Lifecore Biomedical, Inc. Q4 FY2023 earnings call

• Strategic review process is ongoing, with the Board evaluating potential strategic alternatives to maximize value for stockholders. - In the fiscal 2023 fourth quarter, segment revenue and adjusted EBITDA were consistent with expectations. - Lifecore is a fully integrated CDMO with differentiated capabilities for developing, filling, and finishing complex sterile injectable grade pharmaceutical products, leveraging over 40 years of experience in hyaluronic acid manufacturing. - The development portfolio advanced in the fourth quarter with 5 new projects added, bringing active development projects to 29, and development customer count to 27. Projects span early phase to Phase III clinical development and scale up commercial validation. - Invested in 2 new isolator fillers (5-head and 10-head) with anticipated delivery in fall, planned to double theoretical capacity to ~45 million units. Moving to 24/7 fermentation production staff to increase sterile HA capacity by 50% by June 2024. - Built out organizational capabilities with Lifecore University training program and Lean certification program, with 10 individuals granted lean practitioner certification and another lean certification training group starting in November.

In the fiscal 2023 fourth quarter, Lifecore generated segment revenue of $31.5 million and segment adjusted EBITDA of $6.1 million. The hyaluronic acid (HA) raw material manufacturing or fermentation business saw a 38% increase, contributing to the revenue growth. The CDMO business had a 9% increase. Lifecore is the only major manufacturer of pharmaceutical injectable-grade HA with injectable CDMO expertise. Approximately 55% of new drug applications are injectables, and prefilled syringe demand is growing at an estimated 13% compound annual rate.

• Currently not in a position to provide formal guidance for fiscal 2024. - Anticipate Q1 2024 to be the low point of the year, with Q1 revenue and adjusted EBITDA expected to decrease sequentially from Q4. - Expect Q2 2024 revenues to grow by nearly 40% relative to prior year second quarter, and adjusted EBITDA to grow at approximately twice the rate of revenues. - Q3 and Q4 2024 expected to generate adjusted EBITDA at more normalized levels similar to or greater than fiscal year 2022 third and fourth quarters. - Excluded from FY 2024 adjusted EBITDA expectations are approximately $2 million to $2.8 million in start-up costs associated with HA fermentation capacity improvements.

• Delays in SEC filings due to final Curation Foods divestment, accounting activities related to closing transition services agreements and prior period divestments, and significant refinancing complexity. - Strategic review process ongoing with uncertainty regarding potential outcomes. - Complexity from recent debt restructuring and embedded derivative features affecting financial reporting and audit efforts.