Local Bounti Corporation Q2 FY2025 earnings call

Appreciation and Strategic Support

• Expressed gratitude to the Local Bounti team and noted strategic investors' $10 million capital infusion and debt reduction strengthening the balance sheet.

Operational Progress

• Successfully completed Texas facility product mix recalibration; facility at full harvestable capacity; automated harvester installation complete. Tower upgrades in Georgia to complete in late August, with Texas and Washington facilities to complete upgrades by end of August and early September respectively. $7 million annualized cost savings achieved in first half of 2025 with more expected in second half and 2026.

Commercial Progress

• Added Dane Almassy as Chief Commercial Officer. Successfully launched new salad kit line in April; plans to launch family-sized Caesar salad kit in Q4; expanding relationship with home delivery service with four new private label salad kits in mid-September; strong customer discussions and strategic collaborations.

Second quarter sales increased 28% to $12.1 million compared to $9.4 million in the prior year period. The adjusted gross margin percentage was approximately 30%, excluding depreciation and stock-based comp and other non-core items, compared to 29% in the prior year period. The Adjusted EBITDA loss improved to $6.5 million compared to a loss of $8.3 million in the prior year period and $8.8 million in the first quarter.

Revenue and EBITDA Outlook

• Expect revenue run rate to ramp up in second half of 2025 with modest sequential growth in Q3 and acceleration in Q4. Anticipate sequential improvements in adjusted EBITDA loss rate in Q3 and Q4 2025 due to sales growth, cost reduction initiatives, and margin benefits from facilities. Expect positive adjusted EBITDA in early 2026 as scale with retail deployment continues.

Q: Could you help us understand how gross margin expands throughout the year?

A: Kristen, thanks for the question. There are several factors like tower upgrades, pricing, product mix, and cost reductions including raw material and seed cost reduction. Hoping to get to 35%-40% over time but not within next quarter or 2, could get up to 33%-34%.

Q: What is the goal for the new Chief Commercial Officer's role?

A: Dane will help expand strategic relationships with customers as strategic investors work to expand relationships with large customers. His leadership will amplify the existing strong foundation and allow the existing team to spend more time with customers.

Q: Are we still thinking about a Midwest facility in the next 2-year horizon?

A: Yes, Midwest facility is still in planning phases along with expansions of existing Georgia, Washington, and Texas facilities. Dane will help with these conversations.

Q: Elaborate on the level of operations in the Texas facility and what 'full harvestable capacity' means?

A: Texas is a 6-acre facility. For half the year, only 3 acres were garnering revenue from cut side. Now with the other 3 acres online, can run and harvest from all lines in those 3 acres, almost doubling capacity out of that facility.

Q: Regarding retailer engagement and EBITDA target push out?

A: The Texas facility is largely sold out, and volumes shipped annually are millions of pounds. Retailers see Local Bounti as the third largest CEA company in the country, which helps with decisions to come on board and expand SKU count.