Thank you for standing by. My name is Parilla, and I will be your conference operator today. At this time, I would like to welcome everyone to the Arcadia Biosciences Q1 2024 Financial Results and Business Highlights Conference Call. [Operator Instructions] I would now like to turn the conference over to T.J. Schaefer, Chief Financial Officer at Arcadia. Please go ahead.

Thank you, and good afternoon. Joining me on the call today is Stan Jacot, 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.

Good afternoon, everyone, and thank you for joining us today to review our first quarter results for 2024. Since we last talked 6 weeks ago, I am pleased to report that the positive business trends from Q4 2023 have continued in Q1 2024. Revenue continues to grow both sequentially and year-over-year. Our gross profit margins have been greater than 30% for 5 consecutive quarters. Operating expenses continued to decline at a double-digit pace versus last year. All of these factors have contributed to Q1 2024, achieving the lowest loss from continuing operations in over 6 years. Let's now turn our attention to GoodWheat. The GoodWheat brand continues to expand with Q1 adding a couple of hundred stores of distribution on pancake and waffle mixes. Our focus continues to be nurturing our existing point of distribution and building success stories by category. There are plans in place for each customer, addressing everyday pricing, promoted pricing, shelf placement, SKU expansion and account specific marketing. These plans require a significant expense to execute but are necessary in order to achieve brand scale and defend shelf space from fierce competition. On our last call, I mentioned several accolades our GoodWheat brand had received from some significant publications, including Better Homes and Gardens and the website, Eat This, Not That. And I want to share another accolade that GoodWheat has received from a customer. In Q1, we launched GoodWheat Mac & Cheese nationwide on Amazon in 3 varieties: Basket Cheddar, White Cheddar and Three Cheese. At Amazon, recently selected GoodWheat Three Cheese Mac & Cheese as an Amazon's Choice, new arrival pick. This designation is solely driven by Amazon's criteria, which includes being highly rated, well priced, and available to ship immediately. This is 1 more example from an independent source that proves that we…

Thank you, Stan, and good afternoon to everyone joining us on the call today. Before I begin, I would like to remind everyone that all comparisons to our prior year results exclude the impact of our Body Care brands, which were discontinued in September 2023. With that, let me walk through our results for the first quarter of 2024. Revenues of approximately $1.3 million increased 7% sequentially and 2% compared to the same period last year. The quarter-over-quarter improvement was attributable to a 28% increase in Zola as Q4 is seasonally the softest quarter for coconut water. Our year-over-year growth was primarily driven by GoodWheat and Zola sales, partially offset by higher costs associated with new distribution. Gross profit of $435,000 was slightly below the prior quarter and prior year due to product mix, but still resulted in a very healthy gross margin of 35%. And as Stan mentioned earlier, this is our fifth consecutive quarter delivering gross margins in excess of 30%, which is a testament to the progress we have made in delivering high-quality revenue. Research and development expenses of $272,000 declined 18% quarter-over-quarter and 24% year-over-year due to the timing of innovation work following the launch of new GoodWheat categories as well as new Zola flavors. Selling, general and administrative expenses of approximately $3.2 million decreased 7% versus Q4 2023 and 22% compared to the same period last year as we rightsized the organization and our marketing investment. Total operating expenses of $3.5 million improved 9% sequentially and 21% year-over-year, resulting in a loss from continuing operations of approximately $3.1 million which is the lowest level in the past 6 years. From a balance sheet perspective, we ended the quarter with $8.5 million in cash and short-term investments which is $3.1 million below our Q4 2023 ending…

[Operator Instructions] Your first question comes from the line of Ben Klieve with Lake Street.

First, a couple of questions around the expenses associated with the GoodWheat expansion that you both noted in your prepared remarks. I'm wondering, first, if you can kind of help characterize the magnitude of the associated expenses and the impact on gross profit during the first quarter.

Yes, thanks, Ben, for calling in. And I'm actually going to turn that over to T.J. to answer that question.

Yes, Ben. So a lot of the upfront investment is around promotions and slotting. But as we've noted previously, our overall marketing investment will come down significantly relative to prior quarters or prior years as we focus more on our existing customers and again, driving those velocities versus new distribution into new stores.

Okay. That's helpful. So I think you've kind of answered my follow-up question, but we'll ask it anyways here around kind of the trajectory of these costs throughout this year. So it sounds like you're saying you think these -- the cost associated with these initiatives that you just outlined T.J. are going to be potentially ramping down here into the second quarter and third quarter? Or are they going to stay at the kind of a consistent run rate from the first quarter levels?

Yes, Ben, it will probably start to ramp down by Q4.

Okay. Very good. That's helpful, Stan. And then you talked about your focus on kind of nurturing existing retail relationships today, something you've talked about for the past couple of quarters as being a focus throughout 2024. I'm wondering if you could just talk on a high level about kind of the early results thus far in this process? Are you happy with the kind of progression of the relationship that you have with your existing retailers? Are there things that are going uniquely well? Or are there challenges that are still in place? Is there anything you can elaborate on regarding the strategy would be great.

I'd say the results are mixed, Ben. We do have some high spots with some retailers, but there are some retailers we're really still struggling to execute the plan that we've laid out. And again, there's a variety of reasons behind it. It differs by account. Sometimes, it's a change in the buyers, sometimes it's resistance to either changing the planogram or adding SKUs. Other times, it's the difficulty in securing promoted prices. So it is -- but I would say it's mixed at this point. It is difficult and competitive in these markets.

No, fair enough. There's no doubt about that Okay. Very good. We'll look forward to updates on that then in coming quarters. And then last 1 for me is on Zola. You guys seem pretty enthusiastic about the opportunity here from expanding your the SKU count with new flavors and also expansion of single serve. Can you kind of characterize the kind of your vision for Zola progression here throughout this year and especially in the 2025 as all of these initiatives begin to scale. Is this something that's going to be -- ultimately, I'm trying to understand if Zola is going to be really a revenue driver above and beyond GoodWheat here in coming quarters given these initiatives?

Yes, I think that's a fair characterization. The Zola is going to be the majority driver of revenue, and in particular, gross profit growth. And part of the reason for that is because the growth that we have in Zola doesn't come with the same kinds of costs. It's a much different category in that produce set in terms of selling dollars required and promoted dollars required.

well best luck rolling all those initiatives out of Zola.

And there are no further questions at this time. I will now turn it back to Stan Jacot for closing remarks.

Thank you. So in conclusion, Arcadia is continuing its positive trajectory. We have transitioned the top line to high-quality revenue that generates gross profit across multiple sources. We have rightsized the organization and streamlined our cost structure in order to extend the runway. Our GoodWheat is in more than 3,500 stores in 3 categories, and Zola Coconut Water is positioned for double-digit growth with new flavors and new distribution. And finally, we remain focused on monetizing our IP and accelerating delivery of cash flow positive results. We look forward to updating you in the future. Thanks again for joining us, and have a great rest of your day.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.