Innovative Food Holdings, Inc. Reports Financial Results for First Quarter of 2023
• First-quarter total revenue up 8.6% year-over-year to a first quarter record of $17.0 million
• Specialty foodservice increased 19.6% year-over-year to a first quarter record of $13.8 million
• First-quarter profitability impacted by $1.9 million of one-time severance expenses
BONITA SPRINGS, Fla., May 16, 2023 (GLOBE NEWSWIRE) — Innovative Food Holdings, Inc. (OTCQB: IVFH) (“IVFH” or the “Company”), a national seller of gourmet specialty foods to professional and home chefs, today reported its financial results for the first quarter of 2023.
“I am pleased with the strong start to the year as we achieved record first-quarter revenue. The reopening of restaurants, hotels, and other travel related foodservice customers post-COVID has continued to provide us with a tailwind, enabling us to serve our customers and drive our business forward. As many of these positive trends are normalizing, we are focused on leveraging our recent success as a springboard to build a more resilient and adaptable business model, as evidenced by the year-over-year improvement in gross margin and reductions in SG&A expenses. Overall profitability during the quarter was impacted by approximately $1.9 million of one-time employee severance as a result of our recent leadership transition. Backing out these one-time expenses, our first quarter adjusted net loss would have improved by 49%, reflecting the third consecutive quarter of improved adjusted profitability. In addition, our first quarter cash flow used by operating activities, adjusted for payments made on the $1.9 million one-time charge for employee severance, improved over the prior year period,” stated Bill Bennett, CEO of Innovative Food Holdings.”
Mr. Bennett continued, “As we look forward, improving near-term profitability and operating cash flow are top priorities. This includes delivering continued improvements to our gross margin, returning to pre-inflation levels by enhancing our product mix, building a more strategic pricing and promotional plan with supplier support, and reducing shipping expenses. We also remain committed to establishing a new lower baseline in SG&A expenses as we optimize our corporate structure, and proactively reduce spending on digital marketing programs. While this strategy continues to impact eCommerce sales, it has significantly increased eCommerce profitability. Programs are also underway to enhance our eCommerce customer experience and retention, and we are currently targeting 2024 to re-accelerate marketing spend to drive eCommerce growth. In addition, we expect approval of our previously announced loan guarantee from the USDA shortly. If approved, this will provide IVFH with over $3 million of additional borrowings, improve working capital levels, and extend the maturity on our credit facilities.”
“Over the past three months, I have had the pleasure of engaging with our customers, vendors, team members, and partners across the country as my tenure as CEO develops. IVFH has a solid foundation and committed team that is passionate about connecting the world’s best artisan food makers with top professional chefs and gourmet home chefs. The tremendous long-term potential in our industry is evident, and we are excited about the future ahead. We recognize the importance of maintaining a laser focus on our top priorities in a complex economic environment to create a robust, profitable, and sustainable business model. Additionally, we remain dedicated to promoting a culture of continuous improvement and attracting top talent to drive our growth initiatives forward. As we navigate the ever-changing landscape of the food industry, we are confident in our ability to adapt, innovate, and capitalize on opportunities that will drive long-term shareholder value,” concluded Mr. Bennett.
Financial Results
Revenues in the 2023 first quarter increased 8.6% to a first-quarter record of $17.0 million, compared to $15.6 million for the three months ended March 31, 2022. First-quarter revenue benefitted from a 19.6% increase in specialty foodservice revenue, which was primarily driven by the nationwide opening of restaurants and other foodservice establishments as well as increases in travel related foodservice and restaurant dining. First-quarter eCommerce revenue was down 27.3% to $2.6 million from $3.6 million for the same period last year, as the Company continues to proactively reduce spending on digital marketing and improve the customer experience to drive marketing efficiency.
The following table sets forth IVFH’s revenue by business category for the months ended March 31, 2023, and March 31, 2022 (unaudited):
| Three Months Ended | ||||||||||||||
| March 31, 2023 | % of Net Sales | March 31, 2022 | % of Net Sales | % Change | ||||||||||
| Specialty Foodservice | $ | 13,805,000 | 81.2 | % | $ | 11,541,000 | 73.8 | % | 19.6 | % | ||||
| E-Commerce | 2,626,000 | 15.4 | % | 3,612,000 | 23.1 | % | -27.3 | % | ||||||
| National Brand Management | 316,000 | 1.9 | % | 284,000 | 1.8 | % | 11.1 | % | ||||||
| Logistics | 248,000 | 1.5 | % | 206,000 | 1.3 | % | 20.8 | % | ||||||
| Total IVFH | $ | 16,995,000 | 100 | % | $ | 15,643,000 | 100 | % | 8.6 | % | ||||
For the 2023 first quarter, gross margin as a percentage of sales was 24.0%, compared to 23.8% for the same period last year, primarily due to reduced fuel surcharges and lower shipping costs.
For the 2023 first quarter, selling, general, and administrative (SG&A) expenses were $4.8 million, or 28.2% of revenue, compared to $5.2 million, or 33.1% of revenue for the same period last year. The $0.4 million, or 7.2% year-over-year reduction in SG&A expense was the result of overall cost-cutting efforts as well as restructuring the Company’s marketing and advertising programs.
During the three months ended March 31, 2023, the Company incurred $1.9 million of separation costs with certain executive officers including the Company’s prior CEO and current board member, and Director of Strategic Acquisitions and former board member.
The Company recorded GAAP net loss for the 2023 first quarter of $(2.8 million), or $(0.06) per share, compared to a GAAP net loss of $(1.2 million), or $(0.03) per share, in the prior year’s first quarter, which included a $0.3 million pre-tax gain on an interest rate swap.
Adjusted net loss, a non-GAAP metric (see tables below), for the 2023 first quarter was $(0.7) million, or $(0.014) per share, compared to an adjusted net loss of $(1.4) million, or $(0.029) per share, for the same period last year. Adjusted net income for the 2023 first quarter accounts for the impact of non-core items including an addback for separation costs with executive officers, amortization expense, and stock related expenses, and for the 2022 first quarter includes an addback for amortization expense, a gain on the interest rate swap, and stock related expenses.
About Innovative Food Holdings, Inc.
At IVFH, we help make meals special. We provide access to foods that are hard to find, have a compelling story, or are on the forefront of food trends. Our gourmet foods marketplace connects the world’s best artisan food makers with top professional chefs and passionate home chefs nationwide. We curate the assortment, experience, and tech enabled tools that help our professional and home chefs create unforgettable experiences for their guests and families. IVFH’s owned online retail brands include www.igourmet.com, www.plantbelly.com and www.mouth.com.
Additional information is available at www.ivfh.com.
Forward-Looking Statements
This release contains certain forward-looking statements and information relating to Innovative Food Holdings, Inc. (the “Company”) that are based on the current beliefs of the Company’s management, as well as assumptions made by, and information currently available to, the Company. Such statements reflect the current views of the Company with respect to future events and are subject to certain assumptions, including those described in this release. Should one or more of these underlying assumptions prove incorrect, actual results may vary materially from those described herein as “should,” “could,” “will,” “anticipate,” “believe,” “intend,” “plan,” “might,” “potentially” “targeting” or “expect.” Additional factors that could also cause actual results to differ materially relate to the global COVID-19 crisis, international crisis, environmental and economic issues and other risk factors described in our public filings. The Company does not intend to update these forward-looking statements. The content of the websites referenced above are not incorporated herein.
| Investor and Media Contact: |
| Andrew M. Berger |
| Managing Director |
| SM Berger & Company, Inc. |
| (216) 464-6400 |
| andrew@smberger.com |
| Innovative Food Holdings, Inc. Consolidated Balance Sheets (unaudited) | ||||||||
| March 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 1,650,127 | $ | 4,899,398 | ||||
| Accounts receivable, net | 4,829,709 | 4,969,395 | ||||||
| Inventory | 3,021,465 | 3,053,852 | ||||||
| Other current assets | 372,857 | 289,432 | ||||||
| Total current assets | 9,874,158 | 13,212,077 | ||||||
| Property and equipment, net | 7,827,980 | 7,921,561 | ||||||
| Right to use assets, operating leases, net | 136,111 | 152,425 | ||||||
| Right to use assets, finance leases, net | 536,843 | 570,323 | ||||||
| Other amortizable intangible assets, net | 20,663 | 30,994 | ||||||
| Tradenames and other unamortizable intangible assets | 1,532,822 | 1,532,822 | ||||||
| Total assets | $ | 19,928,577 | $ | 23,420,202 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued liabilities | $ | 4,796,700 | $ | 6,853,253 | ||||
| Accrued separation costs, related parties, current portion | 559,370 | – | ||||||
| Accrued interest, current portion | 18,198 | 18,104 | ||||||
| Deferred revenue | 1,238,790 | 1,558,155 | ||||||
| Line of Credit | 2,014,333 | 2,014,333 | ||||||
| Notes payable – current portion, net of discount | 5,709,043 | 5,711,800 | ||||||
| Lease liability – operating leases, current | 63,877 | 64,987 | ||||||
| Lease liability – finance leases, current | 193,226 | 191,977 | ||||||
| Total current liabilities | 14,593,537 | 16,412,609 | ||||||
| Accrued separation costs, related parties, non-current | 1,041,425 | – | ||||||
| Lease liability – operating leases, non-current | 72,234 | 87,438 | ||||||
| Lease liability – finance leases, non-current | 285,036 | 333,092 | ||||||
| Total liabilities | 15,992,232 | 16,833,139 | ||||||
| Commitments & Contingencies (see note 16) | ||||||||
| Stockholders’ equity | ||||||||
| Common stock: $0.0001 par value; 500,000,000 shares authorized; 50,569,327 and 49,427,297 shares issued, and 47,731,747 and 46,589,717 shares outstanding at March 31, 2023 and December 31, 2022, respectively | 5,052 | 4,938 | ||||||
| Additional paid-in capital | 42,367,472 | 42,189,471 | ||||||
| Common stock to be issued, 832,214 and 1,499,940 shares at March 31, 2023 and December 31, 2022, respectively | 83 | 150 | ||||||
| Treasury stock: 2,623,171 and 2,623,171 shares outstanding at March 31, 2023 and December 31, 2022, respectively. | (1,141,370 | ) | (1,141,370 | ) | ||||
| Accumulated deficit | (37,294,892 | ) | (34,466,126 | ) | ||||
| Total liabilities and stockholders’ equity | 3,936,345 | 6,587,063 | ||||||
| Total stockholders’ equity | $ | 19,928,577 | $ | 23,420,202 | ||||
| Innovative Food Holdings, Inc. Consolidated Statements of Operations (unaudited) | ||||||||
| For the Three | For the Three | |||||||
| Months Ended | Months Ended | |||||||
| March 31, | March 31, | |||||||
| 2023 | 2022 | |||||||
| Revenue | $ | 16,995,200 | $ | 15,643,111 | ||||
| Cost of goods sold | 12,908,689 | 11,917,179 | ||||||
| Gross margin | 4,086,511 | 3,725,932 | ||||||
| Selling, general and administrative expenses | 4,799,086 | 5,172,426 | ||||||
| Separation costs – executive officers | 1,945,650 | – | ||||||
| Total operating expenses | 6,744,736 | 5,172,426 | ||||||
| Operating loss | (2,658,225 | ) | (1,446,494 | ) | ||||
| Other income (expense:) | ||||||||
| Gain on interest rate swap | – | 294,000 | ||||||
| Other leasing income | 1,900 | 5,090 | ||||||
| Interest expense, net | (172,441 | ) | (82,973 | ) | ||||
| Total other income (expense) | (170,541 | ) | 216,117 | |||||
| Net loss before taxes | (2,828,766 | ) | (1,230,377 | ) | ||||
| Income tax expense | – | – | ||||||
| Net loss | $ | (2,828,766 | ) | $ | (1,230,377 | ) | ||
| Net loss per share – basic | $ | (0.06 | ) | $ | (0.03 | ) | ||
| Net loss per share – diluted | $ | (0.06 | ) | $ | (0.03 | ) | ||
| Weighted average shares outstanding – basic | 48,462,234 | 46,256,160 | ||||||
| Weighted average shares outstanding – diluted | 48,462,234 | 46,256,160 | ||||||
| Innovative Food Holdings, Inc. Consolidated Statements of Cash Flows | ||||||||
| For the Three | For the Three | |||||||
| Months Ended | Months Ended | |||||||
| March 31, | March 31, | |||||||
| 2023 | 2022 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (2,828,766 | ) | $ | (1,230,377 | ) | ||
| Adjustments to reconcile net loss to net cash used by operating activities: | ||||||||
| Depreciation and amortization | 145,387 | 138,361 | ||||||
| Amortization of right to use asset | 16,314 | 19,691 | ||||||
| Amortization of prepaid loan fees | – | 3,088 | ||||||
| Stock based compensation | 178,048 | 152,726 | ||||||
| Provision (recoveries) for doubtful accounts | 4,666 | (1,115 | ) | |||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable, net | 135,020 | (164,124 | ) | |||||
| Inventory and other current assets, net | (51,038 | ) | (175,367 | ) | ||||
| Accounts payable and accrued liabilities | (2,056,459 | ) | (1,216,020 | ) | ||||
| Accrued separation costs – related parties | 1,600,795 | – | ||||||
| Deferred revenue | (319,365 | ) | (380,462 | ) | ||||
| Operating lease liability | (16,314 | ) | (19,691 | ) | ||||
| Net cash used in operating activities | (3,191,712 | ) | (2,873,290 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Acquisition of property and equipment | (7,995 | ) | (4,760 | ) | ||||
| Net cash used in investing activities | (7,995 | ) | (4,760 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Principal payments on debt | (2,757 | ) | (92,816 | ) | ||||
| Principal payments financing leases | (46,807 | ) | (40,637 | ) | ||||
| Net cash (used in) financing activities | (49,564 | ) | (133,453 | ) | ||||
| Decrease in cash and cash equivalents | (3,249,271 | ) | (3,011,503 | ) | ||||
| Cash and cash equivalents at beginning of period | 4,899,398 | 6,122,671 | ||||||
| Cash and cash equivalents at end of period | $ | 1,650,127 | $ | 3,111,168 | ||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | 174,410 | $ | 84,961 | ||||
| Taxes | $ | – | $ | – | ||||
| Non-cash investing and financing activities: | ||||||||
| (Decrease) Increase in right to use assets & liabilities | $ | – | $ | (13,216 | ) | |||
| Finance lease for fixed assets | $ | – | $ | 42,500 | ||||
| Innovative Food Holdings, Inc. Reconciliation of GAAP to Non-GAAP Measures Adjusted Net Income Calculations (unaudited, in thousands, except share and per share amounts) | |||||||
| Three Months Ended (unaudited) | |||||||
| March 31, 2023 | March 31, 2022 | ||||||
| Adjusted Net Income and EPS (1) | |||||||
| Revenue | $ | 16,995,200 | $ | 15,643,111 | |||
| Net Income (Loss) | (2,828,766 | ) | (1,230,377 | ) | |||
| Separation costs – executive officers | 1,945,650 | – | |||||
| Amortization of intangible assets (2) | 10,331 | 10,231 | |||||
| One-time gain | – | (294,000 | ) | ||||
| Stock related expenses (3) | 178,048 | 152,726 | |||||
| Adjusted Net Income (Loss) | $ | (694,737 | ) | $ | (1,361,420 | ) | |
| Weighted Avg. Shares Outstanding (4) | 48,462,234 | 46,256,160 | |||||
| Adjusted EPS | $ | (0.014 | ) | $ | (0.029 | ) | |
| (1) | Adjusted Net Income are each a non-GAAP metric. Management believes that the presentation of these non-GAAP financial measures provides useful information to investors because the information may allow investors to better evaluate ongoing business performance and certain components of the Company’s results. In addition, the Company believes that the presentation of these financial measures enhances an investor’s ability to make period-to-period comparisons of the Company’s operating results. This information should be considered in addition to the results presented in accordance with GAAP, and should not be considered a substitute for the GAAP results. | |
| (2) | Includes non-cash amortization charges related to assets acquired | |
| (3) | Includes stock and options-based compensation and expenses | |
| (4) | Full Year GAAP weighted share count |
