Release Date: August 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Arcadia Biosciences Inc (RKDA, Financial) completed two significant transactions in Q2 2024, monetizing part of their wheat IP and generating $4 million in cash from Corteva Agriscience.
- The company successfully sold its GoodWheat business to Above Food Corporation, securing a $6 million promissory note with a three-year term.
- Zola Coconut Water sales increased by 42% in Q2 2024 compared to the same period last year, outpacing the category growth of 27%.
- Cost-saving measures, including headcount reductions and exiting a facility early, are expected to save approximately $2 million annually.
- Arcadia Biosciences Inc (RKDA) expects to cut its cash burn by 50% in 2024 compared to 2023, aiming for a more sustainable financial position.
Negative Points
- Despite the positive growth in Zola, total revenues for Q2 2024 were flat compared to the same period last year.
- The company incurred nearly $0.5 million in M&A fees related to the two transactions, impacting their SG&A expenses.
- GLA oil revenues declined, and the company expects this trend to continue as they sell through remaining inventory.
- The sale of GoodWheat resulted in a loss from discontinued operations of $789,000 in Q2 2024.
- Arcadia Biosciences Inc (RKDA) still needs to achieve a low single-digit market share in the coconut water segment to reach sustainable profitability.
Q & A Highlights
Arcadia Biosciences Inc (RKDA) Q2 2024 Earnings Call Highlights
Q: Are there any remaining crop Creek assets that the company still owns that could be monetized in the future?
A: Yes, we still have a few traits in our library that we are actively working on monetizing. It remains to be seen whether this will be through licensing agreements or asset sales similar to our RS durum transaction. - T.J. Schaefer, President and Chief Executive Officer
Q: Can you provide visibility on the timing of introduction of any additional Zola flavors?
A: Pineapple and lime flavors just started shipping in Q2. We have potential new product introductions planned for 2025 and continue to explore longer-term innovation. - T.J. Schaefer, President and Chief Executive Officer
Q: What percentage of the market would Zola need to penetrate to achieve sustainable profitability?
A: Currently, Zola holds about 1% of the market. Achieving a low single-digit market share is the scale needed to reach breakeven. - T.J. Schaefer, President and Chief Executive Officer
Q: Were there any one-time revenues that drove the outperformance in Zola sales this quarter?
A: No, there were no one-time lumpy revenues or large initial sell-ins that drove the performance. - T.J. Schaefer, President and Chief Executive Officer
Q: Can you comment on GLA oil revenues and their expected decline?
A: In Q2, GLA oil represented 10% of our revenue, down from 30% in Q1. We will sell through remaining inventory by the end of 2024, with similar revenue projections for Q3 and Q4. - T.J. Schaefer, President and Chief Executive Officer
Q: What is the expected cash burn rate as you exit 2024 and enter 2025?
A: We expect to cut the cash burn in half to around $7 million to $7.5 million for 2024. Additional cost savings of $2 million annually are expected to come into play more in 2025. - T.J. Schaefer, President and Chief Executive Officer
Q: What are the key drivers behind the strong growth in Zola sales?
A: Zola sales increased 86% sequentially and 42% year-over-year, driven by new product offerings and new distribution gains. - Mark Kawakami, Chief Financial Officer
Q: How did the recent transactions impact your financial results?
A: The sale of GoodWheat and the monetization of wheat IP resulted in significant cost savings, including a 50% reduction in salaries and benefits, and a $2 million annual cost saving from exiting our Idaho facility and selling farm equipment. - T.J. Schaefer, President and Chief Executive Officer
Q: What is the outlook for Zola's market performance in the second half of 2024?
A: We expect continued strong performance with new distribution gains and the introduction of new flavors, leading to strong revenue growth and gross profit. - T.J. Schaefer, President and Chief Executive Officer
Q: What are the financial expectations for Arcadia in 2024?
A: We expect 2024 revenues to be in line with the $5.3 million reported for 2023, with gross margins in the low 40s, resulting in over $2 million in gross profit. Operating expenses are expected to run at approximately $2 million per quarter. - T.J. Schaefer, President and Chief Executive Officer
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
