Local Bounti (LOCL) 9 Aug 232023 Q2 Earnings call transcript

Good morning, and welcome to the Local Bounti's Second Quarter 2023 Earnings Conference Call. All participants will be in a listen-only mode. After today's presentation there will be an opportunity to ask questions. Please also note that today's event is being recorded.

At this time, I'd like to turn the conference over to Jeff Sonnek, Investor Relations at ICR. ahead. go Please

call good Private Local and Chief presentation be XXXX. harbor during will Officer, meaning within Thank the Litigation of Chief morning. Reform Executive by safe today's made comments Bounti's Valiasek. of and forward-looking Officer, hosted statements Kathleen the the you, provisions The Today's contain Securities Anna Financial of Fabrega Act

beliefs statements. as of These than as statements statements historical current facts expectations considered events. management's other of and are statements number forward-looking well based a future assumptions on All are concerning

unknown statements and results forward-looking are the forward-looking Such subject materially to differ that actual results known and cause in the statements. risks could discussed from uncertainties to

the risks Some and uncertainties of filings in these with SEC. and identified discussed are the company's

non-GAAP measures today. the measures directly refer their We'll Relations Please be on certain financial also release, comparable press measures. investors.localbounti.com, our to non-GAAP to to website, of found Investor can which most GAAP reconciliations refer for financial

to over With now the to ahead. that, like Anna. Go I'd turn call

you, everyone be Company's organization, a address welcome call thrilled I'm my the call earnings join Bounti's proud Local I'm opportunities you the the to this have and to journey, first on and time us. in we is today pivotal as This part for to today. of of CEO. to Thank Jeff, and I'm excited ahead

attracted agriculture. and was represents behind Technology mission and I people I CEA Local of Flow for our the most it. innovative believe sustainable & amazing Stack that economically viable Bounti the approach its to because

entire been a has of my life. Agriculture part

hard and to has which and coffee. methods farming Panama in a limitations appreciation teak that my approaches. specific traditionally I for grows dad conventional deep fact, In runs and producers he farm still have geographies limited work a the require, where

across and using techniques sustainability it possible. but the and fraction to local of miles address as quality eventually food I Bounti tasting fresher, and not higher long a better evolution that a as land is country and goals traveled, and sustainable bring consumers Local by growing system in also overdue water, the the represents to and a closer should only be world. believe food products environmental

I love leaders fortunate in in highly I've growing Amazon, organizations skills that the such environment. be are helping been from scaling to while learn and feeding regarded apply the of able to that are up. and young we families business midst quickly and as organizations those

most knowledge our with production. talent. successful, and I food sector grow In and believe work need our efficient excited efficient and I way resources the leveraging the do to be to optimizing we this we are just that. expansion, future scale channeling to team deep collective have of to and direct talented I'm of possible, the operational retail experience business in order the

still a with are We thinking. and fresh operating innovation ripe nascent industry, in

All the the are of challenges real, opportunity is immense.

ramping and a capacity expansion. enhancing growing network simultaneously establishing and our protocols, approximately and at new are customer-focused, up We penetration distribution our replicable facilities operational of doors through program expanding value-added XX,XXX existing consistent

our business. advance economic collectively, our employees for highly accomplish represents value goals a alike. opportunity these Individually, these And massive in materially significant each fashion and generate ability an represents a of to our to shareholders opportunity to disciplined

right to Bounti our place Local position in have the to the business we model, ensure the these in are order believe we returns, success. infrastructure achieve inherent need scaling that people we and In goals, and delivering adapt financial for to to

apply Freshly in growth. at long-time be added CEO drive As able our of key sales this to Executive organizational a experience and strategy. our and resources the company talent structure as to I'm of and process, my significant optimized human of we accelerate part Amazon that to areas operations, have will as excited

press in advancements important forward today to we The economics. have in the and that the of to up are team improve yield Equally manner. a vehicles has solidified unlock place potential unit financing an us exciting enabling continues model capital-efficient our in scale attractive to

have of we will blue-chip to the to XXXX breakeven to ever-growing at broad XXXX roster as of adjusted when early end We EBITDA or a footprint the spans serve an line-of-sight be continue that customers facilities of operating country.

most have I that organization our task progress financial in operations, and in of confident on quickest generating efficiently the years to With quarters our come. focus am the look putting I forward up to the an to am I is that and returns demonstrating the and possible, we

on to of call the Kathy With over update will build-outs, some for provide year. turn comments I on review quarter performance expectations remainder an to facility and provide now our the that, the our second our

capital hard echo extremely the Thank to. people. we've themes for of you, in are fuel place, This our spoke I the like business, would of that and includes growth to in to worked course, to have which resources to for Anna. a pivotal is and This time growth, our ambitions. many fortunate Anna put place our we

over a make I'd has public years, stronger. that scale-up, our advance the huge really displayed recognize resolve which a few come us all together to offering, the changes challenges leadership business included have of like a the a past multitude that team and to and daily transformative acquisition,

embark committed thrilled under is scale-up growth to Anna's pleased great to track. on of of take on our working next that, with professionals, in phase a facility such With group and our share leadership. pride I'm that I'm I

that on completing returns. products near-term We are focused generate

in of we in early fourth are and Georgia this With in quarter on we buildout, year our mind, are completing first of our facility XXXX. complete the that set Washington to the in facility our working quarter Texas

Georgia, Phase construction and shifted complete, X-C. focus X-A of Phase X-B are our to has both to respect and With

focused As a reminder, the footprint, complementary the stack X-B Phase six-acre integration X-A while zones. completed reflect the on site's vertical greenhouse is and Phase X-C automated of

Vertical the XXXX. early reach the zones to The structure add in the stack for enclosed, to in is quarter of it fully rate, approximately site's development and the we critical completion estimate current that terms at in of are revenue-generating houses once add. those XX% the will XX% this run commissioned, of approximately capacity. completion additional shape great today's Nursery fourth project that capacity a and is We The will

us our in Southeast. strengthening premier open product to CEA position space allow and the the offerings, as up will a our This in to our suite partner new deepening roots

new is Our structure advancing health Texas largely in and facility six-acre complete. the green rapidly, is

at the management facilities. focus two similar Georgia for synergistic the that stack Georgia, will to year. commence we continue of design and are facility in installation the Similar operations fourth to to expect quarter shifting The allow to this this we Texas of of operations and to

production across varieties, green and as localized well will grown Southern As support our distribution of spanning coast-to-coast locally fortify mentioned, national leafy packaged facilities, U.S. the with Texas our network as lattices living

by is three supported capabilities Washington will complete, structural our the to of work be quarter multiple be greenhouses comprised for the distribution the Northwest installation of Pasco, expected facility, The greenhouses At progressing. steel commence in the When Pacific operations and XXXX. will that location zones. facility stacked is now the complete in and is will the bolster help acres company's first of glass

fourth been commissioning quarter of our now consciously As the cover staggering the Texas accommodate second to in team. of facility our results. a efficiency maximize construction our I'll the quarter of reminder, XXXX to we've

to in million Second $X.X the million quarter year compared period. XXXX sales were prior $X.X as

production a largely extent, and and facilities. reflected results second Georgia Montana Phase from our lesser our X-B and Our California to facilities X-A quarter

we we With to distribution to complete our customers' the Phase up improving quarter, our in our added now the rate service that centers expansion X-B second during are and quarter. network the ramping fill

later this of run momentum year, protocols further we operational to second anticipate implementation drive to the as expect of out We continue X-C's in which will half Phase increase productivity look year the stack and the Georgia enhanced of facility. improving completion the revenue rate forward this our

items, Second and depreciation, quarter approximately margin, compensation adjusted nonrecurring excluding stock-based XX%. was XXXX gross other

continued adjusted in the quarter constrained our California to gross by margin variables at facilities. weather-related Our be

required in As maintenance. which unique extreme you in through and challenges to temperatures may which June. created production, resulted we decrease fixed facility a cost continued damage that precipitation cool exacerbated weather repairs in recall, The were spring, excessive absorption. This this that led temporary some by growing experienced lower abnormally

the with the footprint current resolved and value local these and approach gives demonstrates This navigate build-outs. facility diversified in the greater us with and a and are experience environment of have team's issues. response since We ability our to pleased future complex conviction

and Washington, have controls, that year our Further, environmental new Texas are which I'd in facilities with production been towards versus anomalies that insulate the the of you our Georgia, sites, California facilities the mix from completion differences we of remind this significantly California. with weather will higher us with shift dealing of in legacy in the in facilities the greenfield each of The building. Pete's new we

prior was the the was quarter, $X.X million from prior versus SG&A million year year $X.X $XX.X with in SG&A stock-based $X in was Adjusted lower difference due million to the largely which period, million compensation second period. down expense. the

for liability amortization; $X.X million and and $XX.X period depreciation million to Second Adjusting change $X.X loss EBITDA these includes $XX.X interest a loss million. of $X.X net and quarter was nonrecurring fair year stock-based of compared of a in in net a $X.X value prior was other loss million adjusted million as comp; a items, million million. the XXXX of warrant and gain of in $XX.X expense, on

cash XXXX, in credit we ended had for amount the of undrawn perspective, and our structure $XX $XX.X capital restricted facility cargo. cash, June cash approximately a From with million quarter and on capacity the of million equivalents XX, second

end very to our important to reach have to has EBITDA been continue hard by working the organization is achieve. or XXXX milestone We which capital necessary we XXXX, breakeven early the that a believe entire that adjusted of

by at for million agreement first million. Then total up we April, of $XXX expanded to $XXX million. the $XX end the with executed Cargill we transaction a our sale-leaseback up construction previously announced, quarter, financing in a to of for As

of continue work lender cost of We lower construction debt. to licensed to our our and financing cost USDA reduce with our a advance

near-term Taken together, sound execute resources agreements we and are to place footing our plan. on with in financial

capital, we additional flexibility for. want current agreements cost that I to continue allow emphasize to our to preserving work on the However, strategies our lower also that of while

While capital in for strategic opportunities. cognizant philosophy growth we our is of longer we term our remain near-term future and constantly are requirements, preparing nature,

we had stock a count XXXX, diluted shares of On million outstanding, XX, have of shares. warrants employees' fully approximately including share our and basis, million restricted approximately units pro X.X As forma June outstanding. we XX.X a

revenue $XX our million to XXXX. reiterating growth compared representing respect full between we With full XX% as least at of million, to of $XX year are outlook, XXXX and guidance year

revenues terms half we improved our and our with service of of quarter. build through the to to the that centers production expect due Phase the Georgia sequentially to to year quarterly X-B online we In expansion our continue the of cadence, back in completion brought second distribution

Georgia the anticipated sequential which quarter. of throughput higher the realized facility, tempers just the third only We've growth for our

expected to X-C's impact quarter, we implementation, in more a benefit improved underlying lift expect increase by from However, from the stack continue which production Phase is pronounced to the fourth which positive and production XX%. will

This of the influence balance positive well, expected on will gradually improve a facility year. our And coming fourth which EBITDA should to quarter, the online. Texas is as have in be our through commensurate adjusted also

That remarks. for open Operator, call concludes the please our questions. prepared

session. question you. Owen Instructions] ahead. answer Thank and go from We'll Kristen comes first Oppenheimer. a Our with question now be Please conducting [Operator

thank Anna, and question, the Hi, for the nice congratulations welcome. taking you on results.

the you the as to you those accomplish see your XX Travis maximize of just first just And in time the how are? the XX so opportunities? and curious first months, and now Where few are the to what question. trying for impressions scale to in Craig you next over You've spending are seat weeks, efforts? context all a What of been my

question, an structure. revenue cost efficiencies. making to I the with maximizing cost high a ever we at too say, think early Because be don't and life on have company's Sure. focused that for growth, team And but the Kristen. thank sure same focus the I it's the driving level, at would in been out my you has cycle time, on efficient

facility. similar on really, Because a think sure making new processes. art agricultural the sets a manufacturing if have So right strong is operation of been focus the operational than that to up, of they're right you skill these more production and coming facility our the facilities, places and that in really grow, has about putting far Georgia, to standard part the we

be And to so, processes putting and be on yield sure mechanisms efficiencies efficiencies, right possible. the we to the as quickly place we making in focused operational that need have our really right driving as

So, we're on up Georgia. focused really ramping

and on As completing those Kathy well. getting online X-B mentioned, Pasco those now then on X-A X-C focused and our and transitioning and are ramped we're locations and Texas and up to ramping as

Thank so Great. you much.

as annually. to of some on you initiatives. then, million really that that So on you about have it at the thinking Based we guys that OpEx about $XX some them a that cash running And should you're level that initiatives, me rate be how making? been realignment going of the optimization those seems optimization on describe cost efforts cost made, the cash basis run moves you forward or given

the to we're also team of changes organizational I operation, some making made is there expect -- kind with tweaks our adjustments say the on and sure Yes. there would right making, at don't focused are that initiatives. an constantly with that that G&A, cost I the and news making level. any being I we that we -- structure mean have been are that because to there of we've are that continue on will lower we be would impact bring-up say a facility are there

that's we higher I is and controlling sure making board, operating on cost are the the of our on that one yields on focused keys across think driving structure.

So don't there any negative there. to I impact expect be

so Thank much. Great. you

question ahead. next Markets. comes with Please Ben Lake from Klieve Street go Our Capital

questions, a couple taking I welcome and of questions on Kristen for Thanks right. quarter sentiment, my echo Anna, All the have I aboard. specifically.

wondering talk of the two gross gross degree on all, of between the outlined. about also kind California those issues. locations on that were pressure of you which weather-related And about First pressure if the the of that talked the on I'm margins? Kathy, that margins. the buckets bit, from to a elaborate can then magnitude you you out

sounds it unprepared facility a some that like also So the for to and weather was there facility growing conditions. damage adverse is just for

pressure of those So was can you talk by about driven how variables? either margin two much the of

do Kathy, to go. you want

Yes. question. Thanks for Thanks, Anna, and good morning, the Ben.

time when level. And the right? XX our California talked March, what years QX greater it in rain, for that did right, rains like So, about and facility results, first lack it we we sun. and even have gave just wind heavy seen that our Severe rains at rain, of

does, of to to years, that a they've us California, product been incredibly instances provide right? it product right, to growth, what especially is and the was the a out so of the where for spec production were with they XX our of bit standard And and love, buying because the impacts slows important little there product up that out XX the customers

production, out historically, spec, over small, the So lack facilities and level the all. level damage of to and do sun, repairs was the slows Pete's, at years, of it catastrophic of not a lot of Like, was of didn't but I of maintenance. mean,

so put place now again, happened, for we saw repairs maintenance. catastrophic, and we -- nothing what in when And protocols we've once

fell the we the say, I'd was because So short by -- product. out-of-spec topline $XXX,XXX of revenue

question, Kathy. you, Thank then, Kathy, helpful. my Very you other Okay. And commented.

years, also we safety our Let for ticking. food July, facilities, It's XX they had audits Ben. but XX%, about when XX% like just I'm around of comment, them sorry, those keep me safety we has in quickly think I our so they've and scored just around like We food on one audit. -- been been -- just

to So that's that. add wanted good. I just

three companies been appreciate the thank current commented the just No, Yes. space, both context eyes where I bankruptcies. unchanged of strategy is future greenhouse bad opportunities. My I'm outlook market from keeping months. really was the where items this for that. Because in there the many your question, has even wondering the backdrop? for macro with on other Or here you. are ago? How last it -- even or vertical accelerated over for it three few this throughout your in seems has Has it growth changed context open outcome months like of the this these growth and environment you so closures your growth really changed last months? new

you that grab and follow want to up? ahead. first you Go Do can going then in

No, go ahead.

Local in look a the out been being on news, viewed successful you've in going seen going controlled ever to environment they very, largely ag. when in about as of think course. develop economics, weren't Local founded to I because diligence every have they in there difficult, -- the and very wanted lot they Bounti, to they there they did actually it's the and discipline in at they and didn't the Bounti and podcast felt that that their at diligence with before And e-Firm, there CEA that's Craig running it, it's And founded they companies place that they right? Travis They invest were backdrop, right? did on around we because company, of When right? why that right, wasn't ran their what's and so,

strategy, from we, the there, mindset in need flow get the We need for not much we margins. of just appropriate say, positive board, on like, have do when think right? cash have Anna have very We a I buy to We to think, would But capital had situations a at us build to gross focus our -- be we we versus beginning, with need it's M&A a hey, positive. the on greater coming about place But have situation. to more where look operational excellence. I it's

about hasn't strategy a had I operational excellence. of, other operation. huge Anna focus it's a turned too when actually say, the like now corner kind as it's running too, of on would the But like Its said, kind Georgia changed I the think and facility, than much manufacturing

comments? your Anna So

add. mean I I'll Yes. just

foundation in of balance of We terms on cash the continue to really availability a financing. have solid and sheet

beyond and And where us that, about where going We're want to customers really to going existing demand. market of our go -- growth at maximize there's we're really, thoughtful looking we're be to to so, going footprint. And drive we're our growth. out always

about, support that more leave talk I questions. my in it I'll of to you want Plenty taking Very but kind Okay. back there. of line. Thanks here. to good. for Appreciate get

Please next comes Brian from Our question ahead. with ROTH MKM. Wright go

Congrats as just Thanks. the How on just, get about stores like kind hello, on does if the think -- you we And on as about those wanted like can for we're centers the the do just of with year? an take and ramp number the distribution and the quarter now Sam's progress, to ramp the Good half far centers of in are understand, progresses. for morning. that, think Club. year approach us, wondered the is I what's like, focus regional to the as comp to Anna. process through distribution of it how Or orders? sense of committed flow of that the that is that a back better that in

be helpful. would That very

Yes. -- up now that we've remember I so brought mean just X-B.

And so, will the -- maximize and as -- up we'll integrate up then, is into that we we'll increasing production on, is X-C. increasing bring the to the we we focus centers. continue on stack through our a fee yields we're we're on the And as our more ramp we're up existing the and go facility. in up bring to the ramping through really production period working But production, into once yields as we of we're move to and start transition out getting need greenhouse. there, ramp demand phase there our And distribution that

to And all details, us it. like for get but sense outsiders, Okay. the for it's -- hard the just right, see you a from

Georgia or network you're to a producing vendors the what of point. way that selling it It's you're it? other production to of distribution this whether Is about the at more the basically, of same out facility, function think growth. So be

exactly the is think to about way it. Yes. That

kind picture, think a our so would the licensing at -- unfair clarification. opportunities that's that this bigger long-term, of unfair, know in very about Thank consider? growth thought forward something you much. have little licensing technology is but early was job growth sometimes. might And That you helpful that and all? be When be of those Have and a you about through kind to vehicles? through thought that just Or about you and Thanks. I stack you then

ramped up the and up on really focused there. these facilities Georgia pent-up well demand we're on now, meeting new getting Right out and ramped that's getting online as wholly and

So really for that's we excited opportunity Pasco consistent to see really online, the to the we and and I'm team consistent moment. coming focus gain. I'm at have what processes, the super efficiencies Washington because with workflow, And excited have

Great. Thank much. you so

I'm question-and-answer closing the and showing over the no like conference Ladies CEO, turn for and further gentlemen, at to back to I'd Anna any end questions. this session call Fabrega, time, remarks.

everyone forward thank morning, in Thank and scale for Local Bounti's further Thank on business look you. coming we this you. I'd our and like the updating grow us progress we to to as you quarters. joining

Ladies and you conclude gentlemen, Thank Bounti's conference that does Local today. for attending. for call

lines. your disconnect now may You