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spk05: Good afternoon and welcome to the Arcadia Biosciences fourth quarter and full year 2023 financial results and business highlights conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand has been raised. Please be advised that today's conference call is being recorded. I would now like to hand the conference over to TJ Schaefer, Chief Financial Officer at Arcadia.
spk04: Please go ahead.
spk06: Thank you, and good afternoon. Joining me on the call today is Stan Jacob, Arcadia's President and Chief Executive Officer. This call is being webcast, and you can refer to the company's press release at arcadiabio.com. Before we start, we would like to remind you that Arcadia Biosciences will be making forward-looking statements on this call based on current expectations and currently available information. However, since these statements are based on factors that involve risks and uncertainties, the company's actual performance and results may differ materially from those described or implied today. You can review the company's Safe Harbor language in our most recently filed 10-K. With that, I'll now turn the call over to Stan.
spk08: Good afternoon, everyone, and thank you for joining us today to review our fourth quarter and full year results for 2023. I am pleased to report that Arcadia continues to make steady progress in executing Project Greenfield, our three-year strategic plan to unlock the company's potential and provide a path to profitability. We are halfway through this strategic plan and the results of this focus are unmistakable. Arcadia has significantly improved quality of revenues and has now delivered two straight years of gross profit growth for the first time in its history. SG&A expenses have declined for two straight years and are at their lowest level since 2019. These factors have had a significant impact on cash as our cash use and operations has gone from $25.9 million in 2021 to $15.3 million in 2023, a decline of 41%. Let's now turn our attention to Good Wheat. The Good Wheat brand continues to expand, and in Q4 added over 1,000 shelves compared to Q3. Since our launch 18 months ago, the brand can now be found in over 3,500 grocery shelves in the pasta, pancake, and mac and cheese categories. In addition, we are excited to announce that all three GoodWeek product categories are now available nationwide on Amazon. As you look forward into 2024, our focus will be on nurturing these points of distribution to grow velocity and dollar sales per store. These success stories by category will be the catalyst for expanded distribution in 2025 and beyond. And Good Wheat has recently received many accolades from some significant publications. And I just want to highlight two of them here today. Better Homes and Gardens, with 13 million followers across social platforms, recognized Good Wheat in the New Basics category as the best stealthy healthy pasta with the same flavor as regular pasta, but four times the fiber. And the Eat This, Not That site, which has 7 million unique views per month, awarded Good Wheat Quick Cakes recognition in two different categories in January. In the 13 best store-bought high-protein desserts, they highlighted Good Wheat Chocolate Chocolate Chip Quick Cakes as a dessert when wanting something chocolatey and warm. With 7 grams of protein, they were easy to make by cooking them in the microwave for 75 to 90 seconds. And in the 38 best store-bought high-fiber snacks, they recognize Good Wheat Buttermilk Quick Cakes as a breakfast mix that provides a fluffy pancake that also carries 11 grams of fiber per serving. These accolades from trusted, independent testing outlets are proving what we already know, that our proprietary wheat is commercially viable to create great-tasting products while sneaking in more fiber and proteins. And we don't plan on stopping with just good wheat products. There are thousands of products across the grocery store that can offer these same valuable benefits. So we see a long-term path to generate recurring royalty revenue. There are two key steps to monetizing this technology. One, partner with the wheat supply chain in order to produce a scalable, cost-effective, identity-preserved wheat supply. We need our wheat technology integrated into all customer preferred wheat types and then efficiently move from seed to farm to mill to delivered flour. We are currently in discussion with several potential partners, and we realize it will take some time to build and perfect this step. In parallel, the second step is to work with large food manufacturers to create a demand for our wheat. This can create a long-term pull-through partnership and ensure we have enough volume through our supply chain system. Contact has begun across several categories. And again, it will take some time to develop products with their R&D groups.
spk04: Now, over to Zola Coconut Water.
spk08: The coconut water category continued to perform well in 2023, with unit sales increasing 6%, while dollar sales grew 15%, according to Nielsen data, for the 52 weeks ending December 30th, 2023. As we previously disclosed, Zola lost distribution at the end of 2022 due to supply chain issues, and we felt the impact in 2023 as we experienced double-digit declines in both units and dollar sales. However, when we look at 2024 and beyond, we are optimistic that Zola has turned the corner for the following reasons. One, Nielsen data for the last 13 weeks shows Zola unit sales up 2% with dollar sales flat, And the latest four-week data shows unit sales are up 8% and dollar sales are up 4%. Two, we have new flavor innovation that will be coming to market in Q2 for beverage season. That includes our original, lime, and pineapple flavors, all in a new 16.9-ounce, weed-stealable, tetra-pack container that retailers are excited about. Pineapple is the number one coconut water flavor, and lime is the number one flavor in sparkling water. So we believe these new offerings will energize Zola sales. Both flavors are 100% natural, no sugar added, and non-GMO, and are a great addition to our original extra pulp and espresso flavors. And three, we have line of sight into new retailer wins in the spring-summer beverage season that could increase Zola distribution by as much as 50% this year. So, a lot to be excited about for Zola when we look at the next several quarters. The last initiative to discuss today is the strategic review announced on July 20th, which stated that Arcadia would explore a range of strategic options, which could include an asset sale, acquisition, merger, sale, or other strategic transaction. Over the last eight months, we, along with our bankers, have engaged with a significant number of potential transaction partners to try to find the best outcome for Arcadia and our shareholders. And while we aren't ready to provide a detailed update today, We continue to have discussions and perform the due diligence work necessary to scale Arcadia and accelerate our ability to deliver cash flow positive results. We will keep you updated as material events occur, and we must point out that there can be no assurance that this exploration of strategic alternatives will result in the company entering or completing any transaction, and no timetable has been set for the conclusion of the strategic review. As you look at 2024, the foundation we have laid over the past two years provides optimism for even stronger results. Good wheat is now in three categories and garnering national attention, which will also assist our efforts in monetizing our wheat IP through other food manufacturers. Zola is leveraging new flavor innovations to expand distribution and is anticipating double digit growth in 2024. And as mentioned in our last call, we continue to evaluate our expense profile in an effort to conserve cash. Due to all of these factors, we anticipate ending 2024 with a net operating loss under $10 million for the first time in the company's history. With that, I will turn the call over to TJ to discuss our Q4 and year-end results. TJ?
spk06: Thank you, Stan, and good afternoon to everyone joining us on the call today. In my prepared remarks, I will walk through our Q4 and full year 2023 financial results, as well as provide insights into 2024. As a reminder, my comments today will focus on our results from continuing operations, excluding the impact of body care, which we discontinued in Q3 2023. With that, let me start by discussing our 2023 Q4 financial results. Our Q4 2023 revenues from continuing operations were approximately $1.2 million compared to revenue of $745,000 in Q4 2022. The 57% increase in sales was primarily driven by good week and the timing of GLA oil sales as Zola remained relatively flat during the quarter. On a year over year basis, Good wheat distribution increased nearly 300% from approximately 1,200 stores at the end of 2022 to more than 3,500 stores at the end of 2023. Over the past 12 months, we also introduced two additional good wheat categories with our pancake waffle mix launching in August 2023 and mac and cheese in November 2023. Despite higher revenues, our cost of goods sold were actually lower in Q4 2023 compared to the same period last year, as our 2022 results included the impact of write downs related to hemp seeds and our archipelago joint venture, which are all no longer part of our continuing results as we focus on generating profitable revenue. Our research and development expenses of $332,000 were $169,000 or 34% favorable to Q4 2022, driven by the timing of innovation work in 22 in order to launch new GoodWe and Zola products. Our selling general and administrative expenses of $3.4 million declined $207,000 or 6% compared to the same period last year primarily driven by headcount reductions that took place in Q3, 2023. In summary, our Q4 revenues from continuing operations increased $425,000 and our gross profit increased $655,000 compared to the same period last year. While sales and margins improved, we also reduced our R&D and SG&A expenses by $640,000 leading to a $1.3 million improvement in our loss from continuing operations, so we are very pleased with the progress we made in Q4 2023. Moving now to full year 2023 results. Our total revenues of $5.3 million declined $2.1 million compared to the prior year, as our 2022 results included more than $2.7 million in revenues from grain sales as well as a non-recurring milestone payment from BioSeries. Excluding these items, revenues would have increased 13%. Despite the lower reported sales, our gross profit increased 54% to just over $2 million as we continue to emphasize profitable growth and higher quality revenue streams. We remain focused on managing our operating expenses and driving costs lower, which I believe is apparent in our results. Our research and development expenses of $1.4 million declined 8% year over year, and our selling general and administrative expenses of $14.5 million decreased 4% compared to last year and are now at the lowest level since 2019. And if you look at our R&D and SG&A expenses together, 2023 represents the lowest level of spend since before Arcadia went public in 2015. Our loss from continuing operations of $13.9 million is relatively unchanged versus prior year as reported. Our 2022 results include a $2 million benefit related to the sale of our Vertica joint venture. Excluding the impact of this gain, our loss from continuing operations would have improved by $2.1 million, or 13%. In 2023, we used approximately $15 million of cash to fund our operations, and we also raised $6 million in March 2023, resulting in a year-end cash balance of nearly $12 million. We believe this cash will fund our operations beyond 2024, so let me provide some context. As Stan mentioned, we are excited about entering 2024 with three good wheat categories and a tremendous opportunity to meaningfully scale our Zola coconut water business with the new pineapple and lime flavors. As a result, we expect to increase sales at a double-digit rate in 2024. The increase in sales should lead to higher gross profit dollars, albeit at a lower gross margin rate. We will continue to focus on managing our operating expenses and expect to realize the full-year benefit of the cost reductions we have implemented. The impact of these actions will result in an estimated use of cash in the single digits in 2024, which would also be the lowest use of cash since Arcadia went public. With that, I will now turn the call over to the operator for questions.
spk05: Thank you. As a reminder, to ask a question, you will need to press star 11 on your telephone. Please be advised that your name will be announced.
spk04: Please stand by while we compile the Q&A roster.
spk05: And our first question comes from the line of Ben Cleave with Lake Street Capital Markets.
spk09: All right, thanks for taking my questions. First, on the fourth quarter and full year gross profit and gross margin side, without the income statement on the press release, I'm having a hard time putting this together. Can you just lay out what the gross profit and gross margin was in both Q4 and on a full year basis, please?
spk08: Yeah, Ben, this is Stan. Thank you for calling in. And I'll turn that over to TJ to answer.
spk06: Yeah, so gross profit dollars in Q4 were $499,000. And the gross profit dollars for the full year were $2.03 million.
spk04: Okay, great.
spk09: And then, okay, I can back that out. Okay, so, you know, from when you talk about the outlook for 24, you know, double digit revenue growth, but TJ, you commented that, you know, given some of the portfolio shifts, I expect margins to come down a bit. Can you talk about your expectations for gross profit improvement from 2023 to 2024?
spk06: sure uh so again uh you know double digit increase in sales um just wouldn't be forecasting i think our if you look at our uh full year we had a 38 gross margin um so that's you know i think there's some product mix uh elements to that and so we're looking more kind of down in the 30 to 35 range uh It's kind of the numbers that we're looking at. Got it. Okay, that's helpful.
spk09: Thank you. Okay, so turning to the comments you made on trying to recognize some royalty revenue and partnering with the wheat supply chain and working with the larger food manufacturers. You know, especially working with the supply chain was something that had been tried, you know, a couple years ago. And not just at Arcadia, but industry-wide, this has been a real challenge for these kind of novel enhanced nutrition varieties to really find their way into the supply chain with these big players. Can you talk about the conversations that you're having today and give us a sense that these large wheat companies are really serious about engaging with technology like you've developed?
spk08: Yeah, and so you're right, Ben. I think it's been a challenge for any identity-preserved crop, but we are actually seeing some manufacturers and some supply chains that are investing in that part of the business because they are realizing better margins on those types of products.
spk07: So we're kind of seeing the industry start to invest more heavily in that route.
spk03: Okay. Okay, great. Very good. On
spk09: On GoodWeat, we've got a question on GoodWeat, a question on Zola, and then I'll get back in queue here. In GoodWeat, you know, you're six months now into the launch of Pancake Mix. I'm wondering if you can talk about kind of the performance of these new products today versus kind of the performance of pasta six months in, you know, after you launched them. Are you, you know, realizing revenue synergies now that you've got, you know, more products in line or is kind of the ramp over the first six months Kind of similar today as it was when you started Good Wheat a couple of years ago now.
spk08: Yeah, I would say for pancakes, we're seeing a similar ramp. But I would say that our velocities compared to the average Better For You product are higher on pancakes than they were on pasta. It just is a more recognizable segment in that particular category. And so we are benefiting from that. Do you really want anything on mac and cheese? That was just November launch.
spk09: Okay, very good. Thank you. And then one last one for me. In Zoli, you talk about expanding distribution, new SKUs coming online here. You also, in your latest investor presentation layout, target of expanding this from a 4% ACV in 2022 to 40% in 2025. Can you comment on kind of what that number was exiting 23 and then collectively how all these dynamics will improve that number, you know, how much that number will be improved in 24?
spk08: Yeah, so for 2024 or 2023, we dipped a little bit from that 4%, as we have stated earlier. But again, if we get a 50% increase in distribution, you know, that's going to get us closer to that 5% to 6% ACV. And so we still have a ways to go to reach that 2025 level. But the other thing to note is the distribution that we are getting is basically filling in some of the retailers that are in our stronghold coast regions. And we still have a lot of efforts underway to kind of fill in the rest of the country. Got it. Got it.
spk03: Very good.
spk04: Okay. I appreciate you taking my questions. I'll get back to you. Thank you. One moment, please, for our next question. And our next question comes from the line of Dipesh Patel with HC Wainwright.
spk02: Hi, Stan. Hi, TJ. This is Dipesh on behalf of Ram Selvaraju at HC Wainwright. I've got a couple of questions with regards to revenue and then just one or other on the strategic review process. The first one, what do you consider the most valuable and fastest growing product line from the Good Wheat franchise? Would you say it's mac and cheese, quick cakes, or pasta?
spk08: Hi, Dipesh. This is Stan. Thanks for calling in. Right now, we would probably say pasta, and it's because we're lapping more distribution growth from pasta. But again, for both pancakes and mac and cheese, We have gained some distribution that we expect to nurture over the next year. So I think all three of them will be growing this year.
spk02: Got it. And then I guess a follow-up question on the good wheat distribution channel. Which one would you say appears to be most profitable at this point?
spk08: Well, right now, most of our distribution is in traditional grocery. Those, I think, have equal profitability, those retailers.
spk02: Okay. And then just a couple more. What innovative strategies can the company use to boost revenue growth in the coming quarters?
spk08: Yeah, so I think we've kind of laid out some of our key principles. One was distribution growth, which we've highlighted on Zola. The other one is focusing on specific retailers for good wheat that we currently have distribution and looking at the entire mix of tools, whether that's in-store and out-of-store, to improve velocity and continue to add SKUs to those stores with our other categories.
spk02: Great, that's helpful. And then last question from me. When does the company plan to complete the strategic review process?
spk08: Well, what we said is there's no specific timetable to complete the review. So we are continuing to do our due diligence, and we'll have more information as material events occur.
spk01: Got it. Thank you for taking my questions.
spk05: Thank you. I'll now hand the call back over to President and CEO, Stan Jaycott, for any closing remarks.
spk08: So in summary, as we enter 2024, Arcadia is in a great position to continue its positive trajectory. We have transitioned the top line to high-quality revenue that generates gross profit across multiple sources. We have right-sized organization and streamlined our cost structure in order to extend our runway. Our good wheat is in more than 3,500 stores in three categories, and Zola Coconut Water is positioned for double-digit growth with new flavors and distribution. And finally, we remain focused on adjacent acquisitions as well as monetizing our IP. We look forward to updating you in the future. Thanks again for joining us and have a great rest of your day.
spk05: This concludes today's conference call.
spk04: Thank you for participating and you may now disconnect. Hello. Bye. Thank you. Thank you.
spk05: Good afternoon and welcome to the Arcadia Biosciences fourth quarter and full year 2023 financial results and business highlights conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand has been raised. Please be advised that today's conference call is being recorded. I would now like to hand the conference over to T.J.
spk04: Schaefer, Chief Financial Officer at Arcadia. Please go ahead.
spk06: Thank you, and good afternoon. Joining me on the call today is Stan Jacob, Arcadia's President and Chief Executive Officer. This call is being webcast, and you can refer to the company's press release at arcadiabio.com. Before we start, we would like to remind you that Arcadia Biosciences will be making forward-looking statements on this call based on current expectations and currently available information. However, since these statements are based on factors that involve risks and uncertainties, the company's actual performance and results may differ materially from those described or implied today. You can review the company's Safe Harbor language in our most recently filed 10-K. With that, I'll now turn the call over to Stan.
spk08: Good afternoon, everyone, and thank you for joining us today to review our fourth quarter and full year results for 2023. I am pleased to report that Arcadia continues to make steady progress in executing Project Greenfield, our three-year strategic plan to unlock the company's potential and provide a path to profitability. We are halfway through this strategic plan and the results of this focus are unmistakable. Arcadia has significantly improved quality of revenues and has now delivered two straight years of gross profit growth for the first time in its history. SG&A expenses have declined for two straight years and are at their lowest level since 2019. These factors have had a significant impact on cash as our cash used in operations has gone from $25.9 million in 2021 to $15.3 million in 2023, a decline of 41%. Let's now turn our attention to Good Wheat. The Good Wheat brand continues to expand, and in Q4 added over 1,000 shelves compared to Q3. Since our launch 18 months ago, the brand can now be found in over 3,500 grocery shelves in the pasta, pancake, and mac and cheese categories. In addition, we are excited to announce that all three GoodWeek product categories are now available nationwide on Amazon. As we look forward into 2024, our focus will be on nurturing these points of distribution to grow velocity and dollar sales per store. These success stories by category will be the catalyst for expanded distribution in 2025 and beyond. And Good Wheat has recently received many accolades from some significant publications. And I just want to highlight two of them here today. Better Homes and Gardens, with 13 million followers across social platforms, recognized Good Wheat in the New Basics category as the best stealthy healthy pasta with the same flavor as regular pasta, but four times the fiber. And the Eat This, Not That site, which has 7 million unique views per month, awarded Good Wheat Quick Cakes recognition in two different categories in January. In the 13 best store-bought high-protein desserts, they highlighted Good Wheat Chocolate Chocolate Chip Quick Cakes as a dessert when wanting something chocolatey and warm. With 7 grams of protein, they were easy to make by cooking them in the microwave for 75 to 90 seconds. And in the 38 best store-bought high-fiber snacks, they recognize Good Wheat's Buttermilk Quick Cakes as a breakfast mix that provides a fluffy pancake that also carries 11 grams of fiber per serving. These accolades from trusted, independent testing outlets are proving what we already know, that our proprietary wheat is commercially viable to create great-tasting products while sneaking in more fiber and proteins. And we don't plan on stopping with just good wheat products. There are thousands of products across the grocery store that can offer these same valuable benefits. So we see a long-term path to generate recurring royalty revenue. There are two key steps to monetizing this technology. One, partner with the wheat supply chain in order to produce a scalable, cost-effective, identity-preserved wheat supply. We need our wheat technology integrated into all customer-preferred wheat types and then efficiently move from seed to farm to mill to delivered flour. We are currently in discussion with several potential partners, and we realize it will take some time to build and perfect this step. In parallel, the second step is to work with large food manufacturers to create a demand for our wheat. This can create a long-term pull-through partnership and ensure we have enough volume through our supply chain system. Contact has begun across several categories. And again, it will take some time to develop products with their R&D groups.
spk04: Now over to Zola Coconut Water.
spk08: The coconut water category continued to perform well in 2023, with unit sales increasing 6%, while dollar sales grew 15%, according to Nielsen data, for the 52 weeks ending December 30th, 2023. As we previously disclosed, Zola lost distribution at the end of 2022 due to supply chain issues, and we felt the impact in 2023 as we experienced double-digit declines in both units and dollar sales. However, when we look at 2024 and beyond, we are optimistic that Zola has turned the corner for the following reasons. One, Nielsen data for the last 13 weeks shows Zola unit sales up 2% with dollar sales flat, And the latest four-week data shows unit sales are up 8% and dollar sales are up 4%. Two, we have new flavor innovation that will be coming to market in Q2 for beverage season. That includes our original lime and pineapple flavors, all in a new 16.9-ounce re-stealable Tetra Pak container that retailers are excited about. Pineapple is the number one coconut water flavor, and lime is the number one flavor in sparkling water. So we believe these new offerings will energize Zola sales. Both flavors are 100% natural, no sugar added, and non-GMO, and are a great addition to our original extra pulp and espresso flavors. And three, we have line of sight into new retailer wins in the spring-summer beverage season that could increase Zola distribution by as much as 50% this year. So a lot to be excited about for Zola when we look at the next several quarters. The last initiative to discuss today is the strategic review announced on July 20th, which stated that Arcadia would explore a range of strategic options, which could include an asset sale, acquisition, merger, sale, or other strategic transaction. Over the last eight months, we, along with our bankers, have engaged with a significant number of potential transaction partners to try to find the best outcome for Arcadia and our shareholders. And while we aren't ready to provide a detailed update today, We continue to have discussions and perform the due diligence work necessary to scale Arcadia and accelerate our ability to deliver cash flow positive results. We will keep you updated as material events occur, and we must point out that there can be no assurance that this exploration of strategic alternatives will result in the company entering or completing any transaction, and no timetable has been set for the conclusion of the strategic review. As you look at 2024, the foundation we have laid over the past two years provides optimism for even stronger results. Good wheat is now in three categories and garnering national attention, which will also assist our efforts in monetizing our wheat IP through other food manufacturers. Zola is leveraging new flavor innovations to expand distribution and is anticipating double digit growth in 2024. And as mentioned in our last call, we continue to evaluate our expense profile in an effort to conserve cash. Due to all of these factors, we anticipate ending 2024 with a net operating loss under $10 million for the first time in the company's history. With that, I will turn the call over to TJ to discuss our Q4 and year-end results. TJ?
spk06: Thank you, Stan, and good afternoon to everyone joining us on the call today. In my prepared remarks, I will walk through our Q4 and full year 2023 financial results, as well as provide insights into 2024. As a reminder, my comments today will focus on our results from continuing operations, excluding the impact of body care, which we discontinued in Q3 2023. With that, let me start by discussing our 2023 Q4 financial results. Our Q4 2023 revenues from continuing operations were approximately $1.2 million compared to revenue of $745,000 in Q4 2022. The 57% increase in sales was primarily driven by good week and the timing of GLA oil sales as Zola remained relatively flat during the quarter. On a year over year basis, Good wheat distribution increased nearly 300% from approximately 1,200 stores at the end of 2022 to more than 3,500 stores at the end of 2023. Over the past 12 months, we also introduced two additional good wheat categories with our pancake waffle mix launching in August 2023 and mac and cheese in November 2023. Despite higher revenues, our cost of goods sold were actually lower in Q4 2023 compared to the same period last year, as our 2022 results included the impact of write downs related to hemp seeds and our archipelago joint venture, which are all no longer part of our continuing results as we focus on generating profitable revenue. Our research and development expenses of $332,000 were $169,000 or 34% favorable to Q4 2022, driven by the timing of innovation work in 22 in order to launch new GoodWe and Zola products. Our selling general and administrative expenses of $3.4 million declined $207,000 or 6% compared to the same period last year primarily driven by headcount reductions that took place in Q3 2023. In summary, our Q4 revenues from continuing operations increased $425,000, and our gross profit increased $655,000 compared to the same period last year. While sales and margins improved, we also reduced our R&D and SG&A expenses by $640,000, leading to a $1.3 million improvement in our loss from continuing operations. So we are very pleased with the progress we made in Q4 2023. Moving now to full year 2023 results. Our total revenues of $5.3 million declined $2.1 million compared to the prior year. As our 2022 results, included more than $2.7 million in revenues from grain sales as well as a non-recurring milestone payment from BioSeries. Excluding these items, revenues would have increased 13 percent. Despite the lower reported sales, our gross profit increased 54 percent to just over $2 million as we continue to emphasize profitable growth and higher quality revenue streams. We remain focused on managing our operating expenses and driving costs lower, which I believe is apparent in our results. Our research and development expenses of $1.4 million declined 8% year over year, and our selling general and administrative expenses of $14.5 million decreased 4% compared to last year and are now at the lowest level since 2019. And if you look at our R&D and SG&A expenses together, 2023 represents the lowest level of spend since before Arcadia went public in 2015. Our loss from continuing operations of $13.9 million is relatively unchanged versus prior year as reported. Our 2022 results include a $2 million benefit related to the sale of our Vertica joint venture. Excluding the impact of this gain, our loss from continuing operations would have improved by $2.1 million, or 13%. In 2023, we used approximately $15 million of cash to fund our operations, and we also raised $6 million in March 2023, resulting in a year-end cash balance of nearly $12 million. We believe this cash will fund our operations beyond 2024, so let me provide some context. As Stan mentioned, we are excited about entering 2024 with three good wheat categories and a tremendous opportunity to meaningfully scale our Zola coconut water business with the new pineapple and lime flavors. As a result, we expect to increase sales at a double-digit rate in 2024. The increase in sales should lead to higher gross profit dollars, albeit at a lower gross margin rate. We will continue to focus on managing our operating expenses and expect to realize the full-year benefit of the cost reductions we have implemented. The impact of these actions will result in an estimated use of cash in the single digits in 2024, which would also be the lowest use of cash since Arcadia went public. With that, I will now turn the call over to the operator for questions.
spk05: Thank you. As a reminder, to ask a question, you will need to press star 11 on your telephone. Please be advised that your name will be announced.
spk04: Please stand by while we compile the Q&A roster.
spk05: And our first question comes from the line of Ben Cleave with Lake Street Capital Markets.
spk09: All right, thanks for taking my questions. First, on the fourth quarter and full year gross profit and gross margin side, without the income statement on the press release, I'm having a hard time putting this together. Can you just lay out what the gross profit and gross margin was in both Q4 and on a full year basis, please?
spk08: Yeah, Ben, this is Stan. Thank you for calling in. And I'll turn that over to TJ to answer.
spk06: Yeah, so gross profit dollars in Q4 were $499,000. And the gross profit dollars for the full year were $2.03 million.
spk04: Okay, great.
spk09: Um, and then okay, I can back that out. Okay, so, um, you know, from when you talk about the Alex for 24, you know, double digit revenue growth, but TJ, you commented that, you know, given some of the portfolio shifts, I expect margins to come down a bit. Can you talk about your expectations for gross profit improvement from 2023 to 2024?
spk06: sure uh so again uh you know double digit increase in sales um just wouldn't be forecasting i think our if you look at our uh full year we had a 38 gross margin um so that's you know i think there's some product mix uh elements to that and so we're looking more kind of down in the 30 to 35 range uh It's kind of the numbers that we're looking at. Got it. Okay, that's helpful.
spk09: Thank you. Okay, so turning to the comments you made on trying to recognize some royalty revenue and partnering with the wheat supply chain and working with the larger food manufacturers, especially working with the supply chain was something that had been tried a couple of years ago. And not just at Arcadia, but industry-wide, this has been a real challenge for these kind of novel enhanced nutrition varieties to really find their way into the supply chain with these big players. Can you talk about the conversations that you're having today and give us a sense that these large wheat companies are really serious about um, engaging with, with, uh, you know, technology like you've developed.
spk08: Yeah. And so, you know, you're right, Ben, that is, uh, I think it's been a challenge for any identity preserved crop. Uh, but we are actually seeing, uh, some, uh, uh, some manufacturers and some supply chains that are investing, uh, in that part of the business because they are realizing, better margins on those types of products so we're kind of seeing the industry start to invest more heavily in in that route okay okay great um very good um on uh
spk09: On GoodWeat, we've got a question on GoodWeat, a question on Zola, and then I'll get back in queue here. In GoodWeat, you know, you're six months now into the launch of Pancake Mix. I'm wondering if you can talk about kind of the performance of these new products today versus kind of the performance of pasta six months in, you know, after you launched them. Are you, you know, realizing revenue synergies now that you've got, you know, more products in line or is kind of the ramp over the first six months Kind of similar today as it was when you started Good Wheat a couple of years ago now.
spk08: Yeah, I would say for pancakes, we're seeing a similar ramp. But I would say that our velocities compared to the average Better For You product are higher on pancakes than they were on pasta. It just is a more recognizable segment in that particular category. And so we are benefiting from that. Can you tell on anything on mac and cheese? That was just November launch.
spk09: Okay, very good. Thank you. And then one last one for me. In Zoli, you talk about expanding distribution, new SKUs coming online here. You also, in your latest investor presentation layout, target of expanding this from a 4% ACV in 2022 to 40% in 2025. Can you comment on kind of what that number was exiting 23 and then collectively how all these dynamics will improve that number, you know, how much that number will be improved in 24?
spk08: Yeah, so for 2024 or 2023, we dipped a little bit from that 4%, as we have stated earlier. But again, if we get a 50% increase in distribution, you know, that's going to get us closer to that 5% to 6% ACV. And so we still have a ways to go to reach that 2025 level. But the other thing to note is the distribution that we are getting is basically filling in some of the retailers that are in our stronghold coast regions. And we still have a lot of efforts underway to kind of fill in the rest of the country. Got it. Very good.
spk04: Okay. I appreciate you taking my questions. I'll get back to you. Thank you. One moment, please, for our next question. And our next question comes from the line of Dipesh Patel with HC Wainwright.
spk02: Hi, Stan. Hi, TJ. This is Dipesh on behalf of Ram Selvaraju at HC Wainwright. I've got a couple of questions with regards to revenue and then just one or other on the strategic review process. The first one, what do you consider the most valuable and fastest growing product line from the Good Wheat franchise? Would you say it's mac and cheese, quick cakes, or pasta?
spk08: Hi, Dipesh. This is Stan. Thanks for calling in. Right now, we would probably say pasta, and it's because we're lapping more distribution growth from pasta. But again, for both pancakes and mac and cheese, We have gained some distribution that we expect to nurture over the next year. So I think all three of them will be growing this year.
spk02: Got it. And then I guess a follow-up question on the good wheat distribution channel. Which one would you say appears to be most profitable at this point?
spk08: Well, right now, most of our distribution is in traditional grocery. Those, I think, have equal profitability, those retailers.
spk02: Okay. And then just a couple more. What innovative strategies can the company use to boost revenue growth in the coming quarters?
spk08: Yeah, so I think we've kind of laid out some of our key principles. One was distribution growth, which we've highlighted on Zola. The other one is focusing on specific retailers for good wheat that we currently have distribution and looking at the entire mix of tools, whether that's in-store and out-of-store, to improve velocity and, you know, continue to add SKUs to those stores with our other categories.
spk02: Great, that's helpful. And then last question from me. When does the company plan to complete the strategic review process?
spk08: Well, what we said is there is no specific timetable to complete the review. So we are continuing to do our due diligence, and we'll have more information as material events occur.
spk01: Got it. Thank you for taking my questions.
spk05: Thank you. I'll now hand the call back over to President and CEO, Stan Jaycott, for any closing remarks.
spk08: So in summary, as we enter 2024, Arcadia is in a great position to continue its positive trajectory. We have transitioned the top line to high-quality revenue that generates gross profit across multiple sources. We have right-sized organization and streamlined our cost structure in order to extend our runway. Our good wheat is in more than 3,500 stores in three categories, and Zola Coconut Water is positioned for double-digit growth with new flavors and distribution. And finally, we remain focused on adjacent acquisitions as well as monetizing our IP. We look forward to updating you in the future. Thanks again for joining us, and have a great rest of your day.
spk05: This concludes today's conference call. Thank you for participating, and you may now disconnect.
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