Arcadia Biosciences (RKDA) Q2 Earnings call transcript Aug 13, 2024

In a recent earnings call, Arcadia Biosciences (ARCA) presented a compelling narrative of transformation and progress towards achieving profitability. The company's financial results for the second quarter of 2024 were highlighted by significant achievements and strategic maneuvers, providing valuable insights into its future prospects.

Monetizing IP and Cost Reduction Strategies

Arcadia made headlines with two major transactions in the second quarter of 2024. The first involved the sale of certain patent and related rights associated with its resistant Starch Durum Wheat to Corteva Agriscience, fetching a $4 million cash payment. This transaction is expected to accelerate royalties for Arcadia while providing Corteva with access to markets beyond North America. The second transaction saw Arcadia and its wholly-owned subsidiary, Arcadia Wellness, sell certain assets relating to its GoodWheat business to Above Food Corporation. This deal included the transfer of GoodWheat grain and finished goods inventory, trademarks, and $2 million cash in exchange for a $6 million promissory note. These transactions not only monetized part of Arcadia's wheat IP but also set the stage for additional cost savings.

The GoodWheat exit resulted in significant headcount reductions, reducing salaries and benefits by 50% compared to the beginning of 2024. Additionally, Arcadia successfully negotiated an early exit from its facility in Idaho, generating several hundred thousand dollars through the sale of farm equipment. These cost-saving measures are estimated to save approximately $2 million on a full-year basis, contributing to the company's path towards profitability.

Growing Zola Coconut Water

Arcadia's Zola Coconut Water brand has emerged as a strategic asset, with sales increasing by 42% during the second quarter of 2024 compared to the same period last year. This impressive growth is attributed to the brand's established customer base and distribution channels, which align with health-conscious consumers and require less slotting investment compared to the produce section. This strategic positioning is expected to lead to more predictable customer reorder patterns and significantly less marketing investments, making Zola a promising driver of revenue and gross profit growth for Arcadia.

Looking Ahead: Strategic Focus and Financial Outlook

With a focus on reducing costs and accelerating the growth in Zola, Arcadia is optimistic about its financial outlook for the remainder of 2024. The company expects its revenues to essentially remain in line with the $5.3 million reported for 2023, with gross margins projected to be in the low 40s, resulting in over $2 million in gross profit. Operating expenses are expected to remain at an approximate $2 million per quarter, leading to a 50% decrease in cash consumption compared to the previous year. This strategic focus on cost reduction and growth is expected to position Arcadia for a more sustainable financial future.

Conclusion

Arcadia Biosciences' second-quarter earnings call painted a picture of a company on the cusp of a significant turning point. With strategic transactions, a focus on cost reduction, and the impressive growth of the Zola Coconut Water brand, Arcadia is well-positioned to navigate its path towards profitability. The company's strategic focus on innovation and expansion, coupled with its financial discipline, bodes well for its future growth prospects. As investors and stakeholders continue to closely monitor Arcadia's progress, the company's ability to execute on its strategic initiatives will be a key factor in determining its long-term success.