Innovative Food Holdings, Inc. (OTC:IVFH) Q2 2025 Earnings Call Transcript

Innovative Food Holdings, Inc. (OTC:IVFH) Q2 2025 Earnings Call Transcript August 13, 2025

Operator: Good afternoon, and welcome to the Innovative Food Holdings Second Quarter 2025 Earnings Conference Call. On today’s call for Innovative Food Holdings is Bill Bennett, our CEO; Brady Smallwood, our COO; and Gary Schubert, 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 and taxes and excluding certain onetime expenses. And adjusted fully diluted earnings per share using the weighted average shares outstanding for the quarter ended June 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 would also like to remind everyone that today’s call will contain forward-looking statements from our management made within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E 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.gov. 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 Mr. Bill Bennett. Please go ahead.

Robert William Bennett: Hello, everyone, and good afternoon. I’m happy to welcome you to our Q2 2025 earnings call. You can read more detail about our results when we file our 10-Q with the SEC later today. I want to start by reminding everyone about the announcement we made 1.5 weeks 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 Q2 financials to help you see the differences between our GAAP reporting and the adjusted results based on our go-forward businesses.

Q&A Session

We are 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&A reduction and cash flow growth. With a planned close date of September 30, our financial results in Q2 and Q3 won’t yet reflect these changes, but we expect Q4 to better demonstrate the earnings potential of the company. Now let’s jump into our Q2 results. In Q2 2025, revenue increased 26.9%. Excluding the cheese conversion business, Q2 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 Q2, 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, U.S. 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 head count to the largest bottleneck of our catalog setup process, which helped us to accelerate items set up. In the last 4 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 5 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 2 acquisitions, driving efficiency and reducing head count and distance driven by our trucks. Lastly, we’ve made progress in preparing the business to onboard toward 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, Q2 represented a large strategic shift for IVFH as we focus our resources on to 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 want to 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: Thanks, Bill. Today, I want to give more detail on the warehouse transition and our exit from cheese conversion. Since joining just over 2 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 6 months period, we ran targeted tests, but the results remain clear that the scale of capital and risk required to reach sustainable profitability were too high. At that point, we began the sales processes for the warehouse and the e-commerce business. The e-commerce business sold first about 6 months later in the fall of 2024. As we retained the building, we continued running other positive contribution profit businesses and pursued new B2B opportunities, including the large retail program we launched late last year.

Q1 was our first full quarter of results for the revised businesses in Pennsylvania. Our review showed the cheese business will need to double its current run rate 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 18 months, redoubling our efforts quickly produced to 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 end of 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 million 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 a high priority. The year-over-year growth in our Airline businesses accelerated from 2.2% in Q1 to 26.1% in Q2, 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 Schubert: Thank you, Brady. Hello, everyone. As we reflect on the second quarter of 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 Q2 was $21.1 million, 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 0.4%. 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 Q2 revenue versus 0% in 2024. Excluding cheese, gross margins improved by 66 basis points driven by lower shipping costs and our continued efforts to manage tariffs by passing price increases through to customers.

Selling, general and administrative expenses rose to $4.2 million in Q2 of 2025 from $3.8 million in Q2 of 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 Q2 of 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. That increase was achieved after $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 end of September will eliminate approximately $9 million 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 have decided to defer the previously announced name change and uplifting initiatives to a later date. This approach allows us to concentrate our resources on operational execution and integration efforts at this time. In summary, Q2 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 want to 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&A session.

Robert William Bennett: 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&A. [Operator Instructions] We’ve allocated approximately 20 minutes to this portion of the call. All right. I see a raised hand from JD Abouchar.

John David Abouchar:

Two Lakes Capital: Yes. 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 have doubled down on the business. So walk me through just a little bit of what you were thinking there. I think it 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?

Robert William Bennett: Great. Yes. So on your first question on the hard decision on the cheese business, yes, definitely hard. I mean, I think if you’ve been listening along to our press releases and earnings calls, you know that we were excited about it. The reality is that the size of the business by the end of Q1, like Brady mentioned, it 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 by leasing out or buying another facility somewhere else that was smaller and more suited for the size of the business that we had — that we found. And the reality is just 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 we’ve even talked about the other cheese opportunities we had outside of the large retailer and the one airline that we were doing business with. And we did a really careful sizing and risk assessment across all of those different opportunities and came to the conclusion that the likelihood of us hitting the size and scale we needed to on all of those different opportunities, still couldn’t get us to the scale we needed to justify Pennsylvania. So we continue to like the cheese business. But at the end of the day, we need to be clear eyed and not emotionally tied to something new that we built like that. And I hope that you’ll appreciate the fact that we didn’t let it drag on for 2 or 3 years, right? It was really important to us that we viewed this as a test of a new sales channel and at 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.

John David Abouchar:

Two Lakes Capital: Yes. Understood.

Robert William Bennett: Great. That’s some more thinking on the exit of the cheese business. And as far as the core strategy, the only 2 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. We have dozens of airports, airport kitchens between those 2 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 kind of just 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 efficient operation with Artisan in Chicago will just drive further efficiency for us there. So the actual geographic placement of that business in the Northeast didn’t have any strategic importance to us. And in the future, we don’t expect any negative impact to the core to the digital channels business, which, as we talked about in the comments today, is the primary driver of both growth and profitability in the future.

John David Abouchar:

Two Lakes Capital: Terrific. I’m sure others are going to have lots of questions on the core business. I’ll let them focus on that.

Robert William Bennett: Sounds good. Thanks, J.D. All right. Tom Kerr. I see that you have your hand up.

Unidentified Analyst: So just a big picture growth question kind of going forward. The portfolio of businesses you have now after the cheese divestiture, is that where you want to be to grow this company? Or is there always room for sort of tuck-in acquisitions to meet your growth goals?

Robert William Bennett: Yes. Great question. Thank you for that. We’ve said all along that the 2 acquisitions we made back late last year out in Denver. So Golden Organics and Local Food Distribution that these were another part of our Phase II 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 2 acquisitions are still very much in flight, right? We’re in the process of integration. It’s a big, long messy process, as you might imagine. And we are making progress, but certainly not at a point where we can get the insights out of it that we needed to be able to make further decisions. So the jury is still out on whether if those acquisitions can meet the synergies and the goals that we had when we went out to make them, then there may be opportunity to make further acquisitions.

If we don’t get to where we want to, as we sell all along, we bought them for such a good price that doesn’t create any financial headwinds for us going forward, but it will definitely shape how we think about M&A in the future beyond that. So a lot of question mark still on that business. But if you look at the investor presentation 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 really is different than any other food distributor can make in the United States. And so we’d really be remiss if we didn’t continue to lean into that business and work to get to a much more respectable growth number there.

So that does continue to be the focus, but the learnings we get out of the M&A we made will be interesting and will definitely inform our future strategy.

Unidentified Analyst: 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.

Robert William Bennett: Yes. Gary mentioned it just right at the end quickly, so you can look back at the transcript, but the overall, just we put it on pause, both the NASDAQ uplisting and the name change. Those are just not the right focus for us right now when we’re in the midst of a huge business transformation. And so they still remain a goal that we will work towards but we need to get through the 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. All right. Next on the list, I’ve got Brian Harper.

Unidentified Analyst: I wanted to ask about the kind of balance sheet effects of this — of getting out of Pennsylvania. And look, you had inventory more than doubled in the last 12 months from the comparable quarter in the last year and then — and AR was up net of AP. So I was wondering, can we expect that to come down a lot? You guys, I think you capitalized some stuff too. Is there any potential impairment on exiting Pennsylvania? And then if there — assuming it closes, will there be any tax impacts on selling the building.

Robert William Bennett: Sure. Yes. Gary, do you want to take that one for us?

Gary Schubert: Yes. Perfectly, 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 not really a lot of cash outflow as it relates to that. As it relates to kind of the balance sheet items, our AR has already come down since the beginning of the year, which is how we’ve actually improved our cash position a bit, and we expect that to as we flesh out of the cheese business. We still have AR that will keep on coming through as our inventory continues to actually decline as well from the cheese declining in value.

We may have some write-offs as it relates to kind of debt inventory, but we’re working through that very diligently and trying to make sure that we have very little — as little as possible 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, we’re going to get rid of some property, plant and equipment that will actually reduce some fixed assets on the balance sheet, but that will also reduce a huge amount of debt on our balance sheet.

And pretty much be virtually debt-free. I won’t say 100% debt-free, but it will reduce debt by 98%. So very much debt-free at that point.

Robert William Bennett: All right. Our next question is from Sebastian.

Unidentified Analyst: Bill, I have 2 questions. So the first question is regarding our gross profit. If 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 net revenue on a percentage basis? Or is that just not attainable anymore with the increase in competition on the U.S. Foods marketplace?

Robert William Bennett: Yes. Thanks for your question, Sebastian. The business mix definitely looks different in Q2 this year than it would have several years ago. But I think that’s a big part of the exit of the cheese business, right? That’s a drag for us right now on margins that we will be unburdened by as we get out of that business. Getting from the 24% to 30%, remember that we’ve also made these acquisitions of 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 might be — the time period you might be referring back to. So I think 30% is probably a challenge to get back to that level. But definitely, as we look to succeed in getting Digital Channels back to meaningful growth, then that should materially drive improvement in our gross margin structure.

Unidentified Analyst: Okay. And then the second question on the AI tool, you just launch. Can you maybe get some or give us a bit more color on that? I mean you referred to the soft launch, maybe where exactly — obviously, it seems to work right now. Maybe you can give us some additional information there, how far you’re already in the process of launching it, not only a soft launch, but like really working with it?

Robert William Bennett: Sure. Yes. 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 how Apple manages phones or Tesla managers cars, it’s a constant development process that never ends. So I just — I want to be clear that it’s not like we’re done and we’re moving forward. It’s our soft launch, which means it’s the first time that we’re actually getting real vendors into the portal to interact with us in a much more streamlined way than we used to. But I mean, we’ve got a road map that will probably take us years to get through to actually get the process as fully automated as we would like to.

But 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 those benefits all relate back to the speed of item set up. So that’s kind of how that development process will work. The main thing that we’re focused on here, though, is the outcomes, right? I mean we’re not going to invent AI here at IVFH. The main thing we want to think about is how we’re driving towards the business outcomes that matter here. And that’s why I referenced that even before this tool is launched at any scale with a meaningful number of vendors, just the improvements we’ve made in the process through added head count and streamlining our internal processes is resulting in an acceleration of items set out.

So 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 never going to get married to the technology 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? All right. Let’s next go to Michael Richardson.

Unidentified Analyst: Thanks for all you do. Really appreciate these meetings of yours. And Sebastian pretty much asked my question about AI. You might have said it earlier, but I didn’t catch it like that — and correct me if I’m wrong, but it used to take about 6 months to onboard people. And I was just wondering where it was — where is that now like kind of week or days or…

Robert William Bennett: yes. So I want to be a little bit careful that’s not like a metric we want to regularly report on, but it’s definitely speeding up significantly. We used to say it was 6 to 12 months to go from 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 going to work through it on our side, it’s just not a good selling proposition to grow your vendor base at any meaningful scale.

So with this kind of first batch of vendors 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 — it’s just through the added headcount that we put in place, but that probably took us about 6 or 8 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 to added vendors as we move forward. 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 get them on to 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 hit 5,000 items in our catalog. I mean that’s only barely below where we are today. I mean it’s crazy that it’s more than a decade and our catalog really hasn’t grown since those days. And so that just illustrates what a pinch point this has been for the entire company strategy where 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 get really rocking and rolling with getting the vendors on, we’re going to start to allocate more headcount, resources and focus to vendor sourcing. We’re going to mount marketing programs to find more vendors and get them onto the platform and it’s just — it’s going to be able to change the entire way that we go to market because we can now have confidence that we can go pitch this value proposition to vendors and help them understand that it’s going to be a very low lift on their part to be able to get the orders and revenue flowing for them.

All right. Dr. Brown. Go ahead.

Unidentified Analyst: Great team, I just wanted to say thank you for all your hard work, and I really respect you, Bill, for what you’ve done in taking things over from Sam. So I wanted to start out with the appreciation there. This is something Bill, you and I have spoken about in the past is I really see there being an additional channel that you can add, where you’re not only selling to the shareholders for us may be to order 50 steaks or 50 tunas or something that’s special or maybe get rid of some of the cheese you’ve got that’s left over, but to also open that up to your vendors and like U.S. Foods and some of these other entities. I just think it would be worthwhile thing to look into because if you had something at your website where as a shareholder, we could log into and get fresh seafood delivered overnight to our houses.

I think you’d be surprised at how much ordering you’d actually get from not only your shareholders and food innovations, but also maybe U.S. Foods shareholders and some of these other entities?

Robert William Bennett: I love it. 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 others who might want some of these similar offerings. Of course, they all come in food service size offerings, right? So 50 steaks is the right way to think about it, not 2 steaks. But definitely something we’ll take a look at. Thanks for that, Dr. Brown. All right. I’m not sure if this is the real name or not, but Josh Local.

Unidentified Analyst: Yes, Josh Dan. I have a question for you. Can you sort of speak to if there’s a backlog of vendors or SKUs to be loaded now that you have debottlenecked the process and sort of what the extent of that is?

Robert William Bennett: Yes, sure. So again, I’m not going to perfectly quantify this because then you want me to update on it every quarter. But we have thousands of items in the backlog already before we even go find new vendors. And that goes from, again, like 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 get the wheels turning on this platform.

Unidentified Analyst: Okay. Great. And then could you sort of speak to why a vendor would want to go through you guys versus direct U.S. Foods or through a competitor?

Robert William Bennett: Yes, sure. So first, we’ll talk about US Foods. Not every vendor wants to do business in the big leagues. U.S. Foods and the others, Sysco and PFG, they all have big complex vendor agreements to sign, rebate structures to track. They’re very big and slow moving. You have electronic data exchanges that need to be set up. You have complex food safety rules of certifications and inspections and a whole host of red tape and administrative pieces that have to be worked with to where for a little mom-and-pop shop who might be raising cattle and spending an hour or 2 in the evening, trying to build their business, they just don’t have the bandwidth to work with these big players. And so one way to think about us is that we’re sort of a digital broker, right?

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’ve integrated it with every single flavor of technology savviness that you can imagine. And at the very base level, we literally e-mail a FedEx label and a packing slip to a vendor that they print off on a little HP printer 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 with all of that in place, it should make it very easy for anybody who wants 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 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 going to 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. They come on to our platform, they build their business. U.S. Foods sees the level of sales that they’re doing on their platform and they then in turn go to the vendors and invite them to list directly with them. We do have in our vendor agreements 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 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 want to do business with directly.

As far as competitors, there are definitely competitors out there that are 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 3 of the big broadline distributors and additional sales channels beyond that. So some of this is the access that we currently have. And again, pursuant to the speed that we move at 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 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 on to all of the platforms at once with a single integration with IVFH. Next, I have a hand up from B. Griffin.

Unidentified Analyst: Bill, can you provide some additional context around the economics of the Amazon sales channel and how that compares to your other sales channels?

Robert William Bennett: Yes, 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 U.S. 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 product and resell it to their customers. On Amazon, we have that a 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 privilege of operating on their platform and getting access to that traffic. So we’re pretty thoughtful about how we set prices in that context to ensure that it remains 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 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. All right. I have one in the chat from Varyk Kutnick. 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 hundred items to the catalog over the past month.

So 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 going to be careful on any specific numbers I gave. I did say in the comments today that we set up 400 items in the last 4 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. 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 100 is a nice bit of acceleration, but I think I’ll be much happier when we’re doing 200, 300, 400 a week. And really item setup becomes nothing of a hurdle whatsoever, but we’re only held back by the speed at which we can source new vendors.

All right. I don’t have any other hands raised or questions in the chat, and we’ve actually gone over time. I appreciate everybody’s engagement today. I’ll give you just one more moment. All right. 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 the 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 Q3 update later this fall.

Thanks all, and have a great day. Goodbye.