Arcadia Biosciences(RKDA) - 2020 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenues decreased by 20% quarter-over-quarter but increased by 20% year-to-date, driven by initial GoodWheat grain sales and increased GLA product sales [72] - Total operating expenses for Q3 2020 were $7.9 million compared to $6.6 million in Q3 2019, with year-to-date operating expenses totaling $21.2 million versus $16.1 million in the same period of 2019 [73] - Cash on hand and cash equivalents totaled $10.2 million at the end of Q3, with an additional $2 million in restricted cash [76] Business Line Data and Key Metrics Changes - The HB4 soybean business was consolidated with Bioseries, providing Arcadia with $6 million in cash and 1.875 million shares of Bioseries stock, enhancing liquidity and reducing future capital contributions [18][25] - GoodWheat products were launched directly to consumers, with positive feedback on nutritional content and taste, indicating strong market potential [7][9][10] Market Data and Key Metrics Changes - The U.S. CBD market is projected to reach $4.7 billion in 2020, with a 14% growth from 2019, despite challenges due to the pandemic [57] - The market opportunity for GoodWheat is significant, with expectations of a 15% premium over conventional wheat prices, translating to potential annual royalties of approximately $11 million for Arcadia [22][23] Company Strategy and Development Direction - The company aims to drive near-term shareholder value by focusing on the commercialization of its products, particularly through partnerships and direct-to-consumer channels [4][30] - The strategic partnership with Bioseries is expected to enhance geographic reach and operational efficiency in South and Central America [5][21] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the potential for GoodWheat products, citing consumer trends towards healthier food options during the pandemic [31][48] - The company is focused on reducing overhead costs and reallocating resources to customer acquisition and direct-to-consumer marketing strategies [70][120] Other Important Information - The company experienced a $1.3 million write-off of archipelago hemp inventory due to regulatory issues affecting CBD processing [75] - The acquisition of Industrial Seed Innovations is expected to enhance the GoodHemp product line and improve market positioning [56] Q&A Session Summary Question: What prompted the timing of the deal with Bioceres? - The timing was driven by a transition from development to commercialization, with Bioseries taking the lead in the commercialization phase [83] Question: What factors are important for sustainable top-line revenue growth? - The direct-to-consumer channel for GoodWheat is expected to yield immediate results, with marketing efforts aimed at gaining new customers [85] Question: What are the implications of recent marijuana legalization for Arcadia's business? - Legalization is expected to positively impact the hemp market, facilitating further legalization and extraction processes [87] Question: Can you provide more details on the inventory write-offs? - The write-offs were primarily due to regulatory clarity issues affecting CBD processing, and the company does not expect similar write-offs in the future [89] Question: What is the expected revenue from Sunova GLA capsules in China? - Projected revenues for the China market are estimated at $1.8 million for fiscal year 2021 [100] Question: What is the status of the backlog for GoodHemp seeds? - The backlog remains, but the focus is now on fulfilling orders for the 2021 planting season rather than emphasizing the backlog [114]