BARFRESH FOOD GROUP INC. Q3 FY2024 earnings call

• Achieved record Q3 revenue of over $3.6 million, a 40% increase y-o-y.
• Three new manufacturing partnerships increase production capacity to over 120 million units annually (400% increase y-o-y), with expanded bottle smoothie capacity coming online in Q4.
• Sales network expanded to cover 95% of the country via broker partnerships and internal sales force, with ~4.5% penetration in the education channel.
• Launched Pop & Go 100% Juice Freeze Pops in the education channel, which is USDA reimbursable and has positive initial response; targets lunch menus with 5x volume potential of breakfast menus.
• Infrastructure investments focus on sustained long-term growth, including integrated ERP and transport management system.

In the third quarter of 2024, Barfresh Food Group achieved record quarterly revenue of over $3.6 million, a 40% increase compared to the third quarter of 2023 ($2.6 million). Revenue benefited from improvements in Twist & Go bottled smoothie sales, smoothie carton, and bulk sales. Gross margin for the quarter was 35%, while adjusted gross margin (excluding production relocation costs) was 38%. Selling, marketing, and distribution expenses increased to $990,000 from $697,000 y-o-y due to investments in personnel, broker commissions, and freight. G&A expenses rose to $705,000 from $577,000 y-o-y. Net loss was $513,000 compared to $476,000 y-o-y. As of September 30, 2024, cash and accounts receivable were ~$2.1 million, with ~$770,000 in inventory.

• For fiscal year 2024, expect record annual revenue and year-over-year adjusted gross margin improvement.
• Growth driven by expansion of product portfolio (Pop & Go), enhanced production capacity, and broadened sales network.
• Pop & Go to generate revenue in Q4 and expand into other channels.

• Forward-looking statements subject to assumptions, risks, and uncertainties beyond control, which could materially affect actual results.
• Liquidity risks, including reliance on inventory builds and financing options like non-recourse litigation finance and secured receivables financing.
• Uncertainties related to the materialization of risks associated with manufacturing, sales, and product rollout.

Q: How is the new Pop & Go performing in terms of traction and pipeline?

A: First orders shipped in Q4, high interest with opening orders and new distributors; lunch menu in education channel has 5x volume potential vs. breakfast.

Q: Are new co-manufacturers producing Pop & Go and what about margins?

A: New manufacturer doesn't make Twist & Go but has similar or better margin profile; work on manufacturing front to get cost savings with new locations.

Q: How many school accounts are active and penetration?

A: ~4.5% penetration (~6,000 schools), new accounts added daily, Pop & Go is new to market with 0% penetration.

Q: How did the company come up with Pop & Go product, and how to get it on lunch menus?

A: Combination of customer feedback and market opportunity; approach to schools varies, some can add directly, others via bids.

Q: Supply constraints and manufacturing relocation?

A: Previously supply constrained, new capacity coming online in Q4; manufacturing relocation due to co-packer sale, focusing on single-serve business next year.

Q: Cash flow breakeven and litigation?

A: Close to adjusted EBITDA breakeven, close to $0.5 million away; litigation claim filed for minimum $20 million related to bridge contract.