Barfresh(BRFH) - 2024 Q3 - Quarterly Results

Barfresh Third Quarter 2024 Results and Business Update Management Comments The CEO highlights record Q3 revenue growth driven by existing products ahead of the new Pop & Go™ launch - Achieved record quarterly revenue in Q3 2024, exceeding $3.6 million, a 40% year-over-year increase[2] - The new Pop & Go™ product is expected to significantly expand the company's presence in the high-volume school lunch channel[2] - The company is positioned for sustained growth with expanded capacity and a distribution network covering over 95% of the country[2] Financial Performance The company reports significant revenue growth for Q3 and the first nine months of 2024, with improved gross margins Third Quarter 2024 Financial Results Q3 2024 revenue surged 40% to $3.6 million with improved adjusted gross margins, though the net loss slightly increased Q3 2024 vs Q3 2023 Key Metrics | Financial Metric | Q3 2024 | Q3 2023 | Change | | :--- | :--- | :--- | :--- | | Revenue | $3.6M | $2.6M | +40% | | Gross Margin | 35% | 35% | 0% | | Adjusted Gross Margin | 38% | 35% | +3 p.p. | | Net Loss | ($513,000) | ($476,000) | +7.8% | | Adjusted EBITDA | ($124,000) | ($89,000) | +39.3% | - Revenue growth was attributed to improvements in Twist & Go bottled smoothie sales and sales of smoothie cartons and bulk formats[3] - The increase in net loss was primarily due to higher personnel costs, travel, broker commissions, and the non-recurrence of an Employee Retention Tax Credit benefit recognized in 2023[4] First Nine Months of 2024 Financial Results Revenue for the first nine months grew 28% to $7.9 million, accompanied by a narrowed net loss and improved Adjusted EBITDA Nine Months 2024 vs 2023 Key Metrics | Financial Metric | Nine Months 2024 | Nine Months 2023 | Change | | :--- | :--- | :--- | :--- | | Revenue | $7.9M | $6.2M | +28% | | Gross Margin | 37% | 36% | +1 p.p. | | Adjusted Gross Margin | 39% | 36% | +3 p.p. | | Net Loss | ($2.0M) | ($2.1M) | -4.7% | | Adjusted EBITDA | ($752,000) | ($1.2M) | +39.7% | - The improvement in Gross Margin and Adjusted Gross Margin resulted from a favorable product mix, pricing actions, and a slight improvement in supply chain component costs[5] - The increase in G&A expenses was driven by higher management headcount, increased stock-based compensation for the Board, and the non-recurrence of 2023 tax benefits[6] Balance Sheet and Liquidity The company managed liquidity through inventory buildup, a new receivables financing facility, and non-recourse litigation financing - As of September 30, 2024, the company had approximately $2.1 million of cash and accounts receivable, and approximately $770,000 of inventory[12] - In August 2024, the company secured a $1.5 million receivables financing facility to provide flexibility for funding inventory as needed[13] - Obtained non-recourse litigation financing to vigorously pursue its legal complaint without further expense to the company[13] - The company has taken measures to reduce liquidity requirements, including compensating directors and employees with equity to reduce cash compensation[12] 2024 Outlook The company expects to achieve record annual revenue in 2024 with gross margins in the mid to high 30s and positive Q4 Adjusted EBITDA - Expects to achieve record fiscal year revenue for fiscal year 2024[14] - Gross Margin and Adjusted Gross Margin for 2024 are expected to be in the mid to high 30's[14] - Expects to achieve positive adjusted EBITDA in the fourth quarter of fiscal year 2024[14] Supplier Dispute The company is engaged in an ongoing legal dispute with a former manufacturer over a product quality issue from Q3 2022 - The dispute stems from customer complaints in Q3 2022 regarding the textural consistency of the Twist & Go™ bottle product from a single manufacturer[15] - After unsuccessful informal negotiations, Barfresh re-filed a complaint in California State Court in August 2023, and the case is progressing through the court system[15] - The company cannot predict the outcome or a range of reasonably possible recoveries from its legal actions, and no gain contingencies have been recorded[15] Non-GAAP Financial Measures The company uses non-GAAP measures like Adjusted Gross Profit and Adjusted EBITDA to provide a clearer view of core performance - The company presents non-GAAP measures like Adjusted Gross Profit and Adjusted EBITDA to provide useful information that is directly reflective of its core business performance[8] - Exclusions from GAAP measures, such as manufacturing relocation costs and stock compensation, are intended to provide a more useful measure for period-to-period comparisons[8] Reconciliation to Adjusted Gross Profit | Reconciliation to Adjusted Gross Profit | Q3 2024 | Q3 2023 | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Gross Profit | $1,260,000 | $913,000 | $2,938,000 | $2,242,000 | | Manufacturing relocation | $126,000 | - | $176,000 | - | | Adjusted Gross Profit | $1,386,000 | $913,000 | $3,114,000 | $2,242,000 | Reconciliation to Adjusted EBITDA | Reconciliation to Adjusted EBITDA | Q3 2024 | Q3 2023 | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Net Loss | ($513,000) | ($476,000) | ($1,973,000) | ($2,123,000) | | Adjustments (D&A, Interest, etc.) | $389,000 | $387,000 | $981,000 | $576,000 | | Adjusted EBITDA | ($124,000) | ($89,000) | ($752,000) | ($1,247,000) | Conference Call Information A conference call to discuss Q3 2024 results was scheduled for October 24, 2024, with webcast and replay details provided - A conference call was scheduled for October 24, 2024, at 1:30 pm Pacific Time (4:30 pm Eastern Time) to discuss the results[16] - Dial-in numbers for North American and international listeners were provided, along with a passcode for a telephonic playback available through November 7, 2024[16]