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spk03: Good morning, and welcome to the Local Bounties Third Quarter 2022 Earnings Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please also note, today's event is being recorded. At this time, I'd like to turn the conference call over to Jeff Sonick, Investor Relations at ICR. Please go ahead.
spk02: Thank you and good morning. Today's presentation will be hosted by Local Bounties co-CEOs Craig Hurlburt and Travis Joyner, President Brian Cook, and Chief Financial Officer Kathleen Valasek. The comments made during today's call contain forward-looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts are considered forward-looking statements. These statements are based on management's current expectations and beliefs, as well as a number of assumptions concerning future events. Such forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from the results discussed in the forward-looking statements. Some of these risks and uncertainties are identified and discussed in the company's filings with the SEC. We'll also refer to certain non-GAAP financial measures today. Please refer to the press release, which can be found on the Investor Relations website, investors.localbounty.com, for reconciliations of non-GAAP financial measures to their most directly comparable GAAP measures. With that, I'd now like to turn the call over to Craig Colbert, co-CEO.
spk05: Thank you, Jeff, and good morning, everyone. We produced a solid third quarter, which was consistent with our expectations. We achieved several milestones during the quarter, including shipping our first product out of our new Georgia facility, completing construction of our first stack zone in Georgia, and making important headway on our integration of PEATS to drive costs out of the business and protect our margin from the persistent inflationary forces. With that said, the big news is is the five-year offtake agreement with Sam's Club that we announced earlier this week. Consumers, retailers, and food service operators alike want a resilient supply chain of locally grown, fresh, and high-quality produce items, and Local Bounty will continue to deliver against that demand. We are thrilled with the engagement we are experiencing with our retail partners for our fresh, great tasting, locally grown produce, and the Sam's Club Agreement is an excellent example of the market's trust in the brands and products that have been developed by our team over several decades. We have been canvassing the market, sharing our progress, and received an unbelievable response at the recent IFPA event in Orlando. In fact, Local Bounty was recognized by a leading industry periodical, The Packer, as a top trend at this year's show. We are honored for their recognition of our team's hard work. In terms of our approach, we continue to focus first and foremost on our existing customer base. This remains one of our greatest advantages and is invaluable to informing our decisions on how we can most efficiently deploy our capital to meet known demand through scaling up our facility network. We remain diligent in our approach to maximizing capital efficiency to drive rapid revenue generation with a sharp eye on maintaining healthy gross margins so that we can reach break-even cash flow as quickly as possible. We have a great appreciation for the impact that the shifting macroeconomic environment is having on corporations globally, and we are keen to continue taking the steps necessary to drive our business in the most efficient way possible so that we can continue scaling up our network to unlock the attractive margin potential and cash flow generation that we believe is inherent in our business. Our co-CEO, Travis Joyner, will speak to how we are utilizing our growing technology to drive improving unit economics. And then our president, Brian Cook, will provide some further commentary around our commercial strategies, product development, and an update on our various construction projects before Kathy Valasek, our CFO, concludes with her financial review. With that, I'll pass it over to you, Travis.
spk08: Thanks, Craig. We have an insatiable appetite for achieving efficiencies, whether through our technology design yields or crop turns, we strive for efficiency in all four corners of our business. It all comes back to finding novel ways to drive productivity and enhance our unit level economics. Like we've said from the beginning, high yield and low cost. Fortunately, we have been able to facilitate those advancements with our patent pending stack and flow technology. Unlocking one and a half to two times yield improvement compared to traditional greenhouse operations, stack and flow is highly disruptive and highly differentiated and fuels our excitement about the opportunities that lie ahead as we continue to execute on our plan to be the leader in CEA. Simply put, our technology strategy gives us an advantage to make a direct iterative improvement on existing infrastructure in a capital efficient manner, which we expect will ultimately drive higher return on investment while reducing required capital. Evidence of this improvement is reflected in the hard work being done in our Hamilton, Montana facility to drive advancements in our growing systems and continue to improve stack and flow. Year to date ended September 30th, 2022. Our annualized yields from this facility have improved by 25% versus the comparable prior year period. This direct and progressive improvement in yield is an apples-to-apples comparison highlighting our ability for current and future facilities to drive yield improvement. Importantly, these improvements do not reflect the impact of existing and future R&D enhancements and innovations that are expected to further accelerate performance at each of our facilities. Beyond our advancements to yield, we are excited to discuss additional opportunities and applications of our stack and flow technology to reduce costs and increase yields across a variety of crops and growing environments. Stack and Flow is not just for leafies anymore. We are in the early trial stages of longer term projects for high value crops such as berries, and we continue to believe that our technology has a very important place in the future of agriculture. Key long term initiatives to apply Stack and Flow to adjacent produce production work hand in hand with our efforts to translate our innovations into a robust IP portfolio across process improvements, genetics, computer vision, AI, and controls. Formalizing our IP portfolio is an important component of the competitive note we are developing around stack and flow, and will ensure that we are well positioned for long-term growth. I'm going to let Brian focus on the key milestones we achieved in Georgia over the last quarter, but would like to hone in on one thing that Craig mentioned briefly. The first section of our stack has been completed in Georgia and is a critical element of our broader strategy with this facility. We expect that when fully implemented, it can add approximately 40% to our capacity. That same appetite for efficiency that has manifested itself in the foundations of this business and has been evidenced by our continued yield increases at our Hamilton facility is now being actioned in our Georgia facility as well. These efficiency gains are central to our capital efficiency strategy. Early learnings from Georgia will not only help bring efficiency in design and operations to future facilities like Washington and Texas, but also help us prepare to bring on Georgia Phase 1B, Washington, and Texas in the second half of 2023. I'll pass it over to Brian for his remarks.
spk07: Thank you, Travis. I'll start with a quick update on the progress of our facility build-out and then speak to some of the new product innovations we are testing. As Craig noted, we recently achieved several significant milestones at our Georgia facility. First and foremost, we shipped our first product from the facility during the third quarter, while continuing its progress toward achieving larger-scale commercial production. We are just finishing the three-month process of full commissioning after first shipment and are excited to expand sales into new stores later this month. The technological advances that lie within the Georgia facility with our stack and flow system will drive significant future margin opportunity for us with the greater throughput it can achieve. And the addition of a sufficient capacity will be highly advantageous for us. Further, the freight savings alone are a huge advantage, providing cost savings as compared to our prior distribution from our California facility. But perhaps more important is how this new local capacity changes our ability to service our customers, which brings me back to the Sam's Club offtake agreement. Local Bounty immediately benefits from known demand, allowing us to rapidly forge ahead with our ongoing build-out, helping absorb overhead and cost in an extremely efficient fashion. Sam's Club benefits from local, reliable product availability in a category that customers are demanding access to. This agreement will provide supply on a consistent basis, help them drive same store sales and grow the CEA category in the important club channel. In terms of our facility progress, and as the team has mentioned, we recently completed our first section of staff in phase 1A during the current fourth quarter of 2022, which will go into service during the first quarter of 2023. As a reminder, phase 1B began construction in June and will mirror Phase 1A in size and capabilities, effectively doubling the capacity of the Georgia facility to 14 greenhouses. Phase 1B construction is moving along rapidly and is now expected to be completed earlier than planned in the first quarter of 2023 and commence operations shortly thereafter. Following the completion of Phase 1B, the rest of our stag zones will become operational during the second quarter of 2023 and fully integrated with Phase 1A and 1b greenhouse infrastructure in terms of our texas facility we are excited to become part of the community in mount pleasant upon closing on the land later in november we will be following the same playbook to that of georgia which is to say that we are in active engagements with our existing customer base and working together to identify how local bounty can help bring greater capacity to our retail customers and help them grow the category We have high expectations for this future site, which will be comprised of a six-acre greenhouse facility and integrated stack and flow technology. We will share additional updates on this facility once those plans begin to move forward. But at this stage, we are targeting the site to be operational in the fourth quarter of 2023. With respect to our project in Pasco, Washington, the facility's contribution continues to progress. with anticipated completion in third quarter 2023. This facility will be composed of multiple stacked zones and three acres of greenhouse. In terms of planning for future growth beyond our existing facility network, our team is currently looking at locations in the northeastern United States as a potential home for one of our next regional expansions. Finally, I'm excited to share some updates with you on the commercial front with the test launch of our new salad kit innovations in third quarter. In October, Local Bounty successfully launched the value-added segment with two grab-and-go salad skews, Modern Greek and Poppy Power. Based on the launch's success to date and customer feedback, Local Bounty will advance the next phase of expansion, adding additional skews and expects to reach approximately 100 stores in the first quarter of 2023. This is just the beginning of our move into the value-added space. I look forward to sharing some more exciting news in the near future. Now I'll turn the call to Kathy for her review of the financials.
spk04: Thank you, Brian. I'll cover our third quarter results. Third quarter 2022 sales were $6.3 million as compared to $159,000 in the prior year period. Quarterly spring revenue from the company's California facilities went down slightly from on a sequential basis versus second quarter of 2022 due to an isolated delivery interruption with the logistics provider. Although our Georgia facility opened in third quarter of 2022 and product is shipping out of the facility, third quarter operations were still in the commissioning phase to prepare fulfilling Sam's Club demand and therefore associated revenues were immaterial for the quarter. We expect to begin our initial shipments to Sam's Club later this month. Revenue from our Montana facility increased 13% sequentially from second quarter of 2022, which was consistent with our decision to pivot more of our production toward commercial sales efforts. Adjusted growth margin, excluding depreciation and stock-based compensation, was approximately 38% in third quarter of 2022. Reported gross profit was 20%. We were pleased with our execution of the rapid recovery in our third quarter adjusted growth margin, following the temporary supply challenges that were rectified during the second quarter. Looking ahead, we continue to see opportunities to capture the COG synergies between local bounty and PEATS operations, and we are already making great progress. In fact, comparing our per unit costs prior to the PEATS acquisition to our actual performance since it closed, we've reduced packaging costs by 40% and reduced feed costs as well. Net loss was $27.1 million for the quarter and includes $10.9 million in stock-based compensation, $5.2 million in interest expense, $1.7 million of depreciation, $1.3 million of amortization, and $0.9 million of strategic transaction due diligence and integration-related costs. Adjusting for these and other discrete items, adjusted EBITDA loss was $7.3 million. From a capital structure perspective, We ended the third quarter, September 30th, 2022 with cash, cash equivalents and restricted cash of 24 million and had approximately 34.4 million of undrawn capacity on our credit facility with Cargill. Subsequent to the end of the third quarter on October 24th, 2022, we arranged a $23.3 million pipe investment in the company with significant investment coming from existing investors, including Fidelity Management and Research Company, NBNP Paribas, as well as management. The pipe proceeds, when added to our September 30, 2022 cash, cash equivalents and restricted cash, along with the undrawn capacity on our credit facility, provides for more than $80 million of total liquidity. We had approximately 94.3 million shares outstanding as of September 30th, 2022. And on a pro forma basis, including our warrants and our employees restricted stock units outstanding, we have a fully diluted share count of approximately 116 million shares. With respect to our outlook, we are reaffirming our 2022 revenue guidance of at least 20 million. We also continue to expect to achieve initial run rate revenue of at least 30 million at full production from our California and Georgia phase 1a facilities, excluding the expected future positive impact from additional capacity due to implementing stack and flow across PEATS legacy facilities. In terms of our quarterly cadence, I'd like to point out that our quarterly adjusted to EBITDA losses have been declining each quarter since we went public. Given that Georgia is ramping up to full capacity over the next quarter or two, and given that we anticipate that our SG&A expenses each quarter will be flat or lower than prior quarters, we anticipate that our quarterly adjusted EBITDA losses will continue to decline through 2023. Of course, the impact of any potential acquisitions as part of our build versus buy strategy for growth could potentially change this expectation. We believe this demonstrates the flexibility of our model and the advantages of our approach, which revolves around capital efficiency. In summary, we are thrilled with the progress we are making across each area of our business. Our commercial team's execution of the new off-take agreement with Sam's Club is especially exciting, and our construction team is doing a wonderful job navigating this complex environment to keep our build-out schedules on track and on budget, which is no easy task given the fluidity of supply chains. We look forward to continuing to update you on our progress as we execute on the achievement of milestones and identify new opportunities to drive growth in this exciting CEA marketplace. That concludes our prepared remarks. Operator, please open the call for questions.
spk03: Thank you. The floor is now open for questions. If you do have a question, please press star one on your telephone keypad at this time. Again, ladies and gentlemen, if you have a question, please press star one on your telephone keypad at this time. Our first question comes from Ben Cleve from Lake Street Capital. Please state your question.
spk08: All right, thanks for taking my questions. First on the SAMS Club announcement, congratulations here. And my questions on this are, you know, one, I'm wondering how much of your Georgia facility you anticipate being allocated to SAMS? And then also, kind of throughout the life of this agreement, if there are minimum volume metrics that either of you are committing to that you can share?
spk05: Yeah, hey, good morning, Ben, Craig, Robert. Appreciate the question. And I'm going to let Brian take that because candidly, Brian is the one that's been playing point with us. So, Brian, do you want to tackle that question for Ben?
spk07: Yeah, definitely. Good morning, Ben. So, as it pertains to the Sam's Club agreement and just our overall relationship with them, we're trying to be very sensitive to all the details around it. But as it pertains to the Georgia facility, and not just with Sam's, but with all the excitement of our other customers in the southeast, you know, it really drove the excitement around adding 1B right away. So it is, we are looking at 1B coming online to help satisfy the business requirements for the southeast.
spk08: Okay. Very good. Thank you. Thank you, Brian. Next one for me, and then I'll pass it over here, is on the kind of capital availability and funding the various expansion initiatives. I mean, between expanding Georgia, integrating Stack and Flow into PEATS, you know, finishing PASCO, starting Texas, there's plenty going on here. And I'm hoping you can help us understand kind of the level of capital throughout these initiatives that's already been committed and then talk about your CapEx expectations for this, you know, collective suite of initiatives between now and, you know, say the end of next year.
spk05: It's such an important question, Ben. Kathy, why don't you tackle the first part of that, and then we'll all pile in, okay, as necessary.
spk04: Sure. Sure. Good morning, Ben. So, as you know, right, we at Local Bounty spend a lot of time thinking about capital efficiency. How do we drive revenue with every dollar we deploy, whether that be through an acquisition such as PEATS or CapEx with our own facilities and initiatives? Our capital structure is in a solid place right now, The $23 million pipe we raised in October with some of our marquee long-term investors, our cash on the balance sheet currently, and the $34 million of undrawn capacity on our credit agreement with Cargill, we have in excess of $80 million of liquidity. And thinking about our relationship with Cargill, we couldn't be in a better place with them. We are revamping our agreement to broaden it for more facilities and also to reduce the interest rate, etc., That being said, we also continue to nurture all of our investor and lending relationships. We've had success demonstrating our progress, and those partners have shown a willingness to help us reach our goals. Of course, signing and announcing the Sands Club five-year offtake agreement helps in these discussions. Regarding, you know, kind of specific numbers for CapEx, Ben, we've not guided to that for, you know, 2023, and basically... A lot of that has to do with the fact that each of the facilities are different because of our build versus buy strategy, the locations, the demand for each of the facilities. But we are very, very focused on meeting our timelines to get the facilities up and running. It's absolutely critical for us because, as we've said repeatedly, we have so much pent-up demand throughout the country that we've got to get them up and running. as fast as possible. And honestly, I said it in my remarks, our construction team has been amazing in their ability to keep costs within budget, even given all the supply chain issues, and just come up with creative ways to keep budgets intact, one of which is to bring the GC function in-house and other things. So hopefully that's helpful.
spk05: Yeah. Hey, Ben, this is Craig. One other thing to consider, you know, we've heard many others in the space have struggled from, you know, CapEx creep. I think one of the important things to keep in mind is that a lot of that can be handled on the construction side, but holding kind of the pro forma together can also happen with innovation. And so where, you know, we're managing our costs very well, we're also seeing tremendous innovation gains in which really holds intact our whole investment thesis around capital deployed versus revenue dollars versus EBITDA. So where we are, everybody's struggling from supply chain. Our ability to innovate has allowed us to hold and even improve the original thesis. So it gives us a lot of flexibility in the way we're doing things.
spk08: Got it. Okay, very good. Appreciate the thoughts from both of you, and congratulations on the gross profit improvement especially, and I'll get back in queue.
spk05: Thank you, Ben.
spk03: Our next question comes from Colin Rush with Oppenheimer. Please state your question.
spk10: Thanks so much, guys. Can you talk a little bit about the learnings that you're seeing in terms of, you know, wrapping Georgia and how you might be able to, apply those more broadly given the different environment that you're operating in from a weather perspective versus Montana.
spk05: Yeah, hey, good morning, Colin. Travis, why don't you start with that and then maybe Brian can chime in.
spk08: Sure. Colin, thanks for your question. I'd say, you know, first off, generally speaking, a lot of the reps in Montana working on that transition from stack to flow are in process of being repeated in Georgia. So with that new stack tower up in Georgia, it's going to give us the ability to get early reps with that stack and flow integration in Georgia. And as we get more and more of those reps, it's just going to prepare us even more for the advent of 1B, Texas, and Pasco. It's always our strategy, go slow before you go fast. And the addition of our stack phase in Georgia is just another opportunity for us to get those early reps and prepare for scale, larger scale in Georgia, Texas, and Washington.
spk10: Okay, great. You know, I guess the second question is really around the timing on berries and other high-value crops. And some of the, you know, if you could just talk a little bit about some of the key friction points that you're running into at this point, you know, and how you expect to approach resolving those things.
spk05: Yeah.
spk10: It's a really good question.
spk05: Yeah, such an important question, Colin. And I think keep in mind our original pro forma had only leafies in it. So this is an opportunity for us to expand our product offerings. Kathy, why don't you start with that question, and then maybe Travis, you can also chime in because I know you've been very involved.
spk04: Yeah. In terms of where we are seeing ourselves going with berries, it's a very broad opportunity for us because our technology is yielding a lot of differentiation in the taste, texture, feel, so to speak, of our berries. And we are, with the large customers and suppliers globally of berries that we're talking to, they are thrilled with the taste of our berries. And so what we're seeing is that's yielding kind of a lot of interest in our berries. And I'll pass it off to Travis.
spk08: Yeah, I think the exciting opportunity ahead of us and really the question we asked early this year internally within our innovation team was how do you apply Stack and Flow to other perishables. And we looked at the whole landscape and said berries would be a very interesting place to play. And we built a thesis around it. And this year got quite a few reps with strawberries, raspberries, and blackberries. And those early trials yielded enough information and promise such that we believe that we are going to have a technology application to berries and that Stack and Flow is not just for leafies anymore. So it's very exciting and just applaud our incredible innovation team. It's a really special and brilliant group of people really answering the question, where can Stack and Flow apply next?
spk05: Yeah, hey, Colin. Travis said something in his remarks. He said, our technology – has an important place in the future of agriculture. I think that that line gets buried, but we're seeing that every day, and this is a very good example of that, where, yeah, we're going to grow out our leafy enterprise, but we're also going to see where else stack and flow can apply to help many other growers and businesses that are struggling with the impacts of climate change in an outdoor environment. And that is real, and we're in some very deep conversations. And the real question for us is how do we monetize that technology in that space? So very interesting opportunity for us, and it won't be just berries. It won't stop there.
spk10: That's super helpful, guys. Thanks so much.
spk05: Thank you, Collin.
spk03: Our next question comes from Ryan Wright with Roth Capital Partners. Please state your question.
spk09: Thanks. Good morning. And I might have missed this, but I just want to make sure for clarity. So as part of the commissioning process in the Georgia 1A facility, just like do you provide an update as far as like yields relative to expectations or any kind of metrics? Could you talk a little bit about kind of how that's going?
spk05: Travis?
spk08: We haven't provided any guidance on that quite yet. Really, and it's in the release, where we sit today is we've really been in the commissioning phase still preparing to fulfill the SAMS Club demand. And, you know, we're producing a very specific set of products for that relationship. So it's been getting that balled in and the reps in place. And I believe Brian can speak to when we expect to start shipping product there, specifically to Sam's.
spk07: Yeah, we are. Sorry, just in case you wanted a little bit of additional color on that. Yeah, we are starting to plan on shipping this week on the SAM sub deal. We have all of the volume to satisfy the requirements there, and we're continuing to see improvements each time. You know, there was a question about, you know, the kind of the facilities within themselves, and it's all about having the right tools in the toolbox from facility equipment team and that. And so we're utilizing all of that to make sure that we're maximizing those yields.
spk09: Got it. So it's a little bit of a different process than maybe some of the others is to use as far as commissioning. You're commissioning for the specific order. So you're growing, you know, specifically for the orders. And as those orders, you know, sizes increase, that's when the – so it's not like, you know, it's not like right away that the full kind of, Yields are being seen. Is that kind of a fair way to Think about it, right?
spk05: Yes. That's a fair way to think about it. Remember the stack phase Brian is being phased in here as we and that's really the beauty of the technology because we're actually the the greenhouse part of the operation is actually Working now or phasing in the stack kind of as a bullpon. So yes the yield that information will become more and more clear here in the quarters and to come, but we're all feeling very excited about what we are seeing.
spk09: Great. Thank you.
spk05: Thank you, Brian. Appreciate it.
spk03: Our next question comes from Christopher Barnes with Deutsche Bank. Please state your question.
spk06: Hi, thanks so much for the question. Just a couple of follow-ups for me. I was hoping first, could you just talk a little bit more about the offtake agreement with SAMS? Which of your products are in scope for the relationship? How are you guys measuring success there? And then how soon do you think that relationship could expand to other markets outside the Southeast?
spk05: Thank you, Christopher. Appreciate your question. Brian, you want to tackle that one?
spk07: Yeah, I will, and I actually have to kind of go back to an initial, you know, we've, this whole agreement with Sam's been some time in the making, and we're really excited about, you know, not just the length of the agreement, but what it can mean for us regionally. All that being said, you know, we've also have been very close and sensitive to what they're trying to do as part of their business, and so we're not putting out anything too specific about, you know, what the size is of the program. I will tell you as far as, you know, what is involved is we're replacing the one-pound spring mix in the club stores. And those will be hitting markets this week or this next week coming up. Got it.
spk05: Thank you. Christopher, I think one more thought on that. I know you're asking about Sam's Club, but I'll use it as an opportunity to just speak a little bit more broadly. The whole category across the U.S. is really seeing tremendous momentum. And obviously, that manifests with type of agreement with Sam's, which, as Brian said, was in the making. But we are just seeing tremendous interest in some of our value-added products, for sure. and then also just our traditional products. So this whole concept of simplifying supply chain, really securing supply chain, focusing on fresh, locally grown products, it is a very, very real movement on the ground in the space.
spk06: That all makes perfect sense. My follow-up was just around – In regards to Ben's earlier question around capital availability, look, I know you guys are – you don't want to talk about the level of, like, capital expenditures, like, in the next couple of years. I understand that. I'm just curious, like, you raised equity, like, recently. I guess, like, why was that necessary, just given your ability to tap into the revolver, your cash on hand? And just going forward, do you have any bias for where the funding will come from, whether just as Georgia cash flow improves through normal operations, or do you expect to lean into equity issuances again over this funding cycle?
spk04: Kathy, do you want to start on that one? Sure. Good morning, Chris. Thanks for the question. So the reason why we did the pipe was really just, you know, being good stewards of capital and just shoring up our balance sheet a little bit, right? Cargill is a fantastic strategic partner for us, and so we are, you know, able to really support leverage that relationship. I mean, I did say in my comments earlier, we also are always very, very close with other lenders that are interested in working with us and other institutional investors, et cetera. I mean, we don't currently have a plan to go out to the equity markets again, is what I would say. I'm just trying to think, does that pretty much answer your question?
spk06: Yeah, no, that's helpful. Thanks so much. I'll pass it on.
spk05: I think, yeah, thanks for your question. We appreciate it. I think one maybe last thought on that is the realities of the capital markets today are creating opportunities for us on the inorganic side. And what that means is there are many operators that are struggling. We've already heard about, you know, those of us in the industry know about several. We can name them. and others that will be on the horizon. That's going to create opportunities for local bounty, primarily because, remember, we have the ability to come in and bolt on our stack technology to existing operations that could get us geography or potentially talent, customers, et cetera, and we could get an extra 40% to 50% yield out of their existing facility. So it creates a very unique opportunity for us So us being in the capital markets is going to be a consistent thing because we're going to need capital to grow. Our challenge as good stewards of capital is really making the most of those capital dollars by really continuing the innovation and making sure that we're able to deliver delicious products consistently and at fantastic unit economics that are unparalleled. And that's really the challenge. of everybody in the company. And I'll just give you an example. This morning, we have many of our employees listening in this morning that are excited about the company and where we're going. I know in Montana at six o'clock this morning in snowstorm, we have our facility manager, Mark Malampi, and many of his team members listening in. So this is all a complete, all hands on deck enterprise, making sure that we're getting the proper capital and deploying that capital properly with great returns, ultimately getting us to EBITDA positivity and cash flow positivity. And that's definitely on the horizon for us.
spk06: Thanks, Craig. That's helpful. Thank you, Chris.
spk03: And our final question comes from Pamela Kaufman with Morgan Stanley. Please state your question.
spk01: Hi, good morning. Congratulations on all of the announcements. My first question is on what your current production capacity is in the Georgia facility. Do you have excess production volume to sell to other customers in Georgia beyond Sam's Club? And where are you in building retail relationships and distribution in Georgia, you know, outside of Sam's Club? Obviously, I know that's an important development, but I'm just curious on the overall strategy.
spk05: Such an important question, Pamela. Hey, Brian, why don't you tackle that? I know you and your team have been working really hard on that.
spk07: Yeah, thank you. Good morning, Pamela. So 1B is going to be very important to our overarching volume needs to satisfy the Southeast in totality. You know, we are already in a lot of the retail establishments in the local areas with local retail. And, you know, we have a couple, you know, a hundred of other stores that are coming online today. in addition to the Sam's Club. 1B is going to be extremely important to come online here in Q1 so that we can continue that progress towards, you know, southeast expansion. But we're really excited about, you know, where we're at today and having that extra availability to continue on.
spk01: Thanks. And just a clarification on Sam's Club, are you going to be selling branded or private label produce to them?
spk07: Yeah, it's a great question. So we are launching next week with a branded local bounty, one pound.
spk01: Okay, great.
spk05: Pamela, I think there's an important point there. We named local bounty because we kept hearing local is so important, and that's really resonating with the retailers. not just at Sam's Club but across the board, that there's that local component to it as they're chasing local and fresh. So just a thought on top of Brian's comment.
spk01: Right, and I think that will be a great way to gain more visibility for the brand as you expand your retail presence. My other question is just on the criteria that you considered when selecting Mount Pleasant for your next facility. What drove your decision to build it there and then the decision to build versus buy like you did with Pete's?
spk05: Another great question, Pamela. Thank you. I'll start and then anyone else can chime in. The great thing about where we are now and really having integrated Pete's completely is now our customers are a heavy voice in where they want us to place facilities. So our Texas facility is really driven by conversations with customers saying, here's our distribution centers, here's where this would make good sense. And so we're able to really have a high degree of confidence when we're putting those capital dollars down on where to put the facilities. And honestly, that's going to be probably the loudest voice in the room moving forward is kind of our desire to always be customer back and delivering, you know, great products and having them where it makes sense for their delivery mechanism to get it into their retail outlets. I'd open it up to anyone else on the LB side to see if you want to add to that comment. Okay.
spk07: Yeah, I think I would just add that, you know, when we're thinking about locations, you know, we're really, to Craig's point about, you know, serving DCs, we want to make sure that we're able to get to the highest number of DCs possible in the region that we're planning on serving. And we're also trying to do that where, you know, we have best of life for our team. So if we're delivering a product, we don't want to be in a spot where, you know, they can't be home with their family at night. And so it becomes a very important piece of the puzzle in marrying all of these different aspects of what makes a good site. But as it pertains to kind of the access to VCs that was mentioned earlier, a lot of it has to do with, you know, just kind of the time to each of them and the ability to serve the maximum VCs possible.
spk01: Got it. Thank you. That's helpful.
spk05: Thank you, Pamela.
spk03: And that was our final question. I'll turn it back over to you for closing remarks.
spk05: We'd like to thank everybody for your time today. This now concludes the meeting. We look forward to speaking with everybody again very soon, and thank you so much for your interest in Local Bounty.
spk03: Ladies and gentlemen, that does conclude today's conference call. We do thank you for your attending. You may now disconnect your lines.
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