Arcadia Biosciences, Inc. Q2 FY2024 earnings call

• Completed two transactions in Q2 2024: Sold certain patent and related rights of resistant Starch Durum Wheat to Corteva Agriscience for $4 million cash, and sold GoodWheat business assets to Above Food Corporation. The GoodWheat exit led to headcount reductions and cost savings. - Zola Coconut Water brand is growing strongly: Nielsen data shows coconut water category sales increased 16% in the 13-week period ending June 29, 2024, while Zola sales increased 27%; in the latest four-week period, category sales increased 25% and Zola sales increased 42%. Launched 16.9-ounce Tetra Pak offerings in original, lime, and pineapple flavors in Q2. - Focus for the rest of 2024 is on reducing costs and accelerating Zola growth, with 2024 revenues expected to be in-line with 2023's $5.3 million, gross margins expected in the low 40s, and operating expense run rate around $2 million per quarter.

In Q2 2024, total revenues were approximately $1.3 million, which was a 32% sequential increase and basically flat compared to the same period last year. Revenue was driven by strong growth in Zola, which accounted for about 90% of the total revenues. Zola sales increased 86% sequentially and 42% versus the previous year. The GoodWheat business is now reflected in the P&L as discontinued operations, and its historical results are no longer part of continuing operations.

• Expect 2024 revenues to be essentially in-line with the $5.3 million reported in 2023. - Anticipate gross margins to be in the low 40s, resulting in over $2 million in gross profit. - Remain comfortable with an operating expense run rate of approximately $2 million per quarter, expecting net cash consumption in the second half of 2024 to be similar to the first half, with cash use cut in half compared to 2023's $15 million.

• Forward-looking statements are based on current expectations and available information, but actual performance may differ materially due to risks and uncertainties. Can review the company's Safe Harbor language in the most recently filed 10-Q.

Q: Are there any remaining crop trait assets that the company still owns that could be monetized in the future?

A: Yes, there are still a few traits in the library actively being worked on for monetization, which could be in the form of licensing agreements or asset sales similar to the RS durum transaction.

Q: Can you provide visibility on the timing of introduction of additional Zola flavors?

A: Pineapple and lime just started shipping in Q2. There are ideas for potential launches in 2025 and ongoing exploration of innovation longer term.

Q: What percentage of the market would you need to effectively penetrate to achieve sustainable profitability?

A: Currently, Zola is probably 1% of the market, and a very low single-digit market share is needed to reach breakeven.

Q: Were there any lumpy one-time revenues in Q2 that drove the outperformance versus the category?

A: No, there were no sort of one-time lumpy revenues or large initial sell-in that drove the performance.

Q: What was the percentage of GLA in revenue base in Q1 and Q2 and how will it tail off?

A: GLA was closer to 30% in Q1 and 10% in Q2, and it will tail off as inventory is sold through by the end of 2024.

Q: Talk about the cash burn run rate exiting 2024 and entering 2025.

A: Guidance for 2024 is cash burn cut in half, around $7 million to $7.5 million. There's an additional $2 million of annual cost savings expected to come into play more in 2025, and more information on 2025 will be available in November, aiming for low to mid-single digits cash burn next year