Barfresh Food Group Inc.

Good afternoon, everyone, and thank you for participating on today's first quarter 2026 earnings conference call and webcast for Bar Fresh Food Group. Joining us today is Bar Fresh Food Group's founder and CEO, Ricardo Delacoste, 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 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. 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 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. 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, in current reports on Form 8K, including any warnings, risk factors, and cautionary statements contained therein. Furthermore, the company expressly disclaims any current intentions to update publicly any forward-looking statements after this call, whether the 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 EBITDA, adjusted EBITDA, which are reconciled in tables in the business update release to the most comparable GAAP measures. The reconciling items are non-operational or non-cash costs, including stock, compensation, and other non-reoccurring costs, such as those associated with the acquisition-related expenses. Management believes that EBITDA and adjusted EBITDA provides useful information to the investor because they are directly reflected of the performance of the company. Now, I will turn the call over to CEO of Barfresh Food Group, Mr. Ricardo Delacoste. Please go ahead, sir.

Good afternoon, everyone, and thank you for joining us for our first quarter 2026 earnings call. I'm pleased to report that Q1 2026 represents a continuation of the momentum built through 2025. We delivered revenue of $5.6 million, which is slightly above our expectations. The outperformance was driven by stronger-than-anticipated contribution from ARPS dairy raw and processed milk business. While this additional revenue contributed to our top-line beat, it operates at a lower margin profile than our core barfresh products. which is why the revenue outperformance did not flow through proportionally to adjusted EBITDA. Overall, we remain on track with our fiscal 2026 plan, and the strategic work underway gives me confidence in our long-term growth opportunity. Let me provide an update on the operational progress that underpins our outlook. The transition into our own manufacturing infrastructure continues to advance. The ARP's dairy processing facility is operating and supported approximately 50% of our frozen beverage and food volume in the first quarter of 2026. At our larger 44,000 square foot facility in Defiance, Ohio, we will continue to procure and install the proper equipment and personnel to enable more efficient and flexible production of our product range. We remain on track to commission the facility before the end of 2026. and the $2.4 million government grant for specialized equipment is supporting that timeline. As discussed on our last call, we closed the $7.5 million senior convertible note financing in March and anticipate paying down a portion of those notes via remortgaging the new facility, the larger facility, in 2026. Turning to our commercial progress during the quarter, the education channel remains our primary area of focus and our greatest near-term opportunity. In the quarter, we continue to make tangible progress, rebuilding customer relationships and adding new school district wins. Our broker network and direct sales team have been consistent in communicating our manufacturing progress and the supply reliability we all seek, and that message is resonating. Our recent award of the seven-year bid with the fifth-largest school district in the United States reflects exactly the kind of large-scale relationship we are now positioned to pursue. This win demonstrates that we can compete successfully for the most significant contracts in the country, and it is a benchmark for the pipeline of similar opportunities we are building. With that overview of our first quarter progress, I'll now turn it over to Lisa to walk us through the numbers.

Thank you, Ricardo. Let me walk you through our first quarter 2026 financial results in detail. Revenue for the first quarter of 2026 was $5.6 million compared to $2.9 million in the first quarter of 2025, representing a 92% year-over-year growth as a result of the ARPS acquisition. As Ricardo noted, this came in above the high end of our guidance range of $5 million to $5.2 million, driven by stronger contribution from ARPS Dairy's raw and processed milk business. Gross margin for the first quarter of 2026 was 18% compared to 31% in the first quarter of 2025. Gross margins continue to reflect the ongoing contribution of ARPS dairy's milk processing business, which operates at different margin profiles than our core barfresh products and remains subject to commodity pricing fluctuations. Additionally, transition costs associated with producing in our newly acquired processing facility have impacted our margins. These are anticipated dynamics as we ramp toward our optimized operating model. We continue to expect incremental margin recovery throughout the year and into 2027, with a more significant improvement as new equipment is installed at the existing facility and construction is completed at the new facility. Net loss for the first quarter of 2026 was 661,000 compared to a net loss of 761,000 in the first quarter of 2025. Selling, marketing, and distribution expenses were 697,000 compared to 824,000 in the first quarter of 2025. The year-over-year decrease reflects lower personnel costs as we increasingly leverage our broker network. Additional reductions are a result of reduced sampling expense following the launch of pop-and-go freeze pops last year and lower equipment maintenance costs as single-serve products, which require no customer equipment, represent a greater share of the portfolio mix in the education channel. G&A expenses for the first quarter of 2026 were $755,000 compared to $747,000 in the same period last year. Adjusted EBITDA for the first quarter was a loss of approximately $238,000 compared to a loss of approximately $506,000 in the prior year period. The adjusted EBITDA result compared to our break-even guidance reflects two primary factors. First, the revenue mix was weighted more heavily toward the lower margin milk processing business than we had anticipated in our guidance model. Second, we experienced startup inefficiencies in our newly acquired processing facility due to lower production volumes than planned. These inefficiencies are typical of facility transitions and are already improving as we optimize our production process and build volume. We continue to expect to achieve positive adjusted EBITDA in fiscal year 2026 as we realize the full benefits of our integrated manufacturing model and complete our facility optimization. Turning to our balance sheet, as of March 31, 2026, we had approximately $4.1 million of cash and accounts receivable and approximately $1.8 million of inventory on our balance sheet. In March 2026, we secured a $7.5 million senior convertible note financing. Combined with the $2.4 million government grant approved for specialized equipment installation, We have a well-structured capital foundation to support the completion of our facility build-out and our operational growth through 2026. We will continue to evaluate additional financing options, including mortgage and equipment financing against our unencumbered facility, as necessary to support our growth objectives and potential pay down of the convertible note. The financial flexibility we have built into our capital structure allows us to preserve cash for operational needs during the construction phase. Now I will turn the call back to Ricardo for closing remarks.