Earnings call transcript Q1 2023

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Operator

Good morning, and welcome to the Local Bounti's First Quarter 2023 Earnings Conference Call. [Operator Instructions].

At this time, I'd like to turn the conference over to Jeff Sonnek, Investor Relations at ICR. Please go ahead.

Jeff Sonnek

Thank you, and good morning. hosted President, Bounti's Financial Brian Valiasek. be and Craig Officer, will Joyner; Travis Cook; presentation by Co-CEOs, Local Hurlbert Kathleen Today's and Chief

future comments than events. current and Private number These concerning in management's on Securities actual and statements Reform Act forward-looking of contain to the The statements. materially subject All statements harbor historical Litigation today's statements facts discussed XXXX. well meaning considered beliefs uncertainties differ forward-looking the from cause other risks forward-looking safe the a as Such based the known of expectations as could of forward-looking results unknown of are to statements. provisions of the results statements during made assumptions statements are and that within call are

the these discussed are risks filings uncertainties the company's SEC. and of identified in Some and with

certain We'll of most the can GAAP release, which to also measures website, measures. directly refer for refer on Relations to today. to Please their press financial Investor measures investors.localbounti.com, found non-GAAP be comparable financial our non-GAAP reconciliations

turn With call I'd to Co-CEO. the like now Hurlbert, over to Craig? that, Craig

Craig Hurlbert

with first Thank performance on a the started you, that morning, XXXX and note with was Jeff, We strong good everyone. our consistent plan. quarter

the and the was put economic importantly, feat financial for small to April growing the the most nicely. in Most in perhaps long our advancement completion we the the no Texas Washington. current As This our second and recently, quarter, we But in operations of given move environment. business support resources term. place facilities with greenhouse X-acre of into our are facility progressing our new Georgia

$XXX credit needs call, earnings As Cargill up we our relieving cash our our simultaneously by with expanded communicated facilities million operations. on with to fund we last to

accessible approximately the to cash with by Cargill of with support reach a breakeven XXXX. of provides amendment, week, end operations our and EBITDA cash, with us million early to or our combined transaction. closing scale business that of last adjusted we built intent $XX available $XX XXXX the cash from sale up upon leaseback the million This Just run the our with

continues ability mistakes we trials national to most in to implementing of speak grown and demonstrate our XX,XXX others that to the learning delivering also and are into which today become to with will be ahead locations while own the the capital-efficient exciting future. will that and Flow to in products advancements levers from our we Technology of to and unique productivity some constantly push the team entire realizing the our of CEA speak Our flow in the platform Travis the maximize operational squeeze long-lasting, industry. to some nationwide. sustainably Stack most delicious & are our gains extremely Georgia cash additional revenue platform future, out assets over These our

Our return Technology Stack business variety enhance approaches. model as crop investment continues and on CEA underpin of to to across a capital-efficient optimal maximize turns & tool our Flow the

scale greater flexibility expansions, other achieve the acquisitions. of inherent affords our also opportunities through quickly Beyond us our approach to strategic greenfield

drive Stack the We are This manner. healthy improving responsible, committed and Local with our due, President, her construction top here concludes to further CFO, to. can projects Joyner which as to our our talented Travis large and will proving grateful on margins Bounti. and is with am growth economics, review so Flow before team with some such progress then will Co-CEO drive our in scale & Brian a capital-efficient Technology business that our are financing And unit continue at part, Kathy provide around speak financial commentary work update. Cook, a various line we I in gains the simultaneously we to we making generate continued to

success result of business our honored behalf a help employees Our to and their and direct of stakeholders. I'm our this collective on efforts, lead is

to pass Travis. I'll that, over With my it friend

Travis Joyner

advantages online impactful limited deliver facility, trial yields stage production our maximizing help will in & achieve goals. Flow Flow-enabled CEA higher results XX% to to network. zone, our noted, economic and facility Craig XX% cascade approach focus a is this than our & at our Flow our As the Stack Georgia continues through the & single that financial is greenhouse. of of at us productive to technology our our will to Technology long-term foundational and Today, our which and relentless Stack stack The production the on is demonstrate optimizing is Stack immensely rest strategy the achieving

As to optimize we time solve integration the we in full stack yields facility over Georgia, as increase complete output. will

Our in dynamically with successful enhanced automation to gutter greenhouse the in the drive with of first facility Montana. Stack will significant indexed system savings Georgia labor integration our and yields compared

XX%, scale, At to by XX% greenhouse we XXX%. enhancements greenhouse us average by believe growers approximately and best the to these allow outcompete that grower the

Our production of & Stack Flow yield But aren't there. X.X greenhouse methods. to stopping the proof Xx statistics the generate we are growing that traditional

Local beyond the enhancements is stage initiatives vetting savings of operational Bounti. business rates currently early ethos critical benefits importance is relationship our of the every technology on production. system and gains Through we our we stack direct the unit fixed do for demonstrates ability do on the greenhouse, the but to While math vertical are see future growing additional capital improve of and environment, vertical optimization our We only This foundational and output economics. great to the including at cost of by of about realize we place decision, higher This Not we within same on achieving. the our in XX% base, an productivity implementation feel to of what similar our these we approach. increase production proportionate highly at advantageous efficiency rigorous is our for capital create expenditures. the another have

remarks. for his Brian to over it pass I'll

Brian Cook

Travis. you, Thank

up, are in working Georgia our we our mind, facility our that are completing facility of Washington in first finishing projects returns. XXXX. Texas quarter quarter of the our scale and this on of fourth terms completing year early With our generate build-out, on in focused the near-term workflows In that

With April. X-B and in respect Phase Georgia, construction was completed to seating of began

reminder, acres a the the X-A The and completion effectively of by the drive site's distribution of Southeast will across through X X-acre footprint. reflects Phase Local greenhouse products the completed X-B QX channels. automated As of end multiple selling Bounti

it X-C. While all the that zones greenhouse rest -- stack complementary a That a we operating of change vertical integrate or horizontal on single facility, have at the largely the the within stack will moment. nursery we is once comprise Phase zone

the space. technology, we on the have with to our With product will partner new suite the open strengthening up ability as to in the brought Stack CEA position additional the premier our capacity offerings,

expect in work our early and We quarter the this online continue Local the will completed fourth roots in of Southeast. XXXX, be to to deepen Bounti allowing

recent of operations in advancing nicely with Georgia and facilities. of for The the to will Texas facility allow of X-acre pad new and is management foundation. of synergistic Our design X completion similar facility the that this

with as As Texas coast living U.S. mentioned, fortify the and to will packaged as distribution varieties our national of our lattices leafy across southern facilities network coast localized well support grown locally production green

mission pad greenhouse are operations expect will The the which in will stack to to our quarter and of to We of facility. multiple superior in construction complete work commence bolster the reflect first company's acres by at quarter. The Northwest expected capabilities foundation facility also the the the XXXX. the accommodate to supported commissioning of continues economics, help facility zones. operations at and XXXX, deliver of quarter will Texas location distribution in be strategy fourth the is Local staggering X our Pasco True continue our unit in of to fourth of Texas comprised Pacific commence that Bounti's to be to

to Commercially, I'm a resonate see as portfolio freshness. excited over Local XXXX velocity and our quality Bounti XX% increased with improvement consumers from levels to in current continues

come Georgia Local set continue to and to the our Our quarter These we with customers. mature increasing and the timing thrilled centers confirm large our call. service distribution ability from market end and facility by note, scale to [indiscernible] additional we mentioned scale successful centers with as shipping regions are has velocities started to new have recently online in Bounti markets distribution On last new that X earnings X retail shortened reflect strategies. are for to wins on our second of great grow

over Kathy her call to the review for the turn I'll of financials. Now,

Kathleen Valiasek

I'll our of Thank you, review provide recent Brian. cover first results a quarter and activities. financing our

year First million sales XXXX period. $X.X in compared $X.X prior the to quarter million as were

from first Phase Georgia and facilities. lesser quarter production and extent, our results a to largely our California reflects Our Montana X-A facility

complete, will now additional growing from X previously second we Georgia the run demand year, space. out and that quarter. additional during complete improved revenue As fold expect we in make that our Phase fulfill the of with are in into Georgia rates of acres our X-B's X-C this facility. quarter With increasing beginning to will further And the work recent X the be completion come for online discussed, Phase revenue preparations distribution network of later of and centers course, second

roads depreciation, margin, rains, by temporary shut First gross and persistent interruptions. margin at impacted was quarter non-recurring and excluding stock-based heavy was comp down XXXX caused California production adjusted other items approximately which delivery gross Adjusted and our facilities XX%.

inclement served due the made We customers also time fewer this demand in shopping saw reduced Western as we during markets the customer trips to weather.

of loss includes inclement the $XX.X net for adjusted was million million and XXXX period. in interest as these as $X.X and $X.X compared compared was in million to discrete business $X.X million integration expense, million loss loss prior million $X.X of depreciation EBITDA quarter in of the prior EBITDA costs combination costs stock-based adjusted a of and Adjusting amortization, increased to and $X million period weather. year net to in First $X.X million related comp, $X.X utility and year $XX.X other million loss items, of

ended the XX, structure March equivalents quarter we with first From million. a cash of capital and perspective, $X.X cash XXXX,

place, reflect our to obviously, financing transactions in of doesn't However, that sheet the incremental balance our we which accessible put approximately provided $XX to fund million operations. cash this

agreement announced previously our expand up in at credit to of fund Texas amended facility our end at up by million. call, we This construction our existing on and facilities Cargill a As capital to $XXX Georgia, to March, total the to million we last of Washington. our provides expansion to with $XXX

leaseback to lender the cost USDA anticipate achieve. source facilities second in of California second of funding Just located X licensed been capital $XX replace reduce provides cash cash, this our $XX $XX last update via flow our is other to closing very results the million closing as our lower of amendment million utilizing sale to a the working debt. of operations. very total breakeven $XX our with Cargill, first important addition $XX we We early facilities of our us quarter we've to a Naturally, financing in of additional last construction to a which for XXXX Cargill or to optimizing use to cash lower future are pursue and cash million this milestone from on million our that cash approximately that be via end for I'd remaining these financing in with note the compared We million. the by available structure, closed shifting with access capital debt completed of the our of million our With which developments. cost you. accessible combined construction our the with to week, sale about this hard agreement a financing They of us in from funding added it available may This necessary with leasebacks on efforts from is reflect excited our focus place and $XX our we to the at provide we component to the XXXX, date. approximately with with funding support reach would capital.

approximately fully employees' As XX, a share million we approximately XXXX, of shares shares. we outstanding. stock have of including XXX.X pro warrants million XXX.X count had diluted and forma a basis, On restricted March our outstanding, units

USDXX between With outlook, compared year respect of to XX% representing as revenue full of our million, are reiterating end and least XXXX growth USDXX million at of XXXX. to we guidance the

of cadence, and in In up we revenues X the this our balance terms Georgia of production the April we centers stepped of are Phase mentioned, sequentially as serve the our year completion to quarter. I with quarterly the additional to as expect X-B distribution beginning build through

Phase sight low have the increase EBITDA. through stack reported will the of have believe we we will this, influence impact in first point balance production positive improve fourth quarter, building lever Following positive XX%. quarter the on adjusted next be year, today. of gradually the again, the X-C's a well, is should adjusted This as commensurate line by our which expected of the established from Once which EBITDA to completion in we we the to

any believe around this of that I'd our part bid build finally, capital note approach, as of strategy also the potentially change And and/or our could the expectation. We efficiency. growth of for potential impact revolves demonstrates and of model the which flexibility advantages this acquisitions our

That for questions. please the open call concludes our prepared Operator, remarks.

Operator

[Operator Instructions].

comes question with Rusch first the Our from of Colin line Oppenheimer.

Colin Rusch

you for As the you start when growing customers Phase conversations I-C products Georgia, and to for ramp? about your talk to now how process can in get around hone products the this year the kind later mature and your ability are right of prepared with those you

Craig Hurlbert

Colin? for Brian, do to want you question that tackle maybe

Brian Cook

online. really of as we put up just construction have X-A, full-on of our into mean, Yes, continue ramp X-B, the the we're -- been We coming to that X-C definitely, may Colin. demand do kind has availability product. excited of by a lot [indiscernible] on a coming at I of actually commissioning

So more than demand we're having we lot have great it. a excited of We're this at do conversations really time. we and have availability about

Colin Rusch

off-line. I'll rest of take Okay. that the

sale on of going decision-making your talk look the those and of capital you leaseback sale through and you're the to loan, and those whether what's for of at loans? how Can facilities, handful obviously, takes. a one with USDA company or look Kathy, the Just you there's at source the optimal us process leaseback a puts

Kathleen Valiasek

sure. Yes,

restructure to of a other the the our the allowing much reducing Cargill Obviously, with advent brings the of into the with of of also that long cap financing sheet. term, lower cost providers capital. longer also in it same sense cash capital, to much agreement, they rate capital the a lower leaseback, but balance but fantastic the are come term, goal it's of our right, sale So on cost with is interest USDA fantastic, stack

sole right, said, we again, But on $XX we cost coming which fantastic. USDA which lowest about the sheet, we of of right, is capital million operations, use recently is the our in for but of we are brought As balance the to for quarters, future sale facilities, that locations we for the the Northeast financing leasebacks, to which be build other and throughout also the both considering to for and country. the our as facilities also look will current planning have

Colin Rusch

the one really last to of want the getting And maybe pipeline. of the then around about demonstration you flexibility of the with the you that technology, be mentioned of You earlier from efficiency acquisition partner folks is you're to get and Obviously, talk how just of the we can want to think that those with in creativity the activity. able or deals? inbounds approach I you of that the might sense just some about guys sort might call. cadence that it a

Craig Hurlbert

Yes. think Colin, own I to directly typically situation. capital their it's tied

but it being I asked and our consistency ability a of the we would one, timing And in different is of the little to is types comments, being the think looked for at of to what's cetera. bit, there. talent, be would said be our varied so, the And these multiple help technologies other gives us us bring on et things, geography, do which what's technology

So we're these on. taking

us. are each a what people to that opportunity mean specific to could quickly able team evaluate have We of

a to for to from, robust something a what very as not the it's right we're shareholders, I we're have did but us these. for say We at obviously at and real way our evidenced something with would looking shy be opportunity of It's and by And got away obviously. Pete's just looking going we it's possibility.

Operator

of Capital. from Lake comes question the Street with line Our Ben Klieve next

Benjamin Klieve

right. All

the to organically expanded you get solely production those locations guys is First Washington? that Georgia, you to production announcement of today one that on about clarify, expect inorganically be beyond you EBITDA EBITDA sufficient capital to to breakeven? get either you include Can you from do to we Texas, know that locations breakeven. around California, Or or the expectation

Craig Hurlbert

Kathy, want you take one? do to that

Kathleen Valiasek

It's facilities. planned with sure. Yes, the existing

Benjamin Klieve

Does integration then, the question Excellent. include clarifying or phases one Stack that. into of California I on that not? And guess,

Kathleen Valiasek

does not. It

Benjamin Klieve

me, Okay. the margin, one you what quarters and one this price for the one-time Great. in spike. row? spike bit of utility do now of being couple over in a Can adjusted of this on elaborate a then think of Is certain the is any utility just couple a kind around what nature reported is And in there increase other a is costs item permanent gross concern really from a a Or more of we quarters? is locations? line

Kathleen Valiasek

just that even -- it's way QX. QX, were take in It and back saw and we QX one. already ahead where we prior, in to is like and go down I'll it more

So get from might even we it definitely the feel And one-time hit. fact, we a in credit a state. back was

Benjamin Klieve

helpful. but there. Plenty about, I'll Very Okay. more to talk leave it

Operator

from Deutsche question comes Chris Barnes next Our Bank. line the with of

Chris Barnes

and one-time late earned I'm I about 'XX, think pick get interruptions margin. here parse over what out for 'XX. these like gross heavy we production the guess, And know gross off margins fourth just Ben EBITDA marry have in meaningfully gross to of as trying that It from breakeven we with sense left how expectation I of been there to from way might up into just balance the should contracted and reduced try the in I'll a your the highlighted to year causing and the future, early the without what items? any by just you where like rains on quarter. delivery But demand. margins the is you

Kathleen Valiasek

happen, XX we other in the you'll a will with that lot we that what quarter. such -- happen Sure. is XX be do continue one-off But the back one, saw as important And of right? scale we an is had in to that facilities, each between to consistently feel facility QX and will the we see diminished. that one things it's California. We it But risk in

So California, the Xx we if have you take for XX% been for quarter. the away would at

Chris Barnes

update retail the and it you how second, terms are or relative And you year. just to banners? these That's consumer expectations? in for from it. repeat products that? to Or that what Sprouts your Like is into an have expanded wanted on Got seeing meal stores earlier other launched into early demand this you've products I helpful. you like other heat ask for kit eat performed then And has of still reception seen too even your

Craig Hurlbert

Thanks, do Chris. take want to you one? Brian, that

Brian Cook

Yes. Thanks, Chris.

hoped. So at we're we of looking on But long redesign weren't went did the the and regular and our gotten a within package actually now and as they as of right the kind merchandised initial we eat items. currently to systems. had through testing, kind retail held the are well heat When as they've lasting stores cycle. They

And we looking actually look the taking a specifically it so, heat the packaging take items step a we're in have future. on to relaunch the to in and it now and at near back eat that

Operator

[Operator Instructions].

question with Wright of ROTH Brian MKM. Our comes next the line from

Brian Wright

ask they've that forward? months? past wanted just been facility in question started about and I in this a kind keep the how commodities coming that's going to kind about as to something of commodity a that doing if going think just potential of kind kind longer-term of what benefit of pricing given Is kind X of future costs year

Craig Hurlbert

one. you to that question? Brian, a maybe good two Kathy, It's want tackle

Kathleen Valiasek

sure. Yes,

Brian, add? build, -- in way we're of not seeing seeing mean, terms the one we're are for frankly, budget I lot And you anything not a we're online of That's my just have those have to So impact coming -- do other. and we the 'XX. or facilities facility that 'XX on sentiments. in

Brian Cook

don't to have I No, add. anything

now. we're that's probably out right seeing I think there what

Brian Wright

impact And the there on -- Is size kind impact well. is you of that there the California us? margin to as Okay. the that indicate for -- just But there gross incremental quantified on of in sales the you was -- kind quarter. then any way weather increment an in did

Kathleen Valiasek

to want know Brian, actually don't can for do you go I well, it? ahead, go if I --

Brian Cook

demand perspective, continued everything back of We leveled Yes. I had to just seen up. part levers -- this update brought of think get I an we as April has mean, get that from in things some has and kind operational orders the what members stock. demand or had But overall are to as back track. looks, supply back usually -- to have Customers volumes traditional increasing to in back as actually and everything get far in supply or on demand what up. putting they for to is

Kathleen Valiasek

folks because the rain Yes. Costner bad to of certain anything even out leave just to dangerous want just sort I've a say I that. so here. days house maybe And it to being shouldn't California I'll this I like the that Northeast in mean the I've years. I personally, it I'll even street. on it that been and actually XXXX, say like was for be the a and rains was Kevin years like were but never degree just this, straight anomaly and on, of add we didn't actually he leave weren't so my was and were the leaving were consumer, days the roads a in couldn't a make level myself, just it the shopping and And house frankly, to much it ceremony weren't so It because lived announced was complete was rains what awards shut because because just XX I've he for QX And anomaly -- days his experienced complete it of even it it to mean, and that house. rained their they heavy as so couldn't Northern drove Right? just a prolonged. strong family, down.

Brian Wright

we've that within a DCs? presence like distribution in forward is how Okay. -- like like sort penetration or as it going maybe give as some how in significant of but far kind forward there urban within Great. we from And metrics as far metric Georgia, about indications Is centers. do not those to those at of the then way think exactly of a think as stores to model, because be gotten about Is share we like us kind many now store gains lastly, there some going the penetration stores? can the

Craig Hurlbert

question. Good want Thanks, Yes. to that Cook, one? you tackle Brian Brian. maybe

Brian Cook

Yes, I that jump in one. on could

So that, kind first taking Sam's the is the Southeast. around Brian, contractual care have We now, our and which outside we Club, gone big of thing penetration now of out is as the with has foremost, the right are, well. of that Georgia customers obligations full do

to focusing So Southeast. at been until with really coming kind that product we officially product. we we've haven't not from really okay, we're too put looked Cub But count up many the then until moving this and looking like, online, much as DCs report all the the official X-B how across here's now that which, Southeast could said total we we're an getting start we the that doors in because of availability right? going door Georgia you the May coming at for be late out so, seeded, it we'll of forward. QX, it -- onboarded end we and haven't of out the But have And on Sam's moving for yet on again, facility

will multiple stores. product get And have more availability the in doors where kind waiting go our give people out the of so, in us what that to to that excited here are wings we into the is do

Operator

for Thank you. questions. any final there comments. the session. our and Mr. further no Ladies Hurlbert Q&A floor This to concludes I'll are gentlemen, back turn

Craig Hurlbert

for we In great to would at morning, forward Thank all Thank I speaking much. and you it. back we're this look sincerely to us just thank have you. like again. joining with meantime, everybody the day. a Everybody, so you

Operator

Thank you. conference This concludes today's call.

you your time. your Thank lines You this at may participation. disconnect for

Local Bounti (LOCL) 10 May 232023 Q1 Earnings call transcript