Edible Garden AG (NASDAQ:EDBL) is a leader in controlled environment agriculture (CEA), providing locally grown, organic, and sustainable produce and products to customers across the Northeast and Midwest regions of the United States. The company's unwavering commitment to innovation, environmental stewardship, and delivering high-quality, flavorful products has positioned it as a trailblazer in the rapidly evolving agricultural landscape.

Company Background

Edible Garden Corp., a Nevada corporation, was incorporated on April 9, 2013. In March 2020, Edible Garden Inc., a Wyoming corporation, was incorporated to acquire substantially all of the operating assets of Edible Garden Corp., which was previously a separately identified reportable segment of its parent company Blum Holdings, Inc. (formerly known as Terra Tech Corporation). The acquisition was completed on March 30, 2020, marking the beginning of Edible Garden AG Incorporated's operations.

Business Overview

As a retail seller of locally grown hydroponic produce, nutraceuticals, and hot sauce, Edible Garden has established a significant presence in the market, with its products being sold at over 5,000 supermarkets throughout the Northeast and Midwest. The company's approach combines traditional agricultural growing techniques with advanced technology to produce fresh, organic food sustainably and safely while enhancing traceability.

Edible Garden operates primarily in two product segments: Herbs, Produce & Floral, and Vitamins and Supplements. The Herbs, Produce & Floral segment forms the core of the company's business, accounting for the majority of its revenue. This segment includes the production and sale of fresh cut herbs, potted herbs, and hydroponic basil through controlled greenhouse facilities. The Vitamins and Supplements segment represents the company's Pulp brand of nutraceutical products, which was introduced in 2024 to diversify the product portfolio and expand into higher-margin categories.

Technology and Innovation

A key component of Edible Garden's success is its patented GreenThumb software, which plays a crucial role in tracking plants through the supply chain. This innovative technology allows for frequent monitoring of the growing process, adding an extra layer of quality control and improving overall traceability. Additionally, GreenThumb assists in managing the day-to-day operations of the business, contributing to increased efficiency and productivity.

Sustainability Practices

Edible Garden's commitment to sustainability is evident in its production and distribution processes. The company employs a closed-loop system for water recycling and utilizes LED lights to accelerate crop growth and yield when necessary. These environmentally conscious practices are designed to reduce the company's carbon footprint compared to traditional farming methods, aligning with its goal of responsible resource management.

Financials

Edible Garden's financial performance has been characterized by steady revenue growth, with the company reporting annual revenue of $11.55 million in 2022 and $10.51 million in 2021. While the company has faced net losses in recent years, totaling $12.45 million in 2022 and $5.54 million in 2021, it has remained focused on implementing operational improvements and diversifying its product portfolio to drive long-term profitability.

For the first nine months of 2024, Edible Garden's total revenue was $9.98 million, up 0.2% compared to the same period in 2023. The Herbs, Produce & Floral segment generated revenue of $8.87 million during this period, representing a 1.6% year-over-year increase. This growth was driven by higher demand for core cut herb and potted herb products, which grew 5.0% and 1.1% respectively. However, this was partially offset by a strategic shift away from lower margin floral and lettuce products, which decreased 11.5% year-over-year.

The Vitamins and Supplements segment, which includes the Pulp brand, generated $1.12 million in revenue during the first nine months of 2024. However, this segment was impacted by shipment delays due to a hurricane in the Gulf of Mexico, causing $215,000 of Pulp revenue to shift to the fourth quarter.

In the most recent quarter (Q3 2024), Edible Garden reported revenue of $2.58 million, a 21.6% decrease compared to the same period in the previous year. This decrease was primarily due to the strategic decision to phase out lower margin products like lettuce and floral. Despite the revenue decline, the company achieved significant gross margin expansion, with Q3 2024 gross margin reaching 27.1%, compared to 0.4% in the same period of the prior year.

Environmental Responsibility

One of the key drivers of Edible Garden's success has been its commitment to sustainability and environmental responsibility. The company's proprietary GreenThumb software, which integrates real-time data and analytics, has enabled it to optimize greenhouse operations, improve resource efficiency, and minimize waste. Additionally, Edible Garden's closed-loop systems and vertical farming techniques have allowed it to significantly reduce its carbon footprint and water usage compared to traditional agricultural methods.

Product Diversification

Furthermore, Edible Garden has strategically expanded its product offerings beyond its core herb and lettuce lines, diversifying into nutraceuticals, sports nutrition, and a line of USDA organic, fermented, and sustainable sauces under the Pulp Flavors brand. This product diversification has not only broadened the company's customer base but also contributed to improved gross margins.

Recent Performance

In recent quarters, Edible Garden has demonstrated its ability to navigate challenging market conditions, leveraging its operational agility and strong relationships with major retail partners, such as Walmart, Whole Foods, and Meijer. The company's focus on streamlining its product mix, reducing reliance on third-party growers, and investing in advanced production capabilities has paid dividends, as evidenced by the significant improvement in its gross profit margin in Q3 2024.

For the first nine months of 2024, Edible Garden's gross profit surged by $1.7 million, a 324% increase over the prior year. Sales of cut herbs increased by 55% in the first nine months of 2024 compared to 2023, showcasing the company's strong performance in its core product categories.

Liquidity and Future Outlook

As of September 30, 2024, Edible Garden reported cash on hand of $2.21 million. The company's debt-to-equity ratio stood at 0.65, with a current ratio of 1.11 and a quick ratio of 0.81. To improve its liquidity position, Edible Garden entered into a $2.48 million accounts receivable financing agreement with Cedar Advance LLC in 2024.

In September 2024, the company closed a public offering raising $4.8 million in net proceeds, which were used in part to pay off $3.2 million in debt. This strategic move has strengthened Edible Garden's balance sheet and provided additional resources for growth initiatives.

Looking ahead, Edible Garden remains well-positioned for continued growth, bolstered by its robust pipeline of innovative products, strategic partnerships, and ongoing investments in sustainability initiatives. The company's recent acquisition of Edible Garden Corp., which expanded its operational footprint and asset base, further solidifies its position as a leader in the controlled environment agriculture industry.

Management expects Q4 2024 to potentially be their best quarter ever, as they have increased capacity and infrastructure to handle more volume. The company is confident that the fourth quarter of 2024 will display significant growth in both margin and revenue, positioning them well to achieve strong results in the coming quarters and drive sustained growth and long-term value for their shareholders.

Conclusion

Despite the challenges posed by the COVID-19 pandemic and broader macroeconomic headwinds, Edible Garden has demonstrated its resilience and adaptability, navigating the landscape with a steadfast commitment to its core values and a relentless pursuit of sustainable growth. As the company continues to leverage its technological advantages, strategic partnerships, and product diversification efforts, it stands poised to capitalize on the growing consumer demand for locally sourced, organic, and environmentally conscious food solutions.