Q4 2023 Sadot Group Inc Earnings Call
Participants
Frank Pogubila; IR; Sadot Group, Inc.
Michael Roper; CEO; Sadot Group, Inc.
Jennifer Black; CFO; Sadot Group, Inc.
Benjamin Petel; Director; Sadot Group, Inc.
Aaron Grey; Analyst; Alliance Global Partners
Tom Kerr; Analyst; Zacks Small Cap Research
Presentation
Operator
Welcome to the second 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 stock Group Inc's Q4 physical 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 US 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 make 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 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 the Data Group, Inc's most recently filed Form 10 K and elsewhere in documents that the Data 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 so dot 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 Sohu dot Group Inc. and exclude the portion related to non-controlling interest on this call, we will refer to so that grouping as the DoT group for the Company.
With me on the call today are Scott 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 Sun dot group's financials filed on March 20th, 2024, and those documents may be found on the Company's website and newswire feeds and on the SEC's website linked from the DoT Group's website at w. w. w. dot sun dot Group, Inc.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 31st, 2023 before diving into Q4 and 2023 full year results and highlights, I'd like to acknowledge that has been a truly transformative first 16 months since that group refocused and retooled the organization become an emerging player in the global food supply chain. Beginning with our initial focus on aggregate 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 2020 to Second, our 2023 full year adjusted EBITDA was slightly positive compared to a $2 million loss year over year for 2020 to 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 aggregate 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 to that Group Inc. achieved top 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 so that AgroFresh subsidiary operations in November of 2022. To be more precise, that aggregate 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 ag 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 in 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 the meal prep assets, which have had a material impact on earnings over the past year. With our remaining restaurants still 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. Pretty significant change.
The adjustments to EBITDA were a series of noncash items related to the restructuring of our legacy restaurant brands. Our corporate name change this to that Group, Inc. And overall financing strategies among other items while these charges did impact our bottom line, they were one-time charges essential for helping to fortify 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 IBM FZLLC.
@ith respect to our agricultural operations, focusing on that aggregate foods, the business unit serves as our economic engine characterized by high dollar volume with narrow margins which is typical for the aggregate commodity trading industry in 2023. So that aggregate foods generated $718 million in revenue and $9.3 million in net income for the Company. You may have noticed that we've transitioned from disclosing monthly revenue numbers to a quarterly reporting cadence 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 an aggregate foods for human and animal consumption, including soy, corn, wheat oils and oilseeds 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 recently increased our trading offices. Adding to that, look, Tom in Miami, Florida and so that Brasil and Sao Paulo, sorry, if I mispronounced that South San 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 as a central, our growth hinges on access to trade finance and 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 in a better position 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 aggregate 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 advocacy regional 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 our process and operations to bolster our supply chain resilience and efficiency. So that'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 that 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 as 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 and 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 maze 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. In addition to this about Edgar foods current ongoing harvest, the company has also initiated a pilot program to help small farm owners in the region receive essential farm inputs such as seeds, fertilizers, et cetera. The need they need that 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 owners that are all in need of help to acquire the inputs needed to fire the program allows for us to that aggregate foods to secure the inputs from local suppliers on credit terms, allowing the small farmers to pay for them at a later date with a farm product at time of harvest.
The company in turn select some 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 as carbon credits. Earlier this year, the Company acquired a forward contract for carbon credits from an ongoing mangrove planting project in Indonesia. This move is aligned with that 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 traits in the future. Overall, for 2023, that group reported a net loss of approximately $7.8 million, in contrast to the net loss of approximately $8 million in the previous year ending December 31st, 2022, as previously mentioned, there were a number of one-time 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 so that aggregate Foods continued to perform well, 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 flux 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. With 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 Black
Jennifer tonight, before I began, I'd like to note that our financial results for the year ended December 31st, 2023 and Form 10 K filed with the SEC yesterday March plan, along with the press release that thing with that, I'd like to give an overview of the financials for the fourth quarter of 2020, Q4 2023, company-wide revenues increased significantly totaling $171 million compared to $153 million for Q4 of 2020 $18 million revenue increase was primarily due to sales revenue from our soda aggregates division, which was only partially operational in Q4 of 2022.
So that aggravates completed 24 transactions in Q4 with the average revenue per transaction of $7.1 million with an average cost of goods sold of that transaction of seven days, 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 consulting as yet.
Now let me turn to the overall financial picture for the Surat Group for the full year ending December 31st, 2023. For the year ending December 31st, 2023, our company-wide revenue significantly increased totaled $727 million compared to $162 million for the prior year ended December 31st, 2022, $565 million increase is primarily attributable to the commodity sales revenue generated by our aggregates. 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 photography. As Mike mentioned earlier, the company's main revenue and margin driver is today, aggregates consisting of our origination and trading operations as well as our farming operations in Zambia. In aggregate, it's generated commodity sales revenue of $718 million for the year ended December 31st, 2020, as compared to $151 million in 2022. The vast majority of the increase was due to the origination and trading operations with the farming operations contributing to a negligible amount. As you know, in aggregate 2023 net income in January 2023, net income was $9.3 million.
Moving on to the company's legacy restaurant operations consisting of multimodal Muscle Maker grill and services, the division generated revenue of $9.2 million for the year ended December 31st, 2023, compared to $11.1 million for the December 31st, 2020. This decline in revenue generated was mainly due to the closing and refranchising of our corporately owned restaurant locations. The Russian division reported a loss of $2.8 million in 2023 compared to a loss of $3.3 million in 2022. As of December 31st, 2023, we had a cash balance of $1.4 million compared to a cash out of $9.9 million as of December 31st, 2022.
This decline is a deliberate outcome of our strategic shift away from the restaurant business towards the anchor commodity trading sector. Historically, as a restaurant company, there was a limited use for our cash reserve. However, with our new focus, the deployment of cash is intrinsic to our business model for generating revenue and margins. Instead of maintaining our cash balance. Our priority now is to actually 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 2020 to $178 million as opposed to 2023 This substantial increase is attributed to strategic initiatives such as acquisition of the farm, our majority owned subsidiary accounts receivable related to trade in forward sales contracts for future delivery. These developments have significantly fortified our balance sheet, reflecting a strategic investment we've made to 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.
Fifth, underscoring our commitment to deploying capital strategically to enhance our financial position and drive sustainable it's 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.
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 so that aggregate 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 operated locations into franchised 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, exploring new opportunities and partnerships to further strengthen our position in the market.
Thank you once again for your trust and that 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 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 received from our stakeholders. Also, on the call with us as one of the doc groups Board members, Benjamin Paeel, Mike, Jennifer, the floor is yours.
Michael Roper
I think Celexa. Yes, we have 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 I will do the answers and the normal trends of transition after that. So the first question that we've received is how is adjusted EBITDA calculated and why should we use this number so I'm going to let Jennifer answer that one.
Jennifer Black
And so we define adjusted EBITDA and we start with net loss anyway, adjusted for a few things like depreciation, amortization, net interest income expense, income taxes, impairment expenses, Scott made consulting expenses, other income change in fair value of stock-based comp gains on extinguishment warrant modification expense and gain on fair value measurement.
Yes, these items are removed. They're either one-time transactions or other noncash transactions that have impacted our net loss position. We believe that adjusted EBITDA, which is a non-GAAP measure, could be useful metrics for investors to understand and evaluate our operating results and ongoing profitability because they permit investors to evaluate our recurring profitability from our ongoing operations also show upper limit by the next question here is how does the additional trading subsidiaries compete with or affect each other?
Michael Roper
Okay. So we're talking about about what Tom Brazil, the meter regional, those type things. How they compete with each other or affect each other. So basically, really the subsidiaries support each other. 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 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 source or client bases. 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 over time, that's all in the central area. They can trade throughout Latin America, Central America, South America and North America, they can trade on new products 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
Thanks, Mike. And so this mine, we've made multiple investments since we started our strategic pivot about 16 months ago. And you can see this by looking at the increase in the balance sheet. And we're investing in business to expand our operation in our business verticals?
Michael Roper
Yes, for example, we purchased the farm in Zambia for cash. We also deployed cash and at various trade 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 Mike was talking about, we also expanded our trading areas to include Brazil, Amazon.
Lastly, we also changed the company name symbol, and we launched a new strategic direction. All of these areas where capital has been deployed and the decline in cash on hand is a deliberate outcome of our strategy shift away from the restaurant business towards us at our aggregate food division and deploying cash is intrinsic to the Company's business model for generating revenue and margins through ratio for home.
Jennifer Black
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 from. So like I said, there's a few things we've talked about here.
Michael Roper
So overall, and 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 know if a senior business, whatever the right word is right, but it's it's new, right? And we're building this thing and we're building a very large corporation that's out there. And this takes some upfront expenditures that may not have an immediate impact on revenues and profits. So for example, okay, would be the farm in Zambia.
The farmer has a seasonal component of its operations being there's an upfront expense that the products that you put in for like planting and all that where it produces income at a 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, pay money upfront. Some of these things have a little bit of delay to come in now renewables cycles as we've started our harvest for the farm. Another example would be the Brazil office as we build up the team and infrastructure spend that money upfront and then we'll start to execute trades, right? And we're getting into that mode where we should start seeing some trades now starting to come through the Brazil office as well for trade. Specifically, this can fluctuate depending on the season. The type of commodity market conditions, shipping costs, et cetera, are in the process of looking to add different types of commodities to our portfolio, such as vanilla lentils and peas, just to get a little bit of difference, diversification going in there.
In addition, we want to continue to open new trade areas beyond our current mean overtime and Brazil areas. So all allow us to shift between regions as market conditions fluctuate. So 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 able to shift around between all these different areas by expanding at least 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 of the 10 of them three questions, if you want to say that we receive So Elexa, do you want to turn it over to the different analysts? Yes.
Operator
Aaron Grey, AGP.
Aaron Grey
Yes, great. Thanks for the detailed prepared remarks and answers to questions. So far, I'd like to pick off a look a little bit where you just left off. The last question is 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 on average $7 million average cost seven. So it was it was one large range that kind of led to the flat gross margins. And it seems like gross margins for commodity business had been trending 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 trend now. So can you speak towards the quarter? Was it more of a one-off sale that really went on margins was it was an accumulation of all the sales that weighed on a. And just to add on to what you had just spoken doors?
Michael Roper
Yes. Okay. I think there are still a couple of pieces there. And I do have Benjamin Patel on the phone and I'll turn it over to him in a second as well. But you had mentioned you know, yes, it's slim or whatever it is a narrow margin, but you said you don't have the kind of seven, $7.7 million. It's really $7 million on center, 7.07 $0.1 million in revenue and certain $7 million cost. So that's not quite flat, but it's still, you know, ARM is still not where we wanted to ultimately be or whatever, right, just to clarify that. But so Benjamin, you want to kind of talk about this?
Benjamin Petel
Hi. Hello, and nice to talk to you again. And I think in general, looking at the environment we're in right now is that there's a lot of strain or volatility in the in the trading world in general. I think that there's a few factors that are kind of piggybacking on the attention in Ukraine, adding to that, the tension in the Middle East and also a China, which is, of course, the largest consumer of the world, and they've been showing kind of on signs of slowing down over the last quarter. But as Michael said, in the throughout his everything that was said here before, I think this is the main thing that the diversification is very important for us and that we plan to increase those margins basically getting into different verticals of the supply chain and of different products and have different geographies.
So certain commodities are certain paths and geographies could be down or lower times. This also depends greatly on the structure of which the trades have been done and the financing is 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 what parts of the supply chain be it, geographies, products, financing, et cetera, in order to be able to mitigate and raise these margins are some.
Aaron Grey
Thanks, Benjamin. And what else you got that and I appreciate the color there are macro measurement on sequential basis, the trade financing. Can you speak on the timing when that was finalized. I may have missed it. So just further color on the timing and then any color in terms of the commodity transactions in a quarter to date in 1Q, were almost done with the quarter about nine days less of this in terms of sales and margins, how that might have trended quarter to date versus 4Q.
Benjamin Petel
But yes, I'll talk about the trade financing stuff. And so we're all we're always working on trade finance, right, continue to expand things out. And we've got several of them finalized deals, I guess, is the way when I look at it that we have been leveraging so far, um, you know, that's probably in the what's the total you think about the trade-off? I'm looking at Jennifer effect that you have or the follow-up 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 and that continues to change, right?
Meaning grow, right as we keep moving forward, we're continuing to have different discussions that are out there with regards to that when you take a look at the total quarter and that we're in so far, I don't have the numbers that I can share necessarily at this stage, right, um, but I think it's I think you can say it's a pretty typical quarter just in general, but I don't I don't have the actual numbers here in front of me or whatever that we can share without having some more details or whatever that are there, what else is going to be.
Aaron Grey
Okay. Great. Thank you. I so yes, so I think that's helpful. I guess just kind of bring it all together then exceptions that I mentioned online here. So in terms of timing and line of sight, you're talking about now being a good quarter you know, how are you seeing in terms of are we 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 or you do 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 holistic and our look on that, that would be helpful.
Michael Roper
Thanks. Yes. I think from I think we've got a Ferrari and go through this, so they are weak 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 now, especially with Brazil coming online from non-U.S. We always have the Americas through the time, and we've had the original stuff that was kind of in the MENA region, right? So we do control a lot of different areas and have access to move between things, right? I think really a better way of looking at it is you know, if there's a certain commodity that's not they are performing as well, let's say it's it's, you know, sewing, right?
We do have the ability to start moving into different areas like vanilla deals as an example, right? Or PC or whatever it might be, right? So we aren't we are able to kind of move around between those type of things when you look at the typical quarters and things that are there, you know, it's interesting because you do have seasonality, you do have, you know, things will trade finance all these things kind of tied 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'm you'll hear, Kevin, I think one of the job and we are here.
Aaron Grey
And 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 line, Frank?
Frank Pogubila
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 backs. And I think that the Company is now sort of transitioning to something that's a little bit more traditional. So I think that, you know, 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
Yes, it was a relevant figure to air and it's not just necessarily the we talked about trade financing a lot, right, but we also have supplier credit lines that's debts that we kind of lumped that stuff together. When people talk about it, but they're kind of two distinct different areas. And so we are working on a lot of credit lines as well as the different suppliers.
Benjamin Petel
If I could if I could some if I could summarize through just one one more sentence. So Aaron, I think your view is 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 off 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 in to the to the group that will potentially do a lot to increase these margins and also to 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
Perfect. Thanks. Really appreciate the color and detail on the answers, guys. I'll jump back in the queue.
Michael Roper
Thank you, Aaron.
Operator
Tom Kerr, Zacks.
Tom Kerr
Morning, guys. Can you hear me Viacom yet notified. Just a couple of clarifications. Most my questions have been covered, but one for you. Okay. Would you have any jokes they want to play and where when I started at that time. I have no problem to embodying simply said, the word Elixir and my election turned on and started talking to novel assets, 40%.
Michael Roper
I've just clarification on the trade finance that Yahoo. Is that or what is it going to be multiple sources? Is that a bank? Is it a private investors? Just kind of wondering who is arranging the trade finance senior and more does it qualify? How do you qualify for that account was assessed our geothermal, Benjamin non-op, please Jennifer, please.
Jennifer Black
So these as you say, these are a bunch of different sources. It's not we have not all banks, it's not all some of them are either trade them. Some of them are either some of them are banks some of them are Itopride, but it's a combination of all of them that we put together mainly because we don't want to rely on one source. We wanted to have we want to diversify this, just like we diversify everything else here, any kind of what your higher end in one basket. And so we are and there are different sources on that$10 billion that you then blows up.
Benjamin Petel
The recoveries are good. It is a very vast for the term trade finance in our line of business. Oftentimes it could also come from the counterparty, the suppliers or customers or so on where you have different terms with them were in essence, they're providing you with the finance to do the trade depending on the on the know the way you negotiate it and the time line and so on in the banking or institutional world, there are banks that provide the funds that provide and then there's as Jennifer said, there's private or sooner or family offices and so on. That also are involved in this 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 it in the $15 million to $20 million, you represents just the collective number of all those sources you may contact.
Tom Kerr
Okay. Then back to the margins, just to beat the 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 timeframe perhaps we can look for that 3% goal it 2024, 2025? Or any other color on that?
Michael Roper
Well, I think number one is Kevin. I think number one, I think we're one to three 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 trying to balance those out as the year goes on and as things change, whether it's market fluctuations, whether trade finance opportunities, et cetera, I'll continue if possible.
Benjamin Petel
And just say that I won't I'm not going to give a date here. But I think that most of the things we've mentioned so far on with the entering into new verticals, which allow us to not only hedge ourselves 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 arm already in the company, and we're able to mitigate a chip called 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 the good the good fortune of the market, if 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, new verticals that will all form this picture together and will hopefully increase the margins to the point that 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 the open house units, strong interest? I mean, as you look at bids or what inning are we in?
Michael Roper
Yes, let me make sure I get with John, let me jump in there. So on there was always two phases. So looking at the restaurants, right? And should we divest them or not, right. The first phase was take the corporate locations and convert them over to franchise locations, right? That is for all practical 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's that position the restaurants that have positioned the whole overall structure to now go out and investigate and hire somebody to go do this, right?
And so we actually hired Melissa and associates who took part of their expertise is selling restaurant chains 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. Our mills are now moving into the second phase, right, which is which is where we are today. So the first phase is already done and complete. We're now into the second phase of looking to divest these these restaurants from a, you know, timing perspective on it. We recently just hired them right in the last, call it last 30 days, two weeks, whatever, somewhere in that timeframe.
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 to get that pretty quickly.
And I would add something also to that, Tom. And I would say that, listen, it is specifically they are very specific in this particular business sale and they're intimately and knowledgeable about the 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 poking Moto from. And so I know that there's I can 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 Leifsdottir, but we're very comfortable that says.
Benjamin Petel
Great. That's all I have for you this morning and thanks for saying all right.
Michael Roper
I think that's basically the left side. 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. And Mr. Roper, any final comment?
Michael Roper
Yes, just I just want to thank everybody again, as always, in all, we had a lot of things that are changing. This business were growing. It is pretty exciting there. You know, 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 some press work and some festival activities as well. So getting some 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 everybody.
