Q4 2023 Edible Garden AG Inc Earnings Call
None: [music].
Greetings and welcome to.
The edible gardening fourth quarter business update conference call.
At this time all participants are in a listen only mode.
The question and answer session will follow the formal presentation.
None: If anyone should require operator assistance during the conference.
None: Please press star zero on your telephone keypad.
None: Please note this conference is being recorded.
None: Although I would turn the conference over to your host Mr. Ted Eva of Investor Relations, Sir you may begin.
Theodore Ayvas: Thanks Ali good morning, and thank you for joining edible gardens quarter and year ended December 31, 2023 conference call and business update on the call with US today are Jim <unk>, Chief Executive Officer available Darden and of course, that's a foolish interim chief financial officer of vegetable Garden.
Theodore Ayvas: Earlier this morning, the company announced its operating results for the three months and year ended December 31 2023.
Theodore Ayvas: The press release is posted on the Companys website Www Dot edible Garden AG Dot Com. In addition, the company has filed its annual report on Form 10-K, with the U S Securities and Exchange Commission, which can also be accessed on the company's website as well as the Sec's website at Www Dot SEC Dot Gov. If you have any questions.
None: After the call or would like any additional information about the company. Please contact crescendo communications at 2126711020.
None: Before Mr. Craig to review the company's operating results for the quarter and year ended December 31, 2000, Twenty's rates 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.
None: <unk> strategy and plans and our expectations for future operations are forward looking statements. 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.
None: 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 and uncertainties.
And assumptions as described in the company's filings with the SEC, including the company's annual report on Form 10-K for the year ended December 31, 2023, 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 adverse.
None: Lee from those anticipated or implied in the forward looking statements.
None: Should not rely upon forward looking statements as predictions of future events, although the company believes that the expectations reflected in the forward looking statements are reasonable it cannot guarantee future results levels of activity performance or achievements. In addition, neither the company nor any other person assumes responsibility for the accuracy.
None: Complete is if any of these forward looking statements the company disclaims any duty to update any of the forward looking statements except as required by law.
None: All forward looking statements attributable to the company are expressly qualified in their entirety by these cautionary statements as well as others made in this conference call you should evaluate all forward looking statements made by the company in the context of these risks and uncertainties, having said that I will now turn the call over to Jim <unk>, Chief Executive Officer of vegetable Garden Jim.
Thanks, Ted good morning, and thank you to everyone for joining US today, we are extremely pleased with the 21.6, increasing our annual revenue that we reported for 2023, along with an even more impressive 32.8 year over year increase in revenue for the fourth quarter. This robust growth underscores the effectiveness.
None: Of our efforts over the past year to leverage our distribution network in order to drive revenue.
None: Strategy and further develop our distribution network is two products, adding new retail partners and expanding our product offerings with existing partners in 2020 three we achieved significant success in both areas. Thanks to our growing industry market position driven by our outstanding service and reliability.
None: As a result edible garden has become a go to partner for retailers seeking a trusted source for organic and sustainable products. Additionally, the company continues continually strives to identify additional opportunities to boost profit margins. The proven prudent management of our operations is reflected in our financials by the increase in our gross profit margin by.
None: <unk> 270 basis points in 2023 to five 9% of revenue nearly double with three point to gross profit margin. We achieved in 2022, and that's the and the 767 basis points improvement in our operating margin. Moreover, our gross profit increased to six 9% of revs.
In the fourth quarter, we believe that by continuing to add higher margin products to the edible garden product line, we will be able to further increase our gross profit margin in 'twenty 'twenty four and in the future years to come.
None: We have further leveraged our platform to enrich and broaden our wider a wider range of edible garden products. We recently partnered with top suddenly markets, introducing our sustainable herbs to 149 stores across New York, Pennsylvania, and Vermont. Additionally, uncle just that these marketplace a division of our best Proteus is now carrying edible garden herbs and their 12 locations throughout New York and New Jersey.
None: These new partnerships further enhance our footprint in the north eastern United States, marking a significant step forward in making our sustainable fresh produce more accessible to consumers in the region.
None: In February we entered into a three year agreement with a leading U S. Food retailers have broadened the range of edible garden products available in their stores. This expansion encompasses a diverse selection of our offerings, including parted and fresh cut herbs fresh cut basal and week Ras the partnership goes beyond merely increasing our product assortment and introduces a fresh and innovative displays designed to elevate.
None: Our brands visibility and probably with prominent on the retailer shelf.
None: These initiatives initiatives underscore our commitment to deepening our relationship with our retail partners aiming to better satisfy the requirements and simplify the shopping experience for their customers in the fourth quarter of 2023, we expanded our offerings at Myer stores with two new flavors from our vitamin away collection. Notable notable for its blood of high quality whey protein amino.
None: While providing excellent nutritional value at an affordable price. This addition is expected to bolster edible garden's reputation as a flavor maker through our ongoing collaboration with neutral com, where innovative flavors. This success in vitamin way supports our belief that these flavors world against the brand and facilitate nationwide expansion.
None: Italy, we enhanced our production capabilities at our greenhouse operations in New Jersey, and Michigan, which is led to a decrease dependency on contract growers, allowing us greater control and flexibility in our operations, while impacting potential profitability. Moreover, our investment in edible gardening heartland has been rewarding incorporating advanced technologies such as our.
None: Terry Green thumb greenhouse imagine system, which significantly improves the efficiency of our supply chain a lot of the competition tens of thousands of fall Ornamentals just in time for the fall gardening season, we anticipate.
None: <unk> profit from the margins on the AR or metal sector and are confident that this expanded line of business will have a positive effect on the company's overall profitability.
None: A major milestone for the company in 2023 was the introduction of pulp our cutting edge collection of sustainable Gourmet sauces in Chile based products, which follow up which allowed edible gardens to enter the global sauces and condiments sector. The sector is projected to grow from $172 billion in 2021 to over 240 billion by 'twenty two.
None: The eight expanding into a new cabinet product category was significant for the company as it provides us with higher margin products with longer shelf life. In addition, it provides the edible garden brand with additional visibility as a product will be located in retailers' refrigerated sections, which are adjacent to our products that are already that they are already carrying in the produce section of their local.
None: <unk>.
None: Within a short time, we have introduced pulp to many new retailers and markets. After initial launch at whole foods market retail locations across the mid Atlantic and South Eastern divisions in the summer of 2023 rapidly, adding new retailers are now, saying pulp mill products pulp is now available at more Williams 16 locations in New York Metropolitan area Dearborn market 26.
None: Locations in the greater St. Louis Metropolitan area, as well as what it means market with.
None: With 19 locations across Wisconsin, and Illinois, Most recently target joined a growing list of retail partners carrying the pulp line in 2020 for expansion into the targets South eastern stores significantly expands our distribution network for all edible garden products, which now spans over 5000 retail locations across the nation, including several major big box retailers at Elba.
None: Martin will support this launch by Rolling out a robust marketing campaign that includes sampling geo targeting influencer partnerships and promotional pricing. We are confident that once customers fire sustainable USDA organic blanda bold gourmet sources. They will they will be eager to explore more offerings in the product line given targets nationwide presence, we anticipate that this collab.
None: <unk> will significantly boost the growth and visibility of both our pulp product line and edible garden brand overall.
None: In early March of this year, we announced that K. He distributors the premier distributor of natural and organic specialty and fresh product is now carrying our pulp product line K. He's expansive distribution network encompasses over 31000 natural food stores chain and independent grocery stores E Commerce with e-commerce retailers and other specialty product retailers across North America.
None: January 2024, we launched pulp the pulp e-commerce site enhancing accessibility to our gourmet sources by enabling online purchase directly this moves significantly broadens consumer attitude towards distinctive flavors. The overwhelming positive reception of pulp is underscored our reputation as the flavor maker with a unique peppers training sauce enthusiasts into fishing idols.
Thank you to our thanks to our ecommerce platform customers across the country. We can now enjoy Atlanta bold flavors of pulp from their homes.
Earlier this year the U S patent and trademark office or awarded edible garden tuna patents. The first patent pertains to green thumb, a web based clean out management system.
None: And demanding system planning system that enables the company to enhance our supply chain, which has led to improved shipping and fill rates alongside notable sales growth. This was the third distinct patent awarded for this advanced system. The second patent highlights our commitment to innovation through our proprietary self watering display technology. This technology has been a game changer for.
None: The company extending plant plant shelf life, and shrink fashion and dramatically, reducing spoilage and retailer outlets align with us are aligned with our zero waste inspired mission in self watering displays all retailers to showcase plants at their peak minimizing waste and delivering superior products to customers.
None: Pat patents are testament to edible gardens, leading role in the AD Tech industry further demonstrating the companys unwavering commitment leading edge innovation through the deployment of advanced technology, such as these patents, we are driving efficient operational efficiency and enhancing.
None: The profitability highlighting edible gardens commitment to sustainable development and its position as a leader in agricultural technology.
None: Recently, the company was awarded several grants to cover various expenses related to the organic crops certification and training costs greenhouse facility can belt with your New Jersey in Grand Rapids, Michigan, and Michigan. The company was granted funding by the going going Pro talent fund overseen by the Michigan Department of Labor and economic opportunity.
None: And facilitated by Michigan works this support.
None: This is designated to cover training costs for our staff at the edible gardens Heartland facility in Grand Rapids, Michigan, focusing on essential skills like supply chain management transportation and logistics. Additionally, we secured a grant from Michigan, Occupational safety and Health administration, which will assist in creating a safer and healthier work environment edible garden Heartland.
None: Thereby reducing the rest of the workplace accidents and health issues among employees.
None: In New Jersey, the company was awarded a grant by the United States Department of Agriculture organic certification program managed by the Hackett Town Farm Service Agency. This grant provides financial assistance to organic producers and handlers offering reimbursement to help cover the expenses related to obtaining organic certification and processing and handling certifications the grants.
None: We've received underscore our commitment to food safety and are a valuable addition to our research collaborations.
None: We are also engaged in a project with New York, New York Institute of Technology, USDA and the EPA to explore the impact of nano pub old technology on the safety and process more fresh Brewers. Additionally, our collaboration of Auburn University Department, Horticulture and tackle food safety challenges associated with fresh produce these collaborations highlight our dedication to upholding the <unk>.
None: Highest standards of food safety and quality across our product lines.
None: I would like now to turn the call over to close to the fullest, who recently joined edible garden as our interim Chief Financial Officer, who will review the financial results for the three months and year ended December 31, 2023 caused us.
Speaker Change: Thanks, Jim and good morning, everyone.
Speaker Change: Starting with the fourth quarter of 2023 results. The company reported revenue of $4 1 million, an increase of 32, 8% compared to $3 1 million for the.
Speaker Change: The fourth quarter of 2022.
Speaker Change: This increase was driven by higher demand from the existing customer base expansion of our product lines and the expansion of our product foot print and key retail partner stores.
Speaker Change: Cost of goods sold was $3 8 million for the three months ended December 31st 2023, compared to 3 million for the 2022 comparable quarter. The increase was the result of costs related to the build out and staffing of our heartland facility increases in rates charged by our suppliers higher packaging costs studio.
Speaker Change: <unk> and higher labor costs.
Speaker Change: Despite the increase in Cogs, we expanded margin by four 5% year over year.
Speaker Change: Selling general and administrative expenses were $2 6 million for the three months ended December 31, 2023, compared to $3 1 million for the same quarter in 'twenty two.
Speaker Change: The decrease was primarily driven by a reduction in professional services expenses related to our IPO along with costs associated with the build out of our Heartland facility.
Net loss was $3 1 million or 54 cents per share for the three months ended December 31, 2023, compared to a net loss of $3 million or $9.13 a share for the quarter ended December 31 2022.
Speaker Change: The net loss for the three months ended December 31st also included a onetime noncash impairment charge of 700000 related to the write down of legacy assets acquired from our predecessor company.
Speaker Change: Now turning to the full year of 2023 results revenue totaled $14 million, an increase of two and a half million dollars or 21, 6% compared to $11 6 million in 2022.
Speaker Change: At $2 2 million revenue increase was attributed to sales of our prototype loyal product driven by a mix of organic growth and new customers. Additionally, sales of our vitamins and supplements increased 324000. During the year ended December 31, 2023, driven by consumer demand.
Speaker Change: Cost of goods sold was $13 $2 million for the year ended December 31, 2023, compared to $11 $2 million for the year ended December 31, 2022, the increase was primarily due to $2 $6 million of higher costs for operating the edible garden Heartland facility.
<unk> transitioned to growing our herbs and lettuce products during 2023.
Speaker Change: These increases were offset by a 377000 decrease in freight and shipping costs and a decline of $264000 in costs for supplies and raw materials for edible garden flagship facility.
Speaker Change: Gross profit increased to 126% or 458000 to $822000 for the for the year compared to 364000 last year.
Speaker Change: Gross profit margin increased by 270 basis points to 585% of revenue in 2023 compared to 315% of revenue in 2022 the improvement in margins was primarily attributed to less reliance on contract cars in 2023 persons point in 'twenty two.
Speaker Change: Selling general and administrative expenses were $10 million for the year ended December 31st 2023, compared to $9 $4 million for the year ended December 31, 2022. The increase was primarily driven by additional costs incurred to operate the edible gardening heartland facility.
Speaker Change: Net loss was $10 2 million or $3.08 per share for the year ended December 31, 2023, compared to a net loss of $12 $5 million or $48.68 per share last year. Please note per share amounts have been adjusted to reflect the all stock split.
Speaker Change: Net loss for the 12 months ended December 31, 2023 also included a onetime noncash impairment expense of $700000 related to legacy assets acquired from our predecessor company.
Speaker Change: In conclusion, we continue to focus on providing outstanding products and value to our customers, while improving the financial performance of the company. We have demonstrated in 2023 that were focused on growth, while improving profitability and I'm excited for what's to come in 2020 four operator, please open the call for questions.
None: Find key.
None: At this time, we will be conducting a question and answer session.
None: If you would like to ask a question. Please press star one on your telephone keypad.
A confirmation tone will indicate your line is in the question queue.
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None: One moment, please while we poll for questions.
None: Thank you.
None: Our first question is coming from Nick Sherwood with Maxim Group Your line is life.
Nick Sherwood: Thank you good morning, and congrats on the quarter and the year can you provide us an update on the build out and the integration of the Heartland facility.
Nick Sherwood: Okay.
Nick Sherwood: Hi, Nick its Jim Kraus, how are you.
Nick Sherwood: Good how are you.
Nick Sherwood: I'm good.
James E. Kras: The status right now is that the the facility we've made a significant investment is currently shipping.
James E. Kras: Meyer, which is one of our largest customers.
James E. Kras: Significant volume.
James E. Kras: We deployed not only argument about technology to help US run the operations. We are a fully operating operating state of the art.
James E. Kras: Pack House, which we just.
James E. Kras: Put in some new machinery in the last 30 to 60 days that help.
James E. Kras: Lower our manpower cost while.
Increasingly the ability to ship more units.
James E. Kras: And in April we'll be bringing in a considerable amount of our Florence pilot Hum higher margin.
James E. Kras: Product, that's currently already being grown in the greenhouse with five acres there that will convert into.
James E. Kras: Vertically integrated in April it will start to see some of the benefits of that in May So we'll be 100% fully operational.
James E. Kras: <unk> come in the next few weeks with us handling all of our product that's in the Midwest flowing through our facility. So once again five acres fully operational for processing.
James E. Kras: 100% deployed as well as.
James E. Kras: It's a software overlay.
James E. Kras: Green thumb being deployed.
None: Awesome. Thank you for that color and then kind of switching gears.
You mentioned the protein powder being sold at the Mira locations. This is kind of one of the first times its been mentioned in.
None:
None: During these earnings releases recently, what is the near term, but the medium term plan is are you is this more of just a opportunistic where you're working with Meyer and you're increasing your skus or is this the beginning of maybe a more substantial kind of accelerated rollout.
Your other retail partners that you well.
None: Now with the completion of.
None: The Heartland facility, we're looking to push out and focus on leveraging our distribution platform.
None: Being in 5000, plus stores being in business with the lights of Myer, and Walmart and target and whatnot allows us the opportunity to push more product through those doors. We've had this this kind of legacy brand in vitamin way admire a it's been a high performer for quite some time.
None: And we see ourselves exalt accelerating that business and then leveraging from there to go into some of these other retail partners that we have we've already started that national rollout presentation process. We're working on a new a new line as well that will that will sort of augment vitamin way, which is really a price value.
None: Rate case being performance product, we're looking at something that's potentially cleaner labels and more contemporary that has a wider a wider audience.
None: We've got one of the benefits. We have here is we have a very strong relationship with mutual com.
None: They're experts in flavoring these products as well as developing state of the our formulas so partnering with them in order to drive in higher margin better for you products is something that's going to be a big initiative going into the second half of this year with with us leveraging the relationships as well as the mortgage.
None: Temporary assortment and better margins.
None: Understood and then my final question is can you provide us any more extensive details on the.
None: The introduction of EG direct and the.
None: The sourcing and supplier.
None: Yeah EG direct continues to be developed the thrust of visa direct is really to start to leverage once again the relationships that we have we have really good relationships with our retailers based on our performance.
None: We're looking at that toward Natalie Nash.
National but international opportunities. So you really use that as sort of.
None: The arm of the business that help source products ideally.
None: Higher margin potentially third party things that we don't necessarily grow with things that we end up.
None: Manufacturing and want to bring into the platform. So we continue to work on that we've already started utilizing the relationships there start to bring in some product from overseas at a at a higher margin.
None: Understood well. Thank you again for answering all my questions Congrats on the quarter and I'll return to the queue.
None: Thanks, Nick.
None: Thank you.
None: Once again, if we have any questions or comments. Please press star one on your telephone keypad at this time.
None: Our next question is coming from Nicole Kaufman.
Nicole Kaufman: It was an investor Maam your line is life.
Nicole Kaufman: Good morning, gentlemen, and thanks for taking my questions and congrats on the fourth quarter results and 2023 results.
So in the past you guys have talked about getting the company cash flow positive can you guys discuss what youre doing to drive efficiencies, there and get the company cash flow positive.
None: Sure. Thanks, I'll take this one closely.
We've continued to invest.
None: Invest in technology, as well as and I've mentioned it.
None: Nick.
None: Hum higher speed more fishing production lines on our with our cut herbs I think the.
None: Integration of our contract grower business right now.
None: We don't benefit from from the margin contribution of that that's a considerable part of the business that problem the Midwest that'll be coming in that will help our.
None: Cash flow dramatically as well as you know help us drive towards profitability I think what you saw last year was us continuing to invest in the business.
None: <unk> continued to iron out a lot of the issues, we had with just trying to get things up to scale and run well and I think just with the some of the tweaks that we've made with our like I said, a better more efficient lines a reduction in our manpower because of the lines running better.
None: Being more automated I think you'll just see an overall optimization across the whole supply chain, which I think will lead towards us being.
None: Cash flow positive at some point in the future.
None: Thanks, that's helpful.
None: And then regarding your gross profit margin, which almost doubled in 2023.
What do you attribute that fix effects tail ends moving forward how would you further increase their gross profit margin.
Close to <unk> do you want to take that one.
None: I can start on that.
None: Two it Nicole thanks for your question.
None: One of the things you might be earlier in the call is the less reliance on contract growers and that's that's going to continue to manifest itself.
None: And beyond.
None: Our mining of our Heartland facility, so that's going to reduce our kind of Rob raw costs of.
The materials and supplies them.
None: Seeds et cetera that we purchase for the business.
None: And less reliance on those contract growers gives us much more control over our cost structure.
None: Profitability essentially.
None: So as we continue to kind of online in <unk>.
None: And drive more product through through our internal facilities rather than rely on those contract growers, we should expect the.
None: Margin to continuing to grow somewhat.
None: Furthermore, adding onto what Jim was saying were looking to add to our product mix on drive.
None: Products that are higher margin through the business more shelf stable. So we're less reliant on the seasonality and sort.
None: Sort of.
None: Potential.
None: Product issues with with plants in general.
James E. Kras: And I think those two things as they continue to kind of manifest themselves through our financial results, we're continuing to drive our.
James E. Kras: Gross profit.
James E. Kras: And Jim feel free to add to that.
James E. Kras: But that was I mean that that sums it up and say you know, it's a combination of factors, but it's widening the base in the assortment of products. So that we have not only what we're great at which is the produce and fluoro business, but also bring in these higher margin.
James E. Kras: You know more shelf stable products and you see that wood pulp you see that with the vitamins and I think you'll see a nice mix, which will dramatically impact.
James E. Kras: The margins as we move forward as we know why the base and deepen our relationships with more items that.
James E. Kras: At better margin.
None: Alright. Thank you bought that that makes sense and things like that dish or color on that and so did touch on pulp for a minute.
None: With the new entry into this new product category or are you exploring any other product categories that you would be looking to enter.
None: Yes, once again I mean.
None: Sticking with the zero waste inspire theme and in the end.
None: Bryan Bryan.
None: Promise of doing more with less we are looking at products that fit that that kind of brand persona and with that well we're gonna be introduced some new products. This year that are within this condiment.
Category.
None: That we're looking to lead and drive with the relationships that we have been known as a purveyor of rash and being so prominent in so many of these big box retailers and their produce section you know gives us permission to develop products that sort of link to what we're known for and you're going to see.
None: See that type of.
None: Product introduction and innovation.
None: That we're known for as a company.
None: Kind of go from being fresh into more bottled more self self stable more good for you and more.
None: Sustainable type of product. So, yes would be the answer and that is underway and I think you'll see some of the exciting stuff over the next quarter.
None: Quarter as we as we get ramped up on that part of the business.
None: Sure. Thanks, Tim I'm looking forward to that and.
None: And my last question is can you provide any additional color on how that balanced approach are going.
None: I, obviously can't get into Spitz specifics, but what I can tell you is that and this isn't a.
None: Our press release as well as the script that I.
None: That I had mentioned.
None: In the script.
None: We continue to drive penetration with with retailers coming on board.
None: K he has been a notable one just in the last 30 to 60 days.
None: With access to 31000 doors, while continuing to drive that relationship.
None: And we continue to see a very positive response to the product line.
And so I think we've got we've got a we've got we're bullish on.
None: How do we think this product lines are going to do and where it's going to go.
None: Great. Thank you for answering all my questions and congratulations again on the results.
Thank you very much.
None: Thank you.
None: We have no further questions on the line at this time I will hand, it back to management for any closing remarks.
None: Thank you again for joining us today I continue to be optimistic about our business as future. Thanks to our growing retail networks diverse product line and strict expense control. We believe these elements are key to our continued success and are paving the way for sustained revenue growth our focus on financial discipline and the operational efficiency.
None: It is crucial to our strategy as we aim to become cash flow positive. We look forward to providing updates on our progress progress in the coming months.
None: Thank you.
Thanks <unk>.
None: This does conclude today's conference call you may disconnect. Your lines at this time and have a wonderful day, we thank you for your participation.