Barfresh Food Group Q2 2025 Earnings Call Transcript

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Provided by Quartr
August 13, 2025

Key Takeaways

  • Positive Sentiment: Barfresh completed equipment installations with its second co‐manufacturer and announced a new high‐capacity bottling partner starting January 2026, expected to boost bottle production by approximately 400%.
  • Positive Sentiment: The company’s sales network covers nearly all U.S. regions, but current 5% market penetration in the education channel and strong interest in both Twist and Go and new Pop and Go products signal a substantial runway for growth.
  • Neutral Sentiment: Second quarter revenue rose 11% year‐over‐year to $1.6 million, driven by expanded bottle capacity, although production challenges temporarily impacted customer menus.
  • Negative Sentiment: Gross margin fell to 31% from 35% due to product mix shifts and co‐manufacturer startup costs, though normalization is expected in the second half of the fiscal year as new partners ramp up.
  • Neutral Sentiment: Fiscal year 2025 revenue guidance was revised to $12.5 million–$14 million (up 17%–31% year‐over‐year), with management forecasting margin improvement and operational leverage in the back half.
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Earnings Conference Call
Barfresh Food Group Q2 2025
00:00 / 00:00

There are 3 speakers on the call.

Speaker 1

Good afternoon, everyone, and thank you for participating on today's second quarter 2025 earnings conference call and webcast for Barfresh Food Group. Joining us today is Barfresh Food Group's Founder and CEO, Riccardo Delle Coste, and Barfresh Food Group's CFO, Lisa Roger. Following prepared remarks, we will open the call for your questions. The discussion today will include forward-looking statements. Except for historical information herein, matters set forth on this call are forward-looking within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements about the company's commercial progress, success of its strategic relationships, and projections of future financial performance.

Speaker 1

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, 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 developments, and other factors that the company believes are appropriate under the circumstances. Such statements are subject to a number of assumptions, risks, and uncertainties, many of which are beyond the control of the company.

Speaker 1

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 reports on Form 10-Q and current reports on Form 8-K, including any warnings, risk factors, and cautionary statements contained therein. Furthermore, the company expressly disclaimed any current intention to update publicly any forward-looking statements after this call, whether as a result of new information, future events, changes in assumptions, or otherwise.

Speaker 1

In order to aid in the understanding of the company's business performance, the company is also presenting 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 GAAP measures, and certain calculations based on its results, including gross margin and adjusted gross margin. The reconciling items are non-operational or non-cash costs, including stock compensation and other non-recurring costs, such as those associated with the product withdrawal, the related dispute, certain manufacturing relocation costs, and acquisition-related expenses. Management believes that adjusted gross profit, EBITDA, and adjusted EBITDA provide useful information to the investor because they are directly reflective of the performance of the company. Now, I will turn the call over to the CEO of Barfresh Food Group, Mr. Riccardo Delle Coste. Please go ahead, sir.

Speaker 2

Good afternoon, everyone, and thank you for joining us for our second quarter 2025 earnings call. I'm pleased to report that we've reached an important milestone with our second co-manufacturing partner completing its equipment installations during the second quarter. While this addresses a key component of the production challenges that have impacted our revenue and margins, we continue to work on building consistent operational capacity, and we now have two co-manufacturers producing product as we enter the third quarter. In addition, we continue to work on solidifying our overall long-term supply chain. As an example, in January 2026, we are adding a higher-capacity bottling manufacturer for our Twist & Go bottles, which will replace one of our current manufacturers at the beginning of 2026. The current manufacturer will continue to produce product through February of 2026, and then our relationship with them will end.

Speaker 2

The new higher-capacity manufacturer is currently producing our Twist & Go smoothie cartons, so this is a natural progression to have them also be a part of our bottling manufacturing team. This additional capacity is expected to exceed the volume of the manufacturer we are replacing by approximately 400%. For the second quarter, we delivered revenue of $1.6 million, representing an 11% year-over-year growth. This growth was driven by expanded bottle capacity at our existing manufacturer as we worked through the final stages of our co-manufacturing transition. The manufacturing capacity investments we've made over the past several quarters represent important progress as we work towards more consistent production capabilities.

Speaker 2

Because of the capacity issues we had in the second quarter, a few of our customers temporarily had to take our offerings off their menus, but we expect them to add our offerings back during the fourth quarter of 2025 and the first quarter of 2026. We are now building inventory for the first time in many quarters. With our high selling season in the education channel ahead of us, we're focused on aligning our production capabilities with market demand. As we work through the operational transition and build production, we expect revenue growth in the back half of this year. Looking at our market position, our sales network continues to cover the vast majority of the U.S., and we remain at only 5% market penetration in the education channel, representing a significant runway for growth.

Speaker 2

The bidding process for the 2025-2026 school year is concluding, and we're seeing interest in both our Twist & Go products and our new Pop & Go 100% juice freeze pops, which target the larger lunch day part market. While we're revising our fiscal year 2025 revenue guidance to $12.5 to $14 million, reflecting the greater than anticipated impact of our manufacturing constraints in the first half, this still represents strong 17% to 31% year-over-year growth despite the earlier product supply challenges. More importantly, we expect the progress we're making on manufacturing consistency to contribute to margin improvement in the second half of the year. The operational leverage we're building will create a foundation for continued margin expansion and provide the flexibility to support accelerated growth as we broaden our market reach and deepen penetration across our customer base.

Speaker 2

I'll now turn the call over to our CFO, Lisa Roger, for a detailed financial review.

Speaker 1

Thank you, Riccardo. Let me walk you through our second quarter financial results in detail. Revenue for the second quarter of 2025 increased to $1.6 million compared to $1.5 million for the second quarter of 2024. The year-over-year increase is primarily driven by our ability to expand bottle capacity from a new contract manufacturing relationship, which also resulted in higher processing and logistical costs. The new manufacturer completed the previously described equipment installations and started making product at the end of the second quarter. Expanded capacity will start becoming available in the second half of this year and continue to ramp. Gross margin for the second quarter of 2025 was 31% compared to 35% for the second quarter of 2024. The year-over-year decrease is a result of product mix and new manufacturer trial and development costs, including inefficiencies during the early production period, incurred to gain additional production volume.

Speaker 1

We expect our gross margin to normalize in the second half of 2025 as new co-manufacturers are operating at full capacity and capability, improving our supply and cost structure. Moving to operating expenses, selling, marketing, and distribution expense for the second quarter of 2025 increased to $634,000, or 39% of revenue, compared to $583,000, or 40% of revenue in the second quarter of 2024. The year-over-year dollar increase is a result of higher storage and outbound freight due to our product mix being more heavily weighted toward categories with less concentrated distribution. G&A expenses for the second quarter of 2025 were $673,000 compared to $865,000 in the same period last year. The year-over-year decrease in G&A was driven by a reduction in personnel-related expenses, a reduction in legal, professional, and consulting fees, and lower stock-based compensation as a result of lower expected attainment under our performance stock unit program.

Speaker 1

Net loss for the second quarter of 2025 was $880,000 compared to a net loss of $1 million in the second quarter of 2024. The decrease in net loss was primarily due to the reduction in general and administrative expense, partially offset by increased storage and freight costs. For the second quarter of 2025, our adjusted EBITDA was a loss of approximately $600,000 compared to a loss of approximately $682,000 in the same period last year. Adjusted EBITDA in the second quarter of 2025 was impacted by costs associated with sourcing elements of the production process from multiple locations, while new co-manufacturers completed equipment installations required to perform as full-service partners. The equipment has now been delivered, installed, and is operational, and we expect to return to our optimized production and distribution network in the back half of the year.

Speaker 1

Turning to our balance sheet, as of June 30, 2025, we had approximately $1.3 million of cash in accounts receivable and approximately $1.8 million of inventory on our balance sheet. We continue to manage our liquidity carefully through various measures, including equity compensation for directors and employees, non-recourse litigation financing, and receivable financing. Now, I will turn the call back to Riccardo for closing remarks.

Speaker 2

Thank you, Lisa. While the first half of 2025 persisted with product supply shortages impacting our customers and revenue, and the manufacturing challenges were more significant than we initially projected, we have made important progress. Our co-manufacturing partners have completed the equipment installations that were needed, and we're now working to build production consistency and operational capability to support sustainable growth. As we enter our high-season selling period for the education channel, we have the manufacturing capacity, product portfolio, and sales network in place to capitalize on the significant market opportunity ahead of us. The investments we've made position us not just for a strong second half of 2025, but for continued growth and margin expansion in the years to come. We look forward to updating you on our progress as we execute on these opportunities in the quarters ahead. I would like to open up the line for questions.

Speaker 2

Operator?

Speaker 1

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 pull for questions. The first question is from Thomas McGovern from Maxim Group. Please go ahead.

Operator

Hi guys, thanks for taking my question. You guys mentioned, obviously with the new school year coming up, it is the big period for signing contracts. You mentioned the interest you guys have received thus far, but I was wondering if we could dive in a little bit more. Just curious how those conversations are progressing, maybe when you expect to close the majority of those conversations, and then specifically if you could comment on the Pop & Go 100% juice freeze pops. I know that was an entryway for you guys to branch out beyond breakfast meals and into the more lucrative lunch meal time. I just want to see where that's progressing, if you've seen specific interest in that new product category.

Speaker 2

Yeah, thanks Thomas. We have seen some good pickup on the pops. We've actually got some large school districts that have approved us already. The bidding process is completing. There are some schools that are still updating their final bids that haven't come through just yet that we're waiting on, that we are on the bids and they just haven't been confirmed. Overall, we've had a good response generally. In addition, the pops have had a very positive start to the year. From that perspective, it's a good start to the year. Yeah, we are still dealing with, though, as we mentioned on the call, the bottle shortages were a bit of a challenge for us in Q2. Obviously, we've fixed that now with the additional inventory that we've been building and the equipment installations being completed at our second co-manufacturing partner's location.

Speaker 2

Some of them have taken us off the menus temporarily and they will be going back on. Outside of that, it's been a good start.

Operator

Gotcha. Just kind of a follow-up on that. For the customers that have had to take you off the menu, is that locked in? Have they committed to taking product once it's available, or is it something that you're going to have to go back and say, hey, you know, we've rectified these issues and kind of convince them or enter a separate agreement maybe to, you know, ensure that they're back on the menu from this school year?

Speaker 2

It's a bit of a mixed bag. The products are already approved, so we don't need to worry about getting them reapproved in most instances. It's more a matter of when we have consistent supply and they know that we have the consistent supply to be able to rely on that they'll add it back onto the menu as the menu opens up.

Operator

Understood. I appreciate that insight. Final question from me. Obviously, you guys over the past few years have done a great job of expanding across, I believe you're in 49 states now. Just curious if there's a specific region or a territory that you guys see an immediate or near-term opportunity that you'd like to call out or anything you talk to on a higher level strategy for your continued expansion across school systems in the U.S.

Speaker 2

Having more capacity is going to allow us to get a broader general penetration across the whole country. Obviously, the larger populated areas have more opportunities for us. The Pop & Go 100% juice freeze pops product is very new, so concentration in the more populated states is a priority.

Operator

Understood. I appreciate you taking the time to answer my questions.

Speaker 2

Fantastic. Thanks.

Speaker 1

As a reminder, to ask a question, please press star one. The next question is from William R. Gregozeski from Greenridge Global LLC. Please go ahead.

Operator

Hey guys, following up on the inventory thing, you ended the quarter with $1.8 million of inventory. What is that made up of? Because I'm assuming it's not much bottle in there.

Speaker 1

No, it's actually mostly bottle because, you know, we are able to build over the summer. We, you know, to compensate for the lack of capacity that we've experienced, we built a lot of inventory to prepare for the school year. That makes sense.

Operator

Okay, the customers that were taken off the menu, that was early in the quarter then?

Speaker 2

Correct. Yeah, the equipment didn't get installed until the end of, you know, toward the end of June. School's already out.

Speaker 1

Right. Everybody's basing their menus on the experience they had in the spring. If that, they wouldn't have placed their first order until early July or August.

Operator

Okay. When will we hear what you mentioned on the pops, but when will we hear how many new schools you'll add for the upcoming school year for the traditional products?

Speaker 2

Soon.

Operator

Should we expect a press release relatively soon on what has happened with that?

Speaker 2

Yeah, we're just finding our feet with it now. It's just getting, you know, schools are just coming back, you know, as we're speaking. That's still getting set up now around the country. As I mentioned earlier, there's still some districts where we've been approved. We're just waiting for what the throughputs would look like, and there are still some larger ones that we are on the bids. They've all, we know that they've approved the product. We're just waiting for some bids to still be awarded.

Operator

Okay. The last question I had was on the manufacturing. What is the capacity now you have for the different products? What will that be at the beginning of next year with the new one coming on?

Speaker 2

With regards to products as a whole or specifically the bottles?

Operator

Yeah, I mean, it seems like you're mostly selling bottles now versus some of the other products you do have in the portfolio. If you can just talk, I mean, I don't know how it's split between bottles and cartons and everything.

Speaker 1

It's about even between bottles and cartons. It's probably 80% Twist & Go, just to give you a sense.

Speaker 2

Yeah, it's split between the bottles and cartons, but we're just at capacity with the bottles.

Operator

Okay.

Speaker 2

That capacity on the bottles increases going forward. Right now, they're even, like Lisa just mentioned.

Operator

Okay. What, I mean, what's the number, like volume number that you'll be able to produce next year with that new one up?

Speaker 2

With the new manufacturing coming up, we should be in the $20 million to $25 million range, just on the bottles.

Operator

Okay.

Speaker 2

Just on the bottles.

Operator

Okay, what's the cartons that you're at?

Speaker 1

We probably have at least three times more capacity on cartons than we're currently selling, so we're not anywhere near a cap there.

Operator

Okay. All right, great. That's all I had. Thank you.

Speaker 2

Thanks.

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