Edible Garden AG Inc Q1 FY2024 earnings call

• Revenue grew 27.6% year-over-year in Q1 2024, with the period being typically slow for the industry.
• Moved towards vertical integration, with 95% of fresh products now produced in company-owned facilities, leading to margin expansion.
• Partnered with Uncle Giuseppe’s Marketplace to distribute Edible Garden Herbs in New York and New Jersey.
• Entered a 3-year agreement with a major U.S. food retailer expected to generate $18-20 million in initial revenue, supporting product range expansion.
• Launched Garden Starters for home gardeners in the Midwest, and shipped spring ornamentals to big box retailers ahead of Mother's Day.
• Pulp product line expanded to new retailers like Target, Whole Foods, and distributors KeHE and UNFI.
• Formed a partnership with Hermann Pickle Company to develop fermented plant-based products.
• Received patents for GreenThumb greenhouse management system and Self-Watering Display technology.
• Secured grants for organic crop certification and training at greenhouse facilities.

In the first quarter of 2024, Edible Garden achieved a significant 27.6% year-over-year increase in revenue, with revenue reaching $3.1 million compared to $2.5 million in Q1 2023. The gross profit margin surged by 195.8% and the gross margin expanded by 171 basis points from the same period the previous year. Edible Garden now produces approximately 95% of its fresh products in company-owned facilities, marking a critical milestone in its development.

• Management is optimistic about the business prospects for 2024.
• Looking to improve margins and accelerate towards generating positive cash flow.
• Committed to reducing SG&A expenses and improving operating efficiency.

• Forward-looking statements are subject to risks, uncertainties, and assumptions as described in the company's SEC filings, including those related to financial condition, results of operations, strategy, and future business operations.

Q: Jump into the Heartland Facility capacity. Where is that capacity at? How much do you have left there? And with new distribution partners particularly UNFI, do you feel like you could get that up to as close to 100% capacity as possible now, what the distributors have signed as well as this large customer that has the potential to get to $18 million to $20 million in annual revenue?

A: Jim Kras responded that Heartland is at around 65%-70% capacity, fluctuates by season. Processing capacity is almost unlimited, and sees no issues servicing new accounts.

Q: Can you talk about the ramp up in orders from the customer, the recent customer signing that could eventually account for $18 million to $20 million in annual revenue?

A: Jim Kras said the ramp up has begun, it's conservative, driven by consumer demand for cooking at home and retailers' efforts to capture sales.

Q: The impact from contract growers, what was the impact this quarter? And any progress on reducing the reliance on the contract growers?

A: Jim Kras stated significant progress, saw impact in Q4 2023, 95% of fresh goods now from company-owned facilities, and no plans to rely on third parties in foreseeable future.

Q: Just to be clear, the impact that you're talking about from less reliance on the contract growers would be an improved gross margin, correct?

A: Jim Kras confirmed absolutely, margin expansion will be realized moving forward.

Q: Any update on the Nutraceuticals business?

A: Jim Kras said Nutraceuticals has new lines in development, Q4 expected to show progress, leveraging distribution platform for shelf-stable products.

Q: Could you provide a little bit more color on what your key growth drivers are right now?

A: Jim Kras mentioned key growth drivers are cut herbs and potted business, with strong business from Walmart and Meijer, driving growth due to consumer demand for cooking at home.