RYTHM, Inc. Q2 FY2022 earnings call

• Business updates: The second quarter was challenging for the cannabis industry with price drops, capital constraints, construction and permitting delays, and supply chain issues. Agrify is adjusting its strategy. They are finalizing existing TTK projects with two coming online in Q3 and one in Q1 2023. - Rapid deployment program: Launched to lower entry barriers, allowing customers to get up and running in less than 30 days with 8 VFUs and an option for a small extraction lab add - on. - Global opportunities: Received VFU orders from Portugal and New Zealand, and sees potential in European markets due to EU GMP standards. - Cost reduction measures: Reduced headcount by 7.5%, brought marketing activities in - house, consolidated facilities, repatriated production, and stopped offering customer sales and credit.

In the second quarter, Agrify generated $19.3 million in revenue, which is a 63.5% increase from the prior year period. Approximately $10 million of this revenue came from the extraction division. Design and build revenue saw a decline. Bookings for the second quarter were approximately $29 million. The company entered the third quarter with approximately $77.9 million in backlog, with a significant portion being related to future TTK - related recurring revenue streams.

Raymond updated the revenue expectation for fiscal year 2022 to between $70 million to $75 million, which is an increase of approximately 7% compared to the $59.9 million generated in 2021.

• The cannabis industry is facing price plummeting in key states, significant capital constraints, delays in construction, local permitting, and licensed issuance. - Global supply chains are an issue leading to longer lead times for critical components and equipment. - The company is in default of certain financial debt covenants associated with its $65 million senior secured promissory note.

Q: Scott Fortune asked about the revenue mix and changes in the business segments going forward.

A: Tim Oakes said about $10 million of the $19.3 million revenue in Q2 was extraction - related. Raymond Chang discussed focusing on finalizing TTK projects and the RDP program.

Q: Anthony Vendetti inquired about the sales cycle and VFUs.

A: Raymond Chang mentioned the sales cycle for large TTK was 15+ months, and there are ~3,500 VFUs under contract.

Q: Eric Des Lauriers asked about TTK deals and cash needs.

A: Raymond Chang said they are not doing TTKs without a repartner or financing partner, and Q3 cash burn is expected to be lower. Tim Oakes mentioned being hesitant to share specific refinancing terms at that time.

Q: An unidentified analyst asked about pricing in Massachusetts and M&A.

A: Raymond Chang said they monitor Massachusetts pricing closely and see potential in M&A for ancillary add - ons, leveraging their large customer database.