Arcadia Biosciences Inc (RKDA) 2024 Q3 法說會逐字稿

Good afternoon, and welcome to Arcadia Biosciences third-quarter 2024 financial results and business highlights conference call. (Operator Instructions) Please be advised that today's conference is being recorded. I would now like to hand the conference over to Mark Kawakami, Chief Financial Officer at Arcadia. Please go ahead.

下午好，歡迎參加 Arcadia Biosciences 2024 年第三季財務業績和業務亮點電話會議。（操作員指示）請注意，今天的會議正在錄製中。我現在想將會議交給 Arcadia 財務長 Mark Kawakami。請繼續。

Thank you, and good afternoon. Joining me on the call today is T.J. Schaefer, Arcadia's President and Chief Executive Officer. This call is beinga webcast, and you can refer to the company's press release at arcadiabio.com. Before we start, we would like to remind you that Arcadia Biosciences will be making forward-looking statements on this call based on current expectations and currently available information. However, since these statements are based on factors that involve risks and uncertainties, the company's actual performance and results may differ materially from those described or implied today.

謝謝你，下午好。今天和我一起參加電話會議的是 T.J.謝弗 (Schaefer)，阿卡迪亞總裁兼執行長。這次電話會議正在進行網路直播，您可以在 arcadiabio.com 上參閱該公司的新聞稿。在開始之前，我們想提醒您，Arcadia Biosciences 將根據當前預期和現有資訊在本次電話會議中做出前瞻性聲明。然而，由於這些陳述是基於涉及風險和不確定性的因素，因此公司的實際業績和結果可能與今天描述或暗示的存在重大差異。

You can review the company's safe harbor language in our most recently filed 10-Q. With that, I'll now turn the call over to T.J.

您可以在我們最近提交的 10-Q 中查看該公司的安全港語言。現在，我將把電話轉給 T.J.

Good afternoon, and thank you to everyone on the call for joining us today to discuss our 2024 third-quarter financial results. When we last spoke in August, we characterized the second quarter of 2024 as a turning point for Arcadia as it relates to our business transformation that has taken shape over the last two years. And I believe our third quarter results exemplify the plan we have put in place as well as our ability to execute on it. First, in the third quarter, our total revenues increased 18% year-over-year, driven by a 55% increase in Zola coconut water sales, which I will discuss in more detail later in my prepared remarks.

下午好，感謝大家今天加入我們討論我們的 2024 年第三季財務業績。當我們上次在 8 月發言時，我們將 2024 年第二季描述為阿卡迪亞的轉折點，因為它與我們在過去兩年中形成的業務轉型有關。我相信我們第三季的業績體現了我們已經制定的計劃以及我們執行該計劃的能力。首先，在第三季度，我們的總收入同比增長了 18%，這得益於 Zola 椰子水銷量增長 55%，我將在稍後準備的發言中更詳細地討論這一點。

Second, at the same time, we grew the top line, we maintained our selling, general and administrative expenses. While SG&A expenses increased by $380,000 compared to last year, the entire variance was driven by severance and transition-related fees following the sale of GoodWheat. And finally, our use of cash during the quarter declined to $1.5 million, and that number includes more than $400,000 related to discontinued operations. To put that in perspective, this is the lowest level of cash used in a quarter since Arcadia went public.

其次，在增加收入的同時，我們維持了銷售、一般和管理費用。雖然 SG&A 費用與去年相比增加了 38 萬美元，但整個差異是由 GoodWheat 出售後的遣散費和過渡相關費用造成的。最後，本季我們的現金使用量下降至 150 萬美元，其中包括與已終止業務相關的超過 40 萬美元。從長遠來看，這是自阿卡迪亞上市以來一個季度現金使用的最低水準。

So we are extremely pleased with the progress that has been made thus far, but our work is not done. While we continue to evaluate strategic alternatives, we are focused on reducing our cost structure, including both cost of goods sold and operating expenses, monetizing our existing wheat portfolio and growing our Zola coconut water business, which is off to an amazing start. In Q3 2024, Zola revenues increased 55% compared to the same period last year driven by new distribution added during the quarter, strong orders from our existing customers and the new items that started shipping last quarter. The general health of the coconut water industry also contributed to Zola's growth.

因此，我們對迄今為止所取得的進展感到非常滿意，但我們的工作尚未完成。在我們繼續評估策略替代方案的同時，我們專注於降低成本結構，包括銷售成本和營運費用，將我們現有的小麥產品組合貨幣化，並發展我們的佐拉椰子水業務，這是一個驚人的開始。2024 年第三季度，Zola 營收較去年同期成長 55%，這得益於本季新增分銷、現有客戶的強勁訂單以及上季度開始發貨的新產品。椰子水產業的整體健康狀況也促進了佐拉的成長。

From a distribution perspective, Zola retail store count increased 68% compared to the same period last year, resulting in the largest quarterly rate of distribution gains in our company's history. But Zola growth was not just driven by winning new customers. In fact, while our revenues, which represent the sell-in to the retailer or distributor, increased 55% year-over-year, our sell-through, as measured by scan data, increased more than 36% compared to prior year, showing strong end customer demand for our products. To drive home that point even further, let me give you an example that illustrates the existing customer demand for Zola.

從分銷角度來看，Zola 零售店數量比去年同期增長了 68%，創造了我們公司歷史上最大的季度分銷增幅。但 Zola 的成長不僅僅是透過贏得新客戶來推動的。事實上，雖然我們的收入（代表對零售商或分銷商的銷售量）同比增長了 55%，但根據掃描數據衡量，我們的銷售量卻比前一年增長了 36% 以上，這表明最終客戶對我們產品的需求強勁。為了進一步闡明這一點，讓我舉一個例子來說明現有客戶對 Zola 的需求。

In July 2024, Zola experienced its highest month of sales since Arcadia acquired the brand in May 2021. This performance was almost entirely driven by strong orders from our existing customer base, as 95% of the new distribution in Q3 did not start shipping until the end of the quarter. Another factor that contributed to Zola's growth during the quarter was our Q2 launch of new items. As a reminder, the new items included our original, lime and pineapple flavors in a new 16.9-ounce tetra pack, and these SKUs have been incremental to the Zola set as opposed to cannibalizing existing sales.

2024 年 7 月，Zola 經歷了自 Arcadia 於 2021 年 5 月收購該品牌以來最高的月份銷售額。這項業績幾乎完全是由我們現有客戶群的強勁訂單推動的，因為第三季 95% 的新分銷直到本季末才開始出貨。促成 Zola 在本季成長的另一個因素是我們第二季推出的新產品。提醒一下，新產品包括我們的原味、酸橙和菠蘿口味的新 16.9 盎司四包裝，這些 SKU 是 Zola 套裝的增量產品，而不是蠶食現有的銷售。

The last driver of growth for Zola is the health of the category in which it competes. The coconut water industry continues to perform well as consumers look for health benefits, such as hydration and electrolytes from their beverages. A healthy industry landscape is vital for growth. But importantly, according to the Nielsen data ending on September 28, 2024, Zola grew faster than the category across all measured time periods.

Zola 成長的最後一個驅動力是其競爭類別的健康狀況。由於消費者尋求飲料中的水分和電解質等健康益處，椰子水產業繼續表現良好。健康的產業格局對於成長至關重要。但重要的是，根據尼爾森截至 2024 年 9 月 28 日的數據，Zola 在所有測量時間內的成長速度均高於同類產品。

More specifically, if we look at the last 52 weeks, the coconut water category grew 15%, while Zola grew 23%. During the latest 13 weeks, essentially representing the quarter, the category rose 20%, while Zola scan data increased by 36%. And finally, in the latest four-week period, which represents the month of September, the coconut water industry grew 28%, while Zola increased 73%, primarily due to the new distribution that began shipping towards the end of the quarter, as I previously mentioned. So from an operating perspective, we are extremely pleased with our performance as well as our ability to lay out a plan and deliver what we said as revenues increased at a double-digit rate, and our cash burn is at historic lows.

更具體地說，如果我們看看過去 52 週，椰子水類別增加了 15%，而 Zola 增加了 23%。在最近 13 週（基本上代表本季）中，該類別增加了 20%，而 Zola 掃描資料增加了 36%。最後，在最近的 4 週內，即 9 月份，椰子水行業增長了 28%，而 Zola 增長了 73%，這主要是由於新的分銷在本季度末開始發貨，因為我前面提到過。因此，從營運角度來看，我們對我們的業績以及製定計劃和實現我們所說的目標的能力感到非常滿意，因為收入以兩位數的速度增長，而且我們的現金消耗處於歷史低點。

Let me now shift gears and talk about what lies ahead for Zola. As we approach the end of the year, we remain optimistic. While Q4 is seasonally the softest quarter of the year for the entire coconut water industry, Zola has strong momentum heading into the end of the year with the significant amount of new distribution we added earlier in the year. In addition, we will begin shipping to 2 new customers in Q4 and we now expect our full year 2024 retail distribution growth to exceed 80%.

現在讓我換個話題，談談佐拉的未來。接近年底，我們仍保持樂觀態度。雖然第四季是整個椰子水產業一年中最疲軟的季度，但隨著我們在今年稍早增加的大量新分銷，Zola 在進入年底時仍保持著強勁的勢頭。此外，我們將於第四季開始向 2 位新客戶出貨，目前預計 2024 年全年零售分銷成長將超過 80%。

We also continue to work on new innovation, which we spoke about briefly on the last earnings call. While we will not be providing any specifics until we are closer to launch, here is what we can share. We have decided on the new concept, the product formulation is done, a mockup of the packaging is complete and the SKUs we intend to launch have been identified. The next step in the process will be to test the concept and product samples with new and existing retailers, to ensure we have interest ahead of our first production run as we will not invest in a new product launch until we understand customer uptake for the product.

我們也繼續致力於新的創新，我們在上次財報電話會議上簡要地談到了這一點。雖然在接近發布之前我們不會提供任何細節，但我們可以分享以下內容。我們已經決定了新概念，產品配方已經完成，包裝模型也已完成，我們打算推出的 SKU 也已確定。流程的下一步將是與新的和現有的零售商一起測試概念和產品樣品，以確保我們在首次生產之前有興趣，因為在我們了解客戶對該產品的接受程度之前，我們不會投資新產品的發布。

And in terms of timing, we expect to have the new product ready for beverage season next year. Before I conclude my prepared remarks, I wanted to let you know that we will not be providing any additional forward-looking guidance on the call today. As I mentioned earlier, we added a tremendous amount of new distribution in Q3. The number of stores added during the quarter alone represents 1/3 of Zola's total retail distribution and approximately 95% did not start shipping until the end of the quarter.

就時間安排而言，我們預計新產品將為明年的飲料季節做好準備。在結束準備好的演講之前，我想讓您知道，我們不會在今天的電話會議上提供任何額外的前瞻性指導。正如我之前提到的，我們在第三季添加了大量新發行版。僅本季新增的商店數量就佔 Zola 零售分銷總額的 1/3，並且大約 95% 的商店直到本季末才開始出貨。

This makes forecast accuracy extremely challenging as the initial sell-in to a new customer to add inventory to all of their distribution centers can be very different from the ongoing reorder patterns that emerge after the initial order is fulfilled. So it's really the size of the distribution gains, the percent of total Zola distribution that it accounts for as well as the timing of the initial shipments, that in combination caused us to be reluctant to provide any forward-looking numbers. While we recognize the fact that this does cause some degree of uncertainty, I want to reiterate that these are all very good problems to have, so we appreciate your understanding. With that, I will now turn the call over to Mark to discuss our Q3 and year-to-date financial results. Mark?

這使得預測準確性極具挑戰性，因為向新客戶添加庫存到其所有配送中心的初始銷售可能與初始訂單履行後出現的持續重新訂購模式非常不同。因此，實際上是分銷收益的規模、佔 Zola 分銷總量的百分比以及初始發貨的時間，這些因素綜合在一起導致我們不願意提供任何前瞻性數據。雖然我們認識到這確實會造成一定程度的不確定性，但我想重申，這些都是非常好的問題，因此我們感謝您的理解。現在，我將把電話轉給馬克，討論我們第三季和年初至今的財務表現。標記？

Thank you, TJ, and welcome to everyone joining us on the call. I would like to remind everyone that my discussion of the financial results will refer to the impact of continuing operations only. Any reference to prior year results will exclude the impact of the discontinued GoodWheat and Body Care operations. With that, I will begin our discussion of the financial results.

謝謝你，TJ，歡迎大家加入我們的電話會議。我想提醒大家，我對財務表現的討論將只涉及持續經營的影響。任何對上一年業績的引用都將排除終止的 GoodWheat 和 Body Care 業務的影響。接下來，我將開始討論財務表現。

In Q3, total revenues were approximately $1.5 million, and this represents an increase of 18% compared to the same period last year. This was driven by a strong performance for Zola, which increased 55% compared to Q3 of last year. This quarter, Zola represented about 86% of total revenues. As a reminder, sales of GLA oil have continued to decline as we sell through the last remaining inventory, and this quarter, sales were about half of what they were in Q3 of last year.

第三季總營收約 150 萬美元，與去年同期相比成長了 18%。這是由 Zola 的強勁業績推動的，與去年第三季相比增長了 55%。本季度，Zola 約佔總營收的 86%。提醒一下，隨著我們售完最後剩餘的庫存，GLA 油的銷售量持續下降，本季的銷售量約為去年第三季的一半。

As TJ mentioned, Zola has closed out the very busy summer season with a strong finish, and we are seeing uplift from the new distribution that we secured in Q2 as well as growth from our existing portfolio of customers. The cost of revenues in Q3 was approximately $1 million, and that included a write-down of just over $150,000 related to hemp and good wheat seed. Including the write-down, the total cost of revenues increased by about $200,000 or 26% compared to last year. Research and development costs were $24,000 in Q3.

正如 TJ 所提到的，Zola 以強勁的表現結束了非常繁忙的夏季，我們看到了第二季新分銷的提升以及現有客戶組合的成長。第三季的收入成本約為 100 萬美元，其中包括與大麻和優質小麥種子相關的略高於 15 萬美元的減記。包括減記在內，總收入成本比去年增加了約 20 萬美元，即 26%。第三季的研發成本為 24,000 美元。

This was an increase of $9,000 compared to Q3 of last year, but it was a decrease of $15,000 year-to-date compared to last year. Selling, general and administrative costs in Q3 were approximately $2.2 million, and that included about $380,000 of transition costs related to the sale of GoodWheat assets. These transition costs made up the entire variance to Q3 of last year, and they represented a 20% increase in cost. The loss from discontinued operations was $430,000, approximately 3/4 of this was termination costs and fees for the remaining employees and vendors that supported the GoodWheat business.

與去年第三季相比增加了 9,000 美元，但今年迄今與去年相比減少了 15,000 美元。第三季的銷售、一般和管理成本約為 220 萬美元，其中包括與出售 GoodWheat 資產相關的約 38 萬美元的過渡成本。這些過渡成本彌補了去年第三季的全部差異，成本增加了 20%。終止營運造成的損失為 43 萬美元，其中約 3/4 是終止成本以及支援 GoodWheat 業務的剩餘員工和供應商的費用。

Overall, losses from discontinued operations decreased by 77% compared to the same period last year and this year, Q3 makes up about 16% of the total year-to-date loss. Moving on to the balance sheet, we ended Q3 with $6.6 million of cash and short-term investments compared to $8.1 million at the end of Q2. This change of $1.5 million included the $430,000 of expenses related to discontinued operations. Additionally, this change of $1.5 million is consistent with our overall cash consumption of $3.5 million in the first half of the year.

整體而言，終止經營業務的虧損較去年同期下降了77%，今年第三季約佔年初至今虧損總額的16%。轉向資產負債表，第三季末我們的現金和短期投資為 660 萬美元，而第二季末為 810 萬美元。這項 150 萬美元的變化包括與終止營運相關的 43 萬美元費用。此外，這 150 萬美元的變化與我們今年上半年 350 萬美元的現金總消耗量一致。

We ended Q3 with an inventory balance of $835,000. This was a decrease of 15% from the end of Q2, reflecting the end of the peak selling season for Zola. The promissory note we received from the sale of GoodWheat continues to accrue interest at the prime rate. We are scheduled to receive approximately $2.5 million of cash in May of 2025 as the first repayment of principal and interest.

第三季結束時，我們的庫存餘額為 835,000 美元。這比第二季末下降了 15%，反映出 Zola 的銷售旺季已經結束。我們透過出售 GoodWheat 收到的期票繼續以最優惠利率計息。我們計劃於 2025 年 5 月收到約 250 萬美元現金，作為首次本金和利息償還。

In conclusion, we have continued to make tremendous progress in all aspects of our financial performance this quarter. We achieved revenue growth from both our existing portfolio, as well as from the new distribution we secured in Q2 that has allowed us to outpace the category and achieve our highest level of sales since acquiring the Zola business in 2021. We also managed to achieve this revenue growth while maintaining our ongoing expenses. This, along with our management of inventory and other working capital has enabled us to reduce our use of cash from ongoing operations to some of the lowest levels in our history as a public company.

總之，本季我們在財務表現的各個方面都繼續取得了巨大進步。我們從現有的產品組合以及第二季度獲得的新分銷中實現了收入成長，這使我們能夠超越同類產品，並實現自 2021 年收購 Zola 業務以來的最高銷售水平。我們也設法在維持持續支出的同時實現了收入成長。這一點，加上我們對庫存和其他營運資金的管理，使我們能夠將持續營運中的現金使用量減少到我們作為上市公司歷史上的最低水準。

I will now turn the call over to the operator for questions.

我現在將把電話轉給接線員詢問問題。

(Operator Instructions) Ben Klieve, Lake Street Capital Markets.

（操作說明）Ben Klieve，湖街資本市場。

Congratulations here on some nice momentum from Q2 extending into Q3. First, a clarifying question, Mark, in your prepared comments, you noted a $150,000 write-down. Did you say that, that was entirely within this quarter and associated the legacy hemp business? Did I hear that correctly?

在此祝賀您從第二季度延續到第三季度的良好勢頭。首先，澄清一個問題，馬克，在您準備好的評論中，您注意到了 150,000 美元的減記。您是否說過，這完全是在本季度內並與傳統大麻業務相關？我沒聽錯嗎？

Yes. It was entirely in this quarter and as it related to both hemp and GoodWheat seed.

是的。這完全是在本季度，因為它與大麻和 GoodWheat 種子有關。

Perfect. So then looking at gross , if you back out that $150,000 write-down and then and then strip out the GLA business here that's going to be coming off the books, can you help give us some guideposts regarding your kind of expectations on margins on a go-forward basis when you back out those 2 big ticket items?

完美的。那麼，看看毛利率，如果你取消 150,000 美元的減記，然後剔除將要從賬簿中刪除的 GLA 業務，你能否幫助我們提供一些關於你對利潤率的預期的指導方針？項大件商品時，是否會繼續進行？

Yes, Ben. So if you back out those two items, I think you're going to land right around 33%. I think if you recall, historically, our sort of long-term outlook for Zola margins is, I think we've kind of communicated low to mid-30s. And so we're kind of right in the middle of that range.

是的，本。因此，如果您取消這兩項，我認為您的支持率將下降到 33% 左右。我想，如果你還記得，從歷史上看，我們對 Zola 利潤率的長期展望是，我認為我們已經傳達了低至 30 多歲的利潤率。所以我們就處於這個範圍的中間。

Perfect. And then the onetime items within OpEx that you flagged, do you expect any more of those kind of residual items to come through in the fourth quarter? Or do you think that was really contained within the third quarter?

完美的。然後，您標記的營運支出中的一次性項目，您是否預計第四季度會出現更多此類剩餘項目？或者您認為這真的包含在第三季度內嗎？

Yes. I mean I think for the most part, things related to severance and those types of issues, we're past that. And so we would expect anything related to that transaction to be pretty minimal.

是的。我的意思是，我認為在大多數情況下，與遣散費和此類問題相關的事情，我們已經過去了。因此，我們預計與該交易相關的任何事情都會非常少。

Great. And then one more for me, and I'll get back in queue. Regarding this just really kind of torrid pace of growth that you have in Zola with new distributors. Can you talk about kind of your confidence in the infrastructure at Arcadia to support this growth, both in terms of inventory levels, any kind of ERP-related dynamic that you have to support this growth? Do you feel comfortable that you guys are going to be able to execute growth of this magnitude here in the fourth quarter and going forward?

偉大的。然後再給我一張，然後我就重新排隊。關於佐拉與新經銷商的快速成長速度。您能否談談您對 Arcadia 的基礎設施支援這種成長的信心，無論是在庫存水準方面，還是在任何類型的 ERP 相關動態方面，您都必須支援這種成長？您對第四季及未來能夠實現如此大規模的成長感到滿意嗎？

Yes. So let me break it up into a couple of pieces. From kind of the infrastructure side of things, we do feel comfortable. Zola is a product that is manufactured in Thailand. We received a finished good at the port.

是的。所以讓我把它分成幾個部分。從基礎設施來看，我們確實感到舒適。Zola 是在泰國製造的產品。我們在港口收到了成品。

And so it is a very asset-light business model. You did touch on inventory. That is something we, along with many of our competitors are trying to manage. Lead times have gotten longer in this industry. And so we're having to plan further ahead.

因此，這是一種非常輕資產的商業模式。您確實談到了庫存。這是我們以及許多競爭對手正在努力解決的問題。該行業的交貨時間變得更長。因此，我們必須提前做好計劃。

And obviously, the large orders that we shipped at the end of the quarter started to eat kind of into our safety stock that we have. And so it's something that we're managing through. We're balancing. And as we kind of approach a softer season, we would look to kind of rebuild some of that some of that safety stock.

顯然，我們在本季末出貨的大訂單開始消耗我們現有的安全庫存。所以這是我們正在處理的事情。我們正在平衡。當我們接近一個疲軟的季節時，我們會尋求重建一些安全庫存。

I'm showing no further questions at this time. I'd like to turn it back to TJ Schaefer for closing remarks.

我目前沒有提出任何進一步的問題。我想請 TJ Schaefer 做結束語。

Thank you. In our view, our third quarter 2024 results represent the progress we have made in transforming Acadia's business as well as our ability to execute on the plan we laid out. Our total revenues increased 18% year-over-year, driven by very strong growth in Zola revenues of 55%. From a distribution perspective, Zola retail store count increased 68% year-over-year and Zola is growing faster than the coconut water category across all measured time periods resulting in market share gains. And finally, we have significantly reduced our use of operating cash to the lowest levels in Arcadia's public history.

謝謝。我們認為，2024 年第三季的業績代表了我們在阿卡迪亞業務轉型方面取得的進展以及我們執行所製定計劃的能力。在 Zola 營收強勁成長 55% 的推動下，我們的總營收年增 18%。從分銷角度來看，Zola 零售店數量同比增長 68%，並且在所有測量時間段內，Zola 的增長速度都快於椰子水類別，從而帶來了市場份額的增長。最後，我們已將營運現金的使用大幅減少至阿卡迪亞公共歷史上的最低水準。

So we are extremely pleased with our performance, and we thank you again for your continued interest in Arcadia.

因此，我們對我們的表現非常滿意，並再次感謝您對阿卡迪亞的持續關注。

This concludes today's conference call. Thank you for participating, and you may now disconnect.

今天的電話會議到此結束。感謝您的參與，您現在可以斷開連接。