Arcadia Biosciences(RKDA) - 2020 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue in Q1 2020 was $151,000 higher than in Q1 2019, primarily driven by licensees' milestone achievements [43] - Total operating expenses for Q1 2020 were $6.1 million, an increase of 39% compared to $4.4 million in Q1 2019 [44] - Net income attributable to common stockholders for Q1 2020 was $2.5 million, compared to a net loss of $12.6 million in Q1 2019 [46] - Cash on hand at the end of Q1 2020 totaled $60 million, up from $25.3 million at year-end [48] Business Line Data and Key Metrics Changes - The hemp backlog remained unchanged at $3.7 million due to a pause in commitments during April, but orders are expected to decline as shipments are fulfilled [15] - The HB4 soybean project has secured regulatory approval on more than 80% of global soybean acres, with sales expected to begin in 2021 [16] - GoodHemp seeds are anticipated to generate significant revenue in Q2 2020, transitioning from backlog to sales [26] Market Data and Key Metrics Changes - The COVID-19 pandemic has impacted the business, with some hemp growers delaying purchases, but interest has increased significantly in May [12] - The company is experiencing a market increase in deal flow as growers resume spring plantings [13] - The wheat business is expected to see initial revenue from European shipments in Q2, with more substantial sales in Q3 and Q4 [40] Company Strategy and Development Direction - The company aims to accelerate shareholder value creation through strategic growth opportunities in the hemp value chain [20] - A focus on vertical integration is emphasized, with plans to capture greater value in the supply chain by combining strong genetics with processing capabilities [56] - The company is committed to acting as a responsible corporate neighbor in Hawaii, where it has expanded operations [31] Management's Comments on Operating Environment and Future Outlook - Management believes the worst of the COVID-19 pandemic is behind them and expects to recover delayed sales in the coming months [17] - The company maintains its revenue guidance of over $10 million for 2020, supported by anticipated sales from GoodHemp, CBD, and wheat [17] - Management is optimistic about the hemp supply chain's potential for consolidation and plans to play an active role in these opportunities [22] Other Important Information - The company experienced unusually high cash burn of $9.3 million in Q1 2020, attributed to inventory builds and capital expenditures [18] - A $1.1 million loan was secured under the Paycheck Protection Program, with plans to apply for forgiveness [50][82] Q&A Session Summary Question: Can you discuss the vertical expansion strategy versus horizontal expansion? - Management sees more value in vertical expansion due to risks in the supply chain quality and aims to capture greater value by integrating genetics with processing [56] Question: How is the supply chain quality in Hawaii compared to the Mainland? - The company is well-equipped in Hawaii and plans to focus initial vertical moves on the Mainland [58] Question: Can you provide a breakdown of the inventory build? - The inventory includes a mix of GoodHemp, some in process, and wheat, with visibility provided in the Q [59] Question: What is the outlook for seasonality and revenue breakdown for the next quarters? - The majority of hemp business will flow out in May, June, and July, with wheat sales expected in Q3 and Q4 [61] Question: How can the company capitalize on the trend towards home baking? - Management sees home baking as a strong trend and plans to announce a retail flour partnership in Q2 [66] Question: Can you expand on the hemp hub model and its progress? - The company has established a footprint in several regions, including Hawaii and California, and is building capabilities in other areas [70] Question: What is the status of the HB4 soybean project and Expoagro? - The project has seen strong interest, with ten times more acreage registered than needed, indicating high demand for innovation [77]