Q2 2026 BranchOut Food Inc Earnings Call

August 13, 2026

Speaker #1: Greetings and welcome to the BranchOut Food's 2026 Q2 earnings and shareholder update call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation.

Operator: Greetings, and welcome to the BranchOut Food Inc. 2026 Q2 Earnings and Shareholder Update call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. John Dalfonsi, Chief Financial Officer. Thank you, sir. You may begin.

Operator: Greetings, and welcome to the BranchOut Food 2026 Q2 Earnings and Shareholder Update Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. John Dalfonsi, Chief Financial Officer. Thank you, sir. You may begin.

Speaker #1: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.

Speaker #1: It is now my pleasure to introduce your host, Mr. John Del Fonzi, Chief Financial Officer. Thank you, sir. You may begin.

Speaker #2: Thank you. I'm going to start with a forward-looking statement and then talk about the agenda. So before we begin, I'd like to remind everyone that today's call contains forward-looking statements, including statements regarding outlook, guidance, and expectations for future performance.

John Dalfonsi: Thank you. I'm going to start with a forward-looking statement, and then talk about the agenda. Before we begin, I'd like to remind everyone that today's call contains forward-looking statements, including statements regarding outlook, guidance, and expectations for future performance. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those we discuss today. For discussing these risks, please refer to our most recent 10-Q and subsequent 10-K and other 10-Q filings with the SEC. Forward-looking statements speak only to today's date, and we undertake no obligation to update them except as required by law. We will also reference certain non-GAAP financial measures. Reconciliations to the most direct comparable GAAP measures are available in today's press release and any appendix in any presentation.

Speaker #2: These statements are subject to risks and uncertainties that could cause actual results to differ materially from those we discussed today. For a discussion of these risks, please refer to our most recent 10-Q and subsequent 10-K and other 10-Q filings with the SEC.

Speaker #2: Forward-looking statements speak only as of today's date, and we undertake no obligation to update them except as required by law. We will also reference certain non-GAAP financial measures; reconciliations to the most directly comparable GAAP measures are available in today's press release and the appendix of any presentation.

Speaker #2: With that, I'm going to jump into the earnings call, and, you know, we're going to go over everything just like we do in our other earnings calls.

John Dalfonsi: With that, I'm going to jump into the earnings call and we're going to go over, just like consistent with our other earnings call, we have an agenda we always like to go over, a summary and kind of recap of our strategy. That remains the same. Eric will go through a customer summary. Eric will go through plant operations and continual efficiency and margin improvement in the plant, and then sales prospects. Then I'll finalize it with financial review of the quarter that was just released at market close. To go into our summary, just highlight, we had our highest quarterly revenue of $4.45 million net. Obviously, the gross revenue was higher. Strong customer execution across all channels.

Speaker #2: We have an agenda. We always like to go over a summary and kind of recap our strategy. That remains the same. Eric will go through our customer summary.

Speaker #2: Eric will go through plant operations and, you know, continual efficiency and margin improvement in the plant, and then sales prospects. Then I'll finalize it with a financial review of the quarter.

Speaker #2: That was just released at market close. So, to go into our summary, I just want to highlight that we had a record—our highest quarterly revenue—of $4.45 million. Net, obviously the gross revenue was higher.

Speaker #2: Strong customer execution across all channels. The key takeaway is, you know, we continue to execute our strategy of creating innovative products for customers to secure long-term business.

John Dalfonsi: Key takeaway is, we continue to execute our strategy of creating innovative products for customers to secure long-term business that is reoccurring, and to create full utilization of our plant with a 40% margin target. That has always been our plan, and we feel we are making good progress towards that. One change is that you saw that you are seeing a big step function up in our revenue guidance for Q4, and I will go over full year guidance when we get to the financial part. We are going to need to produce 70,000 kilograms up from what we were averaging 45, to meet the demands that are coming in terms of sales.

John Dalfonsi: Key takeaway is, we continue to execute our strategy of creating innovative products for customers to secure long-term business that is reoccurring, and to create full utilization of our plant with a 40% margin target. That has always been our plan, and we feel we are making good progress towards that. One change is that you saw that you are seeing a big step function up in our revenue guidance for Q4, and I will go over full year guidance when we get to the financial part. We are going to need to produce 70,000kg up from what we were averaging 45, to meet the demands that are coming in terms of sales.

Speaker #2: We that's reoccurring. And to create full utilization of our plant with a 40% margin target. That's always been our plan, and we feel we're making good progress towards that.

Speaker #2: That you're seeing a big step function up in our revenue guidance for the fourth quarter, and I'll go over full-year guidance when we get to the financial part.

Speaker #2: But, you know, we're going to need to produce 70,000 kilograms up from what, you know, we were averaging 45 to meet the demands. that are that are coming.

Speaker #2: In terms of sales, Eric will talk a little more about that. So, I'm going to hand it over to Eric, who's going to go over the customer summary, planned operations, and continued efficiency and margin improvement, as well as sales prospects.

John Dalfonsi: Eric will talk a little more about that. Eric, I am going to hand it over to Eric, who is going to go over the customer summary, plant operations, and continued efficiency, plus margin improvement and sales prospects.

Speaker #3: Perfect. Yeah, thank you, John. So this is Eric Healy, CEO of BranchOut Foods. Good afternoon, everyone. Excited to go through the last quarter and what we have coming up here.

Eric Healy: Perfect. Yeah. Thank you, John. This is Eric Healy, CEO of BranchOut Food Inc. Good afternoon, everyone. Excited to go through the last quarter and what we have coming up here. Q3 was a fundamental improvement in the company in terms of the high level revenue, as John mentioned. The breakdown of sort of what we accomplished in that quarter is strategic to what we will talk about here for Q4 and beyond. The big one was, of course, our Sam's Club product that we had the one-time rotation. The product went in and it sold extremely well. We met and succeeded their threshold, so we were successful in turning that over to an everyday reoccurring order. We are currently building that order right now, and it will be continuous moving forward. That is going to be back in the stores come September timeframe and in continuously.

Speaker #3: So, Q3 was a fundamental improvement in the company in terms of high-level revenue, as John mentioned. The breakdown of what we accomplished in that quarter is strategic to what we'll talk about here for Q4 and beyond.

Speaker #3: the big one was, of course, our Sam's Club product, that we, you know, we had the one-time rotation. the product went in and it, it, sold extremely well.

Speaker #3: we met and, and succeeded their threshold. So we were successful in turning that over to an everyday reoccurring, order. So we're currently building that order right now, and it will be continuous moving forward.

Speaker #3: So that's going to be back in the stores come September timeframe and, and in continuously. So, the quarter itself, Q3 was, a lot of, you know, there was still some of that production was first time.

Eric Healy: The quarter itself, Q3, there was still some of that production was first time. Some of the products in that production were kind of the first time we had really scaled them up and dialed in the product quality and the efficiency and the attributes we wanted. We also invested heavily in marketing that product in order to secure this follow-on business. There was some rapid shipping, kind of a lot of those things that we associate with customer acquisition in the beginning to secure that long-term business. While we were happy with our record revenue, all these things are reflected in the margins for the quarter. In addition to that, the other big piece in that quarter that was again, good on the revenue side, not so great on the margin side, was our industrial ingredient business.

Speaker #3: So some of the products in that production were, kind of the, the, the first time we had really scaled them up and, dialed in the, the, the product quality and the efficiency and the attributes we wanted.

Speaker #3: we also invested heavily in marketing that product in order to secure this follow-on business. there was some, you know, rapid shipping, you know, kind of a lot of those things that, we associate with customer acquisition in the beginning to secure that long-term business.

Speaker #3: So while we had, you know, we were happy with our record revenue, you know, all these things are reflected in the margins for the quarter.

Speaker #3: in addition to that, the, the other big piece, in that quarter that, was, you know, again, good on the revenue side, not so great on the margin side was, our industrial ingredient business.

Speaker #3: We had a very large opportunity with some, strawberries, specifically organic and conventional strawberry for our ingredient partner. And, unfortunately, they needed it during the off-season of when, when strawberries are available.

Eric Healy: We had a very large opportunity with some strawberries, specifically organic and conventional strawberry for our ingredient partner, and unfortunately, they needed it during the off-season of when strawberries are available. We ended up paying about 2x for the raw material. That, of course, impacted our margins. The good news is that has turned into a much bigger piece of business now going in, again, to Q4 and beyond. We have orders from them for the strawberry that we can now produce during the season and with more foresight and getting these orders ahead of time. During the season, we can contract the raw material and do it during the optimum time. With that, we essentially spent some margin up front to secure the business, and we now have this reoccurring bigger piece of business.

Speaker #3: So we ended up paying about 2X for the raw material. And that, of course, you know, impacted our margins. But the good news is that has turned into a much bigger piece of business now going in, again, to Q4 and beyond.

Speaker #3: So, we have orders from them for the strawberry that we can now produce during the season and with more foresight and, you know, getting more foresight and getting these orders ahead of time during the season, we can contract the raw material and, and do it during the optimum time.

Speaker #3: So with that, you know, we essentially spent some margin up front to secure the business, and we now have this reoccurring, bigger piece of business.

Speaker #3: So there’s a lot of that kind of baked into Q3 that we want to explain, and, you know, we believe we were strategic in the way we went to that there.

Eric Healy: So there is a lot of that kind of baked into Q3 that we want to explain. We believe we are strategic in the way we went to bat there and setting us up for a very big Q4 and beyond. Beyond that, we had some Costco business that was first time. We had the Crunchy Mango Chips in Costco Bay Area that did very well, among other things. So Q3 was a successful quarter. We see it, again, setting us up for a very successful Q4 and beyond. So that is kind of the background of what we accomplished that quarter, and what we believe this is going to do for us going into Q4, and really right now as our factory is ramping up for these new orders. As John mentioned, we have always sort of averaged around 35 to 45 metric tons per month.

Speaker #3: and, you know, setting us up for a very big Q4 and beyond. So, beyond that, we had, some Costco business that was, first time.

Speaker #3: We had the mango chips in Costco Bay Area that did very well, among other things. So, Q3 was a successful quarter. We see it again setting us up for a very successful Q4 and beyond.

Speaker #3: So, that's kind of, you know, the background of what, what we accomplished the quar that quarter. and what we believe this is going to do for us going into Q4 and really right now as our factory is ramping up for these new orders, as John mentioned, we, we've always sort of, averaged around 35 to 45 metric tons per month.

Speaker #3: And we've talked about utilization quite a bit here and how important that is for our business. So historically, that's only been about, you know, maybe 40 to 45 percent utilization in our plant.

Eric Healy: We have talked about utilization quite a bit here and how important that is for our business. Historically, that has only been about maybe 40% to 45% utilization in our plant. With all these new orders that we have booked now, we are starting to ramp up our production capacity to or sorry, our production output to 70. We have some 80,000 kilogram months coming up here before the end of the year, and this is all for booked business. Again, it is this reoccurring Sam's Club order. It is all this new industrial ingredient business. We have a lot of new Costco business as well. We are also launching into Target right now, as we have said recently in some press releases. We have five SKUs going in branded in Target.

Speaker #3: So with all these new orders that we have booked now, we are starting to ramp up our production capacity to—or, sorry, our production output to 70.

Speaker #3: We have some 80, 80,000, kilogram months coming up here before the end of the year. And this is all for booked business. So, again, it's this reoccurring Sam's Club order, it's all this new industrial ingredient business.

Speaker #3: We have a lot of new Costco business as well. We're also launching into Target right now, as we've said recently in some press releases.

Speaker #3: So we have five SKUs going in, branded in Target. so there's just a lot of stuff, coming online right now. A lot of, a lot of new sales that are, you know, frankly, very exciting and, more importantly, getting our factory to that utilization level that we've always, said that we need to get to for profitability.

Eric Healy: There is just a lot of stuff coming online right now, a lot of new sales that are frankly very exciting and, more importantly, getting our factory to that utilization level that we have always said that we need to get to for profitability. At these levels, all of our models indicate that we should be break even, beyond break even, really. Yeah, we believe that a lot of this business is now, instead of being kind of one-time big orders that come on and off, some of this is more reoccurring. That should really help our bottom line as well. It sets us up for a very exciting step function in revenue as well. We believe that Q4 should be around $6 million to $7 million, depending on kind of when some of the orders ship at the end of the year.

Speaker #3: So at these levels, we, all of our models indicate that we should be break even, beyond break even really. And, yeah, we, we believe that, you know, a lot of this business is now, instead of being kind of one-time big orders that come on and off, some of this is more, reoccurring.

Speaker #3: So, that should really help our bottom line as well. It sets us up for a very, you know, exciting step function in revenue as well.

Speaker #3: You know, we believe that Q4 should be around $6 to $7 million, depending on when some of the orders ship at the end of the year.

Speaker #3: But we think that we can sustain that level. You know, the revenue moving forward shouldn't be as lumpy, and we should be able to sustain that level going forward.

Eric Healy: We think that we can sustain that level. The revenue moving forward shouldn't be as lumpy, and we should be able to sustain sort of that level going forward. It is a very exciting time. We are in an inflection point right now. This is really what we have been investing into the last two years since we opened our plant. We are very proud of our team, both on the sales and ops side, for getting us to where we are here. With that, John, I will turn it over to you if you have anything else, and then we will go into kind of future sales prospects beyond what we currently have.

Speaker #3: So, it's an it's, it's, it's a very exciting time. we see, you know, we're, we're in an inflection point right now. This is really what we've been investing into the last two years since we opened our plant.

Speaker #3: And we're very, very proud of our team, both on the sales and ops side, for getting us to where we are here. So, with that, John, I'll turn it over to you.

Speaker #3: If you have anything else, then we'll go into kind of future, future sales prospects beyond what we currently have.

Speaker #2: Sure. what I want to do now is move to our actual 10Q in our, you know, how we did for the quarter. You know, what I always like to start with, if you've listened to these calls before, you know, the balance sheet, you know, and if you look at our balance sheet, we have 8.1 million in current liabilities and 7.7 assets, 8.1 in current assets and 7.7 in current liabilities.

John Dalfonsi: Sure. What I want to do now is move to our actual 10-Q and how we did for the quarter. What I always like to start with, if you have listened to these calls before, the balance sheet. If you look at our balance sheet, we have 8.1 million in current liabilities and 7.7 assets, 8.1 in current assets and 7.7 in current liabilities, but you have to take a closer look at this. It shows we only had 200 thousand in cash. Like I have said in other earnings calls, cash, accounts receivable, inventory, you have got to look at them as one because every dollar we have, we are rolling into orders because we are trying to keep up. One thing that has happened from day one since we have opened the plant is that we are getting more orders. The orders are not a problem.

Speaker #2: But you have to take a closer look at this. You know, it shows we only had $200,000 in cash out of $1,000,000. But like I've said in other earnings calls, cash, accounts receivable, and inventory—you've got to look at them as one.

Speaker #2: Because the account, you know, we're every dollar we have, we're rolling into orders because we're trying to keep up. You know, one thing that has happened from day one since we've opened the plant, is that we're getting more orders than, you know, we're getting the orders are not a problem.

Speaker #2: We're getting a lot of orders. And then given that we're getting so many orders, it kind of turns into a just-in-time manufacturing. If you look at our inventory turn, you know, it's 3.3 million, you know, even if you take 14 million, which are, you know, kind of trailing sales, we're more at a, you know, you're looking at a 6 to 7 million dollar run rate right now.

John Dalfonsi: We are getting a lot of orders. Given that we are getting so many orders, it kind of turns into a just-in-time manufacturing. If you look at our inventory turn, it is 3.3 million. Even if you take 14 million, which are kind of trailing sales, we are more at a, you are looking at a $6 to $7 million run rate right now. The inventory turns are even faster, but they are less than 90 days. Remember, the product is on the water for 60 days. So really, cash instantly gets turned into inventory, which gets turned into accounts receivable. For example, we have over 1 million cash on the balance sheet, but that is getting recycled into inventory. So really, our capital needs are all around working capital. If you look at the current liabilities, the 7.7 really is 4.7. You have that $3 million note payable.

Speaker #2: You know, inventory turns are even faster. But, you know, they're less than 90 days. But remember, the product is on the water for 60 days.

Speaker #2: So, really, cash instantly gets turned into inventory. And then, you know, which gets turned into accounts receivable. So, for example, we have over a million cash on the balance sheet.

Speaker #2: You know, but that is getting recycled into inventory. So, really, our capital needs are all around working capital. so, and if you look at the current liabilities, the 7.7 really is a 4.7.

Speaker #2: You got that $3.3 million note payable. If you recall, that's Dan Kaufman at Kaufman Capital, and it's an 8% note. He's a friendly investor.

John Dalfonsi: If you recall, that is Dan Kaufman at Kaufman Kapital. It is 8% note. He is a friendly investor. He is largest shareholder. He will extend that loan as long as need be to our ultimate goal, which is a revolving credit facility from a commercial bank. That is kind of what we did. Our AR is as strong as it gets with Costco and Walmart and Sam's Club and MicroDry, their billion-dollar family. Inventory is all sold. It lasts. It has unlimited shelf, long shelf life. So when I look at our balance sheet, yeah, I feel it is very healthy. I look at more of our current ratio of two to one. Let us see. That convertible note is Kaufman Kapital's convertible notes that will ultimately convert. He has converted some already. So that is, in my opinion, the pertinent things to look at on our balance sheet.

Speaker #2: He's the largest shareholder. He will extend that loan as long as need be, to our ultimate goal, which is a revolving credit facility from a commercial bank.

Speaker #2: That's kind of what, you know, we did we had our AR is, you know, is, is, is strong as it gets with Costco and Walmart and Sam's Club and, you know, micro dried their billion dollar family.

Speaker #2: And, you know, inventory is, is all sold. So, and it lasts, you know, it has a, you know, unlimited shelf, you know, long, long, long shelf life.

Speaker #2: So, when I look at our balance sheet, yeah, I feel it's very healthy. I look at more of our current ratio of 2 to 1.

Speaker #2: let's see. And, you know, that convertible note is Kaufman Capital's convertible notes that will ultimately convert. he's converted some already. So, that's kind of a in my opinion, kind of the pertinent things to look at.

Speaker #2: on our balance sheet. And then when you go to the income statement, you know, we you know, basically, had a 2% gross margin. And there's, you know, the reason behind that is, you know, when you look at our, our product mix, Costco is 20% of the revenue.

John Dalfonsi: When you go to the income statement, we basically had a 2% gross margin. The reason behind that is, when you look at our product mix, Costco is 20% of the revenue. We actually did pretty well on gross margin, 43%. MicroDry, which is 33% of our revenue, those were the organic strawberries where our gross margin was 3%. Like Eric said, when you buy these raw materials, if you buy them on the off-season, it is the highest dollar you pay, which makes you think that, well, geez, what we are moving to is buying raw materials during the high season and just making the products then. That saves 50% on the raw materials. The Sam's Club, we said we thought air shipping was out of the way. We had to air ship that. So that gross margin was 14%.

Speaker #2: We actually did pretty well on gross margin, 43%. But micro dried, which is 33% of our revenue, that those were the organic strawberries where our gross margin was 3%.

Speaker #2: And like Eric said, when you buy these, raw materials, you know, if you buy them on the off season, it's the highest dollar you pay.

Speaker #2: Which makes you think that, well, geez, you know, what we're moving to is buying raw materials during the high season and just making the products then.

Speaker #2: And that saves 50% on the raw materials. And then the Sam's Club, you know, we had to airship, you know, we'd said we thought air shipping was out of the way.

Speaker #2: We had to airship that, so that gross margin was 14%. That was 31% of the revenue. So when you look at it all, plus the utilization—since we're running at 30% to 40%—what we had to absorb, it's kind of a break-even gross margin.

John Dalfonsi: That was 31% of the revenue. When you look at it all, plus the utilization, since we are running at 30% to 40%, what we had to absorb, it is kind of a break-even gross margin. But if you look further in, I think there is tremendous opportunity. Because just by buying on high season versus on the spot market, raw materials are 50% of our cost in Peru. Then increased in kilograms going to that 70,000. We do not need any further people to execute on 70,000. So really no more hiring. I think you are going to see stronger gross margins, and that I feel is the opportunity with this company. So those are my high-level comments, the things that I feel are really important to take a look at. The last couple things I want to talk about is guidance.

Speaker #2: But if you look further in, you know, I think there's tremendous opportunity. because you know, just by buying on high season versus on the spot market, raw materials are 50% of our costs in Peru.

Speaker #2: And then, you know, increased in kilograms, going to that 70,000, we don't need any further people to execute on 70,000. so, really, no more hiring.

Speaker #2: So, I think you're going to see stronger gross margins, and that, I feel, is the opportunity with this company. So, those are kind of my high-level comments—the things that, you know, I feel are really important to take a look at.

Speaker #2: The last couple of things I want to talk about is guidance. You know, we're a little over $7 million — we're over $7 million for the six months.

John Dalfonsi: We are a little over USD 7 million for the six months, and we got two quarters to go. To get something with a two in front of it, that is 13 to go. We will make USD 20 million plus a product in the plant. The question is: Is it delivered by 31 December? It might be a couple million dollars that do not hit delivery when we can invoice the customer till January. So something with a two in front of it. Although we make something with a two in front of the plant, some of it might slip over. So it might be a number closer to 18 for the year. But we are still getting orders and delivering them. So it is going to be down to the wire. That is my thought there.

Speaker #2: And we got two quarters to go. So, that's to get something with a 2 in front of it, that's 13 to go. And we will make 20 million, plus a product, in the plant.

Speaker #2: The question is, is it delivered? You know, by December 31, you know, might be, you know, a couple million dollars that don't kind of hit delivery—we can't invoice the customer until January.

Speaker #2: So, you know, something with a 2 in front of it—although we may get something with a 2 in front at the plant, some of it might slip over.

Speaker #2: So, it might be never closer to 18 for the for the year. but we're still getting orders and delivering them. So, it's going to be down to the wire.

Speaker #2: That's kind of my thought there. But I guess if you think about it, we've made that something with a 2 in front of it in the plant.

John Dalfonsi: But I guess if you think about it, we have made that something with a two in front of it in the plant. If you look at our run rate based on our Q4, 6 to 7, maybe it is 8, maybe it is a little higher than that. We are clearly in the 30s with that run rate. The last thing I get a lot of questions on is capital. We have only issued 500,000 shares this year. That was with our ATM in January and February. We have had a lot of warrant exercises, and then Kaufman Kapital LLC has given us debt. We may need some top-off capital. It might be a little more debt from Coffman. We still got our little lift on the shelf.

Speaker #2: And if you look at our run rate based on our fourth quarter, $6 to $7 million—maybe, maybe it's $8 million. You know, maybe it's, you know, a little higher than that.

Speaker #2: It we're clearly in the 30s. with that run rate. the last thing, you know, I get a lot of questions on is capital. You know, we've we've kind of we've only issued 500,000 shares this year.

Speaker #2: That was with our ATM in January and February. We've had a lot of warrant exercises, and then Kaufman Capital has given us debt. You know, we may need some top-off capital.

Speaker #2: Might be a little more debt from Kaufman. You know, maybe, you know, we still are a little lift on the shelf. So, that may or may not happen.

John Dalfonsi: So that may or may not happen. But the bottom line, given it does, it is strictly to cover working capital and because of our growing orders. And those I feel are the pertinent things. So I would like to hand it over for Q&A.

Speaker #2: But the bottom line, given it does, it's you know, it's strictly to cover working capital and, because of our growing orders. And, you know, those, those I feel are the pertinent things.

Speaker #2: So, I'd like to hand it over for Q&A.

Speaker #1: Thank you. Well, now, because that's been a ques— Sorry, let me go into the sales prospects. I’ve got a few updates there, if we can do that real quick.

Operator: Thank you. Well, now if you can jump into quest-

Eric Healy: Sorry, let me go into the sales prospects. I got a few updates there, if we can do that real quick.

Speaker #1: Yeah, go ahead.

Eric Healy: Yeah, go ahead.

Operator: Yeah, go ahead.

Speaker #3: Yeah. So, exciting stuff ahead. The Sam's Club order is just sort of our foot in the door with that retailer. So, you know, it's about—we believe—about an $8 million recurring business based on the sell-through we had initially.

Eric Healy: Yeah. So exciting stuff ahead. The Sam's Club order is just sort of our foot in the door with that retailer. We believe about an $8 million reoccurring business based on the sell-through we had initially. We are only in half of the doors at this point. So we believe that if we continue to perform, there's an opportunity maybe mid-next year to expand that door count pretty significantly. There's a category review coming up in March. So that's something that we see as a good possibility that that could grow significantly. We have the second order that's going into Sam's that we've talked about as well. It's the Tropical Mix. So it's our core three tropical fruit chips, the pineapple, banana, mango. And that's going into a multipack format. So it's a very different eating occasion than the other product that's in there now.

Speaker #3: we are only in half of the doors at this point. So, we believe that if we continue to perform, there's an opportunity maybe mid next year to expand that door count pretty significantly.

Speaker #3: There's a category review coming up in March. So, that's something that we're you know, we, we see as a, a good, good possibility that that could that could grow significantly.

Speaker #3: We have the second order that's going into Sam's that we've talked about as well. It's the tropical mix, so it's our core three tropical fruit chips: pineapple, banana, and mango.

Speaker #3: and that's going into a multi-pack format. So, it's a very different eating occasion than the other product that's in there now. that product is a is a one-time rotation, it'll be on shelf in January.

Eric Healy: That product is a one-time rotation. It will be on shelf in January. That one as well, though, if it performs, which we expect it to, could easily convert to an everyday item as well. That is about a $2 million order at the end of the year here that we hope turns into an everyday continuous order. The industrial ingredient partner and others in that space is also growing rapidly. We did about $2 million in 2025. We think this year will be close to $7 million, and next year could be $10 million-plus in that channel. We are seeing a lot of adoption of our products. A lot of strawberry, as I mentioned. We are starting to do a bunch of blueberry. Our tropical products are currently, we are working on a couple of different programs with some big CPG customers that are integrating them into their recipes of their products.

Speaker #3: So, that one as well though, if it performs, which we expect it to, could easily convert to an everyday item as well. So, that's about a $2 million order at the end of the year here that we hope, you know, turns into an everyday continuous, continuous order.

Speaker #3: the industrial ingredient partner and others in that space, is, is also growing rapidly. we did about 2 million, in 2025. We think this year will be close to 7.

Speaker #3: And, next year could be 10 plus, in that in that channel. we're seeing a lot of adoption of our products. a lot of strawberry, as I mentioned, we're starting to do a bunch of blueberry.

Eric Healy: We are seeing a lot of adoption of our products. A lot of strawberry, as I mentioned. We are starting to do a bunch of blueberry. Our tropical products are currently, we are working on a couple of different programs with some big CPG customers that are integrating them into their recipes of their products.

Speaker #3: And then our tropical products are—currently we're working on a couple of different programs with some big CPG customers that are integrating them into their recipes for their products.

Speaker #3: So, that's a, you know, exciting part of our business that continues to grow rapidly. So, Costco—a lot of stuff going on with Costco.

Eric Healy: That is an exciting part of our business that continues to grow rapidly. Costco, a lot of stuff going on with Costco. We have an organic apple chip that is going in here in a couple of months, and then we have another order of the pineapple chips at the end of the year, four truckloads going into the southeast. That one keeps going. They keep reordering that, so that is a great proof point. We did just get an order last week, actually, for our cheesecake. That is something we have been talking about for a long time. We are super excited about it. It is a totally new, innovative product, and Costco just committed to the first order of that. That will be going in in time for the holidays this year in the Texas region, and we think it is very innovative.

Speaker #3: we have a organic apple chip that's going in, here in a couple months. And then we have another order of the pineapple chips at the end of the year, four one, keeps going.

Speaker #3: They keep reordering that, so that's a great proof point. We did just get an order last week, actually, for our cheesecake. So that's something we've been talking about for a long time.

Speaker #3: We're super excited about it. It's, you know, a totally new, innovative product. And Costco just committed to the first order of that. So, that'll be going in in time for the holidays this year in the Texas region.

Speaker #3: And, we think it's, you know, it's very innovative. There's never been anything like it. And we, we expect that to do well and grow as well.

Eric Healy: There has never been anything like it, and we expect that to do well and grow as well. That is exciting. We are also getting our dried cheese products out there. That is a brand-new product line, but we have already got some traction with that. We have a very large retailer. They have about 9,500 doors across the country that will be testing it here in the next couple of months. If that test goes well, that would convert into an everyday business with them that could be anywhere between $4 million to $6 million annually. It is another big one there that could turn into something. With that, we are going to take those dried cheese products. We are very bullish on them. We are launching them in the convenience store channel. It is a channel that our sales team knows very well.

Speaker #3: So, so that's, that's exciting. we are also, getting our dried cheese products out there. that's a brand new product line, but, we've already got some traction with that.

Speaker #3: we have a very large retailer. They have about 9,500 doors across the country that will be testing it here. in the next, next couple months.

Speaker #3: And if that test goes well, that could, you know, that, that, that would convert into an everyday, business with them that could be anywhere between 4 to 6 million dollars annually.

Speaker #3: So, it's a it's another big, you know, a big one there that's, that could turn into something, so, with that, we're, we're going to take those, dried cheese products.

Speaker #3: We're very bullish on them. and we're launching them in the convenience store channel. It's a channel that, our sales team knows very well. We have experience there.

Eric Healy: We have experience there, and we think there is a big opportunity there. With that is kind of all the big things. There are a lot of smaller opportunities or opportunities that are not quite as close yet. But as John Dalfonsi said in the beginning, new sales and new sales prospects have never been our problem. We continue to bring these in, and right now it is really the focus on the plants to effectively double their throughput to deliver on what we have. That is essentially what I got. Let us go ahead and turn it over to questions.

Speaker #3: And, we think there's a big opportunity there. So, with that, that's kind of all the big things. There's a lot of, smaller opportunities or, you know, opportunities that aren't quite as close yet, but, you know, as John said in the beginning, new sales and new sales prospects have never been our problem.

Speaker #3: So, we continue to, you know, bring these in. And right now, it's really the focus on the plants to effectively double their throughput to deliver on what we have.

Speaker #3: So, yeah. So, that's, that's essentially what I got. let's go ahead and turn it over to questions.

Speaker #1: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one on your telephone keypad.

Eric Healy: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A 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 call for your questions. Our first question comes from the line of Ryan Meyers with Lake Street Capital Markets. Please proceed with your question.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A 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 call for your questions. Our first question comes from the line of Ryan Meyers with Lake Street Capital Markets. Please proceed with your question.

Speaker #1: A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue.

Speaker #1: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we queue for your questions.

Speaker #1: Our first question comes from the line of Ryan Myers with Lake Street Capital Markets. Please proceed with your question.

Speaker #4: Hey, guys. Thanks for taking my questions. You know, thinking about the 6 to 7 million dollar guide for the fourth quarter, you know, as we enter into 2027, how much visibility do you already have into sort of maintaining this level or building from that level going forward into '27?

Ryan Meyers: Hey, guys. Thanks for taking my questions. Thinking about the $6 million to $7 million guide for Q4, as we enter into 2027, how much visibility do you already have into maintaining this level or building from that level going forward into 2027?

Speaker #2: Yeah, good question. So, I would say, a lot more than we've ever had before. So, this Sam's Club everyday, is, you know, about a, a baseline of about 8 million annually.

Eric Healy: Yeah, good question. I would say, a lot more than we have ever had before. This Sam's Club every day is about a baseline of about $8 million annually. That is a new base business that we have never had. We have always had this very peaky, unpredictable revenue from club and others. I would say with that, there is also the ingredient business, and with our partners there, they give us pretty good foresight now. We are getting very good at planning out six to nine months ahead. There is still Costco that comes in, and they will hit us with big orders, and it is hard to predict that. But I think we are moving in the right direction significantly, right? I cannot say that we have $6 million to $7 million booked solidly into next year, but we are starting with a much better base business.

Speaker #2: So, that's a, you know, a new, new base business that we've never had. So, we've always had these, you know, this very, peaky, unpredictable revenue from, from Club and others.

Speaker #2: so, you know, I, I'd say with that, there's also the ingredient business. And with our partners there, they give us pretty good foresight now.

Speaker #2: We're getting very good at planning out, you know, 6 to 9 months ahead. So, you know, there is still Costco that comes in and they'll hit us with big orders and, you know, it's, it's hard to predict that.

Speaker #2: But I do think, I, I, I think we've, we're moving in the right direction significantly, right? I can't say that, we have 6 to 7 booked solidly into next year, but, we're starting, you know, we're starting, with a much better, base business.

Speaker #4: Got it. That's helpful. And then, you know, as you guys, look to double the production, is there any way you can help quantify sort of the gross margin improvement that you expect to see from that as we progress through the rest of the year?

Ryan Meyers: Got it. That is helpful. Then, as you guys look to double the production, is there any way you can help quantify the gross margin improvement that you expect to see from that as we progress through the rest of the year?

Speaker #2: Yeah, you know, it's a great question. So, we've always— you know, we built a very large plant, right? And we built this plant assuming that we would get to this level, and we got there pretty quick, right?

Eric Healy: Yeah. It is a great question. We built a very large plant, and we built this plant assuming that we would get to this level, and we got there pretty quick. We have always priced our products. When we go to the customers or go into retail, we price our products. There are two considerations. There is what is the market willing to accept? We kind of look at products on the shelf or kind of competitive products in the space. Then we look at our costs, but we have always had to assume that that plant is utilized to a reasonable degree. We have not actually gotten there yet, and this will be the first time where the plant is at the utilized level that we have always sort of assumed when we price the products to retailers.

Speaker #2: So, we've ar always priced our products. When we go to the customers or go into retail, we price our products, there, there's two considerations.

Speaker #2: There's, what is the market willing to accept? So, we kind of look at, like, products on the shelf or kind of competitive products in the space.

Speaker #2: and then it's also and then we look at our costs, but we've always had to assume, you know, that that plant is fully i-is utilized to a reasonable degree, right?

Speaker #2: So, we haven't actually gotten there yet. And this, this will be the first time, where the plant is at the utilized level that we've always sort of assumed when we priced the products to retailers.

Speaker #2: So, you know, we've always said 30 to 40% margins. And I think this will sort of unlock—you'll kind of see the model come to life as we intended it to.

Eric Healy: We have always said 30% to 40% margins, and I think this will sort of unlock. You will kind of see the model come to life as we intended it to. Before, earlier this year, only utilizing the plant at about 40% with all the overhead costs in there. There is a lot of overhead that goes into the products that will effectively be cut in half. It is hard to quantify, but I believe that once the plant is fully utilized, we will start seeing some of those margins that we have always talked about.

Speaker #2: So, before, you know, we, like you—the, the earlier, earlier this year, right—only utilizing the plant at about 40%, with all the overhead costs in there, it's, you know, there's a lot of overhead that goes into the products that will effectively be cut in half.

Speaker #2: So, it's hard to quantify, but, you know, I believe that once the plant is fully utilized, we'll start seeing some of those margins that we've always talked about.

Speaker #4: Okay. Yeah, let me get a little more real quick.

Ryan Meyers: Okay.

John Dalfonsi: Yeah. To give a little more.

Ryan Meyers: Thank you for taking my question. Oh, go ahead.

Speaker #2: Yeah, go ahead.

John Dalfonsi: Yeah. Ryan, I want to give a little more granularity to that because we're spending a lot of time on this. Number one is 50% of your cost. Peru is about 70% of our total cost, so we really don't have very little overhead. We have six people. Then you kind of have your non-cost of goods, that's more of the packaging, the shipping, expenses from the time it leaves the plant to the customer. First of all, on the raw material is 50% of the cost. If you think about it, these orders are sporadic. They're just in time orders, so you got to buy on the spot market. You're paying double. For example, the strawberries were USD 2 a kilogram. On the high season, you get them for USD 1 a kilogram.

Speaker #4: Ryan, I want to give a little more granularity to that, because we're spending a lot of time on this. Number one is, you know, 50% of your cost.

Speaker #4: Peru is about 70% of our total cost. So, we really don't have a lot, you know, very little overhead we have. Six people. And, and then, you know, you kind of have your, kind of your non-cost of goods you know, that's more of the, you know, the package you know, the things the shipping you know, things that expenses when it from the time it leaves the plant to the customer.

Speaker #4: So, first of all, the raw material is 50% of the cost. And if you think about it, these orders are sporadic; they're just-in-time orders.

Speaker #4: So, you got to buy on the spot market. You're paying double. Like, for example, the strawberries were $2 a kilogram in the high season, given for $1 a kilogram.

Speaker #4: So, now that we have this everyday business, we can, you know, plan—you know, the strawberries for a dollar a kilogram.

John Dalfonsi: So now that we have this everyday business, we can plan the strawberries for USD 1 a kilogram. That's 100% savings. Also just sourcing in general, as we focus on the core five, which are strawberry, banana, pineapple, apple, and mango. We can really focus on buying on high season and bringing those costs down. So that's going to be a big impact. We're seeing it already. Secondly, just production flow. You got to air dry these products before you put them in the end weighing machine. There's a very tight standard deviation of kind of moisture that you can put it into the end weighing machine. So, optimizing the air drying process, which we're well under aware of that. Then the last thing I'd say is packaging. We can package inside the plant and save a significant amount of money.

Speaker #4: That's 50, you know, it's 100, 100% savings. And also, just, you know, sourcing in general— as we focus on the core five, which are strawberry, banana, pineapple, apple, and mango— you know, we can really, really, really focus on buying in high season, and bringing those costs down.

Speaker #4: So, that's going to be an, a big impact. We're seeing it already. You know, secondly, you know, just, you know, production flow. You know, you, you got to air-dry these products before you put them in the hand weighing machine.

Speaker #4: You know, there's a very tight standard deviation of, of kind of moisture that you could put it into the hand weighing machine. So, you know, optimizing the air-drying process, which, you know, we're well unaware of that.

Speaker #4: And then the last thing I'd say is packaging. You know, we can package inside the plant and save, a sig-significant amount of money. you know, we can 5, 6, 7 points right there.

John Dalfonsi: We think five, six, seven points right there. So those are just things that scratch the surface. The way to kind of think about this is you have this plant, it opens, everything's coming at once. Now, a year and a half in, we're kind of under our legs and now really looking on how to utilize it and how to get the margins up. So that's a little more granularity. Hope that helps.

Speaker #4: So, those are just things that scratch the surface. So, the way to kind of think about this is, you have this plant that opens.

Speaker #4: It's everything's coming at once. Now, a year and a half in, you know, we're kind of, kind of under our legs. And now, really looking on how to utilize it and how to get the margins up.

Speaker #4: So, that's a little more granularity. Hope that helps. Okay, got it. No, that's helpful.

Ryan Meyers: Okay. Got it. No, that's helpful.

Speaker #2: Packaging is really exciting. We didn't mention that earlier, but, you know, it's a pretty obvious thing for us to do. It's not a very technically challenging operation.

Eric Healy: The packaging is really exciting. We didn't mention that earlier, but it's a pretty obvious thing for us to do. It's not a very technically challenging operation. But if you look at our numbers, by the end of 2026, we will probably have spent USD 1.5 million on outsourced packaging needs that we've had for our retail products. So, with maybe USD 150,000 to USD 200,000 in CapEx, we can bring all of that in-house for next year. And we're looking at doing that. To date, it's been more about focus, focusing on what we do best down there is dehydration. But we feel like we're in a good place now to bring that in, and I believe it's going to be a pretty big unlock with our margins.

Speaker #2: So, if you look at our numbers, by the end of 2026, we will probably have spent $1.5 million on outsourced packaging needs that we've had for our retail products.

Speaker #2: So, with maybe you know, 150, 200 grand in CapEx, we can bring all of that in-house, for next year. And we, you know, we're, we're looking at doing that.

Speaker #2: It's, you know, to date, it's been more about focus, focusing on, you know, what, what we do best down there is dehydration. And, but we feel like we're in a good place now to, to bring that in.

Speaker #2: And it's, you know, I believe it's going to be a pretty big unlock for our margins.

Speaker #4: Okay. Got it. Thanks, guys.

Ryan Meyers: Okay. Got it. Thanks, guys.

Speaker #1: Thank you. There are no further questions at this time. I'd like to turn the call back over to Mr. Del Fonzi for any closing remarks.

Ryan Meyers: Thank you. There are no further questions at this time. I'd like to turn the call back over to Mr. Dalfonsi for any closing remarks.

Operator: Thank you. There are no further questions at this time. I'd like to turn the call back over to Mr. Dalfonsi for any closing remarks.

Speaker #4: Thanks for joining, and we look forward to the next quarter.

John Dalfonsi: Thanks for joining, and we look forward to the next quarter. Thanks for your time.

Speaker #2: Thanks for your time.

John Dalfonsi: Thank you.

Operator: Thank you.

Eric Healy: Thank you, everyone.

Eric Healy: This concludes today's call conference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.

Operator: This concludes today's call conference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.

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Q2 2026 BranchOut Food Inc Earnings Call

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