Local Bounti Corporation

Good morning, and welcome to the Local Bounties second quarter 2024 earnings conference call. All participants will be in a listen-only mode. After today's presentation, there'll be an opportunity to ask questions. Please also note, today's event is being recorded. At this time, I'd like to turn the call over to Jeff Sonick with Investor Relations at ICR. Please go ahead, sir.

Thank you, and good morning. Today's presentation will be hosted by Local Bounties Chief Executive Officer, Craig Hurlburt, and President 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. Please refer to the press release, which can be found on our 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. Craig?

Thank you, Jeff, and good morning, everyone. Before I dive into our operational and financial highlights, I'd like to take a moment to comment on an important leadership change we made in the second quarter. I want to recognize our CFO, Kathy Balasek, and her role expansion to include President that we implemented in June. Kathy has been instrumental in driving operational efficiencies, building trust with large commercial customers, and developing key financing relationships. Her expanded role reflects her significant contributions that have reached well beyond the leadership of our finance organization and her unwavering commitment to scaling up our business. Together, we look forward to leading our organization through our next phase of growth. Now, turning to our second quarter results. Our sales increased 31% year over year to a record 9.4 million, representing 12% growth on a sequential basis. Our adjusted EBITDA loss also improved by approximately $800,000 year over year to $7.5 million. These results demonstrate that we are on the right trajectory to achieve our near-term goal of generating positive adjusted EBITDA in early 2025. I am especially excited to report that we have achieved several key milestones this quarter. which set a strong foundation for accelerated growth in the second half of 2024 and beyond. The most significant highlight of this quarter is the commencement of shipments from our new state-of-the-art facilities in Washington and Texas. These purpose-built facilities, optimized for our stack and flow technology, are now fully operational and already contributing to our revenue growth. What's particularly noteworthy is the rapid scaling of operations at these new sites. We've been able to achieve yield levels comparable to our Georgia facility in just one to two months, a process that initially took four to six months in Georgia. This accelerated ramp up is a testament to the learnings we've applied from our Georgia experience and the inherent advantages of our purpose-designed facilities. The Georgia Stack and Flow implementation, while very successful, required a more gradual approach to avoid disrupting existing operations. In contrast, our new facilities have allowed us to implement our optimized processes from day one. There are several key advantages inherent in the design of our Washington and Texas facilities that are focused on driving operational efficiency and accelerating our time to market. Both were designed with decoupled harvesting and packing areas, along with improved buffer systems, allowing for greater flexibility in processing various SKUs and reducing production bottlenecks. Built with expansion in mind, these facilities can support double the current acreage, enabling cost-effective scaling. Advanced climate control systems tailored to local conditions ensure consistent yield and quality year-round, while good manufacturing practices layouts with multiple quality control checkpoints uphold our commitment to food safety and product excellence. Additionally, sustainability features like water catchment and recycling systems in our Texas facility align with our environmental focus. These design elements and others collectively contribute to our ability to rapidly scale operations and maintain high quality production from day one. Capitalizing on this new capacity, we've successfully expanded our customer base and distribution network. I'm thrilled to announce that we are now shipping to more than 180 Brookshire Grocery Company locations from our new Mount Pleasant, Texas facility. Brookshire's is stocking our full line of products across three states in the southern United States, including our grab-and-go salad kits, living lettuce, and baby leaf varieties. Additionally, we've expanded our distribution with Sam's Club for our leafy greens production, with service commencing from our new Texas facility. With this added service, we are now fulfilling shipments to six of SAM's regional distribution centers from two of our facilities, Georgia and now Texas. We remain on track with the national expansion of our grab-and-go salad kits. In the second quarter, we rolled out grab-and-go to approximately 200 doors throughout the Pacific Northwest and the Southern United States. and we expect to expand to a total of 700 doors in the second half of 2024. This expansion will be important for driving incremental revenue and introducing more consumers to the Local Bounty brand. The response to these convenient fresh offerings has been overwhelmingly positive, and we are excited about the potential for further growth in this product category. Our stack and flow technology continues to provide opportunities to drive efficiency across our operations. I am pleased to report that our large scale trial mentioned in our last update has delivered as expected with yield increases of 10% over our current Georgia facility performance. These results are extremely encouraging. And we are now developing a comprehensive rollout strategy to implement these improvements across our Georgia, Washington, and Texas facilities. We look forward to sharing more details about this exciting development in future updates. Additionally, we've made significant strides in optimizing our seed costs. We've achieved this through two main approaches. First, by reducing overall seed usage. using fewer seeds per plant site while maintain or even increasing total yield. And second, by lowering our cost per seed. This latter improvement comes from both negotiating cost reductions with excellent suppliers given our growing scale and identifying alternate seeds that offer lower costs without compromising on yield, taste, texture, or flavor. From these combined efforts, we've been able to reduce our seed costs by approximately 20%. These advancements in yield and cost efficiency further strengthen our competitive position and contribute to our path towards profitability. In summary, we achieved significant milestones this quarter, from record sales to the successful launch of our new facilities and expanded retail distribution. This is a direct reflection of the great work our team is doing every day. Our commitment to innovation continues to drive operational efficiencies and product improvements. Looking ahead, we remain focused on meeting increasing demand for sustainable, locally grown produce while steadily progressing towards our goal of achieving positive adjusted EBITDA in early 2025. We're confident in our path forward and we're excited about the opportunities that lie ahead for local bounty. With that, I'll turn the call over to Kathy.