Earnings call transcript: Innovative Food Holdings sees Q2 2025 revenue surge 26.9%

Innovative Food Holdings (IVFH) reported a strong second quarter for 2025, with revenues climbing 26.9% year-over-year to $21.1 million, driven by strategic acquisitions. Despite this growth, the company’s gross margin decreased to 21%, down from the previous year. The stock price closed at $1.02, reflecting a 3.92% increase. According to InvestingPro analysis, IVFH is currently trading above its Fair Value, with a concerning 53% decline over the past six months. The company continues to focus on financial efficiency and operational improvements, maintaining a healthy current ratio of 2.8x.

Key Takeaways

• Revenue increased by 26.9% year-over-year, reaching $21.1 million.
• Gross margin fell by 294 basis points to 21%.
• Adjusted EBITDA decreased to $228,000 from $859,000 in the previous year.
• Positive operating cash flow of $575,000 was recorded.
• Stock price rose by 3.92% following the earnings report.

Company Performance

Innovative Food Holdings demonstrated significant revenue growth in Q2 2025, primarily due to recent acquisitions. The company is strategically exiting its cheese conversion business to streamline operations and improve margins. InvestingPro data shows the company operates with a moderate level of debt and maintains liquid assets exceeding short-term obligations. Despite the decline in gross margin, the company managed to generate positive operating cash flow, indicating a focus on financial stability. InvestingPro subscribers have access to 12 additional key insights about IVFH’s financial health.

Financial Highlights

• Revenue: $21.1 million, up 26.9% year-over-year.
• Gross margin: 21%, a decrease of 294 basis points from the previous year.
• Adjusted EBITDA: $228,000, down from $859,000 last year.
• Operating cash flow: $575,000, with cash and cash equivalents increasing by $448,000.

Outlook & Guidance

The company expects Q4 to better demonstrate its earning potential, focusing on optimizing digital channels and expanding its catalog. With an overall Financial Health score of "FAIR" from InvestingPro, and a P/E ratio of 85.2x, investors should carefully monitor the company’s execution. Future tuck-in acquisitions are anticipated, although plans for a name change and Nasdaq uplisting have been deferred. Discover comprehensive analysis and valuation metrics for IVFH and 1,400+ other stocks with InvestingPro’s detailed Research Reports.

Executive Commentary

"We’re very excited about this new direction for Innovative Food Holdings," said Bill Bennett, CEO, highlighting the strategic shifts the company is making. CFO Gary Shubert added, "We’ve implemented key changes to strengthen our financial footing and orient the business towards sustainable long-term performance."

Risks and Challenges

• The exit from the cheese conversion business could impact short-term revenue.
• Declining gross margins may affect profitability.
• Mixed performance in digital channels, particularly with US Foods marketplace.
• Potential operational challenges with the relocation of the airline catering business.
• Dependence on acquisitions for growth could pose integration risks.

By focusing on strategic acquisitions and operational efficiency, Innovative Food Holdings aims to bolster its market position and financial performance in the coming quarters.

Full transcript - Innovative Food Hldg (IVFH) Q2 2025:

Conference Moderator: Good afternoon, and welcome to the Innovative Food Holdings second quarter twenty twenty five earnings conference call. On today’s call for Innovative Food Holdings is Bill Bennett, our CEO Brady Smallwood, our COO and Gary Shubert, our CFO. Throughout the conference, we will be presenting both GAAP and non GAAP financial measures, including, among others, historical and estimated EPS, adjusted EBITDA, which is net income before costs associated with amortization, depreciation, interest, taxes, and excluding certain onetime expenses, and adjusted fully diluted earnings per share using the weighted average shares outstanding for the quarter ended 06/30/2025. These measures are not calculated in accordance with GAAP.

Quantitative reconciliation of certain of our non GAAP financial measures to their most directly comparable GAAP financial measures appear in today’s press release. I I would also like to remind everyone that today’s call will contain forward looking statements from our management made within the meaning of section 27 a of the Securities Act of 1933 as amended and section 21 e of the Securities and Exchange Act of 1934 as amended concerning future events. Words such as aim, may, could, should, projects, expects, intends, plans, believes, anticipates, hopes, estimates, goal, and variations of such words and similar expressions are intended to identify forward looking statements. These statements involve significant known and unknown risks and are based upon a number of assumptions and estimates, which are inherently subject to significant risks, uncertainties, and contingencies, and many of which are beyond the company’s control. Actual results, including without limitation, the results of our company’s growth strategies, operational plans, as well as future potential results of operations or operating metrics, and other matters to be addressed by our management in this conference call, may differ materially and adversely from those expressed or implied by such forward looking statements.

Factors that could cause actual results to differ materially include, but are not limited to, the risk factors described and other disclosures contained in our filings with the Securities and Exchange Commission, including the risk factors and other disclosures in our form 10 k and our other filings with the SEC, all of which are accessible on www.sec.g0v. Except to the extent required by law, we assume no obligation to update statements as circumstances change. With that, I would like to turn the call over to mister Bill Bennett. Please go ahead.

Bill Bennett, CEO, Innovative Food Holdings: Hello, everyone, and good afternoon. I’m happy to welcome you to our q two twenty twenty five earnings call. You can read more detail about our results when we file our 10 q with the SEC later today. I wanna start by reminding everyone about the announcement we made a week and a half ago regarding the sale of our Mountaintop, Pennsylvania warehouse. In tandem with this transaction, we are sunsetting our cheese conversion business and relocating our remaining profitable airline business to Chicago and integrating it into our artisan specialty foods business.

This strategic shift necessitates several different views of our q two financials to help you see the differences between our GAAP reporting and the adjusted results based on our go forward businesses. We’re very excited about this new direction for Innovative Food Holdings. While we had aspirations for the cheese conversion business, as we looked at our pipeline of additional opportunities, we decided that we couldn’t quickly enough get the business to the scale necessary to justify the size and expense of the Pennsylvania warehouse and therefore make the business model work. This strategic shift will allow us to return to our originally stated strategy to sell the warehouse and consolidate our operations to Chicago, saving significant cash flow and allowing us to focus more resources on growing our core asset light digital channels business. As a reminder, this business requires very little capital and expense to grow since we generally don’t own the inventory and can grow revenues by bringing more vendors into our catalog and listing their assortment with the largest broadline distributors in the country, namely Sysco, Performance Foodservice Group, and US Foods.

As we exit the cheese conversion business, sell the building, and relocate the airlines business to Chicago, we expect significant progress in margin growth, SG and A reduction, and cash flow growth. With a planned close date of September 30, our financial results in q two and q three won’t yet reflect these changes, but we expect q four to better demonstrate the earning potential of the company. Now let’s jump into our q two results. In q two twenty twenty five, revenue increased 26.9%. Excluding the cheese conversion business, q two revenue grew 13.5% with acquisitions driving the majority of the year over year growth since they did not contribute revenue in the prior comparable period.

After an initial period of declines in these acquisitions, as we’ve been working through the transition, our weekly revenues have stabilized throughout q two, and we continue to optimize the team and implement our operational playbook. The remaining core business revenue, excluding our acquisitions, was roughly flat year over year. Within that core business, our airline catering business grew 26.1%, which was offset by a 4.9% decline in digital channels, an improvement from the 6.8% decline in Q1. Within digital channels, we continue to see strong growth with our new national distributor partner announced last year and triple digit growth in our Amazon sales channel. These growth initiatives were offset by continued softness in our largest customer, US Foods, driven by continued increased competition within their marketplace.

Returning this business to growth through significant catalog expansion remains a key initiative for the entire management team. Now I’ll update on a few of our key strategic initiatives. Last quarter, I outlined our strategy to turn around our digital channels business by accelerating our catalog growth. Just last week, we completed the soft launch of our new AI driven catalog management platform and are now taking our first vendor through the process. The platform is smooth, fast, and accurate, so we will now begin to invite new vendors onto the platform.

We also added headcount to the largest bottleneck of our catalog setup process, which helped us to accelerate item setup. In the last four weeks, we set up over 400 items, more than we set up for the rest of the year to date. Beyond catalog growth, we also recently extended our business into five new regional markets with Performance Foodservice Group, and we’ll be exhibiting at US Foods’ first national food fanatics show in Las Vegas later this month. We also continue to work on the integration of our recently acquired businesses. We recently installed a new president of Golden Organics and Loco, a veteran of a much larger food distribution business in Denver.

We completed the integration of ERP systems, allowing us to now combine all data and reporting into our corporate platform. This is also enabling us to combine all logistics between the two acquisitions, driving efficiency and reducing headcount and distance driven by our trucks. Lastly, we’ve made progress in preparing the business to onboard to our digital channels by capturing images and dimensions of the entire catalog. We also continue to work on implementing standard operating procedures across all key functions and tracking daily progress. In summary, q two represented a large strategic shift for IVFH as we focus our resources onto the core profitable parts of our business.

We still have significant work to do to achieve the growing profitable business we’re targeting, but we’re seeing traction in key elements of the strategy, and we’re laying the foundation for long term value creation. I wanna thank our team for their focus and execution, and we look forward to updating you further in the quarters ahead. With that, I’ll turn it over to Brady to talk through some of the specific actions we’ve taken in the operation of our business this quarter. Brady?

Brady Smallwood, COO, Innovative Food Holdings: Thanks, Bill. Today, I wanna give more detail on the warehouse transition and our exit from cheese conversion. Since joining just over two years ago, we’ve tested a range of potential growth paths for the Pennsylvania facility. That operation was unprofitable for many years and presented significant headwinds. Over the first six month period, we ran targeted tests, but the results made clear that the scale, capital, and risk required to reach sustainable profitability were too high.

At that point, we began sales processes for the warehouse and the ecommerce business. The ecommerce business sold first about six months later in the 2024. As we retained the building, we continued running other positive contribution profit businesses and pursued new b two b opportunities, including the large retail program we launched late last year. Q one was our first full quarter of results for the revised businesses in Pennsylvania. Our review showed the cheese business would need to double its current run rate, a scale that we were targeting but was increasingly uncertain given tariff pressure on imported cheeses.

Compounding that challenge, our tenant in the other half of the building, a solar company, announced plans to vacate due to tariff impacts and changes in government incentives. With both halves of the building under pressure, the decision was clear. Wind down cheese conversion and move aggressively to sell the facility. Despite the property being on the market for eighteen months, redoubling our efforts quickly produced a viable buyer. We’ve now entered into a definitive agreement to sell the Pennsylvania facility and are well into the due diligence phase with closing targeted by the September.

The sale price reflects current market conditions for specialized cold storage assets in the region and aligns with independent broker valuations. Proceeds will eliminate roughly $9,000,000 in debt, strengthening our balance sheet and freeing capital for higher return investments. On the transition front, work is well underway. We’ve sequenced the migration of airline and broadline distribution into our Chicago hub to minimize customer disruption. We’ve also rationalized assortments to boost sales and margin while using less warehouse capacity, and we’ve identified meaningful overhead savings.

Supporting our airlines business is high priority. The year over year growth in our airline businesses accelerated from 2.2% in q one to twenty six point one percent in q two, led by faster expansion with newer customers, while our largest accounts remain stable. Execution here is critical. Airlines rely on us for a wide assortment and flexible service to meet unique purchasing cycles. We’re consistently presented with new product opportunities.

And by maintaining high service levels at competitive prices, we believe there’s a long runway for growth. Overall, the decisive actions this quarter both derisk our financial position and set us up for scalable margin accretive growth ahead. With that, I’ll hand the mic over to Gary. Gary?

Gary Shubert, CFO, Innovative Food Holdings: Thank you, Brady. Hello, everyone. As we reflect on the 2025, I’d like to walk you through the financial performance and provide some context around the numbers. As Bill mentioned, our GAAP revenue for q two was $21,100,000, a 26.9% increase compared to the same period last year. However, when adjusting for the impact of our cheese conversion business and recent acquisitions, our revenue growth from continuing operations was a modest point 4%.

Gross margin for the quarter was 21%, down 294 basis points year over year, primarily due to the expansion of the cheese conversion business, which accounted for 17.5% of q two revenue versus 0% in 2024. Excluding cheese, gross margins improved by 66 basis points, driven by lower shipping cost and our continued efforts to manage tariffs by passing price increases through to customers. Selling, general, and administrative expenses rose to $4,200,000 in 2025 from 3,800,000.0 in 2024, mainly due to a $658,000 increase in payroll and a 335,000 rise in office and vehicle expenses. The increase is linked to the additional operating structure to support new acquisitions and the cheese conversion business. These increases were partially offset by a $705,000 decrease in share based compensation.

Adjusted EBITDA for the quarter was $228,000, down from $859,000 last year, primarily due to the margin pressures from the cheese conversion business. GAAP net income from continuing operations was $59,000 compared to a loss of $60,000 in 2024. In the second quarter, we reported positive operating cash flow of approximately $575,000 compared to a use of $977,000 in the prior quarter. This improvement reflects more efficient working capital management and a reduction in cash tied up in receivables and inventory. While this is a step in the right direction, we remain focused on sustaining and building upon these gains in future periods.

Cash and cash equivalents increased 448,000 during the quarter. This net increase was achieved after a $127,000 in combined outflows from investing and financing activities, including modest capital expenditures and scheduled debt and lease repayments. Interest expense for the quarter was $205,000, which continues to be a meaningful component of our cost structure. Looking ahead, we expect the planned repayment of our Pennsylvania facility debt to significantly reduce future interest expense and improve our overall cash flow profile. The sale of our Pennsylvania facility expected to close by the September will eliminate approximately $9,000,000 in debt and free up capital for higher return investments.

We’re also continuing to optimize our logistics footprint and streamline operations across our distribution hubs. Given our strategic priorities, we’ve decided to defer the previously announced name change and uplisting initiatives to a later date. This approach allows us to concentrate our resources on operational execution and integration efforts at this time. In summary, q two and the developments that followed represented a meaningful evolution in our strategic approach. We’ve implemented key changes to strengthen our financial footing and orient the business towards sustainable long term performance.

I wanna express my appreciation to the team for their continued focus and execution. With that, I’ll hand it back to Bill to lead us into the q and a session.

Bill Bennett, CEO, Innovative Food Holdings: Thanks, Gary. Lots of good things happening across the business with several areas of intense focus as we continue on our strategic journey. With that said, we’re happy to take some q and a. If you’d like to ask a question, please use the Zoom function to raise your hand or dial 9 if you’re calling in from a phone. Please limit your comments to one question and one follow-up if needed, and keep your comments professional and respectful.

We’ve allocated approximately twenty minutes to this portion of the call. Alright. I see a raised hand from J. D. Abushar.

Can you, unmute yourself and ask your question?

J.D. Abushar, Analyst/Investor: Yeah. Hi, Bill. Hopefully, you can hear me.

Bill Bennett, CEO, Innovative Food Holdings: Yep. Sounds great.

J.D. Abushar, Analyst/Investor: Yeah. I guess, first, it was probably a difficult decision to pull the plug on the cheese business so soon after starting it. I know a lot of people would would have doubled down on on the business. So, you know, walk me through just a little bit of of what you were thinking there. I think, you know, sounds like tariffs had more than a nominal impact on it.

And two, with the closing of the Pennsylvania facility, does that affect the ability to execute on the core strategy in the Northeast Corridor?

Bill Bennett, CEO, Innovative Food Holdings: Great. Yeah. So on on your first question on the hard decision on the cheese business, yeah, definitely hard. I mean, I think, you know, if you’ve been a lesson listening along to our press releases and earnings calls, you know that we were excited about it. The the reality is that the size of the business by the ’1, like Brady mentioned, was just not where we needed it to be to justify the expense of the entire facility.

Right? We even took a look at, like, should we try leasing out or buying another facility somewhere else that was smaller and more suited for the size of the business that we had that that we’d found. And the reality is just by by the time you think about moving all of the equipment, rehiring all the people, getting through training, all the expense and capital associated with all of those pieces, it just didn’t make sense. So, you know, we’ve even talked about the other cheese opportunities we had outside of the the large retailer and the one airline that we were doing business with. And we did a a really careful sizing and risk assessment across all of those different opportunities and came to the conclusion that the the likelihood of us hitting the size and scale we needed to on all of those different opportunities still couldn’t get us to, to to the scale we needed to justify Pennsylvania.

So, you know, we we continue to continue to like the cheese business, but at the end of the day, you know, we need to be clear eyed and, you know, not emotionally tied to something new that we built like that. And I hope that that you’ll appreciate the fact that we didn’t let it drag on for two or three years. Right? It was really important to us that we, viewed this as a a test of a new sales channel and that the moment we saw that it wasn’t working the way that we intended to, that we would make the hard decision to move on, and that’s what we’ve done.

J.D. Abushar, Analyst/Investor: Yeah. Yeah. Understood.

Bill Bennett, CEO, Innovative Food Holdings: Great. That’s some more thinking on on the exit of the cheese business. On as far as the core strategy, the only two main businesses that we’re operating out of that facility were the cheese conversion, which we’ve already addressed, and then the airlines catering distribution whose main customers are Gate Gourmet and LSG Sky Chefs. So the reality is that airlines business can really operate from anywhere because we’re shipping all across the country. You know, we have dozens of airports airport kitchens between those two main customers that we’re shipping to.

And funny enough, it’s actually cheaper to ship out of Chicago than it is out of rural Pennsylvania because of where the shipping lanes exist within kinda just the the broader transportation landscape of The United States. So it actually puts us in a very nice position to be able to reduce costs on that business, not to mention combining it with an already, you know, efficient operation with Artisan in Chicago will just drive further efficiency for us there. So the the actual geographic placement of that business in the Northeast didn’t have any strategic importance to us. And and in the future, we don’t expect any negative impact to the to the core, to the digital channels business, which as we talked about in the comments today, you know, it is the the primary driver of both growth and profitability in the future.

J.D. Abushar, Analyst/Investor: Terrific. Thank you. I’m sure others are gonna have lots of questions in the core business. I’ll let them focus on that.

Bill Bennett, CEO, Innovative Food Holdings: Sounds good. Thanks, JD. Thanks. Alright. Tom Kerr, I see that you have your hand up.

I just asked you to unmute. If you could unmute yourself, that’d be great.

Tom Kerr, Analyst/Investor: Hello. Can you hear me?

Bill Bennett, CEO, Innovative Food Holdings: Yep. Sounds good.

Tom Kerr, Analyst/Investor: Just a big picture growth question kinda going forward, you know, the portfolio of businesses you have now, you know, after the cheese divestiture, is that where you wanna be to grow this company, or is there always room for sort of tuck in acquisitions to meet your growth goals?

Bill Bennett, CEO, Innovative Food Holdings: Yeah. Great question. Thank you for that. You know, we’ve said all along that the two acquisitions we made back late last year out in Denver, so Golden Organics and Loco Food Distribution, that these were another part of our phase two where we’re trying out different sales channels and trying to nail down the long term strategy for the company. So, as I mentioned in the comments, those are those two acquisitions are still very much, in flight.

Right? We’re we’re in the process of integration. It’s a big, long, messy process, as you might imagine. And, and we are making progress, but certainly not at a point where we can, you know, get the insights out of it that we need to be able to make further decisions. So, you know, the the the jury is still out on whether if those acquisitions can meet the the synergies and the goals that we had when we went out to make the make them, then there may be opportunity to make further acquisitions.

If we don’t get to where we want to, as we said all along, we bought them for such a good price that, you know, that doesn’t create any financial headwinds for us going forward, but it’ll definitely shape how we think about m and a in the future beyond that. So a lot of questions, Mark, still on that business. But, you know, if you look at the investor presentation we we put out several months ago out on our website, we still think of the company as a drop ship company. Right? So any acquisitions we would make would want to be supportive of that broader strategy and mission because that’s where we make differential profits.

Right? That that really is different than any other food distributor can make in The United States. And so it we we really be remiss if we didn’t continue to lean into that business and and work to get to a a much more respectable growth number there. So, that does continue to be the focus, but the the learnings we get out of the m and a we made will be interesting and will definitely inform our future strategy.

Tom Kerr, Analyst/Investor: Got it. One very quick follow-up. Are you still contemplating a name change or corporate rebranding? I haven’t seen much on that lately.

Bill Bennett, CEO, Innovative Food Holdings: Yeah. Gary mentioned it just right at the end quickly so you can look back at the transcript. But the the overall is just we put it on pause, both the the Nasdaq uplisting and the name change, you know, those are just not the right focus for us right now when we’re in the midst of a huge business transformation. And so, you know, they they still remain, a goal that we will work towards, but, you know, we need to get through this sale of the building, the move to Chicago, and kind of stabilizing post move before we will jump back into that piece. Awesome.

Thanks, Tom, for your question. I appreciate it. Alright. Next on the list, I’ve got Brian Harper. If you could unmute yourself.

Go ahead.

Brian Harper, Analyst/Investor: Hey. Afternoon. Thanks for the all the updates. I wanted to to ask about, the kind of balance sheet effects of this of of, you know, getting out of Pennsylvania. And, you know, I’d I’d I’d look in a you you had inventory more than doubled in the last twelve months from, you know, the comparable quarter in the last year, and then and AR was up net of AP.

So I was wondering, you know, can we expect that to come down a lot? You know, you you guys, I think you capitalized some stuff too. Is there any potential impairment on on exiting Pennsylvania? And and then if there would you know, assuming it closes, will there be any tax impacts on on selling the building? Thanks.

Bill Bennett, CEO, Innovative Food Holdings: Sure. Yeah. Gary, do you wanna take that one for us?

Gary Shubert, CFO, Innovative Food Holdings: Yeah. The the quite frankly, they’re all of the above is true. So, yes, we’ll have some tax impacts associated with the sale of the building, but we do have some net operating losses on the books that will, take care of the bulk of those tax impacts as it relates to the sale of the building, from years past. So, you know, not real really a lot of cash outflow as it relates to that. The as it relates to, you know, kind of the balance sheet items, our AR has already come down since the beginning of the year, which is, you know, how we’ve actually improved, you know, our cash position a bit.

And we expect that to as we flush out of the cheese business, we still have AR that will keep on coming through as our inventory continues to actually decline as well you know, from from the cheese declining in in value. We we may have some some write offs as it relates to, you know, kinda dead inventory, but we’re working through that very diligently and trying to make sure that we have very little as little as possible from from a costing perspective. So we’re working through all of those pieces to ensure that we make the most out of the money that we’ve actually got invested in those positions at the current moment. I don’t think we have any risk on the AR, quite frankly, because the AR are with large customers that are very reputable, and they pay on time. So very, very good from that perspective.

And then the last thing, you know, we’re going to get rid of some property plant equipment that’ll actually reduce some fixed asset on the balance sheet, but that’ll also reduce a huge amount of debt on our balance sheet and pretty much be virtually debt free. I won’t say a 100% debt free, but it’ll reduce the debt by, you know, 98%. So, very much debt free at that point.

Bill Bennett, CEO, Innovative Food Holdings: Thanks, Gary. Thanks for your question, Brian. Appreciate it. Alright. Our next question is from Sebastian.

If you could go ahead and unmute yourself.

Sebastian, Analyst/Investor: Yep. I will. I have two questions. So the first question is regarding gross profit. So I remember correctly, historically, your foodservice business had gross profits of around or gross margin of around 30%, and I think you’re now sitting at 24%.

So is that just a reflection of a different product mix? I guess, historically, US Foods had a higher contribution to to net revenue on a percentage basis, or is that just not attainable anymore with the with the increasing competition on The US Foods marketplace?

Bill Bennett, CEO, Innovative Food Holdings: Yeah. Thanks for your question, Sebastian. The the business mix definitely looks different in q two this year than it would have several years ago, but I think that’s a that’s a big part of the exit of the cheese business. Right? That’s a drag for us right now on on margins that will we will be unburdened by as we as we get out of that business.

The you know, getting from the ’24 to the 30%, remember that we’ve also made these acquisitions of the the businesses out in Denver that would be more traditional food distribution gross margins. And the artisan business in Chicago makes up a much it’s a much larger business today than it was a decade ago when, you know, you might be the time period you might be referring back to. So I think 30% is probably a challenge to to get back to that level. But, definitely, as, you know, as we look to succeed in getting digital channels back to meaningful growth, then that should materially drive improvement in our gross margin structure.

Sebastian, Analyst/Investor: Okay. Thank you. And then the second question on the AI tool you just launched. Can you maybe get some or give us a bit more color on on that? I mean, you you referred to the soft launch.

Maybe where exactly obviously, it seems to to work right now. Maybe you can, yeah, give us some some additional information there, how, how far you’re already in the process of, launching it, not only a soft launch, but, like, really working with it.

Bill Bennett, CEO, Innovative Food Holdings: Sure. Yeah. If if you’ve ever if anybody on the call has ever been a part of software development, you try to be really careful to not draw a line in the sand and say that we’re launched and we’re done. Right? If you look at, like, you know, how Apple manages phones or Tesla manages cars, it’s a constant development process that never ends.

So I just I wanna be clear that it’s not like we’re done and we’re moving forward. It’s it’s our soft launch, which means it’s the first time that we’re actually getting, you know, real vendors into the portal to to interact with us in a much more streamlined way than we used to. But, I mean, we we’ve got a road map that will probably take us years to get through to actually, you know, get the process as fully automated as we would like to. But the the reason we picked this time to do a soft launch is we think we can get the majority of the benefits very quickly and early, in the process, and and those benefits all relate back to the speed of item setup. So that that’s kinda how that development process will work.

The the main thing that we’re focused on here, though, is the outcomes. Right? I mean, we’re we’re not we’re not gonna invent AI here at IVFH. The the main thing we wanna think about is how we’re driving towards the business outcomes that matter here. And that’s why I referenced that, you know, e even before this tool is launched at any scale with with a meaningful number of vendors, just the improvements we’ve made in the process through added headcount and streamlining our internal processes is resulting in an acceleration of item setup.

So that that’s the thing we’re looking for is how fast can we set up items, and then in turn, how fast do those items generate sales and ultimately profits for us. So, that’s how we’re thinking about AI, use cases in this situation. We’re we’re never gonna, you know, get married to the technology or or, so enthused with it that we kind of lose the perspective of the business outcomes that we’re pushing towards. Does that answer your question?

Sebastian, Analyst/Investor: Yeah. Thank you very much.

Bill Bennett, CEO, Innovative Food Holdings: Great. Thanks, Sebastian. Alright. Let’s next go to Michael Richardson. If you could unmute yourself.

Go ahead.

Michael Richardson, Analyst/Investor: Okay. Can you hear me, Bill? Yes. Okay. For all you do.

Really appreciate these meetings of yours.

Bill Bennett, CEO, Innovative Food Holdings: Thanks, Michael.

Michael Richardson, Analyst/Investor: And, yeah, Sebastian, much answered. I asked asked my question about AI. You you might have said it earlier, but I didn’t catch it. And correct me if I’m if I’m wrong, but it used to take about six months to onboard onboard people. And I was just wondering where it was how where is that now?

Like, at a week or days? Or

Bill Bennett, CEO, Innovative Food Holdings: Yeah. So I I wanna be a little bit careful just that that that’s not, a metric we wanna regularly report on, but, but it’s definitely speeding up significantly. We we used to say it was six to twelve months to to go from, you know, a new vendor agreeing that they want to be on our platform to actually having their items live on the platform. So you can imagine that makes it really difficult to go recruit new vendors. Right?

Like, hey. I need you to put in all this upfront work. I need you to set aside your day to day operations, fill out a bunch of spreadsheets and forms and everything, and then be patient. Because we’re gonna work through it on our side, it’s just not a good selling proposition to to grow your vendor base at any meaningful scale. So with this kind of first batch of of vendors that that we brought through with the latest acceleration that I’m mentioning, again, this is not even with the AI yet.

Right? Because we’re we’re it’s just through the added headcount that we put in place. But that probably took us about six or eight weeks to get them through the process, and that we expect that to just accelerate as we get the AI platform launched and rolled out, know, to to add as vendors as as we move forward. You know, I’ve kind of said this too before, but historically, because the vendor setup was so difficult, we just didn’t invest much in vendor sourcing. Right?

It didn’t make sense to push more vendors into a really slow cumbersome process where we didn’t even have the bandwidth to, to get them onto the platform. Actually, this is a very sad, anecdote, but I was looking at old press releases from, like, 2011, 2012, and the company had announced at one point that we’d hit 5,000 items in our catalog. I mean, that’s that’s only barely below where we are today. I mean, it’s it’s crazy that it’s, you know, more than a decade, and our catalog really hasn’t grown since those days. And so, you know, that just illustrates what a pinch point this has been for the entire company strategy where, you know, when you don’t own inventory, this should be your goal is to grow the catalog as fast as possible.

So, I think as we as we get really rocking and rolling with getting new vendors on, we’re gonna start to allocate more headcount, resources, and focus to vendor sourcing. We’re gonna mount marketing programs to find more vendors and get them onto the platform. And it just it’s gonna be able to change the entire way that we go to market because we’re we can now have confidence that we can go pitch this value proposition to vendors and help them understand that it’s gonna be a very low lift on their part to be able to get the orders and revenue flowing for them. Okay. Great.

Great. Thanks for the question, Michael. Appreciate it.

Michael Richardson, Analyst/Investor: Thanks.

Bill Bennett, CEO, Innovative Food Holdings: Alright. Doctor Brown, go ahead. You can unmute yourself.

Doctor Brown, Analyst/Investor: Hey, team. I just wanted to say thank you for all your hard work, and I really respect you, Bill, for what you’ve done and taking things over from Sam. So I wanted to start out with the appreciation there. Is something Bill Bill, you and I have spoken about in the past is I really see there being an an additional channel that you can add where you’re not only selling to the shareholders, you know, for us maybe to order, you know, 50 steaks or 50 tunas or something that’s special or maybe get rid of some of the cheese you got that’s left over, but to also open that up to your vendors and, like, US Food and some of these other entities. I just think it would be a worthwhile thing to look into.

Because if you had something in your website where where as a shareholder, we could log in to and get, you know, fresh seafood delivered overnight to our houses, I I think you’d be surprised at how much ordering you’d actually get from not only your shareholders at Food Innovations, but also maybe US Food shareholders and some of these other entities.

Bill Bennett, CEO, Innovative Food Holdings: Mhmm. I love it. Thank thank you for bringing that up. I think that’s an interesting opportunity where we could take what we’ve already built and offer it to, to others who might want, might want some of these similar offerings. Of course, they all come in food service size offerings.

Right? So fifty steaks is the right way to think about it, not two steaks. But definitely something we’ll take a look at. Thanks for that, doctor Brown.

Doctor Brown, Analyst/Investor: Thank you. Alright.

Bill Bennett, CEO, Innovative Food Holdings: I’m not sure if this is, the real name or not, but Josh Local, you can unmute yourself, and go ahead.

Bill Bennett, CEO, Innovative Food Holdings0: Bill, yeah. Josh Dannen. I have a question for you. On do you can you sort of speak to if there’s a backlog of vendors or SKUs to be loaded now that you’ve debottlenecked the process and sort of what the extent that is?

Bill Bennett, CEO, Innovative Food Holdings: Yeah. Sure. So, again, I’m not gonna perfectly quantify this because then you want me to update it on it every quarter. But we we have thousands of items in the backlog already before we even go find new vendors. So and that and that goes from, again, like, you know, years in this industry, lots of vendors we’ve talked to who have expressed interest in being on the platform, but, either we didn’t have the bandwidth or they didn’t have the patience to actually work through the entire process.

So, I think there’s lots of upside for us very quickly as we get things launched and, and get the wheels turning on this platform.

Bill Bennett, CEO, Innovative Food Holdings0: Okay. Great. And then could you sort of speak to why a vendor would wanna go through you guys versus direct to US Foods or through a competitor?

Tom Kerr, Analyst/Investor: Yeah.

Bill Bennett, CEO, Innovative Food Holdings: Sure. So first, we’ll talk about US Foods. Not every vendor wants to do business in the big leagues. You know, US Foods and and the others, Cisco and and, PFG, they all have big complex vendor agreements to sign, rebate structures to track. They’re very big and slow moving.

You have, you know, electronic data exchanges that need to be set up. You have, you know, complex food safety rules and certifications and inspections and, you know, a whole host of of red tape and administrative pieces that have to be worked with to where, you know, for a little mom and pop shop who might be raising cattle and spending an hour or two in the evening trying to build their business, they just don’t have the bandwidth to work with these big players. And so, you know, one way to think about us is that we’re sort of a digital broker. Right? We we help these small vendors get access to sales channels that they wouldn’t otherwise have access to, but we make it as easy as possible.

I mean, we we’ve integrated it with every single flavor of technology savviness that you can imagine. And at the very base level, we literally email a FedEx label and, and a packing slip to a vendor that they print off on a little HP printer and and tape it onto their box. Right? I mean, we’ve tried to think through how to make everything as easy as possible so that you really don’t need any level of sophistication to be able to get up for sale on these platforms. And and with all of that in place, it should make it very easy for anybody who wants to to to get there.

So that’s why, like, part of this whole AI platform is I’ve been trying to get the team to shift their mindset that we really need to be vendor centric in everything that we do. Right? We we try to make the vendor process as easy as simple as easy and simple as possible so that those vendors want to do business with us. Now who’s gonna go to US Foods or to the other broadliners? Probably the ones that are bigger and more sophisticated.

I’ve talked before on the earnings calls that that we see that sometimes in the vendor journey with us. Right? They they come onto our platform. They build their business. US Foods sees the level of sales that they’re doing on their platform, and they then in turn, go to the vendors, invite them to to list directly with them.

We do have in our vendor agreements that that, sort of cutting us out of the loop requires an additional fee to us, a finder’s fee essentially since we’ve made that introduction. But at the end of the day, that’s a natural part of the evolution of this industry, and that makes it our job to to make sure we’re always looking for the next best thing or the next best vendor and finding that before it becomes mainstream or somebody that US Foods would wanna do business with directly. Now as far as competitors, there are definitely competitors out there that are, you know, playing a brokerage role like this. I still, to date, haven’t seen anybody that has the reach that we have with access to all three of the big broadline distributors and, and additional sales channels beyond that. So, you know, some of this is the access that we currently have.

And and, again, pursuant to the speed that we move at, it’s it’s critical that we’re always working ahead of them and building out additional sales channels and additional capabilities that those competitors don’t yet have. So, you know, when we sign an agreement with a vendor, we do ask them to be exclusive with us relative to these sales channels so that they’re not sort of just playing the field, and we’re sort of making a commitment to one another. But as we go through that sales process, vendors really like the opportunity to get onto all of the platforms at once with a single integration with IVFH. Alright. Great.

Thank you for that question. Next, I have a hand up from B Griffin. Go ahead.

Bill Bennett, CEO, Innovative Food Holdings1: So can you provide some additional context around the economics of the Amazon sales channel and how that compares to your other sales channels?

Bill Bennett, CEO, Innovative Food Holdings: Yeah. Sure thing. So Amazon has a little different model than some of the other food distributors because we are a seller on their platform. Right? So we actually set the end customer pricing on the Amazon platform as opposed to US Foods and some of the other channels.

We’re viewed almost as a distributor. Right? We sell to the, Broadline distributor. They mark up our products and resell it to their customers. On Amazon, we have that, you know, little bit more direct connection where we get to set our own prices.

And then, of course, the way Amazon’s marketplace works is that we pay a 15% commission back to Amazon for the the privilege of operating on their platform and getting access to that traffic. So, you know, we’re we’re pretty thoughtful about how we set prices in that context to ensure that it remains a a profitable and accretive sales channel for us. Like I’ve said on prior sales calls, it’s not a gigantic business for us yet, but it’s one that we’ve been looking at as a fairly easy place to execute something that we’ve already built for all these other sales channels. So, you know, if you go search for fresh seafood or Wagyu beef or things like that on Amazon, there aren’t a lot of competitors on there, yet, and maybe there are in the future, but we think it’s kind of a nice way to open up a completely different base of customers versus what we see on our much larger sales channels with the Broadline distributors.

Sebastian, Analyst/Investor: Thank you.

Bill Bennett, CEO, Innovative Food Holdings: Thank you. Appreciate it. Alright. I have, one in the chat from, Varuk Kutnik. He says I may have missed this detail, so please correct me if I’m wrong on the number.

My understanding is that you added a couple of 100 items to the catalog over the past month. Should we view that as a sustainable monthly run rate for the rest of the year, or do you expect the pace to accelerate now that the technology and catalog expansion are in place? So, again, I’m I’m gonna be careful on any specific numbers I give. I did say in the in the comments today that we’ve set up 400 items in the last four weeks. I certainly believe that we can accelerate from where we are today as we get the rest of the technology and team in place.

A 100 items a week would be a nice acceleration from where we’ve been historically. I think I said in prior earnings calls that we had averaged 13 items per week. So going from 13 to a 100 is a nice bit of acceleration, but I think I’ll be much happier when we’re doing two, three, 400 a week. And and really, item setup becomes nothing of a hurdle whatsoever, but, you know, we’re only held back by the the speed at which we can source new vendors. Thanks for that, Vark.

Alright. I don’t have any other hands raised or questions in the chat, and we’ve we’ve actually gone over time. I appreciate everybody’s engagement today. I’ll give you just one more moment. Alright.

Thank you everyone for your questions today and for your attendance and engagement. It’s always inspiring to see the level of interest in Innovative Food Holdings, especially as we’re going through this strategy shift that we’ve discussed today. As always, I’m happy to make myself and my leadership team available to connect with investors who have further questions about publicly available data. Please reach out to Gary Schubert, whose contact info is included in our press release, if you’d like to schedule a touch base. Take care, and we look forward to continuing to update you all on the progress of our strategy at our q three update later this fall.

Thanks all, and have a great day.

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