Barfresh Food (BRFH) 13 Nov 222022 Q3 Earnings call transcript

Good afternoon, everyone, and thank you for participating on today's Third Quarter 2022 Corporate Update Call 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. continue, identified anticipate, use plan, such intend, potential, and are as words should, words statements and forward-looking forecast expand, predict statements. are grow, estimate, project, identify and forward-looking similar by variations intended of the such hypothetical, will expressions These and may, to of such could, believe, expect, are or All forward-looking in developments that or address activities, statements other events occur than may the company statements. statements anticipates believes of the or future historical facts that will the statements and company made circumstances. future appropriate These on on based assumptions the are certain other based experience, expected under believes developments the factors are Such statements uncertainties, the and are are risks beyond to subject control of of assumptions, of company. which number many the a uncertainties incorrect, indicated assumptions materialize or Should or forward-looking by one should actual from those may or prove vary or materially anticipated statements. such more of risks results underlying these cautioned are only investors these speak reliance undue which made. Accordingly, statements, are the to forward-looking not they of on as place date this factors The on Form in Securities reports including contained any on report annual call Form filings current conjunction its and and and statements risk Exchange X-K, contents the the XX-Q recent company's should warnings, on XX-K quarterly with of and reports the cautionary Commission, with considered Form therein. including be information, expressly events, the Furthermore, new as or company changes any after update result in publicly a forward-looking future intention statements otherwise. of to disclaims any current whether this assumptions call, update EBITDA, the are release business in comparable of certain company the company's aid table measures, also In measures. understanding a most the in reconciled non-GAAP which performance, to adjusted GAAP business presenting order to is in including the the costs, services and gain with the are on sales uplist. or and issued compensation, company's derivatives product such items stock NASDAQ stock not associated including The of the these and withdrawal operational costs, loss the or nonrecurring as other noncash reconciling for core business. provides the useful performance the company's adjusted information reflective of investor that period-to-period is of it Management directly the to believes EBITDA because

will Food sir. I CEO Delle turn of Barfresh go Now to ahead, over Riccardo the Mr. Please Group, the call Coste.

thank XXXX Earnings Call. joining Good for everyone, for our and us afternoon, you Third Quarter

Before first provide the and into update that third remainder an and business quarter impact I need our and state provide results, impacted I have on of events on will the some overview results our an to our XXXX. of an have of the year

to complaints our During We the of the textural from customers resolve the customer to third market pride our by of isolated quality one to receive & we and while some product was consistency related produce as and is our quarter, we Unfortunately, manufacturers contractually at issues. bulk Go to manufacturers. out product, informal delivering ourselves negotiation with as disputes to single-serve began Court work Twist Los & these and we required we the withdrew resolve which and of impasse. Today, voluntarily point the in with this were supply to Twist to Angeles filed are an ourselves we product a Federal complaint to only one manufacturer. District customers our of found as our manufacturer, is unsuccessful, specific important to Go work It as impacted understand attempts to tried to our we issue well other manufacturer product and continuing that to the against products. on the the

to working capacity. replace lost the We are bottle also manufacturing actively

we our revenue for all time. accounted lost until the take process in will Considering have the a inventory significant replaced manufacturer impact production will capacity. the XX% on that purchases, have question lost However, of

carton Go We expect up of in launch format. to of our revenue & make new lost the some with the Twist

X.X Go. year bottle past ounce This was ready-to-drink for and of a is that format savings of those one working over a & extension both our a than economically cost been and friendlier number ecologically the carton have Twist format. We on new is initiatives, product

about also with agreement as product. manufacturer, to trials very successfully meet move we emerging a encouraging, was all previously convert towards announce changing we into well trends the customers entered October. carton excited customers. a in also with in that products customers product our customers' constantly our environmentally year, as showcases quarter, new to company carton feedback began the I'm is new and and this existing which product how completing bottle announced, the to the to we school win the testing to trials working good and be was fits earlier feel nicely we after our shipping to during customers The new As schools strategic more third friendly ability production established of The in our for received needs.

Additionally, the us designed to new was aggressively to high-volume accounts. allow product pursue

planned back very bottles ties it its We a to extension, not a are as that excited the Twist emphasize want to of Twist with additional & but from us quality about replacement, Go provide actively to the school was production, existing & as we will customers. completely potential, serve for offset coverage it our It us bottle format therefore do lost product the Go and revenue does engaged bottles. lost not keeps the and

our other to Moving products. on

restaurant strong significantly months have with period. still not are XX% X pre-pandemic manufacturer year incident, first year increase were with to park first prior and $X.X and we and second our only to the third growth are strongest of to product our a half revenue higher, XX% for also our over the XXXX quarter of expecting the previously were for for quarter to million, Prior our this prior consistent we we of to half we're led not if the as We for amusement our The an path the the sales sales across but this increased over to profitability. believe a seen track have than progress levels, and the history, place Revenue are full would in been described. growth on capacity revenue in year projecting have to plans on each exceed XXXX. making issues we working half all channels clients. to in company our year be and back military the with to the growth triple While steady back get greater of

Our for for expectation was our this the inflection as company. to began point of Barfresh hit a second be to an half we stride as year

completely to have this setback. temporary our organization, find is we while that in of and made this situation, as outside so we disappointed current must an control, one remind And a we ourselves now progress are incredible ourselves

and once hurdle, third we Lisa? the detail to the call turn will towards CFO, over those past Lisa customer in this base Roger, more first product to growth. talk be results the months believe, now continue I'll we X move to on our our We have on able impact results. a strong from product path portfolio and and about long-term quarter withdrawal and strong, the

same product year-over-year last unfavorable $X.X Thank million third is for and products. of quarter expected The customer our related same & for orders withdrawal million XX% in lost for Go Revenue at Riccardo. school XX% the increase you, the the period were the our of as XXXX the to XXXX Revenue and single-serve . in increased revenue prior product compared revenues resulting million for to to XX% as the well channel million sales a for million start sales the for the of bulk for to Net result compared $X.X the of quarter $X.X XX% negative XXXX margins of increased Riccardo from in third Twist first to include Gross to $X.X impact year. year. $X.X compared increased the credits period mentioned XXXX the of months call. quarter the of increased third X last year.

the including quarter XX% margins tracked customer third to compared the costs mix. the costs due product months third withdrawal Our costs year. in margins labor the product quarter higher were same market as shortages unsalable The the impact primarily year-to-date raw the packaging for Gross from the of to and first as exclusive to inventory in and for of product in with period decline other our last margin returns, and product QX was XX% costs. the fees, unfavorable related related year-over-year XXXX X addition to well gross to unprecedented withdrawal-related performance material the of gross withdrawal, XXXX,

third launch quarter with gross quarter the $X.X in $X.X & to compared carton Selling, the product. margin million marketing XXXX of and of the third improvement XXXX. expect of Twist to the We Go expense for million increased distribution

were The and million X first expense million to increased last the XXXX, in freight that personnel period elevated same freight, result the the $X.X of also shipments, Inflationary compared of increase product to contributed as a and the ultimately due recognized distribution have result months expense. those is a as to marketing For revenue withdrawal. increase year-over-year sales outbound not including marketing the selling, in $X.X outbound pressures increased to year. and increased of

XXXX have the to well and offset as $X.X third to implementing We the optimization. XXXX. of initiatives & compared as $X.X and increased costs freight freight Twist number million include our product format quarter quarter for new elevated carton the in G&A to a working by of Go been third million of to for expenses ingredient

of same Net loss million in year. compared in a $X.X first loss Net third for of expense to quarter well compared Twist of months carton noncash research loss product. a was same was period months increase a XXXX costs loss of in the XXXX. driven million approximately an million year. they of quarter in million of as to $X.X For Adjusted $XXX,XXX EBITDA development a to $X.X by of approximately $X.X of to was COVID-XX to a XXXX loss loss compared third the compensation last million personnel quarter last last the $X.X million quarter increase related of a of million period in for the including of year, and XXXX, X period in X first $X.X was first stock-based the was $XXX,XXX the XXXX. year. X XXXX million increased a of XXXX the of for compared Adjusted third the pullback the loss compared effective $X.X same last & to as for the an for the to Go the approximately increase in in EBITDA months $X.X compared launch of the third The as G&A quarter to loss

of and approximately As its on sheet. of $X company the XXXX, approximately inventory of balance XX, cash September had $XXX,XXX million

expect we expect to to will navigate we positive of our need the and impact the term, the achieve capacity ability withdrawal, reduction we negatively Although not do cash setback. that cash litigation that near raise will in product the in to flow cost

turn remarks. Now the I will Riccardo to closing for call back

improvements significant our making Lisa. our if would and you, year unexpected a in Thank half spent of the have issue greater part the the manufacturer, incredible with year second delivering sustained for business. profitability. path We towards we of on And this not an been

extension year, this We a manufacturer manufacturing we product of our our increased steady with new see course able believe implemented all visibility entering we existing single-serve have & our improvement channels, the new growth agreement, setback adding temporary by base our and customers, business. introduction sales our us manufacturing expanded format, Twist new to resources. a to Over sales are customer the expanded with weather help and our financial an to issue in provide network with a operating that Go from brokers bulk nationally, footprint our of out continued better manage across isolated, the system into is carton sales into by rolled

the will & that provide Twist confidence we Go were the Our strong we have once the we half long-term be of course and year in first set for up performance on capacity, this replaced growth.

reminder, able is on we in beyond will today. complaint to filed litigation a be not the ongoing comment the As what

your take let's said, that with Now Operator? questions.

question first from Group. The Maxim Instructions] Sherwood Nick with comes [Operator

accounts you This from And have speaking do how Group, the is Vendetti. Twist developing capacity that Go? Nick to sort sort for What do year that see as right new carton Sherwood you add product? of & Maxim you throughout now of Anthony the for

just we've Yes, carton XX We've capacity, now. right product We'll new launched Yes. able started. new the move into units capacity. be just year million a to with that about carton that

about So to be to process we're we improvements annual to have rate. get million some $XX but expect here, as the making able run we a started

gross X follow-up, do past higher as margins in the that your that quarters? for then historical product a And been gross you experiencing being Okay. you've see than margins the

in from the working terms Correct. of the That's on as -- initiatives -- as -- the one described had been actually of the was we that I cost we call, of in improvements. some beginning year improvement the that cost of

have our impact very significant line. So positive we on a to bottom believe going it's

this are call. questions [Operator question-and-answer this at more no Instructions] As time, conference the session there today's and concludes

participating, pleasant You may for your you disconnect a have lines. and Thank day.