Branchout Food (NASDAQ:BOF) held its first-quarter earnings conference call on Thursday. Below is the complete transcript from the call.

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Summary

Branchout Food is focusing on increasing factory utilization and has installed a fourth production line for new Rev products, including dried dairy products.

The company is expanding its customer base with notable partnerships, including Costco, Sam's Club, Walmart, and Target, with new product placements and potential large-scale orders.

Branchout Food reported a Q1 drawdown of cash for production and inventory buildup, expecting a record Q2 driven by upcoming deliveries and strong sales momentum.

The company is exploring a tolling opportunity to provide drying services, which could significantly impact margins and cash flow.

Financial guidance indicates a strong second half of the year, with expected revenue growth and improved liquidity supported by recent financing activities.

Full Transcript

OPERATOR

Greetings everyone. Welcome to the Branchout Food 2026 Q1 earnings and shareholder Update conference call. At this time all participants are in a listen only mode. Question and answer session will follow the formal presentation. If you require operator assistance during the conference, please press star and zero on your telephone keypads. Please also note today's event is being recorded. At this time I'd like to turn the floor over to John DaFonte. CFO. Sir, you may begin.

John DaFonte (Chief Financial Officer)

Thank you all for joining our first quarter 2026 earnings call. Before we start, bear with me, I gotta read the forward looking statement. Disclaimer. During this call we may make forward looking statements with meaning of applicable securities laws. These statements include, but are not limited to comments regarding our future operating performance, financial outlook, business strategy, market opportunities, planned investments and other expectations regarding future events. Forward looking statements are based on current assumptions, expectations and information available to management and are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied in these statements. These risks and uncertainties include, among other, changes in market conditions, customer demand, competitive dynamics, regulatory developments, supply chain disruptions, economic conditions, other risks detailed in our filings with the securities Exchange Commission we undertake no obligation to update or revise any forward looking statements, whether as a result of new information, future events or otherwise accept as required by law. Lastly, additionally during this call we may discuss certain non GAAP financial measures. Reconciliations of these measures to the most direct comparable GAAP measures are available in our earnings are available in our filings. So with that out of the way, we're going to go through an outline today. Eric Healy is going to start going to talk about the following. He's going to talk about the strategy, then our customer progress, new product progress and capacity and then he'll hand it over to me in which I'll talk about, you know, the, you know, quarter and you know, guidance, etc. All the financial aspects. Lastly, we filed we put out a press release of a shareholder update today and then our 10Q was filed at 4pm Eastern. So with that I want to hand it over to Eric Healy.

Eric Healy

Yeah, thank you everyone for joining today. Excited to go through everything here. So I'm going to start with the overall sales strategy of the company. We're still following the same strategy that we talked about at the end of the year. Essentially we are trying to fill out our capacity, increase factory utilization as much as possible. To do that we're being very opportunistic and diverse with our reach and where we're going with our sales and marketing team and really exploring the bounds of what all this Rev technology can really do. And as we dive into it, you know, we're finding more and more opportunities. It's pretty exciting that, you know, and we'll get into that. So we have installed our fourth production line that is now coming online this month. And it was primarily intended to be able to focus on another subset of Rev products, including dried dairy products. Right. Cheeses and cheesecakes and things like that. So that's coming online and we'll talk about kind of the opportunities and early interest we have with that already. But we're still going down the path of club sector that we'll get into. So Costco and now Sam's Club is our newest customer there. So a lot of exciting updates there. The Industrial Ingredient Channel continues to grow, so very diverse channel there from kind of the retail side of the business. And it gives us a lot of synergies within the plants where we can utilize product that isn't high enough quality for retail. That's sort of a waste stream from that production line that we can go sell into that channel. So there's that. And then, of course, private label has always been a big strategy of ours. And so we have some updates there. We had some great meetings recently with Walmart, among others. And then there's kind of a new sales channel that we'll get into as well, the tolling opportunity that we're working on. So the strategy, you know, last year we were pretty concentrated in mainly Costco and Club and some private label. I think this year, what, you know, hopefully the takeaway will be is diversification and just adding new customers. So, you know, we're really excited about how the year is shaping up so far. As we outlined in our press release this morning, you know, we ended the year very strong. We, you know, Q1 was really about a buildup. We had a lot of orders that are hitting now that are being delivered in Q2. So the timing of such kind of just aligned itself to where Q1 was really a big, you know, drawdown of cash production and increase in inventory, as you will probably see in our filing. But all that inventory has a home and we'll get into where it's going. So we're very excited about Q2 and kind of what's coming. So with that, I can get into more specific customer updates. We continue to have success in Costco. We'll start with that one. So this coming June here, we're delivering our first mango chip product into the Bay Area region. So that's a brand new product that we're very excited about. We think it could be number one. It could knock Pineapple out of our number one spot and take that spot. So that product we just scaled up in March and April, so it's a new one for us at scale, but it went really well and we're hopeful that that'll do well. So we have, that we have. The Pineapple continues to be repurchased in Costco. It's going into the southeast region in June as well. So that's, you know, I don't know, four or five or six reoccurring orders there the last couple years. And that buyer, that region actually just placed another even larger order for the pineapple for Q4. So that continues to do well. And you know, as I spoke before, our strategy in Costco is to diversify into other departments. So we have these multi pack products that we've developed. We have those in front of about four or five different regions for the back to school timeframe right now. And we're waiting for, you know, waiting for commitments. They're, they're scheduling and kind of working on that timeframe right now. So, you know, we have probably 3 to 4 million dollars in Costco opportunities that we're just waiting, you know, waiting to come in. Can't guarantee we'll get all of them, but you know, it's still progressing very nicely there. So with that, the other sort of club opportunity or big club update is of course, Sam's Club. We just delivered the crunchy fruit chips. It's a mix of our four different fruits into one bag. It's nationwide in Sam's Club right now. So if you have a membership, go in and buy it. And we would appreciate that. But what's very exciting about that is we've been on the floor there for two weeks. We're going on our third week right now, and the product is selling out. We have achieved, I think, the first two weeks. We've been over the kind of the high end of what their threshold is for considering an everyday successful item. So they like to see between four to $600 per club per week in revenue and we're consistently hitting about 600 now for first two weeks. So. But we're actually seeing the inventory draw down pretty quick and it's actually selling through quicker than we thought. So we're very hopeful that that'll turn into something much Larger, an everyday placement. We think kind of the worst case downside is they do just, you know, it's successful and they repeat order it rotationally and test other items as well. So you know, we have that new customer and they're, you know, it's going very well. We've been a good supplier to them so far and we expect that to continue in some capacity. But the upside is very, you know, very big there with a potential $15 million business with that one SKU every day. So excited about that. We just got back a few weeks ago from a meeting with Walmart and this is where we, you know, we are proud of ourselves for kind of punching above our weight. I mean we're a young small company still and we, you know, we had a meeting with kind of the top, you know, four to six different category managers, the snack category, the dried fruit category, a number of others. And we did a tasting with kind of a whole spread of all of the rev possibilities that we can do with this technology. So we had 35 plus products. We had our whole dried fruit line, our whole dried veggie line, our new dried cheeses, crunchy cheeses, our cheesecake line, chocolate covered fruit. And everyone kind of came in and tasted and asked questions and we got FaceTime with all of these key decision makers. So they were very impressed. We were originally hoping this was going to be launching some products at the end of this year, but I think we're probably looking at beginning of 27. But there's a lot of interest there now and we're just going back and forth with their different requests and interests. So very, very big potential there with Walmart with all of these different product concepts. You know I mentioned industrial, so I think we did about 2 million last year with the, in the industrial side of the business. We had the head of MicroDried, our strategic partner in that channel, come down to our factory a month or two ago and he was very impressed with the progress and, and kind of the commitment we made and the job we've done delivering to them last year or so and committed to more orders for the rest of the year. And you know, with that we've also diversified that a bit and we have some other customers in that kind of category as well. One of them is a big company that is looking to supply some products into Trader Joe's. So long story short there on that channel, you know, we think will be probably 6 to 7 million with that channel this year. And that's, it's growing nicely. So it's you know, it's compelling and helps us kind of diversify further. The new channel that we mentioned in the press release as well is this tolling arrangement. So we have a large scale brand that has come to us with. They have a rev based product that they kind of market tested at a little bit smaller scale and it's, it turned out to, you know, it's doing very, very well. So they're scaling up and want us to potentially toll dry for them which means they deliver the raw material and we just provide the drying service. So for us, you know, and it's pretty large volume would be probably 6, 6 or 7 million as well. For us it's great because it'll really help the margins and the cash flow. It's, you know, for us it's basically just the service. So there's no real new overhead. It's you know, no raw materials that we're purchasing. So we're really just providing a service and collecting revenue for that. So we are hopeful that that will land by Q3 and really ramp up in Q4. So yeah, you know, that one's exciting. Haven't announced this yet but we do expect some placements with our branded SKUs in Target. They have verbally told us that they love the products. They're looking at probably 4 to 6 SKUs for second half of the year and they're making their final decisions this month. So very prominent obviously retailer that we haven't been in yet. I don't expect they're not a huge revenue gain but it's a great sales story and you know, a foot in the door there that could really turn into something big. So that's, that's really exciting and that will sort of lead into a great branded sales story for our new efforts that we've talked about before. But we're kicking off, we just kicked off recently actually a new sales broker with 200 sales reps plus that will be getting our branded multi pack items in front of the general grocery channel. So that's a, you know, that's really where we try to build everyday reoccurring business. It'll be, you know, a bit of a slower build, it'll take a few years. But we believe, you know, it's probably a 20, 20 to $30 million opportunity there that we, we can disrupt with a better product and better price point that we bring. So excited about that as well. We're the first to find globally as well. We have a new partner in Europe that has a private label manufacturing facility in Europe and they bring in product and sell into all the big European grocery stores. So they, they've been sampling our dried fruits, they've been getting it in front of Aldi and Lidl and all the kind of big chains in Europe and the feedback has been fantastic. And in fact we heard earlier this week that we're expecting our first order and it should grow from there. So pretty substantial orders. They in Europe, they're primarily more aimed at private label and they with that they can scale up pretty quick. So we're expecting, you know, our European side of our new European side of the business to grow. Well, we have a couple other kind of brands that want some products. We have a chocolate company that is likely going to order in July and that's probably about a million dollar order that, you know, we've been working with them for a while and they're enrobing our fruit with chocolate and have some different opportunities for that and then just kind of further down the road. But as I said, we have this new line that we'll be doing our dairy products. So we started showing samples to various large scale cheese companies and other opportunities and we're getting a lot of great feedback and opportunities there as well. And I didn't mention. So one of the strategic ideas we've had is mixing this dried cheese with our dried fruit. And actually it came out of a Walmart request because they are looking for GLP1 focused products. So with our dried fruit you get the fiber call out, with the dried cheese you get the protein call out. And it's really well positioned for that trend that we're really seeing just starting. So a lot of opportunities with the new dried cheese platform that we have there, I think that's kind of everything. On the sales updates side, I would say the plant is continually doing better. I think, March, April and now into May, we're starting to hit that 45 ton a month production level that we believe should get us into the profitability standpoint. And you know, with a new line coming on, we should be able to get well above that. We, you know, with the Sam's Club order there were some new products in there. So there was a little bit of development effort in February that we, you know, that we had to, we had to do. But we have all that, you know, most of that behind us now and yeah, very excited about what we have coming. So with that I think John, you can take it from here and talk about finances. Right,

John DaFonte (Chief Financial Officer)

Thanks. Yeah. I want to go over the topics on the finance that I want to go over. The rest could be asked in Q and a is, you know, want to talk about our 10Q. I always like to point out the things that I feel are important to review. You know, having done this, you know, been an investment banker for 25 years, what I feel the key parts of the 10Q are. And then talk about, you know, the revenue for the first quarter, the record we're expecting the second quarter. You know, talk a little about the balance sheet and then, you know, give some guidance and then, you know, talk about, you know, liquidity in terms of, you know, we've took some money in this first, you know, between the beginning of the year and now and credit facility. So if you look at our balance sheet, you know, kind of the things that should stand out is, you know, we had 2.385 million in inventory in December and we're at 4 at the end of, at the end of March and it's higher now. And you got to remember our inventory turns within the quarter. I think our inventory turn is, you know, 50, 56 days. You know, we're still making things as fast as we can. So if you think about the money we've raised, we did an ATM and we sold 500,000 shares on average of $3 in January. And then we've had about a million in warrant exercises. And then we took as 2.25 million from Kauffman Capital and we announced we'll take 750 more. That's all gone into inventory and you know, some money to finish the build out of our, of our factory in the machine. So if you think about where's this money gone, it's outside of what we've used for the machine. It really goes into recyclable capital. And when you have, you know, our first quarter of, you know, 2.6 and a second quarter that's going to be record, you know, we're making a lot of product that's being delivered as we speak. And then if you think of the last part of that, the cash collection cycle. So we're going to collect about 5 million in cash, you know, come June, July. So we're going to have plenty of money till the end of the year unless something transformational happens. And when I say something transformational, it's a, you know, 15 plus million dollar order or, you know, or such. If you look at the balance sheet on the liability side, you see a current liability of 8.84 million. But if you look at 2.874 of that, that's the Kauffman convertible note. That's been extended to the end of 27. So that's going to come off. So that drops the current liability to you know, about 6 million. And then the AP went up from 1.2 to 2.4. But that's all in inventory. AP is 95% inventory, you know, high percentage inventory. And then lastly the note payable related party, that's once again that's coffee capital. He'll extend the note as long as we need. So if you look at our current liabilities, it's in my opinion about four and a half million on the high, you know, that are truly our current liabilities. So with 7.7 in current assets and the, what I say 4.5 incurred liabilities, you know, you know we have a pretty good, pretty good balance sheet. So the next thing I wanted to talk about is guidance. You know, like we said in the last call, we expect something with a two in front of it. 40% in kind of the first half, 60% in the last half. It may be 35% in the first half, 65 in the second half because second half could be strong, you know, looks to be stronger than we expect. So we kind of hold at that number. And lastly, you know, talk about, you know, got questions about the credit facility we're using, Kauffman Capital. The reason we're using him, he's given us 8% money. It's very flexible. He's been a great shareholder. You know, if you look in the future, you know our expectations to work with a major commercial bank on a revolving credit facility where we can get a LIBOR based rate and have a single digit capital. But we're not there yet, you know they want to see a little more performance, understandably. Secondly, they want to see, know, we only need maybe a 4 or 5 million dollar revolver at this point. So anyway that's, that's the financial part of this. So now we want to turn to Q and A.

OPERATOR

Thank you. We'll now be conducting a question and answer session. If you would like to ask a question, please press star and then 1. On your telephone keypads, a confirmation tone will indicate that your line is in the question queue. You may press star and two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again in order to ask a question, please press star. And then one. And again, if you would like to ask a question, please press star. And one. And at this time in showing no questions, I would like to turn the floor back over to management for any closing comments.

John DaFonte (Chief Financial Officer)

Thank you for joining our call. We feel it's going to be an exciting rest of the year and look forward to talking to you in the second quarter. Take care.

OPERATOR

And ladies and gentlemen, that does conclude today's conference call. We thank you for your participation. You may disconnect your lines at this time. Have a wonderful day.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.