Release Date: May 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Edible Garden AG Inc reported a significant 27.6% year-over-year increase in revenue for Q1 2024, highlighting strong sales performance.
- The company has successfully transitioned to producing approximately 95% of its fresh products in-house, reducing dependency on third-party growers and enhancing profit margins.
- Edible Garden AG Inc has expanded its retail partnerships, including a notable three-year agreement expected to generate between $18 million and $20 million in revenue, enhancing product distribution and visibility.
- Introduction of new products like the Pulp line of sauces and the expansion into nutraceuticals, diversifying the product portfolio and potentially increasing market share.
- The company has received several grants and patents, supporting innovation and sustainability in its operations, and reinforcing its position in ag-tech.
Negative Points
- Despite revenue growth, Edible Garden AG Inc reported a net loss of $4 million for Q1 2024, which was higher than the previous year's loss of $2.9 million.
- The increase in net loss was partly due to higher Selling, General, and Administrative (SG&A) expenses, which included a one-time $600,000 charge related to the departure of the previous CFO.
- The company is still in the process of optimizing its operations to fully realize the cost benefits of vertical integration, with expected improvements in future quarters.
- While the company has made progress in reducing reliance on contract growers, it is yet to see the full financial benefits of this strategic shift.
- The nutraceutical business segment experienced a soft performance in Q1 2024, although there are expectations for recovery in subsequent quarters.
Q & A Highlights
Q: Could you provide more details on the Heartland facility's capacity and its ability to meet the demands of new distribution partners like UNFI?
A: James Kras, CEO of Edible Garden, noted that the Heartland facility is operating at about 65% to 70% capacity, which fluctuates based on seasonal demands. He expressed confidence in the facility's ability to meet the needs of new distribution partners and handle increased production, especially with the facility now fully operational and handling all Midwest distribution.
Q: Can you discuss the ramp-up in orders from the new customer agreement expected to generate $18 million to $20 million in annual revenue?
A: CEO James Kras explained that the ramp-up has already begun and is progressing well. He anticipates that the revenue figures from this deal could be conservative, highlighting strong seasonal demand and an increase in consumer cooking at home, which boosts demand for their products.
Q: What impact has reducing reliance on contract growers had on the company's operations this quarter?
A: James Kras detailed significant progress in reducing reliance on contract growers, with about 95% of fresh goods now produced in-house. This shift is expected to positively impact the company's gross margins starting from the next quarter, as most production has moved to their own facilities.
Q: What are the key growth drivers for Edible Garden currently?
A: The CEO identified Cut Herbs and Potted products as the primary growth drivers. These products have seen strong demand, particularly from major retailers like Walmart and Meijer, and have contributed significantly to the company's revenue growth.
Q: Could you provide an update on the nutraceutical business and its performance in Q1?
A: James Kras mentioned that the nutraceutical business had a soft Q1 but is expected to pick up in Q2. He highlighted plans for new product launches in Q4 and the potential for significant growth in this segment, leveraging strong brand recognition and distribution networks.
Q: What are the financial results for Q1 2024?
A: Kostas Dafoulas, Interim CFO, reported a revenue of $3.1 million for Q1 2024, a 27.6% increase year-over-year. The net loss was $4 million, or $13.65 per share, influenced by higher SG&A expenses and some non-recurring costs. Despite these challenges, the company is focused on reducing SG&A expenses and improving operational efficiency.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
