Sadot Group Inc. Q3 FY2024 earnings call

Financial Performance - Q3 2024 saw consolidated revenues of $201.7 million, a 10.7% increase year-over-year. Net income was $1.2 million, marking the second consecutive quarter of positive net income, improving from a $5.2 million net loss in Q3 2023. EBITDA was $2.9 million, an improvement from a negative $4.4 million in Q3 2023. Year-to-date net income through Q3 was $3.3 million, the best 9-month performance in company history. - ### Agri-Food Expansion - Implemented global expansion strategy; placed a deposit for an agricultural property in Indonesia to expand farming assets. Started trading sesame seeds and lentils. Canada trading division has facilitated sales of 11 specialty crop commodities, initiated sales with 12 new customer accounts, and was involved in ~$20 million of transactions. - ### Restaurant Divestment - All company-owned and operated restaurant locations converted to franchise locations, streamlining focus on core operations. - ### SG&A Expenses - SG&A expenses were $4.2 million, an increase of ~$0.9 million year-over-year, mainly due to initial investments in Sadot Agri-Food trading offices and reclassification of trade-related expenses from cost of goods sold to SG&A. - ### Market Risk Management - Exposed to market risk from commodity price volatility; used forward sales contracts and hedges, with a mark-to-market gain on derivatives contributing ~$5.5 million in income for the quarter.

In Q3 2024, consolidated revenues were $201.7 million, a 10.7% increase from the same period last year. The core agri commodity group, Sadot Agri-Foods, generated 99.6% of consolidated revenue, amounting to $200.9 million, with an 11.6% revenue increase year-over-year. The legacy restaurant operations, which are 100% franchise and held for sale, had $0.8 million in revenue from royalties and company operations in Q3.

Growth Strategies - Continue to diversify into verticals within the global food supply chain, including farms, logistics, processing, and wholesaling. - Expand farm operations into new geographies (e.g., Brazil, Canada) and into new commodities (e.g., sesame seeds, lentils). - October revenue was $87.9 million, a strong start to the quarter.

Market Risk - Exposed to volatility in prices of food and feed commodities; managed through forward sales contracts and hedges.

Q: Can you provide an update on progress being made in Canada?

A: Since its recent launch, the Canada trading division has facilitated sales of 11 specialty crop commodities, initiated sales with 12 new customer accounts, and was involved in roughly $20 million of transactions across Canada and with other company divisions.

Q: Can you provide some details on the deposit for the new farmland in Indonesia?

A: The company placed a deposit for an acquisition of farmland in Indonesia, involving roughly 9,500 acres with vanilla plants, coconut trees, and potential to produce corn. Completion could provide new niche commodities and improve margins.

Q: What were the drivers of the increase in SG&A expenses?

A: SG&A increased due to initial investments in Sadot Agri-Food trading offices and reclassification of certain salaries from cost of goods sold to SG&A as part of growth efforts.

Q: How did Brazil contribute to revenue growth?

A: Brazil focuses on building infrastructure and relationships, different from Canada's trading model; it's involved in developing agreements and moving products within Brazil.

Q: Can you provide details on the Yorkville debt retirement transaction?

A: Paid off the last piece of debt with cash on hand; Yorkville no longer owns stock, and the company has met its obligation with them.

Q: When is the expected closing of the restaurant deal?

A: Multiple groups are in various stages of due diligence; there were incentives to close by the end of 2024, and the process is structured to close quickly once a letter of intent is signed.