管理層發言
Good morning, everyone, and welcome to the Edible Garden Incorporated 2025 Second Quarter Business Update Conference Call. 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 Second Quarter 2025 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 this morning, the company announced its operating results for the 3 months ended June 30, 2025. The press release is posted on the company's website, www.ediblegardenag.com. In addition, the company will file its quarterly report on Form 10-Q with the U.S. Securities and Exchange Commission, which will be available 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 June 30 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, 2024.
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 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 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, and thank you to everyone for joining us today. The results that we reported this morning show that our strategy is working and that the disciplined decisions that we've made are delivering real impact. We've been intentional about focusing on higher-margin innovation-driven categories that align with where we see the market heading rather than trying to be everything to everyone. A year ago, we announced a strategic decision to exit two underperforming low-margin categories, lettuce and floral. While at the time, it was a difficult decision, we've since freed up resources to invest in areas where we can lead like CEA-informed better-for-you shelf-stable products that meet the growing demand for healthy and sustainable options. These choices are not just about improving margins. They're about building a portfolio that's more resilient, more adaptable, and better positioned to serve consumers over the long term.
We believe this strategy has rightsized our product portfolio, expanded capacity for our core portfolio, and over time, will not only drive profitability, but also strengthen our role as a trusted provider of wellness-focused solutions to consumers around the world. These results give us a solid foundation as we look ahead, and I'm excited to walk you through the highlights of the quarter. Private label products sold through major big box retailers delivered a standout second quarter performance, climbing 19.1% year-over-year. This growth was driven by expanded retail programs and strong sell-through of our sustainably grown CEA-produced herb products that continue to resonate with consumers seeking freshness, quality, and sustainability. These results underscore the strength of our retail partnerships and our ability to capture share in higher-margin demand-driven categories. That momentum extended into our core produce category with hydroponic basil leading the way, growing 7.1% quarter-over-quarter, followed by potted herbs up 6.4% and wheatgrass up 4.1%.
These results highlight the enduring appeal and consistency of our core offerings, supported by our controlled environment agriculture model, which delivers reliable quality, yield, and sustainability advantages while exceeding major retailer fill rate expectations, consistently delivering at 98% or better. In the second quarter, we made significant progress on our strategic priorities, innovation, brand expansion, and operational sustainability. Furthermore, we've clearly defined our better-for-you market strategy. This is made up of three key pillars: our existing fresh produce and fresh condiments, farm formula supplementation, and performance beverages. Our Fresh Produce segment posted unit growth, supported by new product introductions and ongoing consumer loyalty. A notable highlight was the launch of Kick, our Sports Nutrition line on Amazon, which expanded our digital marketing reach, introducing the brand to a broader and stickier customer base and strengthening our direct-to-consumer engagement.
Early results from these efforts drove an increase in e-commerce sales, demonstrating both the scalability of our product portfolio online and the growing strength of our digital sales. We also advanced brand expansion initiatives with continued retail growth of Pickle Party, which is gaining strong consumer traction and celebrated the debut of the industry's first USDA organic hydroponic basil, further reinforcing our leadership in sustainable agriculture. Together with robust gains in our nonperishable lines, these achievements are diversifying our revenue streams, enhancing long-term portfolio resilience, and positioning Edible Garden to capitalize on emerging opportunities. Internationally, revenue grew 66.5% as we secured new distribution partnerships and expanded retail placements in key global markets, providing a broader platform for sustained growth and global brand visibility. Demand for better-for-you CPG products continues to rise, creating a powerful tailwind for our business.
Globally, the functional food and beverage market is projected to expand from $400 billion to $610 billion by 2030 according to Virtue Market Research. In the U.S., sales of natural, organic, and functional products are expected to reach $386 billion by 2028, growing at roughly 5% annually for the Nutrition Business Journal. With a differentiated brand portfolio built around innovation, sustainability, and wellness, we believe Edible Garden is well positioned to capture share in these large and fast-growing categories and benefit from these long-term trends. As these consumer preferences increasingly influence the fresh category, our produce business is equally poised to deliver exactly what today's shoppers are seeking: fresh, sustainably grown, and high-quality products that align with their health and lifestyle goals. On the operational side, we took a significant step forward with the acquisition of NaturalShrimp aquaculture in Iowa, now operating as Edible Garden Prairie Hills.
This site expands our R&D capabilities in aquaponics, supports year-round climate control production, and brings with it a portfolio of patented water treatment technologies that recycle water, improve yields, and reduce environmental impact. These patents are now part of our IP portfolio, giving us exclusive rights to advance aquaculture methods we can not only use at Prairie Hills, but potentially across our entire growing network, strengthening both our competitive position and our sustainability profile. The central Midwest location also gives us a real advantage in distribution, allowing us to get products to retailers faster, lowering our transportation costs, and delivering fresher products to customers. And with plenty of room to grow, Prairie Hills provides the capacity and flexibility to scale production and roll out new product lines, making it a key driver of innovation, efficiency, and long-term growth.
The second quarter proved that our strategy is working, and we're just getting started with delivering growth in categories that matter most, expanding into high-margin opportunities and strengthening our leadership in sustainable innovation-driven food production. The acquisition of Prairie Hills adds powerful new capabilities in aquaponics, R&D, and distribution that position us to scale faster, operate more efficiently, and bring even more differentiated products to market. With strong market tailwinds, a growing portfolio of brands consumers love, and the infrastructure to support our ambitions, we're entering the next phase of our growth story with confidence, momentum, and a clear path to creating long-lasting value for our shareholders. With that, I'll turn the call over to Kostas Dafoulas, our Interim CFO, who will review the financial results for the quarter ended June 30, 2025. Kostas?
Thanks, Jim, and good morning, everyone. Revenue for the second quarter was $3.1 million compared to $4.3 million in the same period last year. The year-over-year decline primarily reflects our strategic decision to exit the floral and lettuce categories, which accounted for roughly $740,000 of the difference. While we haven't yet fully replaced the revenue from floral and lettuce, these categories carried high costs and low returns, and they didn't align with our focus on higher-margin opportunities. Gross profit came in at $634,000 compared to $1.6 million in Q2 of last year. The decrease was driven by changes in product mix, lower sales volume following the category exits, and some margin pressure due to increased investments in infrastructure and personnel. We view these investments as necessary to enhance scalability and improve efficiency over time. Selling, general, and administrative expenses were $4.2 million compared to $2.7 million last year.
The increase was mainly due to expenses related to the NaturalShrimp asset purchase and legal expenses related to an issue in our capital market activities in the quarter, along with increased labor and raw material costs. The net loss for the quarter was $4 million compared to $1.9 million in the same period last year, with the change largely reflecting the higher SG&A expenses. Over recent quarters, we have taken decisive steps to strengthen our balance sheet meaningfully, reduce leverage, and enhance our equity base. These actions position us to execute against our strategic priorities with greater financial flexibility. We closed the quarter with $2.8 million in cash and remain focused on driving inventory efficiency through improved production planning and optimized distribution, supporting both margin expansion and cash generation. And with that, operator, please open the line for questions.
分析師問答
Operator Instructions. Our first question is coming from Anthony Vendetti of the Maxim Group.
Jim or Kostas, could you provide more details on the numbers related to private label? What percentage of your business does it represent, and how much of your revenues come from private label? I also have a couple of follow-up questions.
Kostas, I believe we can tackle this together. I'll begin with an overview of our strategy, and feel free to add any percentages or further details as necessary. Private label is becoming an increasingly important segment for us. There has been a significant shift in recent years, as seen from various industry reports, particularly among retailers who are eager to incorporate more natural brand equivalents into their private label offerings. Our private label business is experiencing strong growth. The advantage is that we can avoid certain marketing and other expenses tied to branded products, particularly since we are working with labels like Meijer and Hannaford. In Q4, we're set to launch our private label within the largest grocery chain in the U.S., which adds to this positive trend. I appreciate that there are minimal marketing costs involved, making it a straightforward and efficient operation. It's also consistent and typically tied to contracts, such as our three-year agreement with Meijer, which provides us with security and mutual commitment. Overall, we’re executing well across all business aspects, and the private label segment not only strengthens our relationships but also opens up additional opportunities beyond this area. Our contracted business model, combined with low marketing costs, continues to drive significant growth for us.
Yes. And just to add, Anthony, sorry, to what Jim said, we started down this private label path about a year ago with the contract that Jim mentioned with Meijer. And we've seen positive results of our efforts in partnering with these retailers, particularly Meijer, as Jim referenced, which is probably the largest piece of private label, seeing some great growth. It's about 19% in dollars and about 22% in units. So I think we're going to start capitalizing on that relationship and augmenting it across other retailers going forward as we're receiving other opportunities. This is sort of one of the main drivers that we're looking to replace the lost revenue from categories we exited last year, and I'm pretty optimistic for the back half of '25.
Okay. Great. Maybe that's a good segue into the lost revenue, and then I'll have just a quick follow-up on the vitamin supplement business as well as a natural shrimp. So first, you mentioned there's about $740,000 in lost revenue this quarter from exiting the lower-margin floral and lettuce business. But the revenue difference between this quarter and last quarter was about $1.2 million. So what accounted for the other or for the remainder of the shortfall? And what part of the business or what categories were not...
I know you're correct that floral and lettuce contributed significantly to that change. We also experienced some softness in the condiments sector, but fortunately, that area isn't a major part of our revenue. The remaining gap is partly due to our announcement of a new sports nutrition line called Kick Sports Nutrition, which has led us to phase out our legacy vitamin whey products. Consequently, this transition has resulted in some softness in that category as well. We're seeing flat or slightly softer year-over-year comparisons on our core herbs portfolio. However, as we move into the second half of the year with Kick entering the market and partnering with several retailers, we're optimistic that these opportunities will compensate for the lost revenue and bring in even more.
Okay. And these opportunities in terms of Kick Sports Nutrition and these are the higher-margin products, correct?
Yes, that's right. We announced a partnership that we're starting to work with Amazon to put these on e-commerce channels as well. So I think with the refresh of the brand kind of tied in with our better-for-you promise to our customers, we're really excited about the opportunity, and we have a lot of eyeballs online via Amazon on these new products. So I think combined with our marketing efforts there, we're expecting acceleration in that category.
It brings quite a bit, and I mentioned it in the call. First of all, it's a big facility spanning 6.2 acres. We announced a few weeks ago that we've rebranded it Edible Garden Prairie Hills. It's centrally located, just a few hours from major retailers' distribution centers in the Midwest, including Target. This expands our penetration and reach further west toward the coast, leveraging the Midwest facilities. Additionally, there's a patent portfolio that came with it, which will aid in water treatment, lowering costs and improving our sustainability profile. We have significant plans for that facility not only to drive research and development but also to establish a functioning sustainability hub with next-generation products that have higher margins and align with our partnerships. While I can't discuss too many specifics since it's still in development, it is very significant. We're collaborating with a major retailer to develop a facility that will support and advance their private label nutraceutical business.
The facility will also include branded products and any new business we acquire. It's a multifaceted and large facility with a dedicated workforce that is eager to have Edible Garden come in and rejuvenate what is truly a fantastic facility that will achieve a lot and expand our capabilities. We have already begun that process. I'm happy to answer any other questions or specifics, Anthony.
Our next question is coming from an analyst of Forest Capital.
First off, congrats on the progress that you're making in executing the new business strategy. My first question, just in terms of the seasonality, we're traditionally very seasonal with Thanksgiving and the holidays driving significant revenue. And I was just wondering if you can give us a little bit of color around what you're anticipating in the fourth quarter.
In the fourth quarter, our business operates like a Super Bowl. We have two main segments: the Edible Garden branded fresh products and the Edible Garden vitamins and supplements. For both segments, Q4 is crucial, especially with our holiday program starting in early November and lasting until mid-January. As we improve our operations, we’ve become more efficient, allowing us to better manage labor costs and revenue expectations. The produce side of our business continues to grow, and we already have significant preorder increases for Q4, including new accounts that will enhance our performance. I'm very optimistic about a strong Q4, and we are in a more stable position than last year, particularly regarding labor conditions. We've effectively secured a committed outsourced workforce, particularly in Michigan, which allows us to manage operations better than before. Additionally, we’ve invested heavily in our facilities for refrigeration and production, enabling us to handle increased business without significant cost increases.
On the vitamins and supplements front, we see a shift as we transition to a contemporary product line that aligns with customer trends. Our international business is also growing, driven by partners like PriceSmart, and Q4 will be an important loading quarter for us. With January being a peak month for New Year's resolutions, we expect strong sales in dietary supplements and protein powders as we’ve already prepared orders that will hit shelves in time for big promotions. Overall, I'm looking forward to a great fourth quarter. We've worked hard to reach this point, and I believe our platform is ready to thrive.
That's great, and it's very encouraging. You also touched on this a bit earlier, and it was clearly a big announcement regarding Kick and its launch on Amazon. But I'm just wondering, can you expand on the status of that and your plans for the line and growth and other stuff?
The status is — it's been accelerating, which is great. We didn't — unfortunately, like once again, in this reporting cycle, we just launched in the middle of May. So we had really a month of data in line. Obviously, it was significant on a small base. But that business continues to accelerate. We've put resources towards it. We've got a great partner, Pirawna. We got a great buyer at Amazon, who's got a real interest in better-for-you products, understanding where the category is going. So having that kind of support out of Seattle is fantastic, and it is a big category for them. Our success in being on trend and their support and us putting the resources towards it is important. We're starting to see that return. We've been seeing that return, frankly, and the business just continues to accelerate and drive trial. We've made an investment in everything from social media to paid media, on AdWords and kind of all the tools of the trade in digital to start to drive engagement and trial.
We've got great reviews online. And so that's really great. We've got two new items, our pre-workout, post-workout, once again, better-for-you position. Those launch — will be launching at PriceSmart as well as some other retailers in the next — geez, the next probably 45 days for that Q4 load-in that I mentioned, as well as online at Amazon. What’s great about that is you continue to not only differentiate yourself but you expand the portfolio. The retail rings are great on this. The margins are good on it. We've got a great manufacturing partner who's helping us with it. As we continue to drive it, it will help drive not only innovation, but it also is driving a lot of other private label opportunities that we didn't speak too much about on the vitamin supplement area, which it's kind of haloing the whole business as it relates to, hey, if Edible Garden can do what they do in produce in such a difficult category at such a high rate of excellence, imagine what they can do in more shelf-stable products and they're driving this innovation. I couldn't be more happy about where we are right now and how we've evolved over the last couple of years to get into this position to really be a leader.
That's fantastic. And lastly, you mentioned the international business being up. Can you just expand a little bit on how those markets fit into the longer-term growth plans?
What's great about it is, look, it's hard to ship basil from Michigan or Iowa or New Jersey to the Caribbean or South America, right? It's not going to make it unless it's dried or processed. So we have our limitations geographically and based on transportation, how much we can sort of stretch outside of the certain area with the greenhouses without putting a greenhouse up. All we know that our competitors who are no longer around, most of them know they tried to build greenhouses everywhere, and then they just kind of ran out of gas because they either didn't have the relationships or the revenue where the CapEx was so high. We've been so prudent with our money repurposing facilities. We've proven that with our Heartland facility in Grand Rapids and servicing Meijer in the Midwest and now what we're doing out in Iowa. But the reality is the shelf-stable products, whether it's the vitamins and supplements, which has driven the majority of that growth that you see, is the growing demand globally for protein.
All you have to do is read the papers to see that people are bringing in more and more protein. People want better-for-you products, they're reading labels. They don't want some of these nasty ingredients and preservatives. If we can meld that freshness with shelf-stable products and position our products to capture that demand, we're not only going to see that stay side, but internationally. We see that, like I said, on the vitamins and supplements. I think that's just the start. We're working on some very interesting new products that should align with other type of products that extend outside of vitamins and maybe even more into functional foods. We see that with Pickle Party and some of the big box opportunities there. But all those products, because they're more shelf-stable, allow us to have more global reach with them and partner with some of these more bleeding-edge retailers like PriceSmart that's trying to bring in goods into these different markets that are on trend and that they know consumers want beyond the U.S. Super excited about that part of the business. It's been on fire lately, and I don't see it stopping, which is awesome.
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 their closing comments.
Thank you very much.