Prepared remarks
Good morning, and welcome to the Edible Garden Inc. 2026 First Quarter Business Update Conference Call. Please note, this conference is being recorded. I will now turn the call over to your host, Ted Ayvas, Investor Relations at Crescendo Communications. Ted, the floor is yours.
Thanks, Jenny. Good morning, and thank you for joining Edible Garden's 2026 First Quarter Earnings 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 today, the company announced its operating results for the 3 months ended March 31, 2026. The press release is posted on the company's website, www.ediblegarden.ag.com. 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 at www.sec.gov. If you have any questions after the call or would like any additional information about the company, please contact Crescendo Communications at 212-671-1020. Before Mr. Kras reviews the company's operating results for the quarter ended March 31, 2026, I'll provide 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 the conference call, including statements regarding our future results of operations and financial position, strategy and plans and our expectations for future operations are forward-looking statements. The words aim, anticipate, believe, could, expect, may, plan, project, strategy, will, and the negative of such terms or similar expressions are intended to identify forward-looking statements. These forward-looking 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 and financial needs. 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 on Form 10-K for the year ended December 31, 2025.
Because of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in the 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, levels 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 on this conference call.
You should evaluate all forward-looking statements made by the company in the context of these risks and uncertainties. With that, I would now like to turn the call over to Jim Kras, Chief Executive Officer of Edible Garden. Jim?
Thanks, Ted, and good morning, everyone. The first quarter of 2026 reflected continued progress across the business as we began seeing stronger traction from many of the investments and strategic initiatives we put in place over the past year. Revenue increased approximately 22.9% year-over-year to approximately $3.3 million, supported by continued retail expansion and growth across multiple categories. One of the strongest contributors during the quarter was our cut herbs business, where sales increased approximately 46% year-over-year, driven by continued growth within existing accounts as well as new account contributions from Kroger and Weis Markets. That momentum also extended beyond our core produce categories. Vitamin and supplement sales increased approximately 27% year-over-year while condiment sales increased approximately 51%. We also continued seeing strong growth internationally with sales increasing approximately 50% year-over-year reflecting continued expansion of our distribution footprint and our growing demand for clean-label, better-for-you products across multiple markets and categories.
As a result, we continued expanding distribution with both existing and new retail partners during the quarter, including Target, Safeway, The Fresh Market, Hannaford, Busch's Fresh Food Market and Woodman's Market. At the same time, we're broadening distribution across our branded consumer product portfolio, including Pickle Party, Pulp, Kick, Sports Nutrition, Vitamin Whey and JEALOUSY GLP-1 support products. We believe this momentum reflects the broader platform we have been building over the past years, leveraging the controlled environment foundation, vertically integrated infrastructure, retail relationships, operational capabilities and product development expertise established through our core business. We continue expanding into adjacent higher-margin and shelf-stable categories. As we continue evolving beyond our traditional greenhouse and fresher business, one of the areas we are most focused on is the ready-to-drink, or the RTD category.
We believe RTDs represent a compelling long-term opportunity with the global market projected to grow from approximately $842.5 billion in 2025 to roughly $1.26 trillion in 2033, according to Phoenix Research. More importantly, through ongoing discussions with both existing and prospective retail partners, we continue seeing increasing demand for scalable domestic production solutions that can deliver clean-label, shelf-stable functional nutrition products with consistency, transparency and operational reliability. We believe this reflects a meaningful unmet need as retailers and brands continue searching for reliable U.S.-based partners across functional beverage and wellness-focused nutrition categories. To support that opportunity, we continue advancing our Iowa Midwest RTD initiative during the quarter, which includes ongoing work related to the integration of Tetra Pak processing and packaging solutions.
Tetra Pak is a globally recognized leader in food processing and aseptic packaging solutions, and we believe this relationship significantly strengthens the operational foundation of our RTD platform. Our retail footprint now exceeds 6,000 locations across the United States, Caribbean and South America. During Q1, we added new retail partners, including Target, Safeway, Busch's Fresh Food Market and The Fresh Market. This expanding distribution network is not only driving current revenue growth but also represents the foundation for our future RTD product placement. These are relationships that are already in place that we will nurture and look to leverage. More broadly, our foundation in controlled environment agriculture has allowed us to build deep expertise in traceability, sustainability, operational discipline, supply chain management and retail execution. We believe those capabilities naturally support a broader farm-to-formula strategy and Zero Waste inspired initiative while supporting our continued expansion into shelf-stable and functional nutrition categories.
While we're in the early stages of this evolution, we believe the foundation is firmly in place through an expanding retail network, a growing branded product portfolio and continued advancement of our RTD manufacturing initiative. At the same time, we remain focused on improving operational execution, scaling higher-margin categories, strengthening margins over time and positioning the company for long-term scalable growth and value creation. With that, I'll turn the call over to Kostas Dafoulas to review the financials. Kostas?
Thanks, Jim, and good morning, everyone. Revenue for the 3 months ended March 31, 2026 increased approximately 22.9% year-over-year to approximately $3.3 million compared to approximately $2.7 million in the prior year period. The increase was primarily driven by continued growth across the company's cut herb portfolio, which increased approximately 45.9% year-over-year. That growth was supported by expansion within existing customer accounts along with new account contributions from Kroger and Weis Markets. We also saw broad-based growth across hydroponic basil, wheat grass, vitamins and supplements and condiments. International sales increased approximately 50% year-over-year and condiment sales grew 51%, reflecting expanding demand for our branded product portfolio across the retail footprint that now exceeds 6,000 locations. Operating expenses were $10 million for the 3 months ended March 31, 2026, compared to $5.6 million for the 3 months ended March 31, 2025.
The increase of $4.4 million was primarily driven by two factors. First, cost of goods sold increased as we scaled cut herb distribution through third-party sourcing. This dynamic we view as transitional as we work to renegotiate supplier terms. Second, depreciation and amortization increased approximately $2.5 million primarily reflecting accelerated depreciation of certain fixed assets in connection with the company's pivot to RTD, clean nutrition manufacturing at our Prairie Hills facility. The company recorded an income tax benefit of approximately $3.4 million for the 3 months ended March 31, primarily related to a valuation allowance release in connection with the sale of certain tax benefits under the New Jersey Economic Development Authority's Technology Business Tax Certificate Transfer Program. This benefit is a discrete, nonrecurring item. Net loss for the quarter was approximately $3.7 million, compared to approximately $3.3 million in the prior year period.
Turning to the balance sheet and cash flow, cash increased to approximately $2 million at March 31 from $1.1 million at year-end for a sequential increase in 5 quarters. That improvement was driven by positive operating cash flow of approximately $251,000 which reflected favorable working capital, including collections on receivables and inventory reductions as well as net financing inflows. We continue to manage our working capital deficit and are focused on improving the company's capital position as we execute on our growth strategy. Looking ahead, our priorities for 2026 are clear: continue scaling revenue through our expanding retail network, improve our cost structure by transitioning cut herb sourcing and scaling higher-margin branded categories, advance the RTD manufacturing platform with Tetra Pak and maintain disciplined capital management. We're encouraged by the top-line momentum and the cash flow improvement this quarter, and we are focused on translating that momentum into margin improvement over the balance of the year. With that, operator, please open the line for questions.
Questions and answers
Our first question is coming from Nick Sherwood of the Maxim Group.
My first question is across the 6,000 retail locations your products are found in, how many of those stores are carrying the cup herb products? How many of them are carrying vitamin supplements? How should we conceptualize what's being held across the stores?
It's a combination and a mix, obviously. We're seeing growth come out of cut herbs as that's the preferred form that consumers like based on convenience, and that continues to accelerate. We have Target which is going to be coming online in the next week or so. That will be significant for us as a business — the largest percentage being cut herbs with some potted herbs as well. As we start to evolve as a business and get into higher, more shelf-stable opportunities and products, you'll see that mix start to even out where I think you're going to see, especially with the ready-to-drinks down the road, that becoming a larger part of our business and at a much higher velocity as well as margin. But near term, let's say the next 6 to 12 months as we bring on the RTDs, it's going to be, I think, driven primarily by the vitamin supplements, which currently right now I would say is 20% of our business with cut herbs being probably 40% to 50% and then the rest is kind of everything else: potted, wheat grass, hydroponic basil, which is also a big player for us at a nice margin.
So I think a lot of top-line growth coming out of cut herbs, even more coming out of vitamins and supplements, knowing that the ring for a lot of these products is much higher than the clamshell cut herbs. And then the rest of it is going to be some of the other products that are in the mix that have better margins that will offset some of the top-line growth that's coming out of the cut herbs, with once again the vitamins and supplements becoming a bigger and bigger part of our business.
Understood. I appreciate the detail on that answer. And then kind of looking at this new ready-to-drink platform, have you been able to provide some of your retail partners with prototypes? Can you talk about the reception from your retail partners? How should we think about...
The reception has been overwhelming. It looks great. People have to eat, and ready-to-drink is in a segment that is incredibly compelling with the growth in protein consumption. You can't turn the television on and not see it come up, whether in advertisements or people speaking about the growing need, whether you're an active individual looking to build muscle or recover with a healthier lifestyle, or if you're older and trying to maintain weight or if you're ill and need protein, the protein needs just continue to grow across the full spectrum of consumers. For us, the retailers — many of which we already have significant commitments with — have shown strong interest. I think we're going to be at a point where it will become more and more of a negotiation to figure out who we'll bring on post-launch. We are working with a co-manufacturer to start driving the business and servicing the overwhelming demand.
I think we'll be close to capacity with them in the next few weeks. So it's really been incredibly exciting. We are focused on the core business; the greenhouse has got us here. But the RTD business is a large opportunity with the product lines we have, both a performance high-protein drink and an adult nutrition drink that will be launching in the tail end of 2027 or early 2028 in our own factory. We'll be launching prior to that and servicing business out of a co-manufacturer. We're uniquely qualified because there's really no one coming out of the greenhouse business doing the innovative things we're doing, and we're well-positioned to stand for clean label, sustainability and operational reliability. Working with Tetra Pak has been a phenomenal resource as we build out this platform. We have probably more orders than we can handle. We'll be running our prototype to get more specific in mid-July with product beginning to manufacture at a co-manufacturer in September while we build out the factory in Iowa.
We're already in the final stages of finalizing the product. We teamed up with McCormick to develop the products. One is a sports nutrition dairy-based premix that becomes an RTD in a Tetra Pak, and the other is an adult product similar to Boost or Ensure. It's been fantastic. A joke I said to people: I've always wanted to be in the hot cakes business and now we've got a product selling like hot cakes. It's been exciting for the team, the company and investors.
Yes. It sounds like there's a lot of momentum there and something we look forward to. And then my last question is how do you make customers loyal to your brand across product categories so that someone recognizes that you're the company behind the cut herbs they buy and the vitamin supplements or condiments they buy, ensuring they're buying across your product categories rather than just one?
It comes down to marketing, distribution and customer service, both for our retailers and our end users. It comes down to quality and consistency. The art of this is communicating and training consumers to know that when they want the best, they buy Edible Garden. Putting forth marketing initiatives that communicate that is something we do through advertising, in-store promotions and social media. If you've got quality, consistency and availability and you're shipping at 98% like we have, it drives loyalty because people know when they go in the product will be there and will be high quality and fresh. Delivering that experience — it tastes great and makes what you cook taste better — helps build loyalty. We see a stable revenue line and a strong reputation with retailers. This notion of Farm-to-Formula harnesses the greenhouses and R&D work we do. We have partnerships with universities and work with agencies to drive quality and consistency, elevating us above others in the category.
There aren't many competitors because few made the investments we have. The shareholders backed us to enable these investments, and now it's starting to pay off. Retailers are excited because they have a problem and we've got a solution. The shortfall in the marketplace on some items is tremendous and we're able to do it better, cleaner and with partners. It's an exciting time, and I'm very bullish on the business.
Our next question is coming from Ellen of Forest Capital.
You discussed the growing RTD opportunity and increasing retailer interest in domestic clean-label functional nutrition products. As you look ahead, how are you balancing investment between the company's core produce business and the larger RTD opportunity? And what do you think positions Edible Garden to compete effectively in that market?
Welcome, and thanks for joining the call. We're allocating resources where we see growth. The future will be shelf-stable, better-for-you products, and we'll allocate more resources toward RTD and nutrition because that's the larger opportunity. The core business required significant investments in operations and additional greenhouses tied to contracts — that distribution platform of 6,000 stores holds steady and is growing. But you'll see a shift toward investment in the RTD and nutrition platform because of the overwhelming demand for convenience and liquids versus powders, and because everyone from kids to seniors has these protein and nutrition needs. We will invest a good chunk of our resources in that platform, backed by our greenhouses, reputation and reliability. Retailers approached us with this RTD opportunity; when we started working with them we partnered with Tetra Pak and McCormick. Our track record of shipping difficult, perishable products at a 98% ship rate has driven the retailers to collaborate with us. We're a customer service company that happens to grow things, and that commitment to retailers is a core strength that positions us well for this opportunity.
Yes. No, you definitely did. Obviously, it looks like you run a very tight ship. I have another question: as you continue to evolve toward higher-margin and shelf-stable categories, what specific initiatives are underway within the core produce business to improve operational efficiencies and strengthen margins over time?
A lot of it is redeployment of existing resources across the whole platform, including RTD. We're leveraging regulatory, food safety and other teams rather than hiring many new people. We'll shift the business, blend with suppliers, and negotiate harder with suppliers based on growing demand. We'll focus on the accounts where we make money and consider removing some businesses that are too far from the greenhouse given rising diesel costs. We've already impacted labor through investments in automation and additional lines, especially in preparation for anticipated growth. The overall business is up 22% with growth in the core produce business, and I don't see that stopping. We'll continue refining and focusing on traditionally low-margin categories like cut herbs, but as we shift to higher-margin products and pick up velocity, margins will improve. We've already begun cost reductions and investments that are paying off; but there's more to do to refine costs and focus energies where we can drive margin and top line.
It looks like you guys are on your way. You also mentioned that international sales increased approximately 50% year-over-year. Can you discuss what's driving that growth and how important international markets could become within the broader business over time?
The majority of that international growth is driven by PriceSmart. They are the major player in big box for the Caribbean and South America, similar to Costco. They are expanding — opening stores in Chile and already operating in Colombia and other countries — and we've been in business with them for almost a decade. We've benefited from their growth and continue to expand into lines like Kick Sports Nutrition. You'll see more growth from that over the next year. Our existing protein powders and plant protein powders, all clean-labeled, will start to come online toward the tail end of this year in significant numbers at attractive margins. As that mix shifts, the lower-margin cut herb business becomes less of a drag on overall margin. We're starting to receive requests from major retailers to provide higher-margin vitamins, supplements and sports nutrition products, and the RTDs will further accelerate that shift.
That's fantastic. One more question: you highlighted expansion with several major retail partners during the quarter. As an investor, how should I think about the opportunity to continue increasing distribution within your existing retail relationships going forward?
We're in an advantageous position, in 6,000 stores with stable relationships based on performance. We service Walmart, Target, Meijer, Wakefern and ShopRite, the Ahold Delhaize family, Safeway, Hannaford — a who's who of food retailers. We'll look to go deep in these accounts rather than just wide: selling more products across our total portfolio to existing customers makes the most sense. We'll add new accounts when appropriate, but there's a lot of opportunity to increase penetration in current accounts. We're rationalizing the portfolio to drive higher margin and address operational inefficiencies. We want to be efficient from seed-to-store and ensure we're benefiting from margin expansion by optimizing the mix. We'll continue working with retailers we've proven ourselves to and sell more of what we currently have, including Pickles, fermented hot sauces and vitamin supplements. All of these dovetail under the better-for-you push that aligns with consumer demand and retailer initiatives to remove artificial colors and sweeteners. Timing is great for us because we've long been aligned with organic and clean-label practices, and retailers are looking for these products.
Well, we appear to have reached the end of our question-and-answer session. I will now hand back over to the management team for any closing comments.
Thank you, operator, and thanks again to everyone for joining us today and for your continued interest in Edible Garden. We believe the first quarter reflected meaningful progress across the business and continued validation of the broader strategy we have been executing against over the past several years. We're seeing encouraging momentum across our retail footprint, branded product portfolio and operational initiatives while continuing to build the foundation for future growth and opportunities in higher-margin shelf-stable nutrition categories. As we move through 2026 and beyond, our focus remains on disciplined execution. That includes continuing to expand distribution, improve operational efficiencies, strengthen margins over time, advance our RTD initiative and further leverage the infrastructure and retail relationships we have already established across the business. While we are still in the early stages of this evolution, we believe Edible Garden is becoming increasingly well-positioned as a diversified clean-label nutrition company with expanding capabilities across fresh, functional and shelf-stable categories and a stronger foundation for long-term growth. We appreciate everyone's continued support and look forward to updating you on our progress in the quarters ahead. Thanks again, and have a great day.
Thank you very much. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. We thank you for your participation.