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Edible Garden AG Inc (EDBL)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 revenue was $3.87M, down 5.2% YoY and up sequentially from Q3; gross profit was minimal due to intentional holiday labor ramp, and EPS was ($10.34) as warrant-induced deemed dividends increased net loss attributable to common shareholders .
  • Versus Wall Street consensus, revenue missed ($3.87M vs $4.13M*) and EPS missed (−$10.34 vs −$9.00*), with only one analyst publishing estimates* .
  • 2024 annual gross margin expanded to 16.7% from 5.9% in 2023 (+1,080 bps) on vertical integration and exit of lettuce/floral; core herb revenue grew 16.3% YoY (+$1.8M) while total revenue was flat YoY due to strategic mix shift .
  • Holiday performance was strong: preliminary Thanksgiving period sales surged 51% YoY with >98% fulfillment rates, underscoring operational execution into peak season .
  • Management reiterated focus on margin mix, shelf‑stable innovation (Squeezables, Pulp, Pickle Party, Kick. Sports Nutrition) and potential Narayan acquisition as 2025 catalysts .

Values marked with * are retrieved from S&P Global (Capital IQ).

What Went Well and What Went Wrong

What Went Well

  • Gross margin expansion for FY 2024 to 16.7% (from 5.9% in 2023) on vertical integration and portfolio rationalization; core herb revenue +$1.8M (+16.3% YoY) despite flat total revenue .
  • Peak-season execution: preliminary Thanksgiving period sales +51% YoY and >98% fulfillment rate, highlighting logistics excellence with major retail partners .
  • Strategic product pipeline and brand-building: launch of Squeezables; continued Pulp, Pickle Party momentum; prelaunch of Kick. Sports Nutrition into mass market; quote: “By narrowing our focus… we have rationalized our product portfolio with a focus on higher margin, more profitable opportunities” .

What Went Wrong

  • Q4 gross profit was “barely profitable” as holiday-driven labor ramp and targeted purchases compressed quarterly margin; management expects normalization in 2025 .
  • SG&A in Q4 increased to $2.8M (vs $2.6M prior year), driven by warrant inducement transaction costs; net loss was ($3.08M), comparable YoY .
  • Revenue declined 5.2% YoY in Q4 (exit of lettuce/floral impacted revenue) and missed the single-analyst consensus estimate* .

Financial Results

MetricQ4 2023Q3 2024Q4 2024Q4 2024 Consensus
Revenue ($USD)$4.084M $2.584M $3.872M $4.125M*
Gross Profit ($USD)$0.282M $0.699M $0.023M N/A
SG&A ($USD)$2.551M $2.189M $2.764M N/A
Net Loss ($USD)$(3.007)M $(2.063)M $(3.079)M N/A
Net Loss Attributable to Common ($USD)$(3.007)M N/A$(6.952)M (includes $3.873M deemed dividend on warrants) N/A
Diluted EPS ($USD)$(263.52) $(0.65) $(10.34) $(9.00)*

Values marked with * are retrieved from S&P Global (Capital IQ).

Segment/Annual Mix (FY):

MetricFY 2023FY 2024Change
Total Revenue ($USD)$14.049M $13.857M −1.4%
Gross Margin (%)5.9% 16.7% +1,080 bps
Core Herb Revenue Change ($USD)—+$1.8M YoY (+16.3%) Positive
Lettuce/Floral Exit Revenue Impact ($USD)—−$1.7M Negative
Vitamin Business Change ($USD)—−$0.3M Negative

KPIs:

KPIPeriodValue
Fulfillment RateThanksgiving period>98%
Thanksgiving Sales YoYWeeks Nov 8–24 vs Nov 1–18+51%
Cut Herb Sales YoY9M 2024+55%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Gross Profit Target (Management)Medium-termN/ATarget GP 35–40% (mix shift, shelf‑stable, vertical integration) New qualitative target
Revenue/Margins (Formal numeric)2025None providedNone providedMaintained: no formal guidance
One-time Charges (Exiting lettuce/floral)Q1 2025N/A“Don’t anticipate any” Clarification

Earnings Call Themes & Trends

TopicQ2 2024 (Prior Q‑2)Q3 2024 (Prior Q‑1)Q4 2024 (Current)Trend
Vertical integration, margin focusGross margin >34% with ~95% in-house; exiting low-margin segments Q3 GM ~27%; reduced third‑party growers FY GM 16.7%; Q4 margin compressed by holiday labor ramp Improving structurally; Q4 seasonal dip
Shelf-stable innovationEmphasis on Pulp; fresh condiments; packaging innovation Pipeline (Pulp, new lines) Launch Squeezables; continued Pulp; Pickle Party; prelaunch Kick. Expanding portfolio, higher ring/margins
Retail partnershipsUNFI, Walmart marketplace momentum Walmart Hydro Basil station; distribution expansion >98% fill rates; Thanksgiving surge; Walmart/Meijer holiday programs Strengthening execution
Technology/automationOperational innovation; training; automation Capacity expansion; new lines Nano‑bubble trials; yield +55%, harvest cycle −30% (early results) Ongoing efficiency focus
M&A/Strategic——LOI for Narayan; cross‑selling; EBITDA‑positive target Potentially transformative if closed

Management Commentary

  • “We are pleased to report a 181.3% increase in gross profit for 2024 along with a significant expansion in gross margin—from 5.9% in 2023 to 16.7%—driven by strong performance in our core herb business and the successful execution of our strategic initiatives.”
  • “Setting aside the lower‑margin product lines, our core herb product revenue alone grew $1.7 million, or 16.3% year‑over‑year.”
  • On Q4 margin compression: “Part of it… was a ramp up in labor costs for the holiday season… the bigger driver of the lower gross profit margin.”
  • Target margin ambition: “We’ve got a target GP that’s 35% to 40%… achievable as product mix shifts to more shelf‑stable products” .
  • On Narayan: “Their margins are very healthy… complementary from product portfolio and operational strength and margin standpoint.” .

Q&A Highlights

  • Gross margin drivers: Q4 margin compressed by holiday labor ramp and some higher raw material costs (e.g., California fires impacts on certain herbs); expected normalization as processes mature .
  • Narayan LOI: Cross‑selling opportunities in coconut products and superfoods; healthy margins; management views combined entity as enabling faster path to EBITDA positivity .
  • One‑time charges: No expected additional one‑time charges in Q1 2025 related to exiting lettuce/floral; assets repurposed .
  • Balance sheet: ~$3.2M debt paydown in Q4 to shore up balance sheet entering 2025 .

Estimates Context

  • Q4 2024 consensus revenue was $4.13M* vs actual $3.87M (miss); Q4 2024 consensus EPS was −$9.00* vs actual −$10.34 (miss). Coverage depth was limited (one estimate for both revenue and EPS)* .
  • Given the strategic mix shift (exiting low‑margin categories) and seasonal labor investment, we expect sell‑side to reassess margin trajectory, with emphasis on FY gross margin improvements and holiday execution .

Values marked with * are retrieved from S&P Global (Capital IQ).

MetricQ4 2024 ConsensusQ4 2024 Actual
Revenue ($USD)$4,125,000*$3,872,000
Primary EPS ($USD)−$9.00*−$10.34
# of Estimates (Revenue)1*—
# of Estimates (EPS)1*—

Key Takeaways for Investors

  • Structural margin story intact: FY gross margin expanded materially; Q4 compression was seasonal/operational, tied to labor ramp for peak fulfillment; watch margin normalization in 2025 .
  • Top-line growth catalysts are building: shelf‑stable portfolio (Squeezables, Pulp, Pickle Party, Kick.) and strong holiday sell‑through support volume and mix; preliminary Thanksgiving sales +51% YoY with >98% fulfillment .
  • Narayan LOI offers potential scale, margin, and cross‑selling benefits across coconut/superfoods; monitor closing probability and terms .
  • Balance sheet flexibility improved via Q4 debt reduction; SG&A elevated in Q4 partly due to warrant inducement; watch cost discipline vs growth investments .
  • Expect estimate revisions: limited analyst coverage and strategic mix shift likely drove Q4 miss vs consensus; focus should shift to sustained margin trajectory and execution across retail channels .
  • Operational focus: vertical integration and automation (e.g., nano‑bubble trials) point to ongoing efficiency gains; track yield and cycle-time benefits translating to margins .
  • Near-term trading: stock may react to perceived miss on low-coverage estimates; medium-term thesis rests on mix-led margin expansion, shelf-stable growth, and potential accretive M&A .

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