Innovative Food (OTCMKTS:IVFH) reported lower second-quarter revenue as declines across its digital, national distribution and local distribution channels outweighed improvements in gross margin, operating expenses and operating cash flow.
Chief Executive Officer Gary Schubert said the company generated $13.1 million in second-quarter revenue, down 21.5% from $16.6 million a year earlier. While the revenue decline was significant, Schubert said management’s work to simplify operations and increase discipline was reflected in margins, expense management and cash generation.
Revenue declines across three operating channels
Digital channel revenue fell 16.7% during the quarter, primarily due to the transition involving the company’s largest digital partner. National distribution revenue declined 29.2%, reflecting customer and product-program losses, while local distribution revenue declined 24% as the company continued to work through the effects of earlier customer attrition.
Schubert highlighted several areas of improvement within those results. Digital revenue excluding the company’s largest partner increased 6.3% in the second quarter and 8.4% during the first six months of the year. The broader digital portfolio is growing, he said, though pressure remains concentrated in the major-partner transition.
The company is moving eligible items from the legacy environment to a new platform, confirming that products are live and transacting, restoring products that did not migrate properly and addressing pricing or content issues. Schubert said the new platform provides a stronger foundation for assortment, pricing, content and product availability, but added that the company must continue adding vendors and products while improving product presentation and distribution.
“A chef has to be able to find it, buy it, and receive it,” Schubert said. “That is the standard.”
Profitability maintained as margins and expenses improved
Gross margin increased 50 basis points to 26.2% from 25.7% in the prior-year period. Selling, general and administrative expenses declined about $429,000, or 12.4%, to $3 million from $3.5 million.
The company reported operating income of $395,000, net income from continuing operations of $366,000, or $0.007 per diluted share, and adjusted EBITDA of about $579,000. Schubert said operating income, net income and adjusted EBITDA declined in dollar terms from the prior year because the lower revenue base generated fewer gross-profit dollars.
During the first six months of 2026, Innovative Food generated $375,000 of operating cash flow, compared with an operating cash use of $402,000 in the prior-year period. Cash and cash equivalents increased to $1.8 million from $927,000 at year-end.
Current liabilities declined to approximately $3.5 million, while stockholders’ equity rose to about $8.5 million. Schubert said those balance-sheet changes reflected in significant part the sale of the company’s Pennsylvania facility and repayment of related debt. He noted that operating cash flow was reported separately from those investing and financing activities.
National sales effort to broaden customer base
In national distribution, Schubert said a new competitor won individual product programs from both of the company’s airline catering customers. The company lost its developing airline catering customer late in the second quarter after business with that account had declined for several quarters. Because the loss occurred late in the quarter, only part of its impact was included in second-quarter results, he said.
Innovative Food’s longer-standing major airline catering customer remained active, according to Schubert. While the company lost certain programs during the initial competitive disruption, it did not experience further material erosion through the second quarter and won new business that partially offset earlier program losses.
The loss of the developing customer has made the national distribution business too concentrated, Schubert said. The company is recruiting a director of national sales to broaden its sales pipeline across airline catering, other national catering relationships, food manufacturers, retailers, bakeries and other potentially high-volume accounts.
- Digital revenue excluding the largest partner rose 6.3% in the quarter.
- Local distribution’s decline improved from about 31% in the first quarter to 24% in the second quarter.
- New airline catering business partially offset earlier program losses at a longstanding customer.
Chicago and Denver warehouses support digital expansion
Schubert said the company’s Chicago and Denver facilities serve more than local distribution markets, supporting the broader digital platform through inventory, food safety and fulfillment capabilities.
During the first six months, approximately $6.8 million, or about half of digital revenue, was supported by products sourced through Chicago. Those sales are reported in digital channels rather than local distribution, but rely on the Chicago facility’s operational capabilities, Schubert said.
Denver is beginning to support a similar model. As of June 30, 258 Denver-sourced items had been added to digital channels and 19 had generated sales. By early August, 72 items, or approximately 28% of the listed Denver assortment, had generated sales. Schubert said the dollar contribution remained small, but the growth in transacting products indicated that the Denver assortment and fulfillment operation could support more of the company’s platform over time.
Looking ahead, Schubert said the company’s priorities include completing the digital transition, expanding existing national relationships, recruiting a dedicated national sales leader, converting local opportunities into recurring accounts and leveraging Chicago and Denver across more channels.
“The job now is to make the work inside the business show up in total revenue,” Schubert said.
About Innovative Food (OTCMKTS:IVFH)
Innovative Food Holdings, Inc, through its subsidiaries, distributes specialty food and food related products to restaurants, hotels, country clubs, national chain accounts, casinos, hospitals, and catering houses in the United States. The company distributes perishable and specialty food and food related products, including origin-specific seafood, domestic and imported meats, exotic game and poultry, artisanal cheeses, freshly prepared meals, caviar, wild and cultivated mushrooms, micro-greens, organic farmed and manufactured food products, estate-bottled olive oils and aged vinegars, and curated food gift baskets and gift boxes, as well as a full range of food subscription based offerings.
