Sadot Group Q1 2025 Earnings Report

Sadot Group EPS Results

• Actual EPS: $1.60
• Consensus EPS: $2.40
• Beat/Miss: Missed by -$0.80
• One Year Ago EPS: N/A

Sadot Group Revenue Results

• Actual Revenue: $132.17 million
• Expected Revenue: $171.91 million
• Beat/Miss: Missed by -$39.74 million
• YoY Revenue Growth: N/A

Sadot Group Announcement Details

• Quarter: Q1 2025
• Date: 5/21/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, May 15, 2025
• Conference Call Time: 11:00AM ET

Sadot Group (NASDAQ:SDOT) provides supply chain solutions that address growing food security challenges worldwide. The company is involved in the agri-commodity sourcing and trading operations for food/feed products, such as soybean meal, wheat, and corn; and farm operations, including producing grains and tree crops in Southern Africa. The company is also involved in the food service operations across the United States. The company was formerly known as Muscle Maker Inc. and changed its name to Sadot Group Inc. Sadot Group Inc. was incorporated in 2019 and is headquartered in Fort Worth, Texas.

Sadot Group Q1 2025 Earnings Call Transcript

Key Takeaways

• Strong Q1 financial performance: AgriFoods revenue reached $132.2 M, up 24.1% YoY, with net income of $0.9 M (versus a $0.3 M loss) and EBITDA rising to $2.5 M from $0.1 M.
• Healthy balance sheet: Cash balance of $1.9 M and working capital surplus of $21.9 M, with ongoing reinvestment into commodity trading and strategic asset acquisitions.
• Interim CEO appointed: David Hanna, effective June 2, 2025, brings extensive global agri-food, commodity trading, M&A, and financing experience to drive operational efficiencies and shareholder value.
• Margin improvement strategy: Focus on higher-margin containerized specialty crops (pulses, sesame seeds) and fee-based pet food ingredient services to lift sub-1% gross margins.
• Restaurant division sale delays: The sale of Pokemoto and MMG chains is progressing slower than anticipated despite positive Q1 net income of $0.1 M, prolonging divestiture timing.

Presentation

[Operator]

Greetings. Welcome to Sadot Group Q1 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Aimee Infante, Chief Marketing Officer. You may begin.

[Aimee Infante, CMO at Sadot Group]

Thanks, Operator. Before we get started, we would like to state that this call may include forward-looking statements pursuant to the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. To the extent that the information presented on this call discusses financial projections, information, or expectations about the business plans, results of operations, products or markets, or otherwise make statements about future events, such statements may be forward-looking. Such forward-looking statements can be identified by the use of words such as should, may, intends, anticipates, believes, estimates, projects, forecasts, expects, plans, and proposes. Although management believes that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from such forward-looking statements.

[Aimee Infante, CMO at Sadot Group]

You are urged to carefully review and consider any cautionary statements and other disclosures, including the statements made under the heading risk factors in Sadot Group Inc's most recently filed Form 10-K and elsewhere in documents that Sadot Group Inc files from time to time with the SEC. Forward-looking statements speak only as of the date of the document in which they are contained, and Sadot Group does not undertake any duty to update any forward-looking statements except as may be required by law. For this call, all numbers disclosed have been rounded to the closest 100,000, and percentages have been rounded to the closest tenth of a percent unless otherwise noted. All numbers disclosed in this report are the amounts attributable to Sadot Group and exclude the portion related to the non-controlling interests. On this call, we will refer to Sadot Group Inc.

[Aimee Infante, CMO at Sadot Group]

as Sadot Group, Sadot, or the Company. With me on the call today are Sadot Group's Chief Financial Officer, Jennifer Black, and Interim Chief Executive Officer, David Hanna. Throughout this presentation, we will be referring to David Hanna as CEO, which his appointment begins June 2nd, 2025. Jennifer will be presenting prepared remarks related to Sadot Group's financials filed on May 14th, 2025, and those documents may be found on the company's website, newswire feeds, and on the SEC's website linked from the Sadot Group's website at www.sadotgroupinc.com under the investor tab. At this point, I would like to turn it over to Sadot Group's CFO, Jennifer Black. Jennifer.

[Jennifer Black, CFO at Sadot Group]

Thank you, Aimee. Before I begin, please note that our financial results for the quarter ending March 31st, 2025, on Form 10-Q were filed with the SEC yesterday, May 14th, 2025, along with the press release on that same day. Our Sadot Agri-Foods revenue was $132.2 million in Q1. The company completed 76 transactions in Q1 across 17 different countries. Revenue increased by $25.7 million as compared to Q1 2024, an increase of 24.1% over 2024. Net income attributable to Sadot Group improved to $0.9 million in Q1 2025 compared to a $0.3 million net loss in Q1 of 2024. This is an improvement of $1.2 million over Q1 of 2024. EBITDA rose to $2.5 million compared to a $0.1 million in the prior period.

[Jennifer Black, CFO at Sadot Group]

Both basic and dilutive earnings per share as attributable to Sadot Group was positive $0.18 per share compared to a negative $0.06 per share in the prior year. SG&A expenses were $3.1 million this quarter, an increase of over $1.7 million compared to last year. The increase in SG&A was mostly attributable to reclassifying some expenses from cost of goods sold to SG&A, which better reflects the actual cost of goods sold, shifting wages for administrative personnel, insurance, and other items into the general SG&A account. Looking at our balance sheet, the company had a cash balance of $1.9 million and working capital surplus of $21.9 million. It is important to note that as a part of our ongoing strategy, we continue to reinvest our cash into agri-food commodity trading business to drive revenue, growth, and acquire strategic assets.

[Jennifer Black, CFO at Sadot Group]

We are proud to report Q1 was our fourth consecutive profitable quarter and an improvement versus Q1 of 2024, which was our last negative quarter we reported. We believe positive changes are occurring across our business. With that, I would like to turn the call over to David to introduce himself.

[David Hanna, CEO at Sadot Group]

Thank you, Jennifer. As has been previously announced, I'm assuming the interim CEO position effective June 2nd, 2025. I'd like to spend a few minutes introducing myself to everyone. I joined Sadot in June of 2024, and I'm currently the Executive Vice President and Head of Sadot Canada. I will also be performing the dual role of interim CEO for Sadot Group. There are many moving parts of Sadot. We are a rapidly growing company. What's unique is this expansion is happening on a global basis, making it even more complex than a typical emerging company, where we handle the complexities of international rules, customs, time zones, translations, etc. However, through our vast network of employees and consultants, we have been able to manage this growth to date. With this growth, it is natural for companies to experience inefficiencies between new divisions, countries, etc. Sadot is no different.

[David Hanna, CEO at Sadot Group]

Sadot is at a point where we need to take a hard look at how we improve our balance sheet and income statements within a controlled growth plan. I believe my background and skill set will be key in attacking these challenges head-on. I have been involved in rapid growth companies in the past and fully understand the challenges. I even founded my own business focused on pulses, specialty crops, distribution and trading of ingredients for the plant-based protein sector. I grew this business to over $80 million in containers, truckloads, and rail cars to over 35 countries around the world. We developed a plant-based pet food ingredient division with sales into leading pet food manufacturers across North America, while also becoming the leading Canadian exporter of specialized peas for the pea protein extraction industry. I bring a unique skill set to the CEO role for Sadot.

[David Hanna, CEO at Sadot Group]

Not only will I bring global agri-foods and commodity trading experience from building agri-food businesses in excess of $500 million annually, I will also be combining this experience directly with extensive financial experience in M&A, public and private equity, and debt financing, where I was involved in transactions totaling more than $1 billion. I believe I am a leader who can bring all the components of the Sadot business together, both the international commodity trading business and agri-foods operations, plus the financial acumen and experience to drive shareholder value through various mechanisms, including trade finance, M&A, debt financing, operational efficiencies, and cost cutting. On a different note, if you are interested in receiving press releases and other company information automatically, please visit our website at www.sadotgroupinc.com. Go under Investor Relations and then Investor Alerts and sign up for these announcements, which will be sent to your email.

[David Hanna, CEO at Sadot Group]

It's a great way to keep informed of all announcements. I would like to turn the call back over to Jennifer to review a few questions that we have recently been asked by various parties.

[Jennifer Black, CFO at Sadot Group]

Thanks, David. The company receives questions or comments from the investor community during the quarter, and we like to summarize and address these questions during our calls. The first one we have is, can you comment with an update on the general tariff environment and how it affects Sadot's business? David?

[David Hanna, CEO at Sadot Group]

There has certainly been a lot of movement on tariffs globally over the past few months. While the U.S. tariffs cover a wide range of products, industries, and countries, we can say confidently that we do not believe tariffs will have a significant material impact on Sadot. Sadot is a global company. We have conducted agri-commodity trades with 33 countries. The large majority of our revenue is generated outside of the United States, between other countries of origin or destination, having no impact from the new tariffs. For the full year 2024, only a marginal portion of Sadot Group's global trade revenue was directly related to trades originating from or delivering into the United States. Our revenue is mostly generated by agri-commodity trades between countries all over the world. For example, we recently announced a trade to our new South Korea subsidiary between Australia, Kenya, and other countries.

[David Hanna, CEO at Sadot Group]

Because this trade was not originating from or delivering into the United States, it was not subject to the new U.S. tariffs. In addition, our commodity trading business model and products, which represent over 99% of total company-wide revenue, are not considered consumer discretionary items. Everyone has to eat, and tariffs, if they apply, are costs that are usually passed through 100%. What tariffs can impact are what countries become more competitive as origins. We believe the company can manage in almost any environment due to the nature of the food-related products we trade, as well as the global sourcing and distribution of our operating network. Sadot Group remains vigilant in monitoring the situation and will provide updates should any significant material changes arise. For now, the tariffs should be considered a non-material event concerning Sadot's global business.

[Jennifer Black, CFO at Sadot Group]

All right. Thanks, David. The second question we have is kind of a continuation on the tariff subject. How have the tariffs between the U.S. and China impacted the business directly?

[David Hanna, CEO at Sadot Group]

Again, we have a flexible trading model where we can source products from different countries to satisfy demand. What we've seen is that China's demand for major products like soybeans has shifted from U.S. origin product to other markets such as Brazil. We're studying this trade flow to capitalize on new opportunities created by the change in market dynamics, particularly where we can leverage our inland origination capabilities.

[Jennifer Black, CFO at Sadot Group]

Thanks, David. The third question we have, the company's gross margins have been less than 1%. How are you going to improve those margins?

[David Hanna, CEO at Sadot Group]

We're looking at a number of areas where higher margins are more achievable, specifically containerized specialty crops like pulses, such as lentils and beans and sesame seeds. These are lower volume products, so this strategy won't drive sales growth, but will contribute to higher gross margins as we develop those business lines. Both the Canadian and Brazilian teams are focusing primarily on these product lines. We also signed a management services agreement for a pet food ingredients processing business in Canada. While relatively small, this is a fee-based contract that has no related cost of goods sold and contributes fully to gross margin. We're continuing to look for more opportunities like this as part of our development as a company.

[Jennifer Black, CFO at Sadot Group]

All right. The last question we have, please provide an update on the sale of the restaurant process.

[David Hanna, CEO at Sadot Group]

While the sale of the restaurants has taken longer than anticipated, we are making progress, and we have multiple parties interested in acquiring the Pokemoto and MMG chains. We are finalizing a new LOI with a qualified buyer. The Pokemoto chain continues to open new locations with recent openings in California, Alabama, Florida, Connecticut, and Massachusetts. We also have new locations opening over the next few months in Claremont and Fort Lauderdale, Florida, Kingstown, Rhode Island, and Puerto Rico. We currently have 41 open locations and another roughly 60 franchise agreements that have been sold but not opened to date. We continue to expand Pokemoto. The restaurant division in Q1 reported positive $107,000 net income. While we want to complete the sale as quickly as possible, we're also trying to get the maximum value throughout the sale process.

[David Hanna, CEO at Sadot Group]

We thank all of our investors, stakeholders, and team members for your time and continued support of Sadot Group.

[Operator]

Thank you. This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.

Participants

Executives

• Aimee Infante, CMO
• Jennifer Black, CFO
• David Hanna, CEO