• Consolidated Revenue: $201.7 million in Q3 2024, a 10.7% increase year-over-year.
• Sadot Agri-Foods Revenue: $200.9 million, representing 99.6% of consolidated revenue and an 11.6% increase year-over-year.
• Net Income: $1.2 million in Q3 2024, compared to a net loss of $5.2 million in Q3 2023.
• EBITDA: Positive $2.9 million in Q3 2024, compared to negative $4.4 million in Q3 2023.
• Basic Earnings Per Share: $0.25 per share, improved from negative $1.39 per share in the prior year period.
• Dilutive Earnings Per Share: $0.23 per share, improved from negative $1.39 per share in the prior year period.
• SG&A Expenses: $4.2 million in Q3 2024, an increase of $0.9 million year-over-year.
• Cash Balance: Approximately $1 million.
• Working Surplus: $18.9 million.
• Mark-to-Market Gain: $5.5 million from derivative transactions in Q3 2024.
• October Revenue: $87.9 million.

• Warning! GuruFocus has detected 3 Warning Sign with SDOT.

Release Date: November 13, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Sadot Group Inc (NASDAQ:SDOT) reported positive net income for the second consecutive quarter, marking a significant turnaround from previous losses.
• Consolidated revenues increased by 10.7% to $201.7 million in Q3 2024, driven primarily by the core agri commodity group, Sadot Agri-Foods.
• The company achieved a positive EBITDA of $2.9 million in Q3 2024, a substantial improvement from a negative $4.4 million in the same quarter last year.
• Sadot Group Inc (NASDAQ:SDOT) is expanding its operations into new geographical areas, including Brazil and Canada, and diversifying into new commodities like sesame seeds and lentils.
• The company is strategically divesting non-core restaurant assets, transitioning to a 100% franchise model, which has reduced overhead expenses.

Negative Points

• The company faces market risk due to the volatility in prices of food and feed commodities, which could impact future financial performance.
• SG&A expenses increased by $0.9 million in Q3 2024, primarily due to investments in expanding Sadot Agri-Food trading offices.
• The legacy restaurant operations, now classified as held for sale, contributed only $0.8 million in revenue, indicating limited growth potential in this segment.
• Sadot Group Inc (NASDAQ:SDOT) is still in negotiations for the acquisition of farmland in Indonesia, which introduces uncertainty regarding the completion and integration of this asset.
• The company has a relatively low cash balance of about $1 million, which may limit its ability to quickly capitalize on new opportunities without additional financing.

Q & A Highlights

Q: Can you provide an update on progress being made in Canada? A: Kevin Mohan, Chairman of the Board and Chief Investment Officer, shared that the new trading division in Canada has exceeded initial expectations. The team has facilitated sales of 11 specialty crop commodities, initiated sales with 12 new customer accounts, and been involved in approximately $20 million of transactions. This marks a pivotal step forward in Sadot Group's growth strategy.

Q: Can you provide some details on the deposit for the new farmland in Indonesia? A: Jennifer Black, Chief Financial Officer, explained that Sadot Group placed a deposit for acquiring approximately 9,500 acres of farmland in Indonesia. The land includes vanilla plants and coconut trees and can also produce crops like corn. This acquisition aims to provide new niche commodities for trading and improve margins, while controlling commodity supplies in key geographies.

Q: What is the status of the sale of the restaurant brands, Pokemoto and Muscle Maker? A: Michael Roper, CEO, stated that the company is advancing steadily with multiple interested groups in various stages of due diligence. All company-owned locations have been converted to franchise locations, simplifying the sales process and reducing operating expenses. The company anticipates a formal offer soon and has implemented a structured due diligence approach to expedite the process.

Q: Can you provide more details on the rationale behind the Indonesian farm purchase? A: Michael Roper highlighted that the farm offers different crops than the Zambia farm, focusing on niche products. The geographical diversification allows for different shipping routes and trading partners. The farm supports Sadot Group's vertical integration strategy, enabling control over commodity supplies and trading around projected yields.

Q: What contributed to the increase in SG&A expenses this quarter? A: Jennifer Black noted that the increase in SG&A expenses is due to building out teams in new geographical areas, which includes costs like salaries, benefits, and rent. Some expenses were reclassified from cost of goods sold to SG&A to better reflect operational changes. While there are some one-time expenses, the increase is primarily driven by growth-related investments.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.