 totaled $17.5 million as we continue to invest in the Tattooed Chef brand and expand points of distribution.

  • Capital expenditures of approximately $20 million, with investments focused on automation and robotics at our manufacturing facilities, unchanged from prior guidance. Capital expenditures in the first six months of 2022 totaled $15.6 million.

For more detailed information about our quarterly results, see our Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, which we expect to file on August 9, 2022

Conference Call and Webcast

The Company will host a conference call after close of market on August 8 at 5:00 p.m. Eastern Time. Investors interested in participating in the live call can dial:

  • (877) 407-9753 from the U.S.

  • (201) 493-6739 internationally.

The call will be webcast and available on the Investors section of the Company’s website at www.tattooedchef.com. The webcast will be archived for 30 days.

About Tattooed Chef
Tattooed Chef is a leading plant-based food company offering a broad portfolio of innovative and sustainably sourced plant-based foods. Tattooed Chef’s signature products include ready-to-cook bowls, zucchini spirals, riced cauliflower, acai and smoothie bowls, cauliflower pizza crusts, wood-fired plant based pizzas, handheld burritos, quesadillas, and Mexican entrees, which are available in the frozen food sections of leading national retail food and club stores across the United States as well as on Tattooed Chef’s e-commerce site. Understanding consumer lifestyle and food trends, a commitment to innovation, and self-manufacturing allows Tattooed Chef to continuously introduce new products. Tattooed Chef provides approachable, great tasting and chef-created products to the growing group of plant-based consumers as well as the mainstream marketplace. For more information, please visit www.tattooedchef.com​.

Follow us on social: Facebook, Instagram, TikTok, Twitter, and LinkedIn and Taste the Jams on Spotify.

Forward Looking Statements
Certain statements made in this release are “forward-looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. When used in this release, words such as “estimates,” “projected,” “expects,” “anticipates,” “forecasts,” “plans,” “intends,” “believes,” “seeks,” “may,” “will,” “should,” “future,” “propose,” “trend,” “accelerate,” “expansion,” “new,” “leverage,” “continues,” “maintains,” “opportunities,” “outlook,” “next,” “increase,” “expand,” “beyond,” “potential,” “growth,” “pipeline,” “guidance” and variations of these words or similar expressions (or the negative versions of such words or expressions) are intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance, conditions or results, and involve a number of known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside Tattooed Chef’s control, that could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements. Important factors, among others, that may affect actual results or outcomes include: uncertainty surrounding the ultimate success of Tattooed Chef’s e-commerce platform; the need to prove Tattooed Chef’s ability to build brand awareness and continue to launch innovative products; continued acceptance of Tattooed Chef branded products by new retail customers; Tattooed Chef’s ability to increase in-store count and points of distribution; the outcome of any legal proceedings that may be instituted against Tattooed Chef; Tattooed Chef’s ability to effectively and efficiently integrate recent and/or new acquisitions; competition and the ability of the business to grow and manage growth profitably; the impact of inflation, particularly with respect to freight and container expenses; the effect of possible supply chain disruption; uncertainty around our ability to bring the new operational sites up to full capacity; our ability to raise prices without decrementing sales volumes; and other risks and uncertainties indicated from time to time in our annual report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission (the “SEC”), including those under “Risk Factors” therein, and other factors identified in past and future filings with the SEC, available at www.sec.gov. Some of these risks and uncertainties may be amplified by COVID-19 or hostilities in Ukraine. Tattooed Chef undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Non-GAAP Measures

The Company seeks to achieve profitable, long-term growth by monitoring and analyzing key operating metrics, including Adjusted EBITDA. The Company defines EBITDA as net income before interest, taxes, and depreciation. Adjusted EBITDA further adjusts EBITDA by adding back non-cash compensation expenses, non-recurring expenses, and other non-operational charges. The Company’s management uses this non-GAAP financial metric and related computations to evaluate and manage the business and to plan and make near and long-term operating and strategic decisions. The management team believes this non-GAAP financial metric is useful to investors to provide supplemental information in addition to the GAAP financial results. Management reviews the use of its primary key operating metrics from time-to-time. Adjusted EBITDA is not intended to be a substitute for any GAAP financial measure and as calculated, may not be comparable to similarly titled measures of performance of other companies in other industries or within the same industry. The Company’s management team believes it is useful to provide investors with the same financial information that it uses internally to make comparisons of historical operating results, identify trends in underlying operating results, and evaluate its business.

CONTACTS

INVESTORS
Stephanie Dieckmann, CFO
Tattooed Chef
(562) 602-0822

Devin Sullivan, SVP
The Equity Group
(212) 836-9608 / dsullivan@equityny.com

Karin Daly, VP
The Equity Group
(212) 836-9623 / kdaly@equityny.com

TATTOOED CHEF, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS (unaudited)
(in thousands, except for share and per share information)

 

 

Three months Ended

 

 

Six months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

NET REVENUE

 

$

58,110

 

 

$

50,270

 

 

$

130,174

 

 

$

102,739

 

COST OF GOODS SOLD

 

 

57,370

 

 

 

41,953

 

 

 

121,284

 

 

 

87,242

 

GROSS PROFIT

 

 

740

 

 

 

8,317

 

 

 

8,890

 

 

 

15,497

 

OPERATING EXPENSES

 

 

24,346

 

 

 

16,419

 

 

 

49,139

 

 

 

30,615

 

LOSS FROM OPERATIONS

 

 

(23,606

)

 

 

(8,102

)

 

 

(40,249

)

 

 

(15,118

)

Interest expense

 

 

(42

)

 

 

(94

)

 

 

(83

)

 

 

(114

)

Other (expense) income

 

 

(2,334

)

 

 

733

 

 

 

(2,945

)

 

 

(1,948

)

LOSS BEFORE INCOME TAX EXPENSE

 

 

(25,982

)

 

 

(7,463

)

 

 

(43,277

)

 

 

(17,180

)

INCOME TAX EXPENSE

 

 

(455

)

 

 

(50,009

)

 

 

(711

)

 

 

(48,534

)

NET LOSS

 

$

(26,437

)

 

$

(57,472

)

 

$

(43,988

)

 

$

(65,714

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET LOSS PER SHARE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.32

)

 

$

(0.70

)

 

$

(0.53

)

 

$

(0.81

)

Diluted

 

$

(0.32

)

 

$

(0.70

)

 

$

(0.53

)

 

$

(0.81

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE COMMON SHARES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

82,284,005

 

 

 

81,981,428

 

 

 

82,261,079

 

 

 

81,121,795

 

Diluted

 

 

82,284,005

 

 

 

81,981,428

 

 

 

82,261,079

 

 

 

81,258,427

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER COMPREHENSIVE LOSS, NET OF TAX

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(431

)

 

 

(210

)

 

 

(861

)

 

 

(101

)

COMPREHENSIVE LOSS

 

$

(26,868

)

 

$

(57,682

)

 

$

(44,849

)

 

$

(65,815

)

 

TATTOOED CHEF, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in thousands, except for share information)

 

 

June 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

ASSETS

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

Cash

 

$

27,729

 

 

$

92,351

 

Accounts receivable, net

 

 

32,316

 

 

 

25,117

 

Inventory

 

 

62,622

 

 

 

54,562

 

Prepaid expenses and other current assets

 

 

10,824

 

 

 

7,027

 

TOTAL CURRENT ASSETS

 

 

133,491

 

 

 

179,057

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

 

57,687

 

 

 

46,476

 

Operating lease right-of-use asset, net

 

 

16,883

 

 

 

8,039

 

Finance lease right-of-use asset, net

 

 

5,554

 

 

 

5,639

 

Intangible assets, net

 

 

96

 

 

 

151

 

Deferred income taxes, net

 

 

259

 

 

 

266

 

Goodwill

 

 

26,705

 

 

 

26,924

 

Other assets

 

 

175

 

 

 

649

 

TOTAL ASSETS

 

$

240,850

 

 

$

267,201

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

 

 

Accounts payable

 

$

30,579

 

 

$

28,334

 

Accrued expenses

 

 

6,525

 

 

 

3,767

 

Line of credit

 

 

1,510

 

 

 

1,200

 

Notes payable, current portion

 

 

5,028

 

 

 

5,019

 

Forward contract derivative liability

 

 

2,988

 

 

 

1,804

 

Operating lease liabilities, current portion

 

 

2,190

 

 

 

1,523

 

Other current liabilities

 

 

386

 

 

 

122

 

TOTAL CURRENT LIABILITIES

 

 

49,206

 

 

 

41,769

 

 

 

 

 

 

 

 

 

 

Warrant liability

 

 

146

 

 

 

814

 

Operating lease liabilities, net of current portion

 

 

14,910

 

 

 

6,599

 

Notes payable, net of current portion

 

 

1,432

 

 

 

716

 

TOTAL LIABILITIES

 

 

65,694

 

 

 

49,898

 

 

 

 

 

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Preferred stock - $0.0001 par value; 10,000,000 shares authorized, none issued and outstanding at June 30, 2022 and December 31, 2021

 

 

-

 

 

 

-

 

Common stock- $0.0001 par value; 1,000,000,000 shares authorized; 82,459,803 shares and 82,237,813 shares issued
and outstanding at June 30, 2022 and December 31, 2021, respectively

 

 

8

 

 

 

8

 

Additional paid in capital

 

 

245,064

 

 

 

242,362

 

Accumulated other comprehensive loss

 

 

(1,814

)

 

 

(953

)

Accumulated deficit

 

 

(68,102

)

 

 

(24,114

)

TOTAL STOCKHOLDERS’ EQUITY

 

 

175,156

 

 

 

217,303

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

240,850

 

 

$

267,201

 

 

TATTOOED CHEF, INC.
Adjusted EBITDA Reconciliation
(in thousands)

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

(in thousands)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net loss

 

$

(26,437

)

 

$

(57,472

)

 

$

(43,988

)

 

$

(65,714

)

Interest expense

 

 

42

 

 

 

94

 

 

 

83

 

 

 

114

 

Income tax expense

 

 

455

 

 

 

50,009

 

 

 

711

 

 

 

48,534

 

Depreciation and amortization

 

 

1,536

 

 

 

896

 

 

 

3,043

 

 

 

1,448

 

EBITDA

 

 

(24,404

)

 

 

(6,473

)

 

 

(40,151

)

 

 

(15,618

)

Adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock compensation expense

 

 

1,415

 

 

 

318

 

 

 

2,702

 

 

 

3,502

 

Loss (gain) on foreign currency forward contracts

 

 

2,049

 

 

 

(1,023

)

 

 

3,072

 

 

 

1,978

 

(Gain) loss on warrant remeasurement

 

 

(461

)

 

 

371

 

 

 

(668

)

 

 

51

 

Unrealized foreign currency losses

 

 

626

 

 

 

-

 

 

 

626

 

 

 

-

 

Acquisition expenses

 

 

119

 

 

 

726

 

 

 

224

 

 

 

726

 

UMB ATM transaction

 

 

-

 

 

 

22

 

 

 

-

 

 

 

22

 

ERP related expenses

 

 

179

 

 

 

-

 

 

 

338

 

 

 

-

 

Total Adjustments

 

 

3,927

 

 

 

414

 

 

 

6,294

 

 

 

6,279

 

Adjusted EBITDA

 

$

(20,477

)

 

$

(6,059

)

 

$

(33,857

)

 

$

(9,339

)