Edible Garden AG Incorporated (NASDAQ:EDBL) is a controlled environment agriculture (CEA) farming company that uses traditional agricultural growing techniques combined with technology to grow fresh, organic food sustainably and safely while improving traceability. The company's focus on its "Edible Garden" brand is a significant differentiator, allowing it to develop products in the "Consumer Brands" category.
Business Overview
Edible Garden operates in the retail sale of locally grown hydroponic produce, nutraceuticals, and hot sauce, which are distributed throughout the Northeast and Midwest. The company's products are sold at over 5,000 supermarkets, targeting individuals seeking fresh produce grown using environmentally sustainable methods.Edible Garden's key competitive advantages include its use of controlled greenhouse facilities, hydroponic and vertical greenhouse systems, and a "closed loop" system that recycles water. The company has also developed proprietary software called GreenThumb that assists in tracking plants through the supply chain, improving traceability and operational efficiency.
Recent Developments
In the first quarter of 2024, Edible Garden reported a 27.6% year-over-year increase in revenue to $3.132 million, despite the period typically being the slowest for the industry. This considerable growth showcases the dedication of the Edible Garden team and the positive impact of the company's move towards vertical integration.Over recent quarters, Edible Garden has seen consistent revenue growth and an expansion in its profit margins, particularly since decreasing its dependency on third-party growers during the latter half of 2023. The company now produces approximately 95% of its fresh products in-house, a critical milestone in its development that has enhanced its margins.
Edible Garden has also been actively expanding its product range and distribution. In February 2024, the company entered into a 3-year agreement with a prominent U.S. food retailer, expected to generate between $18 million and $20 million in revenue during the initial term. This partnership will support the expansion of Edible Garden's product range in the retailer's stores and introduce innovative displays to boost the company's brand visibility.
Additionally, Edible Garden has broadened its distribution through partnerships with KeHE and UNFI, two major distributors of natural, organic, specialty, and fresh products. This has significantly expanded the availability of the company's Pulp line of sustainable gourmet sauces and chili-based products, which were introduced in 2023 and have quickly gained traction, becoming available at retailers such as Whole Foods Market, Morton Williams, Dierbergs Markets, Woodman's, and, most recently, Target.
Financials
For the full year 2023, Edible Garden reported annual revenue of $14.049 million and a net loss of $10.188 million. The company's annual operating cash flow was -$8.531 million, and its annual free cash flow was -$9.553 million.In the first quarter of 2024, Edible Garden's revenue increased 27.6% year-over-year to $3.132 million, driven by growth in the company's cut herbs and potted herbs products. Cost of goods sold also increased, but the company achieved a 171 basis point expansion in gross profit margin, primarily due to its shift away from third-party growers to in-house production.
Selling, general, and administrative (SG&A) expenses were $3.884 million in the first quarter of 2024, compared to $2.691 million in the prior-year period. This increase was primarily driven by a one-time $600,000 charge related to the departure of the company's previous Chief Financial Officer. Excluding this non-recurring expense, Edible Garden's SG&A expenses were $3.3 million, representing a 476 basis point expansion in the company's operating margin.
Net loss for the first quarter of 2024 was $3.977 million, or $13.65 per share, compared to a net loss of $2.879 million, or $44.19 per share, in the prior-year period. The higher SG&A expenses and the non-recurring charge contributed to the increase in net loss.
Liquidity
As of March 31, 2024, Edible Garden had $388,000 in cash and cash equivalents, and a working capital deficit of $6.966 million. To meet its cash needs, the company entered into a receivables financing agreement with Cedar Advance LLC, raising approximately $1.5 million in net proceeds, and raised an additional $1.1 million through an at-the-market equity offering.Outlook
Edible Garden remains optimistic about its future, driven by its growing retail network, diverse product offerings, and stringent cost management. The company is poised to improve its margins in the upcoming quarters and accelerate its journey towards generating positive cash flow in 2024.The company's dedication to financial prudence and operational efficiency is the cornerstone of its strategy. Edible Garden's vertical integration, which has reduced its reliance on third-party growers, is expected to continue driving margin expansion. Additionally, the company's partnerships with major retailers and distributors, as well as the introduction of new product lines like Pulp, are expected to fuel future growth.