Local Bounti Corporation

Good morning and welcome to Local Bounties Third Quarter 2024 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 note today's event is being recorded. At this time, I'd like to turn the call over to Jeff Sonick, Investor Relations at ICR. Please go ahead.

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 today. Please refer to the press release, which can be found on our investor relations website, investors.local bounty.com for reconciliations of non-GAAP financial measures to their most directly comparable GAAP measures. And with that, I'd now like to turn the call over to Craig. Craig. Thank you, Jeff.

And good morning, everyone. In the third quarter, we delivered sales of 10.2 million, an increase of approximately 50% year over year. However, These results fell short of our expectations, but this was for good reason, which I'll describe in a moment. With our expanded scale afforded to us with the completion of our new facilities and growing customer reach, we've been particularly active with customer engagement to determine how we can work together to optimize our capacity to meet specific retailer demand. During the third quarter, we made the strategic decision to reconfigure our growing plans to align with current customer preferences. More specifically, we are seeing heightened demand for our specialty products such as arugula and spinach, among others, and are reworking our growing mix to meet this demand. Although we are continuing to grow our living lettuce product at the Texas facility, we are working on implementing plans to broaden our capabilities in this section of the facility to meet the demand from customers for our new higher value products. This dynamic caused a shortfall relative to our anticipated ramp in the third quarter and shifted our expected timeline for achieving positive adjusted EBITDA into the second quarter of 2025. However, we continue to believe this evolution positions us to deliver improved performance over the long term by focusing on high velocity, higher value products that our customers are looking for. These learnings have led us to adopt a more measured approach to our next phase of expansion, ensuring that each investment decision aligns with specific customer demand and distribution strategies. Our ongoing philosophy of driving capital efficiency is evident in how we're optimizing capacity utilization across our existing network. Our Washington facility is serving growing demand in the Pacific Northwest with a targeted product mix that matches regional preferences, while our Montana facility has completed its transition from R&D to commercial production. Though Montana's contribution to the third quarter results was modest as we established the right commercial processes with the introduction of basal production, the facility is now fully oriented toward commercial operations and is contributing to improved performance starting in the fourth quarter. Despite these temporary impacts, we are pleased with our adjusted gross margin performance, which reached 32% in the third quarter. This improvement reflects our continued focus on driving operational efficiency and combined with our products optimization efforts supports our margin expansion trajectory and broader efforts to achieve positive cash flow. The successful execution of our product portfolio expansion was another key highlight in the third quarter. Our new high velocity offerings have generated significant customer interest, particularly our arugula and spinach lines, which began shipping to customers toward the end of the third quarter. These new product lines have been exceptionally well received by customers validating our strategy of shifting our product mix to drive growth and value, which ultimately drives our efforts to generate superior unit economics. Our commercial relationships also continue to strengthen and expand. Year to date, we have achieved several significant commercial milestones. We're shipping to more than 180 Brookshire Grocery Company locations from our Mount Pleasant, Texas facility. with their stores carrying our full line of produce products across three states. We are fulfilling our agreement with Sam's Club, where we are shipping to their regional distribution centers from both our Georgia and Texas facilities. We are also having great success expanding our presence in the Pacific Northwest with a large national grocer and mass retailer in the third quarter, both of which are selling all of our new SKUs. Our grab-and-go salad kit program also continues to expand, most recently with the retailer HEB. And we've recently signed a new customer agreement where we will be utilizing all of our newer facilities to fulfill orders. Additionally, we believe recent industry developments have reinforced the value proposition of our controlled environment approach. As traditional outdoor agriculture continues to face food safety challenges, resulting in costly recalls and supply disruption, our ability to provide consistently safe, high-quality produce becomes increasingly important to our retail partners. This advantage, combined with our operational improvements and strategic initiatives, further strengthens our competitive positioning in the market. In closing, we are committed to executing our next phase of growth with a sharper focus on aligning production capabilities with verified customer demand, positioning local bounty to deliver sustainable, profitable growth. While this calibration and strategy shifts our timeline for achieving positive adjusted EBITDA out to the second quarter of 2025, we are confident that our disciplined approach to capital allocation and operational excellence will create meaningful long-term value for our stakeholders. With that, I will now turn the call over to Kathy.