Third Quarter 2019 Financial Results

In Press Releases by Innovative Food Holdings

Company Contact: Investor and Media Contact:
Ronit Wallerstein Andrew M. Berger
Investor Relations Managing Director
Innovative Foods Holdings, Inc. SM Berger & Company, Inc.
(718) 645-1755 (216) 464-6400
rwallerstein@IVFH.com andrew@smberger.com

Third Quarter Revenue Increased 12% to $13.5 Million
Specialty Foodservice Revenue Up 10% to $11.6 Million
e-commerce Revenue Up 33% to $1.6 Million

BONITA SPRINGS, FL. (November 14, 2019) – Innovative Food Holdings, Inc. (OTCQB: IVFH) (“IVFH” or the “Company”), an interconnected data driven platform of specialty food companies that provides chefs and consumers direct access to the highest quality unique specialty food products across the U.S., today reported its financial results for the third quarter and nine months of 2019.

Operating Highlights include:

  • iGourmet partnered with one of the leading voices within the food industry to launch branded specialty food gift baskets and gift boxes that are now available at igourmet.com, as well as omnichannel partners including www.amazon.com and www.walmart.com.
  • iGourmet further expanded its client base of white label partners that leverage iGourmet’s logistics, procurement, and fulfillment capabilities.
  • A new specialty foodservice partner launched within Gourmet Foodservice Group towards the end of the quarter.
  • Completed the purchase of an approximately 200,000 square foot warehouse on 15 acres in Mountaintop, Pennsylvania. This facility will significantly expand IVFH’s e-commerce and specialty foodservice logistic and warehouse capabilities for both perishable and nonperishable food products.

Sam Klepfish, CEO of Innovative Food Holdings stated, “I am pleased by the positive momentum currently underway at IVFH, which I believe is a direct result of the investments we are making in our platform and the ongoing success of our growth oriented, e-commerce business strategy.  Year-to-date e-commerce revenue has increased 51% from the prior year period.  This growth occurred while we strategically limited marketing expenditures and focused on investments in our data-driven specialty food platform and e-commerce assets.  We are also leveraging our highly successful ‘back end’ specialty food procurement, logistics, and warehousing capabilities and these ongoing ‘back end’ investments are improving operating efficiencies and further optimizing our unique platform.”

“For the second consecutive quarter SG&A as a percent of revenue has declined sequentially, despite continual enhancements in our platform.  While the investments we are making in our business have impacted near-term profitability, we believe that IVFH is well positioned for significant top- and bottom-line growth opportunities in the rapidly changing specialty food industry.”

“We have made significant progress upgrading our digital infrastructure and we expect to go live with our new re-platformed iGourmet website by the first quarter of 2020.  This new website is designed to improve the user experience, our marketing capabilities and allow iGourmet to leverage a wide variety of data driven marketing tools and applications, many of which are already in use by one of our other e-commerce assets, mouth.com.  Over the coming quarters, our focus will transition from enhancing our platform to driving customer acquisition and engagement.”

Mr. Klepfish concluded: “2019 is shaping up to be a record year of revenue growth.  We believe we are well positioned for continued revenue expansion and improved profitability in 2020 as a result of this year’s enhancements to our compelling data driven specialty food platform.  We are excited by the direction we are headed and the opportunities we have to create value for our shareholders.”

IVFH’s revenue increased to $13.5 million during the three months ended September 30, 2019, compared to $12.1 million for the three months ended September 30, 2018.  The primary drivers of the 12% increase in third quarter revenue were strong growth in the Company’s specialty foodservice and e-commerce businesses.  For the first nine months of fiscal 2019, total revenue increased 15% to $40.3 million, compared to $35.0 million last year.

Deferred revenue which includes revenues associated with the Company’s e-commerce subscription services, including both Mouth and iGourmet, increased to $198,000 at September 30, 2019, compared to $28,000 at September 30, 2018.  IVFH had approximately 21,700 active and unique e-commerce customers, compared to approximately 21,600 customers for the same period last year.

The following table sets forth IVFH’s revenue by business category for the three and nine months ended September 30, 2019 and September 30, 2018:

Three Months Ended

September 30,
2019

% of Net Sales September 30,
2018
% of Net Sales

%  Change

Specialty Foodservice…………………….

$   11,574,373

86% $   10,481,021 87%

10%

E-commerce……………………………………

1,572,031

12% 1,181,933 10%

33%

National Brand Management …………

            319,360

2%             391,536 3%

-18%

      Total IVFH………………………………..

$   13,465,764

100% $   12,054,490 100%

12%

Nine Months Ended

September 30,
2019

% of Net Sales September 30,
2018
% of Net Sales

% Change

Specialty Foodservice…………………….

$   33,542,367

83% $   29,739,129 85%

13%

E-commerce……………………………………

5,452,024

14% 3,617,039 10%

51%

National Brand Management …………

       1,256,039

3%        1,603,869 5%

-22%

      Total IVFH………………………………..

$   40,250,430

100% $   34,960,037 100%

15%

For the 2019 third quarter, selling and administrative (“SG&A”) expense, as a percentage of net revenue, was 27.9% compared to 27.8% in the prior year quarter, and 28.9% in the 2019 second quarter.  SG&A expenses increased as a result of investments the Company continues to make to support growth including investments associated with procurement, accounting, and systems, as well as the expansion of fulfillment capabilities within the iGourmet warehouse for both e-commerce and specialty foodservice.  For the first nine months of 2019, SG&A expense, as a percentage of net revenue, was 28.7% compared to 27.0% for 2018.

For the 2019 third quarter, IVFH reported a net loss of $158,000, or $0.005 per share, compared to net income of $149,000, or $0.004 per diluted share in the prior year’s third quarter. Adjusting for amortization of intangibles and stock related expenses, 2019 third quarter net income was $149,000, or 0.004 per diluted share, compared to $416,000, or $0.012 per diluted share for the same period last year.  For the first nine months of 2019, net income was $28,000, or $0.001 per diluted share, compared to $927,000, or $0.027 per diluted share for the first nine months of 2018. Adjusting for amortization of intangibles and stock related expenses, 2019 nine-month net income was $1.0 million, or 0.030 per diluted share, compared to $1.6 million, or $0.048 per diluted share for the same period last year.

Cash EBITDA for the 2019 third quarter was $233,000, compared to $495,000 in the prior year quarter.  For the first nine months of 2019, Cash EBITDA was $1.3 million, compared to $2.0 million for the same period a year ago.

IVFH’s balance sheet remains strong with $2.8 million of cash and cash equivalents, and the full availability of over $2 million in commercial credit including the Company’s $2 million commercial credit line which was extended through August 2021.

About Innovative Food Holdings, Inc.

Innovative Food Holdings, Inc. is an interconnected data driven platform of small, specialty food companies serving business and consumer customers.  The platform offers efficient, cost effective, and transparent sourcing of over 7,000 specialty food products including proprietary branded products. Sales channels on the platform include specialty foodservice channels and data driven DTC e-commerce channels including leading specialty food direct-to-consumer e-commerce websites www.igourmet.com  and www.mouth.com as well as a strong specialty food omnichannel offering via www.amazon.com, www.ebay.com and  www.walmart.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” or “expect.” The Company does not intend to update these forward-looking statements. The content of the websites referenced above are not incorporated herein.

Innovative Food Holdings, Inc.
Consolidated Balance Sheets

September 30,
2019

December 31,
2018

(unaudited)

ASSETS
Current assets
Cash and cash equivalents 2,825,995 $ 4,759,817
Accounts receivable, net 3,179,676 3,039,756
Inventory 2,695,489 2,301,377
Other current assets 194,372 144,301
Total current assets 8,895,532 10,245,251
Property and equipment, net 2,208,037 2,456,610
Investments 420,225 339,525
Right to use assets, operating leases, net 296,579
Right to use assets, finance leases, net 115,222
Other amortizable intangible assets, net 1,515,773 2,158,498
Goodwill and other unamortizable intangible assets 2,183,065 2,183,065
Total assets $ 15,634,433 $ 17,382,949
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued liabilities 2,503,147 $ 3,689,868
Accrued interest 18,471 16,402
Deferred revenue 197,574 559,315
Notes payable – current portion 705,460 928,857
Lease liability – operating leases, current 165,369
Lease liability – finance leases, current 19,279
Contingent liability – current portion 306,157 472,876
Total current liabilities 3,915,457 5,667,318
Lease liability – operating leases, non-current 131,210  
Lease liability – finance leases, non-current 92,988
Contingent liability – long-term 227,600 357,600
Note payable – long term portion 436,373 1,196,245
Total liabilities 4,803,628 7,221,163
Commitments and contingencies
Stockholders’ equity
Common stock: $0.0001 par value; 500,000,000 shares authorized; 36,786,528 and 36,296,218 shares issued, and 34,198,948 and 33,708,638 shares outstanding at September 30, 2019 and December 31, 2018, respectively 3,675 3,627
Additional paid-in capital 36,773,186 36,132,065
Treasury stock: 2,373,171 shares outstanding at September 30, 2019 and December 31, 2018 (1,016,370) (1,016,370)
Accumulated deficit (24,929,686) (24,957,536)
Total stockholders’ equity 10,830,805 10,161,786
Total liabilities and stockholders’ equity $ 15,634,433 $ 17,382,949

 Innovative Food Holdings, Inc.
Consolidated Statements of Operations

For the Three Ended
September 30,

For the Nine Ended
September 30,

2019

2018 2019

2018

Revenue $ 13,465,764 $ 12,054,490 40,250,430 $ 34,960,037
Cost of goods sold 9,864,484 8,523,505 28,608,233 24,370,421
Gross margin 3,601,280 3,530,985 11,642,197 10,589,616
Selling, general and administrative expenses 3,754,012 3,354,315 11,560,838 9,429,111
      Total operating expenses 3,754,012 3,354,315 11,560,838 9,429,111
Operating (loss) income (152,732) 176,670 81,359 1,160,505
Other (income) expense:
Gain on settlement of contingent liability (11,000)
Gain on sale of fixed assets (12,495) (12,495)
Interest expense, net 17,377 27,969 66,004 89,013
      Total other expense 4,882 27,969 53,509 78,013
Net (loss) income before taxes (157,614) 148,701 27,850 1,082,492
Income tax expense 155,000
Net (loss) income $ (157,614) $ 148,701 27,850 $ 927,492
Net (loss) income per share – basic $ (0.005) $ 0.004 $ 0.001 $ 0.027
Net (loss) income per share – diluted $ (0.005) $ 0.004 $ 0.001 $ 0.027
Weighted average shares outstanding – basic 34,060,498 33,989,715 34,021,245 33,974,321
Weighted average shares outstanding – diluted 34,060,498 33,989,715 34,021,245 33,974,321

Innovative Food Holdings, Inc.
Consolidated Statements of Cash Flows

For the Nine Months Ended
September 30,

2019

2018

Cash flows from operating activities:
   Net income $ 27,850 $ 927,492
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
     Depreciation and amortization 921,096 794,285
     Amortization of right-of-use asset 140,303
     Stock based compensation 297,503 47,696
     Gain on settlement of contingent liability (11,000)
     Gain on sale of fixed assets (12,495)
     Recovery of doubtful accounts (1,633) (36,857)
Changes in assets and liabilities:
        Accounts receivable, net (183,787) (164,622)
        Inventory and other current assets, net (444,183) (800,119)
        Accounts payable and accrued liabilities (1,090,986) (672,826)
        Deferred revenue (361,741) 27,534
        Operating lease liability (140,303)
   Net cash (used in) provided by operating activities (848,376) 111,583
Cash flows from investing activities:
   Cash related to the iGourmet asset acquisition (2,703,320)
   Cash received from the sale of fixed assets 12,495
   Purchase of property and equipment (131,095) (382,014)
   Purchase of intangible assets (47,000)
   Investment in food related companies (35,200) (50,000)
   Net cash used in investing activities (200,800) (3,135,334)
Cash flows from financing activities:
    Sales of common stock 250,000
    Purchase of stock options from officers, directors, and employees (167,000)
    Cash received from exercise of stock options   35,000
    Cash paid in settlement of contingent liabilities in connection with acquisition (296,719) (189,000)
    Borrowings on term loan 1,500,000
    Purchase of treasury stock (24,057)
    Principal payments on debt (818,819) (846,556)
    Principal payments capital leases (19,108) (5,900)
   Net cash (used in) provided by financing activities (884,646) 302,487
Decrease in cash and cash equivalents (1,933,822) (2,721,264)
Cash and cash equivalents at beginning of period 4,759,817 5,133,435
Cash and cash equivalents at end of period $ 2,825,995 $ 2,412,171
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 68,812 $ 94,614
Taxes $ $ 155,000
Non-cash investing and financing activities:
Issuance of 131,136 shares of common stock previously accrued $ 93,666 $
Right to use assets and liabilities – operating, upon adoption of ASU 2016-02 $ 338,581 $
Fair value of 9,524 shares of common stock issued for services $ 5,143 $
Increase in right of use assets & liabilities $ 98,301 $
Investment in food related company $ 45,500 $
Return of equipment & reduction in amount due under equipment financing loan $ 33,075 $

 

Three Months Ended

 

Nine Months Ended

September 30, 2019

  September 30, 2018   September 30, 2019  

September 30, 2018

Adjusted Net Income and EPS
Revenue $    13,465,764 $   12,054,490 $   40,250,430 $   34,960,037
Net Income           (157,614) 148,701 27,850 927,492
Amortization of intangible assets (1)             210,029 242,874 689,726 648,177
Stock related expenses (2)                96,108               24,288              292,360                 47,696
Adjusted Net Income

 

$          148,523   $         415,863   $      1,009,936   $      1,207,502
Weighted Avg. Shares Outstanding Diluted (3)

 

34,060,498 33,989,715 34,021,245 33,974,321
Adjusted Fully Diluted EPS $               0.004   $              0.012   $              0.030   $              0.048
             
Three Months Ended   Nine Months Ended
September 30, 2019   September 30, 2018   September 30, 2019  

September 30, 2018

Cash EBITDA
Net Income $       (157,614) $         148,701 $           27,850 $         927,492
Interest expense, taxes & other income 4,882 27,969 53,509 233,013
Depreciation & amortization 290,011 294,258 921,097 794,285
Stock related expenses (2)                96,108               24,288              292,360               47,696
Cash EBITDA $          233,387   $         495,216   $      1,294,816   $      2,002,486

 

  • Includes non-cash amortization charges related to assets acquired
  • Includes stock and options-based compensation and expenses
  • Full Year GAAP weighted fully diluted share count