Yahoo Finance Local Bounti Corporation (NYSE:LOCL) Q4 2023 Earnings Call Transcript
Local Bounti Corporation (NYSE:LOCL) Q4 2023 Earnings Call Transcript March 27, 2024
Local Bounti Corporation misses on earnings expectations. Reported EPS is $-8.1 EPS, expectations were $-3.18. LOCL isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good morning, and welcome to Local Bounti's Full Year 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, today's event is being recorded. At this time, I’d like to turn the conference call over to Jeff Sonnek, Investor Relations at ICR. Please go ahead, sir.
Jeff Sonnek: Thank you, and good afternoon. Today's presentation will be hosted by Local Bounti's Chief Executive Officer, Craig Hurlbert; and Chief Financial Officer, Kathleen Valiasek. The comments made during today's call contain forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts are considered forward-looking statements. These statements are based on management's current expectations and beliefs as well as a number of assumptions concerning future events. Such forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from the results discussed in the forward-looking statements.
Some of these risks and uncertainties are identified and discussed in the company's filings with the SEC. We'll also refer to certain non-GAAP financial measures today. Please refer to the press release, which can be found on our Investor Relations website, investors.localbouti.com. For reconciliations of non-GAAP financial measures to their most directly comparable GAAP measures. With that, I'd now like to turn the call over to Craig. Craig?
Craig Hurlbert: Thank you, Jeff, and good morning, everyone. 2023 was a defining year for Local Bounti. We completed the stack implementation in our Georgia facility with amazing results. We completed two new major build outs in Texas and Washington that significantly expands our capacity going forward. We advance the development of new products to fill out our offering. We streamlined our organization and the icing on the cake was being granted a patent for our stack and flow technology, which was a huge endorsement of the innovation that we have brought to the CEA industry. I'll touch on these accomplishments briefly before passing the call to Kathy for her financial remarks. First and foremost is the completion of the stack implementation at our Georgia facility, and more importantly, the result, an increase in production that was even better than anticipated.
The throughput in the facility reflects the iterative improvements that we've been making across our growing operations and highlight the advantages of our efficient and data-driven stack and flow model where we are able to apply learnings rapidly. I'm excited to share that we increase production by an additional 50% versus the update we provided in December, which equates to production that is approximately three times that of a year ago. Further, this enhanced productivity can also be seen in our first quarter 2024 results as well, which we pre-announced today with a 22% sequential increase to approximately $8.4 million. This is precisely the sort of result that we were after when conceiving of the hybrid stack and flow model and to see it operating efficiently in a scaled facility like Georgia is extremely rewarding for our entire team.
The great news is that we've taken all of these learnings and applied them to both our projects in Texas and Washington, both of which have entered the commissioning process with the first seating in January. We expect to begin shipping product to customers from both facilities in the second quarter, and I look forward to sharing our progress on these units in the future. I'd add that these are truly purpose-built facilities. While Georgia is a new facility, it is one that was already designed when we acquired Pete’s and required significant retrofitting to meet the needs of our stack and flow strategy. At our new greenfield build outs, both in Texas and Washington, we have all of our collective learnings implemented from site selection to floor plan layout to operational design to ensure we get the most out of the square footage and ultimately maximize capital efficiency.
These facilities are not only critical to scale up of our growing network to reach more customers, but they're equally important in providing us the physical space to start growing additional produce types. Our R&D and product innovation teams have continued to work on new offerings to meet customer and retailer demand. In 2024, we will be expanding our baby leaf product assortment by introducing several high velocity offerings including Spinach, Arugula, 50/50 Blend and Power Greens. While we aren't wrapped up across all of these new products quite yet, our spinach initiative is on track and we are pleased to have delivered our first shipment to customers in March out of our Georgia facility. We are also building momentum with our grab and go salad kits.
Starting in the second quarter of 2024 we will expand distribution to several existing and new retail partners throughout the Pacific Northwest, Southern and southeastern United States. The first phase of this expansion will add approximately 700 doors of incremental distribution to our current footprint. We continue to work closely with our retail partners across the country to expand distribution further, I mentioned these wins as they reflect the incredible response we are seeing, both in terms of cut consumer demand for a better product, as well as retailer demand for consistent national supply. This is why we are so bullish on our own prospects to be the disruptor in the CEA industry. To keep up with demand today we announced our intent to expand capacity across our network of facilities enabled with our stack and flow technology.
We are quite ready to announce the location and the degree of expansion, but we have plans developed and expect construction to begin late in second quarter of 2024. The planned expansions are designed to provide additional capacity and support our growing product assortment to meet existing demand. In addition to these expansions, we've also decided to transition the majority of our one acre Hamilton, Montana facility from its current R&D focus to one that is more commercially oriented and growing produce for sale to customers. This shift is expected to be implemented this summer and will help us quickly bolster our capacity to ship to customers in the surrounding regions. In turn, improving our overall profitability of that facility to help drive the company towards our goals of achieving positive adjusted EBITDA in early 2025.
Finally, we are also really excited to announce our next greenfield facility in the Midwest. We chose this region because of its close proximity to our existing customer’s distribution networks, which will help serve the growing retail demand we are seeing for our products across the Midwest with the added benefit of improving our access to the North East. The facility will be comprised of a six acre greenhouse that is supported by multiple stack zones, and we expect to name the future location following completion of negotiations. We are targeting construction to begin in the third quarter of 2024. None of this was possible without the hard work and focus of our entire team, and I'd like to thank our group of talented individuals who have each contributed to our success this past year.
Moreover, these projects also require capital for investment, and on this front I would like to recognize our CFO, Kathy Valiasek for tireless focus on ensuring that we have the access and flexibility with our lending partners to continue scaling up this amazing business so that we can reach our near term goal of achieving positive cash flow. With that in mind, I will turn the call over to Kathy for her review of the financials.
Kathleen Valiasek : Thank you, Craig. I'll start by reviewing our full year 2023 results then provide an update on our capital structure before finishing with an update on our year to date progress in 2024. Full year 2023 sales increased 42% to $27.6 million as compared to $19.5 million in the prior year. Our results largely reflected the inclusion of the Pete’s acquisition for the full 12 months and revenue growth from our Georgia and Montana facilities. Full year 2023 adjusted gross margin, excluding depreciation, stock-based comp, and other non-reoccurring items was approximately 27%. Our adjusted gross margin performance was driven by weather related variables at our California facilities that temporarily impacted yields lower utilization at our Georgia facility due to the implementation of the stack towers and general cost inflation, we continue to expect that over time our adjusted gross margin will increase as a percentage of sales as a result of the continued scaling of our business and ongoing efforts to optimize production costs.
SG&A for the full year decreased $18.1 million to $64.6 million driven by lower stock based comp and lower transaction related. As a result of our recent actions to streamline our org structure, we expect to realize incremental savings of approximately $5 million on an annualized basis. Net loss was $124 million in 2023 as compared to a net loss of $111.1 million in the prior year with the vast majority of the difference attributed to a non-cash goodwill impairment charge of $38.5 million. Adjusted EBITDA loss was $34.1 million as compared to a loss of $29.8 million last year. From a capital structure perspective, as of December 31, 2023, we had cash, cash equivalents and restricted cash in the amount of $16.9 million. We expect to close on four conditional commitment letters from a commercial finance lender in the second quarter of 2024, subject to finalizing documentation and customary closing conditions.
Together, the CCLs provide for total financing of approximately $228 million to fund our 2024 facility expansions, our new Greenfield facility in the Midwest, and to repay certain existing construction financing, which will lower our cost of capital. We are very pleased with the growing support for Local Bounti unique CEA approach from these combined sources, we continue to believe that we have access to the necessary capital to fund our operations, complete the construction of our ongoing projects and reach breakeven adjusted EBITDA in early 2025. This is a very important milestone that our entire organization has been working hard to achieve. We expect that the combination of increased revenue contribution from our new facilities decreased SG&A costs of $5 million and decreased R&D costs from shifting our Montana facility toward more commercial activities are what will get us there in early 2025.
Additionally, we continue to pursue opportunities to lower our cost of capital and replace our construction financing, including sale leaseback transactions, and our work with a licensed USDA lender. As of December 31, 2023, we had approximately 8.3 million shares outstanding on a pro forma basis, including warrants and our employees restricted stock units outstanding. We have a fully diluted share count of approximately 15.2 million shares. With respect to our outlook, we are waiting until our first quarter reporting cycle to provide full year 2024 guidance. With the recent completion of growing operations at our new Texas and Washington facilities, we are now moving through the commissioning process, which will provide us with greater visibility on their contributions this year.
We would really like to have that completed before providing the market with an estimate of our 2024 revenues. Nonetheless, as Craig mentioned, we are off to a very strong start in 2024 with revenue expected to be approximately $8.4 million for the first quarter of 2024, which represents a sequential increase of approximately 22% and demonstrates the enhanced productivity that we are realizing at our Georgia facility. That concludes our prepared remarks. Operator, please open the call for questions.
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