Edible Garden Q1 2025 Earnings Call Transcript

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Provided by Quartr
May 15, 2025

There are 6 speakers on the call.

Operator

Good morning, everyone, and welcome to the Edible Garden AG Incorporated twenty twenty five First Quarter Business Update Conference. At this time, all participants are in a listen only mode and the floor will be open for questions following the presentation. Please note this conference is being recorded. I will now turn the conference over to your host, Ted Avas, Investor Relations at Crescendo Communications. Ted, the floor is yours.

Speaker 1

Thanks, Jenny. Good morning, and thank you for joining Edible Garden's first quarter twenty twenty five earnings conference call and business update. On the call with us today are Jim Krasz, chief executive officer of Edible Garden and Kostas Zafoulis, interim chief financial officer of Edible Garden. Earlier this morning, the company announced its operating results for the three months ended 03/31/2025. The press release is posted on the company's website, www.ediblegardenag.com.

Speaker 1

In addition, the company will file its quarterly report on Form 10 Q with the US Securities and Exchange Commission, which will also be accessible on the company's website as well as the SEC's website at www.sec.gov. If you have any questions after the call or would like any additional information about the company, please contact Crexendo Communication at (212) 671-1020. Before Mr. Krash reviews the company's operating results for the quarter ended 03/31/2025, and provides a business update, we would like to remind everyone that this conference call may contain forward looking statements. All statements other than statements of historical facts contained in this conference call, including statements regarding our future results of operations and financial position, strategy and plans, and our expectations for future operations are forward looking statements.

Speaker 1

The words aim, anticipate, believe, could, expect, may, plan, project, strategy, will, and the negative of such terms and other words in terms of similar expressions are intended to identify forward looking statements. These forward looking statements are based largely on the company's current expectations and projections about future events and trends that it believes may affect its financial condition, results of operations, strategy, short term and long term business operations and objectives and financial needs. These forward looking statements are subject to several risks, uncertainties and assumptions as described in the company's filings with the SEC, including the company's annual report on Form 10 ks for the year ended 12/31/2024. Because of these risks, uncertainties and assumptions, the forward looking events and circumstances discussed in this conference call may not occur, and actual results could differ materially and adversely from those anticipated or implied in the forward looking statements. You should not rely upon forward looking statements as predictions of future events.

Speaker 1

Although the company believes that the expectations reflected in the forward looking statements are reasonable, it cannot guarantee future results, level of activity, performance or achievements. In addition, neither the company nor any other person assumes responsibility for the accuracy and completeness of any of these forward looking statements. The company disclaims any duty to update any of these forward looking statements except as required by law. All forward looking statements attributable to the company are expressly qualified in their entirety by these cautionary statements as well as others made on this conference call. You should evaluate all forward looking statements made by the company in the context of these risks and uncertainties.

Speaker 1

Having said that, I would now like to turn the call over to Mr. Jim Krash, Chief Executive Officer of Edible Garden. Jim?

Speaker 2

Thanks, Ted. Good morning, and thank you to everyone for joining us today. We're pleased to report that Q1 twenty twenty five marked a strong start to the year, reflecting the continued momentum behind our strategic transformation. Our realignment towards higher margin, shelf stable products such as Kick Sports Nutrition, Pickle Party, Squeezables, Pulp and Vitamin Way is gaining traction and the results are becoming increasingly visible across our business. We also made meaningful progress expanding our national retail presence.

Speaker 2

During the quarter, we launched or strengthened our relationships with several major retailers, including Walmart, Stop and Shop, Wakefront ShopRite and Burkhart Superfruits. These relationships are driving growth across both our fresh and non perishable categories, while also leveraging our patented in store merchandising solutions, such as our self watering displays and reinforcing our omni channel strategy. Total revenue declined $414,000 to $2,700,000 in the first quarter. This decline was primarily attributed to our strategic decision to exit lower margin floral and lettuce categories. Cutter sales rose 13% on a seasonal basis, highlighting sustained consumer demand for freshness and convenience.

Speaker 2

This deliberate shift in our product mix is already contributing to margin expansion and setting the stage for scalable profitable growth, highlighting the traction in our nonperishable portfolio where revenue rose 15% year over year. Each of our nonperishable shelf stable brands have contributed to this performance. Kick Sports Nutrition achieved a milestone with new brick and mortar placement at a major Midwest big box retailer. The brand includes clean labeled whey and plant based protein powders with planned expansion into pre and post workout formulas and hydration products. These offerings support performance, recovery and overall wellness for today's health conscious consumers.

Speaker 2

Pickle Party, created in partnership with Herman Pickle Company, is the world's first functional pickle fermented, refrigerated and gut health focused. Featuring kosher and non GMO ingredients, It's launching across all Burkhart foods, superfood stores. And then secured pre orders at Food Town, Lincoln Market ahead of summer season. Squeezables, our shelf stable Stern Paste line has successfully completed its pilot and is moving into full scale production. Pulp, our line of organic fermented gourmet hot sauces and chili based condiments continues to gain momentum in the premium condiments category and resonates with consumers seeking healthy, elevated alternatives to traditional sauces.

Speaker 2

Vitamin Whey and Vitamin Whey offer a growing portfolio of whey and plant based protein powders with design designed to support recovery, overall wellness and daily nutritional needs. The brand continues to combine advanced supplementation with consumer friendly taste and value. Following a successfully established retail presence, we launched a dedicated e commerce platform at vitaminway.com to broaden access and accelerate brand growth. Gross profit increased 283% year over year, nearly quadrupling from Q1 twenty twenty four, while gross margin improved to 3.2% from 0.7%. This improvement reflects stronger cost control and improved SKU mix.

Speaker 2

One of the most transforming milestones of the year announced just yesterday was our $15,500,000 acquisition from natural shrimp farms. Funded through a mix of preferred equity and institutional investment. This deal strengthens our balance sheet without increasing debt and further extends our vertically integrated model. The acquisition includes a fully operational aquaculture facility in Fort Dodge, Iowa and two patented water treatment technologies. These patented innovations will be integrated into our greenhouse operations to enhance water efficiency and reduce environmental impact, complementing our ongoing nanobubble irrigation trials with PRSAIA, New Jersey Institute of Technology, the EPA and the USDA, which have already shown up to a 55% increase in yield and 30% reduction in harvest cycle time.

Speaker 2

In addition, the Iowa facility offers valuable infrastructure for expanded R and D warehousing and potential nutraceutical development, supporting our goals around vertical integration, sustainability, and long term innovation. Our commitment to sustainability remains central to our identity. Through initiatives like Walmart's Project Gigaton, we helped avoid nearly 11,800 metric tons of virgin plastic in 2024. Conserved over 28,000 gallons of diesel and diverted 103 tons of food through donation programs. We're proud to be recognized in the FoodTech 500 as a top 50 company and continue to lead the way in our controlled environment agriculture with real measurable impact.

Speaker 2

With a focused strategy, brand momentum and an even stronger operational foundation, we believe Edible Garden is well positioned to deliver long term value for our customers, partners and shareholders. I would now like to turn the call over to Kefoulas, our Interim CFO, who will review the financial results for the quarter ended 03/31/2025. Kostas?

Speaker 3

Thanks, Jim, and good morning, everyone. For the quarter ended 03/31/2025, revenue totaled $2,700,000 a decrease of 13.2% compared to $3,100,000 for the three months ended 03/31/2024. This decline was primarily driven by the company's strategic exit from the lower margin floral and lettuce products. Nonperishable revenue, however, grew 15% year over year in the quarter, a clear indication that our innovative shelf stable brands like Kix, Force Nutrition, Pickle Party, Squeezables, Pulp and Vitamin Whey are resonating with customers. Cost of goods sold was $2,600,000 for the first quarter of twenty twenty five compared to $3,100,000 for the same period in 2024.

Speaker 3

The decrease reflects the decreased revenue in the quarter and as we've seen previously in Q1. Gross profit increased to $88,000 compared to $23,000 in the prior year period, representing an increase of approximately 283% year over year. Gross margin improved to 3.2%, up from 0.7% in 2024, reflecting early returns from the company's shift to higher margin shelf to stable product lines. Selling, general and administrative expenses were $3,300,000 for the quarter, down from $3,900,000 in the prior year period. The reduction was primarily attributable to lower personnel costs as we continue to offset optimize our cost structure and the roll off of severance expenses incurred in the first quarter of twenty twenty four related to executive transitions.

Speaker 3

Net loss was $3,300,000 for the first three months ended 03/31/2025, compared to a net loss of $4,000,000 for the first three months ended 03/31/2024. The year over year improvement in net loss was primarily driven by cost reductions along with increased contribution from higher margin non perishable product sales. With that, operator, please open the line for questions.

Operator

Thank you very much. We will now be opening the floor for questions. Your first question is coming from Anthony Vendetti of The Maxim Group. Anthony, your line is live.

Speaker 4

Thank you. Good morning.

Speaker 5

I was just I was just wondering,

Speaker 4

this this acquisition of Natural it it it was completed. Can you talk about what your initial plans are, for Natural Shrimp and talk about what synergies are available to you immediately and then down the road what the cross selling synergies could be.

Speaker 2

Anthony, good morning. How are you? Thank you for dialing Yes, a couple of quick things here to answer your question. The two it's like basically three driving sort of initiatives that will happen immediately at the facility. First of all, facilities in a key place for us as we're expanding our relationships with the big retailers out that are based out there, whether it's Target or Walmart or Meijer, And the facility has considerable warehousing room for us, which we need, frankly.

Speaker 2

You know, we're in Grand Rapids, and Grand Rapids is getting full. And as we start to shift into more shelf stable products, some of which will require refrigeration, those capabilities are already existing at this facility. So that I'm excited about. Where it's located, gonna give allow us to continue to stretch out, you know, further west, allow us to penetrate where we're already strong as a company in the Midwest and getting stronger and start to run some some really great programs, especially leading into the second half of the year. These products that require refrigeration will be able to be housed there and transported in the central part of the country.

Speaker 2

So that's great. The R and D aspect of it, I'm extremely excited about. You know, shrimp has many therapeutic qualities in addition to tasting great. So it's kind of twofold. It's not only are we going to continue the innovation that the existing team has in order to leverage better, healthier, cleaner shrimp in an era where people are concerned about tariffs and whatnot.

Speaker 2

And yet being able to do things stateside like that long term in a sustainable fashion plays right into what we're known for with being zero waste inspired. So that's, I think, I don't have another word for it other than just very cool. And then there's just the opportunity to take what we learned from Raising Shrimp. There's a bunch of patents that they already have, right, that'll help us not only in the greenhouse aspect, but also in water treatment, but also just with the nutraceutical business that, you know, just continues to accelerate for us. As I've mentioned to you in the past, I come out of that business.

Speaker 2

It's where I started between, you know, TwinLab years ago and then Nature's Bounty for years before we sold out to Carlisle. I'm excited about just developing new innovative ingredients, utilizing shrimp. We know that shellfish in general is used for joint care and other growing areas of that business. So for us, it's a super exciting time. I've been out there quite a few times through due diligence and it's quite a facility.

Speaker 2

These guys, they got a real head start on quite a few people in the industry focusing on this part of the business. So I think we're going to be able to do quite a few things with it. Okay. And then

Speaker 4

are you able to provide what the revenues were for natural shrimps in 2024? And then would this be gross margin accretive?

Speaker 2

As of right now, it's fairly nominal, the sales part of the business. It's, you know, it's not gonna be I wouldn't say it's gonna be, you know, margin accretive, but I think from their existing business. But as we sort of morph and and expand their business, you know, utilizing, like I said, some of the some of the existing space that they have using, like I said, this is a large facility that really gives us penetration to market. There's a lot of excitement around the shrimp shells to develop new products in nutraceuticals. So for us, the existing business is the existing business.

Speaker 2

It's not it was really kind of a demonstration mode and R demonstration mode and R and D facility. We're going to accelerate the R and D piece, start to leverage the facility in order to immediately impact our margin as it relates to warehousing and logistics. So that to answer your question, you know, we'll we'll be able to, you know, leverage our distribution to accelerate what they're currently doing and their sales, as well as, you know, leverage their, the space of the facility to be able to lead to margin accretion. So I think that'll happen pretty quickly. It's just a function of totality of what's sitting out there.

Speaker 4

Okay. And then lastly, switching back to edible gardens. Can you talk about the sports nutrition line? How that specifically did this quarter? And are you happy with that ramp?

Speaker 4

And do you expect that to continue

Speaker 2

20 ecstatic. Look, I love the business. So it's always like people love to work on things that they really take pleasure in. Coming out of brands like Body Fortress and Metrix and Pure Protein and then to be able to do this, you know, better is with this type of line, which is, you know, the right product at the right time, which is so much of what we're focused on as a company. We just gained distribution in the Midwest big box retailer.

Speaker 2

Those orders got shipped in Q2, so in April, so they're not reflective in Q1. And then, you know, we've got, you know, some big launches coming up in the very near term. So I couldn't be happier. We developed the product with NutraCom. They've been a great partner.

Speaker 2

We just continue to deepen that relationship. And I think we're just in such a great spot. And we're continuing to invest not only in people, infrastructure, but also marketing support. We're adding some salespeople to really continue to push out into the marketplace. We continue to go to key trade shows.

Speaker 2

So I'm excited. I think you're going to see more from us. Some of our existing nutraceutical business has really started pick up. I think it's an interesting time, you know, protein, different forms are hot and continue to be hot. All you have to do is, you know, go and look into the news and see where people are at with that.

Speaker 2

So it's a great time to be doing what we're doing. It really is. I, you know, I just want to get there faster, but also be able to do it where we can do it, you know, in the right manner so that we can, you know, continue to have the infrastructure and the integrity we need deliver on what are great relationships that we have out there, because we've always worked hard for our retailers shipping at a super high rate. We've excelled in fresh goods, which is super challenging. Now, if we can marry the two and then leverage the platform of the stores that we're in and pick up new stores and be in almost every corner of the grocery store, as well as our significant online presence that will that's going to be growing and accelerating with our relationship with Piranha, which is, you know, an agent, you know, an agency that was, you know, basically approved by Amazon for us to work with.

Speaker 2

So, once again, I'm pretty I'm very psyched about the business and particularly KIT because I think it's just timing's everything sometimes. And I think we got it.

Speaker 4

Okay. Great. Thanks, Jim. I appreciate all the color. I'll hop back in the queue.

Speaker 2

Alright. Thanks, Anthony.

Operator

Thank you very much. Our next question is coming from Nick Pincus of Forest Capital. Nick, your line is live.

Speaker 5

Hey guys. Congrats on the solid results and the positive shift in the product mix. You touched on this a bit, but I was just hoping if you could elaborate some more on the drivers behind the sustained improvement in gross margin, particularly as you transition towards these higher margin shelf stable products, but also specifically what strategic initiatives are you pursuing to accelerate the growth of these product lines? And how do you see this part of the business developing going forward?

Speaker 2

Thank you. Great question. Welcome, Nick. Look, it gets boiled down to kind of a few things. And for us, you know, it's continued investment in the company, starting with getting the right people, you know, that we continue to do and we continue to elevate the people that come into the business as we become more and more successful, allows us to drive innovation, build strong relationships, the right products, as I just mentioned about Kik, and having the right products at the right time.

Speaker 2

And then the right support, that right support, you know, ties back to not only the products and the people, but also investment in marketing and branding. So for us, you know, this shift to just diversification of the portfolio on the heels of SKU rationalization, I think, really positioned us to drive that gross margin top line, which I think is going to be exciting coming into the second half as we start to gain traction with these products and get them into stores and get them online and get people, you know, trying them. We had a great trade show at Expo West with pickle party. And we just came out of the came out of the show with a lot of excitement around that whole line, which is just like I said, functional and exciting. So right now, it's a great time to be at Edible Garden because it's exciting and the company's really evolving and fun to watch the people who've been here with us and with management, with myself for the last decade, watch the company evolve and transform to, you know, from from a, you know, one greenhouse and, you know, a handful of accounts to spreading out through the country and internationally and, and bringing in diverse products that, you know, that people like and are relatable and the people who work or respond responding.

Speaker 2

So, it's fantastic.

Speaker 5

Well, that's great. And just look forward to following your progress.

Speaker 1

Good luck.

Speaker 3

All right. Thanks, Nick.

Operator

Thank you very much. Well, we appear to have reached the end of our question and answer session. I will now turn the call back over to the management team for any closing comments.

Speaker 2

Sure. Thank you for joining us today. Q1 twenty twenty five marked a strong start to the year with clear progress on our strategy to focus on a higher margin, nonperishable products, brands like Kick, Pickle Party, Squeezables, Pulp and Vitamin A are gaining traction. And we're seeing early financial returns to improve margins and reduce losses. The recent acquisition of Natural Shrimp facility adds valuable R and D and operational capabilities, while supporting our commitment to sustainability and vertical integration.

Speaker 2

Combined with expanded retail relationships and growing e commerce e commerce reach, we believe we've built a strong foundation for continued growth. We're confident in our path forward and excited about what's ahead. Thank you for your continued support.

Operator

Thank you very much. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. We thank you for your participation.

Speaker 2

Thank you, everybody. Yep. Bye.

Operator

Thank you.

Speaker 3

Thanks, everyone.

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Edible Garden Q1 2025
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