BranchOut Food Inc.

Greetings and welcome to the Branch Out Foods 2026 Q2 Earnings and Shareholder Update Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. John Dalfonsi, Chief Financial Officer. Thank you, sir. You may begin.

Thank you. I'm going to start with a forward-looking statement and then talk about the agenda. So before you begin, I'd like to remind everyone that today's call contains forward-looking statements, including statements regarding outlook, guidance, and expectations for future performance. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those we discussed today. for discussing these risks, please refer to our most recent 10Q and subsequent 10K and other 10Q filings with the SEC. Forward-looking statements speak only to today's date and we undertake no obligation to update them except as required by law. We will also reference certain non-GAAP financial measures, reconciliations to the most direct comparable GAAP measures are available today's press release and the appendix in any appendix in any presentation. With that, I'm going to jump into the earnings call. And, you know, we're going to go over, just like consistent with our other earnings call, we have an agenda we always like to go over, a summary and kind of recap of our strategy. That remains the same. Eric will go through our customer summary. Eric will go through plant operations and, you know, continual efficiency and margin improvement in the plant, and then sales prospects. And then I'll finalize it with financial review of the quarter that was just released at market close. So to go into our summary, just highlight we had a record, our highest quarterly revenue of $4.45 million net. Obviously, the gross revenue was higher. Strong customer execution across all channels. Key takeaway is, you know, we continue to execute our strategy of creating innovative products for customers to secure long-term business. That's reoccurring. And to create full utilization of our plant with a 40% margin target. That's always been our plan, and we feel we're making good progress towards that. One change is that you saw that you're seeing a big step function up in our – revenue guidance for the fourth quarter. And I'll go over full year guidance when we get to the financial part. But we're going to need to produce 70,000 kilograms up from what we were averaging 45 to meet the demands that are coming in terms of sales. And so Eric will talk a little more about that. So Eric, I'm going to hand it over to Eric, who's going to go over the customer summary, plan operations and continued efficiency and margin improvement, and sales prospects.

Perfect. Yeah, thank you, John. So this is Eric Healy, CEO of Branch Out Foods. Good afternoon, everyone. Excited to go through the last quarter and what we have coming up here. So Q3 was a fundamental improvement in the company in terms of the high-level revenue, as John mentioned. the breakdown of sort of what we accomplished in that quarter is strategic to what we'll talk about here for Q4 and beyond. The big one was, of course, our Sam's Club product that we, you know, we had the one-time rotation. The product went in and it sold extremely well. We met and succeeded their threshold. So we were successful in turning that over to an everyday reoccurring order. So We're currently building that order right now and it will be continuous moving forward. So that's going to be back in the stores come September timeframe and in continuously. So the quarter itself, Q3, was a lot of, you know, there was still some of that production was first time. So some of the products in that production were kind of the first time we had really scaled them up and dialed in the product quality and the efficiency and the attributes we wanted. We also invested heavily in marketing that product in order to secure this follow on business. There was some, you know, rapid shipping, you know, kind of a lot of those things that we associate with customer acquisition in the beginning to secure that long term business. So while we had, you know, we were happy with our record revenue, you know, all these things are reflected in the margins for the quarter. In addition to that, the other big piece in that quarter that was, you know, again, good on the revenue side, not so great on the margin side was our industrial ingredient business. We had a very large opportunity with some strawberries, specifically organic and conventional strawberry for our ingredient partner. And unfortunately, they needed it during the off season of when strawberries are available. So we ended up paying about 2x for the raw material. And that, of course, impacted our margins. But the good news is that has turned into a much bigger piece of business now going in again to Q4 and beyond. So we have orders from them for the strawberry that we can now produce during the season and with more foresight and getting these orders ahead of time during the season, we can contract the raw material and do it during the optimum time. So with that, we essentially spent some margin up front to secure the business and we now have this reoccurring bigger piece of business. So there's a lot of that kind of baked into Q3 that we want to explain. And we believe we were strategic in the way we went to bat there and setting us up for a very big Q4 and beyond. So beyond that, we had some Costco business that was first time. We had the mango chips in Costco Bay Area that did very well, among other things. So Q3 was a successful quarter. We see it again setting us up for a very successful Q4 and beyond. So that's kind of the background of what we accomplished that quarter and what we believe this is going to do for us going into Q4 and really right now as our factory is ramping up for these new orders. As John mentioned, we've always sort of averaged around 35 to 45 metric tons per month and we've talked about utilization quite a bit here and how important that is for our business So historically, that's only been about maybe 40, 45% utilization in our plant. So with all these new orders that we have booked now, we are starting to ramp up our production output to 70. We have some 80,000 kilogram months coming up here before the end of the year. And this is all for booked business. So again, it's this reoccurring Sam's Club order. It's all this new industrial ingredient business. We have a lot of new Costco business as well. We're also launching into Target right now, as we've said recently in some press releases. So we have five SKUs going in, branded and Target. So there's just a lot of stuff coming online right now. A lot of new sales that are, frankly, very exciting and more importantly, getting our factory to that utilization level that we've always said that we need to get to for profitability. So at these levels, all of our models indicate that we should be breakeven, beyond breakeven really. And yeah, we believe that a lot of this business is now, instead of being kind of one-time big orders that come on and off, some of this is more reoccurring. So that should really help our bottom line as well. It sets us up for a very exciting step function in revenue as well. We believe that Q4 should be around six to seven million, depending on when some of the orders ship at the end of the year. But we think that we can sustain that level. The revenue moving forward shouldn't be as lumpy, and we should be able to sustain that level going forward. So it's a very exciting time. we see, you know, we're in an inflection point right now. This is really what we've been investing into the last two years since we opened our plants. And we're very, very proud of our team, both on the sales and ops side for getting us to where we are here. So with that, John, I'll turn it over to you if you have anything else, and then we'll go into kind of future sales prospects beyond what we currently have.