BARFRESH FOOD GROUP INC BRFH
October 21, 2019 - 5:49pm EST by
jm671
2019 2020
Price: 0.30 EPS 0 0
Shares Out. (in M): 130 P/E 0 0
Market Cap (in $M): 40 P/FCF 0 0
Net Debt (in $M): 1 EBIT 0 0
TEV ($): 41 TEV/EBIT 0 0

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Description

Barfresh (BRFH) is a speculative stock that may get cheaper as we enter tax loss selling.
However the company has huge growth opportunities that shouldn’t require significant
additional operating/capital expenses and if it is able to fully capitalize on some of these
opportunities (we should have more clarity on the QSRs next year), the stock should do very
well. Since it is an illiquid stock, anyone who may be interested in the situation will have to
slowly pick away at the stock.
 
BRFH is a developer, manufacturer and distributor of ready-to-blend beverages, including
smoothies, shakes and frappes, primarily for restaurant chains and the foodservice industry. The
company's proprietary, patented system uses portion-controlled pre-packaged beverage
ingredients that deliver freshly made frozen beverages that are quick, cost efficient, better for
you and without waste. BRFH’s products are distinct from many others because they don’t
require ice to be added to the drink ...it only requires the BRFH ingredient, water and a blender.
This results in an easy manufacturing process that delivers a consistent product with no waste
that can be used in locations that do not have access to ice.
 
BRFH originally expected to be sold primarily in QSRs. While that has taken longer than
expected (you can imagine how long the sales cycle is to get into a large qsr especially with all
the turmoil occurring in the space), BRFH still is optimistic it can penetrate this market. In
addition, the company has expanded into and has gained good traction in new markets such as
schools and military bases which gives it a meaningful competitive advantage due to the hurdles
one must clear to sell into these markets.
 
BRFH currently sells to:
a) Schools BRFH has contracts to serve over 400 schools in the USA and there are
approximately 100,000 schools in the country. Management expects more contract wins
because there are many schools that do not yet use BRFH but that are in districts that
have approved already BRFH. Management expects revenue per school to be
approximately $7 to 8k annually.
 
b) Military BRFH received Dept of Defense approval to sell smoothies into all branches of
the US armed forces. BRFH has contracts to be in over 200 military dining locations (up
100% y/y) and there are approximately 800 bases in the USA which serve 1.3 million
active troops (note each base may have multiple dining locations and this figure does not
include international bases which BRFH is now serving). Management estimates revenue
per base to be approximately $15k per year.
 
c) QSR Last year BRFH received approval to be rolled out at a national QSR with over
2,500 units. This rollout has taken longer than anticipated. The company is also in test
programs/advanced discussions with several other large QSRs. The have been
speculation of a rollout at Dunkin Donuts and we have confirmed there is currently a test
program occurring at that chain and at some other high profile chains.
 
                                        BRFH’s largest shareholders include management, Unibel which is the family behind Laughing
Cow cheese (they invested $10mm in 2016 and got 15 million shares at 64c and 7.8 million
warrants at 88c) and lead another $4.1 million convert), and Ibex/Lazarus (from Colorado).
 
BRFH has an equity cap of $40 million, $2.3 million of cash and $3.3 million of an out of the $
convert that matures next year (much of which is held by insiders). The company expects to be
cash flow break even this quarter and begin generating cash flow going forward as sales ramp
and costs are further reduced.
 
Last quarter revenue was only $1.4 million as the company is not yet generating full year
revenue from all of the above listed contracts. The company expects Q3 and Q4 (and next year)
to reflect to strong revenue growth.
 
 
 

 

I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise do not hold a material investment in the issuer's securities.

Catalyst

contract wins, revenue growth, no equity financing 

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