Prepared remarks
Good morning. And welcome to the Edible Garden AG Incorporated’s 2024 Third Quarter Business Update. At this time, all participants have been placed on a listen-only mode and we will open for questions following the presentation. Please note this conference is being recorded. I will now turn the conference over to your host, Ted Ayvas of Crescendo Communications. Ted, the floor is yours.
Thanks, Jenny. Good morning. And thank you for joining Edible Garden’s quarter ended September 30, 2024 conference call and business update. On the call with us today are Jim Kras, Chief Executive Officer of Edible Garden; and Kostas Dafoulas, Interim Chief Financial Officer of Edible Garden. Earlier this morning, the company announced its operating results for the three-month ended September 30, 2024. The press release is posted on the company’s website. In addition, the company has filed its quarterly report on Form 10-Q with the U.S. Securities and Exchange Commission, which can also be accessed on the company’s website, as well as the SEC’s website. If you have any questions after the call or would like any additional information about the company, please contact Crescendo Communications. Before Mr. Kras reviews the company’s operating results for the quarter ended September 30, 2024 and provides a business update, we would like to remind everyone that this conference call may contain forward-looking statements.
All statements other than statements of historical facts contained in this conference call, including statements regarding our future results of operations and financial position, strategy, plans, and expectations for future operations, are forward-looking statements. The words aim, anticipate, believe, could, expect, may, plan, project, and will, along with other similar expressions, are intended to identify forward-looking statements. These statements are based largely on the company’s current expectations and projections about future events and trends that it believes may affect its financial condition, results of operations, strategy, short-term and long-term business operations and objectives. These forward-looking statements are subject to several risks, uncertainties, and assumptions as described in the company’s filings with the SEC, including the company’s annual report. Because of these risks, uncertainties, and assumptions, the forward-looking events and circumstances discussed in this conference call may not occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
You should not rely upon forward-looking statements as predictions of future events. Although the company believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, level of activity, performance, or achievements. In addition, neither the company nor any person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. The company disclaims any duty to update any of these forward-looking statements except as required by law. All forward-looking statements attributable to the company are expressly qualified in their entirety by these cautionary statements, as well as others made in this conference call. You should evaluate all forward-looking statements made by the company in the context of these risks and uncertainties. Having said that, I would now like to turn the call over to Jim Kras, Chief Executive Officer of Edible Garden. Jim?
Thanks, Ted. Good morning. Thank you to everyone for joining us today. We are pleased to report another strong quarter highlighted by an increase of $687,000 in gross profit for Q3 2024 compared to the same period last year. Our gross profit margin experienced significant growth, reaching 27.1% this quarter. This significant improvement reflects the consistent margin growth that has fueled our progress in recent quarters while marginally impacting our revenue growth in the second and third quarters. Furthermore, our gross profit for the first nine months of 2024 surged by $1.7 million, an impressive 324% increase over the prior year. Our core business and fundamentals are stronger than ever, as demonstrated by a 55% increase in sales of cut herbs for the first nine months of 2024 compared to 2023. Revenue for the first nine months ended September 30, 2024, showed a slight year-over-year increase.
Third quarter revenue for 2024 was down from the same period last year, driven by a strategic decision to phase out of lower margin products and categories. For example, in connection with phasing out our legacy floral business, at the Edible Garden Heartland Facility in Grand Rapids, we have installed new production lines to expand our capacity to drive the growth of our higher margin products. We believe these initiatives will help accelerate achieving our goal of sustainable cash flow and profitability. We also strengthened our balance sheet with our September S1 offering, raising approximately $5.65 million in gross proceeds. Part of these funds went towards paying down $3.2 million in debt due in 2025, helping to reduce our leverage and move us closer to achieving positive cash flow. Additionally, we invested in working capital ahead of the fourth quarter holiday season, putting us in a strong position to meet customer demand and peak season sales.
Our partnership with Walmart continues to evolve in meaningful ways, including the debut of our sustainably grown Hydro Basil, featured in a custom-designed basil station that fits seamlessly into Walmart’s produce section. Additionally, we launched Edible Garden’s Vitamin Whey lines of whey and plant-based protein powders on Walmart Marketplace. This enhances accessibility for our Vitamin Whey products and lays the groundwork to expand our offerings. We are confident our innovative products will resonate with the evolving taste of an expanding consumer audience. We believe this deepening collaboration with Walmart positions Edible Garden for revenue growth in 2024 and beyond. Our Pulp Flavors line of USDA organic, fermented, and sustainable gourmet sauces experienced sales growth in the third quarter of 2024 as we continue to add to our existing distribution network, which includes prominent retailers such as Target, Whole Foods, Meijer, and others.
According to Research and Markets, the global sauces and condiments market is projected to grow from $173 billion in 2021 to $240 billion in 2028. Pulp is poised to meet the rising demand for bold, unique flavors that take meals from bland to bold. We also introduced our innovative Kick Sports Nutrition line, designed for today’s health-conscious athletes. Kick addresses the evolving needs of athletes who prioritize quality in their nutritional intake. The sports nutrition market is expected to grow significantly, fueled by demand for clean labels and convenient options. With over 25 years of experience in sports nutrition, I am confident that Kick Sports Nutrition will set a new standard in the industry. Our vision to redefine the category by delivering innovative, purpose-driven solutions is more important than ever. Edible Garden also received grants from the USDA Organic Certification Program, providing financial support to help offset costs associated with organic certification.
These funds will not only reduce expenses associated with maintaining our organic certification but also support research and development for new product innovation. As leaders in controlled environment agriculture, we are committed to producing local, organic, and sustainable products. These grants further strengthen our partnership with the USDA and align with the company’s Zero-Waste Inspired mission. By utilizing these funds for R&D, we look forward to exploring new opportunities and continuing to lead the way in sustainable agriculture. I would now like to turn the call over to Kostas Dafoulas, our Interim Chief Financial Officer, to review the financial results for the three months ended September 30, 2024. Kostas?
Thanks, Jim, and good morning, everyone. Turning to our third quarter results, revenue totaled $2.6 million, compared to $3 million for the three months ended September 30, 2023. The decrease was primarily driven by our strategic shift away from the sale of lower-margin products and impact from weather events. Our strategic decision to eliminate the lettuce and floral categories accounted for a decrease of $597,000 in revenue. The impact of Hurricane Helene resulted in a shift of $215,000 of revenue from the third to the fourth quarter. Cost of goods sold totaled $1.9 million for the three months ended September 30, 2024, compared to $3.3 million for the same period in 2023. The decrease was primarily driven by our seasonally low sales in the current quarter and the elimination of large third-party growers that previously comprised a material portion of our costs. We saw continued strength in our gross profit margin as a result of this move away from low-margin categories.
We delivered a gross profit margin for Q3 2024 of 27%, our second straight quarter of positive double-digit margin. Selling, general, and administrative expenses were $2.2 million for the three months ended September 30, 2024, compared to $2.4 million for the same period in 2023. The decrease was primarily due to reductions in labor costs and professional fees as we continue to find efficiencies in our cost structure. The net loss was $2.1 million or $0.65 per share for the three months ended September 30, 2024, compared to a net loss of $2.4 million or $13.83 per share for the same three months last year. The improvement in net loss was primarily driven by our gross profit margin expansion and lower SG&A, offset by other expenses. In closing, we are proud of the hard work our team has put into improving our gross margin and the strong execution we experienced this quarter. Our Q3 results demonstrate that our strategic shift in product mix and reduced reliance on third-party growers is paying off, and we remain committed to a disciplined financial approach. And with that, Operator, please open the line for questions.
Questions and answers
Thank you very much. Your first question is coming from Anthony Vendetti of The Maxim Group. Anthony, your line is live.
Thank you. Good morning. You have significantly reduced the number of contract growers, which has clearly improved your gross margin. We're pleased to see this. As we move into the current quarter, which is your busy season, are you able to meet the demand with fewer contract growers compared to last season, or will you need to depend on them to fulfill the demand?
So, hey, Anthony. Good morning. So the answer is we don’t need the contract growers to service our demand. We focused on infrastructure, GP improvement, and the fundamentals of the business in the last two quarters, which shows in sequential quarter-to-quarter GP improvement and dramatic improvement at that. We put in another state-of-the-art production line and made that investment in Grand Rapids. What we see now is a strong signal to our retail partners that we can handle what we currently have, take on a lot more, and push out more in terms of units. Our capacity is limited only by our ability to process, and we're continuing to grow the business. Q4 is shaping up to be potentially our best quarter ever.
Okay. Great. And then can you just further quantify the impact from the hurricanes in Florida? How much of that revenue in total has moved from the third quarter to the fourth quarter?
Well, it was approximately $215,000. That was driven by a relationship with a major big box, PriceMart. We supply a nutraceutical line for them. That business has been growing considerably over the last six months, and I’ve had a relationship with them for decades. Unfortunately, we had a hurricane right at the end of the quarter, and they closed the ports. So, once again, $215,000 that gets pushed into Q4 that we didn’t benefit from. Q4 obviously has additional orders that are ready to ship by the end of the year.
Sure. Of course. So, as we look to 2025, what kind of growth can we expect from the Sports Nutrition line?
Well, as I mentioned earlier, this is a great category. I have a vast background working with major businesses in this sector. We’re already looking at commitments for Kick, and we haven’t even gone full-scale production yet. For us, we’re expecting significant growth as we work closely with our partners and explore opportunities within traditional and e-commerce channels. Next year, I’m pushing my sales team to focus on what will drive the business in the second half of the year.
Yeah. Last question on the gross margin side. It sounds like you particularly exited lettuce, but maybe there were other low margin products? Was that leverage fully reflected in the third quarter or can we expect continued growth?
For us, improving margins is critical, and we will continue to see that as we strengthen operations across our supply chain. You should see gross profit continue to expand as we get stronger. We’re not fully out of the lettuce business, just the low or no-margin segment. By clearing out the legacy products, we’re now focusing on the core business, which is improving our fundamentals. The facility is ready, and we can focus on new products that will leverage our improved logistics.
Excellent. All right. Thanks for all that color, Jim. I’ll hop back in.
Thank you, Anthony. Take care.
Thank you very much. Waiting for questions. Okay. I don’t think we have any further questions. I will now hand back over to the management team for closing comments.
Thank you for joining us today. We believe we have successfully streamlined our business, removing elements that previously constrained revenue. Core operations and fundamentals are now helping and performing well. Based on current trends, we are confident that the fourth quarter of 2024 will display significant growth in both margin and revenue, potentially marking one of our company’s strongest quarters.
Thank you very much. This does conclude today’s conference. You may disconnect your phone lines at this time and have a wonderful day.
Thank you.