Barfresh Provides Fourth Quarter and Full Year 2023 Results and Business Update
- None.
- Revenue for the full year 2023 decreased to $8.1 million from $9.2 million in 2022 due to supply limitations and lost customers.
- Net loss for 2023 was $2.8 million, an improvement from $6.1 million in 2022, but still a significant loss.
- Gross margins for 2023 were 36%, up from 16% in 2022, but the decline in revenue affected overall financial performance.
- Adjusted EBITDA for 2023 was a loss of $1.7 million, compared to a loss of $2.4 million in 2022, indicating ongoing financial challenges.
- The company faced a supplier dispute in 2022, leading to product withdrawal and legal actions, impacting financial stability.
Insights
The recent financial results released by Barfresh Food Group Inc. indicate a significant resilience in the face of supply chain disruptions, specifically the restricted supply of their smoothie bottle product and a national carton supply shortage. The reported revenue of $8.1 million and gross margins of 36% for Fiscal Year 2023, despite these challenges, showcase the company's ability to adapt and maintain a profitable product mix. The anticipated record revenue for the first quarter of 2024 and the sequential adjusted EBITDA improvement suggest a positive outlook, which may interest investors who are gauging the company's recovery and growth trajectory.
From a market perspective, the issues faced by Barfresh are not unique, as many companies have grappled with supply chain constraints in recent years. However, the company's proactive measures to secure additional smoothie bottle capacity and their plans to onboard a new bottle manufacturer by the beginning of the new school year in August 2024 demonstrate strategic planning to mitigate future risks and support long-term growth. This may reassure stakeholders about the company's operational agility and commitment to overcoming supply bottlenecks. The improvements in gross margins, despite the loss of their largest bottle manufacturer, indicate effective cost management and an optimized product portfolio.
Analyzing Barfresh's financial performance reveals a significant reduction in net loss from $6.1 million in the previous year to $2.8 million in 2023, which is a positive signal for investors. The substantial decrease in general and administrative expenses by approximately 24%, driven by a reduction in headcount and lower legal, professional and consulting fees, reflects the company's efforts to streamline operations and enhance financial efficiency. The confirmation and recognition of the company's 2021 COVID-related tax credit also contributed to this reduction, improving the company's bottom line.
Investors should note the company's ability to maintain a steady selling, marketing and distribution expense year-over-year, which suggests a stable investment in these areas despite decreased shipments. The decrease in net loss and improved adjusted EBITDA, which is a loss of $1.7 million for the full year of 2023 compared to a loss of $2.4 million for the same period of 2022, may indicate a stronger operational performance and could be a harbinger of future profitability.
Barfresh's situation highlights the critical nature of supply chain management in today's business environment. The company's experience with a national carton supply shortage and the loss of a significant bottle manufacturer underscores the need for robust supply chain risk management strategies. The company's decision to increase capacity with their existing bottle manufacturer and to secure a new bottle manufacturing partner before the beginning of the new school year is a strategic move that addresses both immediate and future supply chain vulnerabilities.
The supply chain disruptions experienced by Barfresh also emphasize the importance of diversification in supplier relationships. By expanding their supplier base, companies like Barfresh can better manage risks associated with single-source dependencies. Additionally, the engineering changes made by their carton manufacturer to increase capacity to approximately 25 million to 30 million units annually demonstrate a forward-thinking approach to scaling operations in anticipation of demand growth, which is essential for sustaining long-term business expansion.
Company Achieves Second Highest Fiscal Year Revenue in Company History Despite Restricted Supply of Smoothie Bottle Product Throughout Fiscal Year 2023 and National Carton Supply Shortage in Fourth Quarter 2023
Revenue of
On Track to Generate Record Revenue Compared to Any Other First Quarter in Company History and Sequential Adjusted EBITDA Improvement for First Quarter 2024
Company Secured Additional Smoothie Bottle Capacity with Existing Bottle Manufacturer at End of Fiscal Year 2023 and is Focused on Replacing Lost Bottle Manufacturer in Fiscal Year 2024
LOS ANGELES, Feb. 29, 2024 (GLOBE NEWSWIRE) -- Barfresh Food Group Inc. (the “Company” or “Barfresh”) (Nasdaq: BRFH), a provider of frozen, ready-to-blend and ready-to-drink beverages, is providing a business update for the full year ended December 31, 2023.
Management Comments
Riccardo Delle Coste, the Company’s Chief Executive Officer, stated, “We delivered our Company’s second highest fiscal year revenue and year-over-year margin improvement for 2023, despite being without our largest bottle manufacturer, as we benefitted from a full year of sales of our higher margin smoothie carton product. Fourth quarter revenue and Adjusted EBITDA results did however fall short of our expectations due to an industry-wide carton shortage that resulted in lost sales of our smoothie carton product beginning in early December. While the issue has since resolved itself and we are back to full carton production, it did impact the first six weeks of sales in fiscal year 2024.”
Mr. Delle Coste continued, “Heading into fiscal year 2024, we have increased capacity with our existing bottle manufacturer and our carton manufacturer has completed all the engineering changes needed to provide them the ability to increase capacity to approximately 25 million to 30 million units annually. Additionally, we were very close to signing on a new bottle manufacturer for fiscal year 2024; however, due to internal issues on their side they were unable to execute the contract. We are currently exploring other opportunities while we wait to see if they can resolve the issues on their end and expect to have a new bottle manufacturing partner before the beginning of the new school year in August 2024, which will provide us the needed capacity to support our long-term growth plans.”
Fourth Quarter of 2023 Financial Results
Revenue for the fourth quarter of 2023 was
Net loss for the fourth quarter of 2023 was
Fiscal Year 2023 Financial Results
Revenue for the full year of 2023 was
Net loss for the full year of 2023 was
Non-GAAP Financial Measures
The above information is presented in conformity with accounting principles generally accepted in the United States. In order to aid in the understanding of the Company’s business performance, the Company has also presented below certain non-GAAP measures, including EBITDA and Adjusted EBITDA, which are reconciled in the table below to comparable GAAP measures. Management believes that Adjusted EBITDA provides useful information to the investor because it is directly reflective of the performance of the Company. The exclusion of certain items including stock compensation, stock issued for services, and other non-recurring costs such as those associated with the product withdrawal, asset impairment and the Company’s NASDAQ uplift in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons of the Company’s core business performance. Adjusted EBITDA is not a recognized measurement under GAAP and should not be considered as an alternative to net income, income from operations or any other performance measure derived in accordance with GAAP.
Adjusted EBITDA was a loss of approximately
| For the three months ended December 31, | For the year ended December 31, | ||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Net loss | $ | (701,000 | ) | $ | (1,858,000 | ) | $ | (2,824,000 | ) | $ | (6,134,000 | ) | |||
| Depreciation and amortization | 94,000 | 98,000 | 419,000 | 446,000 | |||||||||||
| Interest expense | 3,000 | - | 6,000 | - | |||||||||||
| EBITDA | (604,000 | ) | (1,760,000 | ) | (2,399,000 | ) | (5,688,000 | ) | |||||||
| Stock based compensation, employees and board of directors | 113,000 | 212,000 | 539,000 | 536,000 | |||||||||||
| Stock issued for services | - | - | 4,000 | 32,000 | |||||||||||
| Sales claims resulting from product withdrawl (1) | - | (137,000 | ) | - | 493,000 | ||||||||||
| Inventory related costs due to product withdrawl (1) | - | - | - | 932,000 | |||||||||||
| Operating expense related to withdrawn product and related dispute (1) | 64,000 | 106,000 | 182,000 | 329,000 | |||||||||||
| Asset impairment (2) | - | 746,000 | - | 746,000 | |||||||||||
| NASDAQ uplist (3) | - | - | - | 175,000 | |||||||||||
| Adjusted EBITDA | $ | (427,000 | ) | $ | (833,000 | ) | $ | (1,674,000 | ) | $ | (2,445,000 | ) | |||
(1) Barfresh experienced a quality issue with product manufactured by one of its contract manufacturers, which is the subject of a legal dispute as to the source of complaints received. As a result, product was withdrawn from the market and inventory on hand was destroyed. The results reported in the third and fourth quarters of 2022 include the estimated impact of such actions, some of which were carried out in 2023. Operating expense in 2022 includes storage and freight associated with expected refunded product and legal expense incurred with respect to the dispute. Expenses incurred in the year ended December 31, 2023 include legal expense and inventory disposal costs in excess of original estimates.
(2) Barfresh impaired idle equipment resulting from overcapacity for single-serve products and equipment that is held by the contract manufacturer that is the subject of the dispute noted in (1).
(3) Represents various non-recurring costs associated with the January 2022 uplist of our common stock to the Nasdaq Capital Market exchange.
Balance Sheet
As of December 31, 2023, the Company had approximately
Commentary and Outlook for 2024
The Company expects to achieve record fiscal year revenue for fiscal year 2024.
The Company expects to achieve higher gross profit in 2024 compared to 2023 with gross profit margins for 2024 expected to be in the high 30’s.
Supplier Dispute
During the third quarter of 2022, Barfresh received customer complaints related to the textural consistency of some of the Company’s Twist & Go™ bottle product, which was isolated to one manufacturer. The product was found to be safe for consumption but did not meet the textural standards as outlined in the supply agreement with the manufacturer. In response, Barfresh withdrew product from the market and destroyed on-hand inventory. Barfresh attempted to resolve the issues by informal negotiation, as contractually required prior to filing suit; however, such negotiations were unsuccessful. Barfresh filed a complaint on November 10, 2022, in the Federal District Court in Los Angeles against the manufacturer. In response, the manufacturer terminated the supply agreement. On January 20, 2023, Barfresh filed a voluntary dismissal of the complaint which allows the parties to reach a potential resolution outside of the court system. However, as the parties were once again unable to come to an agreement, Barfresh re-filed the complaint in California State Court in August 2023 and the case continues to progress through the court system. Due to the uncertainties surrounding the claim, Barfresh is not able to predict either the outcome or a range of reasonably possible recoveries that could result from its actions against the manufacturer, and no gain contingencies have been recorded. The total impact of the product withdrawal and loss of a manufacturer of Twist & Go™ bottle product may be subject to change.
Conference Call
The conference call to discuss these results is scheduled for today, Thursday, February 29, 2024, at 1:30 pm Pacific Time (4:30 pm Eastern Time). Listeners can dial (877) 407-4018 in North America, and international listeners can dial (201) 689-8471. A telephonic playback will be available approximately two hours after the call concludes and will be available through Thursday, March 14, 2024. Listeners in North America can dial (844) 512-2921, and international listeners can dial (412) 317-6671. Passcode is 13744104. Interested parties may also listen to a simultaneous webcast of the conference call by logging onto the Company’s website at www.barfresh.com in the Investors-Presentations section.
About Barfresh Food Group
Barfresh Food Group Inc. (Nasdaq: BRFH) is a developer, manufacturer and distributor of ready-to-blend and ready-to-drink beverages, including smoothies, shakes and frappes, primarily for the education market, foodservice industry and restaurant chains, delivered as fully prepared individual portions or single serving and bulk formats for on-site preparation. The Company’s single serving, on-site prepared product utilizes a proprietary, patented system that uses portion-controlled pre-packaged beverage ingredients, delivering a freshly made frozen beverage that is quick, cost efficient, better for you and without waste. For more information, please visit www.barfresh.com.
Forward Looking Statements
Except for historical information herein, matters set forth in this press release are forward-looking, including statements about the Company’s commercial progress, success of its strategic relationship(s), and projections of 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”, “hypothetical”, “potential”, “forecast” and “project”, “continue,” “could,” “may,” “predict,” and “will” and variations of such words and similar expressions are intended to identify such forward-looking statements. All statements, other than statements of historical fact, included in the press release that address activities, events or developments that the Company believes or anticipates will or may occur in the future are forward-looking statements. These statements are based on certain assumptions made based on experience, expected future developments and other factors the Company believes are appropriate under the circumstances. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements. Accordingly, you are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they are made. The contents of this release should be considered in conjunction with the Company’s recent filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, including any warnings, risk factors and cautionary statements contained therein. Furthermore, the Company expressly disclaims any current intention to update publicly any forward-looking statements after the distribution of this release, whether as a result of new information, future events, changes in assumptions or otherwise.
Investor Relations
John Mills
ICR
646-277-1254
John.Mills@icrinc.com
Deirdre Thomson
ICR
646-277-1283
Deirdre.Thomson@icrinc.com
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