Local Bounti Corporation/DE Q4 FY2024 earnings call

• Leadership Transition: Craig Hurlbert steps into Executive Chairman, Kathy Valiasek becomes CEO. Kathy has been key in driving the organization forward as President and CFO.
• Financing and Restructuring: Secured $27.5 million new funding (including $25 million equity), restructured debt with nearly 40% reduction, improved terms (no cash payments until April 2027, extended maturity to 2035, reduced interest rate to ~6%).
• Commercial Progress: Expanded high-value specialty greens distribution, evolved salad kit offerings with new flavors and product lines, strengthened relationships with retailers like Walmart, and highlighted controlled environment approach's value amid industry food safety challenges.
• Operational Updates: Opened new facilities in Washington and Texas, transitioned Montana to commercial, reconfigured Texas facility to focus on specialty products like Arugula and Power Crisp.

For the full year, sales increased 38% to $38.1 million compared to $27.6 million in 2023. This growth was driven by increased production from the Georgia facility and partial year contribution from new facilities in Texas and Washington. However, fourth quarter results fell short of expectations due to product mix recalibration work at the Texas facility. Adjusted gross margin for the full year was consistent with prior year at approximately 27% excluding depreciation and stock-based comp. Fourth quarter adjusted gross margin improved 200 basis points year-over-year but was impacted by increased labor costs from production ramp-ups in Texas and Washington. Revenue contribution: Full-year sales growth was due to new facilities' partial year contribution and Georgia facility production.

• First quarter sales anticipated at approximately $11.5 million, with final stages of Texas facility reconfiguration nearing completion.
• Expect positive adjusted EBITDA in the third quarter as a result of optimized product mix and operational efficiency.
• Reduced annualized expenses by $3 million in Q1 2025, continuing efforts to advance operational efficiencies towards sustainable profitability.

• Forward-looking statements subject to known and unknown risks that could cause actual results to differ from projections. Industry challenges like food safety issues in outdoor agriculture affecting competitors, but Local Bounti's controlled environment approach positions it well.

Q: Can you talk about the changes in Georgia and Texas production and impact on unit economics, pricing power, and Walmart relationship?

A: In Texas, half the facility ships cut product under offtake agreement with Sam's, and the other three acres are being converted for both living head and cut products. Pricing power increases as customers become more familiar with products, with a price increase going into effect in April. Walmart relationship is strengthened as Local Bounti's controlled environment approach aligns with retailer needs for safe, high-quality produce.

Q: About Georgia facility variable costs, expansion updates, and build vs buy dynamic?

A: Georgia facility has reduced seed and labor costs. Midwest expansion is still an intention, with meetings ongoing with retailers to nail building design. For build vs buy, existing greenhouses are considered, like with Georgia where first three acres were built, then expanded, and stack implementation increased productivity by 30-40%.