Local Bounti (LOCL) 14 Nov 242024 Q3 Earnings call transcript

Good morning, and welcome to Local Bounti's Third Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note, today's event is being recorded. At this time, I'd like to turn the call over to Jeff Sonnek, Investor Relations at ICR. Please go ahead.

Thank you, and good morning. hosted President Bounti's Kathleen and be Craig Executive Valiasek. will and Hurlbert; Chief presentation by Chief Local Officer, Today's Financial Officer,

forward-looking the of Litigation are results Reform The concerning statements forward-looking of These beliefs XXXX. and well harbor today's statements a future during other as Act are of meaning than considered statements statements. and within events. statements. assumptions risks results could Such materially subject management's statements provisions uncertainties current expectations Securities forward-looking comments the unknown are number safe facts as in of based Private known call to the on All to that the historical made of statements the from contain discussed and forward-looking cause differ actual

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

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

with to call Craig? to Craig. turn I'd like And over the now that,

Thank of everyone. increase million, third In approximately you, of $XX.X year-over-year. XX% an we delivered and Jeff, good quarter, morning, sales the

with but results and growing retailer our in customer reach, this to However, our engagement meet of demand. our together capacity been I'll facilities determine new customer to active to completion to can our scale work specific for of fell us which these forwarded a good reason, short expanded how was With expectations optimize describe moment. with we particularly the we've

mix such Arugula among we meet seeing plans this to specialty our decision strategic preferences. heightened growing During growing demand demand. others, to reworking align our More made for the customer third the we are our Spinach, as reconfigure quarter, with and and are current specifically, to products,

the ramp facility are in the the our plans the to implementing facility, third of we for for our this and a customers our caused are to capabilities broaden anticipated our XXXX. at living shifted second product in demand Texas from to the lettuce This working section into continuing to grow our adjusted Although line of we on meet quarter products. higher-value quarter EBITDA time new dynamic achieving positive shortfall relative expected

investment However, us customers believe specific the phase These on long performance this customer for. strategies. evolution that of led to with we demand deliver are products high each more that improved looking our our continue us by aligns to higher positions measured next term value expansion, decision learnings to over and approach adopt distribution velocity, a to have focusing ensuring

Our ongoing philosophy of efficiency across is existing our we're evident driving capacity utilization how network. capital in optimizing

R&D mix facilities, from growing completed Pacific facility our its serving Northwest matches transition Washington production. regional targeted while a commercial that is in with has Our the demand Montana product preferences, to

third contribution fourth operations processes the performance the to was facility results of basil commercial as is introduction improved the toward Though is its we with starting the fully Montana's oriented modest established now to quarter. in quarter right contributing and commercial production,

efforts which performance, continued product impacts, efforts we with driving optimization supports reflects margin the and pleased Despite and our margin XX% efficiency gross quarter. reached our our our with improvement cash This trajectory these operational temporary combined are achieve on expansion in adjusted third positive flow. broader focus to

quarter. expansion of another in successful was key The product highlight portfolio our third execution the

drives value, drive exceptionally economics. have to Arugula shipping lines, mix growth the new began our customers, unit our third offerings interest, ultimately which particularly our which to efforts high-velocity end by strategy Spinach lines significant received generated generate been and customers product validating product quarter. shifting of toward superior the new our well Our These have customer to and of

more to of several their X achieved strengthen full relationships facility, our Our line We're continue Grocery carrying Texas than products stores states. locations XXX Company and significant with Brookshire expand. Year-to-date, have also we produce commercial across our to Mount shipping commercial from milestones. Pleasant

fulfilling centers from Texas our are and Club, facilities. We our both agreement distribution the shipping regional with Georgia are where Sam's we to

also in the grocer large SKUs. retailer both success presence Pacific quarter, are our the of of are national expanding great Northwest having our a which all We selling third in mass with and new

expand, of facilities customer Salad also fulfill Kits Grab-and-Go the agreement orders. to a be recently new where program retailer all H-E-B. with we Our to signed our continues newer most we've And will recently utilizing

have we recent value the Additionally, controlled proposition believe developments our reinforced industry approach. of environment

and increasingly food important high-quality advantage, recalls supply traditional in competitive retail challenges, to in disruption, further initiatives, safety our face the to resulting strengthens agriculture operational As consistently improvements combined ability partners. our and our with continues our costly market. provide safe, strategic outdoor to becomes positioning produce This

growth. committed our closing, In deliver executing production aligning with we capabilities with demand, are phase on positioning of growth focus profitable a to Local next Bounti to customer sharper sustainable, verified

positive calibration line EBITDA out the achieving and XXXX. this of shifts adjusted quarter our time strategy for While second to

We our to meaningful disciplined allocation value our will operational excellence for long-term are create capital confident stakeholders. that approach and

I turn over will call now that, the With to Kathy.

I'd Thank initiatives start our by to you updating related on to our thinking phase how growth. are strategic of like you, next about we Craig.

our strategy & taking our is revenue-generating central and starting we're This manner. core approach As maximize our in model. deliberate since a heard Flow capital-efficient to company the to potential optimize you operations from a to been has Craig, further Stack

forward this facilities have X completed We simultaneously taken We operations. and Texas. in new Georgia build-out transitioned leap year. Montana to commercial opened our huge a and Washington We

their a lift working our the want to on and also I business team, very them in demand. up what and entire by to and recognize was industry. thank their contributions This production was for meet period incredible an We our introduced several products new dynamic are and scaling

is goes exercise. our With advance facility which with these broader efficiencies, accomplished, taking the our to network team time our operational milestones hand-in-hand further optimization

offtake the with we demand Club. a to We capacity with established have clear agreement similar Sam's on aligning focus customer specific

are terms is and good it of in us to products. with considerations facility Moreover, as align to plans. also how products, we utilize new new of ensure for partners best demand customer meet capacity ramp right problems to us new up our to distribution products our These down there production for retail make requiring are working with for the each customer optimize our specific slow to closely that long-term decision we but are

footprint out ability entry. while is with to facility's tech-enabled to expansion collaborative words, generate exemplified regional This Midwestern position improve our working We're approach to and to practices. are specific This are synergies capital customers. market performance, their interest our attract flow looking which through in we generate other our In our cash continues ensure closely fresh, as both shareholders. our partners capabilities design to our growing assortment, across retail high-quality broader distribution networks. our This ultimately maximize important structure planning our to to SKU accelerate customer positive each tailored commitment new market from drive strengthens delivering existing capacity to long-term complement products reinforcing particularly strong network our to farming we approach strategic is and sustainable our roll for that produce and

time these approach of new partners, to financing As potential the arrangements customers. strategic for adopted patient existing important with are and making we discussions more a ensure we've a with our we that evaluate variety

that with move at we the compromise by line best the commercial letters closing our forward that efforts would financing this time ensuring transactions engaged previously elements to to long-term drive success. the bound time partners resulting capital relative near-term them In contemplated to conditional multiple our believe with goals agreements expense initiatives this our company finance growing this These position objectives. have evaluation premature with not decided associated commitment lender remain approach, disclosed actively short to the We undertake to support burden a we have with had network. while strategic in run and efficiency to we our on interest to immediate the optimizing execute other flexibility with we while our is in for

Now quarter third shifting to our results.

$XX.X of the X% XXXX. and sales to million in compared prior $X.X in million to quarter the million $X.X Third XX% XXXX to quarter second year as increased compared increased

the facility reflected its our Washington degree, and results lesser Our sales production in Texas and growth to following largely a sales transition. increased Montana our facilities and, Georgia, from from

decision to and optimize from fulfillment optimized. margin differentiated resulting Thus growing our opportunity products, revenue base than wasn't was with demand to in meet customer production our the that our contribution our to Due lower mix fully of realign Texas production expected.

anticipate the While early optimized this project run of underway, XXXX. achieving rates we is until don't second Texas in quarter in

stock-based and was gross comp, XX%. approximately adjusted margin, excluding quarter Third depreciation

we see and gross margin performance our ongoing the improvement pleased reflect margin note see in our coming the quarter. growing were we result point talked third to we optimization quarter sequential scaling a to up adjusted improvement continues optimization mix with XXX basis costs margins second And associated also as about quarters facilities of additional expect strategy today. While that of to in I'd the from to a

Adjusted $X.X for quarter the SG&A third million. was

Our other influence stock-based remove depreciation costs. comp, and adjusted and amortization nonrecurring figures of the

While that logistics observed year, mitigate. cost SG&A. we the expenses I'd working note lower are base located this through we cost-saving and of and resulting expect our to in the to that we transportation from costs continue the quarter, we to the Further, actions have benefit fiscal end within higher third insurance

as of that as be you scales business our to we efficiencies realize can related and leverage drive will synergies. higher longer these believe dollars costs, can to see SG&A and term So expect we we grow, source which we a operating realize

the the was $X.X which increased third from million period. prior expense R&D million $X.X quarter, in year

the prior However, year included is in these stock-comp million and period period. $X.X year depreciation noncash in $X.X million and in the of amounts current

basis, $X.X So cash is million on a spend a year-over-year. modest our up R&D

our offset our the been with products Montana our facility at our working of the this new reduce While facility, transition network. was R&D higher scale-up with we've R&D partially commercial spend across associated to by spend hard

to As down. with thresholds, meet cash will products and our spend R&D and development conclude production begin their our those trend ramp associated

the results expect be achieve visible in quarter in our positive dynamic to term. to our fourth adjusted EBITDA and We this support near efforts

XX, improved a cash, in to and restricted of cash $X.X million. year-over-year cash adjusted structure equivalents EBITDA we Our by million. amount had $XXX,XXX capital as of the perspective, From loss $X.X September XXXX,

provided basis, forma Our stock shares. $X outstanding. adjusted end, to restricted quarter we pro end fund including X.X outstanding, capital. diluted fully be of warrants a as efforts quarter approximately supportive On XX.X of shares had a count units positive our lender of million to continues employees' an to and our million EBITDA has we share additional and have million reach And third working approximately since

EBITDA adjusted about maintaining Our sale XXXX. USDA-backed discussions very existing path operations QX financial capital achieving arrangements financing and with solid our and in foundation. a potential new our and strengthening We're clear. clear partners leaseback financial smarter our supporting of options. business structure, positive forward through target optimizing We're of is in including All

Our are want available, current embark of projects. that as ensure ongoing we capital And I'd to we excited we position the the and we operations both about to our making we position reemphasize in growth that also while we the existing many best run capital have next supports best can business growth. on short the possible decisions are phase opportunities

aim resources, customers growth. alongside we're ensuring is while financial and to meet well-positioned to sustainable expansion being simultaneously Every our grow our strategy, with needs strategic we distribution by connects to metrics. demand Our make and directly customer improving market decision our our growing

XX%. With respect expect approximately approximately the fourth implies which in $XX XXXX, million, quarter for achieve balance revenues growth of the we year-over-year range of of to expectations our to

this expect several key We to contribute to drivers growth.

our following and its ramp production Washington optimized ramp facilities First, to expected mix. Texas further product to Texas with continue

Second, by acceptance. expanded customer strong assortment resets our of customer new products supported we and meaningful contribution anticipate from new

yielding growing Montana our on margin our improvement. operating production to And transition additional customer Third, to demand. commercial facility finally, efficiency to meet provides continue is focus capacity successful expected

quarter. These in in sequential adjusted both to us and performance factors fourth well EBITDA deliver position revenue improvement the

forward our to focused more In really of customers our and grown We EBITDA remain quarter. on prouder to to be consumers. adjusted progress team's path also want organization. We you. recognize fourth in thank of produce our demonstrating help couldn't the who extremely us and Thank efforts closing, deliver our to continue to mission our I positive on look locally bringing

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

of line Instructions] Oppenheimer the Company. & Owen [Operator Our comes with first question from Kristen

revenue to the it discussion. just I XQ specialty? whether ramp production XQ, growth it we the think Is pick should Kathy, in Is that of SKU into terms XXXX? the to that XQ ramp? the about big mix pricing? it Just how throughput? we Is towards this in of of drivers on of revenue wanted the remarks about your prepared some should new how And of think ramp, it's up end buckets from and

Yes. Yes. Great question.

of morning, let's but take some and sort just a little comments, want of level of and just this step say, our a iterative frame this I bit it. and right? recorded start frame to back set just And the off just So to sort just conversation of

brought So keep and Texas X months, in up facilities last mind, X in new we in the Washington. state-of-the-art

are So customers power we large the of, now right? box at H-E-B, Walmart, holy X that facilities almost last cetera. are cetera. customers, all scale, scaled we Amazon, the grail, blends, et have And the SKUs right? full Arugula, And our stacking months, Brookshire, for our X out big et buy speak, retailers. Spinach, customers, who to the are to for These Sam, so Albertsons, our Safeway, in

we amazing would and we these be things want say able have, right? these buying When built we we considering But sampling from All right? of X or time. are new it's take these little SKUs, months scale already what SKUs just is to take our didn't even either they a time, I these know these but buying, us right? So to customers that ago, are facilities, things

like. to of don't more to these Texas these the much XX but later these sell them, All scaled we're customers are bit we time, bit so kind the they of say right? than them going right, little SKUs than And QX, which Washington. Albertsons, new Walmart scale to of QX. did takes been days. a more in Washington Washington, even a ship starting little a takes decisions. we they we So that's selling in right? like things bit little has we out and They in We SKUs, make to customers. They them, what XX And scale in so when in these later okay? Texas new SKUs grow or -- we then December, So samples was to We the already on. products

going the When value didn't up. were we built was later So Arugula saving Texas Texas right, to we capacity facility, optimization, that SKUs sort have we for SKU come facility customers about a more, of again the that right? right, realize all to

So -- it's that to is is of the to the different like just -- new so grow the section these new capacity -- SKUs. decision Texas facility Texas really some the SKUs decision acres. for It's in X those by literally the It's these X save a facility. impacted

Kristen, other one I said think Kathy keep just SKUs add-on. in us the also after sought with to mind those thing that One are not Arugula we're current products, where to it is very in allows very that customers us Spinach, well. able more standard allows to not well. specialty further as maybe and yet our with we're diversify that products, places sell having in our those products

and door us sticky in So our customers. get foot it new those the with gives allows to

point, takes Kathy's it. to several And time. it has to it So benefits different

great we think what just make elucidated was in it to say better in of Right. further I than right? when takes get we And don't thought. lower of then revenue my had I points, acres X planned, right? largely would It's because it we're And second would -- out sure we going the couple statement than because Again, script. much just utilized that I the a make So really let -- the prepared I have -- time. I also, QX want better that to the me

be with the Texas, so scale right? new we QX, new Spinach want again, to in of offer of will it's out all of we're we the improve selling like would we'll doing as in EBITDA facilities much SKUs of already SKUs out thought. of even we I in -- R&D there and Arugula selling of each But incurring and the and we grow out And of more later Because, largely facilities, sample costs out especially different out a said, because the loss the state-of-the-art have able date. each were of we're X didn't facilities, -- as December to at Washington to so the be Georgia, then

this just is in any goals not expansion context Help that corporate choices thinking which I of run the I'm goals about can really revenue for guidance capacity I'm you question, are what for make for already of necessarily understanding XXXX? are looking have provide Just mean, time frame, us this about kind but XXXX next additional understand now? to some there. here. I appreciate for How adjustment? sort EBITDA that color. you've the of temporary commentary long the setting or there what your are up you talked for you're

Yes, yes.

want with get facilities, So can. our we much existing our obviously, utilization as possibly as to we up

operational much have When working gross with we about tightening I'll saw in quickly. quarter We it to year, which the go, in very margin. on are XX and recorded you efficiencies, and our next we times it say this we said again, comments, the think increased

We have to go go fast. slow to

listen thing to because customers that tell they what okay? the every have are saying single We us new to build, drive our

So It's a which if the SKUs, growth seems new new SKUs everyone much have shorter. these they cycle. different to, like

And change within the build significantly. -- facility. how doesn't drives so we that equipment it That it. facility, It It does it the do? the but hugely changes does what the change

to around what drives and so it facility, our the decisions and So what we're say, right? Midwest X does I our the doing -- is that are X customers at to telling expansions over listening to us, the want next basically, is, it months, what

terms facility say new which facilities. the of Midwestern that Arugula, spring in But buy we a break to even going want -- when of right? other et that in to in don't mix want increased the also, customers on volumes want of a SKUs, then they Because words, I facility of increased different process to of drives kind out who's ground each have cetera,

financing And to we're way mean? better but agreements as of doing offtake as because with have about sale-leaseback talk our what relationships to for that mean And our we allows us right, we're Local means And set It customers, them that Sam. we've agreements construction broaden offtake it said, to what well SKU Bounti, means with in does to broaden this we're able our listening then right? financing, that customers, also part Kristen, what also, does to as okay? likewise our like garner able

reasons But And that's the the CCLs backed talked funds had from about required past that I the so I right? listen were because hope... builds one financing frame. saying our we of so within what customers that a why was to the CCLs we out are be deployed that to lot. are those because on close sold time we want to didn't off break certain in we that before have ground, a the That to

there, Bounti. for When improvement. point. Kathy, show XXXX Kristen, up was it will think all a you margin to -- I just I problem you get right and that operate Local in We whole not excellence, which lot Operational on goals to think, said just That's excellently, happened closer happen to with Farms saw what that customers. going just Taylor McDonald's hit. your

get the to we really What broad that's closer we're getting us closer can improve and to and So our that now products, is to across doing deliver really margins and up. do continuing mix even right going of consistently if customers. a on like

by platform, so team a across Gill, kind under COO. have Surjit together whole pulling things of doing And that. operational that our great from He's all that really great Kathy's leadership. so excellence, happen we led a So our whole job -- many

our of more customer the a remove basis customer some been current the think two, on really our that new solid does, nature our that to number together out goal And call, around I conversations with relationships do business the we how consistently has very a customers of leads industry. is the in deepen and anything what longer-term across if customers. history lot of our base, now, transactional fall of produce of this work should And to we're all base

that for out. having us customers that, SKU what And a to to ultimately that day day to relationships across means and allows then benefit their longer-term in and from product broad deliver is enjoy great level well

second And are EBITDA those to so things XXXX. us drive positivity, of quarter to believe, going we the in

-- really team And is the that. we're excited about and laser-focused very so very, whole on

like it we're a And we up seems kind been to putting all this even but little a help we've more that of our it's Kathy flexibility. when it's going tighten than so different bit our together, customer-driven saying, a it's us have were message I positive like really what approach, and facilities, of design we're

Local remember, Bounti why people other can that And grow things can't.

and We flow. stack have

as Some et of much have in greenhouse, the time the products cetera. et don't spend cetera, to

process. So to our we're getting really excellence customers operational get of advantage and our to technology closer the taking in

Our line the Markets. Capital comes of Lake next from Street question Ben Klieve with

'XX, First suggested remarks would QX stands wondering said Texas that the relative as prepared that optimized on Georgia one, run Washington the early rate, Kathy, where hit facility and facilities? to you an you your

sure. Yes,

So is capacity full full at full Washington, utilization. this utilization is Georgia, at quarter.

Great. couple bigger then. picture questions of Okay. A

First, regarding growth access capital. to

you were stage me having than with conversations were partners, on early actively more would CCL those You it seem partners. that to are you the that with multiple but those engaged potential prior noted

where Or with if once new you you're providers? in you curious kind when location cetera, pretty quickly? conversations you solidified? be going early in conversations comfort that with the pretty can design, secure have swiftly customers to think those to conversations are degree the able that site Is and you you capital et of those you to that what talk just capital have pretty I'm are and your of So the about ability the secure

great They too providers, constantly to about and and -- that -- Midwest our committing to asking too, more towards XX%. much right, under that they capital interested facility. it. capital existing these into the are you don't many Cargill provider providing That's the a we thank for the am I are Texas to that it question, is There's facility, such often. capital facility in talking capital talk covering a bought

these sale-leaseback have of sale a talked to, them. I'm mean that the the leaseback. a that All Georgia honestly, talked from there QX sheet I customers be just from for about we're about to we I term certain of again can't I the of -- the I on call. all had facility just all update companies term all are because are that on feedback we waiting on we'll things to able call, hear we QX talk today's sheets

other facilities, to anything, large have of We deals. customers easier each size for of the the expansions. But that -- to are and of wanting in drive the to do come I'm kind sale-leaseback it's also the which if me faster

figure want sale doing of construction and of to to facilities. the you California do on several So right? the And with leaseback know, all on they store have as top And sale others, we leaseback, I a talked them the the as size time, out well them. and until anything expansions and what we I we the as actually need have to our several I'm term facility. hear the we sheets closing on customers, Midwest be on not

I great that... So hope question.

Ben, it's who's we The a One couple just in Bowery down. to too, environment mind, had yet the interested weeks because agriculture make ago right? the when are what's consumers they're to wow, there's in look who's level to really the at for and this of customers product. the way the happening it, we at the if industry. And see more other pull not of interest going customers more more the they and saying, going Obviously, up are and keep thing Craig. product. And the here, industry, to it, make controlled going inside industry, more reacting

aren't -- some keep we've customers, mind you so concern it the got there around kind yet the but for pull of product. people there's of that is in if a what that So making the

enter who this, very who's on as who's I'll the get that it just to to we based are keep knowledge. more and a level, high conversations So in the happening, customers and going at and figuring standing, willing is what's be zoo, they're further into into out

we here IQ and CEA chasing deeper are studying couple The raise I'd they're is conversations getting as space, very chasing every almost emerge right? So point they're -- customers our kind the ability product, to quarters, to to with customer to space that. great like of customers a Kathy's the very, the be because are high easier capital the large of over because our smart next very say will of almost customer in fresh,

And think capital not so with that point, but last it point a -- our is you're going on at is year at door we're we'll to that and year. the I path going be business be was this I positive concern, believe offering raising than always what find to the where EBITDA, of that knocking is to easier

of there all come. We'll Okay. look updates quarters That's the makes the very forward one Midwest. more helpful and expansion to in the sense. to I have more around question

the what's maybe a bit months than if expansion? and internal the today it's configuration the I'm that, little mind? Has about what same the the is What's you Has Midwest just could your it out was different the The characterization what I X facility bit on here further is facility? same different? and ago. that's size the fair a a wondering of think state changed? the in changed? Has changed of site elaborate

Yes, yes.

So the site is same. the

take large want being -- cetera. would amount is reason We through, our okay, of the couple we've on at of under in like time customers site, bit site PSA the little the capacity and are site been starting -- consideration. And site. it narrowed size find it's the of honestly, the us of et a did finalizing great and a diligence, The is But to a the that working facility.

the not or much how to for decision whether the of it we facility size to capacity? and that going And then so make we have we're that works increase to if increase design do more the

all turns these more the of faster SKUs with Arugula, farm drive additionally, There's those other SKUs. turn. Spinach, And then a

or that's yes, decide honestly, because to and going who we reasons to why capacity is go that so the broken whether the And ground conversations not is increase having, the size. we need one to we're the have of we haven't to

it. Got

good. Very wrapping in look of dynamics, next luck the I'll best year ongoing these year, to queue. tell forward we'll Okay. get back updates up Well, and

gentlemen, you. time, showing further turn back comments. Thank any I'm like the and closing no for I'd at call Ladies end management questions. the to this and Q&A to session

our you. Thank thank would Local a in everybody we scale and like for grow great to and Have day, on you. we I joining forward look as updating everyone. and Thank the further us coming to Kathy Bounti's today, you business quarters. progress

thank Thank you. This do conference attention. We your for call. you does conclude today's

disconnect now lines. your may You