Edible Garden AG Incorporated (EDBL) Q2 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call presents a mixed picture: while there are strategic realignments and positive developments like the NaturalShrimp acquisition and high-margin product focus, financials reflect declining revenue and increased losses. The Q&A reveals growth in private labels and optimism about new product lines, but management's vague responses on specifics raise concerns. The company's dependency on new revenue streams and margin pressures add uncertainty. Considering these factors, the stock price is likely to remain stable, hence a neutral sentiment.
Key Financial Performance
Revenue $3.1 million, a decrease from $4.3 million in the same period last year, reflecting a year-over-year decline primarily due to the strategic decision to exit the floral and lettuce categories, which accounted for roughly $740,000 of the difference.
Gross Profit $634,000, a decrease from $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.
Selling, General and Administrative (SG&A) Expenses $4.2 million, an increase from $2.7 million last year. The increase was mainly due to expenses related to the NaturalShrimp asset purchase, legal expenses, and increased labor and raw material costs.
Net Loss $4 million, an increase from $1.9 million in the same period last year. The change largely reflects the higher SG&A expenses.
Cash Position $2.8 million at the end of the quarter, with a focus on driving inventory efficiency through improved production planning and optimized distribution.
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Operating Highlights
Private label products: Delivered a 19.1% year-over-year growth driven by expanded retail programs and strong sell-through of sustainably grown CEA-produced herb products.
Hydroponic basil: Grew 7.1% quarter-over-quarter, followed by potted herbs up 6.4% and wheatgrass up 4.1%.
Kick Sports Nutrition line: Launched on Amazon, expanding digital marketing reach and increasing e-commerce sales.
Pickle Party: Continued retail growth and strong consumer traction.
USDA organic hydroponic basil: Debuted as the industry's first, reinforcing leadership in sustainable agriculture.
International revenue: Grew 66.5% due to new distribution partnerships and expanded retail placements in key global markets.
Functional food and beverage market: Projected to grow from $400 billion to $610 billion by 2030 globally, with U.S. sales expected to reach $386 billion by 2028.
Acquisition of NaturalShrimp aquaculture: Expanded R&D capabilities in aquaponics, added patented water treatment technologies, and improved distribution efficiency.
Operational sustainability: Focused on year-round climate control production and reduced environmental impact through patented technologies.
Exit from low-margin categories: Exited lettuce and floral categories to focus on higher-margin, innovation-driven categories.
Better-for-you market strategy: Defined around fresh produce, farm formula supplementation, and performance beverages.
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Risk or Challenges
Revenue Decline: Revenue for the second quarter was $3.1 million compared to $4.3 million in the same period last year, reflecting a year-over-year decline primarily due to the strategic decision to exit the floral and lettuce categories. This has not yet been fully offset by new revenue streams.
Gross Profit Decrease: Gross profit dropped to $634,000 from $1.6 million in Q2 of last year, driven by changes in product mix, lower sales volume following category exits, and margin pressure from increased investments in infrastructure and personnel.
Increased SG&A Expenses: Selling, general, and administrative expenses rose to $4.2 million from $2.7 million last year, primarily due to expenses related to the NaturalShrimp asset purchase, legal costs, and increased labor and raw material costs.
Net Loss Expansion: Net loss for the quarter widened to $4 million compared to $1.9 million in the same period last year, largely due to higher SG&A expenses.
Dependence on New Revenue Streams: The company has not yet fully replaced the revenue lost from exiting the floral and lettuce categories, creating a dependency on the success of new high-margin product lines and innovations.
Margin Pressure: Investments in infrastructure and personnel have created short-term margin pressure, impacting profitability.
Supply Chain and Cost Challenges: Increased labor and raw material costs are contributing to higher operational expenses, which could impact financial performance if not managed effectively.
Strategic Execution Risks: The company’s reliance on new product launches, such as the Kick Sports Nutrition line and other innovations, poses risks if these products fail to gain market traction or meet revenue expectations.
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Guidance & Outlook
Revenue Growth: The company anticipates capturing market share in the functional food and beverage market, which is projected to grow from $400 billion to $610 billion globally by 2030. In the U.S., sales of natural, organic, and functional products are expected to reach $386 billion by 2028, growing at approximately 5% annually.
Market Trends: Edible Garden expects to benefit from rising demand for better-for-you consumer packaged goods (CPG) products, driven by consumer preferences for fresh, sustainably grown, and high-quality products.
Operational Expansion: The acquisition of NaturalShrimp aquaculture in Iowa, now operating as Edible Garden Prairie Hills, is expected to enhance R&D capabilities in aquaponics, support year-round climate-controlled production, and reduce environmental impact through patented water treatment technologies. This facility is anticipated to lower transportation costs, improve product freshness, and provide capacity for scaling production and launching new product lines.
Product Portfolio and Innovation: The company plans to expand its product portfolio with a focus on high-margin, innovation-driven categories, including fresh produce, farm formula supplementation, and performance beverages. The launch of new products, such as the Kick Sports Nutrition line and USDA organic hydroponic basil, is expected to drive growth in e-commerce and retail channels.
Global Expansion: International revenue grew by 66.5% in the second quarter, and the company aims to continue expanding its global distribution partnerships and retail placements to sustain growth and enhance brand visibility.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:What percentage of revenues is private label, and is it a growing part of the business?
A:Private label is a growing part of the business, with significant growth in recent years. It offers advantages such as lower marketing costs and contracted security, like the 3-year contract with Meijer. Private label accounts for about 19% in dollars and 22% in units, and it is a key driver to replace lost revenue from exited categories.
Q:What accounted for the $1.2 million revenue shortfall this quarter compared to the last quarter?
A:The $1.2 million shortfall was primarily due to exiting the lower-margin floral and lettuce business, which accounted for $740,000. Additional factors included softness in the condiments business and a transition from legacy vitamin whey products to the new Kick Sports Nutrition line.
Q:Are the new Kick Sports Nutrition products higher-margin?
A:Yes, the Kick Sports Nutrition products are higher-margin. The company has partnered with Amazon to sell these products online and expects acceleration in this category due to marketing efforts and consumer interest.
Q:What does the NaturalShrimp acquisition bring to the portfolio?
A:The NaturalShrimp acquisition brings a 6.2-acre facility, rebranded as Edible Garden Prairie Hills, which expands distribution reach and includes a patent portfolio for water treatment. The facility will serve as a sustainability hub and support private label nutraceutical business development, along with branded products.
Q:What are the expectations for the fourth quarter, considering seasonality?
A:The fourth quarter is expected to be strong due to holiday-driven revenue in both the Edible Garden branded fresh business and the vitamins and supplements business. Preorders indicate significant growth, and investments in facilities and labor efficiency are expected to support increased demand.
Q:What is the status and growth plan for the Kick Sports Nutrition line?
A:The Kick Sports Nutrition line, launched in May, is accelerating with support from Amazon and investments in digital marketing. New products, such as pre-workout and post-workout items, will launch soon, expanding the portfolio and driving innovation. The line is positioned as better-for-you and is expected to grow significantly.
Q:How do international markets fit into the long-term growth plans?
A:International markets are a key growth area, particularly for shelf-stable products like vitamins and supplements. The company is leveraging global demand for protein and better-for-you products, with partnerships like PriceSmart driving international expansion.
Q:Review of Unclear Management Responses
A:Management avoided providing specific percentages for private label revenue and used vague language when discussing future developments at the NaturalShrimp facility, stating that plans are 'very significant' but without providing details.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Amazon marketing
CEA herb
CEA shelf
CEO President
CPG product
Chairman Interim
Communications LLC
Communications statement
Conference Instructions
Conference Update
Demand CPG
Division Crescendo
Prairie Hills
RD
Research
acquisition
advantage
aquaculture
basil
beverage
brand expansion
capability aquaponics
capacity
core
distribution product
highlight
margin category
momentum
partnership
produce
product portfolio
share
strength
sustainability
tailwind
water
wellness
yield
EDBL Transcript
Edible Garden AG Incorporated (EDBL) Q1 2026 Earnings Call Transcript
Positive5-15
The earnings call highlights strong year-over-year sales growth in multiple categories, especially in condiments and international sales. The Q&A session reveals positive reception for the new RTD platform and strategic focus on higher-margin products. Despite increased operating expenses and a net loss, the optimistic guidance, significant retailer commitments, and strategic expansion efforts suggest a positive outlook. The absence of specific guidance details is a minor concern, but the overall sentiment is positive, expecting a stock price increase of 2% to 8% over the next two weeks.
Edible Garden AG Incorporated (EDBL) Q4 2025 Earnings Call Transcript
Unknown3-31
The earnings call reveals several concerns: high dependency on retail relationships, elevated costs for expansion, and declining financial metrics, including a gross profit loss and increased SG&A expenses. While there are positive elements such as the USDA Organic herb program and potential growth in CPG products, the lack of specific guidance on CapEx and the need for margin recovery by 2026 raise uncertainties. The Q&A section highlighted management's reluctance to provide detailed financial clarity, further contributing to a negative sentiment.
Edible Garden AG Incorporated (EDBL) Q3 2025 Earnings Call Transcript
Unknown11-14
Despite revenue growth and strategic expansion plans, the company faces significant challenges: declining gross profit, increased operating expenses, and a widening net loss. The cash position has deteriorated, raising liquidity concerns. While there are positive strategic initiatives, such as the NaturalShrimp facility and retailer partnerships, the lack of detailed guidance and the negative financial metrics overshadow these efforts. The Q&A session highlighted management's vague responses, further contributing to uncertainty. Given these factors, the stock price is likely to experience a negative reaction in the short term.
Edible Garden AG Incorporated (EDBL) Q2 2025 Earnings Call Transcript
Unknown8-14
The earnings call presents a mixed picture: while there are strategic realignments and positive developments like the NaturalShrimp acquisition and high-margin product focus, financials reflect declining revenue and increased losses. The Q&A reveals growth in private labels and optimism about new product lines, but management's vague responses on specifics raise concerns. The company's dependency on new revenue streams and margin pressures add uncertainty. Considering these factors, the stock price is likely to remain stable, hence a neutral sentiment.
EDBL Report
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