LNDC - Earnings call transcript Q2 2020 | Lifecore Biomedical, Inc.

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Operator

Good morning, and thank you for joining Landec's Second Quarter of Fiscal Year 2020 Earnings Call. With me on the call today is Dr. Albert Bolles, Landec's Chief Executive Officer; and Brian McLaughlin, Landec's Interim Chief Financial Officer; and Jim Hall, President of Lifecore who is available to answer questions. Also joining today in Santa Maria is Dawn Kimball, Chief People Officer; Glenn Wells, SVP of Sales and Customer Services; Tim Burgess, SVP of Supply Chain; and Lisa Shanower VP of Corporate Communications and Investor Relations.

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

turn me the over Al Let call Bolles. to

Albert Bolles

morning good and you Thank everyone.

two health leading a solutions, comprised Biomedical develops, Landec innovator industry. Curation diversified manufactures, products operating As food and and and Lifecore businesses; pharmaceutical sells in Landec wellness is Foods. designs, and of for the

the highly development, syringes and is and Manufacturing Contract Organization, differentiated a capabilities that CDMO, and Biomedical difficult-to-manufacture in Lifecore of Development offers fill, in finish pharmaceutical fully or distributed integrated products vials.

categories of injectable pharmaceutical bring over emerging a market. to manufacturer leading a their Lifecore expertise for HA, partner Acid, and brings medical As innovations years as to of premium, therapeutic Hyaluronic device and or companies global XX multiple across

natural freshness its Curation naturally and retail, to is and Curation Foods extends to business clean vegetables. supply technology, refrigerated innovating life fruits is throughout America. the patented focused and network club, XXX% with chain, BreatheWay plant-based of which North through foods packaging able Foods, geographically product our dispersed foods of ingredients growers, food shelf channels service on maximize

include packaged salads, Premium and vegetables oil Smart Foods O products, Eat Fresh Yucatan and and vinegar avocado Cabo Curation artisan and products. brands fresh

driving priorities on improve are We strategic in Curation line focused operating financial our at against implementing margins momentum our growth, targets, and to by strengthening Foods, on delivering top creating Lifecore. shareholder value investing balance at sheet,

to For year. second last the XX% quarter revenues increased to $XXX second of the million compared consolidated quarter fiscal 'XX, of

during of in quarter the in decrease $X.XX and 'XX. a loss restructuring EBITDA charges. second a second and and before This we greater-than-planned fiscal experienced However, loss profit resulted a net quarter net non-recurring of gross

plan I discuss operating extensive at Foods to a Curation we've that performance in moment. will that an launched improve have We

while of growth and EBITDA products Lifecore, revenues and focused tremendous product sterile income, impressive with high-quality operating in doubled prior versus manufacturing Landec's CDMO the business quarter development on year. another more than injectable high-growth, had

lifecycle toward development will business its The to advance of move drive continues and that profitable commercialization the product long growth. term its development pipeline customers through customers

impacted second business was supply the Foods faced quarter our results Curation challenges. However, negatively chain with as

we operations better of strategic During understand challenges, review its and completed to Curation and a opportunities which to Curation Foods profitable quarter, strengths our second the Foods competitive again. make revealed

and well result focus plan as value Project and assets already the the strategic organization creation are the upon key to redesign named underway, that network The will SWIFT an ongoing optimization as efforts business its is program appropriate the build size. that action well on

which SWIFT, EBITDA innovate, structure focus, and Project Curation stands to improving improve Curation providing Foods' cost the enhancing for and agile, into an company. profitable strengthen Foods simplify, balance competitive, and by business margin transform foundation operating win, the Company's will transform sheet our and

$XX $X.XX million, While of to are full the we guidance, of a million $XXX $X.XX to and charges. consolidated faced grow range year XX% challenges of operations and excluding have first X% to reiterating which per $XX in EBITDA of half fiscal revenue to non-recurring to $XXX restructuring 'XX, for continuing from million, share million to earnings we calls

substantial and the the goals. We our fiscal third year, of the fiscal achieve current half to to in to profits expect positioned quarter continue are second generate including well we

second Lifecore on details fiscal more new and a into Foods management share to team. players of to introduce I year, I and with Project half SWIFT few would the the Before moving our like Curation momentum

of Board Greg him we for planned best. of his Landec's whose to resignation Skinner, the wish Greg employees, On acknowledge as and Vice wish week. Financial behalf I and to like Officer service. Chief was the announced would Executive all years President I First, last our thank

Officer Financial confidence has Vice for President who McLaughlin, team hires Foods' our Senior place President positioned and Wells, Chief have Chief Financial to Landec's who North great strategic Service Sales to has of With the for me Brian we Vice promoted and our is of goals been new today America. promoted from Interim Sales been Glenn Officer; Customer well Curation that in 'XX. These previously and assignments, are coupled right to me gives with achieve fiscal from announced

the to I'll call that over the With turn for Brian financial highlights.

Brian McLaughlin

Al, and everyone. good morning, Thank you,

a Foods consolidated XX% brief by a second of million driven year, grew First, Curation which revenues $XXX.X moment. XX% was Curation year decrease greater a results. in partially in posted decreased We at strong which offset in Gross respectively. gross performance, over to profit only Lifecore was detail to XX% at Foods increase of driven revenues Lifecore's Curation over and and by that year. Foods our I'll quarter review a year increase a speak a profit contraction X% XX% This by by

to million $X.X a loss for declined EBITDA million the of $X.X quarter.

restructuring per includes charges. $X.XX fees loss and was and non-recurring of Our share per share $X.XX

was per charges, share loss Excluding these quarter $X.XX. second

Yucatan Shifting in Lifecore the we a $X.X backend last our to the believe 'XX, be or against our acquisition during or which revenues; revenues. the quarter. in loaded transitional first third million useful due XX% of $XXX.X half this increase revenue; six primarily the million contributed would increased first results and our increase which on the X, to same to on fiscal results, first salad the year, in months of $XX.X performance period first for projections are to; commentary XX% X% and of XXXX, measure year Foods in second, half third million our December million $X.X fourth 'XX Revenues compared period during a more fiscal

million bean from quarters were offset the $X.X both weather bag and a vegetable limited the tray $X.X and decrease business, green the supplies in to partially by in of packaged planned and fiscal by first resulting events decrease increases second due revenues million in a These XX. in revenues

to issues be to challenge business. continue our Weather the greatest

customer this mitigate strategy action demand to be risk holiday to proved little where took bean during advantageous this felt we with strategy As season. This meet decisive a summer discussed over Hurricane impact. Dorian, plant to green previously, we this

of the early supply weather impacted for another form However, in challenge the availability bean cold industry season. that an experienced green the November our holiday yet in widespread unforeseen event

decreased last profit Company's same or compared $X.X to due the Foods business. to first a Curation year, the period months 'XX during X% million fiscal in the six million of Gross $X.X decrease

The drivers gross was performance follows. of Curation Foods profit

fiscal of 'XX of times the the fourth First products higher sell avocados when quarter costs. fiscal than cost avocado were 'XX, the over of through the current during high cost in of first quarter two

raw Second, supply. weather material events impacting related

and planned or Lifecore the partially tray XX% resulting $X.X by higher decreases million gross profit of a These contraction in a gross by driven Third, were profit lower from increase offset business. vegetable packaged bag revenues. at

to 'XX fiscal Net the first income to. decreased the months due year six prior during of compared

a in First, decrease million profit. gross $X.X

Foods. a the Second, million $X in addition the increase Yucatan expenses of operating resulting from

million associated expense incremental Foods. the debt due the Third in a interest of to acquisition $X.X with Yucatan increase

a expense. $X.X were basis. the in $X.X investment after Fourth, decrease fair months and million $X.X Windset compared first of a tax the a increase increase offset $X.XX $XXX,XXX income the restructuring prior in during six partially of year. an to share market million fees income per on or value million fifth, by These tax Company's net in decreases And non-recurring charges of

EBITDA of year-to-date prior of share per recognized fiscal compared the positive have on a a non-recurring 'XX, negative six the six excluding $X.X when million month charges, $X.XX million. non-recurring would would fees million charges was loss EBITDA the $X.X $X Landec $X.X Excluding the during positive to and restructuring period for have of $X.XX. the months million, of first year, been

quarter second Turning carried Landec financial of approximately fiscal our to position, the the million long-term of of end $XXX at debt. 'XX,

fixed in X.X. with covenant coverage quarter greater than second the of ratio X.X, of which Our end at is our the compliance was

ratio leverage X.X, was debt or compliance of quarter less. of points end in at the Our covenant is X which with second our the

forward. with all have to Curation expects in advance and Lifecore to fiscal our to We the of grow for Foods. our Landec both to going strategies expect invest continue compliance capital business and be 'XX of debt liquidity balance to for adequate its covenants in

to his EBITDA million we million. in million, $XX reiterating $X.XX share to and of non-recurring our consolidating a $XX per Shifting earnings range Al guidance, continuing $XXX restructuring for our to charges. operations are calls X% and XX% $XXX to of full remarks, which revenue million grow from fiscal year as to excluding outlook, to 'XX of mentioned to $X.XX

generate quarter to substantial year fiscal second profits expect in excluding guidance, charges half as We third non-recurring of the fiscal the are and introducing follows. restructuring and

million EBITDA in per $XXX Third quarter the to $X.XX, $XX expected million; earnings the to million range and range share in to to range of be are $X $XXX million. consolidated $X.XX the revenues in

the call back turn Al, now strategy. will to I review to

Albert Bolles

to plans fiscal remain Brian. in drive profitable We our 'XX. growth Thanks, confident about

are we businesses. progress detail Curation Let me our the into go Lifecore more in and Foods about making

pharmaceutical towards two, to to see continues sterile spanning medical number a injectable drugs. trend and trend stage commercialization. to Number And Lifecore formulation development among device the outsource three, and products, manufacture the of momentum. clinical companies increasing the growing

and As HA leader tailwinds. a manufacturing these Through a still knowledge, in and manufacturing both create to high establish opportunities. to has pharmaceutical allowed Lifecore's is to as on highly fully formulate in the XX unique and the grade products vials. in barriers difficult to CDMO, developed differentiated business capitalize syringes Lifecore injectable Lifecore development positioned integrated process of global years competition Lifecore This premium has

one growth commercial by managing its capacity meet three expanding executing operational its pipeline, will two to product expansions priorities. Lifecore long-term Looking and number and demand production forward needs. meeting strategic Number fuel development against by managing customer its future

three, of continuing pipeline. strong a product number from to record track And their deliver development on commercialization

progress XXXX pipeline in fiscal contributed the second significant of development Lifecore XX% in revenue quarter XX% and year-over-year quarter product quarter. this Regarding in fiscal of the second Lifecore development the made second the increase fiscal increased revenues. Business

overall in meet in demand investing The XX the to with aligns approximately for million expansion we Lifecore will To $XX be projects various of at lifecycle fiscal product stages business commercialization 'XX. the development clinical strategy. in business' capacity has development which pipeline future

As this production planned new line will than second Lifecore begin the by for Lifecore's commercial complete fiscal multipurpose When new and vials capacity XX%. more syringe quarter. current increase in validation

to business and Lifecore which with its the meet of the future footprint needs doubling well-positioned accommodate development production commercialization that existing can is Our capacity.

under activities. to product at XXXX. year The supporting phase product the programs X Lifecore make by FDA. review up projected Lifecore the progress development process has scale stage in late its approval clinical activities commercial in Further one calendar during customers continue substantial Currently advancing

product is on the this cadence targeting approximately to and is fiscal XXXX. future in annually achieve beginning to one Looking Lifecore regulatory track approval

continue five pipeline. continue in We Lifecore they on next mid-teen products add to growth expand revenue to the currently new commercialize development as existing and customers its over years sales customers, to that generate to expect to low average are

development product activities. cross and of facility the team experts our with to functional Lifecore's system coupled quality class enabled accelerate in partners best

efficiency Our time-to-market and which of in improve patient therapy. ability our immense our partners, through speed value to innovative decreased lives for commercialization has their

year to when Curation and at priorities strategic our I decisive assumed our financial achieve Regarding Foods help short this [indiscernible] and I goals. earlier fiscal long-term promised established action Landec

excellent made against progress have strategic We initiatives. these

agile, will on an We And our business Foods its future to business. true Projects for food focused on remain highest through Curation our practices. deliver competitive protecting of delicious providing plan with product customer, SWIFT, while access continue on into our nutritious safety sustainable commitments. and transform to to executing the our mission grower profitable and and activation partner for generation while level quality Foods we will excellent and Curation staying

implemented ongoing business launching plan profitability, at three SWIFT first At Aligning our and fiscal in SWIFT we 'XX improve to throughout Foods and simplify activities are Curation be the today. Project that 'XX. Project components. would A our core step

focus continued on network a First, optimization.

strategic the in third, on order compete. focus And redesigning our assets. size organization to a appropriate Second, the to maximizing

annualized cost from be $X.X The share. million $X.XX or actions savings total these approximately per will

are each focus announcement our Foods' in network optimization into today's offices is Curation operational detail Maria, Santa Going to into we on demonstrated core centralizing on more California. and with continued its headquarters components, that

office decision the centrally Los California, in allow This in will in It'll Foods for California, our we the the the Yucatan Foods of collaboration, effective. result leased teamwork. will in San in office more improve Santa leased the headquarters Maria Curation us Santa business. the communication sale greater closure Landec and way California. Having make will Clara, located Rafael, simplify of and Angeles, team This streamline do the efficient and

the strategic business. divesting and end, our Company's the simplify focusing the business non-core of to assets has dressing to are on which continue we assets California and initiating yet salad to To facility, are exit that we become operational. Ontario sale Second,

that to initiatives, a develops Third, which business. size reduce we for the affected is sincerely for this that by places talent headcount I members the plan am organizational have employees ongoing them service. announced and strategic internal new thank right Foods. for to the their that And are at begins I for Curation elevates roles and appropriate team design, our a made grateful contributions

previously pillars facing that will pressures innovation, mitigate performance strong optimizing our Curation As delivering higher we believe strategic operational breakthrough the continuing with discussed, growing cost strive for products, a second to at our product our our into operations, deliver fiscal the margin of while half Foods focus industry I in excellence. continuing to 'XX on

of Although the that And year. reflected see host fiscal 'XX the quarter advancing during fiscal this are our in half we a the first we initiatives. financials of we challenges are met third with overcoming, this was fourth will of and work

fourth Lifecore successful $X.X of this the during four business forecasted growth first, which projected profitability will million quarter recognize EBITDA are; is of to fiscal with income $XX to $X and growing of and million million The million. to key quarter, year, be $X.X largest operating drivers our

food Second, advancing Curation will Foods and with packaging fiscal in innovation 'XX strategy, line natural solutions products. our our we be of high second revenue the with in half margin delivering

We innovative be leader packaging packaging BreatheWay create proprietary with our value resources to an to continue our patented our focus We solutions. with solutions.

being now of The technology raspberries is groceries. for wrap used to pallets

As expanded Driscoll's Driscoll's have the we in America. a California in centers, task special result distribution program now wrap North raspberry to of pallets a

squeeze exclusivity has produces our squeeze In packaging addition, packaging a Curation in Foods with flexible company Yucatan the secured that category pouch.

packaging in solution reduce has to extended for greater the waste. unique North This life rights distribution company well and exclusive as usage allows America. as convenience, shelf This

We also with continue innovation. to lead product

Cabo branded brand. of momentum expanding have in our our Fresh are our our We avocado and products packaging test squeeze into

about and in with insights, We we well identity are which consumer on extremely in consumers, 'XX. to packaging U.S. launch new both of an market for Restage, January have Eat be the scheduled Smart's velocity. sales and expectations is enthusiastic in also brands Based the And uplift the tested Canada. currently

Our Yucatan on team second product. manufacture margin. gross operations strategic and improvements initiating to our focus has Tanok, lean of we pillar practices at improve our third where located avocado momentum Cabo manufacturing Mexico our half continued in is excellence operational made significant by The Fresh

The results reduction our include conversion XX% improvement actions raw of XX% costs in costs. and production in a a fruit

second projected manufactured cost overall to 'XX, of improvements with of XX% our beginning the will fact, These by half In XX% 'XX. inventory January in projected is costs of lower be fruit. fiscal reduce in

margin as in products. to Yucatan, result are of Importantly, least of a our these we efforts, at for projecting Fresh avocado deliver fourth Cabo quarter gross XX%

have As we of fourth our focus out pillar strategic communicating, taking on costs been business. our our is

The savings fiscal $XX track quarter. our 'XX of to Curation with of Foods on savings, the goal in is in recognized million projected program out our achieve to $XX being million XX% cost fourth

of an As one we will contractors part facility, annual from of we California this in the savings Guadalupe that which to program, provide two million. $X.X labor announced labor today, are consolidating contractor

Project in to fourth We savings of this this the as realized from begin will fiscal be action also SWIFT program benefit year. will quarter from

opening mentioned focused simplify right my without achievements in be would believe and team and profitability. location. to one centralized our improve advance statements, together in the possible strategic in right these of As the I working people my jobs, will our business agenda none

on team momentum. driving delivering sheets, growth fiscal creating improve balance our to have strategic we for and Lifecore targets, our summary, against strengthening financial our our Foods; operating value at Curation in confidence top focused The guidance margins Landec 'XX. line priorities is In investing and at and by implementing

securing and successful to shareholders. to our the long-term I to make profitable deliver growth consumers our necessary changes in am customers, confident in value plan be to

open Operator? now are for We questions.

Operator

Thank you.

from Holland now Instructions] a your question-and-answer be Our of line question. comes with first [Operator DA proceed session. will conducting We the Please question Brian with Davidson.

Brian Holland

Yes, thanks. Good morning.

and and that sure full loss maintained. get get revenue First to question, I bean don't the revenue you profit from the how guess guide QX making we Obviously, understand green shortfall just the back. year we being

it QX the keep the -- of else for be is Project hold would should just So, that of the if we thinking of SWIFT that consolidation that, year? sort referenced, of sort that offset that drives numbers? shortfall whole those just for And that facility and not, anything like you implementation the of the sort there the the the is about guidance sounds

Albert Bolles

is Hi, Al. morning. it Good Brian, Yeah.

right. cost absolutely out. You're I our Project is to mean, going part the focus right SWIFT is then getting be of of which a and the size getting

incremental through about side. cost programs on But a that that out working and talked manufacturing the we’ve above of we number also our beyond been cost savings programs are have

started hole there, Brian, back to had projects savings. you further? in comment we incremental So, so do a some some want we had to we find know QX,

Brian McLaughlin

Yes. Yes. Hi, Brian it is Brian.

help part just as quarter up up of the Al for in So, be one year, addition, of right fourth reflected will cost the mentioned, slow of some the in of in sort pace savings us make in to here that sizing and catch here QX. there's first the the

cost that additional the after. There we started tracking identified that items is going out year some after and we're

also We stronger-than-planned revenues margins. and salad have

on We the and we helping of are that in plan ahead that second so to us of also and expect that's year. the half continue,

And also product Tanok the through in along better-than-planned in and have general looking and salad structure margin year. then our we mix, of cost stronger with production overall the our items improvements the in percent is second And costs. conversion half

under mixed the wings add they're sort things. air up So, our in bag all them you and there, it's And putting of a really here some of in quarter. fourth

Brian Holland

That's from you. of you. thank both color Okay, helpful

towards up cost initiatives. the closer are follow you maintaining you're to a targets, speaking quarter and out Obviously, Just the year-end. one

months three of another through working initiatives. So, against you've gone these

scope is on I'm where initiatives had announced in in about were you currently you the I'm initiatives I thinking of but I'm was targets morning, the have doing place. greater visibility, some there presume in are? talk that new this of here number you examples within stuff we place things sight, specific getting if you wondering there's that and – been initiatives before you some greater that curious, where that of you're out stuff place these progress quarter? Obviously, assume, kind the those where this can beginning cushion that to given I cost of

Brian McLaughlin

it's a that up. As add of items broad we've granular discussed, list very

million things. out risk spread And does so, from a standpoint, wide sort risk of It's management $XX really variety it a $XX the that across million. of to

automation our the serves. our automation. single in of palletization yield variety the It's corrugated. plants. erectors, on It's wide, just things. It's case wide improvements of It's automation a It's

master Our design. on. packs, our just trade goes It and on

that And having logistics, it’s plant so, helped us a our into the field. bit granularity. again, quite It's from

it's things. So, of a wide variety

spectrum spread Fortunately, of resources company. across a the it's out broad in

And are from the of spokes hub. really so, a of sort they coming variety into

Albert Bolles

this Yeah. And, of it's PMO Brian, you things, and our through the these could excellence. tell number complex, we making new but managing sure that we us with Office are focusing execute on fairly things

are We third the quarter. into

good this pull to hit a $XX We are being to $XX of able feeling million range million. on together and about track, we're and

Brian Holland

that. appreciate That a appreciate I was I that. pretty broad question.

So everyone. there. context helpful it luck of I will leave there. Best

Albert Bolles

Thanks Brian.

Operator

you. Thank

comes line with the Maxim proceed Our question. your Group. Please question Anthony from with next Vendetti of

Anthony Vendetti

in we through on gross as just going the margin. on Good the to quarter. year, continue wanted best for to Lifecore XX%. they quarter to Thanks. to are to is I the increase up track is fourth get morning. going move know particularly Yucatan their I focus as

I see occurring. ramp the So,

that in range was gross have just we we wondering fourth expect quarter, a margin at the at. I what do we to overall if of be look corporate the

Brian McLaughlin

product number there of more enhance are but here so product we to a are the a on The expect Yes. fourth in we're and number, from away our I SWIFT I shy projects – in would of you precise Well, things since margin that driving working of sourcing mix well. the environment. as a that stable, we well, on a sort that cost and giving continue out, number to Projects raw are there mean against, quarter salad

Albert Bolles

I Anthony. When the decreasing. Yeah, margins salad helm, were took the

salad but good, were decreasing. Our revenues were margins our

on a single first category. out that a the here but It's in a that lot nice very for been has effort and product optimizations, half margin, of serve innovation of of had the packaging in reducing number was outgrowing consumers. in of the terms of is product got Some that mix. in a little it including we've some that started through the We've impact really us, mid-teens

for. we us mid-XXs to at So favorable is serve seeing to expect is mix going also a get we're our this improvement program, year, which us single tremendously packaging somewhere in the And helping the targeting the margin that's we're where with plus salad. help

So we improving. see the salad

And you the that Mexico think in we the avocado happening I business. really focused on products. are driving of down Does get this help? what's profitability

Anthony Vendetti

of the I obvious kind Yes, is lines it? Are know, the other you're once. now eliminated Foods. Al. or projects any there much And what pretty of you've business over that Curation outlined changed just or in that to you've months number And uncovered all dramatically either focus is much on terms undertaking or, of pretty a streamlining be seven last need or at six

Albert Bolles

wouldn't say finished. I we're Well,

Okay.

we Curation Project focused EBITDA SWIFT efforts, off our program the on So for kicked and continuous Foods. today. improvements growing profitability ongoing of It's driving it is,

we've off. engaged focused and kicked event. a not we So It's process on are it's And that a onetime that.

for really So, this where to get probably us. business except come. more thriving to We it's

Anthony Vendetti

helpful. Sure, that's

quick question real Just for Brian. financial

So the charge. million $X.X restructuring

that what $X.X quarter? As the for model, million that tax we the was run through of net

Brian McLaughlin

probably $X.XX. is or The $X.XX about tax $X.X net million of

Anthony Vendetti

Okay.

Okay. hop Great. queue. the in Thanks. I'll back

Operator

you. Thank

Our Gerry with the your Sweeney Please with proceed question. line next Partners. question comes from Capital of Roth

Gerry Sweeney

everyone. morning, Good

Brian McLaughlin

Good morning Gerry.

Albert Bolles

Good morning, Gerry.

Gerry Sweeney

gotten actually couple expansion Actually a efforts. assume on on this. couple. question I completion CapEx mitigate should questions post Lifecore. pretty a starting substantial But this CapEx CapEx's on a five years. side. a in had been likely last inbound I I've other

Lifecore line. their couple actual they facility now the filling once structure What is a years I the level expansion and bowl for the CapEx is all think got ago, done? they expanded this maintenance

Jim Hall

capacity million our pipeline. to you're $X CapEx And the CapEx commercialization the we maintenance the of our Typically Jim. our increase majority is is to right, million yearly $X spend is manage this that of volumes development as range. in with Gerry

Gerry Sweeney

this fair really post Got not invest of that. is I completion you Obviously is I'm capacity getting say it. any CapEx sooner than large revenue a but what doubled if am at. actually correct essentially to And would sure prior you to -- lot you could have investments. But

Jim Hall

Right. We unless invest new usually --like don't you dictates. to I'll a four process. business the give a line year filling in putting But three is example an

potential time So we lot make or a capacities some larger spend needed. evaluating on to well capacity needs the on investments, working need of we're based packaging filling go where to of in our when and on the have expected that products pipeline equipment especially our ahead equipment,

on against waiting return the always be, that would the opportunity, etcetera. it's business investment But what

Gerry Sweeney

Got on led thing a an of is, one also about helpful which switching deemphasized, little this The obviously in having it, thanks. area, talked side. I'm back impact squaring off lower gears that’s Curation to was to veggie bit revenue gross the you but in Then Foods. trouble tray profit the

that under or running the this business margin. even some previously of was I margin impression no low was

is if So business want an gross there line? impact profit this the to you on and deemphasize

went I And million gross if I’m that the was, having discussion think in And mean out that business dollars connecting your veggie profit I without how the on decent longer really does back gross to you the about the of mean, was from door. this from deemphasize gross using two maybe at envelope that trouble deemphasizing that term profit makes tray area. profit thinking $X want square earlier our the dollars? terms just that, whacking if was sense? I in up

Brian McLaughlin

Yeah.

rationalization do to and work effect not So a have say when through deemphasizing process we you SKU customers can business. you something just them, been is with our other there been we that’s the of have with so overnight, going on

a to it's we is we work are So the sell require to product. to that will really we have what in going minimal margin process try do before

customers the So trying here with call by profitability the overall is, that's line do by what I improving work on of really sales by our in addition the we're what but kind organization, to subtraction. to hurdles

actually things your improve some You take out you and margins.

having it's not very after, driving really on our once eyes So conscious revenue. profitability, focus a again driving

Gerry Sweeney

Got the much by gross how tray in to if profit by the business, it. of just flat holistic with removal surprised looking been was may that have profit there, actually but was subtraction step I gross up the I’m thought veggie back….. addition

Brian McLaughlin

some related issues weather profit. we too, that our gross affected had There

not things So green and just the have other other you a beans counter well. of but it was number then as product

Gerry Sweeney

Got That on… it. yeah, then it. I sense. And makes appreciate finally sorry.

Albert Bolles

In and turn the as the other the the the first turn products around half of half year and to we said going second around kind in we're of of year.

Gerry Sweeney

look it XXXX. And and at how can it. Maybe the Got on the getting a and rollout then a that times It's detail into on rollout little new thinking packaging. do we XXXX bit supermarket it finally process [indiscernible], about the just of commentary squeeze chain. many some how

Albert Bolles

current So they velocities Walmart that that at it the we actually selling the our same expect It's at as products It's velocities Walmart. achieving Walmart. for rolled in category. out the in

typical program learn and and consumers different going test a Chicago have [indiscernible] on We in

Walmart consumers.

things there. So going the number on of

number next a on large in major to that it of US. presented we're And them getting the their have six present be could now resets category retailers We months. the happening into within

So we feel pretty about good that.

Gerry Sweeney

it. Got my appreciate That’s it That’s end. from it. I helpful.

Albert Bolles

you. Thank

Operator

you. Thank

proceed Our Please line Sturdivant the of with and Mitch Company. Pinheiro your next question question. from with comes

Mitch Pinheiro

morning. Couple Good here. of questions

there something in it to built nature it's [ph]? in margin have thought we has this I inadequate? of forecast? used yet year. it the what was to safety back in be mean end to fiscal kind of fiscal that of do Was tucked Is year's So this I the And be performance. loaded used? been

Brian McLaughlin

Brian. is this yes, Yes,

is, that the of much So building and in. guidance the that it's really conservatism we're

margin items very the the we're building year, the as in actually well, about. of it is, third that may quarter. half and in in in stuff some favorably year are swing into that But of and the of be us particular of huge one confused affecting talking part We the the burdened second the first the

half first quarter, of roughly $XX breakeven million we in We second in was see and in of the costs, with year issues given In business. basis that our going in the had on the a the year, costs the sustaining forward. the a fruit models and it because operating and of revenues that fourth Yucatan to the avocado half particular in changes

at fourth year that avocado going area. the half quarter half structure margin margins at is really products versus greater in XX% first in the the overall the That for the second to And looking of change the or year. huge. We're of is the

release, in tough might embedded press driver on in major to is swinging out, terms of be cost but it's the the pull And of it things. major, a out so it sort a little

Mitch Pinheiro

have have just so of you the out, we expect the achieve. you $XX Yucatan cost the have XX% -- million some to your So, favorable, you of you plus described,

Project have progress efforts. SWIFT You and ongoing

part -- corporate the Maria Angeles, headquarters to and closing moving Santa of the I You're mean, closing Los despite but, Ontario. original you're moving

there's all has issues. by -- that been going All still to just this? only its beyond be last fourth inconsistency. over into every quarter, margin mean, XX driven difficult of built Because not supply And chain I all have consistent this the the where Landec thing -- the very something we is about years safety

quarter hot dry summer the if guidance? still really wet be into So or really we cold or fourth the to summer and is and going get there

Albert Bolles

So let that. to here bit a me just little add

the And in going second margin better the than salad So, see half of kit our we in of business. coming to the terms that's momentum We're business. have in salad improvement continually year. right on now plan, our

QX. we rest the we then and guidance the the built the And weather have that risk worked have from into for standpoint here most we QX. is appropriate have in cross And functionally of feel

the half second plan is feel, the plan. and that plan team least the tighter I So I or half does know second we my that than half first feel at

been going. only half months that really I've good feeling second to We're the and have new of put flow together. we about the and business team we how six what's the the here gotten pretty know have

Mitch Pinheiro

BreatheWay. helpful. to QX? We'll BreatheWay that's Okay, things. see very Couple of in from start little revenue

Brian McLaughlin

in of have year, Yes, we're this in improvement half Yes, second the is expecting and expansion Brian. continued the BreatheWay. to

of some on spring. into expanding test overall of year more centers kind a the and the of as year going the of picking raspberries. and of the half we're winter through volumes first be up and part latter focused really coming coolers The additional to We're this our was and distribution time

Mitch Pinheiro

a that segment? Foods new is that, Is Curation

Brian McLaughlin

Yes.

Mitch Pinheiro

Okay.

-- terms look like what plan still for million? on the full year of $XX CapEx, where In does

Brian McLaughlin

year the full million or the $XX the looking Actually at half range of point, million plan we're year. $XX first $XX of in at and this between million a

million Second swing has upon range the around to million. could how. we'll of depending see year a $XX $XX And, timing. That half of

make to the numbers down. sure ends things up accelerating our want which hitting Obviously, or quarter in we're fourth we slowing

of fourth So is to about of and -- Lifecore. of that in that thirds two about $XX million And second on centered half the the $XX year million the in it's quarter.

Mitch Pinheiro

do from cash how Okay. asset And out? then sales? you net your about What expect to

Brian McLaughlin

I'm sorry.

Albert Bolles

Cash from asset sales.

Mitch Pinheiro

asset from Cash Ontario. sales the and sale of

Brian McLaughlin

know. liquidating really at early But of path process to this we're to those in items. the too It's point assessing

the coming in more come on be will to quarter. So those there

Albert Bolles

our we're Yeah. This optimize looking And very part continue sheet. at is Project balance to on SWIFT focused are we all the network. of

Mitch Pinheiro

still of heard where Is haven't Is We Was plan? that that curious and new Vinegar. your just part anything about stands? Olive Oil it.

Albert Bolles

Yeah, on improving Olive. working EBITDA well, the at we're

year. for now that's right focus the our So,

Mitch Pinheiro

Alright. Okay. I all That’s had.

Albert Bolles

now. not area for really big It's growth No. us a right

Operator

Barrington Instructions] proceed line Mike Thank Please with next you. from comes question. your [Operator Research. Our the of question Petusky with

Mike Petusky

in XX% Are getting pickup information gross Lot the mean to margin. of just on that? some margin but to Can follow, sort of hard and line? of I terms you SG&A morning. sort the QX, you in much of speak with pickup is XX% leverage of Good or associated

Brian McLaughlin

you say that Could please? sorry, again. I'm

Mike Petusky

Yeah, sorry.

fourth I'm From operating So margins. that the of most fourth in an number via margin in quarter, margin standpoint, huge Obviously, you're quarter. the does of a expecting assuming gross comes, that expansion obviously, line. of the huge, most comes

gross But of pick between split like I to and XX-XX gross the mean that it is going up the line. most margin mean, SG&A margin

Brian McLaughlin

the that The of avocado to Yeah. already. days' XX gross most about inventory earlier, inventory. statement I made again, worth back XX hold to margin it majority We at line. of vast is the that of just centered And

actually in inventory So middle QX, cost. through the the already our most the absolutely see we in of It's it's of no of this QX, and beginning our part through the through latter in that point warehouses. we model there, coming at

of mystery has the that taken So been out. really

yeah, revenue majority margin think on we're line. a have is just the But plan good I It's though our matter improvement continuing of do been gross doing we vast the job SG&A. in to to the the what at of managing very us a line, doing year, this relative

Mike Petusky

Yucatan. extensively. meaningful resulted Has in Okay. in terms the Mexico leadership But I operations changes legal of facility? in you down on there, down the that know And that in of with this issue comment can't

Albert Bolles

environmental an permitting issue. It's Really.

working the on now the resolved with We're have the next step. issue. regulators, We

ongoing. it's So

conversion operations In terms as operations, XX%. the ever decreasing ran as with the our of running costs by are they've good

the highs is us the is Our very running as record well. from operation for yields are throughput plant and consistent is high, and

Mike Petusky

meaningful in Sorry. you changes there? But have had down leadership

Albert Bolles

leadership manufacturing to beginning practices. year on in of there lean put We the put meaningful our

that’s So now had we put there the what was in. leadership

back We of May, have changed out beginning leadership. in the the leadership we the changed

Mike Petusky

Okay, so since. nothing

Albert Bolles

now. terms there leadership prior. have has in that it we changed Nothing changed But of leadership was

Mike Petusky

Yeah. And didn’t I was the were it said. for Olive hear roughly? if the O revenues question. quarter, it What last then second just

Brian McLaughlin

O quarter? second revenues for Olive the The

Mike Petusky

Yeah.

Brian McLaughlin

second. just one Hang Yeah. one million. $X.X Below

Mike Petusky

That’s Okay. I right. Thanks. all got. All

Operator

Thank you.

[indiscernible] your comes Investment line Our Management. with Please the from questions. question of next proceed

Unidentified Analyst

thank Hi, you.

together. you two just was units whether not I in Just two together different general to businesses so think one could keeping long-term. quick or third it These how you if on sense you question. wondering fit then makes the And these very think here, comment

Albert Bolles

well-oiled not at a a so I Foods well. Lifecore the moment. Curation is as machine say Well, well-oiled it's is very, machine, so would operating very

like health are the We terms tailwinds are in and being are Foods around Curation categories store we where premium that that going. in in we of categories that the for the However, believe should have really us consumers wellness.

board So to opportunity work get And the that and on that the sure at Lifecore. make to Foods it Foods and continually the needed that focused our drive to the of the at back Curation with fix two have have focuses now on we great right growth we Curation track. my momentum profitability but continue I are is capital we are the providing profitability

Unidentified Analyst

Great. Thank you.

Operator

you. Thank

question Mr. Bolles for to over of We I turn answer closing to and like have any the our back reached would call remarks. session. the end

Albert Bolles

Thank And you Landec. interest New to very everybody. your much in for Happy Year

Operator

today's teleconference. concludes This you. Thank

You Thank day. for your time. have your wonderful a may you lines disconnect at participation this and

Lifecore Biomedical (LFCR) 3 Jan 202020 Q2 Earnings call transcript