BRFH - Earnings call transcript Q3 2019 | Barfresh Food Group, Inc.

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Operator

Good afternoon, everyone, and thank you for participating in today's Third Quarter 2019 Corporate Update Call for Barfresh Food Group.

Joining us today is Barfresh Food Group's Founder and CEO, Riccardo Delle Coste; Joe Cugine, President; and Raffi Loussararian, Vice President of Finance for Barfresh Food Group.

Following prepared remarks, we will open the call for your questions. The discussion today will include forward-looking statements except for the historical information herein, matters discussed 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 and 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, potential, forecast and project among others. the the developments historical or that or occur than activities, that anticipates other statements. may or forward-looking events the in statements statements fact of address will All are future company believes

are Such many forward-looking assumptions on are the that may expected number beyond experience, subject appropriate factors assumptions, on of under developments and other These company of made to the statements and are based of further the company are materialize. statements not based which certain believes uncertainties, these risks control circumstances. a and

are Commission, update Investors its of guarantees are and recent cautioned by considered as warnings, that forward-looking any should the statements company required call on and Form Exchange future such report Form is in and and contents publicly company's law. statements contained to The factors intend report with including not with XX-Q. the XX-K the on not annual obligated risk filings any does performance. Furthermore, the quarterly the except be Securities statements not conjunction of this cautionary in

these factors stock gain reconciling sale directly order also In measures, the comparable compensation, certain derivatives. cash of services the aid in and because are flow including reflected in EBITDA table adjusted company. company's of update on in measures. to useful the or it’s the the The to GAAP including the believes reconciled for which the presenting provides primary investor information noncash of EBITDA, are issued non-GAAP of loss stock items Management costs company the business to business performance, most adjusted the release in is understanding the that

Group, Delle to turn Barfresh of Please ahead, Mr. the call go the CEO Now sir. I'll Riccardo Coste. over Food

Riccardo Delle Coste

in sales growing our call additional improvements will expanding accomplishments, insight into our today, Good joining our and our On XXXX quarter and you for review discuss pipeline channels we results and sales third thank our operating us. and efficiencies. afternoon everyone provide

a This net last is of than first, basis. two selling and increase sequential third and focused for expected the million quarter, of reasons; recently increase $X.X sales to to generated large in third lower year. main in which the school get during our running of signed due distributors quarter We on a XX% up last fourth order the had we product them quarters year a to third was

temporarily channel reimbursable. that our the installs we on for in as states fully in authorization USDA’s selling school delayed new to many we be such offerings California to order formal school the are Secondly, into wait

fully been have will of and nutrition the clarify direct to existing definitions. been standards our new standards accelerate states. reimbursement by offerings with our child reimbursable. will USDA for school our we definition our USDA working product And the We distributors now salesforce, working has and with believe products and the across our leading meet has that so The wins and clarified reimbursement XX products the all

our opportunity labor costs. and single-serve fact can ability our more operational in can deliver in packaging and that waste additional across any to costs states additional we to format resides greater students addition even and In capital and the without reduce flavors XX expand that reach

progress positive market next this move us various our quarter customers’ quickly has look solutions has plan. Barfresh in testing I to to past and and been very to on which in working sales explain year, been to feedback allows XXXX, forward

over we customers, the course to our quarter progress continue third As all of across make channels. the

and military we locations. the strides more making are briefly on in on add continue channel, to while the great even school USDA approval touch waiting the will I we school

placements of by school in increases the We year. also and significant both military end the expect

and improving and shifted our per location. As focus we channels, in and these traction execution gained have grown to we efficiencies have revenue

our full detail, our more of for in similar the financials the our that margins XXXX third It to expectation margin. margin gross is profit was review for quarter to last gross profit to XX% will year’s quarter Now similar quarter. the be

driven efficiencies gross including as Our improving many margin product by mix. cost as product is well factors continued strong

quarter we realized net third in year. general over $XXX,XXX XX% improvement expenses, of our an administrative the the During a reduction prior of and

We continue and cost as structure such employee to realignment. reduction renegotiated cost implement measures broker agreements

in structure. well as and We of are cost our logistics also making other our continual aspects improvements chain as supply

through of many see begin impact XXXX. to the of You'll results half significantly our these improvements financial first

everyone have our better expenses, to in improvements EBITDA. flow understand help we cash and To adjusted started report

$XXX,XXX compared adjusted was improvement $XXX,XXX loss of EBITDA $XXX,XXX. for loss a of ago For a the year an as our the with third of quarter, period,

We $XXX,XXX improvement and during a the another we on also strong sequential quarter. basis expect improvement fourth made a

sheet. Turning inventory. $XXX,XXX balance our of ended quarter and the to million cash with We $X.X of

As of continue approximately $X.X million we cash. today, to have of

to Now, Cugine, President, Joe? over our I will channel. our Joe call turn the to sales discuss

Joe Cugine

regional accounts. restaurant Thank you, start and by national discussing Riccardo. I'll the

with expect a X,XXX locations. QSR We with over rollout continue a national to

We of QSR one in are currently chains and with chain dine companies. is stage and final the casual the of the casual completed U.S., The along it two including, test be testing national XXXX. in restaurant dine extending is now with to operational largest QX additional in evaluation expect QX of into

some our customers progress restaurant capability of ability customized products I our R&D largest our amongst more and for couldn't be leverage to operators. the excited regarding national and

that customer and restaurants. profile, customers' the met we taste the consumer challenge the against of delivers example, waste creating while reducing their a great-tasting For beats competition, in labor product line

to in operational final XXXX. We the are very stage launch and to proud test expect in be nationally

have to product and with and customers' be to the look feedback consumer as nimble flavor that are will And testing the product be been well enough successful final placed phases waste. rollouts of customers plus these creation we in again, Overall, we XXXX. in continue we customer profile desired navigate proud forward phase reduce operational shifting to tailored market. to able and In as either both labor we've design. solutions situations, Regarding and to the the meet in other be the testing lead to QSRs, completed to waiting

with year, their out. we national region our This locations launched Puerto rolled in chain with Also, in permanent menu. national with in we in national rolled North now additional Rico, that available Barfresh includes chain XX locations be on the have products America out XX a to locations another sandwich

We expansion well theaters expand casual to that continue sales. to locations our of of work dine, with flavors as national the our current third-party throughout number regional locations, product operators, number increased these resorts. and QSR, the drive This is customers ski and zoos, to pouring as

Moving to education channel. the

as new add locations to forecasted. continue school We

channels, It's sold. especially channel and expansion. important we and with continue sales and of As options the continue school our with innovation we added all provide provide already that that variety being to flavors to are package additional product flavor have

the our government. without the reimbursement states, the the administrators school-focused products As to and help updated by Riccardo school schools enables status our not distributors us with USDA sell of by into of concern highlighted, the XX across of all from the reimbursed being

into could on district we reimbursement, with sales time uncertainty only touch Previously, a I'd We and customer like military regarding geographic school at to which sell now penetration. the limitations one in locations XX both the South channel. locations, in XX both the growth to our awarded and plan to pouring Korean internationally. and in ability domestically expanded two approximately next were recently products Internationally, impacted we serve on months. and facilities

dining international positioned domestic addition, facility locations, our we U.S. continue to are domestic expansion. forces' and armed In we well and increased

expansion Our at based military smoothies service food dining all opportunities location, each meal multiple will many mind, bases. And programs, for periods. current are be available creating there military facilities supporting in in at keep new and facilities

gain to X.X patented and We with the testament great to XXX with and the active also but operational penetration clients remainder a is into U.S. are the all this all which expansion serve serve military the actively pursuing with military expect our of engaging enabling product across United world greater States' capabilities, product facilities throughout XXXX offerings. million over U.S. year international The offerings us to our our troops. basis,

And it Riccardo. with to turn I that, back

Riccardo Delle Coste

Thank you, Joe.

customer been for us of continued channel nine expansion. major positioned to sales very XXXX expansion across accomplishment has channels, our with including has progress all filled that in months dramatic addition XXXX, account and with school well new national wins first in the The military a

in achieved a both reduction and fixed overhead We operating our our expenses. meaningful also

to forward for XXXX, continued to adjusted are management. we well and look positioned EBITDA very we cost growth, begin As

the confident we are We of a near to of QSR announce rollout be major future. in will the very timing the in a position

opportunities. are We and have built will revenue current a into test very strong QSRs foundation confident turn our with leading national major national with our channels current

for me let the that, with open call questions. some up Now Operator?

Operator

Thank you. question-and-answer a now We’ll session. you. be Thank [Operator conducting Instructions]

the question your question. Borus Our with Please Lazarus of proceed with Justin first Management. is from line

Eliot Penn

to time. bit on same way. to starting great first, growth of that X,XXX location. Hi at little some in it What the on that revenue looks And many question. if that rollout? what would seems then told can pace related, or conclusion be you're those guys. the Eliot decline mentioned Justin. dig First the what wanted of progress, This And being it would locations seeing to the and a like congrats penetrated? be is likely leads are unit rollout X,XXX with see expect the through is you to just inevitable? expenses how for you hearing the And a And rollouts about us, almost I or the reasonable you like, that a explain that so

Riccardo Delle Coste

Eliot. Hi, Yes.

to the obviously doing – national a years. for number quite lot the relates of of work look, accounts So it been as we've a

Some of are the you approved. referenced, that the the accounts, products already one specifically

marketing with been works have and their with the customer. about calendar. their actually really it's dialogue timing we what having So And

the So we out. customer. there on to are conversations having do expect level expectation we roll the to go is based that of a with That

is market. definitely As the soon that updating will timing we be finalized, as

is done. already that being all So work

other been out including the a I the that were that company we one mean, done it's believer coming mentioned, in ones national the work So originally, the close as the have just the regards position in to pipeline as well if already are, end to approved, when work best well. as are doing the ever Joe you as the been with that the that is with accounts, before, we've started

you think those as that look XXXX, to two of hopeful going So have rollout. we're we're one I least to going at into at

Eliot Penn

For that the been the completed? have test already further particular or upon is tests QSR, results contingent

Riccardo Delle Coste

completed. are market the that's The being testing testing, contingency There's no any evaluation, on product done. the all product all actually – No, products operations more approved. testing, testing, is

Eliot Penn

does then How flavors? mean And what – to stores, how many what quickly, many out? roll it should how

Riccardo Delle Coste

that actually Rollouts a of been that a have particular chains different all have expecting. basis, which number of for actually have expected on are we are at SKUs We be to that locations thousands group. national We of is approved a once. number

Eliot Penn

in the the that for make And QSR mentioned, or national test a the that on I Got where after results rollout? finish they release. other and do decision, you back? mentioned that press you. test to like And the QX are QX then is think go a that Would was in also no-go be expectation then

Riccardo Delle Coste

very that's It's interesting operations with ahead So also work one. this We've review. the decided a really the changed company an After evaluation, enormous done one. move actually profile that the is – product. slightly that the of really the amount an to has on We've of product.

of different and So of test. type final test again, type it's the a

So we end to have in the the confirmed would sometime – QX, by of expect QX. before that

Eliot Penn

Understood. then I line. in more get back in And just if get can question I one can

roll that QSR or terms out? of they are Any status press the The in that in their report third and on where release. is testing mentioned

Riccardo Delle Coste

some Joe, do to color? maybe give you want

Joe Cugine

Yes. talked and testing. Two find – and for about a are are has completed Well, their all they're QSRs, trying been mix, in three we've window chosen, one the they're to Riccardo us. the that been the

and XXXX launch. already actually non-QSR operations has be completed products, the product. that the early, mid-QX It's on customer in we back a response and time agreed do for for now The second on in recently purely national And for selling executing about, spring about conclude menu that's launch. products the shakedown then operation, will a one, we'll a the the test multiple in get and decision to talked just a has comfortable And getting days a final test large XX test. their right states customer the

hoped get feel So but a a right multiple is great now a very good. we believe to with Eliot, very, national kind we have lot This XXXX. taking thought, of would position are I maybe roll in longer, I or outs chain than in

Eliot Penn

getting are great. are have sounds large-account the like It really lot that earlier That that other you stage the a looks are in things pipeline there And close. in category? of any QSR

Joe Cugine

a stages business preliminary could in We've have XX with because thousands We customers talked customer XX, we've locations. larger about of got mentioned rolling customers. some out in Puerto XX, with that they locations. expand that with some We're Rico

So to that's for fill we're XXXX, to up. the imminent nothing but talk certainly, pipeline yet really about trying

XXXX, we'll end. out other similar type for coming So the of customers have

Eliot Penn

We some my come great. fruition. lot That's questions. of look again congrats seeing Thanks And forward the things progress. a these for to to on taking

Operator

Reyes[ph] Ray of with your question. line Instructions] MB with Please [Operator Ventures[ph]. proceed

Unidentified Analyst

Hi, approval, of and it little you get the guys. what it on And accelerates a how really I growth mean how accelerates it wanted it. been color in working USDA and penetration it? the of more does to have system and long terms into how this your systems school like – on

Riccardo Delle Coste

Sure.

for which for some – our it, I reimbursed the – nondairy the for ended we've product has there product the fully products some channel, on of some the of product fully reimbursable. guess, one core up we product, fine. out was and interpretation the pillars products there look, the been some been the What around dairy education that, it we nondairy dairy met been from product viewed our of reimbursement. to standards finding was the So schools. the that our was those different by some USDA for regulations, hampered types a with be of opportunity guidelines had relates adopting But has got created that fully states working the three to product We've clarification to as as we

and working standards. those fully and just So ago, product about the directly approved seven, USDA eight we they clarified months recently with started only

– that reimbursable – was meal clear, all So fully would states, it across all be across across funded all our very meal all XX segments products federally segments.

value, a or not administrators, bit an offer any the reimbursed. incredibly is what to it face our able because it's the ability to kids at from us to for us, with without opportunity concerned and risk enormous now, represents about also confidence not it's complete So important to to products concern but be an and being

was three. to addition now that accounts for as idea give only to, with got of line select year. spoken that, we've we've an only we've with on few number already just a handful approximately of units approved In like got that of next the since you to And impact, X ago, that's sight to a weeks a – literally million customers,

very to is scale impact, but just significant give about to only something that. time, other you completely surface. you're short the and really is an the of period that there's idea So scratched attached to the we've talking very no I of for capital That's important that of understand in a factors incremental think one cost

doesn't attaches product. to having to single-serve the us locations. It fund include equipment a that So itself into

and going us So to powerful it excited it. we're is about very, for be very incredibly

Unidentified Analyst

you, Thank very helpful. that’s

Operator

Mr. turn will remarks. I floor Delle time, back this closing Costa to At the for

Riccardo Delle Coste

it. some much Thanks, come day. appreciate updates everybody. and a forward We look sharing great to as out, Have they

Operator

This concludes today's conference.

your time. your this for may Thank participation. disconnect lines you You at

Barfresh Food (BRFH) 14 Nov 192019 Q3 Earnings call transcript