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spk06: We decided to really broaden and expand our near-term R&D at Hamilton to solve for increased and specific SKU demand from Pete's customers in California and Georgia. So remember that Pete's, they're really the head lettuce kings, if you will, of CEA. Lots of market share, they're in lots of doors, and they have lots of SKUs. And so specifically, Pete's Living Butter Lettuce Really where we're focused, one of the things we were focused on in the first quarter is applying our stack and flow technology and innovating around that technology to pull the crop cycle down and increase the turns that we could get out of our facility on a per-annum basis. And what that resulted in is through our R&D efforts, we were able to cut the crop cycle by seven days, so pick up roughly four turns per year. 17.3 turns per year in total. So as Georgia comes online, we'll be scaling down our Hamilton R&D and increasing commercial production. But the main areas of innovation that we're focused on are kind of core stack and flow patents, as well as controls, computer vision, increasing the number of recipes, et cetera.
spk01: That's really helpful. Thank you for that, Travis. And then as my follow-up, I wanted to ask about just sort of the cycle times with customers. You talked about the change in the tone of your conversation with customers since the piece acquisition. Obviously, your ability to demonstrate the favorable unit economics in this space is something that we can see, but I'm wondering how that's contributing to the nature of the conversations that you're having with customers and any sort of commentary that you can offer around co-location opportunities. I'll leave it there. Thank you.
spk03: Kristen, what a great question, or I guess series of questions. Brian, do you want to take that one, please?
spk05: Yeah, thank you for the question, Kristen. So when you think about the overall sales lifecycle, when someone comes new to the market, the one thing that you have an appreciation for real quick is how relational our market is. And so it generally takes a, you know, it can take a solid year plus for a new company to start selling in any kind of significant numbers within our produce arena. You know, the one, the one beauty about this combined effort is that we were already had access to 10,000 doors. And through that, just longstanding trusting relationships on new product launches. And so what it does is it really reduces the time to market, not only for, you know, just having more capacity and being able to do more with current SKUs, but also adding additional SKUs that are in the pipeline. I think that answered part of your question. Let me know if there's something I missed.
spk01: No, that's really helpful. I appreciate the color.
spk05: Thank you.
spk09: Our next question comes from Chris Barnes with Deutsche Bank. Please proceed with your question.
spk04: Hey, good afternoon. Thanks for the question. I guess just to start, I appreciate all the color around the progress on the Georgia facility update, but I was just hoping you could comment on the integration of Stack and Flow into the other PEATS facilities out in California, like Has that process started yet, or has much of the time right now been focused on commissioning and ramping up Warner Robins? And then relatedly, could you share any details around the implementation and integration costs for each of the three facilities? Thanks.
spk03: Thank you, Chris. Appreciate the question. Again, I'll ask Travis to comment on the integration of the Stack and Flow technology in California specifically. Travis?
spk06: Yeah, so as I said, you know, PEATS has a lot of doors and a number of successful SKUs. Those California facilities, however, are very focused on their core product, including butter lettuce. So a lot of the integration and R&D efforts that we did in Montana this year were really centered around specifically reducing the crop cycle at the existing PEATS facilities in California and in Georgia. And the result that I kind of highlighted as it relates to head lettuce, which is one of their core products, will be directly applicable to the California facility. So really what we're trying to do within our growth systems right now are get reps to prepare us to do the full technology integration in both California and Georgia so that when we turn those systems on, it's plug and play.
spk04: Got it. That's helpful. And then as my follow-up, I just wanted to just dig a little bit more into the $30 million per year run rate that you guys are looking to achieve, like, excluding stack and flow. Is there, like, any timeline around that that you think that you could achieve these goals? Like, is that, like, 2023 potential, or is that really out in, like, medium term? And then, like, Maybe could you share what Stack and Flow would add to that? Because it seems like the crop turns you'd be able to drive after implementing Stack and Flow, like 30 million seems very conservative. So just any color you can share there would be great. Thanks.
spk03: Hey, Chris, this is Craig. I love that question. And it's a great question and very intuitive. Kathy, I'm going to ask you to kind of chime in on that. And then we can maybe follow up with Brian or Travis. Kathy, go ahead.
spk02: Yeah, yeah, sure. So the 30 million run rate is that full, you know, full production for each of the facilities. So, you know, and obviously excluding stack and flow, stack and flow will improve the yield 40%, right, which is obviously very significant. But the 30 million run rate is, you know, would start in Q1 2023.
spk06: In other words, the 30 million run rate is operating the horizontal assets without the benefit of the stack phase. So when the stack phase gets activated in 2023, that's when you'll see that incremental bump.
spk04: Great. That's very helpful. Thanks, guys.
spk03: Thank you, Chris. Appreciate the question.
spk09: Our next question comes from Ben Cleavey with Late Street Capital Markets. Please go ahead.
spk07: Thanks for taking my questions. First question is around peace and kind of a follow-up to what you were just addressing. And first of all, I guess congratulations on getting this closed as quickly as you did. I wish the rest of my coverage could announce the closure of an acquisition so soon after the announcement. So congratulations there. But my first question is around the you know expected revenue contributions here because you know with the 20 million dollar revenue uh guidance on the year and six million dollars of of pete's revenue in the first quarter um you know it's it would seem to be that that not much is expected to be contributed from the georgia facility when phase 1a is complete this summer so can you talk about kind of georgia contributions specifically in the back half of this year please
spk03: Yeah, great. Hey, Ben, nice to hear your voice again. Why don't we have a combination of Brian and Kathy answer that? Maybe Kathy, you start, and Brian, you can top it off.
spk02: Yeah, and great to hear your voice, Ben. What we're trying to do, Ben, is just be conservative, right? We do say in the release that the Georgia Facility Phase 1A will be operational in July of this year. And we anticipate that it's going to do very, very well. We're just trying to be conservative with the 20. Okay.
spk07: All right. Fair enough. And then my... Let's have Brian comment.
spk02: Sorry. Let's see if Brian has any comments that he'd like to add. Oh, I'm sorry.
spk05: Yeah. No. I mean, I think that's factual what Kathy is mentioning. I mean, we were conservative on the number. But there's also, you know, the inherent ramp that goes along with it that you want to be sensitive to. So, you know, we're strong on that $20 million number. So, you know, and we're, you know, hoping to see some significant upside to that.
spk03: Hey, Ben, it's Craig. Craig, one question or one comment. This whole industry has been plagued with what I would call overcommitting and underdelivering. And, you know, we talk about financial leadership, and one of the things we want to really emerge over time is that you can count on what we're telling you, that we will move heaven and earth to deliver on that. And I understand your question. It's really good. And obviously, if you just do the math, it looks like we're a little light there, but there's a lot of moving parts. You did comment on the integration moving very quickly. I don't want that to go without saying that. We have an amazing team involved in that transaction, led by Kathy Valasek and Brian on his side, and Bill, their CFO. And I will tell you, having been involved in many of these transactions, one of the folks at Pete's said it was like a zipper coming together, that we were almost meant to be together. It's like a zipper zipping it up, and that's kind of what's played out. And it's allowed us, you know, if you go down three layers, The integration's gone incredibly smoothly. Couldn't be more pleased with where we are, and really has just helped really de-risk so many different facets of the business. So I'll stop there.
spk07: Got it. No, that was helpful from each of you. And yeah, congratulations, and I look forward to seeing the fully integrated business here in coming quarters. So my second question is around your legacy efforts and the PASCO facility. Great to hear the construction there has begun again. But given that you discussed the redesign of the facility and paused construction for a bit, I'm wondering if you can update us on expectations today for size and total revenue contributions from the redesigned facility, and then also give us an update on the expected timing for that facility to be completed.
spk03: Great question, Ben. Maybe Travis, you start on that one, okay?
spk06: Yeah, I'll just kind of comment and say that the facility, you know, and I've touched on this point again, PEATS had a, you know, very robust and diverse, not only customer base, but also SKU count. And so really the PASCO facility is being redesigned to account for the demand side of the SKU mix. that's desired by Pete's customers. So some tweaks to the selection and mix of our growth systems as a result, and really kind of all around solving for capital efficiency. So we're still chipping away at the design, and I think next quarter we should have a more wholesome update as to the timeline, estimated completion, and revenue add on a go-forward basis.
spk03: Yeah, that's a great answer, Travis, and I think, Ben, you can look forward to that next quarter.
spk07: Okay, we'll stay tuned there. Very good. Thanks for taking my questions, and I'll get back into you.
spk03: Thanks, Ben. We appreciate you.
spk09: Our next question comes from Brian Wright with Roth Capital Partners. Please proceed with your question.
spk08: Hey, thanks. Good afternoon, and thanks for the question. I wanted to get a little bit of more clarification on what consists of Phase 1A and Phase 1B, maybe in terms of square footage, number one for each and number two. Is it also a function of Phase 1 is kind of the traditional high-tech greenhouse, and then Phase 2 is the stack and flow, or is there multiple dynamics to this? I wanted to kind of understand that.
spk03: Yeah, hey, thanks, Brian. Appreciate the question. It is multiple, and I'll let Brian tackle that question.
spk05: Hi, Brian. Yeah, so Phase 1A is... Sorry, I thought I heard someone come on. So Phase 1A is 130,000 square feet of actual production square footage, and that's in our channel system. Phase 1B... is an additional 130,000 square foot. As part of 1A, all of the head house work that was required was done as part of the original design. So phase B becomes just a bolt on as far as needs requirements from the head house. So there's no additional square footage required on the head house side.
spk08: Okay. And then I understand that the, you know, the 30 that we talked about, and I was kind of going through my notes, and I apologize if I haven't asked this before, but when everything's kind of full, you know, fully ramped up, what is kind of the full capacity kind of revenue of the Georgia facility?
spk03: Yeah, Kathy, do you want to take a look at that? I'm not sure we're giving that guidance, but Kathy, go ahead.
spk02: Yeah, Brian, thanks for the question, and great to hear your voice. We have not gotten that specific on the Georgia facility. We've just not gotten that specific. Maybe we can give an update on the next call, but so far we just haven't gotten that specific.
spk08: Okay, if I could just follow up on that, and that's totally understandable. Can you just remind us what the California facility sizes are for PEATS?
spk03: Yeah. Hey, Brian.
spk05: Yeah. No, definitely. So the Carpinteria facility is 16 acres, and the Oxnard facility is 13 acres. And it's important to note that the Georgia facility has the same system as a newer retrofit that we did in part of our Oxnard facility, which is about a little over an acre. And so that's been producing for about a year and a half now. So just kind of give, you know, I don't want you to, you know, make the leap between what those three acres in Georgia does to the 29 acres that we're doing in California, because it's an apples to oranges comparison.
spk08: Okay. Okay. Thank you.
spk03: Great, Brian. Anything else?
spk08: That'll do it for now.
spk03: Thank you, Brian. Appreciate the questions.
spk09: Thank you. This last question comes from Pamela Kaufman with Morgan Stanley. Please proceed with your question.
spk00: Hi. Good afternoon. This is Badog for PAM. I just wanted to touch base on the company's long-term facility expansion plans. So going back to Investor Day, the company initially provided a facility outlook projecting having around eight operational facilities in 2025. And this was prior to Pete's acquisition. So now that the company gained two facilities in California and seem to have another operational facility in Georgia, what are the current projections of facilities through 2025? And then kind of related to that, can you discuss the strategic priorities considered when it comes to timing of breaking ground for a new facility and then also determining the location of that facility?
spk03: Great questions, Radha. Thank you so much. I appreciate the questions. I guess maybe I'll take a start at this and then others can add in. I think with the acquisition of PEATS, what's happened is, We're now in 10,000 doors. We're now in conversations with people that just kind of accelerated the conversations we were having prior. And as a result of that, we're really looking at the customer conversation backwards to where we're going to locate facilities. And there's some very hearty conversations that are in the works around where we should be placing facilities. So while Local Bounty pre-Pete had a plan in place, Local Bounty with Pete will be developing that plan over time, kind of customer backwards. And I think we can all agree there's a lot of change going on in the world right now. And I think supply chain, many, many customers are looking to back solve for having quality products product and also guaranteed supply or a higher risk of supply. So we're in a lot of very interesting conversations, and that plan will develop over time, and we will be announcing each quarter kind of what we're thinking upon as it relates to that. I'll stop there. Travis, maybe you can add in on top of that.
spk06: I think you pretty well handled it. Kathy, I don't know if you wanted to give any specific guidance around 2025, though.
spk02: Yeah, so I think what we said in public forum is that we're comfortable with the numbers as we had set forth last year in terms of the financial metrics, right? We're going to get there. We're probably just going to get there in a different way. Like right now, as Craig alluded, right, we're not counting facilities. We're counting, hey, you know, talking to the customer and then making sure that we fulfill all of their needs. And we're also, you know, spending quite a bit of time also at considering, you know, build versus buy consideration. Right.
spk03: That's an important concept.
spk02: Thank you.
spk03: Yeah, sorry, I interrupted you. Go ahead.
spk00: No, no problem. Thank you. That's helpful for the color. And then just as a follow up question regarding capital allocation, I mean, you mentioned, you know, how you assess the return on invested capital when it comes to greenfield opportunities for buying and retrofitting stack and flow technology. So I guess on that basis, do you see more room for M&A as the company continues to scale? And at what point might you be ready to consider another transaction?
spk03: Right. Great question. Really good question. I think an important question. I think you have to start answering that question by understanding what's happening at the ground level inside the industry of controlled environment agriculture, or CEA. And that is, it's a very cluttered space today. There's a lot of smaller players, most of which may be considered undercapitalized. And I believe that consolidation, we've talked about this ever since we started, is inevitable. And I think us and Pete's combining has us emerging as, if not the leader, one of the very few leaders in the space. And I think what's going to happen is there's going to be more of this that plays out over time. But it will be, as we like to say, we will do the math and we will do the geography and And we will listen to our customers. We'll stay focused on delivering delicious products. And I think with all of that said, we will be making great decisions from a position of strength, which is really where I believe we sit today inside of the industry. So, yes, I hesitate to give you a timeline, but I would say that is a possibility over the pro forma period.
spk00: Great. Thank you so much.
spk03: You bet. Thank you for the question.
spk09: Ladies and gentlemen, at this time, I'm showing no further questions. I'd like to end the question and answer session, turn the conference call back over to management for closing remarks.
spk03: Well, we certainly, on behalf of all 250 employees at Local Bounty, we would certainly like to thank everyone for their time today, your interest in the company. Please reach out to us directly, and I will put this offer out there as well. We would love to have you come to our facility and see with your own two eyes what we're doing and how we're doing it. I think it will really help all of your questions gel. So on behalf of all of us, thank you so much for your time and your attention today. Everybody have a great day.
spk09: Ladies and gentlemen, this does conclude today's conference call. We do thank you for attending. You may now disconnect your lines.
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