Q3 2024 Barfresh Food Group Earnings Call
[inaudible]
Speaker Change: Good afternoon everyone and thank you for participating in today's third quarter, 2024 corporate update call for bar fresh food group. Joining us today is bar fresh food group founder and CEO Riccardo Delacosta and bar fresh food group CFO Lisa Roger.
Speaker Change: Following Prepare Gromarks, we will open the call for your questions.
Speaker Change: The discussion today will include forward looking statements.
Speaker Change: except for historical information here in Matterset Fourth on this call are forward-looking within the meaning of the C-Carber provisions of the private securities litigation reformat of 1995, including statements about the company's commercial progress, success of its strategic relationships, and the projections of future financial performance.
Speaker Change: These forward-looking statements are identified by the use of words such as growth, expand, anticipate, intend, estimate, believe, expect, plan should.
Speaker Change: Potential, Forecast, Project, Continue, Could, May, Project, And Will, and variations of such words and similar expressions are intended to identify such forward-looking statements.
Speaker Change: All statements, others in the statements of historical facts that address activities, events or developments that the company believes or anticipates will or may occur in the future are forward-looking statements.
Speaker Change: You statements are based on certain assumptions made based on experience, expected future developments and other factors that the company believes are appropriate under the circumstances.
Speaker Change: That's statements are subject to a number of assumptions, risks and uncertainties.
Speaker Change: Many of which are beyond the control of the company. Should one or more of these risks or a certainties materialize or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements?
Speaker Change: Accordingly, investors are caution not to place undue reliance on these forward-looking statements, which speak only as of the date they are made.
Speaker Change: The contents of this call should be considered in conjunction with the company's recent filing with the Securities and Exchange Commission.
Speaker Change: including its annual report on Form 10K and the quarterly reports on Form 10K and current report on Form 8K, including any warnings, risk factors and cautionary statements to the team's their end.
Speaker Change: Furthermore, the company expressingly declaims that claims any current intention to update publicly any forward-looking statements after this call. Whether as a result of new information, future events changes in assumptions or otherwise.
Speaker Change: In order to aid in understanding of the company's business performance, the company is also presenting certain non-gap measures.
Speaker Change: Including adjusted gross profit, EBDA, adjusted needs which are reconciled in tables and the business update release for the most comparable gap measures and certain calculations based on the results including gross margin and adjusted gross margin.
Speaker Change: The Recon song items are non-operational or non-cash cost, including stock compensation and other non-recurrent costs, such as those associated with the product with control, the related dispute and certain manufacturing relocation costs.
Speaker Change: Management believes that the adjusted growth profit and adjusted EBITDA provide useful information to the investor because they are directed directly reflective of the performance of the company.
Speaker Change: Now I will turn the call over to the CEO of Barfesh Food Group Mr. Riccardo Delicosa. Please go ahead, sir.
Riccardo Delicosa: Good afternoon everyone and thank you for joining us for our third quarter 2020 for earnings calls.
Riccardo Delicosa: I'm thrilled to announce that we achieved record quarterly revenue of over 3.6 million for the third quarter. Representing a 40% increase over the same period last year.
Riccardo Delicosa: What makes this achievement even more exciting is that it serves as a robust baseline for our future growth, especially considering our new pop and go offering wasn't a part of our third quarter offering or revenue.
Riccardo Delicosa: Our recent investments and strategic initiatives have positioned us exceptionally well for continued growth and profitability. Let me highlight some key developments.
Riccardo Delicosa: Our recent three new manufacturing partnerships, some of which have commenced and others still in the process of being commissioned dramatically increase our production capacity, allowing us to meet growing demand and onboard new customers efficiently.
Riccardo Delicosa: We will now have the ability to produce over 120 million units annually across that product offering. A 400% increase compared to last year.
Riccardo Delicosa: We have already begun ramping up operations, we have new manufacturing partners and expect additional bottle capacity to come online in the fourth quarter.
Riccardo Delicosa: Our sales reach has experienced a transformative expansion. Without broken it was now covering and you've pursued 95% of the countries.
Riccardo Delicosa: This extensive coverage is achieved through strategic partnerships with local brokerage firms across the United States. Effectively putting hundreds of sales professionals on the ground, actively promoting our products.
Riccardo Delicosa: The power of this approach fly in leveraging regional expertise and established local relationship.
Riccardo Delicosa: which has proven to be exceptionally impactful in the Education Channel.
Riccardo Delicosa: Complementing this external network is our dedicated internal saddle force led by our experience by President of sales.
Riccardo Delicosa: This in-house team works in coordination with our National Sales Broker Networks, ensuring a cohesive and comprehensive sales strategy.
Riccardo Delicosa: It's important to point out that we are just beginning our expansion opportunity in the education channel with approximately only 4.5% penetration currently in the schools in the US.
Riccardo Delicosa: During the fourth quarter, we commend selling our 100% reduced freeze pops popping go to the Education Channel.
Riccardo Delicosa: This new product as with our other product in the Education Channel is compliant with USDA Remversible Mill programs and smart snack guidelines.
Riccardo Delicosa: The initial response from students and administrators has been extremely positive.
Riccardo Delicosa: Puppendo compliments Ari's 15 school offerings and strategically target lunch menu in schools, which can be up to five times the volume of our current breakfast menu offerings.
Riccardo Delicosa: Looking ahead, we see a clear path to popping dough to expand into other food service and retail channels further broaden our market reach.
Riccardo Delicosa: The End
Riccardo Delicosa: The infrastructure we put in place is not just about this year's results. It's about building a company crime for sustained long-term growth.
Riccardo Delicosa: We're excited to capitalize on our momentum with the launch of Hopping Girls and further accelerate our growth trajectory.
Riccardo Delicosa: The company is in the strongest position it's ever been, having strategically aligned our on-crain product offerings, amplified production capacity and comprehensive sales networks under the stewardship of our experience management team.
Speaker Change: I'll now turn the call over to our CFO Lisa Roger, Lisa
Lisa Roger: Thank you Riccardo, revenue for the third quarter of 2024 increased 40% to 3.6 million, compared to 2.6 million in the third quarter of 2023.
Lisa Roger: Revenue in 2024 benefited from improvements in twist and go bottle smoothie sales from inventory built ahead of our seasonally high third quarter and improvements in smoothie carton and bulk sales.
Lisa Roger: Grace margin for the third quarter of 2024 was comparable to the prior year period at 35%. Excluding production relocation costs, adjusted Grace margin for the third quarter of 2024 was 38%.
Lisa Roger: The year over the year increase in adjusted gross margin is due to stable goal product mix, pricing actions, and a slight improvement in the cost of supply chain components.
Lisa Roger: Belling Marketing and Distribution expense for the third quarter of 2024 increased to 990,000 compared to 697,000 in the third quarter of 2023.
Lisa Roger: The increase is a result of investments in higher personal costs, travel and broker commissions due to expansion as a company's broker network, as well as freight costs due to the increase in revenue.
Lisa Roger: GNA expenses for the third quarter of 2024 or 75,000 compared to 577,000 in the same period last year.
Lisa Roger: The increase in GNA was primarily driven by the non-recurrents of recognizing employee retention tax credit benefits in 2023.
Lisa Roger: Our net loss for the third quarter of 2024 was 513,000 compared to a net loss of 476,000 in the third quarter of 2023.
Lisa Roger: The year-over-year increases the results of increased head counts and the non-recurrents of tax benefits recognized in 2023, partially offset by the contribution margin from increased sales.
Lisa Roger: For the third quarter of 2024, our adjusted unit was approximately a loss of 124,000 compared to a loss of 89,000 in the prior year period.
Lisa Roger: Now moving on to our balance sheet. As of September 30, 2024, we had approximately 2.1 million in cash in accounts receivable and approximately 770,000 of inventory on our balance sheet.
Lisa Roger: In the first half of the year, we deployed a significant amount of cash to build up inventory and preparation for our seasonally high Q3. The inventory build allowed us to generate a 40% year increase in revenue for the third quarter of 2024.
Lisa Roger: We expect expanded bottles through the capacity to come online in the fourth quarter.
Lisa Roger: Additionally, we have taken other measures to reduce our liquidity requirements, including compensating our directors and employees with equity to reduce cash compensation requirements, and obtaining non-recourse litigation finance and secure refueals finance.
Riccardo Delicosa: Now I will turn the call back to Riccardo for closing remarks.
Riccardo Delicosa: Thank you Lisa. In closing, I want to share both our need term and long term outlook.
Riccardo: For fiscal year 2024, we continue to expect record annual revenues and year over year adjusted gross margin improvements.
Riccardo Delicosa: is driven by 3 key factors. First, the expansion of our product portfolio.
Riccardo Delicosa: Hi, lighted by our innovative Topping Girl Offering, which will begin generating revenue in the fourth quarter. Second, our significantly enhanced production capacity and third, our broadened sales network, which is accelerating new customer acquisition.
Riccardo Delicosa: These strategic initiatives not only set the stage for a strong finish to 2024, but also provide robust momentum as we enter 2025.
Riccardo Delicosa: Beyond the Out 2020 Fall Outlook, we have laid the groundwork for sustained future growth.
Riccardo Delicosa: The key part of this effort has been the establishment of our new Co-manufacturing locations.
Riccardo Delicosa: While this represents a significant investment of internal resources and has resulted in incremental contract acquisition and trial costs that have impacted our third quarter results, it is crucial for our long-term growth.
Riccardo Delicosa: The on manufacturing, we've been diligently working on enhancing all aspects of our business.
Riccardo Delicosa: Our operations have also been bolstered by the newly integrated ERP and transport management system.
Riccardo Delicosa: is integrated infrastructure, physician-dust to scale out business efficiently and effectively.
Riccardo Delicosa: With these building blocks now in place, we're set to aggressively shift our focus and resources from increasing manufacturing capacity and operational improvements to sales growth.
Riccardo Delicosa: Our track record shows we can significantly increase sales and our expanded capacity gives us even more room to growth.
Riccardo Delicosa: We've been diligently rebuilding all aspects of our business and are in a great position to capitalize on these investments.
Riccardo Delicosa: The future is bright and we're more prepared than ever to drive our sales to new heights and see the opportunity to head.
Riccardo Delicosa: The initiatives coupled with our strengths and position in the market and the positive momentum we see in 2024 gives us confidence in our ability to deliver substantial growth and value for our shareholders in both the near term and the long term.
Riccardo Delicosa: and we'd like to open the line for questions. Operator.
Speaker Change: Thank you. We will now be conducting a questionnaire and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your law and is in the question queue.
Speaker Change: You may press star too if you would like to remove your question from the queue
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.
Speaker Change: One moment please, what we pull for questions.
Speaker Change: The End
Speaker Change: Our first question comes from Anthony Vendetti with Maxim Group. Please proceed with your question.
Anthony Vendetti: Thanks, Riccardo, this is how we use
Anthony Vendetti: Good have you
Anthony Vendetti: Good. I was just wondering if you could talk a little bit about the new pop and go freeze pops. Just the initial traction, what the pipeline looks like, and then any other commentary you want to provide around that, that would be helpful.
Riccardo Delicosa: Yeah, sure. So we actually, uh, we've just shipped up our orders for pop-in-go.
Riccardo Delicosa: So there will be a renter in some revenue commencing queue for, like we mentioned.
Riccardo Delicosa: The interest has been exceptionally high. We've had a lot of people express interest in the in you popngos just from the samples that have been sent out. We've already got open in orders. We've got new distributors that are getting codes set up all over the country.
Riccardo Delicosa: I'm probably the most exciting part of the new pop-in-go offering and we do talk about it a little bit.
Speaker Change: Understand the detail of the difference between the breakfast menu, volume of servings and lunch opportunity in the same education channel is very significant. So you just have a much bigger audience and the volume of lunch served.
Speaker Change: If we get on the menu at lunch versus for breakfast, these potentially up to five times in the amount of volume of what we're doing for the, say, the twist and go on the breakfast menu.
Speaker Change: So that is a very, very significant opportunity for us as we look to go into the same customers that we're already serving with the twist and go and the addition to having products on their breakfast menu we now also have products on their lunch menu as well as brain new customers.
Speaker Change: and having an alternative option for the lunch menu.
Speaker Change: We're very excited about it.
Speaker Change: Mary very excited at it.
Speaker Change: Okay, so that's great. So the common fact that you signed up recently are they?
Speaker Change: doing both the twisting go and the pop and go, or is it mostly the pop and go for the new co manufacturer. And then on the pop and go are they similar margins to the twisting go better, maybe just give us an idea about that.
Speaker Change: Sure, so that manufacturer does not make our twisting go product, but they do do some other products for us.
Speaker Change: So it's different, however, from a margin profile perspective.
Speaker Change: Probably at the same, probably a little bit bad-up, margin profile that in a twist and go.
Speaker Change: Okay, okay. I'm going to share my personal share product and some of our ball products as well. So the expansion is, you know, every product line.
Speaker Change: We've really done a lot of work on, you know, we've done a lot of work over the last 12 months on the manufacturing front, you know, to really give us the coverage that we need from a manufacturing footprint nationally and building in some extra redundancy within our system, to cover multiple products.
Speaker Change: So, you know, with that we believe we're also going to get some additional product cost savings as we kind of roll out and commission new manufacturing locations and we get just get more volume and better pricing and you know, just better efficiencies across the network.
Speaker Change: Okay, and then separately at this time how many school counts are you active in right now?
Speaker Change: That's a great question.
Speaker Change: You know, we've got new ones being added almost.
Speaker Change: Almost Daily?
Speaker Change: You know, we did announce about three months ago the addition of about 3000 relocations. Some of them were a lot of been on boarded and others are still to be on boarded.
Speaker Change: as we get through the back half of the year. You know, we feel as though we're at about a four and a half percent penetration, which is about 6000 schools, ish, right, you will take.
Speaker Change: wants to get into the beginning of the media. We'll have a better handle on that number. And we'll be able to share it in more detail.
Speaker Change: So, six thousand about four and a half percent penetration.
Speaker Change: Are there schools that are just not good candidates for this or, you know, when you look at this.
Speaker Change: The spectrum of schools across the United States
Speaker Change: are half the schools, good candidates, or 75% of them, good candidates. How do you look at the entire school account?
Speaker Change: So that's a good question and it's probably worth some further explanation because that's four and a half percent And that penetration that we've been talking about is only for the twist and go right I mean up until This week we hadn't even shipped any Pop and go so pop and go is like
Speaker Change: Just complete white canvas and 100% of the market is open to us, you know, still from penetration perspective. So, you know, as you look at the twisting of the product.
Speaker Change: They're all great candidates for us, all the schools are. It's really just to remember that we've also been capacity constrained up until now.
Speaker Change: Now that we're getting the capacity unlocked in the manufacturing brought up, we expect to increase the volumes significantly and thus the penetration. And at the same time, we're looking to...
Speaker Change: John Penitrate, the same market in the same customers we've popping those, which is, you know, we're at zero at the cent right now.
Speaker Change: Okay, great. That's helpful. Thanks very much. I appreciate it. I'll hop back in the queue.
Speaker Change: Thanks.
Speaker Change: The End
Speaker Change: As a reminder, if you would like to ask a question, please press star one on your telephone keypad.
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Speaker Change: Our next question comes from Anchor Sagar.
Speaker Change: Please proceed with your question.
Anchor Sagar: and Lisa, thank you for taking my questions.
Anchor Sagar: Congratulations on the higher top lane number. I want to commend you for the job you have done. I think it's fair to say you have persevered against all odds.
Lisa Roger: Yeah, we definitely have been and I've got really just scratching the surface still. Yes, it's probably been our first
Lisa Roger: Cunt Significant Jump in a Oil.
Speaker Change: But that's really only because we've had both arms tied by our back, right, and we've really been short on supply. So, you know, with the inventory build that we did at the beginning of this year, and now we've the extra capacity that's coming online, we really expect a lot more of these types of jumps to occur.
Speaker Change: Absolutely, no great job by you and your team. I think it's as a shareholder. It's just been amazing to see that what you have accomplished in the last couple of years. And that too without in a not much
Speaker Change: of Deletion, so that's great. I want to ask a couple of questions. It's the first one is a multi-part question in regarding the new product seems to me like now your innovation company.
Speaker Change: I would put a new product into the lunch area as well for the schools.
Speaker Change: How did the company came about this product? I mean, was it based on the customer feedback on the free spots?
Speaker Change: is just that you wanted to basically go after the lunch side of the school where as well.
Speaker Change: and end.
Speaker Change: In terms of the signing of the schools and getting on this product on the lunch menu, how do you go about doing that? Do you have to wait for the school beds?
Speaker Change: are, you know, that you have customer, the 6000 customers are so for fiscal, you can potentially reach out to the right personnel and just be able to get this on a lunch menu without the bidding process.
Speaker Change: Okay, so I'll take the questions from the top.
Speaker Change: We...
Speaker Change: Create the product.
Speaker Change: by a combination of understanding where the bigger part of the opportunities are. Yes, you're right. The lunch menu is definitely a much higher volume opportunity and we recognize that, but we also...
Speaker Change: is a lot of people are asking for, you know, we're asking for, you know, we're asking for the consumption we're talking to our customers. But then it was also in conjunction with understanding what we already have access to our supply chain. What our supply chain, you know, what kind of great products can we deliver to these customers?
Speaker Change: Utilizing the ingredients that we're already using as well, right? Because we're using a lot of the same ingredients, we're using the same supply chain.
Speaker Change: and talking and by talking to our customers and recognizing the significance of the opportunity on the launch menu. So it's a multifaceted approach to introducing a new product and understand the market and we believe that...
Speaker Change: First thing I believe is the neat pop we can go product.
Speaker Change: I believe it's going to surpass our twisting go product.
Speaker Change: Ahhhh
Speaker Change: just by she volume opportunity out there in the marketplace for this product category and based on the initial reception and acceptance that we've had from the initial customers that we've been talking to. So, you know, Tom will tell but just from the initial feedback and the volumes that are being proposed to us from our customers.
Speaker Change: You know, I do an example. We did have a customer, you know, it was full casting about 40,000 units a month.
Speaker Change: for the Twisting Go product and they intend to add the pop-in-go's in the spring and they're going to do about 200,000 a month of the pop-in-go's started in spring per month.
Speaker Change: So, you know, we are already seeing the significance of the contrast in volume opportunity between the twisting-go product and the pop-in-go products, which is why we're so bullish out of it.
Speaker Change: Approaching Customers now and our existing customers. It's a total mix.
Speaker Change: The answer is yes, absolutely. We're going to be going to our direct customers that we're already servicing that we're already on menus to in some instances they will have flexibility to add them to their menus. They may choose just to add it to their...
Speaker Change: Capitiria Menese at the moment, and Alacart with it.
Speaker Change: and Maya and then maybe when their beat season opens up they'll, you know, they'll re-bid it and then it'll get added to the beat.
Speaker Change: Don't want to be able to add it into a bit season roll ground. Sometimes it happens twice a year. Sometimes they do special bits. It really is a mixed bag around the country for different types of schools.
Speaker Change: Daughter, Daughter
Speaker Change: and that's great. And in terms of the, is it fair to say from the twist and go side that your somewhat still supply constrained? I think you mentioned the prepared remarks about another contract manufacture coming up in Q4.
Speaker Change: and that should allow you to basically go after and supply the twist and go product even to larger school districts.
Speaker Change: Yeah, that's not mean for us, we're not somewhat constrained, we have been, you know.
Speaker Change: We've been completely restrained and that's really being done. It's very significant factor to what's had a cap on our ability to generate the revenue.
Speaker Change: We have the facilities of the commission now as we speak literally.
Speaker Change: and we expect that volume to start to turn on in Q4.
Speaker Change: and further improved at the beginning of next year as well. So as we see that volume capacity opening up, we will definitely be approaching those larger accounts and be more broadly and aggressively going out there and selling the product nationwide.
Speaker Change: I see it actually in on social media, you know, customers, you know, school administrators, you know, students love your product and
Speaker Change: Summer just waiting for like when he's gonna show up again on the menu so I can attest to that. We probably get an email every other day from a parent, a teacher, a grandparents.
Speaker Change: Let's know that their child or their grandchildren had the product and they love it and they want to know where else they can get it from so they can get it at home. So we definitely get great feedback on the product and we look forward to getting that to more students.
Speaker Change: Garret, Garret
Speaker Change: And I think you had one item regarding the manufacturing relocation. Is it just something you're doing with the contract manufacturing right now? Is this still the remainder of that, you know, the legal dispute you had a couple of years ago?
Speaker Change: No, that was more of a repositioning. We actually, one of our co-practices was sold off. And...
Speaker Change: The new owners didn't do any contract manufacturing, so we had to relocate the equipment as a result of that, so that's really our single-serve product.
Speaker Change: So we will be, again, focusing more on once that new line's up and running, which is actually being done as we speak as well, we'll be targeting that single-serve business going into next year again.
Speaker Change: Yeah, that was the business where we had significant opportunities with QSRs.
Speaker Change: before COVID, so that's really a very significant new opportunity to relaunch that. Yeah, and for those that have been following for a while, we had multiple national QSRs where we've got multiple products approved.
Speaker Change: by then and we're ready to roll out, actually. So, we'll be picking up those conversations going into next year. And we've already started planting those seeds.
Speaker Change: Thank you.
Speaker Change: be able to get to cash flow breakeven, generate cash. Is there a revenue number that you can share where the company gets to cash flow breakeven and any sort of comments you can provide on the timeline on when you get there?
Speaker Change: I don't know, half a million to be at just to be at a breakeven. So, you know, we're very close. We expect to be there in a few more.
Speaker Change: Oh, I want to say $1.7 million in AR, we'd only borrowed $100,000 on it, so we could have borrowed like another $1.2 million if we really needed it. We just, you know, don't want to borrow unnecessarily.
Speaker Change: Yeah, so we feel like we have access to and we have cash available to meet our plan. So, you know, we feel like we're in a really good spot right now.
Speaker Change: No, no, that's for sure. I think you guys have done amazing, amazing work here.
Speaker Change: Can you share at least the initial amount that you are going after in this litigation dispute?
Speaker Change: Yeah, we're really taking a position that we're really not talking about it, Uncle. You know, the filing is...
Speaker Change: We filed a claim for a minimum of $20 million for the bridge contract, and that's public and that's really where we're leaving it at this stage.
Speaker Change: Got it. Got it. Okay. That's great. Thank you for taking my questions. I appreciate it. Great book
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