Barfresh Food Group Inc.

Good afternoon, everyone, and thank you for participating on today's first quarter 2025 corporate update call for Barfresh Food Group. Joining us today is Barfresh Food Group's founder and CEO, Ricardo Dele 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, urine, 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 relation, and projections of future financial performance. These forward-looking statements are identified by the use of words such as grow, expand, and spate Intent, 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 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 experienced expected future developments and other factors that the company believes are appropriate under those 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 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 warning, 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, weather has 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-gap measures, including adjusted gross profit, adjusted EBITDA, which are reconciled in tables in the business update released to the most comparable gap 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 and certain manufacturing relocation costs, management believes that adjusted gross profit EBITDA and adjusted EBITDA-approved 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. Ricardo Delicoste. Please go ahead, sir.

Good afternoon, everyone, and thank you for joining us for our first quarter 2025 earnings call. We achieved our revenue and gross margin guidance for the first quarter and continue to sign new customers in the education channel as we continue to invest in our manufacturing operations to be well prepared for the upcoming 2025 school year. Based on the progress we are making towards additional manufacturing capacity and our first quarter results, we are reiterating our full year revenue guidance of 35 to 55% growth. Our revenue guidance accounts for continuing orders from existing customers and confirm bids, while also considering estimated revenue from end-user opportunities at later stages in our sales pipeline. I would like to now provide an update on our manufacturing capacity. During the fourth quarter of 2024, we began onboarding two new strategic partners. This entails important equipment investments by ourselves and our partners, which will continue into the second quarter. While this transition creates near-term cost pressures On our first and second quarter bottom line results, we expect all of the investments and onboarding process to be complete by the end of Q2 2025, bringing us to full manufacturing capacity in time for our high season selling in the education channel, which picks up with back to school demand in Q3. Once our new manufacturing partner for Twist and Go is fully online, we will increase our bottling capacity enabling us to expand our revenue in the back half of this year. In addition, we expect our gross and operating margins to dramatically improve in the back half of 2025, enabling us to achieve positive adjusted EBITDA in the second half of the year. The costs associated with onboarding our new co-manufacturers, including higher supply chain expenses from sourcing products from multiple locations and trial costs are expected to be completed by the end of the second quarter. Turning to our product portfolio, we launched a new pop and go 100% juice freeze pops in our education channel during Q4 and it continues to gain traction as we enter the second quarter. While this new product contributed modest revenue in the first quarter, we're excited about its potential. Unlike our breakfast-focused offerings, this product targets the lunch day part, a market opportunity significantly larger than breakfast. On the sales front, our robust sales network is now covering 95% of the U.S. As a reminder, while we've had strong success in new customer acquisition in the education channel, we're still only at a 5% market penetration, representing significant runway for growth. And many of these new wins will not start contributing to our top line until the back half of 2025. During the second quarter, we will continue to make the appropriate investments in our manufacturing and supply chain, but we fully believe this will be completed by the end of the second quarter. Our expanded manufacturing capacity, new product introductions and robust sales network give us confidence in our growth projections. More importantly, we expect to see meaningful margin improvement as we realize the benefits of our operational investments. Before I turn it over to Lisa for a detailed financial review, I want to thank our employees, partners, and shareholders for their support during this transition period for our company. The investment we have made into our overall company during the past few quarters will enable us to achieve profitable growth in the back half of 2025, and we are very excited about our future. I'll now turn the call over to our CFO, Lisa Rodger. Lisa?

Thank you, Ricardo. As we guided during our last earnings call, our first quarter revenue remained consistent with Q4 levels as we continued to manage our supply chain through a transitional period. Revenue for the first quarter of 2025 was $2.9 million compared to $2.8 million for the first quarter of 2024. The year-over-year increase in revenue is primarily driven by expanded bottle capacity at our existing bottle manufacturer, enabling higher sales volume compared to the prior year. Gross margin for the first quarter of 2025 was 31% compared to 41% for the first quarter of 2024. Adjusted gross margin for the first quarter of 2025 was 31% compared to 43% in the prior year period. Our adjusted gross margin for the first quarter of 2025 was consistent with Q4 2024 adjusted gross margin of 30%, as expected. The year-over-year decrease was due primarily to temporary production inefficiencies and higher supply chain expenses related to sourcing elements of our production process from multiple locations as we continue to enhance our supply chain capabilities. We expect our gross margin to normalize in the second half of 2025 as new co-manufacturers are operating at a higher capacity and capability, improving our supply and cost structure. Selling, marketing, and distribution expense for the first quarter of 2025 increased to $824,000 or 28% of revenue compared to $694,000 or 25% of revenue in the first quarter of 2024. The year-over-year increase is a result of higher personnel costs and broker commissions due to expansion of our broker network, as well as an increase in sample expense due to the introduction of pop-and-go 100% juice freeze pops. G&A expenses for the first quarter of 2025 were $747,000 compared to $855,000 in the same period last year. The year-over-year decrease in G&A was driven by 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, partially offset by an increase in personnel-related expenses. Net loss for the first quarter of 2025 was $761,000 compared to a net loss of $449,000 in the first quarter of 2024. The increase in net loss was primarily due to the reduction in gross margin as previously discussed. For the first quarter of 2025, our adjusted EBITDA was a loss of approximately $506,000 compared to a gain of approximately $53,000 in the same period last year. Adjusted EBITDA in the first quarter of 2025 was impacted by costs associated with sourcing elements of the production process from multiple locations while new co-manufacturers complete equipment installations required to perform as full-service partners. This resulted in higher logistics costs and less efficient production than in the first quarter of 2024. The equipment is expected to be delivered, installed, and operational by the end of the second quarter, and we should return to our optimized production and distribution network in the back half of the year. Now moving on to our balance sheet. As of March 31, 2025, we had approximately $3.4 million of cash and accounts receivable and approximately $1.1 million of inventory on our balance sheet. The company has taken measures to reduce its liquidity requirements, including compensating its directors' employees with equity to reduce cash compensation requirements, obtaining non-recourse litigation financing, and securing receivables financing. In February 2025, the company secured $3 million in growth financing. This capital raise enhances our financial position and supports scaling of production capacity to meet growing customer demand, particularly in the education channel. Now I will turn the call back to Ricardo for closing remarks.