LNDC - Earnings call transcript Q2 2021 | Lifecore Biomedical, Inc.

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Operator

Good afternoon and thank you for joining Landec's Fiscal 2021 Second Quarter Earnings Call. With me on the call today is Dr. Albert Bolles, Landec's Chief Executive Officer; Brian McLaughlin, Landec's Chief Financial Officer; and Jim Hall, President of Lifecore.

During today's call, we may make forward-looking statements that involve certain risks and uncertainties that could cause actual results to differ materially. These risks are outlined in our filings with the Securities and Exchange Commission, including the company's Form 10-K for the fiscal year 2020.

call Al the turn me over Bolles. to Let

Albert Bolles

the everyone. to a that start you to New and up wishing both country. like day afternoon, good recognize moment Foods a healthy Thank Lifecore by and essential will the I’d everyone at and our take of across Curation contributions our Year show workers joyful every a facilities

remained lives on that us businesses; leading have fill in and is Biomedical frontlines contract Landec operational syringes manufacturing difficult-to-manufacture integrated been and finish our offers two Curation Foods. work capabilities of modify essential CDMO, perseverance. from of distributed solutions and Lifecore in many wellness am While employees innovator the I to have highly a operating and pharmaceutical the and differentiated development, their health fully and Lifecore Biomedical grateful our products home, asked comprised in for development of or diversified vials. a and is organization,

fresh chain fresh, medical employees avocado premium vegetables. O able packaged Eat supply maximize feed of and fruits freshness And that products, As partner our Cabo safety, artisan refrigerated through provide bring life pharmaceutical in at our HA, product for a Curation precautions XXX% brands clean our to Through Curation Lifecore therapeutic companies to dispersed ensuring Curation vegetables a their naturally our XX multiple our hyaluronic that to patients’ and nourish nutrient to acid, value during to patented ingredients are protect Curation of manufacturing innovations America. foods Together, Yucatan measures families our extends put emerging Fresh dense as over At expertise salads, to innovating the remains consumers premium Foods delicious, or food of across include retail, Lifecore, we all Foods, focus technology, years club of foods Foods, on which with growers, employees olive products collective global and leading access our and plant-based to shelf and medical brings customers devices vinegar and categories pharmaceutical is products. America. large. Foods improve its and and device company foodservice and channels grade lives. oil BreatheWay and livelihood market. natural North products our at business, their positioned to are for across we injectable throughout manufacturer Smart communities focused is the on improve and North drive network produce packaging geographically that of our and pandemic. and employees, global place and shareholder

further. our goes focus on However, value creating shareholder

half We line these in a pleased against one which cash operating it into execute year capital $XX.X we efforts XXXX, for consistent we share support comprehensive in imperative fiscal Curation at facilities. Project about is flow at that to brought flow implement by SWIFT, that launched of at of a by possible order to strategic credit and million adjusted refinancing to are and Foods Lifecore refinancing financial a improvement margins improve EBITDA deliver targets, priorities company's we top was that Lifecore drive motivated December initiatives, entered efforts. momentum growth, significant cash I’m first invest year-over-year place against generation Curation XX, in to ago. improvement the drove on profitable to the made our in at our was demonstrated Foods. In our XXXX. This have These a growth the structure

I of accomplish together and as critical significantly financial we this track performance, on our to back organization we Our work delivering and improved business milestone. are resilience am proud is

our in reiterating shareholders, confidence have fiscal to continue our guidance we XXXX today. XXXX annual ahead, for look and a our fiscal we As delivering for strong

the increase first versus million the in midpoint for $X.X We the which and have increase prior million expect year year generated EBITDA adjusted of million to adjusted $XX.X $XX.X of EBITDA of fiscal prior $XX represents segment period. EBITDA a year prior implies versus million represents an year. six $XX the months an we million, adjusted generated Year-to-date in level in Foods $X.X of period, an period. EBITDA million year-to-date, the in $X.X at generated the Lifecore increase million of range the XXXX, At continue Curation adjusted XX% versus to range $X.X increase versus which of represents which prior which million the

XX%. segment accelerate expect this performance our and state year-to-date Steady of second Foods targets of end. detailed that year as we've half the Lifecore approximately XX% Curation to margin a We fiscal fiscal marches of gross to trend in range towards that previously to at improving will this performance gross of the the margin year XX% continue XXXX

the share and call for financial performance. half of XXXX for quarter more Curation discussion and the Brian I and turn highlights on deeper second a our Lifecore I'll around our second outlook to and Foods, details priorities Before for the over fiscal refinancing

Brian McLaughlin

Thank Al. you,

way CDMO Curation XX% The food second softness tray and focusing reduction was Project SWIFT this reduction in segment. gross business. profit in of Squeeze primarily business expansion the Curation the in decrease in Foods vegetable margin and our our by ongoing business Curation performance X.X% ongoing gross the is to business, XXX legacy resulted planned partially within revenue increase due by to in from in and offset key and our Fresh was XXX fresh points $XX.X vegetable from end X% Avocado growth decreased X% a Foods a partially state was our to X.X%, prior a products our by primarily The performance increase increase in innovation basis Foods XX%. in puts which of by revenue our year products material products revenues, fermentation operational by COVID. and steady vegetable increased and to and connection period. versus tray increase quarter due XX.X%. by the the in its its Consolidated revenue point decrease a a which compared gross Combined, margin improved aspect business offsetting driven retail prior gross salads our new XX% the on our second X% to achieving planned service million. business innovative revenues margin basis Partially on Lifecore’s distribution with well quarter, this year goals in in avocado led improvement to legacy and Lifecore packaged Cabo increased margin million avocado our year-over-year to improvement of high Foods, Curation The Foods primarily profit strategy brand. and year-over-year the to driven raw Curation $XXX.X The decrease range a to in was driven offset by was consolidated XX% business. was the planned was sourcing revenues. year-over-year improvements decrease by experienced which X.X% XX% driven segment, which For product year to by business, in benefited in At was

year pre-COVID margins by its as contributed driving from business, associated gross margin expansion gross in in year-over-year, within of $X.XX of salads operations impacts improvement the Lifecore net the prior gross SWIFT. were margin profit loss to despite business margin the XX% and expenses, compared the also and include plus of quarter other consolidating profit normalized net the rates its resulting Landec’s in positive vegetables gross a in per which achieved market further operations million revenues Additionally, million of was the a and financial advantageous sales of a as increase consolidated such X.X Windset Project gross XX.X period. to XX.X% million second packaged mix, legal continuous to value net planned XX.X% million share, decrease adjustment $X.X non-recurring or settlement an returned in in segment non-cash also with fresh tax includes that charges tax. bolstered X.X of of improvement or fair restructuring and and loss

year-over-year increased value primarily related during fees settlement after Despite quarter, market charges by non-recurring was year Excluding to Windset net Adjusted growth, increased second share strong the of performance prior EBITDA tax not from was per the $X.X legal versus million this were ongoing these $XX.X in improvements headwinds adjustment, income approximately by muted of segment. and $X.XX. in adjusted million, add with and that Curation charges our back. Foods corporate centered EBITDA fiscal part expenses associated diluted adjusted $X.X fair million

versus year during X.X EBITDA, evidence EBITDA, represents which the increase X.X the X.X the million the XX.X of million operations in XX.X Cash an the of million versus which performance million flow Lifecore which November second adjusted financial $XX.X was mark fiscal adjusted period, million our represents generated Foods period. increase of level, of million year-over-year. used and our for six-month prior segment million Curation year X.X cash period quarter, an to flow improving generated a through Further in prior year ending XXXX seen compared the the by in cash lens can period, of operations prior provided XX, be by On state. improvement

a million capital XX.X XX.X million million. driven proceeds by of sales year and prior fixed improved assets activities versus expenditure investing from decrease cash Additionally, of X.X

quarter its XXXX. funded Turning XX-month turns maintain approximately upon of The financial on fiscal rate of end equivalents we debt. December term via lower quarter as on to X XX points, combination LIBOR adjusted in levels. recent November transaction fiscal to our continue believe $XXX we plan a $X.X line of an credit $XXX.X strategic a long-term at long-term leverage support company’s which million new million uni-tranche which five-year XXXX ratio was EBITDA, Subsequent basis second position, includes consisting while certain and cash on comprehensive accordion X.X as business of improvement based million we Total to feature an momentum term necessary cash of debt had to is and end, plus end $XXX X.X of XXXX, adjusted our requirements. SWIFT of XX, company EBITDA the was carries This an its loan, to have closed Lifecore’s year second The compared additional Curation of uni-tranche million leverage we Project structure million, was XX, immediately access to of on will our closing. performance build flexibility interest refinancing debt XXX we net so to to loan positive and the the and the due net long improved trailing business. growth which Foods and an provides

under This primarily term short annual million related borrowings loan years. impact of expense carries interest are scheduled term lower for the million. provides million annual interest payments. annual line XX in plus $X the to principal was first estimated two favorable partially a rate in the of flows $X to offset by base an credit interest Importantly, points. asset only The cash XXX This basis million initial LIBOR $XX incremental dollar of

million to range an approximately of range As decrease million approximately the representing outlook, for fiscal of result we representing XXX second Curation million, a million, million, will XX XX%; for the adjusted of a to to X%; of the representing and Lifecore approximately EBITDA write-off existing million, as XXXX, From million, second corporate million Lifecore, result reiterating are to of and to Foods allocated the facilities the X.X annual Foods. million $X.X million related other. to management Lifecore, follows; adjusted consolidated approximately we of growth total XX%. to million, guidance million $X.X revenues Foods new of issuance these for as quarter XX public business refinancing, XX of the in a Invested decrease of The the of million consolidated X.X of the total the perspective, range as approximately the third to Lifecore XXX%. 'XX debt to fiscal of XXX the X.X approximately million in to to to credit Consolidated record fiscal XX as to Curation to segments from in costs under unamortized X.X range the fees revenues a XX%; range X.X of facilities. company XXXX, continue million Landec million. representing In charge for growth representing million growth Shifting million three remaining Curation Landec non-cash of were X.X representing a revenues Foods XX.X quarter our in were XX%; of EBITDA XX XX planned quarter overhead follows. from and in range credit refinancing company's XXX and follows; to in XXX of Curation XX.X capital million million expect growth expenditures

the improvements statements continue the fiscal to revenue our fiscal quarterly We target reverted believe as steady seasonality. updating Lifecore greater due that sequencing be are to the segments generate margin in quarter fiscal to by On year-end and sequential the shape levels margin variations gross XXXX. anticipate profit business target towards margin fourth revenue Curation to third profit of XX%. help than half. both we to in that managing we will has pre-COVID from last quarter XX% gross XX% state its consistent business seasonality, gross Regarding builds approximately to Foods gross quarter is annualized its operating for its will in of second margin,

gross Lifecore negative full XXXX margin expect to impact However, of account approximately fiscal to taking we first into achieve the which experienced fiscal COVID, due margin XX%. year to its quarter

minimal third EBITDA turn and EBITDA, fourth for fiscal adjusted adjusted results. consolidated I'll Al. between quarter For to variation back we consolidated With the that, call quarterly fiscal its anticipate

Albert Bolles

Brian. you, Thank

our of Let Lifecore seeing pharmaceutical products about and me value go maximize clinical we making businesses drug demand Curation for across phases a continues shareholder supported portfolio. development, is to number from an various development. new Lifecore our are increasing to by that into Foods increasing more benefit in in market of drug the progress detail

save continues addition, in and and continue In to market outsource services see drug CDMO manufacturing demand internal the to reallocate and for development decrease resources. services time to market, order developers to positive costs

has fully in is positioned their their continues tailwinds to to Lifecore barriers competition. integrated establish and Lifecore’s capitalize and of benefits decreasing CDMO, market efficiency their time ability speed to the which high differentiated improve therapies. and to immense these the by commercialization highly on As partners to innovative value patient its to lives

manage that provide continue commercial demand, to deliver to of expand continue growth to excellence. manufacturing will will pipeline and customers, Lifecore capacity taking forward, trends with meet by new customer positive its advantage Looking long-term market existing and

second a support storage from transitioning no components that of business. warehouse raw and studies materials leased the space questions, testing a development audits Lifecore X finally, reported with allows Lifecore data and to location XX-day Lifecore also two has and additional quarter, customers construction notification that at with clinical site received and customer the During customers. in provide site to serve completed a growing key for initiated as And which key release to their FDA three Lifecore’s approved a for positive three partners the Phase testament their notice is Phase packaging Lifecore X place successfully world for complete its system activities. are to and to class quality their

our are the which Foods, results SWIFT, have the Curation of we year out For we launched Project stabilized now exceptional a ago, business and seeing outcomes those performance. in play financial

to profitably to focus foundation solid have we we While a our cost our opportunities work grow not improve continue done, on structure to operating built our is business.

our improvement quarter final continuous implemented resulting evidence in margin of our consolidation progression results, there on outsourcing Further, SWIFT. that see activities are can Project operations in from of we've of logistics the analysis you is gross with and our operations. stages As improvement strategic we the second

This are targeting fourth implementation more frequent We to will for product improving consumers. margin simultaneously extend strategy less customer our improvement, effectiveness customers. and late life in drive this greater deliveries a efficiency waste will that while inventory with and of shelf quarter result

of gross and key We this underpin through we EBITDA cash our margin laid towards steady confidence out is year balance we to flow year. margin in fiscal guidance improvement targets in adjusted improve for the the year. margin This have this generation great continuing the February last as improvement work state of

push are We margins, forward focus around Innovation. on continuing insights also high our plant-based food to consumer driven

guacamole deliver innovation, at to research, to margin Our key growing year-to-date category expand Foods our growth the Foods category compared category club to outpace the Yucatan Xx continued previous Curation Cabo our are year. and current well. brand all our Nielsen as rate. at existing is continues high at According the is distribution. than with Fresh category. double Squeeze way, growth rate And growth the Year-to-date, business growing to leading guacamole we more X% The avocado of growing the Fresh brands Cabo products Curation performing

XX% Curation Eat products month. squeeze several our In have innovative sales. total retail Our launched launching Smart products now business, of Foods are comprise or we have that we avocado this salad innovations

incremental First, velocity we increase expansion. product that and with slimmer drive line growth we out a design are will bag rolling new believe

Second, we innovation club co-development the are partnerships our success with channel. having in plant-based

promising the questions. retailers profitable focused have creating salads value the growth. progress strategic strengthening business sound are is and sustainable execution, in operating platform our high two In The test products growth to by the priorities targets, showing our and creating and communities. will intend customers, sales against other our and balance shareholders, potential margins, separate 'XX. sheet, implementing on market that with please tremendous in FY the strategic believe open new and improve have of protein summary, to the made trajectories. margin We to Landec realize starting We fully in both in see for investments for are we employees thoughtful We delivering plant-based value through innovation two making drive each call our results. team Operator, our financial

Operator

Thank you.

will Instructions]. We [Operator Thank conducting be session. you. now a question-and-answer

from Please with your Our Gerry with proceed Cap. first ROTH comes question Sweeney question.

Gerry Sweeney

Brian. my for Thanks call. taking Good Al and afternoon,

Albert Bolles

Happy New Gerry. Year,

Gerry Sweeney

is to so come well the It in starting as like here, congrats. looks and numbers. out New turning Happy Curation it's Year the corner

a can I actually So want start question sense here. get see the around this revolves year. nice makes that to My new it's in out if way to a I Curation.

maybe some to growing. have sounds to avocado market of of a XX% to salads. to little operational that are bit in bucket you year. understand opportunity? in of So and as going I'm just on drive avocados out next year. from se second like they just are that come refresh the refresh second It year the an get gross as per a curious this But by XX% guiding end. just just about from a wanted items margin Could standpoint well half, you’re Obviously, half

Albert Bolles

Yes, Gerry.

success The double Fresh having avocado brand. great business Cabo our or to right. products You're continues with

we have be comes the also going a to continue business. of our in that's on not pricing only A salad veg half mix taking as Gerry, think we it to of salads salads did with in we’re second driver what better. that we profitable getting when cost down, big going the So SWIFT but talked out us Smart also We've a to about the and core business Eat for was profitable the we Project are before, not year. lot are swapping key turn that the part more done as

well. year took category. as we've a at pretty long in bean continuing we're not strategy had able that were the thus number green a based This our And we Thanksgiving work the segment hurricanes. the strategy, to far with prorate had to that a we So is on with of we record that time customers good time first growing

in we're our better none geographic of as figured impacted. exactly of businesses that know minimally we anticipate with COVID, some that from the vaccine, primarily We’re when food have the service lift, manage to optimistic come a think And out will been sector, standpoint future. affected we how to by but start that is, begins back. COVID us we've to And a

North margins. help continuous with facilities ZEST So improve America believe have on we with that will focus going overall we a Green it's our things in Bowling in us Project our just and

Brian McLaughlin

of Yes. other Gerry. in. drop Brian. things This quick got I've is to couple Hi, a

year. benefit in second the one, the of to going So half we're

are you go year, Hanover to -- For gross the half the costs the Hanover, the closure with as Included restructuring that the close if full the of way actually the the steady of didn’t X.X is margin just segment. Memorial big of we quarter report our out X.X Cinco highest back half second that well. line, would in of quarter, it. context. above a quarter QX But until Curation and of driven May those some you second to sort by beginning in a Recognize XX.X% that second Day. the Yucatan, had is It's state, for right X.X. de margin have particular give to Mayo not

that lift And It been sort far that has have the standpoint, a as an then to risk kindest, we've lift experience way the company. well. a has is fourth So thus the in things. quarter the typically the which a and that's so quarter of quarter is with margin fourth reserve helps quarter, mildest, raw also lastly, result, as in that had company the traditionally from the

things to So Al saying. had just those been to add

Gerry Sweeney

in Nature most the is kind Mother quarter. fourth

Albert Bolles

Not is. always, XXX% more kind. It kind but

Gerry Sweeney

X.X Curation, prepared my The as XX.X and was you reported, that the questions the one said the of remarks. in versus

did XXX,XXX sort some? say think like, was but there one-time headwinds I weren't was some necessarily looks not it maybe it there of or – items, that adjusted. that were maybe adjusted, You Was of all others that true

Brian McLaughlin

restructuring and Yes, adjustments but line, one-time that Yes, items actually to gross other we closing. had profit was the it about Hanover in the related XXX,XXX above the second there quarter. are

Gerry Sweeney

And be go-forward that it. for of some that basis on a Got [indiscernible]? there shouldn't

Albert Bolles

that’s say. that if to we have you’re trying won’t Yes, going what forward

Brian McLaughlin

SWIFT, believe forward. costs we behind are us as restructuring Gerry, Project with we heavy lifting that we progress move And as

Gerry Sweeney

third I I can the place know question upon every impact was, been is it’s it? across food service. of sort had little and the there, a COVID -- quantify now. country Al, touched right of you impacting other but How much an bit The a you much it’s how

Brian McLaughlin

the about in that goes headwinds. It’s with $X Yes. plus million margins

Albert Bolles

impact, Gerry, have we our also on gathering. tray not because And people business, margin are

but smaller at home. because but single salads work going into a a box, not aren't our with we've off channel people trays just serve for significant So insignificant seen and drop eating

Gerry Sweeney

helpful. That’s it. Got really

Brian McLaughlin

just in about all to were goes with to roll describe and million of margin million what $X that you I've that those – it's $X.X up, If terms impact

Gerry Sweeney

On an annualized basis, right?

Brian McLaughlin

year. just the first the half That's No. of

Gerry Sweeney

okay. half, First

know not get so maybe that's out, It's year. vaccine next year, normal, a happening. less becomes headwind So rolled a next the to little being guidance, potentially also up sure of free that you don't -- a I'm even got what’s own And cash? back There’s quick on way a we real to cost lot or things -- that of review, logistics. but boost of add do [indiscernible] looking you potentially strategic leased okay, would considerable. then profitability, That them. that COVID But for if not it. just Is trucks

Albert Bolles

Yes.

since plus have the and do board just trucks, didn't other We XX all came get at resources to have and to I’m I at Gerry, wanting that that we things we've on do project we've and them had so many to the had once.

compiling we this we're started compelling stages fairly several results, they're in but And So final study the for the months ago. us. of

ounces our a freshness. So as our new there to XX allow trucks. trucks to We're at velocities do are for be us slim our And XX to by the customer we bag bag, going well us is to had has. be That's to a level. that we and some current product going we Xx amount shelf more going which for with plus that to of our we improve. the Don't margins. with going there's launch versus more think achieve as better as have customers the lease. able will Xx But impact facings need effectiveness to to impact all that to believe on if our play important, greatly to improve a deliver we the have same to slimmer us week. going way an to week not believe It’s lead shrinkage less is going combined And bag the of going lead

start wrapped program kind a all into second FY in it's benefits and really is and us here big effectiveness going half, that to efficiency of the in give So up happening 'XX.

Gerry Sweeney

Got done. then have it. I’m up one follow I and

are I [ph], you On Xx service your shrinkage? grocery Xx, side, there dates benefit? near your is So customers look at go little logistic Sometimes the things right? can store, of like service to when that. instead your shelves a spoilage I a the the

So get make or that if easier the better? stores, into you improve could obviously you more but that, service improve sales retention

Albert Bolles

logistics tell what is excited slim you I'll just very together sales all do you this Yes. said and to program the about the force above. the bag

So to more we get expect sales.

to and to the expand we're of be our customers expect at We as get get after, significant going that as requirements shrinkage into couldn't them have meet Gerry. customers some that we able we be to now to well some

Gerry Sweeney

it. I it. appreciate line. in Thank jump back I’ll Got you.

Albert Bolles

Thanks, Gerry.

Operator

you. Thank

from Pinheiro next Sturdivant your Please comes question Mitch & Our with question. Co. proceed with

Mitch Pinheiro

Hi. Good afternoon.

Just a here. questions couple

following First, margin Curation, wanted so second XX a something -- goals, could the was by on on to somewhere what ask be is And then XX% average? or the half that's the to gross range we quarter is, fourth count that that XX% I to year? going to fiscal for XX% XX% that

Albert Bolles

Yes, the I'll just give you details.

what the we steady significant in As said state to so now, XX.X we've is And achieve improvements in committed fourth our expect we're we’ve talked before a and at at to the XX that we are XX really to had getting Brian business quarter. margins. this

done. into 'XX. that fiscal year And So carry isn't expect to over we job our

into Our 'XX focus on expansion margin Mitch. well, as FY will continue

Brian McLaughlin

we're idea the for fiscal a year. of end end question is lot by of year so next just this looking as second this get to is of that by what parts, or calendar that steady moving the The There's Yes. Al the year, forward year? is, of this state part to your going mentioned,

Mitch Pinheiro

Windset, that charge, the date put is when related the the call remind the When is date? With is? me – you could call to

Albert Bolles

XX. March It’s

Mitch Pinheiro

Okay.

write substantial was that? drove down. What a So it

Albert Bolles

and issues, their all this. fires still in around West all greenhouse British jump sunlight, of targeted earnings a Coast, the just Coast extensive model and volumes, It's affecting smoke West dense the The all particular, down the situational Yes, revenue Columbia. production into solid. very some from way as and up that really result, California, facilities is on in I’ll very in up resulted in

combination of I right lowered work situational think really as those of close very earnings earnings, Lower they're model depth these and weighed the what is the correspondingly. through going discount smoke increased issues. the in that some discount now drove modeling The the it. in heavily is being closed way impact to and an two works to

will average put early whichever As of trailing of we date, the greater value of go the the four call to the towards is favorable us. we function get quarters, true be a more

It they and these So are some have, the not issues, business from with competitive and if quarters in looking four model backwards whatever trailing we events that we of then a dealing number we apart on just may wrote from we events XX. issues may just you're stable not, put March that may numbers March of may. We recovery and will but have in just the -- actual depend down. on

Mitch Pinheiro

very regard helpful. the more financing. new question One with to Okay,

a fixed just really Or XXX -- debt -- doesn't that lately? million income high, just XXX but it? refinanced So not haven't over I is I tranche guy, of LIBOR I'm seems am

Albert Bolles

Yes. with actually that. very I'm happy

have quite look COVID. you Credit changed markets months, lenders the nine bit back for underwriting If the senior has quite last over a credit changed a bit. with

on I rate. a think blended is this

in to So average the this very our flexibility is rate support re-bucketing type to equity the that. without be X.X%. kind particular blend at would somewhere when some and to with able I'm in you them shareholders, of to company, together, the that warrants sort that get that an financing growth around diluted component of or I'm to our of we provides growth be to going and whatever be happy of platforms, financing think Lifecore ability platforms thrilled the

Mitch Pinheiro

has of I'm here. covenants not the Lifecore. some I Okay. almost relate -- around but a the road a is, noticed it what CapEx down needs But sure like obviously Lifecore is -- It's life with lot --

million, be you called Landec sort to was that gross kind So profit curious that, of it in I it's comment fact was wasn't covenant but it understand of on that. it that profits and need the odd gross and that out $XX I the Lifecore relies could if

Albert Bolles

When type at you this and mezzanine It's shareholders it's look piece. of of lender. between senior sitting a a somewhere debt, sort really

sort behind value you're So Lifecore in to there's equation, definitely space components. the if that lot Clearly adds of a senior the on an enterprise focus that lenders.

and the rely where they Curation I and a sense sort capitalization Lifecore. they're given that it today, big makes equation to balanced going But more in that Lifecore. and more they of sense and think value going intrinsic that the forward as [indiscernible] accordingly upon focus there heavily would of on value would shift get to puts be they the enterprise it sort we are So between favorably continue makes

Mitch Pinheiro

I All very That have. color. Thank right, you. some helpful was all that's

Operator

Thank you.

Lake question comes from proceed with Smith next Mark Our Please Markets. Street your question. Capital with

Mark Smith

Hi, guys.

well First into of grocery as kind been you're one kind those with food recently? from insight additional from seeing happening COVID. what environment, Any consumer into some customers what's of behavior and insight gave you there for me, good as here kind of club, us service

Albert Bolles

the Yes. trays. Hi, to a been our through business The stores. we been [ph] veg most cut as That's has club affected club of business impact tray Mark. primarily big sell

down is business that down. remained more So XX% has or us and for

into products, lot is customers the the But into been. our believe new QX a on be beginning on as we to seen new of us forming and to they for And the that our And do. resets do side, to ability aggressive some of recently. have products. other are other they may on be that They're stores we on are into a doing the be normally delaying order has go that been as sort that there's us. club the based that have The their as important programs to of to them new QX. to flows expand like issue been over see the bit is based they as seeing not patterns retail we to we the aggressive lift we’re not the that impact We're COVID zigzagging that a products in not stores, able environment. sampling are want big And ordering here to of lines which launching

we the see those So big are that and club the at impacts retail level level.

Mark Smith

Okay. to are you gross seeing look as profit confident kind your avocado you margin at And and are pricing? today market then And what where get Canada, we goals? as the far in how that you as avocado of that in the is pricing helping purely products,

Albert Bolles

with products, cost. and guacamole to mentioned, Yes. we Well, to low the margin this and very innovation, be put put us our helps very, And to the the us. cost away avocados we're away of full at which able very year plant first on in we've have them run costs where we the we the able a that model as that low been And the squeeze buy lot at is fall able avocado I is our well pricing. operating were on working efficiently for and low

the rate We product, gross brands. getting be And the with really talked that good margins experiencing margin the we that Fresh to growth have Fresh in I've that squeeze And of of it's resonates Cabo some a terms of this we growing millennials. product it's that lot going before, significantly our lowest with the improving is now most, seeing Mark, programs we're in place traction. brand successful. where are that's Cabo are the that currently but

Mark Smith

Great. picture and moved but that to steps too in business, of And are this kind looking look broad turnaround be through of kind a at might this following are that a lot of the big the of be as now? items question, refinancing, what we we've then SWIFT we at the should next what of

Albert Bolles

as heavy is some have we the gone with costs game, through inning. of was We'll we've have with as production baseball I on majority say But a Hanover, consolidating we overhead, our I to taking categories probably SWIFT did the we've probably of Foods big growing with the innovation. to our we salad. the to forward business and really into QX, And protein me, logistics from by costs are begin for But and focus but based we transition of cutting loaded plant-based a primarily profitably pipeline think got in the getting there with Curation paybacks a the offices, a things salads, still in seventh into now year past around what rightsizing do closing we down our I behind is us. really a that that project, the one if would restructuring restructuring avocado FTEs, this QX say would our tremendous. the Well, move program, we're products this few mentioned.

momentum set 'XX. we’re growth, really year really forward second it's So FY the looking Mark. up of us half what from for having us take the into the to That's

Mark Smith

from turnaround kind now transition and growth. to of a really operating so Okay,

Albert Bolles

healthy an now planning we now our and key right have of Right, at we we've innovation launching with very point lot a we're relationships I improved are really inflection would customers. of and The working we on the lot got is that say They're on and our innovation Mark, way. were directly but with customers, it them really and ago night today, in the versus a very talk what day. year with that a about this, don't absolutely relationship, we relationship we're a collaborative

remain I to confident our forward, while business innovation cold we a very we're So be move to continue that going on cost. eye this we through that as growing have

Mark Smith

Thank you. Okay, sounds great.

Albert Bolles

you, Mark. Thank

Operator

Thank you.

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

Anthony Vendetti

you. evening. Thank Good

just questions. One is, to talked what Can at extract the were of review. quantifiable you logistics operations were you you quantify couple what your and So you a of the that? found when that the about from logistics benefits able looking

Albert Bolles

million we can there several Well, in have I But numbers where the just savings will is right figured achieve. all we now believe yet. we you we are out don't tell

us decreasing opportunity great the fresher effectiveness expand we have just We program it. shrink, for not an of think what payback to really standpoint as we rate it's shelf, for our get us. by holistically will that only pretty until this logistics, is know also there's into getting But on we clear facings but which product the efficiency said, won't believe really there's, the a I

where that's at something going this. to we're little out in just It's with I not this. going a us doing turn I can But bit be the QX to it's time. as of light take we're switch with on. And Mitch, mentioned, So

Anthony Vendetti

Curation have be the What's fruit? about Can the And margin to seems be that see you for expect products, gross margin, plant-based the opportunity you to see nice to that starting higher talk Okay. And that you bear a then single incorporation you? just on contributor when serve, to we new of start innovations, improvement the alternatives? there? the in can

Albert Bolles

Yes.

there gaining has trying focus our eat know So here with there's a that's vegetarian, and flexitarian meat. less to out customers not consumers, insights consumer been really but we with they're our working on growing our

-- launched store that. our These that club just They're we around So innovation happened for here we focused We've promising. the two products launched us we've recently. only and new have four at higher margin have really level, very products. are launches

be processes discipline only level right It's got but door. right lot we've the be we what margin So not to in about got send to of got at for our a the product, the out us. it's

pay see has to that we us would to have expand, off COVID we're says going rate in 'XX. down into but start terms very slowed then So, to we that in begin QX the really strong that us and to the we're from products. the feedback impact getting that betting for we're of of customers that like FY

Anthony Vendetti

become eventually distant we is future? would nascent become a this the you club this level, You it here, COVID. the said stages, say you forward at because launched too fair -- believe is not you go could but And still that store to in could as of significant opportunity in say the opportunity

Albert Bolles

able COVID like us this And that forward. in and the we for have for this the we the stores, move commandment been be expand, in normally be platform are haven't is to we in Yes. year. half to And we club environment. is we in We've big going big, launched second a but would expansion as differentiator and invested believe a for we've of that expecting us

Anthony Vendetti

want number, question, the if Where's Excellent. I last by product, this X,XXX you in Squeeze how you gave of Then that call. terms of fiscal that just the a points of had distribution? many goal be Avocado to know this points with of in distribution believe the of now do you don't have on end but distribution product? points you on And I in of year terms last

Albert Bolles

XX% ACV. XX.X% the is goal And percent focused point a you on kind of is Yes, just ACV. at -- actually give we're right now, ACV. our that’s Yucatan, And to on Squeeze to

well. as I to So the have speedy we Squeeze see in force. said, a expansion grow we that in continue Squeeze we some see margin things planned product And as

Anthony Vendetti

in it. the Thanks. Okay, back great. I I'll queue. appreciate hop

Albert Bolles

Thanks, Anthony.

Operator

you. Thank

your with Please with from question. Morales proceed & comes Mike Co. question last Walthausen Our

Michael Morales

portion. be Good they've Where's understand understanding going all and to as everything think Windset Hope guys to from all operational might actually on that And to that that was the them? challenges, well. creates Thanks the for start able need? get preferred afford put I taking off to we unreasonable help that financing coming safe the folks. to actually redemption that is challenges staying needs evening, where's the question. operational had if you confidence you're it's put call With me confidence closer it the a they not want date, of going my coming to Windset from? on, do that Guys, the with this

Albert Bolles

Yes. that Brian, one? take you don’t why

Brian McLaughlin

confident. poking few things. Exactly. this in there of our at a with that lenders. to low capital The way but behind somewhere just am their they're we're My formula structure that are Well, a is EBITDA. very us is, sense their works, segment it's Yes. multiple out them, very going substitute in that I senior

from them that don't for It's different least are asset very check. way that to the my discussions intensive them model. talking of take up, with sorts out. I folks a writing see all there think business advisors very us a I likely a and them lining at that is initial to, they're

the platform greenhouse space, have you to space. of lot is demand going There's a your that grow. If for

a cannabis They the They're debt, is have excellent out. honestly, behind an more they operational They're amount their but if very senior to very, doing to fair well. financing finance substitute platform much Windset’s have solid. to to their world, of going model. Some being to amount bank they find that lender tap on not group is that model able someone growth to ratios, over I they're which has believe regulated of a then And growth very a to reverted us to expand player. options many to that model. of their am, and think I ability too do senior do their use continue given greenhouse I and space demand Their into which putting have the close

Michael Morales

having – have were problem talking that whole not financing? anticipating to them Do load guess you about arranging with that just I guys refi. And anticipate do mindful they and this Sure. any so debt you creditors more you're the

Albert Bolles

I do not.

new are not just in put very model. financing they I They a financeable. place think actually and brand it's a strong arrangement that

close I'm to it. So very

Michael Morales

turning Sure, agreements. a to defined stuck the out really gross understood. over term to not interesting spin-on guys in all. question consolidated Lifecore’s few it this A previous with was to have that interesting a but to in for things profit like. one, on me relative this noted just look I is And agreement, in me bear previous of profit, one credit that gross awards you Lifecore. know that I permitted in really a considering found what defined specifically there anticipation Curation a clause at might Curation a for And sale so equity allowing

Curation’s language So much in structure, the we've think that like tangible more have all guys we this about creation. past the seems in improving work value kind mindful you certainly together and done taken than good as of of of that seen operating

done about improve but for guys operating question, to of just and long creation, thinking of is you it the guess total the that Board an that mindful you've I update the of give the work is structure this refi apologies on So value can businesses? how

Albert Bolles

work answer Board. continually with I I'll Well, that. my

my with how if continue think forward, can more expertise, the I on Board work folks value. you I create and we you shareholder some move expanded know that will. more and their And we've to life added science enhance as we to Board

of So our it's strategy. part

Michael Morales

take rest all offline. that I'll stay safe well. it, Hope and you the I folks. had. appreciate guys I That's Understood.

Albert Bolles

thank and everyone in much. New very interest today Year And their everyone to Happy much. Landec and you Thank safe. very for stay having I you Thank

Operator

conference. concludes This today's

You may participation. your for disconnect a your evening. you Have lines Thank wonderful at time. this

Albert Bolles	CEO
Brian McLaughlin	VP of Finance and Administration and CFO
James Hall	President, Lifecore Biomedical
Gerry Sweeney	ROTH Capital Partners
Mitch Pinheiro	Sturdivant & Co.
Mark Smith	Lake Street Capital Markets
Anthony Vendetti	Maxim Group
Michael Morales	Walthausen & Co.

Lifecore Biomedical (LFCR) 6 Jan 212021 Q2 Earnings call transcript