Edible Garden AG Incorporated Q2 FY2025 earnings call

• The company strategically exited 2 underperforming low-margin categories (lettuce and floral) a year ago to invest in higher-margin innovation-driven categories aligned with market trends.
• Private label products sold through major big box retailers had strong growth, driven by expanded retail programs and strong sell-through of sustainably grown CEA-produced herb products.
• Core produce category showed growth with hydroponic basil, potted herbs, and wheatgrass experiencing quarter-over-quarter growth, supported by the controlled environment agriculture model.
• The company advanced strategic priorities in innovation, brand expansion, and operational sustainability. Key pillars of the better-for-you market strategy include existing fresh produce/fresh condiments, farm formula supplementation, and performance beverages.
• Acquired NaturalShrimp aquaculture in Iowa, now operating as Edible Garden Prairie Hills, which expands R&D capabilities in aquaponics, supports year-round climate control production, and brings patented water treatment technologies that recycle water, improve yields, and reduce environmental impact.

Revenue for the second quarter was $3.1 million compared to $4.3 million in the same period last year. Private label products sold through major big box retailers saw a standout second quarter performance, climbing 19.1% year-over-year. The core produce category exhibited growth with hydroponic basil up 7.1% quarter-over-quarter, potted herbs up 6.4%, and wheatgrass up 4.1%. Gross profit was $634,000 in Q2 2025 compared to $1.6 million in Q2 2024. The year-over-year revenue decline was mainly due to exiting underperforming low-margin categories like lettuce and floral, which accounted for approximately $740,000 of the difference.

• The company is optimistic about Q4, noting it's a significant quarter with holiday programs starting in early November and running through mid-January. Preorders for Q4 are already up significantly, and new accounts are expected to add to growth.
• Confident in replacing revenue lost from exited categories with opportunities like Kick Sports Nutrition and private label expansion, expecting acceleration in the back half of 2025.
• International business is seen as a key growth area, with shelf-stable products like vitamins/supplements and protein having global reach and potential for further expansion with new products.

• Forward-looking statements are subject to risks, uncertainties, and assumptions as described in the company's SEC filings. These include risks related to the company's future results of operations, financial position, strategy, and plans.
• Strategic adjustments may face execution challenges, such as fully replacing revenue from exited categories and successfully launching new products like Kick Sports Nutrition.

Q: What percent of revenues is private label?

A: Jim Kras stated private label is a growing part of the business, with about 19% in dollars and 22% in units growth from the contract with Meijer. Kostas Dafoulas added that the private label relationship with Meijer is a major driver and they are receiving other opportunities to expand it.

Q: What accounted for the remainder of the revenue shortfall?

A: Kostas Dafoulas mentioned softness in the condiments business and a transition from legacy vitamin whey products to Kick Sports Nutrition as factors contributing to the remainder of the revenue shortfall.

Q: Overview of the NaturalShrimp acquisition?

A: James E. Kras said the acquisition of NaturalShrimp aquaculture in Iowa (Edible Garden Prairie Hills) expands R&D capabilities in aquaponics, brings patented water treatment technologies for recycling water and improving yields, and has a central Midwest location for better distribution and lower transportation costs.

Q: Anticipation for the fourth quarter?

A: James E. Kras is bullish on Q4, noting it's a significant quarter with preorders up, new accounts on the produce side, and growth in vitamins/supplements due to New Year's resolution season.

Q: Status of Kick Sports Nutrition?

A: James E. Kras said Kick Sports Nutrition is accelerating, launched in May, with marketing efforts driving trial, and new items will be launched in the next 45 days at PriceSmart and online at Amazon.

Q: International business fit into long-term plans?

A: James E. Kras explained that shelf-stable products like vitamins/supplements and protein have global reach, and the company is working on new products for functional foods, partnering with global retailers like PriceSmart to capture international demand