Edible Garden AG Inc Q2 FY2024 earnings call

• Vertical integration: Approximately 95% of fresh product line produced in-house, contributing to gross margin improvement.
• Pulp distribution: Expanded distribution of pulp line via UNFI and KeHE distributors, with major retailers like Target, Whole Foods, etc., carrying the product.
• Partnerships: Product development partnership with Hermann Pickle Company, training program with Abilities in Northwest New Jersey.
• Retail distribution: Expanded to Seasons Kosher, Lincoln Market, and Brooklyn Fare; new integrated rack program with Hemingway’s; Garden Starters available at Brooklyn Fare locations.
• Sustainability: Innovations in packaging and shipping to extend shelf life, aligning with zero waste mission.

Total revenue for the second quarter was $4.2 million, relatively flat compared to Q2 2023. The core product portfolio, primarily cut herbs (61% year-over-year growth) and vitamin supplement business (30% growth), drove the slight revenue increase. Gross profit increased by 157% compared to the 2023 comparable period. Gross margin surged to 36.7% in Q2 2024 from 13.1% in Q2 2023, driven by the shift away from third-party growers and focus on higher-margin segments, with approximately 95% of the fresh product line produced in-house.

• Vitamin supplements: New line to be introduced at a trade show in September, with e-commerce expansion plans; functional pickles launch expected at fall produce show; new products to launch in 2025.
• Vertical integration: Continued investment in efficiency, moving away from third-party growers to improve margin, quality, and supply chain control.
• Margin improvement: Expect margins to continue improving, with plans to add production lines and use consultants to enhance efficiency.

Forward-looking statements are subject to risks, uncertainties, and assumptions as described in the company's SEC filings, including those related to market conditions, competition, supply chain disruptions, and regulatory changes.

Q: Talk about the outlook for vitamin supplements for the rest of the year and contract growers' impact on gross margin.

A: Vitamin supplements have a trade show in September with a new line, e-commerce expansion, and new products like functional pickles launching at fall produce show; contract growers shift reduced third-party reliance, improving margin, quality, and supply chain control.

Q: Expand on shift to shelf-stable items and benefits, and vertical integration/gross margin improvement in 2025.

A: Shelf-stable items allow higher margins and leverage retail relationships; vertical integration continues with new production line in Michigan, margin improvement expected, and consultant help to enhance efficiency for peak seasons like Thanksgiving.