RiskOn International, Inc. (ROI)·Q2 2018 Earnings Summary

Executive Summary

• Q2 FY2018 revenue was $1.9M with a net loss of $12.0M (EPS $(0.27)), down sequentially in revenue from Q1 but with a smaller loss; YoY revenue declined from $3.9M and EPS worsened from $(0.18) as Pioneer/Sable volumes compressed while Zest Labs remained early-stage .
• Management pivoted the company to a Zest-centric strategy (divesting non-core assets) and moved from development to deployment, recording initial Zest Fresh SaaS revenue on a per‑pallet basis in Q2; pallets were “in the thousands,” signaling early commercialization and product-market traction .
• CFO highlighted progress in liquidity and investments: cash of $8.3M at quarter-end (Sep 30) and $6.5M invested in Zest Labs in H1 FY2018; management guided to “meaningful” Zest revenue increases in Q3–Q4 FY2018, a potential stock catalyst pending customer announcements and scaling deployments .
• No formal numeric guidance was issued and S&P Global consensus estimates for ROI were unavailable; we therefore cannot assess beat/miss versus Street for Q2 . (Consensus data unavailable via S&P Global for ROI — no comparison possible.)

What Went Well and What Went Wrong

• What Went Well

  • Zest commercialization milestone: “moved from the development phase of Zest Fresh into deployment with initial revenue generated on a per pallet SaaS model,” with pallets shipped “in the thousands” .
  • Strategic focus sharpened: Board approved a plan to divest non-core assets and focus the enterprise solely on Zest Labs, aiming to improve investor clarity and capital access .
  • Technology leadership enhanced: introduced integrated blockchain support at no additional cost to growers/shippers, leveraging Zest’s authenticated sensor data and predictive analytics to add trust/traceability .

• What Went Wrong

  • Revenue contraction in legacy/transition businesses: consolidated revenue fell to $1.9M (from $3.9M YoY) as Pioneer/Sable revenue compressed while Zest was still nascent; gross loss remained negative as fixed overhead weighed on lower volumes .
  • Elevated non-cash expenses continued to pressure P&L: share-based compensation remained a material component of operating costs intra-year (management emphasized large vesting-related expense in H1) .
  • Segment profitability challenged: management noted Pioneer margins turned negative amid lower volumes and price/mix headwinds, limiting gross profit contribution during the pivot .

Financial Results

Segment revenue breakdown ($USD Thousands):

KPIs and operating context:

• Zest Fresh SaaS adoption: management reported initial per‑pallet SaaS revenue in Q2, with pallets “in the thousands” .
• Liquidity/investment: cash reached $8.3M at Sep 30; $6.5M invested in Zest Labs over H1 FY2018 .

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “We have moved from the development phase of Zest Fresh into deployment with initial revenue generated on a per pallet SaaS model… [pallets] were in the thousands.” — Randy May, CEO .
• “We…expect to announce new customers and achieve a meaningful increase in [Zest] revenue [in] the third and fourth quarter of this fiscal year.” — CFO summary .
• “The Company…added…integrated blockchain support at no additional cost…creating true transparency [of] freshness and safety factors” by combining authenticated data and smart contracts. — CEO .
• “We announced…divesting all the non-core assets…so that our sole focus can become the Zest Labs' suite of post-harvest AgTech solutions.” — CEO .

Q&A Highlights

• Adoption go-to-market: Management emphasized a grower‑centric strategy to drive pull‑through to retailers, noting strong intrinsic value for growers even before mass retail adoption .
• Customer disclosures: Under NDAs and competitive concerns, management declined to name customers; intends a “land grab” first, with more partnership detail after further progress .
• Sales strategy and TAM: Focus on top U.S. targets first; considering international opportunities longer‑term, with U.S. pipeline likely to occupy near‑term capacity .

Estimates Context

• Street consensus (S&P Global) for ROI’s Q2 FY2018 EPS/Revenue was unavailable; we cannot evaluate beat/miss versus consensus. The company did not issue formal numeric guidance, but qualitatively guided to higher Zest revenue in Q3–Q4 .

Key Takeaways for Investors

• Zest inflection underway: First per‑pallet SaaS revenue and “thousands” of pallets shipped validate commercial readiness; watch for Q3–Q4 revenue ramps and named customer wins as potential stock catalysts .
• Strategic simplification: Divestitures and a Zest‑only focus should improve operating clarity and capital allocation, but legacy headwinds (Pioneer/Sable) will likely keep gross profit negative until Zest scales .
• Technology moat: Integrated blockchain plus AI‑driven freshness metrics (ZIPR Code) create defensibility and higher-value analytics/traceability use cases for enterprise buyers .
• Operating leverage ahead: As Zest revenue scales, monitor gross profit trajectory and non‑cash share‑based compensation normalization to narrow losses over H2 FY2018 .
• Execution watch‑items: Conversion of pilots to enterprise deployments, pace of pallet throughput growth, and timing of customer announcements will drive narrative and valuation .