The Real Good Food Company, Inc. (NASDAQ:RGF) Q2 2022 Earnings Conference Call August 12, 2022 8:30 AM ET Company Participants Chris Bevenour - Vice President, Investor Relations Bryan Freeman - Executive Chairman and Chairperson of Board of Directors Jerry Law - Chief Executive Officer, Director Akshay Jagdale - Chief Financial Officer Conference Call Participants Jon Andersen - William Blair Bill Chappell - Truist Securities Rob Dickerson - Jefferies George Kelly - ROTH Capital Partners Operator Ladies a ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 or ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission File Number 001-41025 THE REAL GOOD FOOD COMPANY, INC. (Exact Name of Registrant as Specified in its Charter) Delaware 87-1280343 (State or Other Jurisdiction of Incorporation or Orga ...

The Real Good Food Company, Inc. (NASDAQ:RGF) Q1 2022 Earnings Conference Call May 13, 2022 8:30 AM ET Company Participants Bryan Freeman - Executive Chairman Jerry Law - CEO Akshay Jagdale - CFO Chris Bevenour - VP, FP&A and IR Conference Call Participants Jon Andersen - William Blair Bill Chappell - Truist Securities Rob Dickerson - Jefferies George Kelly - ROTH Capital Partners Operator Greetings, and welcome to The Real Good Food Company First quarter 2022 Earnings Conference Call. At this time, all par ...

Bo | --- | --- | |-----------------------|-------| | | | | | | | First Quarter 2022 | | | Earnings Presentation | | | May 2022 | | (Nasdaq: RGF) Disclaimer Forward-Looking Statements This presentation contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which statements are subject to considerable risks and uncertainties. These forward-looking statements are intended to qualify f ...

PART I [Business Overview](index=5&type=section&id=Item%201%20Business) The company is a high-growth, health-focused frozen food manufacturer that completed its IPO in November 2021 - Founded in 2016, RGF focuses on health & wellness frozen foods, offering high-protein, low-sugar, gluten- and grain-free products in approximately **15,000 stores** and online[17](index=17&type=chunk)[18](index=18&type=chunk) - Completed its Initial Public Offering (IPO) on November 9, 2021, issuing **5,333,333 shares** of Class A common stock at **$12.00 per share**, trading on Nasdaq under 'RGF'[19](index=19&type=chunk) - Strategic advantages include a mission-focused approach, craveable products, a large and engaged consumer community, innovative product-development, self-manufacturing capabilities, and strong product positioning[21](index=21&type=chunk) - Core products, breakfast sandwiches and entrées, are the chief drivers of growth, all designed to be gluten-free, added sugar-free, higher in protein, and lower in carbohydrates[23](index=23&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk) - Operates a 45,000 sq ft USDA/FDA registered manufacturing facility in City of Industry, CA, producing **over 70% of goods sold in 2021**, with products certified 'gluten free' by GFCO[24](index=24&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk) - As of December 31, 2021, the company had **107 full-time employees** and approximately **451 contract employees** hired through Professional Employer Organizations (PEOs)[47](index=47&type=chunk)[48](index=48&type=chunk) - Leases its principal executive office in Cherry Hill, NJ, a manufacturing facility in City of Industry, CA, a warehouse in La Verne, CA, and a new 81,406 sq ft facility in Bolingbrook, IL, commencing January 1, 2022[52](index=52&type=chunk)[53](index=53&type=chunk)[54](index=54&type=chunk)[55](index=55&type=chunk) [Risk Factors](index=12&type=section&id=Item%201A%20Risk%20Factors) The company faces risks from its limited operating history, net losses, customer concentration, and market competition - The company has a limited operating history and incurred significant net losses of **$67.1 million in 2021** and **$15.6 million in 2020**, requiring additional financing for its growth strategy[72](index=72&type=chunk)[73](index=73&type=chunk)[111](index=111&type=chunk) - Substantial customer concentration risk exists, with **Costco and Walmart** collectively accounting for approximately **71% of net sales in 2021** (51% and 21% respectively)[78](index=78&type=chunk) - The company operates in a highly competitive market with numerous brands, including larger conventional and health & wellness companies, and faces risks from changing consumer preferences[86](index=86&type=chunk)[87](index=87&type=chunk)[90](index=90&type=chunk) - Reliance on co-manufacturers (up to **30% of products in 2021**) without long-term contracts poses a risk of reduced manufacturing capacity and supply disruptions[101](index=101&type=chunk)[102](index=102&type=chunk) - Volatility in prices of food commodities (e.g., poultry, dairy) and packaging materials can significantly increase cost of sales and reduce profitability[110](index=110&type=chunk) - The company's structure, including the Tax Receivable Agreement (TRA) and control by Class B common stock holders (**76% voting power**), may lead to conflicting interests with public stockholders[150](index=150&type=chunk)[155](index=155&type=chunk)[156](index=156&type=chunk) - As a public company, increased expenses, management's limited public company experience, and the need to maintain effective internal controls pose significant challenges[187](index=187&type=chunk)[190](index=190&type=chunk)[196](index=196&type=chunk) [Unresolved Staff Comments](index=36&type=section&id=Item%201B%20Unresolved%20Staff%20Comments) The company reported no unresolved staff comments from the SEC - No unresolved staff comments[219](index=219&type=chunk) [Properties](index=36&type=section&id=Item%202%20Properties) The company leases all its facilities, including its headquarters, manufacturing plants, and warehouses - Leases corporate headquarters in Cherry Hill, NJ (5,800 sq ft, expires Oct 2026)[220](index=220&type=chunk) - Leases primary manufacturing facility in City of Industry, CA (45,000 sq ft, expires June 2024)[221](index=221&type=chunk) - Leases a 19,500 sq ft warehouse in La Verne, CA (expires March 2026)[222](index=222&type=chunk) - Entered a lease for an 81,406 sq ft industrial facility in Bolingbrook, IL, for manufacturing, warehousing, and distribution, commencing January 1, 2022 (expires April 2029)[223](index=223&type=chunk) [Legal Proceedings](index=36&type=section&id=Item%203%20Legal%20Proceedings) The company is involved in ordinary course legal proceedings not expected to have a material adverse effect - Involved in various legal proceedings and disputes arising from ordinary business activities[224](index=224&type=chunk) - Management believes no current matters, individually or in aggregate, would have a material adverse effect on business, operating results, financial condition, or prospects[224](index=224&type=chunk) [Mine Safety Disclosures](index=36&type=section&id=Item%204%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[226](index=226&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=36&type=section&id=Item%205%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company completed its IPO in November 2021 and does not anticipate paying dividends in the foreseeable future - Completed IPO on November 9, 2021, issuing **5,333,333 shares** of Class A common stock at **$12.00 per share**, with net proceeds of approximately **$59.5 million**[227](index=227&type=chunk) - Issued **19,577,681 Class B common stock** immediately following the IPO, representing **76% of voting interest** with no economic interest[229](index=229&type=chunk) - As of March 25, 2022, there were **8 stockholders of record** for Class A common stock[231](index=231&type=chunk) - The company has not declared or paid cash dividends since inception and does not anticipate doing so in the foreseeable future[232](index=232&type=chunk) - No issuer purchases of equity securities were made during the fiscal year ended December 31, 2021[233](index=233&type=chunk) [[Reserved]](index=37&type=section&id=Item%206%20%5BReserved%5D) This item is reserved and contains no information - This item is reserved[233](index=233&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=38&type=section&id=Item%207%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Net sales grew significantly in 2021, though net loss widened due to increased operating and IPO-related expenses Key Financial Performance (Year Ended December 31, in thousands) | Metric | 2021 | 2020 | $ Change | % Change | | :-------------------------------- | :----- | :----- | :------- | :------- | | Net sales | $84,085 | $38,984 | $45,101 | 115.7% | | Cost of sales | $73,791 | $36,306 | $37,485 | 103.2% | | Gross profit | $10,294 | $2,678 | $7,616 | 284.4% | | Selling and distribution expense | $14,965 | $7,593 | $7,372 | 97.1% | | Marketing expense | $20,649 | $2,351 | $18,298 | 778.3% | | Administrative expense | $27,792 | $2,592 | $25,200 | 972.2% | | Loss from operations | $(53,112) | $(9,858) | $(43,254) | 438.8% | | Interest expense | $5,365 | $5,682 | $(317) | -5.6% | | Change in fair value of convertible debt | $8,925 | $0 | $8,925 | N/A | | Net Loss | $(67,093) | $(15,562) | $(51,531) | 331.1% | | Net loss attributable to The Real Good Food Company, Inc | $(10,143) | $(16,108) | N/A | N/A | Cash Flows (Year Ended December 31, in thousands) | Cash Flow Activity | 2021 | 2020 | | :-------------------------------- | :----- | :----- | | Net cash used in operating activities | $(26,755) | $(7,754) | | Net cash used in investing activities | $(4,739) | $(149) | | Net cash provided by financing activities | $61,211 | $7,543 | | Net increase (decrease) in cash and cash equivalents | $29,717 | $(360) | | Ending cash and cash equivalents | $29,745 | $28 | - Net sales increased by **115.7% to $84.1 million** in 2021, driven by strong growth in core product sales volumes, expansion in the club channel, and increased demand from existing retail customers[253](index=253&type=chunk) - Gross profit increased by **284.4% to $10.3 million**, primarily due to higher net sales and a greater proportion of self-manufactured products (**over 70% of sales in 2021** vs none in 2020)[254](index=254&type=chunk)[255](index=255&type=chunk) - Marketing expense increased by **$18.3 million (778.3%)** and administrative expense by **$25.2 million (972.2%)** in 2021, largely due to equity compensation expenses related to the IPO ($15.8M in marketing, $12.3M in administrative)[257](index=257&type=chunk)[259](index=259&type=chunk) - Net loss increased to **$67.1 million in 2021**, up from $15.6 million in 2020, primarily due to increased operating expenses and a change in the fair value of convertible debt[263](index=263&type=chunk) - Liquidity significantly improved with **$29.7 million in cash** (including restricted cash) as of Dec 31, 2021, following **$55.8 million net proceeds from the IPO** and an expanded credit facility[267](index=267&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=47&type=section&id=Item%207A%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is not required to provide market risk disclosures as a smaller reporting company - As a smaller reporting company, the registrant is not required to provide quantitative and qualitative disclosures about market risk[289](index=289&type=chunk) [Financial Statements and Supplementary Data](index=48&type=section&id=Item%208%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the audited consolidated financial statements for fiscal years 2021 and 2020 Consolidated Balance Sheets (as of December 31, in thousands) | ASSETS | 2021 | 2020 | | :-------------------------------- | :----- | :----- | | Current assets | $62,952 | $11,972 | | Property and equipment, net | $10,289 | $1,745 | | Operating lease right-of-use assets | $12,127 | $100 | | Goodwill | $12,486 | $0 | | Restricted Cash | $2,310 | $0 | | Other noncurrent assets | $1,162 | $69 | | Total assets | $102,144 | $15,470 | | **LIABILITIES AND EQUITY** | | | | Current liabilities | $31,645 | $8,563 | | Revolving line of credit/capex line | $17,501 | $36,936 | | Lease line of credit | $7,258 | $0 | | Long-term operating lease liabilities | $11,249 | $66 | | Long-term finance lease liabilities | $154 | $72 | | Long-term Business acquisition liabilities | $3,352 | $0 | | Total Liabilities | $71,159 | $45,637 | | Total stockholders' equity/members' deficit | $30,985 | $(30,167) | | Total liabilities and stockholders' equity/members' deficit | $102,144 | $15,470 | Consolidated Statements of Operations (Year Ended December 31, in thousands) | Metric | 2021 | 2020 | | :-------------------------------- | :----- | :----- | | Net sales | $84,085 | $38,984 | | Cost of sales | $73,791 | $36,306 | | Gross profit | $10,294 | $2,678 | | Total operating expenses | $63,406 | $12,536 | | Loss from operations | $(53,112) | $(9,858) | | Interest expense | $5,365 | $5,682 | | Change in fair value of convertible debt | $8,925 | $0 | | Net Loss | $(67,093) | $(15,562) | | Net loss attributable to The Real Good Food Company, Inc | $(10,143) | $(16,108) | | Net loss per common share/unit (basic and diluted) | $(1.64) | $(1.86) | Consolidated Statements of Cash Flows (Year Ended December 31, in thousands) | Cash Flow Activity | 2021 | 2020 | | :-------------------------------- | :----- | :----- | | Net cash used in operating activities | $(26,755) | $(7,754) | | Net cash used in investing activities | $(4,739) | $(149) | | Net cash provided by financing activities | $61,211 | $7,543 | | Net increase (decrease) in cash and cash equivalents | $29,717 | $(360) | | Ending cash and cash equivalents | $29,745 | $28 | - The company's financial statements are a continuation of RGF's, adjusted to reflect the legal capital of The Real Good Food Company, Inc following the reverse acquisition guidance[318](index=318&type=chunk) - Net sales disaggregation for 2021: **Entrees ($67,174k)**, **Breakfast ($7,744k)**, **Pizza and Snacks ($9,167k)**[372](index=372&type=chunk) - Acquired a co-manufacturing business in March 2021, resulting in **$12.5 million of goodwill** and contingent consideration liabilities of **$7.0 million** as of December 31, 2021[381](index=381&type=chunk)[384](index=384&type=chunk)[387](index=387&type=chunk) - Long-term debt as of December 31, 2021, included **$14.2 million** for PMC Revolver, **$3.6 million** for PMC Capex line, and **$7.3 million** for PMC Lease line, with a weighted average interest rate of **12.45%** for the revolver[396](index=396&type=chunk)[397](index=397&type=chunk)[406](index=406&type=chunk) - The **$35.0 million convertible notes** from Fidelity Investors were converted into **$43.8 million** of Class A and Class B common shares in connection with the IPO, eliminating the debt liability[403](index=403&type=chunk)[405](index=405&type=chunk) - Equity interests post-IPO consist of Class A common stock and Class B common stock, with Class B shares (**19,577,681 outstanding**) conveying **76% of voting rights** but no economic interest[407](index=407&type=chunk)[409](index=409&type=chunk) - The company recorded approximately **$0.6 million in equity compensation expense** in 2021 related to Restricted Stock Units (RSUs) granted to officers and directors[430](index=430&type=chunk) - Due to its 'Up-C' structure post-IPO, the company is subject to federal and state income taxes on its **24% allocable share** of RGF's taxable income, with a full valuation allowance against deferred tax assets in 2021[431](index=431&type=chunk)[433](index=433&type=chunk)[436](index=436&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=77&type=section&id=Item%209%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reported no disagreements with its independent registered public accounting firm - There have been no disagreements with the Independent Registered Public Accounting Firm on any matter of accounting principles or financial disclosures[444](index=444&type=chunk) [Controls and Procedures](index=77&type=section&id=Item%209A%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of year-end 2021 - Management concluded that disclosure controls and procedures were **effective** as of December 31, 2021[446](index=446&type=chunk) - No changes in internal control over financial reporting materially affected or are reasonably likely to materially affect internal control over financial reporting during Q4 2021[447](index=447&type=chunk) - Management's assessment report on internal control over financial reporting is not included due to a transition period for newly public companies[449](index=449&type=chunk) [Other Information](index=77&type=section&id=Item%209B%20Other%20Information) The company reported no other information required under this item - None[450](index=450&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=77&type=section&id=Item%209C%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable to the company - Not applicable[451](index=451&type=chunk) PART III [Directors, Executive Officers and Corporate Governance](index=78&type=section&id=Item%2010%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Required information is incorporated by reference from the 2022 proxy statement - Information incorporated by reference from the definitive proxy statement for the 2022 annual meeting of stockholders[454](index=454&type=chunk) [Executive Compensation](index=78&type=section&id=Item%2011%20Executive%20Compensation) Required information is incorporated by reference from the 2022 proxy statement - Information incorporated by reference from the 2022 Proxy Statement[455](index=455&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=78&type=section&id=Item%2012%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Member%20Matters) Required information is incorporated by reference from the 2022 proxy statement - Information incorporated by reference from the 2022 Proxy Statement[456](index=456&type=chunk) [Certain Relationships and Related Transactions and Director Independence](index=78&type=section&id=Item%2013%20Certain%20Relationships%20and%20Related%20Transactions%20and%20Director%20Independence) Required information is incorporated by reference from the 2022 proxy statement - Information incorporated by reference from the 2022 Proxy Statement[457](index=457&type=chunk) [Principal Accountant Fees and Services](index=78&type=section&id=Item%2014%20Principal%20Accountant%20Fees%20and%20Services) Required information is incorporated by reference from the 2022 proxy statement - Information incorporated by reference from the 2022 Proxy Statement[458](index=458&type=chunk) PART IV [Exhibits and Financial Statement Schedules](index=79&type=section&id=Item%2015%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all exhibits and financial statement schedules filed as part of the annual report - Includes organizational documents (Certificate of Incorporation, Bylaws), key agreements (Tax Receivable Agreement, Registration Rights Agreement, Employment Agreements), and financial agreements (Loan and Security Agreements)[460](index=460&type=chunk)[461](index=461&type=chunk) - Lists certifications from the Chief Executive Officer and Chief Financial Officer pursuant to the Sarbanes-Oxley Act of 2002[462](index=462&type=chunk) [Signatures](index=82&type=section&id=Signatures) This section contains the required signatures for the Annual Report on Form 10-K - The Annual Report on Form 10-K was signed by Gerard G Law (CEO), Akshay Jagdale (CFO), Bryan Freeman (Executive Chairman), and other directors on March 30, 2022[466](index=466&type=chunk)[470](index=470&type=chunk)

(Nasdaq: RGF) | --- | --- | |-----------------------|-------| | | | | | | | Fourth Quarter 2021 | | | Earnings Presentation | | | March 2022 | | Disclaimer Forward-Looking Statements This presentation contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which statements are subject to considerable risks and uncertainties. These forward-looking statements are intended to qualify f ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended September 30, 2021 or ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission File Number 001-41025 THE REAL GOOD FOOD COMPANY, INC. (Exact Name of Registrant as Specified in its Charter) Delaware 87-1280343 (St ...