Arcadia Biosciences (RKDA) 11 May 232023 Q1 Earnings call transcript

Good afternoon, and welcome to Arcadia Biosciences' First Quarter 2023 Financial Results and Business Highlights Conference Call. At this time all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to T.J. at Officer Financial Chief Arcadia. Schaefer, Please go ahead.

and you, good afternoon. Thank

the today Jacot, This Arcadia's Joining refer is me and Stan call the to can you Officer. on President at is Chief webcast, and press company's release being arcadiabio.com. call Executive

we and start, remind to currently be available like Biosciences call based you on forward-looking information. statements would this Arcadia on will we Before that making current expectations

may actual differ that these from involve on risks performance statements and the uncertainties, since or results However, described factors company's materially those implied are and based today.

filed language You can safe company's review the in harbor our most recently XX-Q.

I'll the that, over to With Stan. now turn call

areas: everyone, and made in the first afternoon, I and for call. and progress quarter joining us the Today, into an water; two, path coconut of pasta our three, primary to XXXX Greenfield want GoodWheat to Good insights remarks update Project one, you quarter profitability. our Zola our on conference thank we first focus XXXX; for three and on

with First, let's our start progress. QX

As at discussed are to generating opposed on profitable as Arcadia revenues revenues calls, we is on cost. that have any focused prior

We our costs minimize consumers without impacting to focused or finding high-quality our revenues negatively on are grow intensely and customers. ways

revenue. not behind is chase will we on scaling investment. or resources return our value-destroying empty Greenfield and top-line core our We principle and maximizing a This Project are that ensures improving the

$XXX,XXX is in profit QX of low-quality focus contributor gross operations. result improvement seen dollars our as XXXX the profit gross loss is in this the These less QX of a clearly And improvement the from a more high-quality in substantially than revenues quarters. recent results main impact in while were revenues to as the are The $XXX,XXX last the QX dollars. results year, the than well in

year. update pasta. prepare and to in while which pasta invest expansion during pasta in we new GoodWheat on activities, category to consumers categories half primarily investment launch to XX% up compared of to first which the topic, customers QX continued to And expand the the of XXXX. of brand-building the and in second The the GoodWheat new are This XXXX, an trial-driving quarter last leads next to is continue we supporting

on data unit X, the sales ending Based by down category. sales driven weeks while XX action dollar XX%, for Nielsen across rose April X%, were pricing the

added to X%, Looking they XX%, no sales many grew stores leading and grow, at $X last category was retail large annual targeting hundreds and chains quarter, XXXX of in shelf of store-plus units QX while sales consistently QX exception. QX. the and acceptance GoodWheat continues increased weeks, we distribution XX every of X,XXX to billion. GoodWheat dollar are as in Retailer plan has their resets

Importantly, XXXX. we also seen increase QX during in pull have consumer an

board have in added follow competitive everyday lever convert trial. in they accounts to half expect come the with we this XXXX. Our velocity brands, newly and current been retailers as display programs on have surpass better-for-you pricing driving the all playbook lower to Execution underway model, many retailers of newer retail and GoodWheat's seen second same a will key is

accolades continues pasta from collect GoodWheat our And to trusted sources.

X,XXX the of being registered now which and the to has New serving U.S. received American retailer-employed pasta Canada. the addition certification, Heart-Check Alliance, throughout In GoodWheat Award Product only a network with Heart is dietitians traditional pasta Association the by Best Dietitians the dietitians Retail over Business

that the eat avoid. registered conversation foods a source our Council dietitian came out close companies other from through new Hershey's, Our multibillion-dollar combination to Wrigley. XXXX, to product GoodWheat taste or from an International such is a nutritionist on of Food May Information Mills submissions beat and nutrition. as great according of trusted Mars and report survey And most information pasta General with No food consumers

with improving velocity started feel the store we GoodWheat's So that performance, and potential. count, surface we of just award-winning scratching product have expanding

category units coconut category Zola XXth, to XX The flat with the was now growth. driver to the in water. ended be and primary pricing a in coconut continuing weeks of Moving March water dollars XX% for increase

For declined continues the sales be XX% last first referenced the the in million. by units the last I impacted X%, XX losses $XXX but quarter, weeks, were up In Zola to to distribution call.

their in distribution quarters annual and We grocery in QX. new QX while next retailers of velocity shelf and the headwinds couple expect grocery we for resets to presented continue these for

grocery, into and also as closer to during details we innovation We of launch. to channels you to will the beyond and share plan product more move half new expansion packaging launch with year drive second this we

Despite we due gross to headwinds, and the chain for profit seen the Zola improvement cost increase price in savings. margins have XXXX distribution supply an

In higher to profit fact, revenue in last XXXX QX declining Zola's this gross are year Xx than X% a further Zola's year revenues despite compared dollars reinforcing on our ago, quality. focus year,

linking both finish by Project innovation importance on innovation remarks wanted to I and I to brands, my the of Greenfield. have mentioned

you Greenfield to Greenfield to plan solid, Project a aligns achievable shareholder value, retail drive recall, including three-year expansion is and acquisition. As our profitability. unlock and company’s company’s innovation the the might create path through goals both potential one, Project around GoodWheat to resources

agile out. brands inside next core everybody make and three, driving cultivate wellness Two, and growth that to partnerships, generation an our organization and products good feel of maintaining

to are and the three-year We is and are profitability, two expansion that year planned. path starting of the category just channel this year

two categories well year, next for the acquisition. Project calls entering launch wheat-based as technology wheat an as Greenfield our through incremental the proprietary additional category of with Over

there exponential of generate strategy. acquisition brand targets This our launches have the product be and to innovation that we profit for an to a opportunity preferred have Does brand? the the outlined along Can before. is and XX% segment the better-for-you the The One, least the existing market category and leading investment will in in match better-for-you criteria follow share? the dollars grow? at revenue gross three year with expansion, Zola’s channel will we opportunity

co-packing and we the capacity margins the premium have entire partners This we standards? scale as highest without Two, Three, categories. can discipline for capital? gross quality there Is share profitable? we and we improve be team consumer that adding that the significant can pricing? in can Have grow identified the total space profitably scale? these businesses approach win we spend on in $XX focused annual acquiring creating of billion marketplace is and ensures Can of

competitive wait For the share GoodWheat category next reasons, our next we will call. to until launch

financial turn over results. the T.J. that, With call I to T.J.? our discuss will QX to

to Stan, today. Thank good you, and joining everyone us afternoon

sales our increased by XX% required grow our brands. and higher across to quarter all $X.X quarter-over-quarter represent Our the XXXX cash of continued and our first of sales preserving million focus driven generating fund In financial QX, net sales results profitable on our business.

the despite seasonally last QX of more than our losses earlier. entire Stan were sequentially, XX% mentioned Zola As factors. XX% sales is two year-over-year QX softest by coconut quarter, that sales softest water down while the as And category. Zola quarter, we an driven second well net in quarter as the is mentioned basis, for did uptick the a see distribution On

prices. consumption quality First XXXX, the in sell early to the as spike commodity wheat process grain for our in grain issue following decision this we part late March in non-human testing identified made and a of

more I result, with out where was of had costs we in have currently grain want than a the million, that associated three but sold $X.X the sale of QX also no $X.X quarter such to recorded we commercial sales As grain of point to related a quarters XXXX. no million one-time in products. traits

grain or category future poor launches. minimal the grain product So supply quality had on impact our a for pasta

Saavy was of QX more in The no XXXX driver body brand the Naturals sales from part than business of second and sales co-packing Arcadia. significant are million in longer that $X.X care

As plant we in to Naturals divested its to reduce August, due the and on manufacturing margin reminder, revenue wound business streams brands. XXXX co-packing in a and and expenses focus down the higher Savvy unprofitable order

businesses Excluding the even QX as the Arcadia, significant are longer reported sales of as the is that last compared of what quarter XX% sales part XXXX care $X.X year. XXXX. increased is to while QX grain were But our well below more million would’ve our no that one-time in sale same body

is higher, we making to $XXX,XXX was the testament profit gross focusing towards a growth. Our which on profitable are progress

$XXX,XXX SG&A. the development as by modest $XXX,XXX, XXXX end additional prepare work $XX,XXX Turning in more X%. XXXX. the or at launch Research about was now of driven declined we quarter-over-quarter, XX% to innovation R&D and of products to and a The year-over-year or timing of expenses decline

fees Selling, in X.X% were QX. which of general related costs XXXX, quarter by $X.X and administrative million the of in increase is slight payroll higher driven sequentially first a about

complexities common compared with more filing, sales in Our marketing given of to attributable invested the we still were activities. loss be which net the XX-Q flat shareholders XX% is The essentially SG&A financing. under review that the our will last fact March despite expenses generating released company’s to year,

receive to Moving we Accounts payment QX the receivable milestone from to $XXX,XXX $XXX,XXX declined the of sheet. balance bio $XXX,XXX series. as

payment we additional which milestone QX related have XXXX. receive we to in to As one of the a reminder, $XXX,XXX expect HBX

we working season, expect the other balances do categories earlier. accounts our XXXX. increase as inventory end compared of and capital Zola’s launch such GoodWheat All for that Stan remain relatively beverage new of We as payable mentioned inventory summer prepare accounts to the to as unchanged as well

may fund our compared sufficient the We cash capital the access March Our into of XXXX, was end markets our the anticipation proceeds of the XXXX, to the end balance million from $XX.X believe $XX acquisition. million by a but primarily at QX operations is driven at of in to financing. potential cash

questions. turn the With over to the for will that, operator I call now

Thank of question line from [Operator H.C. Wainwright. you. the in first Dipesh comes Instructions] Our Patel

T.J. Stan, Hi,

for lucrative? of number currently of available? in total And most through is made standing appear be to these questions. products Wainwright. H.C. What GoodWheat Just Selvaraju which retail Ram the being at Several channels the are which

in. Dipesh, Thank Yes. calling you, for

is now, to right currently products. into we our So expect channels expand conventional as especially well. grocery, we selling do grocery, And are other where

gross naturals, which for club, opportunity of an also terms in And profit be similar is For to relatively example, all their those mass, expect there's of channels we contribution. us.

Got that product, it. product versus competitors you And kind touching just that then differentiate are on to base coconut water the planning market? in how of

things This help really for to it nearest in competitor And the actually are our of we clean is Yes. taste. one that couple Stan taste. is doing. change combination two the differentiator Well, a preferred which of category. versus have we packaging us. key Thank are the you. will us, in Really, is we One again. highlight crisp, that We for have us

taste of will We're key moving taste we that our think marketing to that to people are also the the And innovative expand And flavors. able new also, audience expand into will so though, be in water. a coconut future interested forward. that that preference that,

quarters? coming this, have these Got are but of the over key are what you or margin likely what And -- how may it. to touched trend some then the are drivers And on the improvement?

Yes.

the and I'll question, part answer second. the So first of let answer that T.J. I'll

that us, were remarks, So yes, number of lot a a in about T.J. where dragging the talked was mix. this a lot of there businesses for were think product And his I down margin. it

And to grow in opportunity shift that grow, for the the that that have was be and profitably to that to the making and businesses us, has contribute best we been would so sure it and ones resources would case. the a and scale the

outlook other the of T.J.? terms for in quarters, So

this Yes. product so I mix mentioned, XX%. Stan was issues. quarter, the around there gross some Again, margin mean, were as

expectation, And to kind QX, maybe with margin recent forward, line the the so of for gross in more be going the QX. quarters, would be

kind that we So to of as out we level mix forward. move expect

company my then its expect Got any it. And near-term? Thanks color. last to the be inventory monetize question, of able for hemp does to that

let that answer question. T.J. But I'll

Yes.

is So to $XXX,XXX about have on related books plan. only the We hemp. currently that the

it are assets but as as speak. So was, we it's once those actively trying not monetize as to we significant

Perfect. Thank for Stan T.J. All my you right. taking and questions,

welcome. You’re

for Thank you. One moment our question. next

line next Lake Markets. of comes question Klieve Street in Our the Ben Capital from

for All right. my taking Thanks questions.

be kind category of like an existing maturity for company move category. a you have Stan, that wondering your don’t earlier a mind. be if expecting the pipeline? with introducing potential elaborate your, distribution suspect you acquisition company bit a place? you an make I going seeking a Most is in if this within candidate. -- it to mind, at are have you Or in to stage that already around a sounds you a has candidates comments First notably, acquisitions, can of on distribution to in for you are that to handful going least broad your that I’m is candidate down have a

the is, looking Hi we today. Ben. need compelling are have your acquisition. Thanks for it Stan. has I grow to those has achieve for us And And to on for before, has an would have footprint, compelling the consumer opportunity scalability it is path are looking to includes existing is or order I able margin fact in they which cement which it distribution What identified. yes, quickly. have to question, to to answer in third It This guess calling some categories have candidates piece for as retail is that. grow the at a side, acceptance. a either we We then in outlined an do story had that a to to that profitability be

those are three in for So we’re criteria really that acquisitions. the looking these

is are this And category GoodWheat any do really on the for kind focused product, this channels, distribution on on opportunity type retail entirely chains then where to e-commerce? maybe the is Got food going it. focused service you on and better-for-you be value Very the proposition something see of some with Or that good. menus? within

our on contacts. instead food service support We feel retail be to is an is food opportunity do all to building rather that e-commerce. reach but for and would service, like quickly Yes, able now so a those infrastructure there use right that, of focus partner we’d in

Zola, got the you’re Really of I’m of you tune curious the here to of quarters, -- approach. say you what on dramatic -- sensible flavor the as over Okay, -- guess skews. this going brand? you this the expanding of as this just few for a about high and level fine kind a you rebranding I curious refocus that’s line the the it. of the uptick product is talked And expecting kind of kind about No, next Zola, how do XXXX? top do think expectations

Zola’s for Yes, growth. opportunity to is no, do categories. we opportunity We still GoodWheat, to coconut multiple expand see opposed only do can obviously which in water though, see as

only expecting some GoodWheat. in a channels. in comparison again, does have But that from we’ve other Zola think has lower I we’re said X% a on distribution to as growth So ways what calls, grocery

it’s and no is so It that. only in in channels grocery. And besides other

package, and channels where that’s will we right the the the one -- So right expand us expand help having help other lineup as feel like right well. flavor size

good. that. more updates Very forward for look on We’ll Okay.

I’ll for does me. Thanks and back I line. think it taking in for that my questions get

closing Thank conference would At Jacot not like you. over to time, the Stan remarks. this turn for back I to

the continue in to progress I am closing, with So pleased we make.

our quality by higher generating are evidenced We revenue as improved gross profit.

trial, areas in we in marketing investment other reducing than resulted keep SG&A our flat. has to expected higher in in that activities increased have while We have balance. order expenses driving a expenses cash And managed working capital

excited we as you look a have to day. again innovation in Thank new us forward, Going for planned are launch joining the you and of we have updating about forward future. great we well as the GoodWheat and Zola, for categories the

Thank call. conference for today’s concludes This you participating.

disconnect. now may You