Now presenting John Dalfonsi with BranchOut Food.
Good morning. I'm John Dalfonsi. I'm the CFO of BranchOut. Just a quick question, how many of you are familiar with BranchOut? Can you raise your hands? Okay. Most of you are new to the story. Once again, I'm the CFO. There's our forward-looking statement. About BranchOut, we are a food technology company. We make snacks, and our snacks are made with EnWave's REV technology. We make not only fruits and vegetables, but cheeses. The way to think about this story is that there's a current freeze-dried market. We feel we have a superior technology and process to replace freeze-dried. When you look at this company, you have to think out three or four or five years as we penetrate all the accounts.
We've only had a plant open in Peru for about two years, and we already have the major retailers of Costco, Sam's Club, Walmart, a major ingredient company, and that's just growing. You're going to see announcements of new customer sign-ups as we get out there with our product. Like I said, when we started this company, and Eric Healy's the CEO, I'm the CFO, I was one of the first investors in 2020. The thought was to make avocados. Over time, we've discovered that the place to make the product is South America because you have the most access to produce there, with fruits and vegetables. Of those countries, Peru, we felt, was the best country because they have four valleys, very stable political environment, great workforce. Their whole economy surrounds agriculture. We built a plant there that opened in 2024, and we had zero sales.
We'll have about $14.5 million sales this year. Could've been about $20 million, because a lot of the sales were moved into next year. You could see the production in this plant growing quickly. The other part of our business is we got a sales effort here in the U.S. We have a very good sales team that gets out and talks to all the major customers. We just were at a trade show in Europe. The combination of a plant in Peru, which we have about 300 people, and our U.S. sales force creates a company with substantial growth opportunity. When you think about our break even, because we've got a lot of questions about break even, we have capacity in our existing plant of about $40 million-$50 million.
We bought the piece of property next door, which, if that's built out, it's a $100 million footprint. The capacity, we have 300 employees, although the labor's only $1.50 an hour, but we do have fixed costs to cover. The way to measure our revenues is the kilograms produced of product. The average price of our kilograms is about $33. If you take the kilograms produced in a month times $33, that's your monthly revenue. That covers our fixed cost. It gives us kind of a break even of around $18 million, I mean, of $26 million at all the existing costs. We opened this plant two years ago, and there's a lot of room for improvement. The biggest component of your purchases are raw materials. When we open this plant, everything is still sold in this plant.
We're still racing to keep up. When you're at that junction, you have to buy materials in the spot market, and that's where they're most expensive. We've been able to do a couple capital raises, and we've done a couple in a row, but that is to get working capital for orders that we have for next year because you have to buy at the right time. Raw materials can be 50% of your revenue, or they can be 30% of your revenue. We've gotten to about 35% of revenue because we're buying during the high season for a lot of these raw materials, such as strawberries, blueberries. With that, we feel we can optimize break even about $18 million, and with packaging changes such as bringing it in-house, we feel that could be as low as $14.5 million.
If you look at all our past expenses and you take an average, it's about $26 million, and we're going to do $6 million-$7 million in the fourth quarter. We're about break even from a cash flow basis. One thing we've never had, our revenue's been very lumpy, the rotational orders from the club, and even from ingredients. Now we have a base of revenue of about $4 million per quarter going into 2027. Just a little about BranchOut. Once again, we use EnWave's technology. We're the first ones really to commercialize it on a large level, so uncharted territory. I think over the time we've been in the plant, there's the EnWave technology, which is a great technology, but it's also a lot of know-how and trade skill, trade secrets of how you serve the product to the EnWave machines.
The way the EnWave machines work is the better the product you serve up to it the more output you get. We make, I'd say, about a dozen different fruits and vegetables out of the plant, all need to be pre-processed differently. Over the two years, we've really, really have perfected that, and there's even more improvement. That's why I'm very bullish about 2027, because we were averaging maybe 30,000-40,000 kgs a month. This month we'll hit 70,000 kgs, and that is all around the process we've built over the last couple of years. When you think about BranchOut, you see this ramp-up of taking over the freeze-dried market, and there's a lot of blocking and tackling that goes into it.
One of the key pieces of blocking and tackling is getting the plant to a point where you can create an assembly line and product that you could serve up to the EnWave machine and continue to increase your output. One thing about this company that a lot of people don't know about, and an advantage of being in Peru is, when Peru exports fruits and vegetables, you go into the supermarket, they're nice and shiny. We don't need to buy that fruit. The fruit tastes the same. It could be bruised or not look as attractive, and we can buy that fruit. We get it at a much better price, and it's very sustainable. For those who care about sustainable companies, we buy fruit that'd be thrown out otherwise. A little about the EnWave technology, if you don't know. It's a vacuum chamber industrial microwave.
It essentially brings the boiling point down to room temperature, and there's tremendous advantages to that. For example, you keep the flavor of the product. We've done studies. There's three times more of the flavor, the texture. You'll see in these pictures, the fruit looks like an actual fruit. The color, I'll show you an example of how the color differs. It's much more vibrant, and it's much less expensive and faster than freeze-drying. Product tastes three times better. If you look at the pineapple on your right, that's the final product. It look and tastes just like pineapple. That's the product on the left going into the machine. How this product looks. We've done a lot of studies with our product in Sam's Club and Costco, and we get very high ratings here when people try the product or sample the product.
You look at the freeze-dried product on the left, it's very chalky. You look at on the right, it looks like the real fruit. Once again, feedback from customers. We have a lot of feedback that we've continued to get over time. We get taste, texture, appearance, cut, and shape. We get very high marks. The other thing that's very important that people don't think about is the consistency of product. There's a real art to making this product, and there's a real art to making it consistently. If you don't make it, if you don't serve it up to the machine properly, it'll come out brittle or hard. We have developed outstanding consistency in the plant, and that's why we feel our sales are increasing, and we're getting repeat orders. Little about our financials.
If you look at this company, starting in 2022, we went public in 2023, our revenue has doubled every year. In 2025, we had $13.72 million, but about $4.5 million of that was a sourcing contract we had for prunes. If you think about plant production, it was about $9.5 million in 2025. This year it'll be $14.5 million. Like I said, we about $5.5 million in orders that just got pushed to next year. Here we talk about $26 million revenue. We think we'll be higher than $30 million, but it's something that we feel happened, but that's a number we have out there now. Breakeven is around $24 million. That says $21 million, and optimize $18 million, but once again, we feel that we can get that down to about $14.5 million as breakeven.
If you think about our cost structure, and this is very important if you build a model, raw materials are 35% of revenue. All the other costs, if you think about the tariffs, the EnWave royalty, the broker commissions, the packaging, the shipping, everything to get to the customer is about 20%. You look at a marginal cost, once you reach capacity, of about 55%. We feel it can bring those raw materials down some, and we definitely feel that the other costs, we can bring down significantly. Once again, packaging is maybe eight points of that 20%. Our gross margin for our third quarter will be about in the teens.
We feel it is going to improve in the 20%s, and once again, a targeted gross margin of 40%. If you think about this story, we are the first ones to do this. We are looking to replace a massive market.
Just by opening our plant for two years, we have had tremendous success with all the household names. I feel it is just only a matter of time before you will see a company with $100 million in revenue. The other thing people do not really think about in this company is we are launching our dried cheese product, and we feel cheese can be as big or bigger than the fruits and vegetables. The product is already starting to go out there in Target superstores, but we will also be making some announcement on some cheese business in 2027 that I think people will be pretty pleased to see.
This is the plant. I am just going to show you some pictures of the product. This is new innovation that went out for 2026. This is our Costco product. I want to get to a particular page. This is our first everyday product in Sam's Club.
It is about an $8 million piece of business. It is in half of the Sam's Clubs. It is the crunchy mix, and it is selling very well. The sales have been increasing. We have a $2 million tropical mix pack that we are making now that is going to go into Sam's Club for the end of the year. We feel this could be an everyday product that has the level of revenue like the Crunchy Fruit Multipack product. We are creating a product line of just seasonal products that you could put in lunch packs. You will see those in major club. Our Cheesecake Bites, the EnWave technology makes cheesecake, and we have the middle one going into Costco, Texas.
Lastly, the dried cheese product first going into Target, you have the two on the left that are in Target right now. We can make any fruit or vegetable, we feel.
The last part of our business, ingredient growth, it will be about up to a $10 million business next year, we feel. About $6 million-$7 million this year, and we feel that is going to grow out throughout the world. A little about BranchOut. We are forecasting a record fourth quarter. I think the big thing to think about is how we could take over freeze-dried. If you think about the long game of this company and the early progress we have made, I feel that is a great indicator of what our future looks like. Our plant is only two years old, and we have already had tremendous success, with about $14.5 million sales.
Could have been $20 million. Some of those sales are moved next year, and for next year, we already have a base of about $16 million. We have a three-pronged strategy of retail, private label, and ingredients.
Once you hit break even, the marginal costs are such that it creates contribution from the plant of about 40%. That is once you are really hitting your stride. Then, we have a seasoned management team and a strong board of directors. With that, I will take any Q&A.
You mentioned that, if I was correct, the $5 million has been pushed out to next year?
Yeah.
Is that correct? What is the reason for that?
Good question. When you deal with these big companies like a Walmart, like a Costco, Sam's Club, they move slowly. They talk about a product, and sometimes it takes a year or two to develop. We kind of handicapped, at the beginning of 2026, of how much club we are going to get and how much ingredients, because it was really our first full year into that. What you learn is they are deciding what department to go into, and you think something might take a certain period of time to go into the store, but it takes a longer time. It is not a matter of with or, it is a matter of when. Yes.
Yeah. For some of the retailers that are M&A, private label is a big thing. What percentage of your business with them is private [inaudible]
Yeah, that's a good question. If you look at our revenue mix, about half is ingredients right now, and only about 10% is private label. The other 40% is club, and club is branded. The 10% private label is a Walmart product and a couple of their smaller customers. We feel that's a growth area. Trader Joe's is one of the big names out there. ALDI another one, and I think you're going to see our private label business grow. We've just had faster growth in ingredients and in club, to this point.
Between the snacks, the retails, and the ingredients involved, which one is more profitable?
Yeah, he said between the snacks. It's a good question. Between the snacks and the ingredients, which is more profitable? You get a lower price for ingredients, because it's not a premium product. We get a lower margin there, say maybe 30% versus maybe 40%- 45% on branded. Again, in branded, you have packaging costs and you have marketing costs. When you work with a Costco or a Sam's Club, they market for you. They do demos. You don't really have a choice of the 6.6% Costco charges, for example. If you wash it, you're looking at that 30%. Yes.
[inaudible]
I'm sorry, can you get my microphone?
Yeah, [inaudible]
[inaudible]
Yeah, that's a good question. We haven't run into any competition. No one uses this technology to the scale you do, and even if you did buy an EnWave machine, the product has to come out as a premium product, and that takes a lot of work. It's taken us years to create the sort of product. So we feel that even if someone entered this business tomorrow, we probably have a three or four-year head start. So there isn't competition. Like I said, freeze-dried is the competition, but for the reasons I showed, we're a superior product.
Great. Two questions. One is, what's the capacity of your current factory, and building a new one for that product? I know you've been issuing a lot of shares. Do you ever contemplate factoring against receivables and contracts that you have with customers?
Sorry about that.
No worries. First question, what is the capacity of the current factory?
The capacity of our plant?
Yeah, in terms of how much more can you produce with the current factory versus having to build a new one?
First of all, we could produce about $40 million-$50 million in the current plant. A capacity expansion is simply an EnWave machine, which is the CEO of EnWave's here, so maybe we get a discount, but $2 million all in. Then we have a piece of property next door that we bought for $200,000. We just have to put up a shell. That is $150,000 to put up the shell, and our capacity goes to $100 million.
Okay. In terms of financing, I have seen that you have been issuing a lot of shares the last few years. Did you ever contemplate things like factoring, basically borrowing against receivables, or even signed contracts with a Costco or a Sam's Club, and telling whoever wants to finance you, "Hey, listen, I have got this contract. Can we get some money up front?
Yeah, that is a great question of a corporate finance as an investment banker. So we have had to use equity capital for working capital. Outside of some equipment purchases in the $3 million raise, we then raised another $5 million, it has been for working capital because our working capital cycle is up to six months, and we want to get a revolving credit facility from a major commercial bank. I think that will happen in 2027, but we have had to finance that with equity. We have looked at factoring and other things. It has not been that attractive. So the answer is yes, and we hope to get that commercial bank facility in 2027.
Thank you.
I had a question on the Cheesecake Bites product that you launched. So most of it will be manufactured there, and how will the texture be? Because I mean, cheesecake is something soft, and you are doing something dried.
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Yeah, that's a good question. He asked about the Cheesecake Bites product, and for this first order, it's being co-packed at another facility in the U.S., another company that has EnWave technology. You make it based on where the cheesecake's the cheapest. In the future, we could do that in Peru. Maybe we can use the same co-packer we're using. The cheesecake is actually a creamy cheesecake. It's not hard. We say two years is the shelf-stable lifetime of the product, but in the past, we've worked with the U.S. military, and they've determined our products really didn't have an expiration date. So a couple of years, at least. Yes.
I didn't see Kroger logo up there. Is that one that you're looking to get into, is the Kroger outlets? They have almost 5,000 stores. They're one of the biggest food outlets. The second question is, each retailer typically has a different hurdle rate and different thing that they're looking for. As you continue to go down the private label path, are you going to build to what they expect, or are they going to accept what you're doing from a branded standpoint [inaudible]
Yeah, that's a good question. If you think about BranchOut, and I have one minute left, we've only scratched the surface, and I think that's what you really have to look at. We have not even gone into the retail channel. As it relates to the big retailers like Kroger and others, they definitely have their hurdle rates, but given how we can produce the product so cost-effectively in Peru, we can meet their hurdle rates. I think you're going to see an expansion of our verticals in 2027. We have a lot of things in the works that we really haven't talked about, but in our early discussions, any hurdle rates they've laid out, we can definitely cross them.
Great.
All right. Well, thanks for your time, and please let me know if you have any other questions. I will be at table number 11.