Barfresh Food Group, Inc. Q2 FY2026 earnings call

• Strategic Transformation Progress

• Barfresh is transitioning from full reliance on third-party co-manufacturers to full in-house production control, a shift anchored by the ARPS Dairy acquisition.
• The ARPS acquisition addressed prior supply chain exposure: co-manufacturers failed to renew contracts or meet volume needs amid a cultured dairy manufacturing shortage, and the acquisition has ensured ongoing product supply to customers, meeting the year's core stabilization goal.

• Production Operational Updates

• The ramp-up of the existing ARPS dairy facility was slower than modeled, due to unanticipated required repairs to older infrastructure and equipment that only became apparent under full production load. Higher unplanned repair costs reduced gross margin and adjusted EBITDA below guidance.
• Ice cream production was moved out of the existing facility to free up capacity for core legacy Barfresh products; the business will be returned once production is fully stabilized.
• Significant throughput improvements have already been achieved at the existing facility, with continued improvement expected through the second half of 2026.
• Construction of the new 44,000 square foot facility in Defiance, Ohio remains the top operational priority. Partial commissioning for core products is targeted by the end of 2026, with full product rollout shortly after. The company already owns the property free and clear, has secured a $2.4 million grant (on track to be spent by year-end 2026), and is actively arranging a new mortgage and equipment financing to complete the project (total project costs have increased beyond initial projections).

• Commercial Highlights

• The education channel is the company's core near-term growth opportunity. New school wins from recent bids began rolling out in the 2025-26 school year, with full implementation across all locations planned for 2026-27. Additional new education channel wins are expected to be announced in coming months as bid processes close. The company has rebuilt sufficient inventory and production capacity to meet all 2026-27 school contract requirements.

Total Q2 2026 revenue for Barfresh Food Group was $4.7 million, representing 190% year-over-year growth from $1.6 million in Q2 2025. There are two operating product segments:

1. Frozen Beverage and Food (Legacy Barfresh Products): This segment grew 9% year-over-year, contributing $1.5 million of total Q2 2026 revenue, equal to approximately 32% of total revenue.
2. Raw and Processed Milk (ARPS Dairy Acquisition): This new segment added $2.9 million of Q2 2026 revenue, equal to approximately 62% of total revenue. Combined ARPS Dairy contributed a total of $3.2 million to Q2 2026 revenue, equal to approximately 68% of total revenue.

Management revised full-year 2026 guidance downward from prior May projections, based on slower-than-expected production ramp at the existing ARPS facility: • Full-year 2026 revenue is now guided to $23 million to $26 million, representing 62% to 83% year-over-year growth from fiscal 2025. • Full-year 2026 adjusted EBITDA is now guided to a loss of $1 million to $2 million, with adjusted EBITDA expected to range from a loss of $0.5 million to break-even in the second half of 2026. • Revenue is expected to improve sequentially in Q3 and Q4 2026, driven by ramp-up of new school district wins for the 2026-27 school year and ongoing production efficiency improvements at the existing facility. • Once the new Defiance facility is fully operational, management expects significant long-term margin expansion and increased production capacity for existing and new products.

• Unanticipated infrastructure and equipment repair costs at the existing ARPS facility, which have increased operating expenses and reduced margins in the first half of 2026.

• Project costs for the new Defiance facility have increased beyond initial projections, requiring potential adjustments to the project financing approach to maintain viable economics.
• Input material costs for core products have risen, adding additional pressure to margins.
• Legacy Barfresh revenue recovery has been delayed by prior year supply constraints that forced the company off some customer menus, with growth not expected to materialize until the 2026-27 school year.
• Synergies from the ARPS acquisition, including freight and cold storage cost savings, have not yet been realized, putting additional pressure on full-year results.
• Loss of the ARPS ice cream mix business (moved out of the existing facility to free capacity) has reduced near-term top-line and bottom-line results.

Q: What caused the need to move ice cream production out of the existing ARPS facility, and is the core production issue resolved? What was missed during due diligence?

A: Unpredicted stress on older infrastructure and equipment arose only when the facility ran at full capacity with both Barfresh core products and ice cream production. Due diligence was thorough, but full-load testing with Barfresh's specific product mix was not possible before closing. Moving ice cream out allowed focus on improving throughput for core education channel products, and significant improvements to efficiency and reliability have already been completed, with ongoing incremental improvements expected. All existing school contracts for core products are able to be fulfilled 100%.

Q: Legacy Barfresh frozen beverage sales are only up marginally year-over-year in the first half despite new school signings — why is that, and do you have enough capacity for the upcoming school year?

A: The delayed growth is expected: prior year supply constraints forced many customers to remove Barfresh from menus last year, and new and returning customers only come on board with the start of the new school year, which will be reflected in second half results. The company does have sufficient capacity to meet all projected demand for the 2026-26 school year, and still retains limited third-party co-manufacturing capacity to supplement in-house production during the ramp-up.

Q: What is the expected revenue split between legacy Barfresh and ARPS in the second half of 2026? Could additional capital raising be required for the new facility project?

A: All projected second half growth will come from legacy Barfresh products; ARPS raw/processed milk sales will remain steady with no planned growth. The company does not plan to return to the public market for additional capital: the Defiance property is owned free and clear, and management's current plan is to secure a standard mortgage on the property and equipment financing to fund remaining project costs.