Q4 2024 Barfresh Food Group Inc Earnings Call and Business Update Call

Operator: Success of the Strategic Relationships and Projections of Future Financial These forward-looking statements are identified by the use of words such as grow, expand, anticipate, intend, estimate, believe, expect, plan, should, hypothetical, potential, forecast, and project, continue, could, may, predict, and will, and variations of such words and similar expressions are intended to identify such forward-looking statements. All statements other than the statements of historical fact that address activities, events, or developments that the company believes or anticipates will or may occur in the future are forward-looking statements. These statements are based on certain assumptions made based on experience, expected future development, and other factors that the company believes are appropriate under the circumstances.

<unk> kits and projections of future financial performance.

These forward looking statements are identified by the use of words, such as grow expand anticipate intend estimate believe expect plan should hypothetical potential forecast and project continue could may predict and will and variations of such words and similar expressions are intended to.

You identify such forward looking statements all.

All statements other than 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.

These statements are based on certain assumptions made brief on experience expected future developments and other factors that the company believes are appropriate under circumstances.

Such statements are subject to a number of assumptions risks and uncertainties many of which are beyond the control of the company should one or more of these risks or uncertainties materialize or should underlying assumptions prove incorrect actual results may vary materially from those indicated or anticipated by such forward looking statements.

Operator: Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the company. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements.

Accordingly investors are cautioned not to place undue reliance on these forward looking statements, which speak only as of the date. They are made the contents of this call should be considered in conjunction with the company's recent filings with the Securities and Exchange Commission, including its annual report on Form 10-K, and the quarterly re.

Operator: Accordingly, investors are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date they are made.

Operator: The contents of this call should be considered in conjunction with the company's recent filings with the Securities and Exchange Commission, including its annual report on Form 10-K and the quarterly reports on 10-Q, current reports on Form 8-K. including any warnings, risk factors, and cautionary statements contained therein.

Imports on 10-Q current reports on form 8-K.

Inc, including any warnings risk factors and cautionary statements contained therein.

Operator: Furthermore, the company expressly disclaims any current intentions to update publicly any forward-looking statements after this call, whereas a result of new information, future events, changes in assumptions, or otherwise.

Furthermore, the company expressly disclaims any curtin intention to update publicly any forward looking statements. After this call, whereas a result of new information future events changes in assumptions or otherwise.

Operator: In order to aid in the understanding of the company's business performance, the companies also presented certain non-GAAP measures. including adjusted gross profit EBITDA, adjusted EBITDA, which are reconciled in tables in the business update release to the most comparable GAP measures. And certain calculations based on its results include gross margin and adjusted gross... The reconciling items are non-operational or non-CASPER. including stock compensation and other non-recurring costs that are those associated with the project withdrawal, the related dispute, and certain manufacturing relocation costs. Management believes that Adjusted Gross Profit, EBITDA, and Adjusted EBITDA provide useful information to the investor because they are directly reflected in the performance of the company.

In order to aid in the understanding of the company's business performance. The company has also presented certain non-GAAP measures.

Including adjusted gross gross profit EBITDA, adjusted EBITDA, which are reconciled in tables in the business upbeat relief to the most comparable GAAP measures and certain calculations based on its results include gross margin and adjusted gross margin the reconciling.

The items are non operational or non cash costs, excluding stock compensation and other nonrecurring costs that are those associated with the project. Mr. All the related dispute asserted manufacturing relocation costs.

Management believes that.

Adjusted gross profit EBITDA and adjusted EBITDA provides useful information to the investor because they are directly reflected the poor performance of the company.

Riccardo Del Coste: Now I would like to turn the call over to the CEO of Barfresh Group, Mr. Riccardo Del Coste. Please go ahead. Good afternoon, everyone, and thank you for joining us for our fourth quarter and full year 2024 earnings call. 2024 was a transformative year for our company. One where we made significant strategic investments and operational enhancements that have positioned us for sustained growth. I'm pleased to report that these efforts delivered record full-year revenue, and we expect this momentum to continue with another year of record revenue expected in 2025, with growth guidance between 35 and 55 per cent.

Speaker Change: Now I would like to turn the call over to the CEO of bar Fresh group Mr. Ricardo they'll cost day. Please go ahead Sir.

Ricardo Day: Good afternoon, everyone and thank you for joining us for our fourth quarter and full year 2024 earnings call.

Ricardo Day: 'twenty 'twenty four it was a transformative year for our company, one where we made significant strategic investments and operational enhancements that have positioned us for sustained growth.

Ricardo Day: I'm pleased to report that these efforts delivered record full year revenue.

Ricardo Day: We expect this momentum to continue with another record revenue with it.

Ricardo Day: In 2025 with great guidance between 35 and 55%.

Ricardo Day: Our revenue guidance accounts for continuing orders from existing customers and confirm did well.

Riccardo Del Coste: Our revenue guidance accounts for continuing orders from existing customers and confirmed bids, while also considering estimate revenue from end-user opportunities at later stages in our sales pipeline, including two of the top ten largest school districts in the United States.

Ricardo Day: While also considering estimate revenue from end user opportunities at later stages, and our sales pipeline, including two of the top 10 largest school districts in the United States.

Ricardo Day: Let me highlight our key accomplishments.

Riccardo Del Coste: Let me highlight our key accomplishments. First, we successfully addressed our manufacturing capabilities. After losing our largest co-manufacturer in 2022, we secured and began onboarding two new strategic partners. While this transition created some near term cost pressures in Q4, we expect the onboarding to be complete by the end of Q2 2025, bringing us to full manufacturing capacity in time for our high season selling in the education channel, which picks up with back to school demand in Q3. Second, we expanded our product portfolio with the significant launch of Pop'n Go, 100% juice freeze pops in our education channel during Q4.

Ricardo Day: First we successfully addressed our manufacturing capabilities.

Ricardo Day: Losing their largest car manufacturing 2022, we secured and began onboarding two new strategic partners.

Ricardo Day: While this transition created some near term cost pressures in Q4, we expect the onboarding to be complete by the end of Q2 2025, bringing us to full manufacturing capacity in time for a high season selling in the education channel, which picks up with back to school demand in Q3.

Ricardo Day: Yeah.

Ricardo Day: Second we expanded our product portfolio with a significant launch of popping out at 100% juice freeze Pops in our education channel during Q4.

Riccardo Del Coste: While this new product contributed modest revenue in its first quarter, we're excited about its potential. Unlike our breakfast-focused offerings, this product targets the lunch day part, a market opportunity significantly larger than breakfast. with manufacturing ramping to full capacity by the end of Q2. We expect material revenue contribution from this product in 2025. Third, we secured our financial foundation through non-dilutive financing, including non-recourse litigation financing and a $1.5 million line of credit. Additionally, we raised $3 million through the sale of common stock, providing us with the resources to execute our growth strategy. On the sales front, we've built a robust sales network with 95% coverage across the US.

Ricardo Day: While this new product contributed modest revenue in its first quarter.

Ricardo Day: We're excited about its potential.

Ricardo Day: Unlike our breakfast focused offerings these products target the lunch day part our market opportunity significantly larger than breakfast.

Ricardo Day: With manufacturing ramping to full capacity by the end of Q2, we expect material revenue contribution from these products in 2025.

Ricardo Day: Third we secured our financial foundation through non dilutive financing, including non recourse litigation financing and a $1.5 million line of credit.

Ricardo Day: Additionally, we raised $3 million through the sale of common stock, providing us with the resources to execute our growth strategy.

Ricardo Day: On the sales front, we built a robust sales network with 95% coverage across the U S.

Riccardo Del Coste: While we've had strong success in new customer acquisition in the education channel, we're still only at a 5% market penetration, representing significant runway for growth.

Ricardo Day: While we've had strong success in new customer acquisition in the education channel.

Ricardo Day: Only at a 5% market penetration representing significant runway for growth.

Ricardo Day: Now, let me address outperformance.

Riccardo Del Coste: Now let me address our performance. While we achieved record revenue for fiscal year 2024, our results in the fourth quarter were impacted by two temporary factors. costs associated with installing production equipment while onboarding our new co-manufacturers. and higher supply chain expenses from sourcing products from multiple locations while we wait for more equipment to arrive that needs to be commissioned. Both pressures will be resolved when we reach full manufacturing capacity by the end of Q2 2025. Looking ahead, we're entering 2025 with strong momentum. Our expanded manufacturing capacity, new product introductions and robust sales network give us confidence in our growth projection.

Ricardo Day: While we achieved record revenue for fiscal year 'twenty 'twenty four our results in the fourth quarter were impacted by two temporary factors.

Ricardo Day: Costs associated with installing production equipment, while on boarding our new car manufacturers.

Ricardo Day: And higher supply chain expenses from sourcing product from multiple locations, while we wait for more equipment to arrive that needs to be commissioned.

Ricardo Day: Both pressures will be resolved when we reach full manufacturing capacity by the end of Q2 2025.

Ricardo Day: Looking ahead, we're entering 2025 with strong momentum.

Ricardo Day: Our expanded manufacturing capacity, new product introductions, and robust sales network give us confidence in our growth projection.

Ricardo Day: More importantly, we expect to see meaningful margin improvement as we realize the benefits of our operational investments.

Riccardo Del Coste: More importantly, we expect to see meaningful margin improvement as we realise the benefits of our operational investment.

Speaker Change: Before I turn it over to Lisa for a detailed financial review I want to thank our employees partners and shareholders for their support during this pivotal year.

Riccardo Del Coste: Before I turn it over to Lisa for a detailed financial review, I want to thank our employees, partners and shareholders for their support during this pivotal year. While 2024 required significant investment and presented some challenges, it was essential groundwork that has positioned us for strong, profitable growth in 2025 and beyond.

Speaker Change: While 2020 full required significant investment and presented some challenges it was essential groundwork that has positioned us for strong profitable growth in 2025 and beyond.

Speaker Change: I'll now turn the call over to our CFO Lisa Roger Lisa.

Lisa Roger: I'll now turn the call over to our CFO, Lisa Roger. Lisa? Thank you, Riccardo. Revenue for the fourth quarter of 2024 was $2.8 million, compared to $1.9 million for the fourth quarter of 2023. Revenue for the full year of 2024 was a record $10.7 million, compared to $8.1 million in the same period of 2023. The increase in quarterly and full-year revenue is primarily due to expanded bottle production capacity year-over-year, enabling higher sales volumes, complemented by improvements in smoothie carton and bulk sales. First margin for the fourth quarter of 2024 was 26% compared to 33% for the fourth quarter of 2023.

Lisa Roger: Thank you Ricardo.

Lisa Roger: Revenue for the fourth quarter of 'twenty 'twenty, four was $2 8 million compared to $1 9 million for the fourth quarter of 2023.

Lisa Roger: For the full year of 2024 was a record 10.7 million compared to $8 1 million in the same period of 2023.

Lisa Roger: The increase in quarterly and full year revenue is primarily due to expanded bottle production capacity year over year, enabling higher sales volume.

Lisa Roger: Complemented by improvements its movie carton and bulk sales.

Lisa Roger: Gross margin for the fourth quarter of 2024 was 26% compared to 33% for the fourth quarter of 2023.

Lisa Roger: Adjusted growth margin for the fourth quarter of 2024 was 30% compared to 33% in the prior year period. Gross margin for the full year of 2024 was 34% compared to 35% for the same period of 2023. Adjusted gross margin for the full year of 2024 was 37% compared to 35% for the full year of 2023. The year-over-year improvement in full year adjusted gross margin is a result of favorable product mix, pricing actions, and a slight improvement in the cost of supply chain components, partially offset by the temporary production inefficiencies and increased logistic costs experienced in the fourth quarter of 2024.

Lisa Roger: Adjusted gross margin for the fourth quarter of 2024 was 30% compared to 33% in the prior year period.

Lisa Roger: Gross margin for the full year of 2024 was 34% compared to 35% for the same period of 2023.

Lisa Roger: Adjusted gross margin for the full year of 2024 was 37% compared to 35% for the full year of 2023.

Lisa Roger: The year over year improvement in full year adjusted gross margin as a result of favorable product mix and pricing actions and a slight improvement in the cost of supply chain components, partially offset by the temporary production inefficiencies and increased logistics cost experienced in the fourth quarter of 2024.

Lisa Roger: Selling marketing and distribution expense for the fourth quarter of 'twenty 'twenty four increased to 872000 or 31% of revenue compared to 624000 or 32% of revenue in the fourth quarter of 2023.

Lisa Roger: Selling, marketing, and distribution expense for the fourth quarter of 2024 increased to $872,000, or 31% of revenue, compared to $624,000, or 32% of revenue in the fourth quarter of 2023. Spelling marketing and distribution expense for the full year of 2024 increased to $3.1 million, or 29% of revenue, compared to $2.6 million, or 32% of revenue in the same period of 2023. The year-over-year dollar increase in quarterly and full year is a result of increased sales and marketing personnel costs, broker commissions, and outbound freight as a result of increased shipments. G&A expenses for the fourth quarter of 2024 were $620,000 compared to $624,000 in the same period last year.

Lisa Roger: Selling marketing and distribution expense for the full year of 2024 increased to $3 1 billion or 29% of revenue compared to $2 6 million or 32% of revenue in the same period of 2023.

Lisa Roger: The year over year dollar increase in quarterly and full year as a result of increased sales and marketing personnel costs broker commissions and outbound freight as a result of increased shipments.

Lisa Roger: G&A expenses for the fourth quarter of 2024 were 620000 compared to 624000 in the same period last year.

Lisa Roger: G&A expenses for the full year of 2024 were $3 million compared to $2.7 million in the same period of 2023. The year-over-year increase in full-year G&A was driven by an increase in management headcounts, an increase in stock-based compensation resulting from the increased headcounts and the extension of options previously issued to our Board of Directors, and the non-recurrence of recognizing employee retention tax credit benefits in 2023. As a result of the above noted changes in gross margin and operating expenses, our net loss for the fourth quarter of 2024 was $852,000 as compared to a net loss of $701,000 in the fourth quarter of 2023.

Lisa Roger: G&A expenses for the full year of 2024 were 3 million compared to $2 7 million in the same period of 2023.

Lisa Roger: Year over year increase in full year G&A was driven by an increase in management head count and increase in stock based compensation, resulting from the increased head count and the extension of options previously issued to our board of directors.

Lisa Roger: And the non recurrence of recognizing employee retention tax credit benefits in 2023.

Lisa Roger: As a result of the above noted changes in gross margin and operating expenses, our net loss for the fourth quarter of 2024 was 852000 as compared to a net loss of 701000 in the fourth quarter of 2023.

Lisa Roger: Net loss for the full year of 2024 was comparable to the full year of 2023 at $2.8 million. For the fourth quarter of 2024, our adjusted EBITDA was a loss of approximately $561,000 compared to a loss of approximately $427,000 in the same period last year. For the full year of 2024, our adjusted EBITDA loss was $1.3 million, compared to a loss of $1.7 million in the prior year. Our plans to achieve positive adjusted EBITDA in the fourth quarter were impacted, as Riccardo discussed, by the startup costs of onboarding our new cone manufacturers, as well as certain manufacturing equipment being in transit, which caused us to have to source product from multiple locations to meet customer demand.

Lisa Roger: Net loss for the full year of 2024 was comparable to the full year of 2023 at coupons 8 million.

Lisa Roger: Sure.

Lisa Roger: For the fourth quarter of 2024, our adjusted EBITDA was a loss of approximately 561000 compared to a loss of approximately 427000 in the same period last year.

Lisa Roger: For the full year of 2024, our adjusted EBITDA loss was $1 3 million compared to a loss of 1.7 million in the prior year.

Lisa Roger: Our plans to achieve positive adjusted EBITDA in the fourth quarter were impacted as Ricardo discussed by the startup cost of Onboarding, our new co manufacturers as well as certain manufacturing equipment being in transit, which caused us to have to source product from multiple locations to meet customer demand.

Lisa Roger: This resulted in higher logistics costs and less efficient production allocation than our target operating model. The equipment is expected to be installed and operational by the end of the second quarter, and we should return to our optimized production and distribution network.

Lisa Roger: This resulted in higher logistics costs and less efficient production allocation.

Lisa Roger: And our target operating model.

Lisa Roger: The equipment is expected to be installed and operational by the end of the second quarter and we should return to our optimized production and distribution network.

Lisa Roger: Now moving onto our balance sheet as of December 31, 2024, we had approximately $1 1 billion in cash and accounts receivable at approximately 1.5 million of inventory on our balance sheet.

Lisa Roger: Now moving on to our balance sheet. As of December 31st, 2024, we had approximately $1.1 million in cash and accounts receivable and approximately $1.5 million of inventory on our balance sheet. In the first half of the year, the company deployed a significant amount of cash to build up inventory in preparation for its seasonally high third quarter. The inventory build allowed the company to achieve its highest fiscal year revenue in company history for fiscal year 2024. The company brought on expanded capacity in the fourth quarter of 2024. Additionally, the company has taken other measures to reduce its liquidity requirements, including compensating its directors and employees with equity to reduce cash compensation requirements, obtaining non-recourse litigation financing, and securing receivables financing.

Lisa Roger: In the first half of the year the company deployed a significant amount of cash to build up inventory in preparation for a seasonally high third quarter.

Lisa Roger: Inventory build allowed the company to achieve its highest fiscal year revenue in company history for fiscal year 'twenty 'twenty four.

Lisa Roger: The company brought on expanded capacity in the fourth quarter of 2024. Additionally, the company has taken other measures to reduce its liquidity requirements.

Lisa Roger: Food and compensating, it's directors and employees with equity to reduce cash compensation requirements, obtaining nonrecourse litigation financing and.

Lisa Roger: So carrying receivables financing.

Lisa Roger: In February 2025, the company secured $3 million in growth financing. This capital raise enhances our financial position and supports scaling of production capacity to meet growing customer demand, particularly in the education channel.

Lisa Roger: In February 2025, the company's sick care 3 million and gross financing this capital raise enhances our financial position.

Lisa Roger: Port scaling of production capacity to meet growing customer demand, particularly in the education channel.

Riccardo Del Coste: Now I will turn the call back to Riccardo for closing remarks. Thank you, Lisa. Before we open up the lines for questions, let me emphasise that while 2024 was a year of strategic investment and transformation, we enter 2025 with expanded product portfolio, robust sales coverage, and operational improvements underway. As we continue our co-manufacturer ramp through Q2, we expect revenues and margins for Q1 to be consistent with Q4 levels. And for the full year of 2025, we expect significant revenue growth of between 35% and 55% with margin expansion beginning in the second half as our manufacturing capabilities come online.

Ricardo Day: Now I will turn the call back to Ricardo for closing remarks.

Ricardo Day: Thank you Lisa.

Ricardo Day: Before we open up the lines for questions. Let me emphasize that while 'twenty 'twenty four it was a year of strategic investment in transformation, we enter 2025 with expanded product portfolio robust sales coverage and operational improvements underway as.

Ricardo Day: As we continue our car manufacturer ramp through Q2, we expect revenues and margins for Q1 to be consistent with Q4 levels and.

Ricardo Day: For the full year of 2025, we expect significant revenue growth of between 35, and 55% with margin expansion beginning in the second half is it manufacturing capabilities come online.

Ricardo Day: The temporary cost we absorbed in Q4 when necessary investments to build a stronger foundation.

Riccardo Del Coste: The temporary costs we absorbed in Q4 were necessary investments to build a stronger foundation. We've been waiting for some time for additional bottle capacity to come online and it's finally started and it will be here in a meaningful way very shortly. With a great pipeline of business, we're confident these actions will drive both top-line growth and margin expansion as we've outlined, making 2025 another record year. We look forward to updating you on our progress in the quarters ahead.

Ricardo Day: We've been waiting for some time for additional borrowing capacity to come online and it's finally started and it will be here in a meaningful way very shortly.

Ricardo Day: We have a great pipeline of business. We're confident these actions will drive both top line growth and margin expansion as we've outlined making 2025. Another record year. We look forward to updating you on our progress in the quarters ahead, and with that I would like to open up the lines for questions operator.

Operator: And with that, I would like to open up the lines for questions. Operator? Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Thank you.

Speaker Change: Thank you we will now be conducting a question and answer session.

Speaker Change: If you would like to ask a question. Please press star one on your telephone keypad.

Speaker Change: Confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.

Speaker Change: Okay.

Nicholas Sherwood: Thank you. Our first question comes from the line of Nicholas Sherwood with Maxim Group. Please proceed.

Nicholas Sherwood: Our first question comes from the line of Nicholas Sherwood with Maxim Group. Please proceed.

Nicholas Sherwood: Hi, Good evening. My first question is related to the new popping up or your stocks.

Riccardo Del Coste: Good evening. My first question is related to the new Pop and Go Freeze Pops. You talked about how you expect them to contribute meaningfully in the second half of the year. Can you sort of give us your expectations on how that specific product line is going to help you achieve the revenue guidance you gave for 2025? Yeah, so it's still pretty early days. We launched the product late in Q4, we launched it in Q4. So we've started to get it out to customers and trials and testing. So we've had very good feedback in terms of acceptability for the product.

Nicholas Sherwood: Talked about how you expect them to contribute meaningfully in the second half of the year can you sort of give us your expectations on how that specific product line is going to help you can achieve.

Nicholas Sherwood: The revenue guidance you gave for 2025.

Nicholas Sherwood: Yeah. So it's still pretty early days, we launched the product late in Q4, we launched in Q4. So we've started to get it out to customers and trials and testing. So we've had very good feedback in terms of acceptability for the product. We do have bids that are in process now.

Riccardo Del Coste: We do have bids that are in process now. So we're right in the middle of bid season. So we do have some customers that have already started to add it on the bid. So we are waiting to see the total effect of all the testing that we've done. And that's really part of the range and potential further upside, depending on how well the POPs get into the market in this bid cycle. Understood.

Nicholas Sherwood: So we're right in the middle of bid season. So we do have some customers that have already started to add it on the beach.

Nicholas Sherwood: We are waiting to see the.

Nicholas Sherwood: Total effect of all the testing that we've done and that's really part of the range and potential further upside depending on how well the pops Ah <unk>.

Nicholas Sherwood: Getting to the market in this bid cycle.

Nicholas Sherwood: Mhm.

Nicholas Sherwood: Understood and then.

Riccardo Del Coste: And then... Can you just talk about just, um. how you're working with or how have your relationships with your customers been during this, during some of these sort of production issues that you've had in the fourth quarter? Yeah, so that's a good question. It's definitely tested some relationships in the sense of having availability of products for some of those customers because we were tested with supply and that was a challenge still because even though we turned on some of the bottles that still outstripped the capacity that we had at the time, even though we've incrementally added bottle supply, we just haven't had enough because we've been waiting for additional upgrades and change parts to arrive for equipment.

Nicholas Sherwood: Can you just talk about just.

You're working with or how how's your relationships with your customers been bearing this.

Nicholas Sherwood: During some of these sort of production issues that you've had in the fourth quarter.

Nicholas Sherwood: Yeah. So.

Nicholas Sherwood: That's a good question.

Nicholas Sherwood: It is it's definitely tested some relationships in the sense of having availability of products for some of those customers because we were tested with supply and that was a challenge still because.

Nicholas Sherwood: Even though we turned on.

Nicholas Sherwood: Some of the bottles, that's still out stripped the capacity that we had at the time, even though we incrementally added bottle supply. We just havent had enough because we while we've been waiting for additional upgrades and change cards to arrive for equipment.

Like we discussed on the call those change parts are expected to be up and installed and commission before the end of Q2.

Riccardo Del Coste: Like we discussed on the call, those change parts are expected to be here and installed and commissioned before the end of Q2, paving the way for a very, very solid back half of the year with additional supply, more than what we need to do our plans. So whilst relationships, it's been an uncomfortable discussion for some customers in terms of supply, they really stand there waiting for the product and they love the product so much so hopefully once we've got everything back on track, it'll be back in the kids' hands in those schools. Understood.

Nicholas Sherwood: Paving the way for a very very solid back half of the year with additional supply more than what we need to you know to do are playing so well.

Nicholas Sherwood: Well you know relationships.

Nicholas Sherwood: It's been uncomfortable discussion for some customers in terms of supply they really stand there.

Waiting for the product and they love the product so much. So hopefully you know once they've got everything back on track it'll be it'll be back into kids and in those schools.

Nicholas Sherwood: Understood and.

Riccardo Del Coste: And my final question is, have you heard anything from your customers sort of related to funding? The Department of Education is kind of being whipped up for cuts. Have you heard anything from them about any worries for budgetary constraints related to... products. Yeah, we haven't really, we haven't really got any... direct negative feedback. You know, obviously we see what's in the press and we see some of the programs that are being cut. Some of those programs that are being cut may actually help us in the long run because they're actually subsidizing other programs that could be offering substitute products than our products that maybe the kids don't like as much but they have more of a financial incentive to offer them.

Nicholas Sherwood: My final question is have you heard anything from your customers sort of related to funding.

Nicholas Sherwood: Vegetation, that's it would be.

Nicholas Sherwood: It kind of being what they are for cuts are there any have you heard anything from them about you know any worries for you now, but budgetary constraints related to you know.

Nicholas Sherwood: Yeah, we havent really we havent really got any.

Nicholas Sherwood: Direct negative feedback.

Nicholas Sherwood: We see what's in the press and we see some of the programs that are being caught some.

Nicholas Sherwood: Some of those programs that are being cut may actually help us in the long run because they're actually subsidizing the other programs that could be offering substitute products than our products that maybe the kids don't like as much but they have more of that.

Nicholas Sherwood: Incentive to offer them so they.

Riccardo Del Coste: So, you know, there could be out of all the changes so far today, a net positive effect on our products in the schools. But again, there's a lot of moving pieces that are going on. Nothing negative. Mm-hmm, understood.

Nicholas Sherwood: It could be out of all the changes so far today.

Nicholas Sherwood: Net positive effect on our products are in schools.

Nicholas Sherwood: But again as there's a lot of moving pieces that are going on nothing negative.

Nicholas Sherwood: Uh-huh understood well. Thank you for taking the time to answer my question to I'll return to the queue.

Operator: Well, yeah, thank you for taking the time to answer my questions and I'll return to the queue. Thank you. If you would like to ask a question at this time, please press star 1. As a reminder, if you would like to ask a question, please press star 1 at this time.

Nicholas Sherwood: Thank you.

Nicholas Sherwood: Thank you.

Speaker Change: I'd like to ask a question at this time, Please press star one.

Nicholas Sherwood: Yeah.

Nicholas Sherwood: As a reminder, if you would like to ask a question. Please press star one at this time.

Nicholas Sherwood: There are no further questions. This concludes today's teleconference. You may disconnect your lines at this time.

Operator: There are no further questions. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Nicholas Sherwood: Thank you for your participation.

Nicholas Sherwood: Okay.

Nicholas Sherwood: Yeah.

Nicholas Sherwood: Yeah.

Nicholas Sherwood:

Nicholas Sherwood: Hum.

Nicholas Sherwood: Yeah.

Nicholas Sherwood: Yeah.

Nicholas Sherwood: Yeah.

Hum.

Nicholas Sherwood: Hmm.

Nicholas Sherwood: Okay.

Nicholas Sherwood: Uh-huh.

Nicholas Sherwood: [music].

Nicholas Sherwood:

Nicholas Sherwood: Oh, Oh Oh.

Nicholas Sherwood: Uh huh.

Nicholas Sherwood: Hum.

Nicholas Sherwood: Hum.

Nicholas Sherwood: [music].

Nicholas Sherwood: Hum.

Nicholas Sherwood: [music].

Nicholas Sherwood: Hum.

Nicholas Sherwood: [music].

Nicholas Sherwood: Hum.

Nicholas Sherwood: Hmm.

Nicholas Sherwood: Uh-huh.

Nicholas Sherwood: Yeah.

Nicholas Sherwood: Yeah.

Nicholas Sherwood:

Nicholas Sherwood: Uh huh.

Nicholas Sherwood: [music].

Nicholas Sherwood: Uh huh.

Nicholas Sherwood: [music].

Nicholas Sherwood: Okay.

Nicholas Sherwood: [music].

Nicholas Sherwood: Yes.

Nicholas Sherwood: Hum.

Nicholas Sherwood: [music].