LNDC - Earnings call transcript Q4 2018 | Lifecore Biomedical, Inc.

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Operator

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

Molly Hemmeter

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

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

forward includes Landec diversified Oils called Smart As business and of is now specifically Now packaged a Olive foods the solutions, and a O plant and leader, and new and CDMO natural brand Premium growing comprised in Eat our consumers or health brands, development innovator Vinegars Landec the target contract business, Lifecore, Planting. fresh three to which vegetables, of population wellness leading manufacturing, our

new We discuss its continues conjunction release growth of this three earnings in are our Now in to introducing after today will about this investment results. community each Landec with year more XXXX Planting we brand and drive to talk fiscal we Lifecore growth grew salad Lifecore, a strategic grew XX%. XX% and year year, XXXX Eat Smart natural XX%, and and platforms, compared salads food revenues fiscal last grew In product revenues products. Smart to food Eat by natural fiscal tremendous revenues

XX% Landec As fiscal fiscal to compared grew XXXX. revenues year a XXXX consolidated result, year for

excluding by benefit per the $X.XX in For fiscal XX% fiscal XXXX share tax operations, per reform, per for XXXX. XXXX, $X.XX fiscal one-time continuing share earnings recently from from enacted Landec’s from share tax grew to

premium of to historical completed Lifecore, Lifecore hyaluronic capabilities acid, about fully business. as contract become talk and integrated a has first HA development its manufacturing transition Let’s CDMO or beyond its supplier organization. a Landec’s

as filling representing to $X.X and of year. gross had of products. fourth quarter formulation, gross quarter a XX%. Lifecore final last Revenues well profit outstanding services doubled for and fermentation of pharmaceutical increased million, an of gross revenues compared $XX.X is providing and million Lifecore difficult-to-handle packaging XX% aseptic CDMO, fourth as As differentiated with margins profits

installation XXXX, X% exceeding of For fiscal increased increased while operating of The projected and line validation to income growth, year late second X% the X% will complete fiscal of gross in Lifecore’s commercial multi-purpose million full XXXX. revenues original year compared our to profit increased with quarter is begin production to filling during new expectations fiscal $XX begin XXXX, Lifecore fiscal X% and Lifecore of designed a XXXX capabilities growing XX%, its commercial This The investment market the capacity address. line products expands will further is quantities in which breadth XXXX. be of specifically Lifecore of align fiscal CDMO, strategy able vials, early new to with incremental will to products to Lifecore’s and fill as expectations which that markets provides drug or Lifecore’s the partners. of enhance the growth the and needs

potential and line Although full syringes dual the we to income million year. capacity business from it new given to fresh to of force, plant-based direct positioned will a refrigerated be Landec’s during unique capabilities combination consumers. and makes innovation other fresh vary provide comprised in of O our packaged of be million and into increased Revenues Smart, brands, foods $XX has brand. to natural generate In which truly differentiated a due product to fill foods Landec capacity, the The significant solutions mix and natural line any a utilization. primarily filling companies Eat line Now to the fill foods can sales internal on net natural contribution $XX foods new annually. the revenue on-trend, to transforming market. manufactured new the capabilities, product With business, uniquely chain an company will innovative are that natural vials, business business At new three versatility Apio’s is it used the vegetable proven also deliver and produce has supply utilized Planting

revenues and and the investments our an in natural meaningful this shareholder We establishing will to million transformation development fell profit $X.X growth million. profits loss of continue in but successful. in a These to enhanced O’s operating for expectations impact and capital quarter programs in negatively short the operating foods short-term, value make performance long-term. of fourth the $X.X path to with invest of are business

The such year growth With in vinegar delay Vinegar, in increased Cider XX a O XXXX increase retail new facility. products. For fourth recently points weeks rapidly cider Organic Nielsen all million below Organic and increased shortfall same and June $XXX XX% multi-serve from The of in the XXXX rapidly from sales quarter XX% preservatives, to increased which grew tasting same better loss to May the XX% The in O the driven XX% from its also O growth year. in new to to $X.X in retail in This originally expectations leading and during the and cultures. and increase that by This quarter distribution began for the unfiltered the cider Smart shipping California in fiscal half organic its U.S. in O’s flavor vinegar operating These XX, no revenues resulted and Kroger, cider basis was facility than apple accounts, revenues weeks Nielsen million market XXXX. second introduced was delays in and to XX% XX% vinegar with artificial salad January retail salad this growth versus X-month a at retail XXXX from product in distribution to to commodity Northern period apple is XXXX in-house the Eat year. full raw, without sequentially XX forecasted. expanded vinegar driven the in annual XX% Despite salad volume, from O growth or XX last May for ACV, Eat Walmart, last production as Valley consumer delay fiscal to in XX The fiscal the ended penetrate for market XXXX. bright, Sonoma XXXX unexpected others. ended harsh facility, compared with O reaching retail California XXXX Target of Vinegar organic a ACV flavors U.S. the multi-serve of Apple XXXX, an operation. fiscal an June points from Cider fiscal of O for growth primarily full Apple according ended U.S. million. the sales, originally of primarily Eat and to organic to Eat salad a organic apple occurred rate is increased live O apple of XXXX, due to period. vegetable for we weeks craftfully in increased in the over the of XX, XX% channel growing of this the U.S. fresh, option. during are XXX by impact same Smart average in from contains of higher is aftertaste. growth year or due to growth intends U.S. year the periods the U.S. and production ended XX% XX% by were years, vinegar XX% X of XX%, XX% has Smart kits fires results full key salads increases of category more in kits anticipated, considerably the the and permitting was driven XX XX% incremental compared during Smart customers percentage and primarily that in in fresh historic fourth kits XXXX. vinegar packaged last the months XX% compared XX, operating nearly revenues revenues fiscal still revenues fermented $X.X the startup new compared

XXXX million XXXX. realized first in The which from fiscal resulted fiscal salad our margin X XXXX of we significant vegetable it some was in of produce. new in worsened events freezing the by the and XXXX. occur fall events during include impacted by fiscal were green year and temperatures compared warm tropical As the packaged of to year and the for temperatures XXXX, gross XX.X% storms and events was produce or fiscal schemes, bag the aftermath or resulted XXXX to distributions Florida of during The sourcing increase regions significant the Western bean fiscal These seasonally of regions the sourcing fiscal of cost of in business of which during instead the growing per summer XXXX approximately January persistent expect to fresh during months hurricanes and comps $X.X negative that gross weather margin These impacts XX.X% lower cost growing after in fiscal due to in our business. share in incremental XXXX. in weather taxes lower margin $X.XX vegetable affected

new innovate packaged sourcing higher ability this In on new ultimately and categories and the XX% as business food would gross our is margin labor cost compared consumer increase a expenses. in in deny to last to our the line, to the run XX.X% fiscal in food best-in-class excess create focus our to a that will the increase to our fresh into after year same top reducing in our we cost significant even been year vegetable we Despite volatility these and XXXX, year increasing operational rates year fiscal the or to disrupt required Excluding cannot have products, costs, last business. taking grow business. fiscal understand and account promotional

must contribute business. lower we is profitability available or cost a we abnormal generating into to from in higher cover the the or to new reinvestment the margin increasing basis create costs our ensure is bottom operating will of weather events. and are the required normal launch to not such, weather products abnormal food As assume the and This for that the business back line

fiscal and not but in operations. As our top line focus cost year growth, food concentrated on effort strong only with a XXXX reducing on such, entered we a

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

Greg Skinner

everyone. Molly you, morning and Thank good

profit Lifecore shown in the quarter company’s XX% or of ago for investment $X.XX financial $X.X gross $XX.X XXXX. market second, for and $XXX,XXX a export in result by quarter million a company to in quarter. in increase a revenues Financial the a million and share reminder, fresh its was XXXX the years fourth per in XXXX, Revenues the a change are business. $X.X year increase to XX% the increase or fiscal $XXX,XXX results operation. million four operating tax from to as or food benefit business in the million fourth reform Net discontinued during increased reclassified have continuing Therefore for to vegetables in in quarter. in fiscal vegetables $XXX,XXX operations increases million Apio’s the the quarter the million quarter increase the a continuing results first, business; the profit food increase statements expenses. export $X.X million exclude were of enacted and from XXX% export compared increase million tax of revenue. or primarily $X.X business been $X.X the million of full $XXX,XXX a These quarter a The increase $X.X to net per the $XXX.X the in packaged share fourth million XXXX business. quarters Windset packaged XX% of increase of Lifecore; in discontinued partially was taxes from As the due was income of in a ago of third, the $X.X fresh to offset in in increase $X.XX or XX% was fiscal fair the The year Apio’s in XXXX a of the in in December the fiscal income and tax gross year income a net from fourth The XXXX. in $XXX.X increase increase in or operations in compared last value income food

debt result million of at year of one-time $X.X million a lower as change For profit products result decrease from X result due increase fiscal the increase consolidated income The in partially business issues year to increased or pre-tax in was X% which at vegetable continuing $XX.X net XX% new a in grow to fiscal were $X.X XXXX, The revenues of driven range $XXX,XXX fair primarily increase as from the was was X% Reported million in unplanned profit an business during grow to $X.X sourcing and $X.XX quarter net a in increase $XXX.X compared and increase XXXX, in XX% in packaged $X.XX fiscal projecting to or in These $X.X of to the for of all a $XX.X $XXX.X fiscal XX% Smart $XX.X or the continuing Windset from XXXX a costs million, rate from and primarily during to second, loss operations $XXX,XXX year. the salad revenues to increase $X.XX GAAP by of share in million a operations million to due is continuing $X weather-related compared expectations benefit Apio’s million million million income a gross per XXXX in fiscal to to of increase Shifting Apio’s XXXX. market vegetables increase X%. or investment in a last first, we or corporate share of a year million fresh X% per refinancing ago XX% for or a per ago million grow operations revenues fresh first the $X third, are the offset the packaged year. Lifecore from by $X at tax fiscal in increase a or from $XX.X loss from XXXX; months the a tax revenues. the value Lifecore; and decrease to the XX% share in tax reform; to X%, on X% gross company’s Eat range a income increases fourth, last O. Lifecore of to million in produce million

year solid Smart XXXX fiscal rate growth XX% with of of XXXX implies growth the fiscal Eat growth Our X per realized year. in combined in XX% salads approximately projected a

total Apio’s pure core We simultaneously while $X and expect customer suite fiscal plant margins. O in X%, X% generate shifting million we revenues business higher to to the million and our to to products to expect mix product Now Planting in line $X and deliver of ‘XX revenues bags increase in of trade

projecting $X.XX increase estimated realized are income XX% tax from We to $X.XX. consolidated one-time fiscal in fiscal an net EPS to operations range benefit resulting XX% the excluding in continuing of to XXXX, in XXXX

will $XX cash that Over $XX are We in the projects and of in to initiatives to $XX capital million million from been to capacity expected million be expenditures of on of projecting flow are primarily million focused projected for innovation. be will but million operations from be expenditures fiscal the $XX million XXXX expansion, range to various in the and in reasons. XXXX. $XX $XX million The remaining fiscal XXXX, have fiscal completed delayed $XX reduction cost were capital

per timing the $XXX and Now fiscal to is in The $X.XX year startup share. will For production Molly. of to call the of the within fiscal income production breakeven over suites O’s at Lifecore net XXXX, now income million and decrease be in to first back the quarter the launch expenses from to due net revenues from facility. compared first turn last and vinegar mix Planting million the new product of of year I the to quarter to $XXX to range and expect be we projected

Molly Hemmeter

Greg. Thanks,

profitability. growth manufacturing. and products specialty positioned more detail Eat making other to for companies which benefiting trend we pharmaceutical material a into we outsource growth three go among Lifecore natural is medical Lifecore, enhanced me progress salads Let in businesses, each services from top and about are our and and as continuing the line Smart include growing food

number Lifecore growing FDA fully of approval, long-term industry is fuel positioned its the its in integrated CDMO products well to the augment a to projects seeking pipeline as new With growth. with

natural products customers Lifecore is Transformation expect growth revenue years Lifecore to adds sales over We in next customers, to to and continue low the packaged fresh the clean pipeline. our In than will sourcing These new vegetable products bag product X a current of higher on XXX% rapidly. our product include Apio we that products needs less expanding with commitment existing commercializes fresh mid-teen ingredients. from to currently vegetables evolving have meet evolving to consumer gross margins and volatilities its transformation our phase, to the as are offering. development generate are expands line business exhibit that average food historical natural

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to ingredients all-natural artificial ensure all XXX% We clean are Eat and Smart including from no toppings, made products, initiative have ingredients. label launched with salad Eat dressings that dips Smart the

end deliver of this to by year commitment schedule on calendar the are We XXXX.

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our XXXX plant our recent the kit salad this of debut category, Vinegars of implemented disruption multi-served O of our fiscal Oils year Now successfully Premium single-served salad and Planting in with strategy with entry food. launch pure into and the have kit We Olive making category, addition its

natural manage our business. historical closely packaged As products, our offering business, must within food we into our expand cost vegetable to the vegetable we bag fresh continue especially product rising of

this implemented lower third-party to such, to drop or savings consultant several initiatives we us work effects team cost over next identify As to innovation shall initiative is be hired continue The the additional we and a closely normal our to of to objective weather. say to invest line. have to cost-down with that cost to in of bottom dollars enable the absorb our the can abnormal and years to

have of We we and throughout more as entered the cost-down program recently stages will progresses the the share initiative fiscal the initial year.

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focus to developing rising the to and deliver continued cost offset value weather efficiencies and also on and of and consumers down products shareholders. cost – drive affecting our our And on on increase that focused to continued customers, driving our are volumes each that finally, to business focused food are business We we volatility will our on to of capital. increasing we efficiencies In production invested in order is business. summary, innovative in in return increasing continue

our the and and us and on simultaneously As strategic Smart resources increasing natural products, strong balance for sheet executing finally, provides businesses, will focus growing goals. food we reaching objectives our our And continue we to our our financial with salads Eat cost three and reducing remains while efficiencies. transform Lifecore, platforms:

open now questions. are We for

Operator

from our Maxim with first Instructions] comes Alexander [Operator Scharf And question Group.

Your line is now open.

Alexander Scharf

morning. good Hi,

‘XX when within growth, much incremental how existing salad much you that doors be you expected how X%, of from points from – of much how can kit of about quantify to distribution? year think to to guiding is and are growth that fiscal you X% organic So

Molly Hemmeter

Great.

So, we is year that in sure are very through. focused fiscal making distribution gained we fiscal the ‘XX that ‘XX in year selling on

So, in year. our focus to investing and in products velocity trial the on primarily driving was going be that last we gained

a get that gained our So, those They sure are year brand in of be building that products. – from of by our growth our lot consumers that areas. executing some distribution know year-over-year excellence. strategic will We lot on the and want and time of to with our really the drive last we we and accounts making we geographic with love trial relationships new to spend

new So, gained. distribution just going most the best making sales have to of we the be that of are just from those

Alexander Scharf

Lifecore, or quarter and quarters Got about it. you the past in Lifecore? you of both in first is lower lower or especially regards talked expecting revenue, have week be then unfavorable And to magnitude be what we are have at or seen that to margins for this then will to unusual similar going the quarter mix, an and timing

Greg Skinner

top line the expect line last flat The top shrink. be quarter relatively with probably we the should to Yes, year. first don’t

mix. instead of sheet ends end the particularly production costs up side it inventory, they much a don’t produce quarters sales. flushing cost your and on of that of where in fermentation said, in up I the it’s In through as balance As product more

what in last in year, of first So, impacts quarter down, it is margins in and quarter this the the is seeing the year. shipments first first. quarter from And movement had major to they fairly of are where your the second couple that quarters, we a the production a

So, change production from that at half is coming year-over-year mix the would Lifecore. say and I of product

Alexander Scharf

million, of to your cap operating that And ‘XX $XX just by $XX your guidance, drawing expect based year to down exceeding about Great. flow cash fund then million at do you lastly you gap line on fiscal by credit? have

Greg Skinner

yes. Right now,

that. planning are We

We that of will be for using credit to line pay excess. our

Alexander Scharf

taking Alright. questions. the Thanks for

Operator

Capital. next question And Chris you. Street Thank Lake our with comes Krueger from

Your line now open. is

Chris Krueger

morning. Good

Greg Skinner

morning, Good Chris.

Chris Krueger

Hi.

Just soup expect on whether timing a couple product or have every your of couple of salad quarter products, like kits we that? last salad what’s quick a kit the what? rollout new the new or the on Should years new it’s ones, introduction we

Molly Hemmeter

say constantly that’s a developing Keep stores. products in for are mind good we of our rotations I approximation. would that new some club in

sometimes to is ask. complicated a this So, question

that one retail one Our two partners multiple launch the and and spring fall launches another typically we the SKUs in per usually have year, in during time.

kind usually on usually of is way there quarter. think So ways good per That’s it’s of but about on one it. two average, new products the to salads, a

Chris Krueger

Okay.

is Planting it to gave the in detail lot could I press don’t Now soup, canned the soup section, the new going little Is it be a On sold in think a of give you a product, produce us you bit more of description release? of it?

Molly Hemmeter

didn’t, you Yes, truth. because to the tell little of holding we kind bit back are we a

very to aisle, It much We select the a will are going customers to be starting to is this which be produce sold disruption. in in ship QX.

is other soups believe this our strongly will truly with that in the the are the and of partners buy into or deli the us. So lower nutritional primarily these have cans not the these consumer sold based obviously, are one profile, but because island already agree nutritional of very have sodium in soups we deli, that full, and the right center and do shopping now, much we soups, in which who benefits, produce, plant

So, a going learning be we lot are to here.

We are time. going to be taking this step launch a at one

It not and going let evolve but these rest is haven’t are it the plant patented package, we yet. am place go are in we launched of forward consumer. produce This after We to to kind in in to since going is going a a I that can.

Chris Krueger

following you And unknown of at couple had last how completely Do year? droughts, that, do your how Okay. whether at have some like the or factor in that? control, of question your out you a in that volatility years, sourcing, negative should guidance lot look we least that’s be assume at of things last for look hurricanes, we it floods,

Molly Hemmeter

Right.

So we abnormal what to to right accordingly. years. We as abnormal you we call to normal. quit these need these stated, are And for internally, weather saying and we just have ourselves calling conditions have had multiple our need these we business is plan need to now

year to right get It’s system investment to a our It’s year cost plan huge on investment towards year an events means this investment get these fronts. year investment we now, weather cost year the the And year working that but happen we are to systems, go above food in many is the multiple So out it’s that in an that is in in in new also business on are going out. and potential fiscal out ventures. cost going winter. can of ‘XX any an

next are happening, to year and have that So, we any on so of us trying create help count our that budget it events this to those our these cost in guidance. so doesn’t for year, counteract and affect up out set more we contingencies basically

are at it that So, ‘XX. going this in to and is approach that’s how we year are fiscal looking year how we

Chris Krueger

got. I all That’s you. Thank it. Got

Operator

you. Thank

comes next Capital. Gerry with Our ROTH question from Sweeney

Your is open. line now

Gerry Sweeney

taking for Thanks Greg. and Molly my morning, Good questions.

Molly Hemmeter

Hey, Gerry.

Greg Skinner

Gerry. morning, Good

Gerry Sweeney

a walk potential your rough of sure sense? maybe could look of look through the maybe you the at be and in years, looking what are that Smart ideas opportunities opportunities? the from at now and makes to maybe Now something you potentially sort maybe of O could at Eat you at obviously, couple how foods pipeline maybe I’m funnel from Landec of – then us for ideas ventures but process natural to if Planting, you internal growth, analytics next natural have sort the perspective, wanted looking I you what’s have and

Molly Hemmeter

it Thank you. Yes, does.

the our know, just So, phone on people as in ventures most group started we XXXX. new

It eating did on was to all very with thing changing we it’s new X.X are the a what immersed look So, in And been busy. the we know going – just is starts out over a really at little considerably. and we just group. with habits consumer extremely they the only first consumer. ourselves and consumer just as – have the we It’s been have a year, it’s yet really growing years

first with we started only and of that the come different consumer. we but consumer, That’s gets it ideas. to that of psychographics up a the understand started. where all who plethora was When is this half consumer started and so demographics, to to not the And define mindset

also leverage capabilities comes was entirely and one development say new ideas to is There bring that do that our we thought the an path. process. and at So and new our those technologies how to market existing in so different another we group that path look we from ventures

come about ideas me no and funnel that’s those have this company, set of as are cases what’s on entire develop a biggest believe that’s how that we of great shortage criteria have. ideas, all then have use a where group that into and that we and this So, we investment return say to we business prioritize we the and ideas we the have ideas the

have These of have So, required venture just new years, investment. the over significant pipeline last of ideas. a couple created we

are have did not benefits are fiscal see the to the in A we you investing but this it’s of we we at this case not over a result, lot you So, because the going and in these investment they public, year the our we several are in are to SG&A, right next and is mentioned, capital that are in, for level and we business get innovation a yet will ‘XX reap believe as our capital. innovations years. see for that yet going investing for the

is I bigger is, year another fiscal the but year, in our initiative and vague are year will am mean, this foods grow to have very have of So, our of Planting this launch half second business. that half being have we of purpose, the I ‘XX, we said the big talk quarter, another second initiative. poised we and you we launch announcing about Now fiscal be natural as I But will it the ‘XX then. on we think more half

that the ‘XX. in and of think means going to that to are we we are Now will point less bottom that’s heavily start starting to in line, turnaround year is key beyond fiscal short-term, year start are investments benefits I really year reap dropping investing the fiscal we to in but because the in these and investments ‘XX these ideas, fiscal these ‘XX specifically

Gerry Sweeney

the another that to that that obviously, group for about Planting criteria? then Now of still out developed, and And may opportunity acquisition internally you an go acquire some side, natural how was on is the food fit

Molly Hemmeter

looking. are always We

there want are return we – acquisitions. throw at So, we for looking make ROI. specific back at process investment. out to never look on again acquisitions. have comes know it multiple to very a to that We a crazy something return go will We that we Again, don’t a through

us that’s it we it, will it right we push, going – on to we to jump right when be and it. we not not are price makes company a sense believe for can force to value, again get has going drive but So, we we shareholder for that are the find strategically to

are so we very And much focused.

going acquisition, control organic is good and and believe we extremely we an well. that’s at find organic growth priority so opportunistically, we will under first Our to it are as we because our are growth, and if do we that focus on

Gerry Sweeney

then gears the, of bit, that a I it talked of give is initiatives early? or too And vegetable any for or business. some or still you maybe cost-out details you historical Okay. at us Can those ideas initiatives of some about little least what exploring initiatives guess, switching

Molly Hemmeter

about Yes, it’s me process, but in let pretty early the process. the you to talk more

productivity initiatives you increasing costs and a grow the our company are implementing had in current and with want see at okay, this the been every prices of the pipeline. I focused kind that rate capital first, business we are faster to in to starting than in on cost but always enhancements I prices So has Obviously, that with cost-out. start year, get to our out, think we

good, brought missing so bring so starting a are pair just and are say And have and process. it’s third-party, we always we that we in in a of eyes fresh what

just just are To fiscal our year this me is innovation So first side. ‘XX, innovation of on be we like in the focused going to half the same, right.

focused We reduction have ideas of creating on a funnel ideas. are those and going for funnel of we to cost be a

are Now, a timeline ideas, will have their prioritizing quantifying, they can am for their additional don’t and automation in process to capital investment done hanging and those we and ROI that others I going be of looking to even take the resources go quickly systems all creating hoping perhaps. some in execution. we budget the be have current of low required because through on and fruit at in our

going some to to have make are trade-offs. We

fiscal the we see first the of we the that share be are I of on will going that’s to going about will in it be next year process it execution defining able three this half over – So, more fiscal and it to and the to be are that second year one quantifying through. programs half be and won’t we two the or benefits see cost-out ideas the will will X we and X – years. then three one over be a of these those to

Gerry Sweeney

for I my it. taking Got appreciate it. Thanks questions.

Molly Hemmeter

Yes, thank you.

Operator

Instructions] [Operator comes John Walthausen Our you. Company. Thank & Walthausen with from question next

Your line is now open.

John Walthausen

have the really take that’s of in been basis understand this an on trying were that you that to it is My on it committed market capital have better, you Lifecore made developing include business your spending way? the good you is in-house bit investment and expectation Yes, will it I questions or to year about Are to morning. a these significant more. your

Molly Hemmeter

short That’s both. a is answer great question. The

new go for development products these there this through The approved time these on a with that these have with FDA challenge an and all and that but all to again we we sure customers. development business extremely are pipeline, pretty are in customers we partnering products existing to so have trials. existing are is and and them make for lengthy customers expand that strong is also we there capacity – growing all clinical So, them, are

we do looking out at disciplined pretty CapEx we map is when investing what spending. are process supporting in customers for a our that and we So, that

when when So, as that that investing results are we more see and we and we have of products the the the place sure company to capital those goes those and through and is gain make clinical capacity more the start confidence in trials trials commercialized. we

time right, to to in – You equipment have ready takes it equipment a on and and installed to be end it because have prior to have you and actually being order get bet, have it commercialized. that order to the make you

our good bet on closely So, of is we that. a and little think with sight there have in partners here, we bit work but extremely a we

and new been And have in so have pipeline. that capital our is plan product customers the that we in the existing both for development

John Walthausen

that where goes is spend R&D that that with is? products, segment, for that basically spend these qualifying new the on is the Is

Molly Hemmeter

Yes.

John Walthausen

not a reimbursed an that’s that’s And for us out-of-pocket R&D?

Molly Hemmeter

for we actually all the Lifecore development Well, for projects. is – reimbursed could pay

revenue a actually that’s stream. So,

So, we revenue streams. typically different have three

formulation includes development have fill. products, then CDMO our the and We business, and the fermentation development which vial syringe and and

John Walthausen

relatively I are But shouldn’t we it then of been it’s the see you ramp-up it’s type growth? it’s out revenues, when we something take years X revenue all or Okay. a about going reasonable expect R&D to growth the is to that will fact revenue the year revenue see growth to double-digit thing, talk and the growth, that unfolds, spend R&D not has compared that as slow this indication

Molly Hemmeter

staffed giving, in pipeline mid-teen are growth are for currently to see and projections with which the have. R&D that growth those the is we staffing the low we an No, those are basis we in annual Yes. we projects on projects that

John Walthausen

highly okay. see Lifecore’s X years? I an out get basically. you am within better am the and with just mean at ophthalmic as understanding, this line would product your we mean, mix timing outlook, to horizon, trying Right, profitability lookout if I originally I the I impressed the was What

Molly Hemmeter

What mix?

John Walthausen

you that markets of mix servicing are in The Lifecore.

Molly Hemmeter

other markets we lot externally, we mention mention to market, goes which don’t markets the in, we our Well, as we but a that the are be XX% all products have years. to as business oncology HA but is of purpose our general Okay. markets and that going ophthalmic other in have some markets have business tend well, And of we about then XX% the mentioned is and the we orthopedic. see to X on mainly non-HA

ago, was there see a you is few it So, XXX% just years shift. HA. a dramatic And

years. in more X will XX% non-HA to going it’s be XX% to Now,

amount the new going other in products that that pipeline markets after biomaterials. we of the are you other tells that have that So using

John Walthausen

the the an arrive very the are allocation assets like overall a Lifecore, sales, the corporate it of bulk accounting at but side And because obviously questions, overhead, bulk on of of of small to a allocating it do at helpful. seems business, about but of it’s third generally of as that’s the I Okay, seems the bulk you the how you the product? food then sort the like look

Greg Skinner

corporate It the Well, external through to go we in SEC of ties detailed fairly analysis our department. a reporting. have with

the to and team looks corporate to allocate it cost management how You the required subsidiaries. at are

very cases, that in for line So And an expense cases go it’s compensation, by we allocate, like instance, stock easy. stock-based we sense. makes that’s we a with options, methodology actual up where And line. the literally in other come

net everyone how the decided all income. because that numbers And allocations so one tie everything we it’s sure the and make We to in back – to detail apply want it’s in divide our gaining and by just we through down high actually way and SEC corporate. see numbers the to analysis are transparency that for actually number we level release, detailed at to take this the particular reports, the or our not can and to looking go

John Walthausen

Right, okay.

you. thank helpful. That’s Okay, very

Molly Hemmeter

Thank you.

Operator

call back and would the over turn Ladies today’s for you. now our question-and-answer concludes gentlemen, Hemmeter session to further Thank remarks. that to for any call. Molly I like

Molly Hemmeter

in I in growth in we ventures, really Lifecore. the initiatives, growth to at new of to fiscal and it transformation I we of order to year investments natural look fiscal foods making at will ‘XX. in I business, look as Thanks. when are at And an year in that systems cost-out this Lifecore’s year as new incredible when all in year long-term drive of looking I start we for beyond. company in very our in year our first fiscal see see And are I ‘XX happy this food guess and are the core then growth look ‘XX we forward

is value-added So substantial transformation all – right business just from a words, vegetable part of transformation, the which on package to company company, but which true trend. a and isn’t of natural it’s foods a a

for future. So, businesses, our and we business and are food our CDMO Lifecore extremely excited the about prospects our the of both business

call So, us our joining for thank today. you on

Operator

Ladies you program all participating does and may today’s you conference. conclude today’s day. disconnect. gentlemen, Everyone thank and This wonderful a in have for

Lifecore Biomedical (LFCR) 4 Aug 182018 Q4 Earnings call transcript