[Management View]
Barfresh management emphasized the completion of critical manufacturing capacity expansions, including onboarding a higher-capacity bottling partner set to increase bottle output by approximately 400% in 2026. The company is focused on aligning production capabilities with market demand, particularly in the education channel, where it has achieved 5% penetration. New product approvals, such as the Pop and Go freeze pops, are gaining traction in large school districts.

[Outlook]
Revenue guidance for FY2025 was revised to $12.5 million to $14 million, reflecting 17%-31% projected year-over-year growth despite first-half supply constraints. Management expects operational improvements in the second half of 2025, including margin normalization and increased production consistency. Expanded manufacturing capacity is expected to support accelerated growth and deeper market penetration in the education channel.

[Financial Performance]
Revenue for Q2 FY2025 reached $1.6 million, an 11% YoY increase driven by expanded bottle capacity. Gross margin declined to 31% from 35% YoY due to inefficiencies and costs associated with ramping up new co-manufacturing partners. Operating expenses were mixed, with selling, marketing, and distribution expenses increasing to $634,000, while G&A expenses decreased to $673,000. Net loss narrowed to $880,000 from $1 million YoY, and adjusted EBITDA loss improved to $600,000 from $682,000.

[Q&A Highlights]
Question 1: How are contract discussions progressing for the new school year, particularly for the Pop and Go freeze pops targeting lunch meal occasions?
Answer: Management reported "good pickup" for Pop and Go freeze pops, with approvals from large school districts. Some bids are still pending, but overall interest has been positive. The product is positioned to expand beyond breakfast into the lunch segment, offering growth potential.

Question 2: For customers who temporarily removed Barfresh products due to supply issues, are they committed to reintroducing them once supply stabilizes?
Answer: Most products are already approved, so reintroduction depends on consistent supply availability. Customers are expected to add Barfresh offerings back to menus once reliability is confirmed.

Question 3: Are there specific regions or territories with immediate growth opportunities for Barfresh's school system expansion?
Answer: Management highlighted larger populated areas as priorities for penetration, particularly for the new Pop and Go product. Expanded capacity will enable broader penetration across the U.S.

Question 4: What does the $1.8 million inventory consist of, and how does it align with production capacity?
Answer: Inventory primarily consists of bottles, built over the summer to prepare for the school year. The bottling capacity issues were resolved with equipment installations completed in June.

Question 5: When will updates on new school additions for the upcoming year be available?
Answer: Updates are expected soon, as schools are just reopening. Some districts have approved products, but throughput and bid awards are still being finalized.

Question 6: What is the current and projected manufacturing capacity for bottles and cartons?
Answer: Current bottle capacity is at parity with cartons, but bottle capacity will increase to 20-25 million units annually in 2026. Carton capacity is three times higher than current sales, offering untapped production headroom.

[Sentiment Analysis]
Analysts expressed cautious optimism, focusing on the resolution of supply issues and the potential for growth in the education channel. Management maintained a confident tone, emphasizing operational improvements and long-term growth opportunities.

[Quarterly Comparison]
| Metric | Q2 FY2025 | Q2 FY2024 | YoY Change |
|-------------------------|-------------------|-------------------|--------------------|
| Revenue | $1.6 million | $1.5 million | +11% |
| Gross Margin | 31% | 35% | -4 percentage points |
| Selling, Marketing, Distribution Expenses | $634,000 | $583,000 | +8.7% |
| G&A Expenses | $673,000 | $865,000 | -22.2% |
| Net Loss | $880,000 | $1 million | Improved |
| Adjusted EBITDA Loss | $600,000 | $682,000 | Improved |

[Risks and Concerns]
1. Supply chain disruptions in the first half of 2025 led to temporary product removals from customer menus, impacting revenue growth.
2. Margin pressure from inefficiencies during the early ramp-up of new co-manufacturing partners.
3. Dependence on successful execution of manufacturing transitions and capacity expansions to meet demand.

[Final Takeaway]
Barfresh's Q2 FY2025 results reflect progress in resolving manufacturing challenges and building inventory to support future growth. While supply constraints impacted first-half performance, the company is positioned for a stronger second half with expanded capacity and new product approvals in the education channel. Revised revenue guidance still indicates double-digit growth, supported by operational improvements and untapped production potential. Investors should monitor the execution of manufacturing transitions and customer reactivations as key drivers of near-term performance.