Executive Summary

Q3 2024 delivered 18% YoY revenue growth to $1.54M, driven by Zola coconut water (+55% YoY) and broader retail distribution (+68% YoY); gross margin compressed sequentially due to a ~$150k inventory write-down and mix, and EPS was ($1.18) vs ($1.89) YoY .
Management reiterated strong Zola momentum (sell-through outpacing category) and highlighted materially reduced operating cash burn to “the lowest levels” since going public; combined cash and short-term investments ended Q3 at ~$6.6M .
Guidance: No additional forward-looking guidance given in Q3 due to the size/timing of new distribution sell-in; management expects full-year 2024 retail distribution growth to exceed 80% and targets Zola long-term gross margins in the low-to-mid 30s .
Potential stock reaction catalysts: sustained Zola outperformance and new distribution sell-in (with lagged reorder normalization), continued cost discipline/cash burn reduction, and any updates on strategic alternatives or further monetization of legacy IP .

What Went Well and What Went Wrong

What Went Well

Zola-driven growth: Revenue +18% YoY; Zola +55% YoY in Q3; Zola represented ~86% of total revenue and continued to gain market share, growing faster than the coconut water category across all measured periods. “Zola retail store count increased 68%…largest quarterly rate of distribution gains in our company’s history.” .
Operating cash burn improved: “Use of cash during the quarter declined to $1.5M, including >$400k from discontinued ops,” the lowest levels since going public, aided by cost structure actions and working-capital management .
Strategic progress: Prior quarter monetization of RS Durum trait ($4M gain) and GoodWheat sale set the stage for lower OpEx and a more focused beverage portfolio, with management continuing to evaluate strategic alternatives .

What Went Wrong

Gross margin compression: Sequential gross margin fell (Q2: ~52% vs Q3: ~33% ex write-down guidance), impacted by a ~$150k write-down (hemp/GoodWheat seed) within cost of revenues and product mix normalization as GLA wanes .
SG&A elevation from transition costs: Q3 SG&A rose to ~$2.24M (+$379k YoY), entirely due to severance/transition related to GoodWheat sale; management expects related items to be “pretty minimal” going forward .
Visibility uncertainty: Management withheld forward-looking guidance for Q4/FY due to outsized new distribution shipping late in Q3 and uncertain reorder cadence; Q4 is seasonally soft for the category, complicating near-term forecasting .

Financial Results

Quarterly results (sequential trend)

Metric	Q1 2024	Q2 2024	Q3 2024
Revenues ($000)	1,255	1,306	1,537
Cost of Revenues ($000)	820	633	1,032
Gross Profit ($000)	435 (calc from )	673 (calc from )	505 (calc from )
Gross Margin %	34.7% (calc from )	51.5% (≈52% cited on call)	32.9% (calc; includes ~$150k write-down)
SG&A ($000)	3,189	2,683	2,241
Net Income (Loss) from Continuing Ops ($000)	(2,423)	1,850	(1,182)
Net Income (Loss) Attributable to Common ($000)	(2,423)	1,061	(1,612)
EPS, Basic/Diluted ($)	(1.78)	0.78	(1.18)
Cash ($000)	3,317	5,504	3,936
Short-term Investments ($000)	5,184	2,604	2,640

Notes: Q2 includes a $4.0M gain on sale of intangible assets (RS Durum) that lifted reported operating income and contributed to strong gross margin in that period . Q3 cost of revenues includes a ~$150k write-down of hemp/GoodWheat seed inventory, pressuring gross margin .

YoY comparison (Q3 2024 vs Q3 2023)

Metric	Q3 2023	Q3 2024
Revenues ($000)	1,298	1,537
Total Operating Expenses ($000)	2,695	3,297
Net Loss Attributable to Common ($000)	(2,567)	(1,612)
EPS, Basic/Diluted ($)	(1.89)	(1.18)

Segment / Mix and KPIs

KPI	Q2 2024	Q3 2024	Commentary
Zola Share of Revenue (%)	~90%	~86%	Zola is the core driver; GLA oil declining
Zola Revenue Growth YoY (%)	+42%	+55%	Accelerating growth
Zola Retail Distribution Growth YoY (%)	—	+68%	Largest quarterly distribution gains
Category vs Zola Sell-Through (13 wks)	Cat +16%, Zola +27%	Cat +20%, Zola +36%	Zola outpacing category
Category vs Zola Sell-Through (4 wks/latest)	Cat +25%, Zola +42%	Cat +28%, Zola +73%	Momentum into late Q3
Inventory ($000, end-period)	978	835	Seasonality and sell-in normalization
Cash + ST Investments ($000)	8,108 (sum from )	6,576 (sum from )	Management cited ~$6.6M

Guidance Changes

Metric	Period	Previous Guidance	Current (Q3 2024)	Change
Total Revenue	FY 2024	“In line with $5.3M (FY23)” (reaffirmed in Aug)	No additional forward-looking guidance; forecast challenges due to new distribution timing	Withdrawn/Not updated
Gross Margin	FY 2024	Low 40s (FY)	No additional guidance; Zola long-term margin target low-to-mid 30s (commentary)	Qualitative only
OpEx Run Rate	Ongoing	~$2M/quarter	“Transition-related severance largely past; expect minimal going forward”	Maintained; one-time items fading
Cash Burn	FY 2024	~50% lower vs $15M in 2023	“Use of cash at historic lows; Q3 ~$1.5M including ~$0.4M discontinued”	Positive trajectory (qualitative)
Retail Distribution (Zola)	FY 2024	—	“Expect full-year 2024 retail distribution growth to exceed 80%”	Initiated metric in Q3

Earnings Call Themes & Trends

Topic	Q1 2024	Q2 2024	Q3 2024	Trend
Strategic alternatives / IP monetization	Pursuing partners for wheat supply chain and OEM dialogues; focus on monetizing IP	Monetized RS Durum ($4M) and sold GoodWheat (note receivable); continue exploring alternatives	Continue evaluating strategic alternatives; focused on cost reduction and Zola growth	Ongoing monetization; portfolio focus
Zola growth & innovation	New flavors planned; ~1,300 additional stores shipping in Q2	New 16.9oz flavors launched; Zola +42% YoY; outpacing category	Zola +55% YoY; distribution +68%; 52w/13w/4w sell-through outpaced category; new innovation targeted for beverage season next year	Strengthening
Gross margin / cost of goods	GP >30% for 5 straight quarters	Gross margin ~52%; mgmt expects FY trend low 40s (mix shift as GLA declines)	Gross margin pressured by ~$150k write-down; Zola long-term GM target low-to-mid 30s	Normalizing to Zola profile
SG&A / OpEx discipline	Double-digit YoY OpEx decline; rightsizing	SG&A includes ~$0.5M M&A fees; cost saves ramping	Q3 SG&A +$379k YoY due to severance; most transition costs behind	One-time costs rolling off
Cash burn / liquidity	Target sub-$10M net operating loss in 2024	Burn expected ~half of 2023; ended Q2 with ~$8.1M cash+STI	Burn at historic lows; ended Q3 with ~$6.6M cash+STI; $2.5M note repayment due May 2025	Improving, seasonality-aware
Guidance stance	—	Provided preliminary FY24 outlook (revenue in line, GM low 40s, OpEx run rate ~$2M/qtr)	Withheld further guidance due to sell-in timing; distribution growth >80% expected	Reduced specificity near term

Management Commentary

“Our total revenues increased 18 percent year over year, and we have significantly reduced our use of operating cash to the lowest levels in Arcadia’s history as a public company.” — T.J. Schaefer, CEO .
“Zola grew faster than the coconut water category across all measured time periods… Zola retail store count increased 68% compared to the same period last year.” — T.J. Schaefer .
“We ended Q3 with $6.6 million of cash and short-term investments… [and] reduced our use of cash from ongoing operations to some of the lowest levels in our history as a public company.” — Mark Kawakami, CFO .
“We will not be providing any additional forward-looking guidance… the size of the distribution gains… and timing of the initial shipments… make forecast accuracy extremely challenging.” — T.J. Schaefer .

Q&A Highlights

Inventory write-down and margin framework: ~$150k write-down in Q3 (hemp and GoodWheat seed). Excluding write-down and GLA runoff, go-forward gross margin “around 33%,” consistent with Zola’s long-term low-to-mid 30s target .
One-time costs largely behind: Severance/transition expenses tied to GoodWheat sale mostly contained in Q3; minimal expected in Q4 .
Execution capacity and supply chain: Asset-light model (manufacturing in Thailand; finished goods at port). Managing longer lead times and rebuilding safety stock into seasonally softer Q4 .
Mix dynamics: GLA oil declining (about half of Q3’23 levels in Q3’24), reinforcing Zola’s majority mix (~86%) .

Estimates Context

Wall Street consensus (S&P Global) for Q3 2024 could not be retrieved at the time of analysis due to a system limit, so estimate comparisons are not included. If you need, we can refresh and add a beat/miss analysis once access is restored.*

Key Takeaways for Investors

Zola is driving the story: accelerating sell-in and sell-through, with distribution up 68% YoY and market share gains; execution on new customers and innovation cadence are key to sustaining momentum .
Near-term GM normalizing: Expect gross margin to trend toward Zola’s structural low-to-mid 30s, especially as GLA fades; one-time inventory write-down in Q3 further pressured margins .
Operating discipline intact: Transition costs largely behind; OpEx run rate focus (~$2M/quarter) and working-capital management underpin historically low cash burn .
Visibility caveat: Management withheld guidance given the unusually large, late-quarter sell-in; monitor reorder patterns and Q4 seasonality to gauge true run-rate demand .
Liquidity watch: ~$6.6M cash+ST investments at Q3-end and ~$2.5M note repayment expected in May 2025 provide runway; continued burn reduction remains pivotal .
Strategic optionality: Ongoing evaluation of alternatives and potential further IP monetization could be catalysts; any updates here may impact the equity narrative .
Trading lens: Positive narrative on Zola traction vs. uncertainty on near-term forecasting and margin mix; monitor category data, reorder normalization, and margin trajectory as potential inflection drivers .

Sources:

Q3 2024 press release and 8-K exhibits .
Q3 2024 earnings call transcript .
Q2 2024 press release/8-K and call .
Q1 2024 8-K and call .
Earnings date release .

Arcadia Biosciences, Inc. (RKDA)·Q3 2024 Earnings Summary