Lifecore Biomedical, Inc. Q2 FY2023 earnings call

• The Board announced intention to pursue strategic alternatives to maximize value for stockholders, including evaluating potential sale, debt/equity financing, etc., and retained Morgan Stanley for expertise.
• Completed restatements associated with retroactive impairment of Curation Foods' avocado products business (divested Feb 7, 2023) for fiscal 2022 10-K and fiscal 2023 first quarter 10-Q, and filed fiscal 2023 second quarter 10-Q.
• Ongoing concern determination and negotiations with lenders.
• Fiscal second quarter results and commercial development portfolio update: $10M upfront cash commitment from a customer (with $5M received last week) and up to $15M CapEx reimbursement; 63 new prospective opportunities in development funnel; initiated 2 new development programs using Lifecore HA; active development projects increased to 25 (comprised of 22 customers) with spread across early-phase, Phase I/II, and Phase III clinical development; 3 late-phase projects approved and now producing commercial material, with Lifecore manufacturing/supporting 29 commercial products with 14 customers.

Lifecore segment revenues decreased 13.1% to $21.7 million for the fiscal second quarter of 2023. The CDMO business saw a 25% decrease in revenue, while the hyaluronic acid (HA) raw material manufacturing business experienced a 58% increase. Lifecore segment gross profit decreased to $6.7 million, with a gross margin of 30.8% (compared to 47% in the prior year period). Segment-adjusted EBITDA was $3.1 million, representing an adjusted EBITDA margin of 14.3%.

• Withdrew fiscal 2023 outlook due to exploring strategic alternatives.
• Shift in shipment timing and lower development revenue expected to persist through fiscal third quarter; anticipate a larger fourth quarter but no precise guidance given the strategic alternatives review process.

• Substantial doubt about going concern for next 12 months due to existing/anticipated issues under credit arrangements and liquidity needs.
• Ongoing negotiations with lenders.

Q: Will there be a live Q&A session?

A: In light of the company's announcement of intent to explore strategic alternatives, management will not be conducting a live Q&A session on today's call.