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spk04: Good afternoon everyone and thank you for participating on today's first quarter 2022 corporate update call for Bar Fresh Food Group. Joining us today is Bar Fresh Food Group's founder and CEO Ricardo de la Coste and Bar Fresh 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 Security Statification Reform Act of 1995, including statements about the company's commercial progress, success of its strategic relationships, and projections of future financial performance. 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 and 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 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. 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 that they are made. The contents of this call should be considered in conjunction with a 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 disclaims 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. In order to aid in the understanding of the company's business performance, the company is also presenting certain non-GAAP measures, including adjusted EBITDA, which are reconciled in a table on the business update with lease to the most comparable GAAP measures. The reconciling items are non-operational or non-cash costs, including stock compensation, stock issued for services, gain or loss on the sale of derivatives and other non-recurring costs, such as those associated with the company's recent nice-take-up list. Management believes that adjusted EBITDA provides useful information to the investor because it is directly reflective of the period-to-period performance of the company's core business. Now, I will turn the call over to the CEO of Barfresh Group, Mr. Ricardo de la Costa. Please go ahead, sir. Okay.
spk07: Good afternoon everyone and thank you for joining us for our first quarter 2022 earnings call. I'm pleased with the start of this fiscal year. Revenue in the first quarter increased 149% year over year to 2.5 million despite continued supply chain issues impacting our ability to fulfill all immediate orders. Our revenue growth was driven by continued success in the education channel with our Twist and Go products. and also by an uptick in our single serve and bulk products as we enter into the spring selling season and continue to see more and more of those customers re-engage with us following a hiatus from the pandemic. It's encouraging to see these customer segments start to improve and more importantly, as we enter the upcoming quarter, that we see a greater return of our single serve and bulk customers. Firstly, because they are a higher margin product and will help offset the pressure from the supply chain and secondly, because our education channel slows down in the second quarter with the school year coming to an end. Our diverse customer mix also helps to offset that seasonality. Additionally, we have been expanding our customer base driven by our strong product adoption and increased size of our sales team. We have continued to expand our footprint with new school locations as we tackle the massive opportunity in the United States with over 98,000 schools and 14,000 school districts. And you can expect a number of new school announcements from us as we enter the new 2022-23 school year. We also have a number of distributors in our pipeline that we are building relationships with, similar to the one we announced earlier this year with G&J Pepsi-Cola bottlers. As was also the case in the fourth quarter, Our entire industry continued to face unparalleled supply constraints this quarter that included raw material shortages, increased labor and packaging costs, and elevated transportation costs. These costs impacted our ability to fully service all our clients and impacted our margins in the first quarter. As we enter the second quarter and look to the back half of the year, we believe we have initiatives in place to offset the majority of these issues. These initiatives include freight and ingredient optimization, packaging and equipment improvements, and price increases that went into effect at the end of the first quarter across a broad range of our products and customers. We remain confident that the strong sales growth we are projecting, matched with the initiatives we are continuing to implement to offset cost pressures, will allow us to achieve more record sales quarters and improve margins in the back half of this fiscal year. I'll now turn the call over to our CFO, Lisa Roger, to talk about the first quarter results in more detail. Lisa?
spk02: Thank you, Ricardo. Revenue for the first quarter of 2022 increased 149% to $2.5 million, compared to $1 million for the same period last year. As Ricardo mentioned, we achieved year-over-year revenue growth despite our inability to fulfill all orders. The year-over-year increase in revenue is the result of increased orders for our Twist and Go product in the school channel as well as the gradual return in sales of our single-serve and bulk products. We believe the second quarter top line will be comparable to the first as we will be entering a seasonally light selling quarter for our education channel and while seeing progress are still gradually ramping up with our single-serve and bulk customers. However, We believe the back half of the year will be strong and expect to achieve record revenue growth for the full year 2022. Gross margins for the first quarter of 2022 were 32% compared to 34% for the same period last year. The decline in gross margins was due to higher raw material and packaging costs, as well as higher sales volume and product mix for our lower margin Twister and Go products. We expect gross margins to improve in the back half of 2022 as the pricing and other cost savings initiatives in various stages of implementation go into effect and as more customers of our higher margin single serve and bulk products reengage with us. Our net loss for the first quarter of 2022 was 0.9 million as compared to a net loss of 0.6 million in the first quarter of 2021. G&A expenses for the first quarter of 2022 increased to $1.5 million compared to $0.8 million in the same period last year. The increase in G&A was driven by a significant increase in personnel costs compared to the pullback we had in this area in the COVID-19 affected quarter last year, as well as an increase in shipping and storage costs from the increase in revenue coupled with the unprecedented market price and labor shortages in the quarter. For the first quarter of 2022, our adjusted EBITDA was a loss of $547,000 as compared to a loss of approximately $437,000 for the same period last year. Adjusting for the increase in revenue, shipping and storage costs impacted adjusted EBITDA by approximately $80,000 and the decline in gross margins had a $60,000 impact. Personnel costs increased by approximately $190,000. We believe more than half of these cost increases will be offset by the price increase implemented at the end of the first quarter, with the remaining costs offset by the other savings initiatives we are implementing. Now moving to our balance sheet. As of March 31, 2022, we had approximately $4.5 million of cash and $900,000 of inventory on our balance sheet, compared to $5.7 million of cash and $700,000 of inventory as of December 31, 2021. Now I will turn the call back to Ricardo for closing remarks.
spk07: Thank you, Lisa. We are pleased that Q1 has set a new baseline revenue number for the company, especially given that Q1 is traditionally the lowest revenue quarter of the year and given the industry-wide supply challenges that we have not been immune to. I believe we are well positioned to manage through them and will exit this fiscal year with an improved top and bottom line. Q1 sales alone were approximately 40% of all of 2021 full-year sales and will continue to grow. We are entering the spring and summer quarters where we expect the greater return of our pre-COVID customers. We continue to work on cost and efficiency improvements. We are continuing to work on strategic partnerships. We now have a near full team on board and we expect to finish the year with strong improvements to both our top and bottom line. I believe we are off to a successful start to the year and we are just beginning to hit our stride as a company. Now with that, let's take your questions. Operator?
spk05: Thank you very much, sir.
spk04: Ladies and gentlemen, we will now be conducting a question and answer session. If you'd like to ask a question, please press star and then one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and then 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.
spk00: One moment, please, while we poll for questions.
spk04: Ladies and gentlemen, again, if you wish to ask a question, please press star and then one. Our first question is from Anthony Venditti of Maxim Group. Please go ahead.
spk06: Thanks. So a couple questions. Ricardo, you know, you signed the agreement with the distribution with Pepsi bottlers. Any other independent distributors? Pepsi bottlers, are you having discussions with any others signed up since last quarter? And can you talk a little bit about how that distribution's going with the first one?
spk07: Yeah, that one's just getting started. I mean, it has been, you know, only six weeks, five or six weeks since we last kind of got together. It's progressing, and we are in conversations with others. Okay.
spk06: And then... I know you're looking at convenience stores. Where are you in the potential move into the supermarket channel? Is that still early stage or is that planned?
spk07: It is still early stage. We've got a lot of white space in front of us. And as you can kind of see, we have... We've been dealing with some of the supply chain challenges, the same as everybody else, and we've made a lot of changes and improvements, and we continue to look for ways to make further improvements. Even the price increase that we provided was really at the end of the first quarter, so we didn't get the maximum impact for that. So as it relates to the grocery product, it is still in the works and just a little bit earlier than what we would have hoped.
spk06: Okay. And then obviously supply chain issues, raw material inflation impacts your cost of goods sold. You mentioned you've been able to implement price increases. Have the price increases been able to completely offset your input costs, partially offset, and then what's been the response from clients? Any pushback, or have they said that makes sense, everyone is seeing price increases?
spk07: Yeah, good question. Mixed bag all around. We haven't been able to fully offset the cost increases with the price increase and we were never intending to do so. We also did implement that price increase at the end of the first quarter, but we do expect between the price increase and some of the other initiatives that we have underway, it will probably more than offset, it will actually more than offset the cost increases. So the silver lining from what's kind of happened in the marketplace is that it's really forced us to do a deep dive on our costing structure. And I think that by the time we're finished, it's going to end up yielding some very positive results for the company from what we have underway.
spk06: Just to dig a little further, you said a mixed bag. So the clients that are pushing back, what's been their concern? Obviously, the price increase is the concern, but what's been the pushback? Are they Are they saying if there's going to be too much of a price increase, they're going to go elsewhere, or they're not able to absorb it because they don't think they can pass it along themselves? I'm just trying to understand what the question is.
spk07: For the most part, it hasn't been an issue. It really hasn't. There are the occasional accounts, just like anything, where you hit a little bit of a resistance or Maybe it's just price increase fatigue because it's not just us, right? It's everybody that's giving price increases. So I think for the balance and the vast majority, it really hasn't been an issue. And we've been able to take price pretty easily, actually.
spk00: Okay, good. Excellent. I'll hop back in the queue. Thanks.
spk05: Thank you very much. The next question is from William of Greenwich Global.
spk03: Hey, guys. You mentioned that you're seeing the old single serve and bulk customers coming back online. Can you roughly quantify, I mean, what percent of the ones you have sent product to in the past are taking product again now?
spk00: Yeah. That's a good question.
spk07: We're really just starting to see the orders coming through and the engagement has definitely ticked up. I would probably say we're maybe at like the 70 mark, but it's still pretty early in the spring. As we get deeper into the summer, you know, and later into the spring, I think that'll continue to improve. It really just started and it's been great to actually see not only the orders have been picking up, but there's actually been a fair amount of outreach from customers seeking us out and seeking the product again, even where maybe in some territories where distributions dropped off because people had closed down or what have you, and they're still seeking us out through new distributors or some of our other distributors or even direct. I would say we're probably at about a 70 mark right now, but it's definitely growing.
spk03: Okay, and is that about the same in the military channel?
spk07: Yeah, very similar, actually. The military is probably a little bit further along, or it's coming back a little bit more because they seem to be turning on all at once. And they did have a little bit of a closed down when we had that COVID spurt at the end of the year.
spk03: Okay. And you've mentioned in the past that you could have had more sales if you had more product. How are you guys doing with getting enough to send out to customers that want the product?
spk07: Yeah, great. That's a great question. So we've really been doing an enormous amount of work on our supply chain, both capacity and production capacity with co-packers as well as ingredient sourcing, alternative suppliers as well. We have opened up the additional capacity, so we've solved that capacity issue. We've also located and sourced additional vendors for products. that have now closed the gap for what we see as you know at least the balance of the year and the foreseeable future now so you know we have taken a look at all those critical and high-risk ingredients and put contingency plans in place as well as contracts so we feel very good about where we're at right now with both the ingredient sourcing and the capacity, and we've got some additional initiatives that are in the pipeline right now that's going to only further enhance that and also contribute to lowering our cost of goods.
spk03: Great, thanks.
spk07: These issues have forced us to take a hard look at the business, and it's going to yield an incredibly positive result for us.
spk00: Thanks, Ricardo. Thanks very much. Thank you very much.
spk04: Ladies and gentlemen, again, if you wish to ask a question, please press star and then one to join the queue.
spk00: We'll pause a moment to see if we have any further questions. Thank you.
spk04: Ladies and gentlemen, we have reached the end of our Q&A session. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.
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