In November 2022, the company announced a series of initiatives designed to achieve annual cost savings of approximately $30M, which it then believed could result in positive Adjusted EBITDA and cash flow by or around mid-year 2024. However, based on progress to date, the company now believes that it could achieve annual cost savings of up to $40M or more in 2023, which if achieved, would allow it to reach breakeven Adjusted EBITDA and become cash flow neutral during Q4 2023, approximately six months ahead of its original outlook. The anticipated cost savings include reductions in marketing and promotional expenses, workforce reductions, costs savings derived from operating efficiencies, new product introductions, and retail expansion. The company continues to expect the following: a reduction in 2023 marketing expenses of approximately $15M; operational and automation-derived savings of approximately $6M, primarily driven by a reduction in labor and increased productivity in the same footprint; savings of approximately $2M associated with operating dedicated, in-house cold storage facilities; and a reduction in promotional programs that are estimated to produce approximately $7M in cost savings. In addition to the above-referenced actions, the company has undertaken a workforce reduction plan, realigned company resources, and is in the process of rationalizing its product portfolio, all while taking steps aimed at driving higher revenue in 2023. "We continue to execute a plan that we believe will reduce cash burn, reduce our annual losses, and strengthen our brand profile and retail presence," said Sam Galletti, President and CEO. "Tattooed Chef holds a distinct position in our industry as a vertically integrated, value-added plant-based food company, and we remain focused on producing the highest quality products, pursuing innovation, and optimizing both the efficiency and utilization of our operations to unlock their inherent profitability. Although we still have much work ahead of us, we are seeing early indications of our progress on a sequential quarterly basis, with material improvements expected to manifest beginning in Q1 2023 and continuing throughout the year." Galletti noted that on a consecutive quarterly basis, comparing to Q3 2022 to estimated Q4 2022 metrics, the company reduced promotional spend by approximately $2M, operating expenses of approximately $12M, which includes approximately $7M in selling, general and administrative, and approximately $5M in sales and marketing.
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