Barfresh(BRFH) - 2023 Q4 - Annual Results

Executive Summary Barfresh achieved $8.1 million in FY2023 revenue with 36% gross margins, overcoming supply chain issues and projecting record Q1 2024 - Achieved the second-highest fiscal year revenue in company history at $8.1 million, despite supply chain disruptions[2] - Fourth-quarter results were negatively impacted by an industry-wide carton shortage, which has since been resolved but affected the first six weeks of fiscal 2024 sales[3] - The company is focused on securing a new bottle manufacturing partner before the new school year begins in August 2024 to support long-term growth plans[3] - Barfresh is projected to generate record revenue in the first quarter of 2024 compared to any prior first quarter[2] Financial Performance Barfresh's 2023 financial performance showed mixed results, with full-year revenue declining to $8.1 million but gross margins improving to 36%, and net losses narrowing Fourth Quarter 2023 Financial Results Q4 2023 revenue increased to $1.9 million with 33% gross margin, while net loss significantly narrowed to $701,000 due to reduced G&A expenses Q4 2023 vs Q4 2022 Financials | Metric | Q4 2023 | Q4 2022 | Change | | :--- | :--- | :--- | :--- | | Revenue | $1.9 million | $1.4 million | +35.7% | | Gross Margin | 33% | 36% | -3 p.p. | | Net Loss | $(701,000) | $(1,900,000) | +63.1% | | G&A Expenses | $629,000 | $912,000 | -31.0% | - The increase in revenue was attributed to improved supply from increased carton production capacity and the return of customers lost due to the previous year's bottle manufacturer issue[3] Fiscal Year 2023 Financial Results FY2023 revenue was $8.1 million, down from $9.2 million in 2022, but gross margin improved to 36%, and net loss significantly reduced to $2.8 million FY 2023 vs FY 2022 Financials | Metric | FY 2023 | FY 2022 | Change | | :--- | :--- | :--- | :--- | | Revenue | $8.1 million | $9.2 million | -12.0% | | Gross Margin | 36% | 16% | +20 p.p. | | Net Loss | $(2.8 million) | $(6.1 million) | +54.1% | | G&A Expenses | $2.7 million | $3.5 million | -24.0% | - The decline in annual revenue was a result of limited supply and lost customers from the loss of its largest bottle manufacturer, compounded by a carton shortage late in the year[10] - The 2022 net loss was impacted by $1.8 million in charges related to a product withdrawal and a $746,000 non-cash asset impairment charge[5] Non-GAAP Financial Measures Adjusted EBITDA loss narrowed for both FY2023 to $1.7 million from $2.4 million, and for Q4 to $427,000 from $833,000 Adjusted EBITDA Reconciliation Summary | Period | Net Loss | Adjusted EBITDA | Year-over-Year Improvement | | :--- | :--- | :--- | :--- | | Q4 2023 | $(701,000) | $(427,000) | 48.7% | | Q4 2022 | $(1,858,000) | $(833,000) | - | | FY 2023 | $(2,824,000) | $(1,674,000) | 31.5% | | FY 2022 | $(6,134,000) | $(2,445,000) | - | Balance Sheet As of December 31, 2023, Barfresh maintained a cash position of approximately $1.9 million and held about $1.2 million in inventory Key Balance Sheet Items (as of Dec 31, 2023) | Account | Value | | :--- | :--- | | Cash | $1.9 million | | Inventory | $1.2 million | Business Updates and Outlook Barfresh is addressing manufacturing and supply chain challenges, pursuing a new bottle manufacturer, managing a legal dispute, and forecasts record revenue with high 30s gross margins for 2024 Operational Update Barfresh increased capacity with existing manufacturers, with carton production reaching 25-30 million units annually, and is actively seeking a new bottle partner by August 2024 - Carton manufacturer has increased annual capacity to approximately 25 million to 30 million units[3] - The company is actively seeking a new bottle manufacturing partner with the goal of having one in place before the new school year in August 2024[3] Supplier Dispute Barfresh is engaged in an ongoing legal dispute with a former manufacturer over Q3 2022 textural consistency issues, having re-filed a complaint in California State Court in August 2023 - The dispute stems from customer complaints in Q3 2022 about the textural consistency of the Twist & Go™ product from one manufacturer, leading to a product withdrawal[17] - After initial legal filings and attempts at resolution, Barfresh re-filed a complaint in California State Court in August 2023, and the case is progressing[17] 2024 Outlook Barfresh has a positive outlook for fiscal year 2024, expecting to achieve record annual revenue and gross profit margins in the high 30s - Expects to achieve record fiscal year revenue for fiscal year 2024[16] - Gross profit margins for 2024 are expected to be in the high 30s[16] Conference Call Information The company scheduled a conference call and webcast for February 29, 2024, at 4:30 pm Eastern Time to discuss the financial results - A conference call to discuss the results was held on Thursday, February 29, 2024, at 1:30 pm Pacific Time (4:30 pm Eastern Time)[18]