Edible Garden AG Incorporated (NASDAQ:EDBL) Q2 2023 Earnings Call Transcript

And I think you’ll see us continue to service the customers that we have that are wholesalers. And then I think we’re going to look to it strategically place that business probably in the area with maybe some other additional capacity we may have to bring on in the future. The produce business, that’s the leafy greens, that’s already in production and shipping with more business coming online in Q3. I would think capacity, once again, it’s kind of how you define growing capacity. I would think we will have that place fall by either a year and/or definitely by end of Q1 next year. But the production aspect of it with the processing that there isn’t really a major gating factor that won’t allow us to go past what we currently are doing and what we think we have projected.

So I think the $20 million is fairly conservative. There’s different things that go in there. And then the fourth piece of it would be obviously some of the products that we look to distribute that whether it’s commodities that we’re getting asked to put into the entire platform or potentially even importing some other types of products that are shelf stable that we’re looking at right now. So once again that $20 million number was something we put out there based on a conservative outlook of what we felt we could do with the facility. But as we continue to invest, as we continue to drive business, we’re just getting more and more opportunity from these major retailers that they’re very happy with how we execute.

Anthony Vendetti: Just lastly on the gross margin. I know you mentioned you had some plant-based supplements, which is high margins. Your gross margin came in significantly greater than we expected. Is that sustainable or is that onetime, I’m not saying it’s a one-time order, but that order helped this quarter and the gross margin may tick down a little bit as we move forward? Or is this much better gross margin and new run rate?

Jim Kras: I think that business has kind of always been in the background, and we’re continuing to optimize that business. But the margins that we really are seeing the expansion on are really the stuff that we’re growing as a function of bringing it in-house that’s going to continue to be the key driver, floral was a nice add-on. It’s not as production heavy technology sort of maybe, I guess, is maybe some of the leafy green or some of the other things that we’ve continued to invest in the CEA aspect of the business. I think you’ll see more things out of the supplement business as we push into 2024. We’ve really just tried to focus on what our core business is and our core business is picking, packing and shipping. I think that’s what’s allowed us to separate ourselves from some of these other companies, some major players that are in this the space have gone out of business and claimed bankruptcy just in the last 90 to 120 days.

And I think that’s just keeping our head down and driving product, driving margin, focusing on the core business and then adding on what we know we can take it on, I think, has worked out well. It takes a little longer than maybe people would like, but we’re starting to see the fruits of our labor. So the supplement business, once again, I think, helped us a little bit on the margin, but I don’t think it’s going to be the driving factor moving forward at recently or next quarter or 2. I think you tend to continue to see margin improvement like I said, the leafy greens business and the floral. So we’re pretty excited. And I think to answer your question, yes, it will be sustainable moving forward if you only see improvement.