Arcadia Biosciences(RKDA) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenues for Q3 2024 increased by 18% year-over-year, reaching approximately $1.5 million, primarily driven by a 55% increase in Zola Coconut Water sales [7][24] - Selling, general and administrative (SG&A) expenses increased by $380,000 compared to last year, mainly due to severance and transition-related fees following the sale of GoodWheat [7][26] - Cash used during the quarter declined to $1.5 million, marking the lowest level of cash used in a quarter since the company went public [8][31] Business Line Data and Key Metrics Changes - Zola Coconut Water sales increased by 55% year-over-year, representing about 86% of total revenues for the quarter [10][24] - The retail store count for Zola increased by 68% compared to the same period last year, achieving the largest quarterly distribution gains in the company's history [11][43] - Sales of GLA oil continued to decline, with Q3 sales being about half of what they were in the same quarter last year [24] Market Data and Key Metrics Changes - The coconut water category grew by 15% over the last 52 weeks, while Zola outpaced this growth with a 23% increase [14] - In the latest four-week period, the coconut water industry grew by 28%, while Zola's sales increased by 73% [15] Company Strategy and Development Direction - The company is focused on reducing its cost structure, monetizing its existing Wheat portfolio, and growing the Zola Coconut Water business [9] - New product innovations are in the pipeline, with plans to test concepts and product samples with retailers before launching [18][19] - The company aims to exceed 80% retail distribution growth for Zola by the end of 2024 [17] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about Zola's momentum heading into Q4, despite it being seasonally the softest quarter for the coconut water industry [17] - The company acknowledged challenges in forecasting due to the significant new distribution gains and the timing of initial shipments [21][22] - Management emphasized the importance of maintaining cash flow and managing inventory effectively to support growth [31] Other Important Information - The loss from discontinued operations decreased by 77% compared to the same period last year, with Q3 losses making up about 16% of the total year-to-date loss [27] - The company ended Q3 with $6.6 million in cash and short-term investments, down from $8.1 million at the end of Q2 [28] Q&A Session Summary Question: Clarification on the $150,000 write-down - The CFO confirmed that the $150,000 write-down was entirely within Q3 and related to both Hemp and GoodWheat seed [35][36] Question: Expectations on margins going forward - Management indicated that, excluding the write-down and GLA business, gross margins are expected to be around 33%, aligning with historical long-term outlooks for Zola margins in the low to mid-30s [37] Question: Infrastructure support for Zola's growth - Management expressed confidence in the infrastructure to support Zola's growth, noting that the product is manufactured in Thailand and that they are managing inventory levels carefully [40][41]