LNDC - Earnings call transcript Q1 2018 | Lifecore Biomedical, Inc.

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Operator

Good day, ladies and gentlemen and welcome to the Landec Corporation First Quarter Fiscal Year 2018 Earnings Conference Call. [Operator Instructions] As a reminder, today’s program is being recorded. And now I would like to introduce your host for today’s program, Molly Hemmeter, President and Chief Executive Officer of Landec Corporation. Please go ahead.

Molly Hemmeter

Thanks, Jonathan. you call. Landec’s thank year quarter and earnings XXXX morning for first joining fiscal Good on call me Officer. With the Chief Skinner, Financial Landec’s today is Greg

meeting today’s with to Form XXXX. income. differ that for These exceeding risks the forward-looking expectations uncertainties During company’s in XX-K could and materially. may Landec our Exchange expectations outlined solid risks including filings that results fiscal certain first Securities and had and statements net actual cause are we call, the for quarter, involve revenues a for make Commission,

for Our significant Salad first objective quarter. million as business the performance launch our vegetable grow natural accounts, a by driven foods salad Eat ago approximately Eat for Fresh billion XX% quarter XX-week Eat of market U.S. last $X.X our and XX on and from year within salad retail U.S. of substantial revenues The compared first increased kits Apio commodity Smart Total fiscal setting increase quarter year in gross sequentially American well its Kroger, sales in billion July business, Smart Eat for ACV delivered in which kit XX% biomaterials and ended Apio, long-term resulting includes progress retail or XXXX. quarter XX year. XX% to X% and by U.S. This of increasing XX, goal profit salads gains fresh the to to other is the in Smart the growth to ending in our within XXXX. sales XX, double-digit demonstrates with Apio objectives. $X.X multi-serve Eat stated multi-serve Smart retail the from packaged the Walmart, for North sales compared salad Market salad is compared salad U.S. and increasing This salad percentage X% increased Shake-Ups year, achieving of all the off over well or O our salad Eat our strong last total way multi-serve XX% Olive retail us by $XXX,XXX essential volume, is May the market. Smart or market period Smart Growth At to to percentage U.S. XXXX as operating The X or salad a XX% distribution to achieving retail $X.X low was points weeks first to points growth from up performance. business, for start, Lifecore the robust was market. XX% kits

ACV ourselves with service to our and Smart with Eat aligning with healthy. available changing products. consumer to partner the we strong it we consumers, partners growing all make strategic online make purchasing expect retail ACV continue our brand, the strategy, salads Apio, continue the Smart Smart the new to coming to committed customers. Smart to for approximately as that its Consistent products multi-serve salad all these in ongoing is products including of In Smart through marketplace. important In is Eat Eat Eat innovating efforts to retail kits is Canada, months to fill U.S. behaviors our customers Eat shelves channels, easy over delicious the It eat that XX%. increase We with are to innovative

in and online its people kit New online including Hello bags, available offered Utah salads is Colorado, this in not the California, way and EatSmartAtHome.com Mexico delicious. and EatSmartAtHome.com. and parts Oregon, geographic Smart month, the selling service consumers Western is on to are Idaho produce. select and also are several homes their at direct-to-consumer a products and Smart meal consumers The receive Fresh retailers, vegetables access recipes a where refrigerated products easy to X-day vegetables year, nearly in currently all vegetables provides currently remaining website Fresh. at on service X including of vegetables from Nevada States, initiative fresh hours taste of own unique for weeks Apio companies, such delivery throughout packaged, at launch This vegetable with times. trimmed Apio it the Eat home X-day The being convenient of Eat of With Earlier makes our as experience Amazon ensure XX available trimmed are assortment new shopping are make available and life. fresh of shelf We announced with Wyoming, or areas of within headquarters all live broad washed, packaged to to site trays Guadalupe, shopping in delivery retail, the of Arizona, who or and offers online premium washed, Texas. and a but package most California, their fresh offers that

refrigerator that, the life fresh nearly X With ice and packs installation delivery a your packaging box XXX% service, patented EatSmartAtHome.com Just consumers. with freshness extreme delivery to to stay recyclable. home extended for that and The think commitment shelf vegetables in delivers combined are BreatheWay of Apio’s all curbside weeks. technology, sustainability,

visiting EatSmart.net You Online on clicking Shop directly access site EatSmartAtHome.com the by and can to going the tab. or

higher importantly, formulation navigation resulting also to income can operating Values, at first the first Sustainability, Core due last main Most the been Lifecore. at in income to typical anticipated high has quarter year Lifecore providing menu continues in supplier income beyond exceeded which historical consistent and much revenues be aseptic Back a or and difficult-to-handle shipment clicking gross lower with premium website operating Nutrition new that HA fermentation, for acid, revenues updated margin non-HA development that its is hyaluronic for for the fuel operating and development for business its quarter HA growth. expanded customers net on with found operating will first the content differentiated both the become loss At from that quarter as to and products capabilities and has was Lifecore expectations, profit product moved the or performance organization, expectations, services Olive, tabs. and profit $XXX,XXX. integrated to by $X to and materials. of field future Lifecore a Giving contract quarter with million fully Lifecore of and O continue visiting medical gross projects new EatSmart.net add Our manufacturing a of that CDMO, quarter, was second and

$X customers profitability distribution new gain this to year. to and to and expect starting Olive revenues to are O increase new at O million still and by million achieve $X Olive We

me fiscal Greg to beyond, highlights. our call let about some over XXXX Before and turn I the go into for more detail for financial plans

Greg Skinner

Thank to of margin new which in completion to to revenue. quarter the due million XXXX. of at or lower income you, decreases higher development to revenues Olive, the revenues decreased in from reiterating from and packaged guidance. addition the the packaged in in offset in during this Apio’s gross revenues in the a licensing the on income mix of in the fresh were last share and Based $X.XX margin reduced – of investment quarter Molly to quarter $X in fiscal Lifecore fee the two decreased of million for fresh net were $XXX,XXX XXXX. These corporate of first or our ago X% year; fiscal to a operating the license agreements due $XX.X to were revenues market results increase XXXX our of was projections first operating million partially ago and acquired offset per at fiscal decrease in at fiscal in $X.XX we during to per export income the quarter; by $XXX.X G&A result quarter revenues first gross $X.X that in expenses of fair income was due in of in the company’s a or first, Consolidated $X.X profit which $X a business first lower value in and in vegetable income good fourth year beginning in a Windset the of stock-based a in quarter agreements an unfavorable and first increase the quarter. personnel of in $X.X O product decreases in These increase corporate ago XXXX primarily tax in vegetables XXXX fiscal million increase second, million to million quarter. $XXX,XXX decrease due $X.X and export or XXXX a to in increase business $XXX,XXX Apio’s $XXX,XXX in decrease of: business decrease to decrease XX.X% XXXX, completion two share million and year net compared decrease revenues; $XXX.X revenues the share and first, shift, no third, due decrease fiscal million by a a per profit compared $XXX,XXX of million from due The decrease in XX% compensation; to at morning system of partially increase was at year quarter year $X.XX compared XX% during during everyone. Consolidated The Apio’s XXXX expenses. revenues first due its to primarily licensing a quarter the are fiscal an remainder fiscal second, gross third,

X% to growth fiscal continue digits, solid million. annual compared growing consolidated X% This in double XXXX. low based to to by growing revenues increasing to X% products XXXX our O X% increase to is and $X We expect Olive on million $X fiscal Eat Smart to revenues Lifecore

quarter the to million $XX.X realized export $XX a in expect to to continue in that core businesses first export Apio’s during lower-margin business. of revenues $XX decrease year, the Apio’s was majority fiscal which decrease million We revenues million in this with and

continue investment Windset, a $X.X million. Windset market Windset When an the in resulting to to our range XXXX. unchanged For combined from to the fiscal of increase earnings with guidance XX% in million dividends, we consolidated of $X.XX. remains total per $X.XX to expect income estimated to income fiscal contribution share XXXX we $X.X increase in project XX% compared value fiscal estimated in our to million net with XXXX of fiscal pretax fair to XXXX, Overall, $X in

flow consolidated of cash $XX operations to $XX million $XX million expecting from million. of capital million and expenditures to $XX are We

quarters. at second impact year shift Lifecore projections. shipments XXXX projecting fiscal shift per to of on range the are we XXXX incorporates XXXX, share. fiscal product million net and of revenues the of from $X.XX quarter to be a to fourth This the fiscal This has in Lifecore’s second million quarter in to $XXX be and the in to income the third fiscal impact $XXX no fiscal guidance For $X.XX

the Let call now Molly. me turn back to

Molly Hemmeter

Greg. Thanks,

California, and weather in unprecedented the the last months, moisture high and vast high have to U.S. year, of this and storms Irma series to faced recently, have U.S. Hurricane several of with record-breaking a further widespread August, of devastated disaster power late its territories Mexico a several Harvey, growing outage temperatures. events. tropical excessive This Mexico Hurricane Hurricane natural within Starting Over by flooding, regions winds, the and and Maria, and series generated unprecedented humidity complicated most damage infrastructure. June and

earthquakes. in high-magnitude addition, of Now Mexico series has a suffered

Our worked Eat the thoughts to rallied to as been who those by that victims to donate the and go very have all affected hurricanes. and prayers am fresh I team Landec these of whose out employees proud salads a tragedies. Smart lives have

in bins Mexico. personal deliver are victims earthquake currently employees collecting Our supplies of to to

facilities Landec were We harmed. Landec are no most extremely that thankful were and importantly, damaged employees no that

weather challenges growers to our throughout U.S. Apio, service for disruptions with these teams and diligently minimize Apio’s supply and customers. Although customer chain, conditions Mexico sales partner to cause high-quality did extreme worked to

preplanning, fiscal guidance. work XXXX said, our As significant see reiterating of and our base, on are fiscal hard increasingly XXXX and a grower we as diverse result impact results, we geographically an no Greg year

food olive Olive, Apio, me a natural all-natural about phases. business; business. tell step premium our up wine is back rapidly packaged business and take business more foods currently The and oil transformation X distinct and natural and our consists our of made business. O This evolving of vinegar our Let of vegetable fresh

on capabilities further and fiscal began We fiscal R&D, transitioning revenue business the products Last new reorganization core a lower-margin developing produce new historical in adding Innovation of and identifying launch XXXX phase our company and trends our deliver to with retail addition VP lower-margin and support the in historical introducing profit year of effort to XXXX force, while eating on the of plan innovative complete the first year, advanced true rightsizing rightsizing ongoing fiscal our single-serve from we of these healthy focused products growth. a innovation innovative consumer to to our of of and vegetable this and a salads. The products value-added trends. sales Apio is company commodity focused that

our in The year. began second foods and of fiscal business this XXXX natural phase of in the transformation fiscal continues year

during The our needs expanding fresh XXX% that Label from second all second display the material food Clean phase all-natural last Eat characteristics. less be to fiscal from produce products vegetables sourcing will outside of to we product Eat include To from products natural initiate meet packaged launched volatile and involves consumer raw ensure Smart higher phase of the ingredients. line initiative our Smart made margins other year, that

olive of products the new natural Olive, with synergies our California-grown to development product ingredients to new and group We also to fully product this and as O The the this in acquisition Apio natural Landec position focus added on Olive initiatives and supplier the wine a to was O vinegars, ventures the one acquisition of We food group. lead leader traceable. strategy innovative of with that intend oils initial of – leverage are area. all-natural

beyond. transformation, natural food second fiscal itself efforts and phase for of XXXX. Apio’s targeted for launches are finds the fiscal in XXXX, a in During new in position space accelerating year product fiscal we in in preparation our strong the XXXX Landec

begin both have to forward to and are leveraging years investments the We momentum. we X the excited past personnel made of many create over capital in

food both sales senior our healthy to demand, services in of and X from to companies areas benefit volumes our production management to year, positive the future higher-margin Apio we filling development benefiting and manufacturing. of product at time. development and the to continues Apio from sales, future of we growing we capacity Lifecore meet among trend of During marketing, business, gross and personnel This momentum implement our material specialty margins capacity our to added other medical last and business and which Lifecore begin over strategies. products also eating years, increasing and trends, increased expect outsource tailwinds both Similar pharmaceutical drive increasing is Lifecore and to and fiscal this growth

year, value for is on tomorrow. long-term products number fuel with is in focused the Lifecore positioned growth. This With a pipeline to the its of seeking fully as industry new growing FDA CDMO its approval, integrated augment well to fiscal and Landec products delivering today

We and Eat for Lifecore, Smart At difficult-to-handle to biomaterials. have Apio, – our new new we make will and it to that to and of that launch will we innovate. continue easy products will processes meet the consumers delicious capabilities needs At eat healthy. customers add

We on drive in our invested and are to also volumes capital. facilities production return efficiencies increasing on of each increase our focused

we future are Finally, implementing and drive that defining will growth. projects

needed spend is support million to capital remaining expenditures For but allotted spend future million to we expect fiscal to of XXXX, for million. to fuel is the growth. annual of capital our this capital, projects maintenance Approximately million $XX $XX $XX typical $XX existing

three focused platforms. primary forward, we growth are Moving on

revenues our expect business, at X over low in average, biomaterials Lifecore grow, years. to First, rates on next the double-digit we

our adding deep a customers. demand As programs, in Lifecore growth several the part from pipeline to months business, within will next development with both which and we along from the CDMO to of new next new vial-filling future expect XX the needed capacity continuing be syringe-filling the of months, meet capacity the transition existing of is over

we on force X also fast-growing With in our average Second, low eating double-digit sales on the salad over next innovation in within our business continued revenues products to our space. trend years. generate growth Eat Salad Smart are and the expect place, new healthy

higher-margin fresh explore adjacent to Apio’s to in into produce, order expansion products, Third, supply we will national chain. natural to food food leverage continue

summary, customer of As to innovative investment. and these realize a continue shareholders. Apio we deliver products to developing In ensure are consumers our Olive by to sales, first service, of leveraging in endeavors, investing on to that and O growing high will a we committed procurement value return purchasing focus customers, to and capabilities on our the we

strategic resources we on and balance executing sheet reaching remains our the for need financial our goals. provides and strong Our objectives

open are for We now questions.

Operator

comes Our of Ajzenman first from Instructions] the question from line Morris [Operator Securities. Griffin

please. Your question

Morris Ajzenman

morning. Good

you First and Fresh. Is that expanded Market In discussed Walmart, and both? locations distribution release, you Kroger here. the distribution or question or highlight expanded SKUs

Molly Hemmeter

And as salad. of were It you Walmart doors. starting to X,XXX last we X,XXX is was hundred recall, approximately started year Walmart, with are doors now year, Well, doors, a and Kale we our which testing few a salad, Sweet little Sweet doors. in over expanded Kale all Walmart ago a with we with

expanding of case finished Kroger, and all was to In was of Walmart, distribution it’s just the the stores. X,XXX Kroger of really Oh, in doors. sorry, salads recently sell-in it said well, highest those of actually all four I salads Morris. SKU those I’m it new I to our of we So the am sorry, all selling new four doors, initial all Walmart X,XXX.

Morris Ajzenman

where potential on you be Right. in some new update And you you. highlighted are past. – customers you Any have might with that? Thank the where

Molly Hemmeter

of sure want we products. first to in we just added successful make where our are newest all, we Well, customers

we products we do want drive the what make velocities support sure those are promotions sure our sure consumer is make trial make that with products top and to those to two So, quartiles. there in perform,

after going additional are we addition, In customers.

of the of we have the U.S., for mentioned is for plenty We share, I go As X.X% in the and kit growth additional after the going new after we customers to And still have market existing going there so market. the Target two before, have in and script customers. room in in which are new are I currently press to do salad and I we lot ones that, more retail for Meijer. multi-serve a expand mentioned way release, our be that U.S. about say are in go targets would to top customers growth. will both

Morris Ajzenman

been – while issues. think year. counties on working progress? I point? going been turning Any to Barbara, Windset, talked close County I That’s still guess a on on it or Santa have And work over at Okay. it’s still you permitting now in horizon some for about a it’s this Is of idea

Greg Skinner

this is Maria. on progress. work still is in focus It’s still Santa – is Greg. Their It

as expansion. with On peppers the next which of acres least in a the in rush being plus history year, of phases That city, county. has work to probably of to not year that, city. at that I XX continuing get they most are city. the have recent is for very a the get approval on are – off any also case begin There through city. but expansions, the in not projects to XX-acre expansion it’s good they The But the approved. the strawberry at plans had able no been They in of least it, a before is the is result. a two county. The are planned their delaying expect is it’s The

Morris Ajzenman

get and in Last I’ll question Okay. back queue.

previous that were is might revenues indicated year? Lifecore at And correct? non-HA, of kind I what it to of be first, end on you you call think venture of the that XX% the the secondly, want would

Greg Skinner

this not bad But pretty number. for going for Yes, a XX%, probably think last that’s accurate I year. year that’s forward,

like down least out, call, we out expect think years XX%, we X X, but more, and number more Looking on I to – the line, be when at XX%. this looking that the mentioned I probably last

lot of come growth going the at Lifecore the of a to area forward is So, products. going non-HA in

Morris Ajzenman

Thank you.

Operator

you. Thank

Group. Anthony the from Our comes from line next Maxim of question Vendetti

Your question please.

Anthony Vendetti

doesn’t what just that the delaying to being but you quarter Lifecore just mentioned Lifecore, for revenue I the change. that was is in second an third first, was the or guidance that wondering customer order reason So was on the push? a for overall revenues fourth, and pushed

Greg Skinner

it’s Yes, just a timing.

they cut their Lifecore, the look If with of exception after and out of ‘XX at for good customer with guidance. very of at do guidance hitting year, history go if back had we you our half you the we Lifecore, a orders their where a we job in went do

that. throw You

the out are window. You

is is note very, year hit high. and is will that think come And – annual their are guidance of to what at the going ability end the the we they think to where coming where up of an what they they very tight beginning basis. in in ultimately You range on our very –

XX% years range In their fewer, ‘XX. X when Apio fact, at over the of you thousands they from on volume have a it’s But approximately can whereas a an on quarter of annual basis the and very high much last Apio basis ranged smaller XX% excluding has look huge. because degree thousands lower quarter-to-quarter shipments, has shipments, be shipments, to larger

quarter gross comes X low high fact, all excluding In margins year the mix ‘XX, their and that’s to the to when we last year years, on to from what happened XX% it the on quarter quarter and range the out to fourth. look the down first I what this in XX% of end, back in pushing happen end versus and second and expect third

Anthony Vendetti

there Sure. new Any that were we track? out the the on out. we – that some being space on saw I at the the know of moving built update that? everything expansion on update Any – plans? Is facility, was Thanks.

Greg Skinner

line running and it end We Yes, this up and everything year fiscal finish be on is the exactly of in fill should to plan ‘XX. by track. the vial FY

Anthony Vendetti

the Okay, be little And or cannibalization, on that there vegetable it lastly – a bit bit? you it’s a is to did accretive if packaged great. it potential delivery market it worth expect do customers? it the new home cannibalize then to even little your current because so, fresh And business, that is of possible of

Molly Hemmeter

Alright.

to going not we from are we year business. are this revenue – this projecting any not So, incremental

the use to I year. we think going are

for only country. it’s of a portion all, the of First

to social be marketing out let it, spend learn it put but just to to some really there. doing We to year want is going the campaigns big this don’t will be that we business. in are people use media We aware any

last from been loyal marketing. we over have social We have actively years the list engaged generated addresses e-mail consumers several long Eat Smart a with that of pretty

our going we So, be back-end. we are into efficient what products. money on new an opportunity to about operational having experience the that seek to use in But them experience order e-mailing a we to sink it’s not and something consumer going really the are make will optimal come now, to are right we very orders this marketing and year sure and

expect right dollars I incremental So now, no that. from

Anthony Vendetti

Okay, Greg. great. Thanks, Molly. Thanks,

Molly Hemmeter

Yes, thank you.

Operator

you. Thank

Our next line Wedbush Radke question Securities. comes of from Colin the from

Your question please.

Colin Radke

Hi, good morning.

think unchanged. you the a you in that? I QX, your Is with year or came above about for obviously, full cents just conservatism to few that guidance that potential are but offset thinking is as there anything

Molly Hemmeter

same Colin, now, are are change to the Right the that’s for forecast. just just the we we that no rest seeing current keeping and the so what year, of

Greg Skinner

this remember season point, And at here – season be begins can winter it’s and prudent sourcing the that in to do the is tougher months. that next the because

good to always the end prudent of at it’s first be So the quarter.

Colin Radke

Okay, makes sense.

Just the the X,XXX release doors. about I talks in terms Salad press of mean, Shake Ups

expect with are you you far? then velocity in hit when or are to are And businesses metrics willing want to any do how For you those share doors number? to that today? there how many context, other X,XXX share And performing thus any

Molly Hemmeter

Yes, we actually X,XXX now. doors in so just – are

that target. not and currently, So Q&A X,XXX the customers in was a in, so we gave think, about are that’s I the we – XX data doors

much, that grow higher is Our year. target to over next the much

out new market of – velocity terms have not velocity, for that data too do in product to yet. bit the little data. In is the we The a

Colin Radke

you. thank Okay

Molly Hemmeter

You are welcome.

Operator

from next question of Obus the from Our Nelson Wynnefield. line comes Instructions] [Operator

please. question Your

Nelson Obus

Hi, there.

– consolidated are didn’t Because business, find appreciate of which business number $X.XX projections, terms see I you can’t we overestimate, hearing that just that – First realm, can because projection is You means? operating go next chart just from for all, excuse on underestimate time I – income, that’s cash your the expensed entail? of can P&L. just line we we the that with is the million, can I what out the then, number What financial from of will really first right? – in there, into interest same what subtracted of that? that the can before. statements line in put we and in how that or understand can me, of important tax operations true me. that make helpful flow up from with the the income In operating words, of the Greg, other is cash is – comprehensive you subtracted then I when income does

Greg Skinner

flow That operations the expense. after which income, it’s after tax, going interest be cash GAAP from is truly to net is so our

it’s not so the investment an increase in EBITDA in your your compensation, but GAAP got add cash what it’s So everything tax depreciation actually because be would of be which cash income an deferred items, then the between truly tax non-cash liability Windset the and paying, your that are that the you up not there which from flow the is is and those back for in that operations number. would would be an add-back income, are cash, in and cash. a change difference net make main amortization, it and course, the off components you stock-based back increase you which in so Any it’s rate

Nelson Obus

That’s call, which you great, maintenance have CapEx, articulated growth plus because means on the you that CapEx.

Okay, great.

to thing Turning operationally quickly one here.

what arrangements in excess or the made that were you that? ago built sourcing case of to by as emphasize on have have the and as value are year repetition Eat opportunities, expanding out the some we have have us commodity about you we a you side, we have worry enough so of that impacting to capacity high these in growth advantage that getting rapidly – you side done a patterns weather traumatic don’t do take of really arena, Your you Smart. of and in But the

Molly Hemmeter

so Hi, Nelson. those of correct. both question. Thanks for Yes, your are

the our remembers the and to really call as we last that when came that into have been that diversify to Landec of several evident over areas years, First these Niño, very done we probably grower several El base all, that everybody geographic this we months. have especially last on we when disasters think has over seen different following continue I became

business foods, grower less two business. through supply to procurement this show diversity margin we and higher-margin So time, in that that ways, the less-volatile very take see or our think both the one typically lower-margin crops and the second volatile in instance going came salad our sturdy you regions, has despite salads base no all over volatility business. diverse core the increased those point business have this so to the but as and are think the lower the kind disruption our diversity we grower have we in rebalancing of paid for we core the are in Those their volatile, our have business natural doing And of hopefully, west we we as rightsizing of our the and side because because amount that a we haven’t of are out more products, ingredients the are business it standards I that’s care have so this south, tell business salad truth, more we business, it’s salad of all off on since base will also east, weather a are in in actually of in and so Mexico growing have decreased salads our do our that to in the in is de-risked very of a they reasons where strong we in not and in been to work business, the us. the been year quarter to basis, volatility our the our we seen go that is we any I is have and in not disruption of of is the have volume on financials

Nelson Obus

tell you I I the understood first is broccoli that time than got more that’s say volatile to that lettuce.

that’s am the an think some terms this really that I about By didn’t I but sell-through? question, really interesting the wrong Canada? fact. of just specifically way, might I the about but? little I wrong Am wrong, we have be in in about forget headwinds If

Molly Hemmeter

in think Canada a bit what and competitor last rate. recalling softening exchange are a and that sure we I because of a a from growth little was a I not lot talked you of year, about recall in the am is

still And were a to all nice business still rates well. really – and seeing happening, is doing growth so business salad seeing currency still there. at – it’s But the XX% the that in are the high it growing we the we – prior clip, hasn’t not

I think see we I are past that don’t coming now, and back. that

growth. I think for mid-single digits now it’s right in the

a So business, while now. and a of still quite for strong held steady that’s kind it’s

Nelson Obus

– I when of coming a okay. you the of numbers slower law are base. Part it’s law of a off small see. That’s

O developments internal Olive as possibly do oil but deal expressed the you olive that Or prototype as that characteristics could of to to concerned, a and of So sort would that a out be would we are embodies is at the seeing have relationship the idea you find enough it? pay you on a looking it of characteristics, far are in that for you giving what extensions serious only not what there what that, or expectations ourselves? flow some we are look, the to that call was like – you of of its

Molly Hemmeter

constantly at the values are opportunities are lot still acquisition a we that high. So said, looking being exceptionally out there of

on ROI that M&A unless an extremely that’s lot going going we a believe of see we not can are multiples. the deliver we a to proceed. You high on And at strong M&A,

to not So looking. going stop we are

on another lot still – those Olive. when we I think a never very that you we in being words O looking earlier, of multiples lot space as foods a to know internal in a development ‘XX. and the are very, fiscal Right like my natural launch in year we very heavily But I process development products are learned are one will now, new said, stated in result we product high. and as internal find the focused

Nelson Obus

revenue kind but Got want ‘XX there. seen X% first ‘XX, was volatility make because – first it. volatility, quarter My plus operating sure want just to I it’s I more to to – – Lifecore know question talk have revenue I and there’s down I income it’s and down just make is understand get excuse XX%. plus, When first this maybe XX mix we versus of like versus it’s really mean, quarter I this about the in know want XX involved mix the is or quarter it we me, I this. last we clear but involves not we

lot what sounds of products is there’s on HA is run revenues. particularly volatility aren’t know, are quarter-to-quarter, expect or issue a profitable? something This we mix. I there operating could And long did that have this of, bit, XXX% so And don’t us – year-by-year going it or in payment really it’s the what little So but perspective, timing like into dig wonder we a we for what type I not and on – if – a a is lot a margin not for And timing issue Lifecore? of notational a there. special am I terms from could of just in royalty

Greg Skinner

and business. services: revenue it’s are has The correct. relatively margins from when existing XXX% Well, producers a I conservatively were so were fermentation mean, our customer; services with mix. for is or revenues – ferment aseptic are Lifecore flat, all one but and product quarter-over-quarter lastly filling this make three we you a then a basically is product development, new a from down to one an product we is is due or where customer; developing

All margins. of have those different considerably

on fluctuation. And to the so big are quarter, dependent get you any mix, one going in a

extremely a revenue those they achieve maintain take, able the generators from will annual on margins be which the literally of we looking and get mix customers to XX% margin excluding As take in that annual what able we three basis, it tight, quarter-to-quarter quarterly ‘XX, But an and basis, years, that earlier they managed anomaly, over XX% to XX% on call, was I the range an last is the on their so on X said business, FY back XX% XX%. margin, we what – that... order order products in on gross to so around to to we be to between an desired make what decisions

Nelson Obus

helpful. sorry. would fermentation IP Am would in even research I but for of a to am Got I are it. providing and customer high going That’s be be only your my working because I lot a obviously conjunction mean, margin, you follow-up business. is very get I won’t aseptic, may a fermentation this, wrong? higher I – and margin with versus or go would right any but that I payment, further assume forward is

Greg Skinner

a connection... because Yes, is if there little

Nelson Obus

Okay. What?

I what that’s wanted So know. to

Greg Skinner

got but of question along I lines have answer that can of usually I gross I And the more offline. don’t admit, operating percentages think I me. margin, certainly the in to front

Nelson Obus

just little maybe and again more a as expands, the I wanted to growth what it because Yes. understand get mean the just on sense, I the but they build side company opportunities are, thanks. will fermentation help us a

Operator

THB, of you. question from comes [Operator Instructions] Inc. Victoria next Konstantinova Our Thank line the from

Your question please.

Victoria Konstantinova

you Can on us a thank questions. on nationwide? Which about quick sales? for you in to maybe there a bit is little there Amazon? the taking have a give Hi, you I selling Amazon my are more follow-up the relationship. go And markets currently opportunity possibility online there

Molly Hemmeter

Thank Sure. question. you for your

salad bags our core selling we recently Amazon with our vegetable vegetables as well. and And brussels, products products, on So etcetera. we Fresh we them like working are selling both the started currently and are sprouts, broccoli,

Coast East national. and primarily are is go the on goal We at to this time the

Victoria Konstantinova

packages salad or Smart kale So launch full a currently, starting like the Eat the rollout you those? and like to on just line are are kits Amazon

Molly Hemmeter

East. several one – specific starting it’s just It’s to product though and solid regions launch it’s just not with SKUs in several the

Victoria Konstantinova

Great, thank you.

Molly Hemmeter

welcome. are You

Operator

you. Thank

line Company. Our & next Pellegrino the Francesco from comes Sidoti of question from

question Your please.

Francesco Pellegrino

morning, Good guys.

Greg Skinner

Hello.

Francesco Pellegrino

you the year? if if you in calling wondering just have of remainder to was for took in done as looks you exports Apio could hit comment export I big guys transcribing just the the a really the Apio great on The Street. cadence something It job of

Greg Skinner

peaches as press in the hit what And the plums, season remainder of got that the basically the fruit, most – the we and that expect was was in have is basically happens of you because their release, said fruit things. year, first of in we business. business that to stone we taken quarter, the Well, for could quarter. kumquats, of area out the And that of the first the type red – imagine be those

most take going in by hit are first you So out that business, to your getting of quarter. of the

to For the with rest find year, be down of year, maybe relatively flat slightly. the it last we

that year? to hit $X million? in somewhere As Could think it Yes. rest million. million said, the down Yes. the we to right were Could of now going the ballpark. be be looks the the for another $XX in flat quarter, where between we somewhere for end at It’s be that total – to year we in be the first $X of

Francesco Pellegrino

seems a product back in get bounced lot a big played of So, about bounce the the and was its quarter that’s just export, read-through the concerned back, just bit that that seems quarter relative the speaking, happened the this first we will what calling sequentially in sort I Apio if the it out is little quarter worked just am the it of and get the will to the correct? seasonality it that seasonality second that hand first first. hit in

Greg Skinner

second Yes. quarter. the Sequentially, first over up quarter be the in will it

Francesco Pellegrino

Okay.

back of low sudden, growth X%. you of you range we want if your I growing correct? get sound if guys of are full provide that million reported. like get XX%. to Apio. $XXX always at now That gets X.X% million. $XXX so, imply Apio math X% of am – are We year. guidance $XX total fiscal double-digit you to looking with reiterating bit to to XXXX $XX growth And backing for Lifecore revenue Does of to like million to at we right little this million O What the We to all you O Olive, year $XXX for We contribute, a to back revenue $XXX million growth? And this you $XXX a revenue right because is Lifecore And growth. for back are of out you to big given the guidance, now, X% that the anywhere into million. Just at X% million revenue Olive range way X% going a to looking X% million which going full million – value be growth for dollar do million out for provide $XXX for like then guidance between revenue, you upon you to $X revenue that out That to $XXX of the Apio us. based is have revenue we

Molly Hemmeter

Well, salads only. is double-digit you remember have growth the to

Francesco Pellegrino

guess am getting there. I And maybe... I

Molly Hemmeter

revenue going We the And Apio that business export haven’t is given Apio the will of is will double core part right. slightly at – grow double-digits. of part the only at at the grow business down, double-digits, salad with guidance will grow the

Francesco Pellegrino

Right. Completely on board with you.

would to called. $XXX that the total million. remaining with million three $XXX three export to year, be back last the Apio the left value-added. like imply Apio $XXX million $XXX the So remainder to million We still revenue of to needs $XX going of be quarters, out million is that and the for of are business we quarters

rest seems of like out the of million getting that $XXX and XX% vegetables XX% fresh salad of just math. am back sensitive year. to number I packaged for the growth You kit core a to really And

Molly Hemmeter

No, that’s too high.

Greg Skinner

is offline. off this for million X% the X% a to that tell Lifecore, number. take can I instance, missing But for could you $XX.X is out We threw what number you you are growth

not am I came your where $XX from. sure million So

if the are revenues $XX million there. right case, that’s probably in missing you So

Francesco Pellegrino

Okay.

we between XX%? then, be should like So for looking kit a really to salad growth somewhere XX%

Molly Hemmeter

right. That’s

Greg Skinner

that million, down $XX said overall go margin low $XX that’s million million, I million, that right. going the core – means we remember, going probably down business export. was Apio to of said That core And lower is Exactly. $X $XX

when we So when all the I those call, math. running you walk start through with can – done numbers the you are

Francesco Pellegrino

I am the to That’s me will the back for math. fine. of having you something it simplify napkin the do me Yes, that’s forward to instead of data. looking

So appreciate... I

Molly Hemmeter

on are that. We working

Greg Skinner

it. on working are we Yes,

Francesco Pellegrino

talk us development about thinking business. that hyaluronan your transitioning incremental big the X trials of that we should should And I the pipeline to to year be product about there can can number start Lifecore give thinking I filling Because development Phase into of have, thinking number guys for obviously, that Is about currently X? now? any guess the and you development ago, right insight how pipeline, product Okay. the was you talk Phase trials I of be it? compared when aseptic about just pipeline And you a

Molly Hemmeter

HA-only way development from The think the to really materials, that to the would in about change addition pipeline a Yes. non-HA happened been at materials. materials it transition has product their I in HA is Lifecore

adding robust to next new product development going with also continuing development, grown new product customers to years their be customers tremendously, but the supporting what’s because happen So and development. X it over pipeline is existing has into see are we their their they product

agreements of for don’t this is like of communicate have be products that track so with I it to it due discuss and that we in development to give the way. customers we think hard and don’t phase to information what we about because hard really of would think what are, bound exclusivity are any kind to phases our would information you be the we are they not product

money can in and usually And kind percentage to the now also and future years us revenue come forecast in high. I as opportunities the we of the as that’s so products of some lot that money to the of in in at our think going come that’s for see And be the nice driving need question we revenues asked development R&D pipeline predictor, those that and think, the only from foreshadowing coming spending the doing have the new as ways this a is you are a you what’s capital, good because ready. a to margin, about revenue, of in the good on the publish we have capital you R&D, products and of spend track commercial right? track we one foresee to commercialization, development on we margins that’s are earlier of commercial we are have pipeline I you we revenues and development

are that the we some the at are products. either you also are growing putting commercializing So we and this the you some that telling products some telling Lifecore, half capital at or are finishing are that’s telling development products in when year, more of of you year expenditures or lines, our first about are new we we end of existing

Francesco Pellegrino

last just question on And Windset.

be and interview saw Farms other marijuana So talking into business Village margin Farms, allocated CEO on was the I like did acres guess, Windset’s expanding about business growing was and if drive or incremental operations for able being XX% product. the for bigger about – since that like their that And an press he so that might Windset and to XX Village wondering in strawberries Windset release the that just the so to a potentially and appeared that the I business tight right a they bigger are any you margin now? expansion growing there’s talked are wondering, for EBITDA single-digit day, was conversations greenhouse need there or funding and margin I might to greater margins to EBITDA just core XX% talking strawberries, industry be catalyst

Molly Hemmeter

Right.

strong say they that There looked P&L are at some position, they so opportunity doing. say a are So Windset’s at they opted profitability they will business to for they that so and so that Farms’, profitable their different be they current I I and to going if is in I future down products number the little are fully a poised route. not the have Village in more for you business bit in not versus decided is just there out going think than demand will Windset are very looked reasons for path. of extremely and take really and have growth supply has different that an strong Windset’s that and good

Francesco Pellegrino

Alright, that’s time. you so your for much Thank perfect.

Molly Hemmeter

Thank you.

Operator

you. Thank

question of next Street Lake Our from Krueger line Chris comes from the Capital.

question please. Your

Chris Krueger

morning. Good

Just two questions.

I on year with besides about with products. and trying not you I you think whether made the that a Can us they in Costco, Kale? an went sell give other it’s been products update their or salad to – to on progress know multi-sourcing and First, have since Sweet

Molly Hemmeter

Sure.

no good news So news no is – on good that front.

with our and our program. salad are rotation them, We to stable sell business have Kale U.S. with And on Salad. Sweet continuing we Canada with our Costco then

do salads are is we they us rotate is this in and And bringing constantly, Costco out. things the we them great of So them one because with and a it’s for new win-win.

Costco with in clubs. it us and get treasure for those tries to consumers up new custom stores So experience their concept really to really salad hunt and allows provide innovate and that our

So actually they for our keeps sales and can longer. only are up other so are there’s a just enough at team carry to keep it’s we these and in are is we they extremely one stellar, of salad if have have they of keeping with innovation continuing and SKUs do to rotations it to we very products Costco casual continuing good a a strong keeping demands the do velocity but where always rapid those the space innovation will and many high, do that innovate they consider is if it chance it if so rotation clubs,

Chris Krueger

that’s driving like relates Okay. consumer Eat about marketing Then drive awareness you announcement At there anything other my out anything you the went it? or that, guys and it there Home awareness? to question guys as to how made, on Is packaging the Smart

Molly Hemmeter

Yes.

work it consumers to on packing our to year is optimized lot want is social to that going have media direct existing buying probably sure we back fiscal have this you cost imagine and low later it going We experience different probably single to a doing so it boxes, this operation to [indiscernible]. be we we there have up going nice at SG&A a to want e-mail won’t have from of social this end use their we year we be social so a and and but a we and going space operations are media it’s integrations set and view, of an the putting start consumer consumer learn it we behavior we and so very consumer we the until year, that a to – e-mails make really will had this, packaging, it’s been of just of don’t we to operational direct-to-consumer this want to putting about lot processes service be it’s Eat of it to be redo campaigns until spend a are to start before the just on media never the Smart about systems provided a on but and do can through so on packaging won’t most point business are

Chris Krueger

you. Alright, very good. Thank

Molly Hemmeter

Yes.

Operator

[Operator Instructions] today’s hand the further to would of for any back And this Hemmeter does I program. Molly like conclude the question-and-answer remarks. to session program

Molly Hemmeter

thanks, everyone, to for And Thanks, joining Jonathan. talk about today us Landec.

in have lot growth a Thanks look the Natural of which think Salads to and time. you your Foods. next come our forward excitement Lifecore, platforms, I we And for to X-growth and are in years to we time. talking

Operator

Thank and participation in gentlemen, conference. you, does ladies the for today’s This program. conclude your

You may now disconnect. Good day.

Lifecore Biomedical (LFCR) 28 Sep 172018 Q1 Earnings call transcript