Sadot Group Inc. Q1 FY2024 earnings call

Management Statement and Operational Highlights

• Initiated process to sell Sadot Group's Services segment, with nonbinding LOIs signed for Pokemoto and Superfit Foods in Q2, in due diligence phases.
• Expanded Fausto Plaza's role at Sadot Latam for global trading and farm operations. Fausto has over 2 decades of agri-commodity experience from Bunge.
• Opened new trading office in Brazil with 8 traders, revenue expected in late Q2. Team sourced products and secured financing from Brazilian banks.
• Harvested 1,700 metric tons of corn under agreement with Food Reserve Agency of Zambia, revenue expected in Q2/Q3.
• Finalized $27 million trade financing for Sadot Agri-Foods operations, crucial for growth.

Segment Performance

• Sadot Agri-Foods: Contributed $106.5 million in revenue in Q1 2024. Completed 24 transactions across 14 countries from Sadot LLC and Sadot Latam trading line. Harvested over 1,700 metric tons of corn and 500 metric tons of soy, with revenue from current harvest expected in Q2 and potentially Q3. The farm's contract farmer pilot program started first deliveries.
• Sadot Food Services operations: Revenue was $1.4 million in Q1 2024, down from $2.6 million in Q1 2023. Decrease due to converting corporate-owned Pokemoto locations to franchise locations in preparation for divestiture. Classified as held for sale in financials.

Guidance

• Management expects headwinds on revenue to subside in Q2 and Q3. April 2024 revenue for Agri-Foods division was $56 million, showing improvement.
• Brazil trading office revenue expected to come online in late Q2.
• Anticipates return to historical trading patterns after temporary market reset due to China's impact.

Risks

• Challenges in agri-commodity sector including China's unexpected absence in wheat market, softness in agri-commodity prices, and seasonality factors.
• Sale of segments subject to customary closing conditions, no guarantee of definitive agreement or final sale.
• Market volatility and commodity price fluctuations impacting margins.

Q: Just on the rebound at April of $56 million, can you also speak a little bit just from May month to date?

A: April revenue didn't involve China trades. China is expected to come back online in Q2/Q3. Brazil trading office's first trade expected end of May/beginning of June. Harvest from farm mostly in Q2, some in Q3 depending on weather.

Q: On the margin side, how far away are we from getting to more and greater gross margins?

A: Shift from large trades to smaller container-type trades, expansion into other commodities (like sunflower seeds), and farm operations coming online will contribute to margin increase, but market volatility makes exact prediction difficult.

Q: On the trade financing, how does $26 million translate into revenue?

A: Trade lines work differently, not one-to-one. Increases number of trades, generating additional revenue and margins.

Q: On the restaurant business, is Muscle Maker Grill still up for sale?

A: Pokemoto is first focus for sale. Interest in Muscle Maker Grill exists, but not at LOI stage yet. Will focus on it after completing other transactions.