Arcadia Biosciences, Inc. Q3 FY2024 earnings call

• Q3 total revenues increased 18% y/y, driven by 55% growth in Zola Coconut Water sales.
• Maintained selling, general and administrative expenses, with the variance in SG&A due to severance and transition fees from GoodWheat sale.
• Cash used during the quarter declined to $1.5 million, the lowest since going public.
• Zola retail store count increased 68% y/y, sell-through via scan data up over 36% y/y, and Q2 launch of new items contributed to growth.
• Coconut water category growth aided Zola's performance, with Zola growing faster than the category in various time periods.
• Looking ahead, Zola has strong momentum into Q4 with new distribution added, expects full-year 2024 retail distribution growth >80%, and has new innovation in the works with product formulation done and packaging mockup complete, expecting new product ready for beverage season next year.

In the third quarter, total revenues were approximately $1.5 million, a 18% increase year-over-year. Zola Coconut Water drove this growth with a 55% revenue increase compared to the same period last year, accounting for about 86% of total revenues. GLA oil sales continued to decline as the company sold through remaining inventory. Cost of revenues in Q3 was approximately $1 million, including a write-down of just over $150,000 related to hemp and GoodWheat seed.

• Management will not provide forward-looking guidance due to challenges in forecasting accuracy related to size of distribution gains, their percentage of total Zola distribution, and timing of initial shipments, which create uncertainty in providing precise numbers.

Q: Clarifying question about a $150,000 write-down, asked if it was entirely in the quarter and associated with legacy business.

A: Mark Kawakami confirmed it was entirely in the quarter and related to hemp and GoodWheat seed.

Q: Asked about guideposts for margins going forward after backing out big ticket items.

A: T.J. Schaefer stated margins would land right around 33% when backing out those items.

Q: Asked about residual one-time items in OpEx in Q4.

A: T.J. Schaefer said most severance and related issues are past, so minimal residual items expected in Q4.

Q: Asked about confidence in infrastructure to support Zola's growth.

A: T.J. Schaefer discussed inventory management and planning ahead due to longer lead times in the industry, balancing safety stock as they approach a softer season