BranchOut Food Inc. Common Stock 2026 Q2 Earnings Call

Thank you. I am going to start with a forward-looking statement, and then talk about the agenda. Before we begin, I would like to remind everyone that today's call contains forward-looking statements, including statements regarding outlook, guidance, and expectations for future performance. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those we discuss today. For discussing these risks, please refer to our most recent 10-Q and subsequent 10-K and other 10-Q filings with the SEC. Forward-looking statements speak only to today's date, and we undertake no obligation to update them except as required by law. We will also reference certain non-GAAP financial measures. Reconciliations to the most direct comparable GAAP measures are available in today's press release and any appendix in any presentation.

With that, I am going to jump into the earnings call and we are going to go over, just like consistent with our other earnings call, we have an agenda we always like to go over, a summary and kind of recap of our strategy. That remains the same. Erick will go through a customer summary. Erick will go through plant operations and continual efficiency and margin improvement in the plant, and then sales prospects. Then I will finalize it with financial review of the quarter that was just released at market close. To go into our summary, just highlight we had our highest quarterly revenue of $4.45 million net. Obviously, the gross revenue was higher. Strong customer execution across all channels.

Key takeaway is we continue to execute our strategy of creating innovative products for customers to secure long-term business that is reoccurring, and to create full utilization of our plant with a 40% margin target. That has always been our plan, and we feel we are making good progress towards that. One change is that you saw that you are seeing a big step function up in our revenue guidance for the fourth quarter, and I will go over full-year guidance when we get to the financial part. But we are going to need to produce 70,000 kilograms up from what we were averaging 45,000 to meet the demands that are coming in terms of sales. So Erick will talk a little more about that. So Erick, I am going to hand it over to Erick, who is going to go over the customer summary, plant operations and continued efficiency, plus margin improvement and sales prospects.

Perfect. Thank you, John. This is Erick Healy, CEO of BranchOut Food. Good afternoon, everyone. Excited to go through the last quarter and what we have coming up here. Q3 was a fundamental improvement in the company in terms of the high level revenue, as John mentioned. The breakdown of what we accomplished in that quarter is strategic to what we will talk about here for Q4 and beyond. The big one was, of course, our Sam's Club product that we had the one-time rotation. The product went in and it sold extremely well. We met and succeeded their threshold, so we were successful in turning that over to an everyday reoccurring order. We are currently building that order right now, and it will be continuous moving forward. That is going to be back in the stores come September timeframe and in continuously.

The quarter itself, Q3, there was still some of that production was first time. Some of the products in that production were kind of the first time we had really scaled them up and dialed in the product quality and the efficiency and the attributes we wanted. We also invested heavily in marketing that product in order to secure this follow-on business. There was some rapid shipping, a lot of those things that we associate with customer acquisition in the beginning to secure that long-term business. While we were happy with our record revenue, all these things are reflected in the margins for the quarter. In addition to that, the other big piece in that quarter that was again, good on the revenue side, not so great on the margin side, was our industrial ingredient business.

We had a very large opportunity with some strawberries, specifically organic and conventional strawberry for our ingredient partner. Unfortunately, they needed it during the off-season of when strawberries are available. We ended up paying about 2X for the raw material, and that, of course, impacted our margins. The good news is that has turned into a much bigger piece of business now going in, again, to Q4 and beyond. We have orders from them for the strawberry that we can now produce during the season and with more foresight and getting these orders ahead of time during the season, we can contract the raw material and do it during the optimum time. With that, we essentially spent some margin upfront to secure the business, and we now have this reoccurring bigger piece of business.

There is a lot of that kind of baked into Q3 that we want to explain, and we believe we were strategic in the way we went to bat there, and it is setting us up for a very big Q4 and beyond. Beyond that, we had some Costco business that was first time. We had the Crunchy Mango Chips in Costco Bay Area that did very well, among other things. Q3 was a successful quarter. We see it, again, setting us up for a very successful Q4 and beyond. That is kind of the background of what we accomplished that quarter, and what we believe this is going to do for us going into Q4, and really right now as our factory is ramping up for these new orders. As John mentioned, we have always sort of averaged around 35 to 45 metric tons per month.

And we have talked about utilization quite a bit here and how important that is for our business. Historically, that has only been about maybe 40%, 45% utilization in our plant. With all these new orders that we have booked now, we are starting to ramp up our production capacity to, or, sorry, our production output to 70. We have some 80,000 kilogram months coming up here before the end of the year. This is all for booked business. Again, it is this reoccurring Sam's Club order. It is all this new industrial ingredient business. We have a lot of new Costco business as well. We are also launching into Target right now, as we have said recently in some press releases. We have five SKUs going in branded in Target.

There is just a lot of stuff coming online right now, a lot of new sales that are frankly very exciting and, more importantly, getting our factory to that utilization level that we have always said that we need to get to for profitability. At these levels, all of our models indicate that we should be break even, beyond break even, really. Yeah, we believe that a lot of this business is now, instead of being kind of one-time big orders that come on and off, some of this is more reoccurring. That should really help our bottom line as well. It sets us up for a very exciting step function in revenue as well. We believe that Q4 should be around $6 million-$7 million, depending on kind of when some of the orders ship at the end of the year.

But we think that we can sustain that level. The revenue moving forward shouldn't be as lumpy, and we should be able to sustain sort of that level going forward. It is a very exciting time. We are in an inflection point right now. This is really what we have been investing into the last two years since we opened our plant. We are very proud of our team, both on the sales and ops side, for getting us to where we are here. With that, John, I will turn it over to you if you have anything else, and then we will go into kind of future sales prospects beyond what we currently have.

Sure. What I want to do now is move to our actual 10-Q and how we did for the quarter. What I always like to start with, if you have listened to these calls before, the balance sheet. If you look at our balance sheet, we have $8.1 million in current liabilities and $7.7 million in assets, $8.1 million in current assets and $7.7 million in current liabilities. But you have to take a closer look at this. It shows we only had $200,000 in cash. But like I have said in other earnings calls, cash, accounts receivable, and inventory, you have got to look at them as one because every dollar we have, we are rolling into orders because we are trying to keep up. One thing that has happened from day one since we have opened the plant is that we are getting more orders than the orders are not a problem. We are getting a lot of orders.

Given that we are getting so many orders, it kind of turns into a just-in-time manufacturing. If you look at our inventory turn, it is $3.3 million. Even if you take $14 million, which are kind of trailing sales, we are more at a, you are looking at a $6 million to $7 million run rate right now. The inventory turns are even faster, but they are less than 90 days. Remember, the product is on the water for 60 days. So really, cash instantly gets turned into inventory, which gets turned into accounts receivable. For example, we have over $1 million cash on the balance sheet, but that is getting recycled into inventory. Really, our capital needs are all around working capital. If you look at the current liabilities, the $7.7 million really is $4.7 million. You got that $3 million note payable.

If you recall, that is Dan Kaufman at Kaufman Capital. It is 8% note. He is a friendly investor. He is largest shareholder. He will extend that loan as long as need be to our ultimate goal, which is a revolving credit facility from a commercial bank. That is kind of what we get. Our AR is as strong as it gets with Costco and Walmart and Sam's Club and MicroDried, their billion-dollar family, and inventory is all sold. It lasts. It has unlimited shelf, long shelf life. When I look at our balance sheet, I feel it is very healthy. I look at more of our current ratio of 2 to 1. Let us see. That convertible note is Kaufman Capital's convertible notes that will ultimately convert. He has converted some already. That is, in my opinion, the pertinent things to look at on our balance sheet.