Innovative Food Hldgs Inc

Good afternoon and welcome to the Innovative Food Holdings second quarter 2025 earnings conference call. On today's call for Innovative Food Holdings is Bill Bennett, our CEO, Brady Smallwood, our COO, and Gary Schubert, our CFO. Throughout the conference, we will be presenting both GAAP and non-GAAP financial measures, including, among others, historical and estimated EPS, adjusted EBITDA, which is net income before costs associated with amortization, depreciation, interest and taxes, and excluding certain one-time expenses, and adjusted fully diluted earnings per share, using the weighted average shares outstanding for the quarter ended June 30, 2025. These measures are not calculated in accordance with GAAP. Quantitative reconciliation of certain of our non-GAAP financial measures to their most directly comparable GAAP financial measures appear in today's press release. I would also like to remind everyone that today's call will contain forward-looking statements from our management made within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities and Exchange Act of 1934 as amended concerning future events. words such as aim may could should projects expects intends plans believes anticipates hopes estimates goal and variations of such words and similar expressions are intended to identify forward-looking statements these statements involve significant known and unknown risks and are based upon a number of assumptions and estimates which are inherently subject to significant risks uncertainties and contingencies and many of which are beyond the company's control Actual results, including without limitation the results of our company's growth strategies, operational plans, as well as future potential results of operations or operating metrics and other matters to be addressed by our management in this conference call, may differ materially and adversely from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, the risk factors described and other disclosures contained in our filings with the Securities and Exchange Commission, including the risk factors and other disclosures in our Form 10-K and our other filings with the SEC, all of which are accessible on www.sec.gov. Except to the extent required by law, we assume no obligation to update statements as circumstances change. With that, I would like to turn the call over to Mr. Bill Bennett. Please go ahead.

Hello everyone and good afternoon. I'm happy to welcome you to our Q2 2025 earnings call. You can read more detail about our results when we file our 10Q with the SEC later today. I want to start by reminding everyone about the announcement we made a week and a half ago regarding the sale of our mountaintop Pennsylvania warehouse. In tandem with this transaction, we are sunsetting our cheese conversion business and relocating our remaining profitable airline business to Chicago and integrating it into our artisan specialty foods business. This strategic shift necessitates several different views of our Q2 financials to help you see the differences between our gap reporting and the adjusted results based on our go-forward businesses. We're very excited about this new direction for Innovative Food Holdings. While we had aspirations for the cheese conversion business, as we looked at our pipeline of additional opportunities, we decided that we couldn't quickly enough get the business to the scale necessary to justify the size and expense of the Pennsylvania warehouse and therefore make the business model work. This strategic shift will allow us to return to our originally stated strategy to sell the warehouse and consolidate our operations to Chicago, saving significant cash flow and allowing us to focus more resources on growing our core asset light digital channels business. As a reminder, this business requires very little capital and expense to grow, since we generally don't own the inventory and can grow revenues by bringing more vendors into our catalog and listing their assortment with the largest broad line distributors in the country, namely Cisco, Performance Food Service Group, and U.S. Foods. As we exit the cheese conversion business, sell the building, and relocate the airlines business to Chicago, we expect significant progress in margin growth, SG&A reduction, and cash flow growth. With a planned closed date of September 30th, our financial results in Q2 and Q3 won't yet reflect these changes, but we expect Q4 to better demonstrate the earning potential of the company. Now let's jump into our Q2 results. In Q2 2025, revenue increased 26.9%. Excluding the cheese conversion business, Q2 revenue grew 13.5% with acquisitions driving the majority of the year-over-year growth since they did not contribute revenue in the prior comparable period. After an initial period of declines in these acquisitions, as we've been working through the transition, our weekly revenues have stabilized throughout Q2, and we continue to optimize the team and implement our operational playbook. The remaining core business revenue, excluding our acquisitions, was roughly flat year over year. Within that core business, our airline catering business grew 26.1%, which was offset by a 4.9% decline in digital channels and improvement from the 6.8% decline in Q1. Within digital channels, we continue to see strong growth with our new national distributor partner announced last year and triple digit growth in our Amazon sales channel. These growth initiatives were offset by continued softness in our largest customer, US Foods, driven by continued increased competition within their marketplace. Returning this business to growth through significant catalog expansion remains a key initiative for the entire management team. Now I'll update on a few of our key strategic initiatives. Last quarter, I outlined our strategy to turn around our digital channels business by accelerating our catalog growth. Just last week, we completed the soft launch of our new AI-driven catalog management platform and are now taking our first vendor through the process. The platform is smooth, fast, and accurate. So we will now begin to invite new vendors onto the platform. We also added headcount to the largest bottleneck of our catalog setup process, which helped us to accelerate item setup. In the last four weeks, we set up over 400 items, more than we set up for the rest of the year to date. Beyond catalog growth, we also recently extended our business into five new regional markets with Performance Food Service Group, and we'll be exhibiting at U.S. Foods' first National Food Fanatics Show in Las Vegas later this month. We also continue to work on the integration of our recently acquired businesses. We recently installed a new president of Golden Organics and Loco, a veteran of a much larger food distribution business in Denver. We completed the integration of ERP systems, allowing us to now combine all data and reporting into our corporate platform. This is also enabling us to combine all logistics between the two acquisitions, driving efficiency and reducing headcount and distance driven by our trucks. Lastly, we've made progress in preparing the business to onboard to our digital channels by capturing images and dimensions of the entire catalog. We also continue to work on implementing standard operating procedures across all key functions and tracking daily progress. In summary, Q2 represented a large strategic shift for IVFH as we focus our resources onto the core profitable parts of our business. We still have significant work to do to achieve the growing profitable business we're targeting, but we're seeing traction in key elements of the strategy and we're laying the foundation for long-term value creation. I want to thank our team for their focus and execution, and we look forward to updating you further in the quarters ahead. With that, I'll turn it over to Brady to talk through some of the specific actions we've taken in the operation of our business this quarter.

Brady. Thanks, Bill. Today, I want to give more detail on the warehouse transition and our exit from cheese conversion. Since joining just over two years ago, we've tested a range of potential growth paths for the Pennsylvania facility. That operation was unprofitable for many years and presented significant headwinds. Over the first six months period, we ran targeted tests, but the results made clear that the scale, capital, and risk required to reach sustainable profitability were too high. At that point, we began sales processes for the warehouse and the e-commerce business. The e-commerce business sold first about six months later in the fall of 2024. As we retained the building, we continued running other positive contribution profit businesses and pursued new B2B opportunities, including the large retail program we launched late last year. Q1 was our first full quarter of results for the revised businesses in Pennsylvania. Our review showed the cheese business would need to double its current run rate, a scale that we were targeting but was increasingly uncertain given tariff pressure on imported cheeses. Compounding that challenge, our tenant in the other half of the building, a solar company, announced plans to vacate due to tariff impacts and changes in government incentives. With both halves of the building under pressure, the decision was clear. Wind down cheese conversion and move aggressively to sell the facility. Despite the property being on the market for 18 months, redoubling our efforts quickly produced a viable buyer. We've now entered into a definitive agreement to sell the Pennsylvania facility and are well into the due diligence phase with closing targeted by the end of September. The sale price reflects current market conditions for specialized cold storage assets in the region and aligns with independent broker valuations. Proceeds will eliminate roughly $9 million in debt, strengthening our balance sheet and freeing capital for higher return investments. On the transition front, work is well underway. We've sequenced the migration of airline and broad line distribution into our Chicago hub to minimize customer disruption. We've also rationalized assortments to boost sales and margin while using less warehouse capacity. And we've identified meaningful overhead savings. Supporting our airlines business is high priority. The year-over-year growth in our airline business is accelerated from 2.2% in Q1 to 26.1% in Q2, led by faster expansion with newer customers, while our largest accounts remain stable. Execution here is critical. airlines rely on us for a wide assortment and flexible service to meet unique purchasing cycles. We're consistently presented with new product opportunities, and by maintaining high service levels at competitive prices, we believe there's a long runway for growth. Overall, the decisive actions this quarter both de-risk our financial position and set us up for scalable margin and creative growth ahead. With that, I'll hand the mic over to Gary. Gary?