Three key factors that bode well for Tattooed Chef (TTCF) going forward

Shares of Tattooed Chef Inc. (NASDAQ: TTCF) have gained 57% over the past 12 months but has dropped 25% since the start of this year. The sentiment on the stock appears somewhat mixed. The company continues to see strong demand and generate sales growth but its losses and the lack of guidance on net income has raised concerns. Here are three factors that bode well for the plant-based food products maker going forward:

Demand

Tattooed Chef offers a different range of plant-based products beyond burgers and sausages that appeal to vegetarian and vegan customers. The company is seeing strong demand that has led to solid revenue growth. In Q1, revenues increased 59% to $53 million, driven by increases in its branded products as well as private label and legacy products.

TTCF’s branded product sales totaled $36 million and comprised 69% of total revenue in Q1, which is double the amount seen in the same period last year. The company had earlier expected to reach 75-80% branded sales in 2-3 years but now it is nearing that goal much faster.

TTCF’s products are available across a large number of stores and points of distribution. At the end of 2020, the company’s branded products were available in around 4,300 stores and across 23,000 points of distribution. At the end of Q1, these numbers increased to 6,065 stores and 31,000 points of distribution.

By the end of the second quarter of 2021, these are expected to increase further to 7,477 stores and 40,275 points of distribution. TTCF is confident that it can achieve its goal of reaching 10,000 stores and 65,000 points of distribution by the end of 2021. For FY2021, TTCF expects total revenues to grow 58-63% to a range of $235-242 million.

Product innovation

TTCF continues to invest in product innovation. At the end of the first quarter, the company had 42 Tattooed Chef branded SKUs and by the end of the second quarter, it is expected to have 54. The new range of products include cauliflower spaghetti with plant-based bolognese, sweet potato gnocchi with plant-based butter and sage, and a riced cauliflower burrito blend, among others.

TTCF also has its own pasta alternatives such as Pesto Harvest Bowl and Cauliflower Mac & Cheese as well as its range of plant-based pizzas. The company’s acquisition of Foods of New Mexico will help improve its capabilities in product innovation.

TTCF believes there are not enough plant-based options in the Mexican food space and it plans on moving into the $1 billion frozen Mexican food category soon. The company believes the acquisition will allow it to expand into the $20 billion Hispanic Southwest food sector and estimates that it will contribute up to $200 million in revenue annually in 2-3 years.  

Strong balance sheet

Tattooed Chef has a stable balance sheet. At the end of the first quarter, the company had a cash balance of $185 million while its debt stood at around $2 million. Total assets amounted to $332 million while total liabilities were about $45 million.

Click here to read the full transcript of Tattooed Chef’s Q1 2021 earnings conference call