Sadot Group, Inc. (NASDAQ:SDOT) Q4 2023 Earnings Conference Call March 21, 2024 11:00 AM ET
Company Participants
Frank Pogubila – IR
Michael Roper – CEO
Jennifer Black – CFO
Benjamin Petel – Managing Member
Kevin Mohan – Chairman
Conference Call Participants
Aaron Grey – Alliance Global Partners
Tom Kerr – Zacks
Operator
Welcome to the Sadot Group, Inc. Q4 Fiscal Year 2023 Earnings Conference Call. Today’s call is being recorded and all participants will be in listen-only mode. After management’s prepared remarks, we will take questions.
At this time, for opening remarks and introductions, I would like to turn the call over to Frank Pogubila, Sadot Group, Inc.’s Investor Relations Contact.
Frank Pogubila
Thank you, Operator, and welcome everyone to Sadot Group, Inc.’s Q4 fiscal earnings 2023 conference call and webcast.
Before we get started, we would like to state that this call may include forward-looking statements pursuant to the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. To the extent that the information presented on this call discusses financial projections, information, or expectations about the business plans, results of operations, products or markets, or otherwise makes statements about future events, such statements may be forward-looking. Such forward-looking statements can be identified by the use of the words such as should, may, intends, anticipates, believes, estimates, projects, forecasts, expects, plans, and proposes.
Although management believes that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. You are urged to carefully review and consider any cautionary statements and other disclosures, including the statements made under the heading Risk Factors in Sadot Group, Inc.’s most recently filed Form 10-K and elsewhere in documents that Sadot Group, Inc. files from time to time with the SEC.
Forward-looking statements speak only as of the date of the document in which they are contained and Sadot Group, Inc. does not undertake any duty to update any forward-looking statements except as may be required by law.
For this call, all numbers disclosed have been rounded to the closest thousand and percentages have been rounded to the closest percent. Unless otherwise noted, all numbers disclosed in this report are the amounts attributable to Sadot Group, Inc. and exclude the portion related to non-controlling interests.
On this call, we will refer to Sadot Group, Inc. as Sadot Group or the company. With me on the call today are Sadot Group’s Chief Executive Officer, Michael Roper; Chief Financial Officer, Jennifer Black; and Chief Investment Officer and Chairman of the Board of Directors Kevin Mohan. Michael and Jennifer will be presenting prepared remarks related to Sadot Group’s financials filed on March 20, 2024, and those documents may be found on the company’s website, newswire feeds, and on the SEC’s website linked from the Sadot Group’s website at www.sadotgroupinc.com under the Investors tab.
At this point, I’d like to turn the call over to Sadot Group’s CEO, Michael Roper. Michael?
Michael Roper
Thanks, Frank. Good morning, everyone, and thank you for joining us today as we present the results of our fourth quarter and full-year earnings ending December 31, 2023. Before diving into Q4 and the 2023 full-year results and highlights, I’d like to acknowledge that it has been a truly transformative first 16 months since Sadot Group refocused and retooled the organization to become an emerging player in the global food supply chain. Beginning with our initial focus on agri-commodity origination and trading, we’ve embarked on a journey of diversification and growth.
Allow me to give you a few headlines before we dive into the specifics. First, our 2023 total company revenue rose to $727 million from $162 million in 2022. Second, our 2023 full-year adjusted EBITDA was slightly positive compared to a $2 million loss year-over-year for 2022. Third, our total assets increased from $27 million in 2022 to $178 million at the end of 2023. And lastly, we are now fully focusing the company on the agri-commodities business as we’ve made the decision to explore alternatives, including potentially divesting the company of its restaurant operations.
So let’s jump into the details. I’m pleased to announce that Sadot Group Inc. achieved chop line revenue of $727 million for the full year of 2023. This marks a significant increase over the $162 million generated in 2022, noting that we had only commenced our Sadot Agri-Foods subsidiary operations in November of 2022. To be more precise, the Sadat Agri-Foods division accounted for 98.7% of our total company revenue for 2023. This is an extremely significant point given where we were a year ago, where we are today and where we’re heading.
So where are we heading? Our vision is to become a global food supply organization focused on origination and trading of agri commodities along with investments that have the potential to help improve our trading margins. Aligning to this goal, I can announce that we have formally engaged, listed associates in New York, specialists in the sale of restaurant concepts to facilitate and exploring the divestment of our remaining restaurant and e-mail — and meal prep assets, which have had a material impact on earnings over the past year.
With our remaining restaurants that are weighing on our P&L for 2023, I am pleased to report that recorded full year positive adjusted EBITDA of $89,000 for 2023 compared to a $2 million adjusted EBITDA loss for 2022, a pretty significant change. The adjustments to EBITDA were a series of non-cash items related to the restructuring of our legacy restaurant brands, our corporate name change to Sadot Group Inc. and overall financing strategies, among other items. While these charges did impact our bottom line, they were onetime charges essential for helping to afford our long-term financial strength and growth opportunities for the company.
We anticipate further non-cash items to affect our bottom line in the near future as we proceed with the sale of our restaurant operations, along with stock-based performance expenses as part of our consulting agreement with Aggia FC LLC and with respect to our agricultural operations.
Focusing on Sadot Agri-Foods, the business unit serves as our economic engine characterized by high dollar volume with narrow margins, which is typical for the agri commodity trading industry. In 2023, Sadot Agri-Foods generated $718 million revenue and $0.3 million in net income for the company. You may have noticed that we’ve transitioned from disclosing monthly revenue numbers to a quarterly reporting case to better align revenues with the company’s margins and profitability to present a more precise financial overview.
It is also important to note that we trade exclusively in Agri-Foods for human and animal consumption, including soy, corn, wheat oils and oil seeds. The trades typically range in physical size from 130 to over 78,000 metric tons or $35,000 to $45 million per trade, and we averaged over 20 trades per quarter over the past year.
In order to expand our global reach, we’ve recently increased our trading offices, adding Sadot LatAm in Miami, Florida and Sadot Brazil and Sau Paulo — sorry, if I missed pronounced it, Sau Paulo, to our existing locations in Singapore and Dubai. Moreover, we remain open to exploring additional expansion opportunities in the future.
While expanding our global presence is essential our growth hinges on access to trade financing capital. The growth of our top line revenues and bottom line margins is directly linked to increasing our access to trade financing, particularly to execute larger trades. With a year of financial reporting behind us, we are now on to potentially access new and larger trade financing facilities.
I cannot emphasize how important these trade financing facilities are to our growth. Access to such financing will provide us with the flexibility to pursue more and larger agri commodity trading opportunities, thereby increasing our top line revenue and potentially enhancing our margins and net income.
In August 2023, the company expanded its footprint in the global food supply chain with the acquisition of approximately 5,000 acres of farmland and the Mkushi region of Zambia through our majority-owned subsidiary. This strategic move enables us to produce in-demand grains and tree crops such as soybean, wheat, corn, mango and avocado, complementing our origination and trading operations to bolster our supply chain resilience and efficiency.
Sadot’s farm operations, not only stand-alone as a profit center, but it also serves as an integral part of the total supply chain operation. The farm crop allows the company to trade year round and the underlying commodity as a collateral in case the market turns negative to help insulate the market fluctuations.
I’m happy to report that we have recently signed an agreement with the Republic of Zambia’s Food Reserve Agency, reaffirming the company’s dedication to combating global food security challenges. This agreement aims to support the Zambian government’s efforts, to safeguard national food security and bolster the supply the production of maize, a key staple in the region amidst growing demand. The agreement will facilitate the cultivation of high-quality maize.
In support of this agreement, we have started our fall harvest of both maize and soybeans and has, as of this recording, delivered over 96 metric tons of maize from 24 hectares with a full maize harvest of the remaining 513 planted hectares anticipated to take approximately seven to eight weeks to complete. The harvest for more than 348 hectares of soybeans will begin approximately three weeks from now and be completed in the mid- to late May time frame.
In addition to Sadot Agri-Foods current ongoing harvest, the company has also initiated a pilot program to help small farm owners in the region received the central farm inputs such as seeds, fertilizers, et cetera. They need — excuse me, that they need in order to plant and farm their land. This contract farming program is in its pilot stage, engaging approximately 140 local farmers covering over 1,400 hectares. It’s estimated that there are close to 3 million hectares, which actually converts to about 7 million acres of land in Zambia alone belonging to small gainers that are all in need of help to acquire the inputs needed to farm.
The program allows for Agri-Foods to secure the inputs from local suppliers on credit terms, allowing the small farmers to pay for them at a later date with the farm product at the time of harvest. The company, in turn, flex a minimal management fee and increases its presence in the region. This initiative marks a significant contribution to local communities and the positive impact we can create as a large international company in rural Africa.
Another new and exciting business line we’ve engaged in is carbon credits. Earlier this year, the company acquired a contract for carbon credits from an ongoing mangrove planting project in Indonesia. This move is aligned with Sadot Group’s sustainability values and diversifies our product portfolio to open new markets and new opportunities.
Carbon credits have become an inseparable part of agriculture and industry across the world, playing a major part in regulating and managing global environmental pollution. This asset is also part of the company’s vision to potentially offer carbon-neutral commodity trades in the future.
Overall, for 2023, Sadot Group reported a net loss of approximately $7.8 million, in contrast to a net loss of approximately $8 million on the previous year ending December 31, 2022. As previously mentioned, there were a number of onetime charges that significantly impacted our results. While these charges necessitated short-term financial adjustments, they are essential steps towards our long-term objectives.
What is important to understand is that our economic engine, Sadot Agri-Foods continue to perform, generating $9.3 million in operating income in 2023, further validating the company’s strategic direction to focus on this business moving forward.
While some tough strategic decisions were made this year that have impacted our financial results, we recognize their necessity in order to potentially impact the long-term benefits for the overall strength of the company and our valued stakeholders. We remain dedicated to executing our strategic vision and harnessing the opportunities the global food supply chain presents, and we eagerly anticipate building upon this momentum as we move forward.
Now I’d like to turn the call over to our CFO, Jennifer Black, to review the financial performance of the company for the fourth quarter and full year results for 2023. Jennifer?
Jennifer Black
Thank you, Mike. Before I begin, I’d like to note that our financial results for the year ended December 31, 2023, on Form 10-K were filed with the SEC yesterday, March 20, along with the press release out the same day.
With that, I’d like to give an overview of the financials for the fourth quarter of 2023. Our Q4 2023 company-wide revenues increased significantly, totaling $171 million compared to $153 million for Q4 of 2022. The $18 million revenue increase was primarily due to sales revenue from our Sadot Agri-Foods division, which was only partially operational in Q4 of 2022.
Sadot Agri-Foods completed 24 transactions in Q4 with the average revenue per transaction of $7.1 million, with the average cost of goods sold of that transaction of $7 million. These 24 transactions were completed across 16 different countries.
The company incurred approximately $525,000 in stock-based compensation expense in Q4 2023. These expenses are primarily the result of stock-based performance expenses as part of our consulting management agreement with our consultant, Aggia.
Now let me turn to the overall financial picture for the Sadot Group for the full year ending December 31, 2023. For the year ending December 31, 2023, our company-wide revenues significantly increased and totaled $727 million compared to $162 million for the prior year ended December 31, 2022. The $565 million increase is primarily attributed to the commodity sales revenue generated by Sadot Agri-Foods. Our adjusted EBITDA was a positive $89,000 in 2023 as compared to a loss of $2 million in 2022.
I would now like to further discuss the financials for our two operating divisions of Sadot Group Inc. As Mike mentioned earlier, the company’s main revenue and margin driver is Sadot Agri-Foods, consisting of our origination and trading operations as well as our farming operations in Zambia.
Sadot Agri-Foods generated commodity sales revenue of $718 million for the year ended December 31, 2022, as compared to $151 million in 2022. The vast majority of the increase was due to its origination and trading operations with the farming operations contributing to a negligible amount. Our Sadot Agri-Foods 2023 net income — sorry, Sadot Group’s 2023 net income was $9.3 million.
Moving on to the company’s legacy restaurant operations consisting of Pokémoto, Muscle Maker Grill and Superfit Foods. The division generated revenue of $9.2 million for the year ended December 31, 2023, compared to $1.1 million through the December 31, 2022. This decline in revenue generated was mainly due to closing and refranchising of our corporately owned restaurant locations.
The restaurant division reported a loss of $2.8 million in 2023 compared to a loss of $3.3 million in 2022. As of December 31, 2023, we had a cash down of $1.4 million compared to a cash balance of $9.9 million as of December 31, 2022. This decline is a deliberate outcome of our strategic shift away from the restaurant business towards the agri commodity trading sector.
Historically, as a restaurant company, there was a limited use for our cash reserves. However, with our new focus, the deployment of cash is intrinsic to our business model for generating revenue in margin. Instead of maintaining large cash balance, our priority now is to actively utilize our cash to drive growth and profitability. This strategic approach aligns with our core objective of maximizing returns and creating value for our stakeholders.
It is notable that our total assets increased from $27 million in 2022 to $178 million by the close of 2023. This substantial increase is attributed to strategic initiatives, such as the acquisition of the farm by our majority-owned subsidiary, accounts receivable related to trade and forward sales contracts for future delivery. These developments have significantly fortified our balance sheet, reflecting the strategic investments we may bolster our operations.
While it is true that our cash reserves decreased by $8.3 million, it is essential to underscore that our overall asset base rose by $151 million. This shift underscores our commitment to deploying capital strategically to enhance our financial position and drive sustainable growth.
It is important to remember that we continue to grow our overall revenue, increasing our working capital surplus and build our balance sheet, all while making significant strategic changes in the company.
With that, I’d like to turn the call back over to Michael Roper.
Michael Roper
Thanks, Jennifer, and thanks for that financial overview. In closing, I want to express my gratitude to all our investors and stakeholders for joining us today and for your continued support. Our 2023 full year earnings call has shed light on a remarkable journey over the past year, showcasing our emergence as a key player in the global food supply chain.
We’ve witnessed positive growth, particularly in our Sadot Agri-Foods division despite facing challenges along the way. Over the past six months, we’ve implemented our announced strategy to convert all of our corporately owned and operating locations into franchised-owned locations. We believe this strategy will position the division once complete, to potentially divest the restaurants.
We believe this approach underscores our commitment to focus on our core operations and driving long-term value for our shareholders. We are currently evaluating additional opportunities in the global farming, trading, processing, shipping and distribution to increase our market share and operational footprint.
I’m proud of the resilience and dedication demonstrated by our team whose hard work has propelled us towards amidst a dynamic landscape. As we move forward, we remain steadfast in our strategic vision, explore new opportunities and partnerships to further strengthen our position in the market.
Thank you once again for your trust in Sadot Group Inc. We look forward to the exciting journey ahead and delivering continued success for our investors, stakeholders and the communities we serve.
With that, please give us a few seconds to open the call for questions.
Question-and-Answer Session
Operator
Before we get to questions from our selected analyst, Michael Roper and Jennifer Black would like to address some questions which we have received from our stakeholders. Also on the call with us is one of Sadot Group’s Board members, Benjamin Petel. Mike, Jennifer, the floor is yours.
Michael Roper
Okay. Thanks, Alexa. Yeah, we got a few questions that came in previously that we wanted to go over and address before we turn it over to the live questions as well with the analysts.
And so I’m going to read the questions and then we’ll do the answers and then we’ll transition after that.
So the first question that we’ve received is how has adjusted EBITDA calculated? And why should we use this number? So I’m going to let Jennifer answer that one.
Jennifer Black
Okay, Mike. So we define adjusted EBITDA, and we start with net loss, and then we adjusted for a few things like depreciation, amortization, net interest income and expense, income taxes, impairment expenses, stock-based consulting expenses, other income, change in fair value of stock-based comp, gains on extinguishment, warrant modification expense and gain on fair value measurement.
These items are removed. They’re either onetime transactions or their non-cash transactions that have impacted our net loss position. We believe that adjusted EBITDA, which is a non-GAAP measure, it’s a useful metric for investors to understand and evaluate our operating results and ongoing profitability because they permitted investors to evaluate our recurring profitability from our ongoing operations.
Michael Roper
Awesome. Thanks, Jennifer. Let me find the next question here. Here it is. How does the additional trading subsidiaries compete with or affect each other?
So we’re talking about Sadot LatAm, Brazil, the MENA region those types of things. How do they compete with each other or affect each other. So basically, really the subsidiaries support each other. And our strategy is to establish these different trading offices and the important production and distribution geographies across the world. That will work together to facilitate supply and demand as well as the specific needs of the different locations.
So for example, our most recent subsidiary established in Brazil, those actually source commodities for our Dubai office, which in turn may supply in the Asia area. So they’re all kind of interacting and they support each other without necessarily being in competition.
By expanding our global footprint, this plays a vital role in our overall diversification that allows us to actually mitigate risks and enjoy multiple options rather than just relying on a limited sort of client basis. Again, we’re spread out across the world. There’s different opportunities that pop up all the time.
And don’t forget that each one of our individual subsidiaries not only can trade internationally, but also trade domestically as well, right? So LatAm, that’s in the central area, they can trade throughout Latin America, Central America, South America, North America. They can trade and move product all over the world as well, just as an example. So there is no real competing against those different areas.
Let’s see the next question. Why is your cash on hand decreased year-over-year? And again, I’ll throw that back towards Jennifer.
Jennifer Black
All right. Thanks, Mike. So this one, we’ve made multiple investments since we started our strategic pivot about 16 months ago. I mean you can see this by looking at the increase in the balance sheet.
We’re investing in business to expand our operations and our business verticals. For example, we purchased the farm in Zambia for cash. We also deployed cash into other various trades with cycles that are throughout the trade process. Many of our trades require capital components and contributions from the company to execute those. And just like Michael was just talking about, we also expanded our trading areas to include Brazil and LatAm.
Lastly, we also changed the company name symbol, and we launched a new strategic direction. All of these areas are where capital has been deployed. The decline in cash on hand, it’s a deliberate outcome of our strategy shift away from the restaurant business towards the Sadot Agri-Foods division. And the deployed of cash is intrinsic to the company’s business model for generating revenue and margins.
Michael Roper
Okay. Thanks, Jennifer. Fourth question that we see here is how can the company increase its overall margins? And then more specifically on the actual commodity trades being executed today?
So how do we increase margins, basically, right, at the end of the day? So look, I think there’s a few things to talk about here. So overall, I think it’s important to remember that we are building a business, right? And we are in expansion mode. So it’s not an established — whatever, I don’t want to say, senior business, whatever the right word is, right? But it’s new, right? And we’re building this thing. We’re building a very large corporation that’s out there.
And this takes some upfront expenditures. I may not have an immediate impact on revenues and profits. So for example, okay, it would be the farm in Zambia. The farm is a seasonal component of its operations, meaning there’s an upfront expense that the products that you put in, like planned and all that, where it produces incremental later date.
Again, we’re seeing that in Zambia now as we just started the major harvest of maize and soybeans that will be completed over the next few months. The contract farmers also begin their harvest later, which again brings in revenue throughout the later months. We did incur expenses, not only getting the farm integrated into the overall company, but then also incurred expenses for planting, for example.
So again, paying money upfront. Some of these things have a little bit of delay to come in. Now we’re in those cycles as we’ve started our harvest for the farm.
Another example will be the Brazil office as we build up the team and infrastructure, you got to spend that money upfront, and then we’ll start to execute trades, right? We’re getting into that mode where we should start seeing some trades now starting to come through the Brazil office as well.
For trades, specifically, this can fluctuate depending on the season, the type of commodity, market conditions, shipping costs, et cetera. We’re in the process of looking to add different types of commodities to our portfolio. Such as vanilla, lentils and peas just again, a little bit of different diversification going in there.
In addition, we want to continue to open new trade areas beyond our current MENA LatAm in Brazil area. So this will all allow us to shift between regions as market conditions fluctuate. Again, we’re going to be able to be selling stuff and doing things in Brazil, while maybe the conditions are bad in wherever, right?
And so we’re going to be able to shift around between all these different areas by expanding in these different roles, which that all combined should help drive some of the margins in the business.
So I think that was the last – kind of the pre questions, if you want to say that we received. So Alexa, do you want to turn it over to the different analysts?
Operator
Yes. Thank you, Mike, Jennifer. We will go ahead and take the first question from our analysts, Aaron Grey with AGP. Do you have any questions, Aaron?
Aaron Grey
Yeah, great. Thanks for all the detailed prepared remarks and answers the question so far. I’d like to pick off a little bit where you just left off in the last question. Just in terms of commodity trading environment for the quarter, right? So gross margins were down slightly negative or flat based off some of the remarks I heard average $7 million average cost 7. So — was it one large trade that kind of led to the flat gross margins, and it seems like gross margins for a commodity business have been turned that way for the past couple of quarters now.
So I know there can be volatility, but it seems like it might be a little more trading now. So can you speak towards the quarter? Was it more of a one-off sale that really went on margins? Was it was accumulation of all the sales that weighed on it? And just to add on to what you had just previously spoken towards.
Michael Roper
Yeah. Okay. All right. Thanks, Aaron. So a couple of pieces there. And I do have Benjamin Petel on the phone, and I’ll turn it over to him in a second as well. But you had mentioned — and yes, it’s slim or whatever, right, it’s a narrow margin. But you said it was kind of $7 million and $7 million. It’s really $7 million — yes, $7.1 million in revenue and $7 million costs. So it’s not quite flat, but it’s still — it’s still not where we would want to, ultimately be or whatever, just to clarify that. But so Benjamin, do you want to kind of talk about this?
Benjamin Petel
Sure, hi. Hello, Aaron. Nice to talk to you again. I think in general, looking at the environment we’re in right now is that there’s a lot of strain or I’d say, volatility in the trading world in general. I think that there’s a few factors to that kind of piggybacking on the tension in Ukraine, adding to that the tension in the Middle East and also China, which is, of course, the largest consumer of the world and they’ve been showing kind of signs of slowing down over the last quarter.
But as Michael said, in the throughout is everything that was said here before, I think this is the main thing that the diversification is very important for and that we plan to increase those margins basically getting into different verticals of the supply chain and of different products and different geographies. So certain commodities or certain paths, certain geographies could be down or lower at times. This also depends greatly on the structure of which the trades have been done and the financing as also Michael alluded to.
So I think it’s a combination of factors, but this is definitely why we’re striving and working so hard to put in new and parts of the supply chain, be it geographies, products, financing, et cetera, in order to be able to mitigate and raise these margins.
Michael Roper
Awesome. Thanks, Benjamin. Aaron, what else you got, man?
Aaron Grey
I appreciate the color there, Michael, Benjamin. Second question for me, just the trade financing. Can you speak on the timing when that was finalized? I may have missed this for the color on the timing and then any color in terms of the commodity transactions quarter-to-date in 1Q? We’re almost done with the quarter about nine days left. So just in terms of sales and margins, how that might have trended quarter-to-date versus 4Q? Thanks.
Michael Roper
Yeah. So I’ll talk about the trade financing stuff. So we’re always working on trade finance, right, continue to expand things out. And we’ve got several finalized deals, I guess, is the way you want to look at it, that we have been leveraging so far. It’s probably in the — what’s the total you think now in the trade? I’m looking at Jennifer. Yeah, let’s call it $15 million to $20 million that we’ve already got secured, I guess, is the right word that we’ve been leveraging in some of the trade finance so far.
That continues to change, right, meaning grow, right, as we keep moving forward. We’re continuing to have different discussions that are out there in regards to that.
When you take a look at the total quarter that we’re in so far. I don’t have numbers that I can share necessarily at this stage, right? But I think it’s — I think you can say it’s a pretty typical quarter just in general. But I don’t have the actual numbers here in front of me or whatever that we can share without having more details or whatever that are there. What else you got?
Aaron Grey
Okay. Great. Thanks. All right. All right. So yeah, so I think that’s helpful. I guess just kind of bring it all together then except for that taking online here. So in terms of timing and line of sight, so you’re talking about now being a typical quarter. How are you seeing in terms of — are we in a longer-term period of these more compressed margins? Do you think the trade financing is enough to get you in a normalized way?
Are you — do you have the ability to be more nimble and get to some markets that are more favorable? How do we think about the overall balance of top line growth, but also profitable growth for you guys as you look for the longer-term 2024 in the environment out there? So if you could just kind of give a whole stick outlook on that, that would be helpful. Thanks.
Michael Roper
Yeah. I think I think we’ve got — how do I go through this. So yeah, we are nimble right? We do have the ability to move around to different regions of the world. We actually cover a big chunk of the world now in the biggest markets, right, that are out there, especially with Brazil coming that line. We obviously have the Americas to LatAm, and then we’ve had the original stuff that was kind of in the MENA region, right? So we do control a lot of the different areas and have access to move between things, right?
I think really a better way of looking at it is if there’s a certain commodity that’s not performing as well, let’s say, it’s soya, right? We do have the ability to start moving into different areas like vanilla, as an example, right, or peas or whatever it might be, right? So we are able to kind of move around between those types of things.
When you look at the typical quarters and things that are there, it’s interesting because you do have seasonality. You do have things with trade, finance, all these things kind of tie together and help build this business, right? And you are going to have ups and downs and everything in between that’s there. But I know Kevin, I think I wanted to jump in.
Kevin Mohan
Yeah. Aaron, it’s Kevin. No, I was just saying, I think that another thing that’s really going to be critical for our go forward is to continue to add these trade lines. So I think if you look back at the history of this company, we kind of started off by doing a lot of net offs and back-to-back. And I think that the company is now sort of transitioning to something that’s a little bit more traditional. So I think that sort of as we implement that strategy and as we grow that side of the business, we are definitely hoping that things are going to improve.
Michael Roper
Yeah. And the other thing to think of too, Aaron, it’s not just necessarily the — we talk about trade financing a lot, right? But we also have supplier credit lines. And that’s kind of lump that stuff together when people talk about it, but they are kind of two distinct different areas. And so we are working on a lot of credit lines as well with the different suppliers.
Benjamin Petel
If I could summarize for just one more second?
Michael Roper
Yes.
Benjamin Petel
Aaron, I think you used the word nimble, and we usually use the word agile, but I think that’s really, the main thing here is to be agile and to be able to seize opportunities that are best — that are in line with our strategy. And if we see that there’s a slowdown in our typical commodity cycles, which are very short term, and our return on equity is usually quite significant. It’s just we’re dealing here with very large volumes with a very large ticket size, of which there are limited margins to begin with.
But there are different products, and there are different geographies, as Michael kind of alluded to, which are things that we are very much involved in examining and in different stages of bringing into the group that will potentially do a lot to increase these margins and also secure different kinds of trades and flows that will make us not depend on one geography, one product, one financing and so on. So I think that Agile is definitely the word and we look forward to diversification and diversifying into these other areas.
Aaron Grey
Thanks. Well I appreciate the current detail and answers, guys. I’ll jump back in the queue.
Michael Roper
Okay. Alexa, do you want to go to the next?
Operator
Yes. Thank you, Aaron. We’ll move to Tom Kerr with Zacks for questions.
Tom Kerr
Good morning, guys. Can you hear me?
Michael Roper
Yeah, we hear you fine.
Tom Kerr
Just a couple of clarifications. Most of my questions have been covered but — one second. Hold on.
Michael Roper
Anybody have any jokes they want to tell, while we…?
Tom Kerr
Sorry about that.
Michael Roper
No, problem, Tom.
Tom Kerr
Somebody said the word Alexa and my Alexa turned on and started talking to me.
Michael Roper
That’s funny.
Tom Kerr
Just a clarification on the trade finance, who is it? Or what is it? Is it going to multiple sources? Is it a bank? Is it a private investors? Just kind of what — who is arranging the trade financing? And what does it qualify how do you qualify for that?
Jennifer Black
I’ll take those on. Do you want to go ahead, Benjamin?
Benjamin Petel
No, no, please, Jennifer, please.
Jennifer Black
So these — as you said, these are a bunch of different sources. It’s not — it’s not all banks, it’s not all — some of them are either trade companies, some of them are either — some of them are banks. Some of them are private. It’s a combination of all of them that we put together, mainly because we don’t want to rely on one source. We want to diversify this just like we diversify everything else. And kind of you don’t want to put your eggs in one basket. And so we have — they’re different sources on that.
Benjamin, did you want to add to that?
Benjamin Petel
No, I think that basically covers it. Again, it is a very vast kind of term trade finance. And in our line of business, oftentimes, it could also come from the counterparts, either suppliers or customers or so on where you have different terms with them where, in essence, they’re providing you with the finance to do the trade depending on the way you negotiate it and the time line and so on.
In the banking or institutional world, there are banks that provide their funds that provide. And then there’s — as Jennifer said, there’s private or pseudo family offices and so on that also are involved in this business. So we have a blend of some of those at the moment and always looking to find more that fit within our matrix of finance and what we’re looking for.
Tom Kerr
Got it. And the $15 million to $20 million you referenced, that’s just the collective number of all those sources you mentioned?
Jennifer Black
That’s correct.
Tom Kerr
Okay. And back to the margin, just to beat that dead horse for a second. We had talked about 3% margins in that commodity business over time or that’s a goal of 3% or better. I know you guys aren’t providing guidance, but is there a time frame perhaps, we can look for that 3% goal is 2024, 2025 or any other color on that?
Kevin Mohan
Well, I think, number one — this is Kevin. I think number one, I think we were 1 to 3 is kind of, I think, what we’ve historically talked about. But I think that there are a lot of creative ways being the type of company that we are, a smaller company where we’ve had success in getting much higher margins than that.
So sometimes you’re going to have fluctuations in the business where you may have some of these higher-margin deals that you can facilitate and then you may have a quarter where you don’t make a whole lot, right? So the whole goal is to try to balance those out as the year goes on and as things change, whether it’s market fluctuations, weather trade finance opportunities, et cetera.
Benjamin Petel
I’ll continue if possible. And just say that I won’t — I’m not going to give a date here, but I think that all the things we’ve mentioned so far with the entering into new verticals, which allow us to not only hedge or sell against the volatility of the market, but also add margins every step of the way. So if it’s just for example, if it’s getting into shipping, we’re not into shipping right now, that would make a significant difference today already if we had a shipping already in the company, and we’re able to mitigate shipping costs and so on and so forth because those are also commoditized, and they also go up and down depending on conditions.
So that’s what we’re trying to do and not rely on the good fortune of the market of, I would say, of the commodity prices and so on. Where we see that it’s unreliable, we need to diversify, and we need to open ourselves to new products, new geographies and new verticals that will all form this picture together and we’ll hopefully increase the margins to the point we want them to get to.
Tom Kerr
Great. That’s helpful. And last question for me on the restaurant business. Can you kind of give us any more color on where we are in that process? I mean, do you have to wait for those corporate things to be refranchised? Or is there open solution strong interest? I mean, are you guys looking at bids or what inning are we in?
Michael Roper
Yeah. Let me — I’ll get with you on. Let me jump in there. So there was always two phases looking at the restaurants, right? And should we divest them or not, right? First phase was take the corporate locations and convert them over to franchise locations, right? That is for all graphical purposes, been complete, okay? We still have a few out there that we’re working on, but it’s pretty much been complete. And that positions the restaurants — that it positions the whole overall structure to now go out and investigate and hire somebody to go do this, right?
And so we actually hired listed and associates, part of their expertise is selling restaurant chains. We’ve been doing it for about 40 years. They’ve been out there for a long time doing this stuff, right? So we have hired them recently. We’re also now moving into the second phase, right, which is where we are today. So the first phase is already done a complete. We’re now into the second phase of looking to divest these restaurants.
From a timing perspective on it. We recently just hired them, right, in the last, call it, last 30 days, 2 weeks, whatever, so where that time frame as we work things out. We are now in the process of creating the data room and all that to be able to put things in there. We do have some people already showing interest. We’ve had some general discussions that have already started. But I don’t have necessarily a time line on it per se, other than it’s an important thing for us, and we’re working against it pretty quickly.
Kevin Mohan
And I would add something also to that, Tom, and I would say that Lecithin specifically, they are very specific in this particular business sale, and they are intimately knowledgeable about brands specifically. So they are up in the Northeast. They know the brand extremely well. We’ve known them for a long time. That was actually the firm that we purchased Pokémoto from. And so I know that there was — I could disclose this. There was a lot of people that were bidding on that when we first bought it. And so it made sense after interviewing several other firms to go with Lecithin, but we’re very comfortable with that decision.
Tom Kerr
Great. That’s all I have for this morning. Thanks.
Michael Roper
Okay. All right. I think that’s basically it, Alexa, do we have anything else that’s out there from an analyst perspective or questions?
Operator
That is all. I believe that concludes our Q&A portion of this call. Mr. Roper, any final comments?
Michael Roper
Okay. Yeah. Just I just want to thank everybody again as always. We’ve got a lot of things that are changing in this business. We’re growing it. It’s pretty exciting. There’s we’re — we’ve obviously started our farm stuff with the harvest in Zambia, which is pretty exciting. I don’t know if anybody saw but we had the President of Zambia actually was on our farm this week, doing some press work and some festival activities as well. So getting some high-profile type of visits from people as well that are out there.
So very exciting stuff and more to come soon. I appreciate it, everybody.
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