• Revenue: $2.6 million for Q2 2024, a 23% increase from Q1 2024.

• Retail Sales Growth: Increased 88% in the US and 111% in Canada sequentially.

• Gross Profit: Improved to 10% in Q2 2024 from a gross loss of 2% in Q2 2023.

• Operating Expenses: Decreased to $3.4 million in Q2 2024 from $4.2 million in Q2 2023.

• Walmart Store Expansion: Products added to an additional 600 Walmart stores, totaling 1,400 stores in the US.

• New Retail Partnerships: Onboarded retailers include Wegmans, HEB, Meijer, and others.

• Ready-to-Drink (RTD) Products: Entered six US retailers and four Canadian retailers.

• Customer Acquisition Cost: Achieved as low as $7 for new customers.

Release Date: August 14, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Else Nutrition Holdings Inc (BABYF) reported a significant sequential revenue increase of 23% for the second quarter of 2024, driven by strong growth in US and Canadian retailers.

• The company successfully expanded its retail presence, adding products to 600 additional Walmart stores in the US, and entering walmart.ca in Canada.

• Else Nutrition’s ready-to-drink (RTD) products have gained significant traction, earning the prestigious Mom’s Choice Award and entering multiple US and Canadian retailers.

• The company has improved its gross profit margin, achieving a 10% gross profit in Q2 2024 compared to a gross loss in the same quarter of the previous year.

• Else Nutrition is making progress in reducing production costs and improving product quality through new partnerships, including a new US powder plant and plans for a European facility.

Negative Points

• The company’s stock price remains a concern for shareholders, with management acknowledging frustration over its current valuation.

• Else Nutrition has not yet received FDA confirmation for its plant-based infant formula, limiting its ability to move forward with clinical trials in the US.

• The letter of intent with a large organization, Xenon, has expired, and macro political events may be delaying further discussions.

• Despite progress, the company is not yet cash flow positive and estimates it will take 18 to 24 months to achieve this goal.

• The launch of the adult RTD product line is still in the planning stages, with commercial production expected in Q3 2024 and a full launch in early 2025.

Q & A Highlights

Q: Given the traction with retailers, who are the top-performing stores? A: Hamutal Yitzhak, CEO: We have not disclosed results on specific retail stores. However, revenue from US and Canadian retailers increased 88% and 111% sequentially. Significant customers include Walmart, KE, and Unify.

Q: When do you expect to be cash flow positive? A: Hamutal Yitzhak, CEO: We are working aggressively to be cash flow positive and believe we can achieve this within 18 to 24 months.

Q: When will the adult ready-to-drink product be launched? A: Hamutal Yitzhak, CEO: The first commercial production is planned for Q3 2024, with a soft launch in Canada in Q4 2024. We expect a full commercial launch in the US and Canada in early 2025.

Q: What are the key milestones achieved in the second quarter of 2024? A: Hamutal Yitzhak, CEO: We onboarded new retailers like Wegmans and HEB, increased retail sales significantly in the US and Canada, and launched our ready-to-drink products in multiple retailers. We also made progress in cost reduction and product quality improvements.

Q: Can you provide an update on the FDA approval process for the infant formula? A: Hamutal Yitzhak, CEO: We are in continuous discussions with the FDA but have not received confirmation or guidance on proceeding. We are exploring additional avenues, including lobbying and legal activities, and considering a pathway for approval in Europe.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.