Prepared remarks
Good morning, everyone, and welcome to Edible Garden Incorporated 2026 Second Quarter Business Update Conference. The 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 Second 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 and 6 months ended June 30, 2026. The press release is posted on the company's website, www.ediblegardenag.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, 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 June 30, 2026, 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 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 and other words and terms of 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, level of activity, performance or achievements. In addition, neither the company nor any other 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 Mr. Jim Kras, Chief Executive Officer of Edible Garden. Jim?
Thanks, Ted, and good morning, everyone. The second quarter was another period of solid progress for Edible Garden. Revenue grew 12.8% year-over-year to $3.6 million, while total sales increased by more than 31%. What was particularly encouraging was the breadth of that growth. Cut herb sales increased more than 42%, driven by continued growth with existing customers and newer programs with major retailers, including Kroger, Target and Weis. We saw growth across potted herbs, international vitamins and condiments as well, while expanding our relationships with retailers, including Target, Walmart, Wakefern, ShopRite and The Fresh Market. In addition, we extended a multiyear private label contract with a major Midwest retailer. More recently, we were awarded fresh-cut herb distribution through a key Target Midwest distribution center, further expanding that relationship and broadening distribution of our premium fresh cut herb portfolio across the region. We believe the award demonstrates our ability to leverage our Midwest production and distribution infrastructure to efficiently support additional volume as our retail programs expand. Overall, we see a core business that continues to gain traction across customers, products and channels. Improving the underlying economics of the business remains an important priority. In Metro New York, for example, we are transitioning more volume from direct store deliveries to retail distribution centers and regional logistics hubs. We believe this can reduce transportation and delivery-related costs, simplify the network and create better operating leverage as we grow. At the same time, the retail relationships, distribution capabilities and infrastructure we have built through our core business gives us a foundation that can be leveraged well beyond traditional produce. That brings me to what we believe is the most significant long-term growth opportunity in front of Edible Garden, our Farm-to-Formula strategy and the development of the ready-to-drink RTD manufacturing platform at Prairie Hills in Webster City, Iowa. We believe this has the potential to fundamentally change the scale and profile of our business over time, and we made significant progress during the second quarter. Most notably, we successfully completed prototype production at Tetra Pak's new product development center. This is much more than a product development exercise that allowed us to run our proprietary clean label formulations under commercial processing conditions, generate production data, further optimize the products and advance our preparation for customer sales and commercial manufacturing. In parallel, we continued moving forward with the physical development of Prairie Hills with Structura Architects and E2 Building Group supporting the design, engineering and construction process. Together, these milestones represent meaningful progress towards a scalable commercial manufacturing platform we envision. The reason why we are so focused on this opportunity is the potential scale. Prairie Hills is being developed as a flexible, high-capacity platform for shelf-stable, clean label nutritional beverages utilizing advanced Tetra Pak processing and packaging technologies. At full production, we expect the facility to have capacity to manufacture more than 100 million beverage units annually, providing the potential to participate across sports nutrition, protein beverages, functional wellness, meal replacement, GLP-1 support and other better-for-you categories. Importantly, the platform is being developed to drive our own brands as well as private label and co-manufacturing opportunities, giving us multiple potential paths to build volume and create value from the facility. What makes this opportunity particularly compelling is that we are not starting from scratch. Our products are already available in more than 6,000 retail locations and growing. We've spent years developing relationships with national and regional retailers along with food safety, supply chain and commercialization and retail execution capabilities needed to serve them. Combining that existing commercial infrastructure with scalable domestic RTD manufacturing has the potential to significantly expand our addressable market, diversify our revenue base and over time, improve the earnings profiles of the business. That is really what Farm-to-Formula is about. We started with controlled environment agriculture and fresh produce, expanded into higher-value branded nutrition and functional foods. And now Prairie Hills gives us the opportunity to take another significant step into shelf-stable, clean label nutrition. We view Prairie Hills as much more than a new manufacturing facility. We believe it has the potential to become an important growth engine for Edible Garden and a key part of our evolution into a broader clean label food and nutrition platform. Our focus remains on execution, growing the core business, improving operating efficiency and advancing Prairie Hills towards commercial production and developing the branded and private label opportunities that can ultimately utilize that capacity. We believe the pieces are increasingly coming together, and we're excited about the direction of the business and the opportunity ahead. With that, I'll turn the call over to Kostas to review the financials. Kostas?
Thanks, Jim, and good morning, everyone. Revenue for the 3 months ended June 30, 2026, increased 12.8% to approximately $3.6 million compared with approximately $3.1 million in the prior year period. The increase was driven by continued growth in our cut herb and potted portfolio, which increased approximately $0.5 million or 50% year-over-year. Revenue growth was supported by underlying volume gains concentrated in select categories with total gross sales increasing 7.6% year-over-year. While cut herbs and condiments drove the growth, our financial focus is on converting that higher volume and revenue into improved operating performance as we continue to scale the business. Gross profit for the quarter was approximately $0.6 million, essentially flat with the prior year period. While we continue to generate top line growth, cost of goods sold remained elevated and improving profitability of that growth remains an important focus for us. One of the more meaningful improvements during the quarter was in selling, general and administrative expenses. SG&A declined approximately $0.9 million or 21.5% to $3.1 million, compared with approximately $4 million in the second quarter of last year. We believe this reflects a continued focus across the organization on managing expenses and improving operating efficiency as we scale the business. Net loss improved year-over-year to approximately $3.3 million from approximately $4 million in the second quarter of 2025. Turning to the balance sheet and cash flow. Total debt increased approximately $14.2 million from approximately $1.9 million at year-end, reflecting $13.5 million of new financing this quarter related to our initial investment in the Prairie Hills manufacturing facility in Iowa. Cash and restricted cash together were approximately $10.7 million at June 30, 2026, though approximately $10 million of that was held in a restricted account for the Iowa facility, leaving approximately $0.7 million of cash available for operations compared with approximately $1.1 million of unrestricted cash at year-end. Total assets were approximately $27.7 million compared with approximately $20.6 million at December 31, 2025, and total liabilities were approximately $22.1 million. We continue to focus on strengthening our capital position as we fund the business and invest in Prairie Hills. Operating cash flow was positive for the second consecutive quarter with net cash provided by operating activities of approximately $0.9 million for the 6 months ended June 30, 2026, compared with cash used in operations of approximately $6.8 million in the prior year period. As we look ahead, our financial priorities remain closely aligned with the operating strategy Jim discussed. We are focused on continuing to grow revenue and pursuing opportunities we believe can generate the greatest long-term returns. At the same time, we are continuing to invest in the development of Prairie Hills and the RTD platform. As we make those investments, we intend to remain disciplined in how we deploy capital and balance the requirements of the existing business with the opportunity we see in building a scalable domestic clean label beverage manufacturing platform. We believe the combination of continued revenue growth, a more efficient operating structure and disciplined investment in higher-value growth opportunities provides a path towards improving the financial profile of Edible Garden over time. With that, I'll turn the call back to the operator for questions.
Questions and answers
Our first question is coming from Nick Sherwood of Maxim Group.
My first question is about the new expansion and the new Target expanded distribution. Can you kind of contextualize what that distribution was before and how big of a win or a gain this new distribution is?
Nick, yes, it's significant. We've had a long-standing relationship with Target, and we've made quite a bit of investment in the relationship and being positioned for this type of opportunity. There have been market conditions where some produce suppliers, not us, have faced challenges. We're very fortunate. We're in controlled environment agriculture, which means we control how we grow and we have strong food safety processes in place. With that said, this is one of their largest, or pretty close to one of their largest, distribution opportunities. They just opened up a new fresh distribution center as they've been growing this part of their business, Target. We had picked up some business earlier this year. Based on our performance and market conditions, with a lot of consolidation in CEA and some of our major competitors going out of business, Target reached out and wanted us to pick this up for them because they wanted a partner they could rely on. For us, it's very significant since it's in Iowa, which aligns with our facilities there and their proximity in Minnesota. This is central to their business, and we're very fortunate and happy to have gotten this opportunity. We've put out a press release recently noting increased interest from other partners. My phone has been ringing off the hook with people trying to align with Edible Garden since my team does such a great job of execution, and it's always been the key for us. So yes, it's pretty significant. I hope that helps.
No, yes, I think that's a perfect explanation for what I was thinking about. And one thing that you mentioned in that answer was some of this consolidation that's kind of going on in the industry. Can you give us a little bit of insight on maybe how that may have accelerated in the past year and what it's looking like through the end of the year and the opportunity that might still remain available to Edible Garden in addition to this Target distribution expansion?
Well, yes, there's been quite a bit of consolidation, and I think it's really driven by where people put their investment dollars and the fact that Edible Garden had invested in our distribution platform and relationships. There are going to be issues in these types of businesses, whether there are supply chain issues or other operational challenges. What has happened is that some competitors put a lot of money into technology and trying to emphasize yield per square foot rather than securing the relationships in parallel and making the customer-facing investments we made. Yes, we have technology with GreenThumb that helps with our supply chain efficiency. When we bought the greenhouse in Michigan, we did a retrofit rather than a greenfield project. Those kinds of decisions have kept the business tighter and more efficient as we've continued to drive the delivery part of the business—on-time and in-full in-stock rates. All of that has positioned us to pick up the ball when it's been dropped by our competitors. The build-it-and-they-will-come approach in this category hasn't worked well because it's really about ensuring consumers can buy your products and that the retail loop gets completed. Kostas has brought discipline to the business that's allowed us to focus on cleaning up SG&A and improving efficiency. We're still in serious growth mode. With the Iowa facility, that will take the company to the next level. Most importantly, we've earned our stripes, and people call us because they don't want a headache; they want partners who will service their business. That's what my team has focused on, and I think it's paid off.
Yes. It sounds like there's definitely a continued opportunity there. Kind of switching gears, this Tetra Pak opportunity really is one of the key opportunities for your company going forward. Can you give us some insight on whether that timeline is still intact on building out the facility? Any specifics on the completion of the prototype production at Tetra Pak's new product development center? And what do you still need to bring in or do to make sure that everything remains on schedule for this?
We're still on track, and we're looking at the tail end of 2027 to see the first bottle come off the line. Given our reputation for service levels and execution, we've got presold commitments for 100% of the facility, which is unusual and reflects strong demand. We have a blend of our brand as well as private label commitments. Protein is hot and continues to grow, and we continue to innovate. Building the bridge from farm to formula is a major thrust to harness and add another dimension to what we do in the greenhouse. We're going to start with a co-manufacturer at the end of Q4 this year to allow us to continue proving out the formulas and go to market quickly so we can start realizing revenue without having to wait over a year for the Iowa facility to come online. Tetra Pak has been an excellent partner. The development process at their state-of-the-art facility in Denton, Texas was phenomenal. We have experienced people on our team who have worked with Tetra Pak for decades, including Dr. Chuck Sizer, who helped develop many patents for Tetra Pak packaging and advised during the production runs. The result is great-tasting, clean-labeled product that we're excited about. Leveraging our growing core business continues to uniquely position us for growth. I think this will be a much different company as we head into Q4 next year and especially in 2028 when we start producing out of Iowa. We're focused on driving that business. We're also mindful of sustainability with our Zero-Waste Inspired mission and recyclable packaging; Tetra Pak fits into that. We'll be launching our brand Kick in Q4 and are doing development work with major retailers. So overall, it's very exciting, going well, and we have a great team executing on it.
Our next question is coming from Nicole Kaufman of Blackridge Capital.
Congratulations on the quarter results. Jim, you've talked about the significant opportunity you see at Prairie Hills and the ability to support both Edible Garden brands and private label and co-manufacturing customers. Can you talk about the level of interest you're seeing from potential customers and how those discussions are progressing?
The interest has been phenomenal. Retailers have been coming to us saying we're innovative, we service their business well, and they want more. They've asked if we can translate what we grow into beverages and help with milk and whey-based products. My background working at companies like Nature's Bounty and Ajinomoto gave me credibility to lead this effort with the team. Major retailers that we currently deal with, as well as new partners, are asking if we can do this for them. Private label continues to grow, and there's an underserved private label RTD space largely because there isn't enough manufacturing capacity in the marketplace. We're going to solve that problem for some major retailers. We've got commitments on essentially the whole factory, and right now we're focused on executing and getting it up and running. We're also starting to get some pricing power on the herbs, which should help as we move into RTDs. Retailers will pay a bit more for reliability and availability. On the RTDs, we'll continue to capture the unmet volume demand, which will help drive top-line growth and allow us to price appropriately so that all parties win.
You delivered double-digit revenue growth this quarter and SG&A significantly declined year-over-year. What do you see as the biggest opportunities that would translate into continued revenue growth and improved profitability and operating leverage?
I think conventional wisdom applies: many of our fixed costs will remain relatively static as we put more volume into the existing greenhouses. We're not building more greenhouses currently; we have two and can continue to drive our potted product and expand fresh cut herbs. We're going to see revenue gains while keeping many costs relatively steady. We will make targeted investments, primarily around the Tetra Pak facility and associated staffing. Kostas and his team have done a nice job this quarter focusing on SG&A. We're working to procure better from suppliers; as our orders become more consistent, we can negotiate better terms. We've built long-term relationships with suppliers who are happy to scale with us. As we scale, our unit costs should come down and we'll realize economies of scale. We'll make some incremental strategic hires—people are our most important asset—but overall, the mix is continued top-line growth, minimized costs in the greenhouse business, and targeted strategic investments to capture larger opportunities.
We have no further questions in the queue at this time. I will now hand back over to Jim for closing comments.
Thank you. Before we conclude, I want to leave you with a few thoughts. We came into 2026 focused on strengthening our core business while continuing to build the foundation for Edible Garden's next phase of growth. Through the first half of the year, we believe we made meaningful progress on both fronts. Our core business continues to grow, supported by expanding relationships with leading retailers, broader growth across our product portfolio and continued efforts to improve operating efficiency. We believe that business provides an increasingly strong commercial foundation for where we want to take Edible Garden next. At the same time, we are making tangible progress with Farm-to-Formula and Prairie Hills. The work completed with Tetra Pak, along with the continued development of the Prairie Hills facility, brings us closer to our goal of building a scalable domestic RTD manufacturing platform capable of supporting both our own brands and private label opportunities. We believe Prairie Hills has the potential to significantly expand the scale and reach of Edible Garden while we combine that opportunity with the retail relationships, distribution network and operating capabilities we have already built. We believe we have the foundation to evolve Edible Garden into a much broader clean label food and nutrition company. There's a lot of work ahead, and our focus remains on execution, but we are encouraged by the progress we are making and excited about the opportunity in front of us. Thank you to our employees, customers, retail partners and shareholders for your continued support. We look forward to updating you on our progress. Thank you for joining us today.
Thank you very much. This does conclude today's conference. You may disconnect your phone lines at this time, and have a wonderful day. We thank you for your participation.