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Innovative Food Holdings, Inc. Reports Financial Results for Second Quarter of 2023

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Innovative Food Holdings, Inc. reported its financial results for the second quarter of 2023. The company's adjusted EBITDA improved by $1.2 million to $453,947, marking the first profitable second quarter since 2019. Second quarter revenue was down 8.2% year-over-year to $18.8 million. Gross margin improved 377 basis points to 25.4%, and SG&A declined by 271 basis points to 24.2%. The company generated $1.3 million in positive cash flow from operations, an improvement of $1.7 million compared to Q2 2022.
Positive
  • Adjusted EBITDA improved by $1.2 million to $453,947, marking the first profitable second quarter since 2019.
  • Gross margin improved 377 basis points to 25.4%.
  • SG&A declined by 271 basis points to 24.2%.
  • The company generated $1.3 million in positive cash flow from operations, an improvement of $1.7 million compared to Q2 2022.
Negative
  • None.

Key highlights:

  • Second quarter adjusted EBITDA improved by $1.2 million to $453,947, first profitable second quarter since 2019
  • Second quarter revenue down 8.2% year-over-year to $18.8 million
  • Gross margin improved 377 basis points to 25.4%
  • SG&A declined by 271 basis points to 24.2%
  • $1.3 million in positive cash flow from operations, an improvement of $1.7 million compared to Q2 2022

BONITA SPRINGS, Fla., Aug. 10, 2023 (GLOBE NEWSWIRE) -- Innovative Food Holdings, Inc. (OTCQB: IVFH) (“IVFH” or the “Company”), a national seller of gourmet specialty foods to professional chefs and home gourmets, today reported its financial results for the second quarter of 2023.

“During the second quarter, our revenue declined by 8.2%. Both our eCommerce and Specialty Foodservice businesses contributed to the declines, though both declined less than our expectations. On the eCommerce business, we continued to restrict marketing spend relative to historical levels as we improve the business model, leading to declines of 30.7%, in line with trends in the prior three quarters. Now that we’ve run four quarters of marketing cuts and revenue declines, we expect these revenue headwinds to subside in future quarters. On the Specialty Foodservice business, revenue declined 5.1% as post-COVID reopening trends normalized. This normalization, combined with our recent price increases and a change in the technology platform used by a key partner, have led to a smaller, though significantly more profitable business for us. We expect this Specialty Foodservice revenue softness to continue at a similar magnitude for the remainder of the year while our new growth plans begin to take shape. Our plan to improve the fundamentals of the company’s business model made significant progress, with gross margins increasing 377 basis points to 25.4% and SG&A decreasing 271 basis points to 24.2%, compared with Q2 of 2022. These improvements drove a $1.2 million improvement in net income to $13,471, and a $1.2 million improvement to adjusted EBITDA to $453,947, or 2.4% of revenue, marking the fourth consecutive quarter of year-over-year improved adjusted profitability, and our first profitable Q2 since 2019. Lastly, our strong financial performance resulted in $1.3M in positive operating cash flow, compared to $0.4 million of cash used in operating activities in Q2 2022, an improvement of $1.7 million,” stated Bill Bennett, CEO of Innovative Food Holdings.

“We also exit our second quarter with a dramatically reshaped balance sheet, enabled by the restructuring of our loans through Maple Mark bank, receiving a loan guarantee from the USDA, and receiving additional working capital from the USDA. As a result, we improved net working capital to a positive $4.5 million in the second quarter, compared to a deficit of $4.7 million in the prior quarter, an improvement in net working capital of over $9 million. As part of the transaction, Maple Mark has also increased our revolver by an additional $1 million. Due to the Company’s improved operations performance along with its restructured balance sheet, we believe that we now have adequate near-term liquidity to implement our business plan.”

Mr. Bennett continued, “It’s exciting to see the impacts of our plan begin to take shape as we see improvements in our capital structure, margins, expenses, and profit, and revenue declines less than we had expected. As we look forward, improving near term profitability and operating cash flow continue to be top priorities. This includes delivering continued improvements to gross margin 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.”

“Over the past five months as my tenure as CEO has developed, my level of confidence in the opportunity that lies ahead for IVFH continues to increase. We have a solid foundation, a passionate and committed team, and an industry with tremendous long-term potential. 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. 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 second quarter decreased 8.2% to $18.8 million, compared to $20.5 million for the three months ended June 30, 2023. Second-quarter revenue was impacted by a 5.1% decrease in specialty foodservice revenue. Second-quarter eCommerce revenue was down 30.7% to $2.2 million from $3.2 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 June 30, 2023, and June 30, 2022 (unaudited):


 Three Months Ended
  June 30,
2023
 % of Net
Sales

  June 30,
2022
 % of Net
Sales

 %
Change

Specialty Foodservice$16,046,000 85.3% $16,901,000 82.4% -5.1%
E-Commerce 2,208,000 11.7%  3,185,000 15.5% -30.7%
National Brand Management 309,000 1.6%  252,000 1.2% 22.6%
Logistics 270,000 1.4%  185,000 0.9% 45.9%
Total IVFH$18,833,000 100% $20,523,000 100% -8.2%


For the 2023 second quarter, gross margin as a percentage of sales was 25.4%, compared to 21.7% for the same period last year, primarily due to improved margin and mix management and lower shipping costs.

For the 2023 second quarter, selling, general, and administrative (SG&A) expenses were $4.6 million, or 24.2% of revenue, compared to $5.5 million, or 26.9% of revenue for the same period last year. The $0.9 million, or 2.7% year-over-year reduction in SG&A expense was primarily the result of restructuring the Company’s marketing and advertising programs, as well as by overall cost-cutting efforts.

The Company recorded GAAP net income for the 2023 second quarter of $0.013 million, or $0.0 per share, compared to a GAAP net loss of $(1.2 million), or $(0.03) per share, in the prior year’s second quarter.

Adjusted EBITDA, a non-GAAP metric (see tables below), for the 2023 second quarter was $452,947, or $0.009 per share, compared to $(714,718), or $(0.015) per share, for the same period last year. Adjusted EBITDA accounts for the impact of non-core items including an addback for interest, taxes, amortization expense, expense on the extinguishment of debt, and stock related expenses in both 2023 and 2022.

Conference Call
IVFH will host an investor call on August 10, 2023 at 9:00 am Eastern Time via Zoom and by phone. The purpose of the meeting will be for management to discuss the Company's second fiscal quarter results for the quarter ended June 30, 2023, followed by Q&A with investors.

Investors and other interested participants may attend the call on the web or by phone as follows:

Join Zoom Meeting online: https://us02web.zoom.us/j/83669790398?pwd=NG9qcXVpeE03WmtTb0pZK1hXNjNiQT09

Meeting ID: 836 6979 0398
Passcode: 487262

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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 gourmets 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 international crises, 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:
Richard Tang
Chief Financial Officer
Innovative Food Holdings, inc.
investorrelations@ivfh.com 


Innovative Food Holdings, Inc.
Consolidated Balance Sheets
(unaudited)

  June 30,  December 31,
  2023  2022
ASSETS (unaudited)     
Current assets        
Cash and cash equivalents $6,172,432  $4,899,398 
Accounts receivable, net  4,604,872   4,969,395 
Inventory  2,619,771   3,053,852 
Other current assets  390,091   289,432 
Total current assets  13,787,166   13,212,077 
         
Property and equipment, net  7,754,787   7,921,561 
Right of use assets, operating leases, net  120,575   152,425 
Right of use assets, finance leases, net  503,363   570,323 
Other amortizable intangible assets, net  10,332   30,994 
Tradenames and other unamortizable intangible assets  1,532,822   1,532,822 
Total assets $23,709,045  $23,420,202 
         
LIABILITIES AND STOCKHOLDERS' EQUITY        
Current liabilities        
Accounts payable and accrued liabilities $5,444,639   6,853,253 
Accrued separation costs, related parties, current portion  350,590   - 
Accrued interest  61,316   18,104 
Deferred revenue  1,084,122   1,558,155 
Line of Credit  2,014,333   2,014,333 
Notes payable - current portion  119,627   5,711,800 
Lease liability - operating leases, current  65,356   64,987 
Lease liability - finance leases, current  190,507   191,977 
Total current liabilities  9,330,490   16,412,609 
         
Note payable, net of discount  8,934,659   -  
Accrued separation costs, related parties, non-current  957,892   -  
Lease liability - operating leases, non-current  55,219   87,438 
Lease liability - finance leases, non-current  240,166   333,092 
Total liabilities  19,518,426   16,833,139 
         
Commitments & Contingencies (see note 16)        
Stockholders' equity        
Common stock: $0.0001 par value; 500,000,000 shares authorized; 50,969,327 and 49,427,297 shares issued, and 48,131,747 and 46,589,717 shares outstanding at June 30, 2023 and December 31, 2022, respectively  5,092   4,938 
Additional paid-in capital  42,608,233   42,189,471 
Common stock to be issued, 847,320 and 1,499,940 shares at June 30, 2023 and December 31, 2022, respectively  85   150 
Treasury stock: 2,623,171 and 2,623,171 shares outstanding at June 30, 2023 and December 31, 2022, respectively.  (1,141,370)  (1,141,370)
Accumulated deficit  (37,281,421)  (34,466,126)
Total liabilities and stockholders' equity  4,190,619   6,587,063 
         
Total stockholders' equity $23,709,045  $23,420,202 



Innovative Food Holdings, Inc.
Consolidated Statements of Operations
(unaudited)

  For the Three  For the Three  For the Six  For the Six 
  Months Ended  Months Ended  Months Ended  Months Ended 
  June 30,  June 30,  June 30,  June 30, 
  2023  2022  2023  2022 
                 
Revenue $18,833,321  $20,523,156  $35,828,521  $36,166,267 
Cost of goods sold  14,040,410  $16,074,259   26,949,099   27,991,438 
Gross margin  4,792,911   4,448,897   8,879,422   8,174,829 
                 
Selling, general and administrative expenses  4,556,149   5,522,049   9,355,235   10,694,475 
Separation costs - executive officers  -   -   1,945,650   - 
Total operating expenses  4,556,149   5,522,049   11,300,885   10,694,475 
                 
Operating income (loss)  236,762   (1,073,152)  (2,421,463)  (2,519,646)
                 
Other income (expense:)                
Gain on interest rate swap  -   -   -   294,000 
Loss on extinguishment of debt  -   (40,556)  -   (40,556)
Other leasing income  1,900   2,294   3,800   7,384 
Interest expense, net  (209,357)  (112,372)  (381,798)  (195,345)
Total other income (expense)  (207,457)  (150,634)  (377,998)  65,483 
                 
Net income (loss) before taxes  29,305   (1,223,786)  (2,799,461)  (2,454,163)
                 
Income tax expense  15,834   -   15,834   - 
                 
Net income (loss) $13,471  $(1,223,786) $(2,815,295) $(2,454,163)
                 
Net income (loss) per share - basic $0.00  $(0.03) $(0.06) $(0.05)
                 
Net income (loss) per share - diluted $0.00  $(0.03) $(0.06) $(0.05)
                 
Weighted average shares outstanding - basic  49,064,084   46,855,525   48,764,822   46,557,498 
                 
Weighted average shares outstanding - diluted  49,064,084   46,855,525   48,764,822   46,557,498 



Innovative Food Holdings, Inc.
Consolidated Statements of Cash Flows
(unaudited)

  For the Six  For the Six 
  Months Ended  Months Ended 
  June 30,  June 30, 
  2023  2022 
Cash flows from operating activities:        
Net loss $(2,815,295) $(2,454,163)
Adjustments to reconcile net loss to net cash used in operating activities:        
Depreciation and amortization  286,869   279,735 
Amortization of right of use asset  31,850   35,162 
Amortization of prepaid loan fees  -   20,582 
Amortization of discount on notes payable  729   - 
Stock based compensation  250,851   367,492 
Loss on extinguishment of debt  -   40,556 
Gain on valuation of stock appreciation rights  (419)  - 
Provision (recoveries) for doubtful accounts  50,905   8,056 
         
Changes in assets and liabilities:        
Accounts receivable, net  313,618   (1,779,184)
Inventory and other current assets, net  333,422   41,607 
Accounts payable and accrued liabilities  (1,303,268)  627,395 
Accrued separation costs - related parties  1,476,482   - 
Deferred revenue  (474,033)  (409,159)
Operating lease liability  (31,850)  (35,162)
Net cash used in operating activities  (1,880,139)  (3,257,083)
         
Cash flows from investing activities:        
Acquisition of property and equipment  (32,473)  (92,633)
Net cash used in investing activities  (32,473)  (92,633)
         
Cash flows from financing activities:        
Payment of offering costs for stock previously issued  -   (50,000)
Cash received from notes payable, net of costs  3,285,588   - 
Principal payments on debt  -   (167,001)
Principal payments financing leases  (99,942)  (85,176)
Cost of debt financing  -   (110,305)
Net cash provided by (used in) financing activities  3,185,646   (412,482)
         
Increase (decrease) in cash and cash equivalents  1,273,034   (3,762,198)
         
Cash and cash equivalents at beginning of period  4,899,398   6,122,671 
         
Cash and cash equivalents at end of period $6,172,432  $2,360,473 
         
Supplemental disclosure of cash flow information:        
         
Cash paid during the period for:        
Interest $342,081  $128,798 
         
Taxes $-  $- 
         
Non-cash investing and financing activities:        
(Decrease) Increase in right of use assets & liabilities $-  $(13,216)
Finance lease for fixed assets $-  $42,500 
Debt to Fifth Third Bank paid directly by Maple Mark Bank $-  $7,686,481 
Issuance of common stock for severance agreement previously accrued $168,000  $- 



Innovative Food Holdings, Inc.
Reconciliation of GAAP to Non-GAAP Measures
Adjusted EBITDA Calculations
(unaudited, except share and per share amounts)

  Three Months Ended
(unaudited)
 
  June 30,
2023
  June 30,
2022
 
Adjusted EBITDA & EBITDA per share (1)        
Revenue $18,833,321  $20,523,156 
Net Income (Loss)  13,471   (1,223,786)
Interest, net  209,357   112,372 
Taxes  15,834   - 
Depreciation and Amortization (2)  141,482   141,374 
EBITDA (3) $380,144  $(970,040)
Loss on extinguishment of debt  -   40,556 
Stock related expenses (4)  72,803   214,766 
Adjusted EBITDA  $452,947  $(714,718)
Weighted Avg. Shares Outstanding  49,064,084   46,855,525 
Adjusted EBITDA per share $0.009  $(0.015)


(1)Adjusted EBITDA and Adjusted EBITDA per share 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 depreciation and amortization charges
(3)Earnings before interest, taxes, depreciation, and amortization
(4)Includes stock and options-based compensation and expenses

FAQ

What was Innovative Food Holdings' adjusted EBITDA for the second quarter of 2023?

Innovative Food Holdings' adjusted EBITDA for the second quarter of 2023 was $453,947.

What was the gross margin for the second quarter of 2023?

The gross margin for the second quarter of 2023 was 25.4%.

What was the SG&A percentage for the second quarter of 2023?

The SG&A percentage for the second quarter of 2023 was 24.2%.

How much positive cash flow from operations did the company generate in the second quarter of 2023?

The company generated $1.3 million in positive cash flow from operations in the second quarter of 2023.

INNOVATIVE FOOD HLDGS INC

OTC:IVFH

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IVFH Stock Data

86.01M
24.57M
28.78%
42.17%
Food Distribution
Consumer Defensive
Link
United States of America
Bonita Springs