Edible Garden AG Incorporated Q3 FY2024 earnings call

• Strategic shift away from lower-margin products, including phasing out lettuce and floral categories.
• Installed new production lines in Grand Rapids to expand capacity for higher-margin products.
• Raised approximately $5.65 million in gross proceeds from a September S1 offering, using part to pay down debt and invest in working capital.
• Partnership with Walmart evolved, including debut of sustainably grown Hydro Basil and launch of Vitamin Whey lines on Walmart Marketplace.
• Pulp Flavors line saw sales growth with existing distribution network.
• Introduced Kick Sports Nutrition line, a premium performance product for athletes.
• Received USDA grants for organic certification to support R&D and reduce expenses.

For the three months ended September 30, 2024, revenue totaled $2.6 million compared to $3 million in the same period in 2023. Cost of goods sold was $1.9 million vs. $3.3 million in 2023. Gross profit margin for Q3 2024 was 27.1%. Sales of cut herbs for the first nine months of 2024 were up 55% compared to 2023. Pulp Flavors line experienced sales growth in Q3 2024. The Kick Sports Nutrition line was introduced. Revenue for the first nine months ended September 30, 2024, showed a slight year-over-year increase, while Q3 2024 revenue was down due to phasing out lower-margin products.

• Confident Q4 2024 will display significant growth in margin and revenue, potentially marking one of the strongest quarters in the company’s history.
• Positioned to drive sustained growth and long-term value for shareholders based on solid foundation and robust infrastructure.

• Weather events impacted revenue, with $215,000 of nutraceutical product revenue shifted from Q3 to Q4 due to Hurricane Helene.
• Reliance on third-party growers previously affected cost of goods sold, but strategic shift away from them is paying off.
• Forward-looking statements subject to risks, uncertainties, and assumptions as described in SEC filings.

Q: On reducing contract growers and handling demand in the busy season, how are you able to handle demand with fewer contract growers?

A: We don't need contract growers to service demand. We've vertically integrated facilities, added capacity, and put in new production lines. We can handle current and more demand, and Q4 is shaping up to be the best quarter ever.

Q: How much revenue moved from Q3 to Q4 due to hurricanes?

A: Approximately $215,000, driven by Hurricane Helene impacting nutraceutical products shipped from the Port of Miami.

Q: Growth expected from Sports Nutrition line in 2025?

A: Expect significant growth. Already have commitments, planning launches with Amazon, major big box, and PriceMart internationally. Launching paste herbs in Q1 and focusing on driving business in the second half of 2025.

Q: Is the gross margin leverage from exiting low-margin products fully reflected in Q3 or can it increase further?

A: Gross profit will continue to expand as we get stronger. We've cleared the deck of non-core low-margin businesses, focused on core business, and efficiencies across the supply chain are driving margin improvement.