LNDC - Earnings call transcript Q3 2018 | Lifecore Biomedical, Inc.

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Operator

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

Molly Hemmeter

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

today’s with to Form XXXX. differ that These risks the forward-looking uncertainties During Company’s in XX-K could and materially. may our Exchange outlined risks including filings that results fiscal certain Securities and statements actual cause are we call, the for involve make Commission,

to drive a Salads, solutions continues As Lifecore innovator space, strategic three health in Natural and Smart growth wellness and solid growth leading diversified products biomaterials. Eat its within Landec platforms: Food

As export revenue from this performance decreasing year-over-year a business a revenues revenues these record consolidated with Landec despite third XX% quarter on delivered the result quarter of basis. increasing food growth our strong X% platforms, from

As material costs this in release our will Extreme to discontinued February revenues. at food fiscal X% positive the the have end year earnings more press adversely weather be from contribution increase XX, sourcing year. export the of on raw this Apio business the than offsetting events mentioned in on impacted

recorded a the we As recently $X.XX benefit per meet revised quarter. share, result, excluding our tax one-time guidance quarter the third did of during

share. U.S. the was strong from XX% demonstrating third impact X and Apio, first of based and is of X the grow expected Target in some The the distribution we into U.S. increased Smart by in key on per We the Commodity year XX% ending Smart the The the more retail Kroger, last the expect original originally guidance year XX% compared last salad sales in revising quarter XX-weeks points XX% year nearly rapidly months compared high Revenues revenues salads, year. occurred ended than to rate the XXXX. fiscal much for fiscal fiscal are same a to others. This to was driven multi-serve occur the in in now revenues Smart year for growing The such discontinuation increase accelerating Walmart, projected the distribution had of anticipated salad salad period driven XXXX. channel to the expanded nine our This export incremental business our year. revenues this considerably events that was this the the growth However, XXXX Eat and Eat salad Eat growth retail the Eat revenues the January higher-than-expected quarter this increased fresh of as this leading and ACV of salad months exceptionally business in year to October salad in to Eat XXXX XX, accounts business, U.S. annual more XX% increased fiscal to $XX.X guidance same doubling growth XXXX next fiscal of in originally slightly fiscal At quarter in Lifecore first met profits packaged months operating Lifecore third with very due of first timing gross revenues fiscal weather-related $X.XX by XX% basis Revenues being to quarter as third to expected. for margin in XX% year. On kits doubled income the this last fiscal year. to profitable from $X.XX expectations revenues to and Smart retail the ACV, the quarter last a $XX.X gross months beginning basis primarily year-to-date than the to are of to quickly we salads recognized had typically of this and than of quarter million. period during to or a of the and of XX, XX% XX% for due a $XX vegetable fourth and XX% million in XX-weeks XX% of EPS food shipments, increase of Smart our are lower we performance and of from by XX%. year. compared certain U.S. at distribution up shifted first of which million during continuing XX% XXXX Volume, from XXX was and nine third XXXX from All sequentially shift year in fiscal with a the growth operations

to handle revenues We manufacturing become by first compared and or expect formulation the for to original performance to development to projected a HA capabilities to year fully of last with its of contract fiscal a strategic operating is with months Lifecore beyond to pharmaceutical projections up slightly of fiscal acid XXXX or and Olive revenues our $XXX,XXX. O for growth materials. fueled year, X% medical our of our historical differentiated for XX% expansion its as X%. XXXX an $X.X million services and of expectations to business and below organization integrated loss At XX% difficult growth being hyaluronic supplier premium of CDMO. increase aseptic fill the expectations Lifecore’s nine original exceed Providing fermentation, is operating from

economically to several Apio experienced margin Eat we negatively fiscal sourced on bag product reliance XXXX. third the in North fronts leverage fiscal America such produce attributed to as there for and during mitigate throughout the reduce relationships demand The nine January higher issues unexpected unexpected fresh salad on and geographic that integrating in growing net of in mix included storms currently region, of Smart temperatures sourcing gross distribution costs freezing and O have gain costs base were has modifying resulting Florida Apio costs warm income to focused regions customers sales in our produce Olive. during Western Eat the unseasonably with sourcing sourcing products. related in quarter at million $X.X the meet impact fiscal difficult O that been our our future weather and Smart sourcing certain months Olive consolidated during on weather weather resulted the exacerbated for earlier tropical force our vegetable It new produce our profit is and salad quarter. no year. Landec organization sourcing customer impacted both to of able to first shifting by note and events important customer contracts The working to all is business We raw weather are items. higher new and material the business which And to during within Apio been cut to hurricanes lower from the team our

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

Greg Skinner

$XX.X quarter $XX.X increased you, compared due rate in first third deferred in per a the export GAAP per Thank from discontinued in million million $X.XX The $X.X was lower benefit million tax the Apio’s X% liability. fresh This in compared increase corporate million to fiscal was result quarter. one-time ago of third per to morning margin XX% net the year company’s revenues in fiscal XXXX will a packaged Molly to of million decrease Apio’s Reported ago which was was increase income million the $XXX.X business. to or vegetables quarter. partially or from and in lower share XXXX $X.XX a fiscal of everyone. primarily Revenue the quarter tax $X.X good or $XXX.X $XX.X increase a year be tax at in end increase the in share XXXX. or reduction business of million The new share income revenues primarily the in or $X.XX XX% offset by

Second, Apio’s third expenses due costs of operating legal due million benefit. partially $X.X result the as prior last gross decrease related profit decrease million business, a the $XXX,XXX to income net fresh during one-time million year. in taxes quarter weather $X.X a $X.X $X.X a during of a million unplanned decrease settlement of vegetable in in were income first to the These by And increases packaged sourcing produce charges quarter. offset in a tax third of to in incurred issues primarily consolidated

profit $X to the at shipments Lifecore fiscal in gross due within the year. million timing of decrease Second,

the during the profit in increase Third, a the a third last third lower market quarter and decrease to due decrease fair in export $XXX,XXX value investment gross compared quarter in $XXX,XXX from change to of year; export of fourth, year during of $XXX,XXX Windset the our a revenues. this change no

XX% vegetable at during in $X.X the year; fiscal decrease XXXX; corporate $X.X X to $XXX,XXX operating tax due million X X% from revenues income or the the The The tax from one-time in a the fiscal new months in within increase of the result increase the These per share decrease and export per in decrease last fifth, first loss tax million the was to first by first million primarily GAAP in year; a fiscal Lifecore $XX.X in a million $XX.X first profit of $X.X of in XXXX, margin or of business $X.X compared million increase million to gross partially months fiscal million and X or of to unplanned of or million the to or compared a decrease same the XXXX during $X.X share is $X.XX in a net million first, $XXX,XXX decrease million to this due were a export business packaged $X.X gross primarily $X.XX Apio’s Lifecore in fiscal fourth, as was timing to $XXX.X a from first result issues X the decrease taxes shipments in X company’s increases weather-related XX% For lower costs refinancing from These a in months income revenues third, in lower rate; of in offset in a profit during sourcing year. one-time $X.X million the market Apio’s investment increase income period revenue. first value million a year; million a increase fresh $X.X from million of months share a of Windset months prior $X.X Apio’s increase during on benefit. per the were for last million months benefit third, increases year income $X.XX lower to consolidated $X.X due offset fresh or fair Reported of increase tax decrease X business. XX% last by produce partially first expenses; packaged $XXX.X gross in a or change a second, revenues. months XXXX. vegetable $X.X the due second, debt increased and the X million X% first in $XX.X the profit of export

our Turning available $XX.X receiving line of third under $XX XX, end totaled $X.X to the financial from million and borrowings of investing generating At million had million credit. at fiscal our million million in quarter cash cash $XX.X to XXXX, $X.X February XXXX, we of operations position the equipment. borrow of and after property in flow net

market fiscal XX% to the last fourth from Looking the to fourth consolidated business growth Smart forward food sales include our of operations, the exclude recognizing drivers XX%, fair to fourth value product to growing Lifecore between export $XXX,XXX. of quarter XXXX, salad to of at continuing quarter revenues Key we quarter. compared $X.X million $X.X increased XX% year. the O which this Olive fiscal expect in growth Eat quarter and XX% to XX%, investment be And our to XXXX XX% to the between in of in $XXX,XXX change of we revenues that expect million fourth Windset growing during the revenues

the net per for As to operations a income result, from projecting consolidated be to we fourth $X.XX are continuing $X.XX quarter share.

projection prior to now revenues For XX% they we up is projected XX% to XX% revenues projected XX, to and is our original are XX% from year and grow to million that growth is are now $X.X $X being up of bringing by sales are delays million, XX% which Eat to million running. is by salad which to expected press XXXX to XX%, projection of to the grow compared recent our year. of expect X% and XX%, of in from to to now in-house, $X Olive Smart operations full projections original Lifecore XXXX, fiscal our protection our construction revenues X% from is continuing driven consolidated primarily XX% release most XX% to projections This which in approximately O grow by to which the grow original from and our February due up our XX%. below

for tax operations and all from projecting XXXX per export fiscal are continuing favorable of XX% one-time We per XXXX from excludes from the to the earnings the benefit in share $X.XX results which share earnings $X.XX fiscal our of business. the

XXXX capital We fiscal $XX million $XX are to flow now expenditures $XX of million. cash $XX projecting of from to operations consolidated million million and

turn me Molly. the Let to call back

Molly Hemmeter

Thanks Greg.

making companies go to Lifecore of Lifecore, and let Now, into profitability. are we of HA me its trend among three Food integrated model and being and benefiting specialty enhanced CDMO. outsource in Smart other each business evolve for to services positioned these products Eat detail Lifecore from a for more salads businesses, we supplier our the medical continuing as growing with and progress growth is continues material fully pharmaceutical manufacturing. a growth Natural about

business, as in with long-term than projects integrated a projections number With products Due growth. XXXX of our of total FDA XX% a well the this revenue its revised to fuel augment our growth projection the to its have pipeline the revenue to stronger Lifecore million to approval seeking expected positioned to to year, of CDMO fiscal Lifecore new $XX fully XX% we million. industry implying $XX growing performance year is

and gross maintain margin and fiscal in EBITDA XX% approximately $XX of realize to a an continue to million between expect We XXXX. target XX%

to products This Lifecore is expect The is customers revenue We evolving next distinct that Apio rapidly. phases. X process expand years continued its but development in two in Lifecore of growth to average existing are on the and double business pipeline. sales transformation to in generate transformation occurring its as still commercialized new as the currently customers digit over

on year The fiscal first commodity and consumer healthy eating from focused to focus XXXX phase trends. identifying a on Apio company to and of began on innovation true in transformation with support value those transitioning trends added produce company developing products the

salad kit penetration through in healthy in first Smart over market. Key share launched consumer strategy the kit in-depth billion North of understanding U.S. kits our multi-service eating to Costco. market market retail is this our the for transformation an Eat progress we the trends. U.S. growth is salad billion, strategy during to was approximately $X.X multi-service The Smart $X.X XX% are Eat significant the kit making approximate Our retail business including and of phase salads of from increase of multi-service annual U.S. salad American salad market retail representing in

in retail retail kits category XXXX, Smart U.S. a dollars XX, market of consumer multi-service compared January ended weeks XX the For growth Eat rate to salad in XX%. U.S. XX% grew the

from share the the same we continued For Smart and period distribution, Eat in next grow to market the market to retail gains to for of U.S. over demonstrating salad X of business multi-service in years. X.X% room salad growth. as the our expanded well points, innovation XXX continue additional an distribution as revenues increase With increased X.X%, expect basis kits continuous

that natural The needs. our began other involves second to food year. phase our vegetable of from fresh products packaged business include expanding transformation fresh This consumers meet phase food product of last fiscal evolving line

Smart all natural made products first and clean to the we ensure toppings, Eat XXXX. Smart salad second ingredients end of initiative all year our the of Eat label in from launched calendar dressings phase, the that XXX% by [ph] dips step are As the including

and natural acquisition are on to we this a initiatives new Landec this deliver to group new develop the to product area. year In We created and schedule lead strategy development commitment. XXXX, food fiscal also in ventures

oils effort, supplier traditional As future all-natural olive the we was from consumers the all and new vinegars. This rapidly a switching to acquired in natural oils premium are as first timely ventures growing and step all O kit Eat vinegars salad options. acquisition olive provide Olive dressings facility California. vinegar of offering Smart we also business. in our March, natural construction unique products the completed opportunity our Olive Olive at O within In innovation O Petaluma, for a The

internal are gross highest oversight now simultaneously transparency, our standards quality ingredient ensure delivering producing We margins. own costs enabling sourcing and higher in-house vinegars the while reducing to product and

fruits, but celebrate likely consumer Group plant-based These is the accelerated the their vegetarian searching year, strategy. of a number not is plant-based products meal the found fiscal development for and experience. central ingredients of grains efforts this new consumers vegan. we the a through more This that our in or not and solutions. eating research, consumers And plant-forward rapidly component view Ventures During growing be, New natural vegetables, as its of there could

However, product the this developed target, natural we to we new understanding found meet products that of of consumers. this plant-based meet behaviors the will to and ingredients our ever-growing first at on segment needs of of foods XX% this developing make within of are by least enjoyed Group consumer. meals emerging up attitudes launch Based of New this segment. deep Ventures the the fiscal of needs In consumer the internally line XXXX, half year first our initiative Landec a

this more about initiative release during call. share earnings will our We next

food and are Our with capital. on-trend our developing and delivered consumers higher our invested offering focus higher return in have business on at is margins on products that

a currently all our and noodles offered make Sam’s kit unique of to product this in eating salad products. produce delicious. core timesavers single-serve entry Olive the vegetable We includes our recent convenient timesavers and Eat and multi-serve the O kit the Smart stores. stirfry and implemented kit walk vegetables historical Club Smart successfully to the and the within strategy offered The are that walk and fresh, lunch Smart ready our category, vinegars with fresh that into being with line ready oils product into launch category, vegetable Eat is Eat our of addition of have as vegetables recent salad department

the of parts the margin export margin our continue our food business. lower business. more also right-size Currently, to products, While discontinue to we expand we value-added includes this volatile decision margin or higher lower the

the become the has months this initiative. business weather X of by had strategic fiscal on during an effects that seen XXXX, increasingly our important first As

We create and production and to excited expanded Apio momentum. fiscal Lifecore over begin higher the to of production This and margins leveraging year, several increasing time. of over capital to our past investments forward years both the made filling both products gross volumes are many margin begun increasing we start personnel in have we our capacity our

Looking delicious will Apio, launch it we Eat will continue healthy. eat and products make to that XXXX, easy to to innovate. Smart we continue At for consumers at new fiscal

products. processes of new food pharmaceutical for the internally to and and continue continue Olive difficult our will meet begin addition and to capabilities materials to products selling on new will We needs our line of handle add we grow natural to Lifecore, O vials line developed we in of to to syringes. and products their At will and customers medical

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

we we consumers operations in value deliver to in are driving to focused rising and offset down order increasing on summary, affecting will to are Finally, that our products costs to and our innovative on developing focus shareholders. businesses. the In continue our costs efficiencies customers,

we As while products on we three our platforms, and growing increasing will continue Smart costs transform Lifecore, Food Natural simultaneously and our Eat reducing salad focus our businesses, to efficiencies.

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

We are for questions. now open

Operator

from Maxim of Instructions] the first question Group. Our Vendetti Anthony [Operator from comes line

Your question please.

Anthony Vendetti

morning. Good thanks. Yes,

Greg Skinner

Good morning.

Anthony Vendetti

Good morning.

that thought any that are put them translate going all a specific around. or anything be quarter doing Lifecore? and at getting was to guess off ahead Lifecore year good a they transition So, XXXX product year, what into start is transitions specific of is this contract to schedule over that’s Any strong to outperforming. I going I

Greg Skinner

from I Lifecore should existing we average it which higher next were particular, news. times, to as expect why into no basically in anything that, we yes, And shouldn’t range our XX% the good wasn’t ‘XX. it XX%, carryover that expecting, just on to reason customers see is stated grow that year. Well, be numerous we volumes sales Anthony, And

Anthony Vendetti

think terms around year or whether do And Lifecore if about plus part at where we revenues? it revenues, point of once decision you $XXX at Lifecore of just ‘XX by Landec that you $XXX or could the ‘XX to of in remains do as fiscal how math not make million a to be million Lifecore gets or

Molly Hemmeter

Anthony. Hi,

looking options are at We consistently Lifecore. with our strategic

we isn’t that what this understand around sitting So, waiting are to is.

point We are strategic time. decision at is constantly the evaluating any what in right

of kind it believe sense are maybe at and will right to maybe bit strongly the us for those of better so portfolio maximize that will time it now, million that $XXX belongs and one And going do shareholder needs at we at we opportunity shift reasons grow of we as Landec when look to to continue to will it whatever to a options and bigger the the provide will it value. and and is sense, part picture make but numbers look makes the be, grow

Anthony Vendetti

thought on obviously growth they Analyst higher why salad growing than consumers, significantly as then understand right move to XX% and great. much are had you the you Okay, we so that through this them are we there doing chance well for I were I obviously And can the couple kits, do Day, years? and Eat out sustainable think next a the Smart try when with we that’s you trend faster plus growth the of on see as and of personally

Molly Hemmeter

this distribution able is much to quicker amazingly year I and were was they new had get What the sales anticipated. experienced team well new than just accelerated distribution mean, doing an growth. we we

but a this the think a in of growth from was lot some lot, to the not year. I of next year pulled So, growth,

it’s customers, those about salads is trying it’s So, recently that and distribution that to in one the that, remaining about added that we start selling with are in shelf I to Kroger, increasing SKUs know, gaining the our to we our our Walmart, Target. we you ensuring pursue to adoption are as Meijer. it’s then after of at be awareness on are consumer more salads we going our and we as number relationships we started added salads say – But going also customers. increased account these have growing be will

year stating growth year I we think year this next each are average pulled grow to that this So, but grew so lower XX% some we we XX% year, that, trying next and single was that than of think we from the hold haven’t be on as can digits I year. the much do to of into might

Anthony Vendetti

new have of coming that Okay, only right market? are now X.X% you with out right and about in but products the did say you now you category about

Molly Hemmeter

That’s right exactly.

there lots expand, of accounts So space. more lots room is keep room have innovating that fighting of to is existing we and and in SKUs there for to just add to

Anthony Vendetti

are And that Kroger, are just I you were at Target, but Walmart in out and stores, this know point ones rolled you all within of the all them you ? Target into the

Molly Hemmeter

are are we We at approximately in – in doors about XXX Target.

another that’s doors at our to So, grow and opportunity is expand Target.

Anthony Vendetti

so hop will you back I much. Thank the great. in Okay, queue.

Molly Hemmeter

You’re welcome.

Operator

[Operator question Thank question Company, your please. Pellegrino from from you. & Our Francesco comes Instructions] of the line Sidoti next

Francesco Pellegrino

Good morning guys.

Greg Skinner

morning. Good

Molly Hemmeter

morning. Good

Francesco Pellegrino

$X about So are off business a it kit I to in value net XX%, gross on profit this if Apio look of and performance XX% kit just salad margin product quarter at was quarter? out for line did regards just your pack ranging start guess the added in the sort Apio, XX% line kit did single I peg then the really anywhere like will around operating the salad profit, sort I the segment your gross margins to that of against I talked it product if product strong at fresh know like XX% into – with guess gross And of for then apply around to product probably I breakeven during vegetable the the packaged to maybe million that margins backing during what I kit we quarter core am salad line. sort between salad rest I like I is what of

Greg Skinner

of one remember that me. level have can’t you things and I your detail don’t in I front math, if Well, verify of of

Francesco Pellegrino

just It was hypothetical?

Greg Skinner

core quarter million the took primarily historical – and hits during associated sourcing the with bag business. $X.X that’s core all historical that the The

in you So good exactly even business though that said math or factor a put probably for of million don’t against that that out the quarter. put is position margins what you it front me, makes it when play the the in the $X.X I loss could have in did a it

Molly Hemmeter

Or that these too, now are all new is heavily our we the salads because accounts. we that right into part other are of prompting

of are ensure promotional to We consumer these a adoption behind putting lot grow dollars and awareness.

to the gross other on to sourcing going be addition factor that’s the So hits. in your margins

Francesco Pellegrino

thinking it do get All are on more competitive is a pulled after of last margins you the or then all line to and think back space normalized a like for quarters margin you Okay. the kit for we four going or sudden you expansion this activity, of you salad promotional like time? get bit product quite

Molly Hemmeter

how we will We top you some that to to SKUs X pull or new when but we only shelf, real for I next the the so sea selling in estate we on it at XX, X look And back make still to have just these on promotional in salad. will consumer keep need long, getting longer we the because X like time this really to our can’t accounts. try how time, in of through say it’s year that be spend won’t after be, are will at rate forever,

Francesco Pellegrino

be XX% to over to for for Got some know Lifecore’s you we but about provide can the income really it. just aiming Lifecore gross guys really we year? for should growth shifting each I guidance to business, Lifecore guess segments minute, in just historically great the a and of overall get we regards I in providing is thinking margin what gross Lifecore guidance are for should for XX% think that margin, provided with operating – with about the your

Greg Skinner

Your range good. was pretty

Francesco Pellegrino

Okay.

were was to are that second – maybe the call coming XX% for was if was had really of maybe thought over was more of going going gross are business looks have we things quarter, of I just some the gross it margins online, guys is and thought what think going margin being business in XX%? I half pushed or having was business Lifecore out this like issue slightly for XX% upon of I we to bit to shifted that guidance aiming is a half I we providing a higher XX% are that little for the enthusiastic wasn��t where below as around the back and the So the and right to you high be timing there it earnings the us the back come just right seeing half we based margin if was for necessarily Lifecore excess and being as fourth some year some to comfort the guess exist is second on on margin last implied XX% at the thought I there level going call quarter now to with you the isn’t second half was second

Greg Skinner

pretty that’s And probably accurate.

down that’s it Lifecore, the because the filling, overhead is lower businesses, aseptic to mix, have margin distinct exist. which and business, the three the where because they With got comes all labor

on the look fourth You margins. mix higher in is if historically the development quarter, higher. fourth usually that the which And got their margins and which in historical at you change are business dramatically depending XXs. fermentation, And going is quarter, to given quarter any it’s the

the margin third of even the business close where quarter that fact getting so quarter occurs lot a to tells fourth XX%. the that it’s the nearing shifted even to that you high XX% And

we what within for actually year. for is this expected Lifecore So, had the

Francesco Pellegrino

sub changes, that to as there going thought creating each sense line mix shift and going these is product product lines well. the product to I make be product be It but mix were of your

was of going within of thought lowest aseptic to I see product line coming product filling also to it’s the online overall business margin the that in filling thought which second half, three For within margin. aseptic were lines gross non-HA going we increase product actually the aseptic phenomenon line the this Lifecore. example, I

– I filling aseptic not that sure So, am maybe happened.

Greg Skinner

the pointed quarter Yes. That’s to you in one quarter Their some have fourth nearing of otherwise fourth the with XX% reasons shift would the margins from are in less. even there. been quarter, shipments as third out the

Francesco Pellegrino

at last is just range? I to question the sum lower gross full for better the guess up, Lifecore XX% And year Okay. of all XX% it to to margins think the end of maybe this

Greg Skinner

Yes.

Francesco Pellegrino

for me. That’s it Okay, guys. you, perfect. Thank

Operator

you. Thank

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

please. Your question

Chris Krueger

Hi, good morning.

Greg Skinner

morning, Good Chris.

Molly Hemmeter

Chris. morning, Good

Chris Krueger

Just a couple of quick questions.

couple this your grow Eat to You mentioned million you at If that to were about do could how your selling a a to for couple $XX business, trying million then are of you O in people expected land is that? get and retailers business that the be to look start could business at year or Smart how that $X.XX years, big Olive significant next it be national you that?

Molly Hemmeter

new distribution. acquired day we we comes business. has their business mean double a different do us saying, know It timings. million we first definitely these that new when to I with in to one to reset I $XX definitely exactly the million think business are the timing Well, be the but and to that next that hope getting can we X can even this you it That $XX we from years business X believe would go be there, think and what is which can of back that business. buyers over

Chris Krueger

to do you to capacity significant meet contracts, a If you were have couple demand? land that the quickly of

Molly Hemmeter

Yes.

we side capacity. have business, on have So, plenty the of vinegar of we the

in own mentioned just we our the capacity As which facility, we vinegar build has that of call, have. projections the plenty for we growth

we of limited olive do and the olive we side have oil business. business, how can oil supply if the quickly grow that On of

oil now our olive years. the new and go growers we new partnering million enable growth, plus over that XX with could in middle to in sourcing So actually growth olive right our X are take of

it working olive on oil longer of will plenty have until supply, we vinegar, agreements. we secure issues supply So, capacity, and supply limited no on

Chris Krueger

question my internal kind is evaluating right are that have now growing? do And is you new of or of an potential acquisitions Alright. new the pipeline and last that brands then you

Molly Hemmeter

and getting really that. we new, – a in have and initiative consumer, And this we we based I developing lot to in beliefs year excited line needs have behaviors and we found launch unique this attitudes insights, of a found about have our that been calendar plan new space the food to But the and that been and what September natural are to large in some nothing release on and call. this will on a we fiscal out to down product our market are plan about of year product August we that so we know insights. more to ‘XX. based new And or next I line around be sharing So, doing we forward and bring and looking consumer fall earnings in research but research that’s those think area very

Chris Krueger

Alright, thank you. That’s all I got.

Molly Hemmeter

Thank you.

Greg Skinner

Thanks Chris.

Operator

you. Thank

Our from Pinheiro next Asset question Management. comes of from Mitch the line Costello

please. question Your

Mitch Pinheiro

morning, hi. everybody. Good Yes,

Greg Skinner

morning. Good

Molly Hemmeter

morning. Good

Mitch Pinheiro

Hey.

on or Fresh resulting in changes So, Apio, acquisition you Del the couple Monte’s just market Mann? any of Any have anything from a first seen questions. of

Molly Hemmeter

at yet. any haven’t it. not a anything seen in I people relationships I anything our it’s know time. seen differences have buzz or mean, or and shifts We about this

Mitch Pinheiro

of you Okay. going sourcing to the at anything the strategically some I dramatically And how about can the been in that really change to hearing mitigate but about sourcing years? years sourcing have then of the day, sort had in you with you to have or tried has how couple mitigate the issues always or downs talk if of are changed the will lots end issues, for confident of last really going that we and are have sourcing

Molly Hemmeter

correct that, risks. portion where and to have in it’s our is highly vegetable is are we You sourcing volatile that going always bag business fact in. are the the portion, it’s business the It that of

to business strategy. short said, several shelf is do That it produce we what that mitigate is. in are We feel it do and like with can things being life I

at are our that’s one that I margins increase we gross to when volatile, do line all, of look the of line. trying that is First most thing product

absorb So, we that those the costs. extra even profitability there when to have is volatility

have year for that going doing price and how success some a at while. these look One, we fiscal in which that? had we haven’t price we we next I had out increases are gaining in been increases, when have so And with

So, we are seeing success finally and price getting some increases.

third The innovation. is thing

started is thing innovation. So, have we the to – second

We to our started within line. innovate core have

that are we So like a the core a evolving for know, mentioned of actual we and really are but more as about at our bag which and kits, products launched the consumers cauliflower business, looking to of within convenience. call products more just are I there beginning and you broccoli bag bag of

calling the are line. makes come they to test kits, taste better products make in vegetables and easy. it margin them easy that in that different we and with we make we line they better. consider it core still our additions timesavers, It sauces to So on to put These these adding are

we cauliflower So, of launched examples one fried rice. just is the

they sauté. doing Another well. launched rather but one them, a just is green And beans we are

is line And margin. stir kits a it of Sam’s. also is call – at And a of line department, noodles with and doing new well started ready-to-wok. this We the fry ready-to-wok in a vegetables produce extremely higher fetches

do thing second to we trying the is are So, innovate.

aggressively kit bit third has one portion and is also after been this a creating companies small we a the direct-to-consumer the channels we packs shifting profitable and our been endeavor are also. The market and different for going us have for meal

say all fetching be higher green So, of meal a beans margin. bag small about the thing for such And convenience it Those but a just I’d small are reduction. bag might those these kit because fetching, a of or it’s broccoli, are companies. cost is fourth

we efficiencies and costs to We in side taking gaining out can. get the reducing cost aggressive in our wherever have continue and to plant

if And would that that – the not And bags core we out this you sourcing initiatives actually increase if over have the margin profitability. you so four had hits. hurricanes in an vegetable I sort these time year, would in seen the do we the taking hope business was have increase

an time. standard was but margin the and business sourcing has increased, year year this hiding over margin that the it’s we fact that in that likely completely are So increasing we awful see the

Mitch Pinheiro

the you other brunt the then but like that such risk, as bear like never rarely or are you sourcing of or sourcing ones yourself the Yes, able Molly. seems the risk paid And and are get or retailer it consumer the just out it’s take the companies than pointed have the have out the costs what got for that’s helpful you for think are consumer do never been just around the to and the ones to in that that, retailer, labor you faster is do you to that trying to you so pricing just I you something that can about work you to take but what going plant you can labor up, rises? got mean labor

Molly Hemmeter

getting So major to that with are lot right those we And brunt the that. and the so cost initiative four probability pricing that’s trying increases won you And that increase outlined fiscal are to we to weather, on into in seeing counteract we have year our why offset increases have price there along is initiatives I volatility do just and try all labor core start going a costs to a to of to have those. going down. start to just and it’s that passing we ‘XX the of are

Mitch Pinheiro

look one are questions, like or pipeline they with M&A down view? your other and the of valuations couple how a Just M&A look, how that the up, is flat does in trending

Molly Hemmeter

you are acquired. we of I reviewing extremely probably will say still are and high are multiples long companies we the been a that M&A constantly seeing have we are have for list that reviewing that companies So that

compared strategic ROI seeing high acquisition make have It from sense the can Until believe target multiples makes its that that back, right ROI we to sense we on will we are are If that, found find develop in an not acquisition an deliver an it. doesn’t We market. and standpoint. going we now right sitting are we the from pay our not at just higher be we we internal higher competency to right an can think we I new Apio a acquisitions. have space products to I launch insight much innovation food that internally And on our we we because do is it’s – own products there I ROI our a in can engine. the will now developing products and that think is natural think ROI core consumer deliver

can changes we and changes and acquisitions immediately. we those come down, can the if shift for market Now that multiple

Mitch Pinheiro

last then the be, – what’s spending? CapEx the delineate the one And Okay. will what CapEx, buckets you of Greg can

Greg Skinner

being or... Apio Buckets between Lifecore and

Mitch Pinheiro

specificity Yes. exactly just type a what that project more And like maybe think? I within this little of

Greg Skinner

running and This up are most you June is line filling and that revised in which the Yes. new this very Lifecore is excited be which should know what majority year of about. what our that’s the guidance, we year

projects the of being were delayed. at are Some at Apio Lifecore

that year need And projects. in difference is the now were looks done. it would delayed mid-XXs in had and it’s to the going of this we year. be just be you to in still to so They like Lot going low-XXs. next roll get originally thought the They

year, so had a And close pretty think this year, be to expected big they big going we I being year-over-year. are drop next

going year So it’s to this low-XXs, in to next be that. year the close

Mitch Pinheiro

Okay. And visibility…? your good

Greg Skinner

buildings, most some in or least area At it capacity. is of equipment, there equipment but of the is

Mitch Pinheiro

potential that, the with And and part spending the customer of the pipeline there the with were CapEx Lifecore, customer visibility anywhere at new or Lifecore then Lifecore? additional of at performs is that for you have new is pipeline good better

Greg Skinner

currently Yes And and customer yes. are we those filling of prepared what to needs We obviously built if in than add filling are fully much another forecasting, we the needs. line become line. greater anticipation

Mitch Pinheiro

Okay. Thanks for the time guys.

Greg Skinner

Thanks Mitch.

Molly Hemmeter

you. Thank

Operator

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

Molly Hemmeter

so further for you forward you Thank us about our to call you to initiatives. today everyone much. joining We to talk update Thanks with on look next our Landec.

Operator

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

may disconnect. now Good day. You

Lifecore Biomedical (LFCR) 4 Apr 182018 Q3 Earnings call transcript