RKDA - Earnings call transcript Q1 2018 | Arcadia Biosciences, Inc.

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Operator

Good afternoon, and welcome to Arcadia Biosciences First Quarter 2018 Earnings Conference Call. Today’s presenters will be Raj Ketkar, President and CEO; and Matt Plavan, CFO. This call is being webcast, and you can refer to the company’s press release and slides at arcadiabio.com.

Before we start, if you refer to Slide two, 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.

company’s and language of again the recently their this review XX-K filed on can safe in harbor most presentation. You Slide two Raj I’ll President that, now the over With turn and to CEO. call Ketkar,

Raj Ketkar

and achievements Heather, call developments report at some the on purpose us The first I first quarter you, financing who and XXXX XXXX the will quarter is Matt completed thanks end the first Thank today. our is call exciting take joining your this the we Arcadia. round discuss of At questions. and the call, will, quarter always, on will everyone, to financials. and to recently the earnings summarize of as

better making the quarter our trait nutrition beyond. took three. meaningfully the and a allow XXXX, a health Slide which was of completion provider to will company our million private In to to Turning round, nutrition major first XXXX accomplishment cash transition A and resources the ingredients strategy a financing company. in from execute steps of placement towards and health fortify we $XX us some growth major and

Starch of developing major also announced important We wheat milestones content achievement meeting high achieving We traits for made in portfolio. non-GM our high-fiber designation. amylose in progress Resistant and wheat, threshold two the

for as have company. of added ingredient appointed Sarah food Gluten by consumer to by Commercial we wheat the quantities also test wheat the the testing Chief Officer expect Reduced launched also and available year We end to and branded our of Reiter companies. the ingredients portfolio brand GoodWheat the We of

traits. development the in progress our of good made ag also productivity We

On tolerant includes demanding Water healthier, value portfolio quality are by natural and traits, the containing Use consumption evidenced in opportunities focus a their we trials. food products yield two and Slide is yesterday, food rice agriculture wheat on salt announced double-digit Use four, in non-GM in a Efficiency, chain. to our as the commercializing Just demonstrated over XXXX, traits of which increases address Nitrogen years Efficiency changing in Consumers triple-stack that growth traits, current patterns. lines ingredients

to the trait demands, consumer distinct Starch executing Gluten innovations food by GoodWheat portfolio. enables What five. commercialization this wheat Arcadia a this flour, including This first meet wheat be we announced means a their towards to to believe product provider assures recently products ingredients, chain. pasta, their In and the that customers. believe innovators seed for in differentiate from As that the brand cereals building model healthy bread, of are shift of shift in Resistant shift the our we brand. they for shown a providing they to these wheat are healthy ingredient traits, quality food creating as ingredients, ingredient as brand and companies cookies, platform competitors food companies products products, ingredients that these companies food first We on under getting We across two to other ingredient branding their our a consumers this healthier from products. is we industry. of partnerships demand ingredients first wheat step the their and can our can food the key companies and respond by launched we’re is ingredient a in companies develop that XXXX, so innovative In is for quarter, in of our Reduced for Slide the major business food provider value an being to companies. strategic of A looking

Starch development wheat, portfolio. high-fiber product two Resistant milestones important the of announced Slide in Turning to six. lead We the recently in this

traditional available wheat. compared XX% achieved levels XX% in be the containing varieties XX% highest amylose believe First, to wheat we to we to

Having clean high an Secondly, labels that source have them. for diet. that fiber the food companies have and fiber products of formulations designation in wheat important varieties Wheat FDA’s our to packaging. don’t in added to enables fiber can fiber increased these or part fiber wheat levels high good deliver of the meet of of intrinsic dietary the is

comes of initiated our much healthier partners As to day breeding can contribute By improved breed in or process the almost health per typical germplasm. with calories XXX traits as X,XXX American delivering normal day consumers, the to we varieties calories benefits customers. wheat for XX% We intake of the per commercial wheat. our into our to diet from

enough food for company acres of for our across to ingredients relationships recognize provider, successful value to build customers. an as samples supply wheat expanded increased to wheat testing the be wheat by we chain. that We planting now us are and need produce We processor to

and for We prepare we these And their consumers. providing and partnerships production, processors, are our seed wheat are companies to market to as process building development sales. testing bring with products to we companies for in food testing product samples

Our ag HBX, progress. progress good in to seven. venture being by make a as drought-tolerant trait shown Verdeca, Slide to on between productivity continue XXXX developed joint and Arcadia steady traits soybeans continues make the Bioceres,

the in Efficiency controls nitrogen average conditions. Efficiency, XX% these Salinity We in soon of at two been other rice studies growing significant crop harvested an germplasm progress as for of report continues approvals country. of available. We Center and yielded Use input proprietary Europe recently of trait under of an more second multiple traits, XX% Nitrogen carrying the together. many Argentina same limiting In In to in trials parts the controls than and Water outperformed season of in trials Argentina. with trials submission Tropical is And – field Arcadia’s in The was are the drought commercial seasons of recently confirm to of Columbia, and recently effects drought field. dossier International traits as farm farmers yield of in data Agriculture this rice three lines as season, conducted average of Tolerance indications the climate our lines conditions Argentina The trials improve Use by of our facing revenue the Meanwhile, performance drought under growing change form and conditions, the states announced nitrogen import they visited help promise the conducted stacked positive. regulatory for of results early and productivity the traits combined and we salinity. stresses with the as for deal is soil, increase significant hold in completed view gains challenging yields being conditions and results countries. agriculture and These nutrient-deficient the the in limiting such have that

our Matt have to non-GM in in see commercial call to ingredients traits near-term these our to turn While continue our these portfolio, shifted focus will productivity our of we potential we on blockbuster financial the now to over quarter. With the update support agricultural wheat the we unlocking like that, for traits. would tremendous partners and for an I value results

Matt Plavan

Raj, you, good everyone. afternoon, Thank and

pleased quarter million sheet, of We on special in May our million following no cash the first are debt. complete, strong $XX having this ended a our financing pipe meeting the X. over balance financing we with completion $XX very with With and of shareholders

evolving discussion begin regard expect and have quarter, the nutritional to to funded business the ingredients. of for our model the results near- to on portfolio financial about a commercialization With like impact well start our are our financial we mid-term I’d will brief We GoodWheat of with performance.

and are today research know, GM GLA revenues, revenue our from revenues contract our associated government associated and historical from rights business research revenues with we to These focused associated product former out-licensing R&D from of our you revenues with sources; on discovery model primarily and with derive As technologies traits. licensing projects. three the payments commercialize grants

away be fees ingredient upon like we characterized will scale to customers. the our product advance to historically. with to GoodWheat we Because the projects pursuing do specific QX not intend new to new up on HBX at and government our research XX as continue have the products near-term revenues, grant contract and scale we with we These and in onset production, HBX of commercialization, forward projects or revenues nutritional and the levels and deliverables Over nutrition GoodWheat launch we other resources other products. forward are and commercialization which focus health high-value end trait strategy next relevant potential, our our essential to products successful and of depending critical longer our breeding, most no the as business to our essential the arrangement XX divert expect of likely soybeans from introduce months, market

contract lower year replaced. expect this to current projects our grant agreements as are As not conclude such, and research and government be these we revenues

XX-K of revenues XXX, business do filed license our In into model. no of and anticipate XX-Q addition, the under we form new five our XXXX, can over fees amortize pronouncement we fully And upfront ASC in the licensing filed today upfront with such significant our longer accounting revenue new as implementation described time. QX for more not footnote

As license to year. result and revenue of $XXX,XXX year, to $XX,XXX revenue deficit were QX amortized a and effective January and scheduled full of be deferred for which reversed revenues X was charged respectively, out of into retained this

we expect these the during year. For reasons, revenues licensing to decline

first revenue of at onset on our to quarter Looking our revenue XX% the wind are revenue driving quarter. legacy the see first prior these quarter the in this a now, down factors in of impact sources we year the prior overall over as new to eight sources, Slide beginning reduction revenues the

have operations $X of operating revenue further Importantly, our overall however, X% resulted impact this continued loss for reduction reducing of fully by compensated to cost XX% shortfall expenses million, from which through $X.X we containment of million. an in the net efforts, our our to

at by the changes put we’ve nine. take closer revenues type a that little Now Slide on look context, quarter for into the macro let’s the

the the had of no I license quarter amortization first to first XXXX. revenue agreements just the in quarter from described, as compared XXX of $XXX,XXX executed no were prior the longer ASC and we As license there no in the per during XXXX first was agreements change there quarter that

grant were research as others contract government are winding these XXXX revenues down. grant recorded and agreement, and in and our other Now several our active contracts Agritech as government QX XXXX, and XXXX. in approximately in XXXX, all reduction $XXX,XXX conclusion the of for Therefore, of were NIH, grants of revenues well USAID, contracts longer research grants our research the are contract grants from $XXX,XXX. completed Origin which revenues in in of $XXX,XXX of revenues, contract as from resulted of In total in and no and

products for that a As Sales down year they decreased from orders of XX%. customers we expected product in SONOVA due to in last supplement dietary occurred this were $XXX,XXX of QX our QX recur by that revenues, in to of our year. delay

QX orders in this instead. We’re year occur of confident that will these

they that needed recorded In test and addition, customers, we pet formulations. although food we’ve our new from recipes underestimate to pet our optimal time food length the the sales did determine of

So to in our GLA, throughout we sales now food to a to see the return sales and for expenses. And of historical at summary, levels pet the quick for year. balance better, expect do dietary look supplement improving or

energies quarter R&D expenses same partially see comparing end legal Therefore, license expenses This three decreased intellectual also XXXX, down were prior grants of prior clearly in our in subcontract to commercial government developing of or quarter Turning to fees first year of lower to periods, of our total lower benefits by the bonuses XX, at the first during agreement a XX% XX% XXXX. termination the the that $XXX,XXX we also though we’ve quarter-over-quarter. of Total in benefits. operating Slide the for salaries less decrease mainly more as quarter salaries the where and an even driven by were by $XXX,XXX to compared in in can shifting can quarter. decreases on subcontracting were aggressively down or a period most occurred here expenses market, These was result expenses, continued and SG&A and expense things; of $XXX,XXX higher workforce towards for XX%, the primarily or you overall the this maintain and costs the year. the research they even support and is offset driven are – to The that keel you path see incurred our reductions XXXX. property by by first

million our just totaled the resources. of cash end word and no $XX.X a at had capital Now we quarter. about equivalents the and hand on debt Cash and liquidity

couple instrument’s positively $X.X pipe common of consumer assigned into for the as expense proceeds in nutrition associated XX Our to the the for opportunity one-time the over $X.X our between difference nine a to Therefore, used the determined combined recorded for the exceeded liabilities insight you, a expect not Raj at values. initially cash the to common million from as million of specific to common a stock but during year. was our Thank of quarter, last and quarter-end the that, liabilities the quarter and with for under noncash the liabilities based nonoperating, were for the a values financial was more health next described issued. I’d the a the Because transaction, million quarter wrap-up. transformation how with million our GAAP the be were XX stock we fair share million, transaction. net With we Both and the call fully features the $X.X to at Also improvement upon through the in in more and same liability financial importantly, you business their like the fair value million in only turn value the accounted each warrants used quarter. provider to to $XX.X footnote charges back accounting the for flows to XX-Q, $XX significant quarter feature a during impact performance the results to months. the adjustment proceeds, for of $XX over ingredient respective stock market of and adjustment no P&L the provide the some opportunity Raj? the in

Raj Ketkar

Matt. Thanks,

just XXXX. like the results summarize your to our for of get we quarter Before first I questions, to

great a was first to plan. the million a We start company. in to The strategy year fund raised execute our of health on and to as nutrition transitioning ingredients our we capital growth quarter $XX

and as and lowered costs brand like And rice continued through call make discipline operating Starch we operating products. of wheat your We the that, our to questions successful trials. to and over ag continue Reduced productivity in our Resistant milestones to trials soybean fiscal and Gluten GoodWheat reduced key our achieved With launched losses. Our traits of I’d advances tolerant completion our lines drought our now. turn

Operator

first open. Instructions] your from Ram question the Wainright, H.C. Selvaraju Your line [Operator line from comes of is

Karthik Sunkesula

Hi. for Ram. taking the Karthik questions. for on is you This Thank

Raj Ketkar

Karthik. Hi

Karthik Sunkesula

the like any regulation Hi. those crops subject traditional guidance EPA What to the is the that crops editing likelihood with by breeding indicating techniques? aren’t rules that and to produced elect the using using recent USDA, might incongruence aren’t provided FDA applied techniques gene that to formulate produced to the different

Raj Ketkar

What editing know regarding seen the – we we’ve declaration USDA gene and the processes. regulatory

transformed would – are essentially crops foreign has foreign that be as USDA would are a yet. the What All that so they will source far they as indications to organism not what gene are long gene So said FDA sure is EPA a we’re or and by do the if not these adding process. from a the produced you’re regulated. be crop, gene not they regulated not editing

Karthik Sunkesula

product for thus concept far TILLING? have How in candidates crop regards originating from a platform? product been Perfect. this many average from what’s to the using current And different time cultivation candidates. then And candidate to created

Raj Ketkar

TILLING, traits four the pipeline. about. Gluten from Resistant in been that we’ve These wheat are that we and So Starch today, in have are talking Reduced

also We an development. life that extended shelf is trait have in

in early again, are quality working We also increase and other wheat. traits that traits, from some the very have yield we’re platform on the And some TILLING pipeline.

some quality, also We to terms products, improve working soy are in on quality. soy soy of

deliver pipeline. pipeline years active pipeline. be launching I of in this rich currently, products we that So a for And we’ll have several probably the we out current to five say would have six and we’ll fairly candidates

Karthik Sunkesula

cat And use of food food for see. to GLA slated SONOVA in approved? additive petition is be the when I

Raj Ketkar

literally and That have that for it in expect been we now. would day the be appears indications received actually has any We that But we’ve it to submitted approved. that. until wait register, federal

So we’re that. waiting currently for

Karthik Sunkesula

Okay.

Raj Ketkar

from of asked you discovery another to process Karthik, seven years earlier, commercialization trait. five the question about takes And TILLING derived to timelines. TILLING about

Karthik Sunkesula

All U.S.? timing question. product Wheat be is rollout the to the right. of And flour RS likely more one in What

Raj Ketkar

doing XX as the our months in They goods And who – possible. with – then said quickly with start to So XX the can some before earlier market consumers we have companies are it we call, expect get be into to what in testing also we’re formulations. is sales. will see some and testing material it right market it and the quality are companies on consumer like next focused market to But RS period. we the testing putting to bringing as sales early product, now I that’s food

Karthik Sunkesula

for queue Awesome, the of thank information. now, thanks I out to going but jump you. am

Raj Ketkar

Thank you.

Operator

at And Ketkar turn I’m the back this for like closing questions showing call to over further Raj to time. I’d no remarks.

Raj Ketkar

your in joining interest call, the Thank you in speaking call. next forward for quarterly everyone, Thanks, again Arcadia. look with during our to XXXX continued and We you.

Operator

thank you for and may have Everyone, all does This a conference. disconnect. conclude Ladies and wonderful gentlemen, the participating day. you today’s program, in

Arcadia Biosciences (RKDA) 11 May 182018 Q1 Earnings call transcript