Tattooed Chef Reports Third Quarter 2020 Financial Results

Nov 9, 2020 |

Record Revenue of $41.0 Million for Third Quarter Fiscal 2020

PARAMOUNT, Calif., Nov. 09, 2020 (GLOBE NEWSWIRE) -- Tattooed Chef, Inc. (Nasdaq: TTCF, TTCFW) (“Tattooed Chef” or the “Company”), a leading plant-based frozen food company with a broad portfolio of innovative products, today announced financial results for the three and nine months ended September 30, 2020.

Third quarter 2020 financial results for Tattooed Chef reflect the three months ended September 30, 2020, prior to the closing of the recent business combination (the “Business Combination”) between Ittella International and Forum Merger II Corporation (FMCI) which occurred on October 15, 2020. In connection with the closing of the Business Combination, the Company changed its name to Tattooed Chef, Inc.

Sam Galletti, President and CEO of Tattooed Chef said, “Our third quarter revenue marks the highest level in company history. We are pleased to achieve such a milestone in our last quarter as a private company. 2020 has been a monumental year for us, most notably with the completion of our merger with FMCI and Tattooed Chef becoming a public company. We expect to continue to drive top-line growth based on the ongoing success with our key club customers, expansion in new and existing retail customers, and our direct-to-consumer e-commerce site. We are pleased to have completed the merger and are more determined than ever to capitalize on the tremendous growth opportunities we have.”

Sarah Galletti, Creative Director and “The Tattooed Chef”, added, “There is so much to be excited about at the Tattooed Chef. Our branded product sales increased to a record $22.6 million in the third quarter and surpassed private label sales for the third consecutive quarter. Since launching our e-commerce site two weeks ago, the reaction in the marketplace has been overwhelmingly positive and we are thrilled with the initial success. Our brand awareness is growing, our distribution is expanding, our innovation pipeline is robust, and we are confident that we can and will continue to build off the excellent foundation we have established and drive significant growth in the years to come.”

Financial Highlights for the Third Quarter of 2020 Compared to Third Quarter of 2019

  • Revenue was a record $41.0 million, a 65% increase compared to $24.8 million in the prior year period; Tattooed Chef branded product revenue was a record $22.6 million, an increase of 288% compared to $5.8 million in the prior year period;
  • Net loss attributable to common stockholders was $3.3 million compared to a net income of $1.8 million in the prior year period due to $4.6 million of non-recurring transaction costs; and
  • Adjusted EBITDA was $1.5 million, or 3.6% of net revenue, compared to $2.3 million, or 9.4% of net revenue, in the prior year period.

Financial Highlights for First Nine Months of 2020 Compared to First Nine Months of 2019

  • Revenue was $108.9 million, an 87% increase compared to $58.1 million in the prior year period;
  • Net income attributable to common stockholders was $3.9 million compared to $3.4 million in the prior year period; and
  • Adjusted EBITDA was $10.6 million, or 9.7% of net revenue, compared to $4.7 million, or 8.2% of net revenue, in the prior year period.

Third Quarter 2020 Results

Revenue increased by $16.2 million, or 65.3%, to $41.0 million for the three months ended September 30, 2020 compared to $24.8 million for the three months ended September 30, 2019. The revenue increase was primarily driven by a $16.8 million increase in revenue of “Tattooed Chef” branded products, offset by a $0.1 million decrease in revenue of private label products and a $0.5 million decrease in legacy fish and commodity vegetable products for select private label retailers. The increase in Tattooed Chef branded products resulted from expansion in the number of U.S. distribution points, as well as increased volume at existing retail customers with our current portfolio of products and new product introductions including acai bowls, spring vegetable blends, buffalo cauliflower, and other value-added riced cauliflower meals.

Gross profit was $3.8 million for the three months ended September 30, 2020 compared to $4.5 million for the three months ended September 30, 2019. Gross margin in the three months ended September 30, 2020 was 9.2% compared to 18.2% in the three months ended September 30, 2019. The decline in both gross profit and gross margin was primarily due to a $1.4 million program with one of our top club customers to promote our Organic Acai Bowls. No such program occurred in the prior year period. This successful promotion gave the Tattooed Chef brand exposure in 450 stores for an eight-week period across the entire U.S. and resulted in increased sales and brand awareness.

Operating expenses increased $4.8 million to $7.2 million for the three months ended September 30, 2020 compared to $2.4 million for the three months ended September 30, 2019. The increase in operating expenses was primarily due to $4.6 million in nonrecurring expenses related to the merger with FMCI, as well as a $0.6 million increase in sales and marketing expenses resulting from a shift in focus to building the Tattooed Chef brand and initiatives to accelerate sales to retail grocery store outlets. As a percentage of revenue, total operating expenses were 17.5% for the three months ended September 30, 2020, compared to 9.5% for the prior year period. Excluding the $4.6 million of transaction expenses, operating expenses for the three months ended September 30, 2020 would have been $2.6 million, slightly higher than the prior year period, or 6.3% of sales.

Adjusted EBITDA of $1.5 million, or 3.6% of net revenue, for the three months ended September 30, 2020 decreased $0.9 million compared to $2.3 million, or 9.4% of net revenue, in the three months ended September 30, 2019. The decrease in Adjusted EBITDA was primarily due to the lower gross profit from the promotional program explained above. Adjusted EBITDA for the third quarter of 2020 was also lower sequentially, compared to $2.0 million in the second quarter of 2020 due to increased growth in sales from the products manufactured by our facilities in Italy and timing of delivery to key customers. Adjusted EBITDA is a non-GAAP financial measure defined under “Non-GAAP Measures. Please see “Adjusted EBITDA Reconciliation” at the end of this press release.

First Nine Months 2020 Results

Revenue increased by $50.8 million, or 87.4%, to $108.9 million for the nine months ended September 30, 2020 compared to $58.1 million for the nine months ended September 30, 2019. The revenue increase was primarily driven by a $51.1 million increase in sales of Tattooed Chef branded products and a $1.4 million increase in sales of private label products. The increase in Tattooed Chef branded products resulted from expansion in the number of U.S. distribution points, as well as increased volume at existing retail customers of our current portfolio of products and new product introductions including acai bowls, spring vegetable blends, buffalo cauliflower, and other value-added riced cauliflower meals. This increase was partially offset by a $1.7 million decline in legacy fish and commodity vegetable products for select private label retailers.

Gross profit increased $6.9 million to $16.8 million for the nine months ended September 30, 2020 compared to $9.9 million for the nine months ended September 30, 2019. Gross margin in the nine months ended September 30, 2020 was 15.4% compared to 17.0% in the nine months ended September 30, 2019. The decline in gross margin was primarily due to the promotional program with the key club customer which did not occur in the prior year period and increased shipping and storage costs in the current year versus the prior year.

Operating expenses increased $6.1 million to $11.6 million for the nine months ended September 30, 2020 compared to $5.6 million for the nine months ended September 30, 2019, primarily due to a $4.8 million in nonrecurring expenses related to the merger with FMCI, as well as a $2.1 million increase in sales and marketing expenses resulting from a shift in focus to building the Tattooed Chef brand and initiatives to accelerate sales to retail grocery store outlets. As a percentage of revenue, total operating expenses were 10.7% for the nine months ended September 30, 2020 compared to 9.6% for the prior year period. Excluding the $4.8 million of transaction expenses, operating expenses for the nine months ended September 30, 2020 would have been $6.9 million or 6.3% of sales. We expect our operating expenses to increase in future periods as we transition to being a public company, increase expenses to effectively manage our growth, and continue our shift in emphasis to Tattooed Chef branded products.

Adjusted EBITDA was $10.6 million, or 9.7% of revenue, for the nine months ended September 30, 2020 compared to $4.7 million, or 8.2% of revenue, for the nine months ended September 30, 2019. The improvement in Adjusted EBITDA was primarily the result of the increase in revenues, gross profit and operating expense leverage compared to the prior year period.

Balance Sheet and Cash Flow
As of September 30, 2020, Tattooed Chef had cash and cash equivalents of $3.2 million and an outstanding balance on the line of credit of $19.7 million. Following the completion of the Business Combination on October 15, 2020, the Company had cash and cash equivalents of approximately $95 million and an outstanding balance on the line of credit of approximately $5 million.

Conference Call and Webcast
The Company will host a conference call and webcast to discuss the results today at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time). Investors interested in participating in the live call can dial 855-327-6837 from the U.S. and 631-891-4304 internationally. A telephone replay will be available approximately two hours after the call concludes through Monday, November 23, 2020, and can be accessed by dialing 844-512-2921 from the U.S., or 412-317-6671 internationally, and entering conference ID 10011746. The webcast will be available on the Investors section of the Company’s website at www.tattooedchef.com and archived for 30 days.

About Tattooed Chef
Tattooed Chef is a leading plant-based food company offering a broad portfolio of innovative plant-based food products that taste great and are sustainably sourced. Tattooed Chef’s signature products include ready-to-cook bowls, zucchini spirals, riced cauliflower, acai and smoothie bowls, and cauliflower pizza crusts, which are available in the frozen food sections of leading national retail food stores across the United States as well as on Tattooed Chef’s e-commerce site. Understanding consumer lifestyle and food trends, and a commitment to innovation, allows Tattooed Chef to continuously introduce new products. Tattooed Chef provides great-tasting, approachable, and innovative products not only to the growing group of consumers who seek to adopt a plant-based lifestyle, but to any of the “People Who Give a CropTM”. For more information, please visit www.tattooedchef.com​.

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, the words “estimates,” “projected,” “expects,” “anticipates,” “forecasts,” “plans,” “intends,” “believes,” “seeks,” “may,” “will,” “should,” “future,” “propose,” “trend,” “accelerate,” “continues,” “opportunities,” “next” 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; the outcome of any legal proceedings that may be instituted against Tattooed Chef; competition and the ability of the business to grow and manage growth profitably; the ability to meet Nasdaq’s listing requirements; costs related to our recent business combination; anticipated increased costs associated with our transition to a public company; and other risks and uncertainties indicated from time to time in the definitive proxy statement filed with the Securities and Exchange Commission (the “SEC”) in connection with our recent business combination, 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 the COVID-19 outbreak. Tattooed Chef undertakes any 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’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
Rachel Perkins
rachel@ulshir.com

MEDIA
Devynne Honsa
devynne@blndpr.com
310-616-3049

 
MYJOJO, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (unaudited)
(in thousands, except per share information)
         
  Three Months Ended  Nine Months Ended
  September 30, September 30,
   2020   2019   2020   2019 
REVENUE $40,962  $24,786  $108,896  $58,117 
         
COST OF GOODS SOLD  37,180   20,276   92,126   48,263 
         
GROSS PROFIT  3,782   4,510   16,770   9,854 
         
Sales and marketing expenses  894   243   2,673   552 
General and administrative expenses  6,293   2,111   8,972   5,040 
TOTAL OPERATING EXPENSES  7,187   2,354   11,645   5,592 
         
INCOME (LOSS) FROM OPERATIONS  (3,405)  2,156   5,125   4,262 
         
Interest expense  (188)  (155)  (569)  (493)
Other income  825   -   1,113   - 
         
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES  (2,768)  2,001   5,669   3,769 
         
PROVISION FOR INCOME TAXES  492   162   1,775   346 
         
NET INCOME (LOSS)  (3,260)  1,839   3,894   3,423 
         
LESS: INCOME (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTERESTS  (160)  352   1,201   532 
         
NET INCOME (LOSS) ATTRIBUTABLE TO MYJOJO, INC. $(3,100) $1,487  $2,693  $2,891 
         
NET INCOME (LOSS) PER UNIT        
Basic and diluted $(376.68) $180.72  $326.87  $351.30 
         
WEIGHTED AVERAGE COMMON UNITS        
Basic and diluted  8,230   8,230   8,230   8,230 
         
OTHER COMPREHENSIVE (LOSS), NET OF TAX        
         
Foreign currency translation adjustments  (584)  (192)  (201)  (212)
         
Total other comprehensive (loss), net of tax  (584)  (192)  (201)  (212)
         
         
Comprehensive income (loss)  (3,844)  1,647   3,693   3,211 
Less: income (loss) attributable to the noncontrolling interest  57   (4)  91   1 
         
Comprehensive income (loss) attributable to Myjojo, Inc. shareholder  (3,901)  1,651   3,602   3,210 
         

 

MYJOJO, INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (unaudited)
(in thousands, except per share information)
           
        September 30, December 31,
         2020   2019 
ASSETS      
           
CURRENT ASSETS    
Cash    $3,182  $4,537 
Accounts receivable  17,142   9,440 
Inventory   27,894   17,960 
Prepaid expenses and other current assets  4,385   3,013 
TOTAL CURRENT ASSETS  52,603   34,950 
           
Property, plant and equipment, net  13,822   8,238 
           
Deferred taxes  189   227 
           
Other assets   104   481 
           
TOTAL ASSETS $66,718  $43,896 
           
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST    
AND STOCKHOLDERS' EQUITY (DEFICIT)
    
           
CURRENT LIABILITIES    
Accounts payable $30,783  $17,037 
Accrued expenses  2,354   724 
Distribution payable  2,485   1,868 
Line of credit  19,745   10,054 
Notes payable to related parties, current portion  188   357 
Notes payable, current portion  514   610 
Other current liabilities  481   65 
TOTAL CURRENT LIABILITIES  56,550   30,715 
           
           
Notes payable to related parties, net of current portion  -   443 
Notes payable, net of current portion  2,274   2,662 
TOTAL LIABILITIES  58,824   33,820 
           
COMMITMENTS AND CONTINGENCIES (See Note 15)    
           
REDEEMABLE NONCONTROLLING INTEREST (See Note 3) $43,900  $6,930 
           
STOCKHOLDERS' EQUITY (DEFICIT)    
Common units  1   1 
Additional paid in capital  -   2,316 
Accumulated other comprehensive loss  (984)  (692)
Retained earnings (deficit)  (36,675)  1,265 
Total equity (deficit) attributable to Myjojo, Inc.  (37,658)  2,890 
Noncontrolling interest  1,652   256 
TOTAL STOCKHOLDER'S EQUITY (DEFICIT)  (36,006)  3,146 
           
TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST    
AND STOCKHOLDERS' EQUITY (DEFICIT)
 $66,718  $43,896 
           


MYJOJO, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(in thousands) 
 
       Nine Months Ended
       Sept 30,
        2020   2019 
CASH FLOWS FROM OPERATING ACTIVITIES   
Net income$3,894  $3,423 
Adjustments to reconcile net income to net cash from operating activities:   
Depreciation and amortization 693   477 
Bad debt expense -   (1)
Realized forward contract (gain) -   - 
Accretion of debt financing costs 34   34 
Unrealized forward contract losses (gains) (728)  - 
Changes in operating assets and liabilities:   
Accounts receivable (7,702)  (2,871)
Inventory (9,934)  (4,018)
Prepaid expenses and other current assets (228)  (468)
Accounts payable 13,745   384 
Accrued expenses 1,630   438 
Other current liabilities 416   25 
Net cash provided (used) in operating activities 1,820   (2,577)
          
CASH FLOWS FROM INVESTING ACTIVITIES   
Purchases of property, plant and equipment (5,957)  (2,176)
Proceeds from the sale of property, plant and equipment 36   14 
Net cash used in investing activities (5,921)  (2,162)
          
CASH FLOWS FROM FINANCING ACTIVITIES   
Borrowings of line of credit 9,657   1,778 
Borrowings of notes payable to related parties 32   329 
Repayments of notes payable to related parties (644)  (210)
Borrowings of notes payable 28   763 
Repayments of notes payable (512)  (538)
Capital contributions 355   6,001 
Payment of distribution (5,613)  - 
Net cash provided by financing activities 3,303   8,123 
          
NET INCREASE IN CASH  (798)  3,385 
EFFECT OF EXCHANGE RATE ON CASH  (557)  (173)
          
CASH AT BEGINNING OF YEAR      $4,537  $336 
          
CASH AT END OF NINE MONTHS      $3,182  $3,548 
          
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION   
Cash paid during the six months for:   
Interest $237  $152 
Income taxes$16  $- 
Noncash financing activities   
Distributions$617  $1,192 
          


MYJOJO INC. AND SUBSIDIARIES
Adjusted EBITDA Reconciliation

Unaudited

  Nine Months Ended  Three Months Ended
  September 30, September 30,
(in thousands) 2020 2019 2020 2019
  (unaudited) (unaudited)
 (unaudited) (unaudited)
Net income (loss) $3,894  $3,423 $(3,260) $1,839
Interest $569  $493 $188  $155
Taxes $1,775  $346 $492  $162
Depreciation & amortization $693  $477 $222  $176
EBITDA $6,931  $4,739 $(2,358) $2,332
Adjustments        
Gain on foreign currency forward contracts $(1,113) $- $(825) $-
         
Non-recurring (transaction expenses)$4,770  $- $4,646  $-
Total Adjustments $(3,657) $- $(3,821) $-
Adjusted EBITDA $10,588  $4,739 $1,463  $2,332




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