Local Bounti Corporation/DE Q3 FY2024 earnings call

• Third quarter sales were $10.2 million, a 50% year-over-year increase but fell short of expectations. - The company made the strategic decision to reconfigure growing plans to align with current customer preferences, focusing on specialty products like Arugula and Spinach. - Facilities: Washington facilities serving Pacific Northwest demand, Texas facility continuing to grow living lettuce while working on broadening capabilities for higher-value products, Georgia build-out completed, Montana transitioned to commercial production. - Product portfolio expansion was successful with new high-velocity offerings like Arugula and Spinach well-received by customers. - Commercial relationships strengthened with partnerships such as Brookshire Grocery Company, Sam's Club, and H-E-B. - The controlled environment approach provided an advantage due to traditional outdoor agriculture facing food safety challenges, enhancing the company's competitive positioning.

In the third quarter, Local Bounti achieved sales of $10.2 million, a year-over-year increase of approximately 50%. The company's Washington facilities are catering to growing demand in the Pacific Northwest with a targeted product mix. The Montana facility completed its transition from R&D to commercial production. There was heightened demand for specialty products such as Arugula and Spinach, leading to a reworking of the growing mix. While the living lettuce product continued to grow at the Texas facility, efforts were underway to broaden capabilities in that facility to meet demand for higher-value products. Revenue contribution was influenced by the strategic reconfiguration to align with customer preferences and the progress of various facilities.

• Anticipates fourth quarter revenues to be in the range of approximately $11 million, representing a year-over-year growth of approximately 67%. - Key drivers for fourth quarter growth include ramping production at Washington and Texas facilities, contribution from expanded new product assortment, margin improvement from operating efficiency, and the Montana facility's commercial production contribution. - The expected timeline for achieving positive adjusted EBITDA was shifted to the second quarter of 2025.

• Costs related to ongoing optimization and scaling of facilities. - Higher insurance costs observed in the third quarter that are being mitigated. - Transportation and logistics expenses within SG&A are expected to increase as the business scales, which could impact operating results if not managed effectively. - Risks associated with the controlled environment agriculture industry, such as competition and potential operational failures of other players, could affect Local Bounti's market position.

Q: How should we think about the drivers of the revenue ramp from 3Q to 4Q and beyond?

A: The revenue ramp is driven by production and throughput of new SKUs like Arugula and Spinach, which have different growth cycles and customer adoption timelines. The Texas facility scaled later than the Washington facility, and customer sampling and decision-making take time.

Q: Regarding access to growth capital and the Midwest expansion?

A: Actively engaged with multiple capital providers, with term sheets from sale-leaseback companies. The Midwest expansion site has been narrowed, and the size is under consideration based on customer feedback and capacity needs for new SKUs.