Innovative Food Hldgs Inc

Good afternoon, and welcome to the Innovative Food Holdings first quarter of 2026 Earnings Conference Call. On today's call for Innovative Food Holdings is Gary Schubert, our Chief Executive Officer. Throughout the conference, we will be presenting both GAAP and non-GAAP financial measures, including, among others, adjusted EBITDA and adjusted fully diluted earnings per share. These measures are not calculated in accordance with GAAP. Quantitative reconciliations 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, 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, 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-Q 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. Unless otherwise noted, all results discussed today reflect continuing operations only. With that, I would like to turn the call over to Gary Schubert, Chief Executive Officer. Please go ahead.

Thank you, and good afternoon, everyone. I appreciate everyone joining us today. Before discussing the quarter, I want to acknowledge that much of what I'll discuss today will sound familiar to those who joined us for our year-end earnings call. That's because many of the conditions affecting our first quarter results were already present and previously communicated as we exited 2025. The digital marketplace transition, competitive and menu cycle pressures within national distribution, and customer attrition within local distribution all continued into Q1. None of those represent new developments. The question is not whether those headwinds continued. They did. The more important question is whether we are making progress on those areas we can control while simultaneously positioning the business for future growth. That is where I want to focus today's discussion. For the first quarter of 2026, revenue was $12.2 million compared to $15 million in the prior year period. The decline reflected the same factors we discussed during our year-end call, including the ongoing digital marketplace transition, competitive and menu cycle pressure within national distribution, and customer attrition within local distribution. Gap net income from continuing operations increased to approximately $343,000 or 0.6 cents per fully diluted share compared with approximately $254,000 or 0.5 cents per fully diluted share in the prior year quarter. Operating income improved to approximately $351,000 compared with approximately $260,000 in the prior year period. Adjusted EBITDA was approximately $441,000 compared with approximately $593,000 in the prior year quarter. Selling general and administrative expenses declined approximately $888,000 year-over-year, reflecting the lower cost structure of the continuing business and actions taken through 2025 to simplify the organization and align expenses with our current operating footprint. The most significant event during the quarter was the completion of the sale of our former mountaintop Pennsylvania facility. This transaction eliminated substantially all debt associated with the facility, reduced annual interest burden, released restricted cash, simplified the balance sheet, and sharpened management's focus on continuing operations that will drive IVFH going forward. At March 31, 2026, current liabilities declined to approximately $3.3 million compared with $12.4 million at year end, while stockholders' equity increased to approximately $8.1 million from $6.2 million. From my perspective, however, the most important part of Q1 was not this income statement or even the balance sheet. It was what we learned. Over the last eight months, I have spent a significant amount of time evaluating how the business actually operates, where growth opportunities exist, and what has prevented us from capturing those opportunities consistently. One conclusion has become increasingly clear. The opportunities in front of us are not primarily constrained by demand. Across digital channels, national distribution, and local distribution, we continue to see opportunities to add customers, add vendors, add items, expand distribution points, win new business, and increase revenue. The challenge is execution. The challenge is converting opportunity into revenue consistently and repeatedly. When I look across the organization, I see a business that historically built a tremendous amount of commercial opportunity but did not always have the systems, processes, visibility, accountability, and operational capacity necessary to fully capitalize on that opportunity. As a result, much of our effort today is focused on improving the organization's ability to execute at scale. That includes technology, that includes process, and that includes accountability. And it includes creating better visibility into what is working, what is not working, and where management should be allocating resources. I believe this is one of the most important observations to come out of the first quarter. The challenge is not finding the opportunities. The challenge is converting opportunities into profitable growth. Turning to digital channels, the marketplace transition we have discussed for several quarters continued to impact results during Q1. While revenue remained under pressure, our focus has increasingly shifted from managing disruption toward building a stronger platform for the future. During the quarter, we continued expanding vendor onboarding, increasing new item interventions, improving item maintenance processes, and utilizing our hub platform to improve throughput and efficiency. One area I have become particularly focused on is transactability. Ultimately, growth within digital is driven by having more commercially healthy items available across more points of distribution, supported by reliable maintenance and operational execution. Adding a new item is only the beginning. This item must remain active, it must remain competitive, it must remain discoverable, and it must remain properly maintained. Those are the disciplines that create recurring revenue over time. We continue to believe the opportunity within digital remains significant. The challenge is timing. New vendors, new products, and new points of distribution take time to onboard, become discoverable, establish purchasing frequency, and ultimately contribute meaningful revenue. What gives me confidence is that the opportunity pipeline continues to grow even if the financial benefit takes time to materialize. Turning to national distribution, the same competitive and menu cycle pressures we discussed previously continues through Q1. However, I believe it is important to remember that airline and national account business are relationship driven businesses. Success is rarely determined by a single bid opportunity. Success is built through years of execution, responsiveness, trust, and reliability. Our focus remains on strengthening customer relationships, improving fulfillment reliability, maintaining procurement discipline, and positioning ourselves to win future opportunities as they emerge. We continue to see bid activity and menu cycle opportunities across the airline channel. While those opportunities do not immediately translate into revenue, they represent future opportunities that expand our participation and grow the business. Our objective remains straightforward. Execute reliably, remain competitive, and earn a larger share of future opportunities. Turning to local distribution, local distribution remains our most challenged operating segment. The customer attrition that occurred throughout 2025 continued to impact first quarter results and rebuilding that business will take time. However, I believe the conversation around local must be broader than simply stabilizing existing customers. The long-term objective is growth. That means retaining existing customers, it means re-engaging former customers, and it means winning entirely new customers. Today, our teams are actively pursuing all three. The operational improvements taking place across Chicago and Denver are important because they create the foundation necessary to support growth, but those improvements alone are not the destination. The destination is a larger customer base, stronger market positions, deeper customer relationships, and increased revenue. I am encouraged by the level of customer engagement taking place across the organization today, and by the opportunities we continue to pursue. Stepping back, I would characterize 2026 as a year of execution, not because we lack ambition, but because sustainable growth requires operational consistency. As we move through the second quarter, many of the conditions affecting Q1 remain in place. Revenue comparisons continue to be influenced by the same factors we discussed today. At the same time, we remain focused on expanding our opportunity, steps through customer engagement, vendor development, item expansion, operational improvement, and disciplined execution. Our objective is not simply to maintain the business at its current size. Our objective is growth. We believe meaningful growth opportunities exist across digital channels, national distribution, and local distribution. Our responsibility is to execute well enough to capture them. The headwinds affecting the business today are well understood. The opportunities in front of us are equally clear. Our job is to convert those opportunities into results. While we recognize there is still significant work ahead of us, we believe we are focused on the right priorities. We are committed to improving execution, pursuing growth opportunities across all three operating channels, strengthening customer and vendor relationships, and building a stronger, more scalable company over time. We appreciate the dedication of our employees, the support of our customers and vendors, and the continued confidence of our shareholders as we work to move the business forward. Since we did not receive any questions in advance of today's call, we'll conclude here. Thank you for your time, your attention, and continued interest in Innovative Food Holdings. We look forward to updating you on our progress next quarter. Operator, that concludes today's call.

Thank you. A replay of this call will be available on the company's website at www.ivfh.com. This concludes today's conference call. You may now disconnect.