Q4 2021 Landec Corp Earnings Call
[music].
Good afternoon, and thank you for joining landeg for fiscal 2021 fourth quarter earnings call. During the presentation, all participants will be in a listen.
Only mode. Afterwards, we will conduct a question and answer session at that time I will provide instructions on how to ask a question now I would like to turn the call over to Jeff Sonic Investor Relations at ICR.
Good afternoon, and thank you for joining us today to discuss Landa Corporation's fourth quarter.
For fiscal 2021 earnings results on the call today from the company are Dr. Albert Bolles, President and Chief Executive Officer, John Warburg, Chief Financial Officer, and Jim Hall, President of life for buying.
By now everyone should have access to the press release, which went out today just after 1 pm Pacific.
For PM Eastern time, if you've not received the release, it's available on the Investor Relations portion of land <unk> website at IR Dot land deck Dot com.
Before we begin today, we'd like to remind everyone on the safe Harbor statement certain statements made in the course of this conference call contain forward looking statements.
It's important to note that the company's actual results could differ materially from those projected in such forward looking statements additional information concerning risk factors that could cause actual results to differ materially from those and the forward looking statements is contained from time to time and the company's filings with the SEC.
<unk>, including but not limited to the company's form 10-K for fiscal year 2020 copies of those filings maybe obtained from the Companys website.
And with that I'd like to turn the call over to al.
Thanks, Jeff and good afternoon, everyone and thank you for joining us today.
Today's call.
And I will provide highlights from our fiscal 2021result.
Jim Hall will then review some of the exciting developments that life Corp.
And I'll cover our operational progress that curation foods and John Marburg on it.
It's just us and answer results and fiscal 2022.
We will then open the call.
And for your questions.
We had a solid finish to fiscal 2020, 1 for the fiscal fourth quarter performances that exceeded our revised expectations.
Full year consolidated revenues.
544 million exceeded the high and expectations by 12.
And then.
Driven by both curation foods and life Corp.
Similarly, consolidated adjusted EBITDA for the year and was $31.4 million.
Head of the high end of our guidance by 2 point for me.
Both segments performed well and I'm proud of.
And then for like a lot.
The efforts and what was a challenging year.
Complete with a turnaround of our curation foods segment during a global pandemic.
Life core proved to be especially resilient.
COVID-19 disruptions.
And I think top line growth of 14 per.
The team and adjusted EBITDA growth of 22% for the full year.
This was really an exceptional performance and Ah ha.
Wiley uncertain year and is consistent with the low to mid teens compound annual growth trajectory that we expect out of this business.
Over.
For the long term.
And at Curation Foods, we were pleased to meet our year and steady state goal of generating segment gross profit margin in the range of 11% to 14% for the reported margin of 11, 9% and the fiscal fourth quarter on.
Turnaround.
Around efforts for curation foods are on track and.
And we have the added support of a more efficient distribution network that expands our reach well for.
Simplifying our operations.
Looking ahead to fiscal 2022.
We have the benefit of some customer.
Customer momentum and above life core and curation foods and <unk>.
Embler organization, and and improving balance sheet.
And will help us keep pace with our long term growth objectives for.
FY 'twenty 2.
Currently anticipate full year consolidated revenues of 545.
$554 million and consolidated adjusted EBITDA.
33.3 to 35.5 day.
I think FY 'twenty 2 is best characterized as an investment year for life Corp.
We will be spending additional funds on capex.
And in areas of sales and marketing.
<unk> grown new development channel, thereby expanding our future opportunities and it's attractive C. D M O space.
As we will discuss in further detail certain customers were carrying larger inventories during COVID-19, resulting in our FY 'twenty.
And revenue growth expectations, and having an annual impact from a.
Approximately 5 percentage points.
Including this impact we expect revenue growth of 7% to 10 per cent and adjusted EBIT for growth.
6% to 10% next year.
We are continuing to position the life.
Core segment for consistent long term profitable growth going forward.
On the duration side.
Continue to see growth and our avocado products business offsetting planned declines and a corvette and trade business.
Overall revenues to be flat.
Lately.
Negative year over year.
However, we are expecting adjusted EBITDA to grow 9%, 18% based on a full year benefit from our operational enhancements and cost controls, which will drive improved gross margins, partially offset by inflationary pressures that we expect.
Continue.
I am proud of our accomplishments and excited by the opportunities that lie ahead.
We have more work to do but we are on the right track, we have a solid foundation and both our businesses and expect to drive more consistent results going forward.
As we work towards.
Delivering shareholder value.
I do want to mention that Pat Walsh, 1 of our directors resigned due to personal reasons as we stated on an 8-K.
No disagreements with Pat and the company and we thank him for his invaluable service to Atlanta and.
And wish him all the best.
<unk>.
And also voted to reduce the size of the board from 11 to 10 directors.
With that I'll turn the call over to Jim.
Thank you all we had a very exciting fourth quarter with the highlight being our seeding them all partner parent therapeutics FDA approval for.
And Kurt and relief product and important new therapy for treating certain post surgical pain approve.
Approval showcases the support that life course world class quality systems and manufacturing Engineering Excellence provides to our partners. We now look forward to continuing to work with heron on commercials.
<unk> generally over the course of our fiscal 'twenty, 2 which includes the continued process optimization and scale up of our commercial manufacturing process that will support this important product.
Naturally our revenue scale up and a septic fill and finish is batch size increases are commercialized.
For its contingent with market penetration rates, whereas in prior years. The revenues were primarily and development that were associated with known timelines.
Nonetheless, we are always back filling our development pipeline with projects that reach across the spectrum and don't anticipate on material.
<unk> shift and the complexion of the revenue generators and the near term.
And the fourth quarter, we learned that many of our commercial customers carry large inventories of finished products during COVID-19 due to the temporary deceleration and procedure volumes our customers are now and the process.
Lies this of rebalancing their inventories over the first half of our fiscal 'twenty, 2 which is translating to some timing variances and our revenue growth versus prior year, which we believe represents approximately 5 percentage points of headwind on our fiscal 'twenty 2 revenue guidance growth.
Rates.
Our pipeline continues to be robust supported by our reputation for quality and execution of difficult projects. We now have a total of 21 active projects that are in various stages of their product lifecycle and are in active discussions with several potential new projects.
Profit growth of our pipeline continues to provide us comfort around her goals to deliver long term revenue growth.
According to market research and the last 10 years, approximately 75% and new drug development amongst small to mid sized pharma companies has been outsourced injectable.
Products represent approximately 45% of total products and development, which have projected compound annual growth rates of 10, 5% and pre filled syringes have a projected compound annual growth rate of 13% through 2023.
Based on our expectation for.
For an acceleration and injectable approvals.
There are significant unmet demand for specialized seed them, all vial and syringe capacity, which the industry estimates will grow by an incremental 75 million to 100 billion units.
We believe that life core can play an even greater role to meet the large.
Large incremental needs of the fast growing <unk> industry.
Our expertise and viscous materials and our world class quality system that supports not only drugs with biologics medical devices and combination products enables us to stand out as a specialized leader and the CDM all.
Industry.
We are very pleased with the continued expansion and activity and our pipeline. It is imperative that we keep pushing ahead with our planned capacity investments to satisfy demand that we see on the horizon as.
As such we are making capital investments in fiscal 'twenty 2.
Approximately $32 million towards expanding our filling capacity beyond our current 10 million units to reach approximately 37 million units over the next 5 years. This investment will support future capacity needs and nearly double life quarters revenue generating capacity on a septic fill and.
And finish.
In fiscal 'twenty, 2 we're also investing an incremental $1.6 million and the P&L through sales and marketing and development resource expenses to expand our reach with new customers and.
And to increase our development service capabilities, which ultimately allow us to continue to.
Expand our development pipeline and open new sales channels that complement our existing capabilities. We believe that organic sales expansion is highly profitable with attractive returns on investment.
And we operate in and amazing industry with strong fundamentals and life quarters perfectly.
Positioned to take advantage of the growing opportunities to deliver attractive financial returns to all of our stakeholders.
Thank you for your continued interest and our story and I look forward to updating you throughout the year.
Now I would like to return the call to al.
<unk> FY 'twenty and 1 was very busy and important year and our supply chain and curation foods made some significant events within project Swift to simplify the business and the fourth quarter to finish out the year.
And we dealt with COVID-19 integrating facilities.
And entered into a new city.
Thanks for that distribution agreement.
We also monetize that investment.
Last year, COVID-19 had a tremendous impact on our workforce and.
I'm very proud to say that our team.
And that seriously implemented.
Implemented recommended litigation quickly.
As a result, we were able to maintain the health and wellbeing of our people, while continuing to grow harvest process and ship, the very best Guacamole salads and vegetables.
And we did this for the entire year.
At the same time, we will.
We're also.
Also optimizing our operational footprint by paring back capacity to better match, our product focus and generate profitable growth.
As previously reported.
We have divested underutilized assets.
Fiscal first quarter. This included our Hanover, and Ontario assets.
And third quarter, our Vero Beach facility.
And in fourth quarter, our rock Hill operation.
These strategic moves reduce organizational complexity by broadening leadership, Accountabilities and flattening our management structure.
We also entered into a logistics.
And with Castellany at Premier fresh produce distributor.
This strategic partnership will allow us to improve our delivery performance.
As a result of their existing route infrastructure.
Both in terms of frequency and reach we also have the benefit of leveraging the excellent.
And gravitation management system.
Which in turn results and better information available for our customer service team to keep customers well informed of delivery status.
Finally, we will enjoy shared productivity as we improve the utilization of cash flowing assets.
And FY 'twenty, 2 our focus is about driving efficiencies and our operational performance for them.
Maturing our operational excellence program.
Which we've referred to as zest zero waste and.
And for your engagement standardization and trained.
This is an approach based on our lean.
Those that are a well recognized for improving operational performance.
We have discussed inflationary concerns as a leadership team and are looking at our cost base to try to anticipate the impact.
Fortunately many of the programs that we commenced and FY 'twenty 1.
Excluding the reduction in facilities and the cash.
And when we contract.
Set us up to deal with the broad inflationary pressures that are impacting global economies.
We have a focused program to drive continuous productivity through the supply chain with a concerted effort to offset cost.
Increases.
Where we are unable to offset cost increases.
We're also working with our sales teams for this.
<unk> price increases to customers.
As we are committed to maintain gross margins and the 11% to 14% steady state range.
On.
And the commercial front, our retail and merchandising efforts related to resets and new items.
Turning to build.
And we hold more top level customer meeting.
Even club stores are planning demos again in September which is extremely encouraging.
We see all of these size as positive indicators.
And as for our business now I will turn the call over to John.
Thank you al.
I am pleased to share with you our financial results for the fourth quarter and full year of fiscal 'twenty 1.
I will begin with a summary review of each segment before concluding with the consolidated financial.
And for review.
Starting with our life core segment fourth quarter revenues ended at $25.8 million, a 1.3% increase over the same period of the prior year.
C D and Mo revenues posted a modest increase of 1% to $21.9.
$10 million from the prior year.
Primarily due to the timing of Aseptate commercial shipments within the fiscal year, particularly the large 33% growth rate. We previously shared with you and the third quarter.
Fermentation revenues similarly grew by 2% to $3.9.
Gross profit margin improved by approximately 90 basis points versus the prior year to 43, 5% largely due to timing and mix.
Segment, adjusted EBITDA totaled $7.7 million for the quarter.
2.6% increase over the per year and EBITDA margin was 20.
9.8%.
Marchi, and a slight 40 basis points of improvement versus prior year.
Okay.
For the full year life core revenues grew 14, 3% to $98.1 million above our high estimate guidance range generating a 22.
Percent year over year increase and adjusted EBITDA of $24.5 million, which is at the high end of our guidance range.
Let's turn to our curation foods segment results for the fiscal fourth quarter.
Revenues totaled $114 million a 12.7.
Per cent decline from the prior year fourth quarter, which included the additional 14th week.
On a comparable basis, excluding the additional 14th week and the prior year revenues decreased approximately 6%.
Fresh packaged salads, and vegetables declined 13, 9% or 7.
2%, excluding the additional week and the prior year, which was primarily due to the planned reduction and a lower margin legacy vegetable and trade business.
Avocado products revenues declined 5.7% from the prior year.
We're excluding the effects of the additional week and the prior year.
Increased approximately.
1.6%.
We achieved our steady state gross margin goal with and 11, 9% gross margin performance in the fiscal fourth quarter and increase.
<unk> of approximately 180 basis points over the prior year.
On a sequential basis.
And from the third quarter of fiscal 'twenty 1.
Gross margin improved 450 basis points, which was impacted by channel disruption related to Covid that we previously discussed.
This was a significant accomplishment for our team and reflects the improved profitability and the curation segment.
That will carry forward into fiscal year 'twenty 2 as.
As we benefit from a more favorable mix of higher margin products and improvements to some of our lower margin products.
Adjusted EBITDA for the quarter totaled $5.9 million with a corresponding margin of 5.2%.
For the full year duration revenues declined 11, 6% to $446.1 million well above the high end of our revised guidance range and we generated adjusted EBITDA of $11 million, which is $2 million above the high end of our revised guidance range.
$11 million adjusted EBITDA.
EBITDA represents an increase of 148%.
Over the $4.4 million adjusted EBITDA and the prior year, which.
Which included a 1 time $1.5 million royalty.
Excluding the effects of the onetime royalty and the prior year adjusted EBITDA would have increased.
274%.
Briefly turning to our consolidated financial performance.
Fiscal fourth quarter revenues declined 10, 4% to $139.8 million and.
And full year fiscal year 'twenty, 1 revenues declined 7.8% to 540.
For <unk> 2 million.
Selling general and administrative expenses decreased $2.1 million versus the prior year to $16.1 million and the fourth quarter and decreased $6.8 million versus the prior year to $65.4 million for the full fiscal year.
Consolidated adjusted EBITDA totaled $12.1 million for the fourth quarter compared to $14.1 million and the prior year period.
Consolidated adjusted EBITDA totaled $31.4 million for the full year fiscal 'twenty, 1 and increase of 43% over the prior.
44.
Let's now turn to our improving cash flow performance.
Cash provided by operations was $15 million for the full year ended may 32021, which marks a $32.1 million improvement compared to cash used by operations of 17.
$17 million and the prior year period.
Cash from investing activities improved by $13 million compared to the prior year through a combination of a $3 million reduction and Capex and a $10.5 billion increase and sales proceeds.
At the end of the fourth quarter our.
Debt was $192.6 million.
But as a reminder, we realized $45.1 million and proceeds for the sale of our interest and the 1 set of investment.
And correspondingly use 41.4 million to repay debt subsequent to the fourth quarter close.
Our pro forma net debt would have been $151.2 million and on a pro forma net leverage ratio would've been approximately 4.8 times and improvement of 1.3 turns.
We continue to improve our financial position and create greater financial flexibility to ensure.
Our net and execute our strategic plans as we similarly, and strategically review each and every aspect of our business and we will continue to do so.
With that I want to share our outlook for fiscal 'twenty 2.
Along with some considerations to help shape the cadence of the year.
<unk> and some of the drivers that will impact comparability.
Let's begin with our overall consolidated outlook for the full fiscal year.
We are introducing guidance for consolidated revenues and the range of $545 million to $554 million representing.
Sure that would range of flat to plus 2%.
And consolidated adjusted EBITDA is expected and a range of $33.3 million to $35.5 million, representing an increase of 6% to 13%.
At the segment level, we are guiding light.
<unk> core revenues to a range of $105 million to $108 million.
Representing growth of approximately 7% to 10% and.
And adjusted EBITDA, and the range of $26 million to $27 million.
Representing an increase of approximately 6% to 10%.
Curation foods revenues are expected and a range of $440 million to $446 million, representing a slight year over year decrease of flat to down 1.4%.
And adjusted EBITDA is expected in the range of $12 million to $13 million, representing an increase of approximately.
9% to 18%.
As you think about this segment level guidance and how it builds into our consolidated outlook.
We think it is helpful to share some framework to inform your modeling and judgment of our future performance.
First starting with life core.
As discussed.
Just by of course topline growth and fiscal year 'twenty..2 is hindered by approximately 500 basis points due to excess customer inventory as a result of a delay on elective procedures.
Expectation is that this will rebalance at the end of our fiscal second quarter.
Results and flattish expectations for growth.
Staff.
And then transitioning to substantial second half growth to meet the plan, we're putting forth today for growth of 7% to 10%.
Layering on the 500 basis points inventory headwind.
We bridge back to life Core's long term expectations for compound annual revenue growth.
And the FERC low to mid teens.
From an adjusted EBITDA perspective, we expect the first half to approximate 25% to 30% of the full year guidance with the first quarter approximating our results from the prior year first quarter of fiscal 2021.
For the fiscal second.
And second half growth should recover and a very material fashion to meet our guidance for the fiscal year, which implies an increase of approximately 6% to 10%.
As Jim discussed please keep in mind that the businesses and investing in sales marketing and development activities to drive longer term development.
Revenues and to enhance capabilities and anticipation of future growth.
Adjusted EBITDA margin expansion on the higher revenues is temporarily muted.
Expected to resume over the intermediate and long term.
Shifting over to the curation foods segment, we expect a thoroughly.
Constant year on quarterly growth.
Save for the first fiscal quarter, where the positive impacts for store resets aren't yet completely realize so.
And so on the case for the first quarter, we are expecting a low single digit decrease followed by modest quarterly growth thereafter.
Gross margin has.
It's been an important kpis for curation since embarking on project Swift and we expect to drive additional games and fiscal year 'twenty 2 as a result of those operational enhancement and simplification efforts that al spoke to.
We ended fiscal year 'twenty, 1 with the segment gross margin of 9.7% and we believe.
We can set we will meet our steady state goals of 11% to 14% on a full year basis for fiscal year 'twenty 2 as we realize the full year impact from those initiatives.
And from an adjusted EBITDA perspective.
We expect the quarterly cadence to be largely aligned with the prior year fiscal.
Please the 'twenty 1.
Save for some higher relative growth rates and fiscal first and third quarters due to some more favorable comparisons.
Net we have the business and and much better place heading into fiscal year 'twenty 2.
And those operational improvements are translating to games and adjust.
<unk>.
As referenced by or implied growth and the range of 9% to 18% for the full year.
And finally from a capex perspective.
In addition to the $32 billion and life core we plan to spend more modestly at curation.
And up $2.7 million on projects primary.
Primarily related to maintenance Capex and some minor automation enhancements.
And with that and the.
And the operator, please open the call for Q&A.
Thank you.
This time and it will be.
Conducting a question and answer session. If you would like to ask a question.
And EBIT.
And 1 on your telephone keypad, a confirmation tone will indicate your line is and the question queue. You May press star 2 if he would like to remove your question from the queue.
Participants using speaker equipment and may be necessary to pick up your handset before pressing Jackie.
1 moment, please I'll be poll for questions.
Our first question is from Mark Smith of Lake Street Capital markets. Please state your question.
Guys. Thanks for taking the question.
First I just want to look at curation foods, a little bit can you discuss some of the inflationary pressure where youre seeing it.
And it's labor.
Delivery wherever.
This is and kind of response to initial price increases or other ways to kind of mitigate this.
Yeah, Hi, Mark its IL and al you today doing well how are you.
Yes.
A lot of the inflation is coming from our direct materials.
Things like corrugated packaging.
Those types of things and.
And we're very focused on our.
And our efficiency program through zest.
We continue to take costs out we have some for.
For their automation planned as well.
But as I said and.
Statements earlier that.
We think we have a pretty good head start on this with the actions that we took with Swift last year and getting the full year.
The impact of the reduction of the <unk>.
Workforce and getting our footprint.
Much more tighter so that's that's.
Too much where they're coming from and I think other companies are feeling the same thing, but we feel like we have a little bit of a head start and that area.
And if we continue to see inflation and build.
We're not afraid to.
And I take pricing, where we feel we have leverage to do that.
And.
Preliminary discussions that we.
We have going on right now, but our cultures.
Much more focused and.
We know that this is a headwind, but it's 1 that we're going on.
I think we have a head start on and we have some other things planned as of fiscal year <unk>.
<unk> for us.
And to.
To mitigate those risks because we're really focused mark on it.
<unk> and 11% to 14% gross margins and our business.
Perfect and then 1 more on curation just can you just discuss foodservice, maybe what youre seeing and it kind of changes in consumer behavior or with the.
And those are spinning and and maybe any benefit from that.
Yeah.
Now as I had lunch and previously a.
We hired a head of food service.
Last fiscal year.
We never had that focus.
Sales person dedicated to foodservice before.
So we are anticipating.
Operating growth and the foodservice area.
Seeing open up for us.
Primarily.
Sure.
Green Bean business, those restaurants are coming back that up as well as our salads and just recently we started shipping.
And so Amazon, which is a new channel for us.
We had not been and before so we expect some growth from that.
As well as a continuing growth with the away from home.
Category with Hello, fresh continues to grow very strongly for us.
So.
So we're starting to see and open up and we're going to benefit from that.
Which really was a big part of our.
The decline with Covid.
During the last fiscal year.
Okay and then the last 1 for me and just looking at Life Corp. As we look at this.
I don't know if access to visit right word inventory and kind of the timing of the roll off or will this be kind of a gradual kind of slow roll off throughout the first half or is it more <unk>.
Dropped you know the debt and.
And over the next 6 months if it happens more properly and then you know is there anything that could change.
Kennedy's these inventory levels or could help take some of this pain away and the first half as far as you know and new accounts coming on and new customers.
Yeah, Let me take the first part of that and then I'll turn it over to Jim for more color.
But we.
We don't have a visibility into our customers' inventories.
And until they really order.
And.
They're kind of they all had built stockpile during COVID-19 and.
And we expect that to roll off here and the first half of the year and <unk>.
Really get back on track and January.
But I will let Jim give you some more color there.
Yeah, Hi, Mark.
They all said and you know what we we started noticing.
Slower order patterns from some of our customers and started working with them to understand what the issue was with their inventory levels and got some insight.
Throughout Q4, and what the issue is.
And is not so much and the U S. Most of these customers sell their products worldwide.
Things are opening up and pretty much back to historical rates and the U S. Not so much and the rest of the world and as things open up over there and they expect to work through they have surgeries lined up.
And the product the reason they let it build up as you know the uncertainty of how fast things would open so.
We're working hand in hand with these customers to understand how this goes we're hopeful that it happens.
We quickly as things open up and vaccination rates pick up.
But it's something we'll mine.
Monitor and like always we continually.
Try to build our pipeline with new projects that.
Could potentially offset some of this but we're not projecting that.
Okay. That's helpful. Thank you guys.
Mhm.
And there.
And you would like to ask a question. Please press star 1 on your telephone keypad, a confirmation tone will indicate your line is and the question queue for participants using speaker equipment and it may be necessary to pick up your handset before pressing and stacking.
1 moment, please while we poll for additional questions.
Our next question is.
And from Anthony Vendetti of Maxim Group. Please state your question.
Sure. Thanks.
Good afternoon guys.
And I was just I wanted to follow up on the comments you made.
On your agreement with <unk>.
Castellini.
Transportation, obviously youre looking to.
And get some efficiencies there and.
And I was wondering if you could quantify a little bit more what this could mean in the and the near term and then what's the what's the total opportunity is this is this going to bring down your.
Transportation expenses by X or contribute too.
And margin by why what what what can we what can we look for there.
Yeah, Hi, Anthony this is al how are you today.
I want to.
And I'll talk just to give you a little bit of background here.
And we had our own logistics system and this move.
Primarily driven by us to be more efficient and more effective 1 of the things that we have not been able to do is deliver 6 times, a week, which enables us to have fresh.
Fresher product on the shelf and now with this agreement that we just put in place and.
Was now we're in the middle of just starting to.
Rolling out and implement it and let's go to help us with our reach to being able to deliver.
Deliver 6 times, a week, which should translate into a decrease shrinkage at and our customers that's primarily due to us having fresher product.
On the shelf.
And there are places today, we just couldn't get to with our own logistics system has a fair amount of white space out there for us primarily in the Midwest and.
And cast them and delivers for those places so it's going to help us in terms of being able to.
Generate new business for us.
With our.
And with our customers.
And at the <unk>.
Are you able to get there with our own logistics system. So.
They have the ability as well that we didn't have based on your scale and being able to hedge pricing fuel.
We were not able to do that so our timing couldn't have been better.
In terms of doing that so we feel really good about the efficiency and the effectiveness and they're gonna reach.
John any color you'd like to add here.
No no it's great it's just that with.
Cash Delaney, it's what they really do right they are experts in it.
It was just something that you know we weren't nearly as efficient and we weren't sending out full trucks. You know, we're 1 of the products and capsule and he delivers and by the way that the cost of us to deliver 6 days a week would have added several million dollars and this and our agreement we have a guaranteed savings per year built.
And it can only get better and I really describe it as a strategic partnership.
And so I think there's just a lot of benefits for the company now built into our logistics team. So.
And and really the timing just couldn't be better, particularly you know walking into a year and a lot of inflationary pressures.
And it's nice to have that done versus have and inflation hitting and then trying to figure it out and then and that project was probably being worked on for the better part of a year or so.
And it's a lot of work you know logistics to get right and I think there's just a lot of benefits for the company from a white space.
Base.
And the costs distribution and all of those things. So our sales team is very excited about it.
You know because of the service levels, we can provide or.
To our customers and in particular.
Okay. Good I mean, it sounds like.
And you had a homegrown.
And that was that was clearly inefficient and.
And like you said for all the reasons you just mentioned as well as some of the external events going on and transportation has been getting expensive for for <unk>.
<unk> across <unk> across all industries true.
Double hiring truck truck drivers and.
And so right various reasons so true.
And you get that off you play and I'm sure is a is a big.
When and.
But what I want to segue into us and project Swift right because.
And you know improvement and and efficiencies is something I'm sure you work.
On a regular basis, but if we had and just quantify projects with.
Where is that at in terms of total savings recognized since that was implemented and do you have a specific and day for projects with recognizing of course, the Troy is gonna be looking for efficiencies and better systems and and so forth, but I was just just to.
On and on on projects with for for this question.
Yeah, Anthony and.
On a big baseball fan so I would say, we're probably in the fifth or sixth centering on a swift.
The cash flow deal was a deal that was.
It was on my strategic focus.
The focus to get after we just had so much to do in terms of right sizing our operations and.
And the ability for us now to get that done at the end of fiscal year and begin the implementation of that.
It was really important for us it was a cheap part of project Swift.
Cliff.
As just a way of.
The way, it's gonna be accuray and foods were always looking.
To improve our efficiencies and our operations.
So.
That's that's more or less for a lot of that heavy lifting is done I would have gotten that cash delaney sooner.
We just have so many other things at.
Focus on.
Quote unquote, we had to clean up and I and our.
And our system to right size the operations in terms of our of our footprint.
And.
The right structure in place from a people standpoint.
That would go along with that.
Okay and.
Yeah, but you have a total savings since you implemented project Swift to date.
On an annualized basis.
Yeah. So Anthony we've you know that's been a key part for us and our focus on gross margins.
And that's what is enabling us to get on gross margins up.
And I'll do and 11 to 14.
Per cent range.
In terms of total assets sold to date I think it's been around a $20 million or sell that with our focus on our balance sheet.
To pay down debt and and it's going to help us as we begin.
And to.
Fight the inflationary pressures that we see ahead and I.
John anything you wanted to add here for Anthony Yeah, and I think I'd just add debt I think project Swift is more than just a savings to EBITDA, but it's also.
Really a cultural change.
It's about simplification, it's about picking up assets.
And trying to make and simplify and.
And so it's things like you know how do we monetize our investment and when set for instance that was not strategic so instead that we could put more investment into life Corp.
And as Capex going forward.
And as very strategic for the business. So it just makes a lot more sense.
And it's also those kinds of things that really fall into our thinking around project Swift. It was the idea is how do we find a strategic partner and think through logistics and a smarter way for us.
And it wasn't just how do we.
Put more EBITDA and bottom line, but you know, but how do we do it or not really.
It really and a smart way and how do we make our culture work for us and a better way as well.
So it's just it's a really a bigger thinking process and.
And once the culture starts getting behind it. It's just there's just so much more that can get accomplished.
And I think that that's really the.
The benefit and you know.
And the.
The brilliance that all brought to that.
When he started that and and it just feels like.
And I agree with and without that were probably like and the fifth inning or so and I think it will be with the company for quite some time.
Because.
As we rationalize skus.
Through our marketing efforts all of those things are kind of still following.
Within the idea of.
The framework of project Swift.
Okay. No. That's helpful. Just you know if you're in the fifth inning on are there any you know obviously transportation.
As you know was was it was a big item are there any on big items like that on the near term horizon that you've identified and said hey, there's a there's a huge opportunity here.
2.2.
Make this particular piece of the business much more efficient.
Well.
I think most of the heavy lifting is behind US Anthony as I mentioned and you know our focus is.
And as with Swift.
2 continuing to simplify and.
And we got a lot of things to look at and terms.
Ms of.
How we work with inside the business and we've made big improvements and our processes are big improvements and are forecasting.
We have things that we're working on and the harvest area that I'm very excited about that we're not ready to talk about today, but how can we improve our or.
Casting.
And on time to harvest, how do we continually grow our green bean business by.
Diversifying our planting.
As well as where we plants and how we plan to get ready for.
Seasonality upticks and the business.
For it so it's really about getting it to work for us now.
Much harder and much more efficiently and we have before but I do believe that from a.
A footprint standpoint, we're down to 2 manufacturing facilities.
We're leveraging gasoline and so we're able to take.
Take down our Oh Raphael facility with <unk>.
Cut down Vero Beach, which are only had 1 line and at that made green beans, and I'll be able to make all those green beans, and and bowling green with the investments that we've made there.
So.
We will continue to focus on.
The big opportunity.
<unk>.
But for the most part the heavy lifting is behind US, it's really about getting it to work for US now as we move forward.
Okay very helpful. I'll hop back in the queue. Thanks very much.
Thanks Anthony.
Our next question and from Mike Poppe Husky.
Banking and research please state your question.
Good evening.
I guess, the first 1 for Jim and Jim could you remind me and and possibly a few others just sort of the.
As a product.
Successfully.
And the regulatory approval and then goes to commercialization can you just talk about the impact.
Impact.
And in terms of that customer in terms of you know.
Revenue sort of in the short term margins and the short term and then sort of how that.
Well typically play out over time or your expectations for how that will play out over time, just you know in terms of that customer that's gotten irregular.
Regulatory clearance.
Yeah go ahead Jim.
Okay.
Hey, Mike how are you doing its a good question and and depends a lot on the product and how it's being launched but typically.
And in the qualification process, we work through.
Process qualification lots that are on.
Also utilized for commercial production so.
And on how a customer wants to build prelaunch quantities, but typically life core is selling commercial product.
And at least a quarter if not earlier before our product launches.
And then it just depends.
And on what type of launch it is and.
How rapidly they build their sales force if it's a if.
And if it's a customer that's got and established sales force that happens quicker. If they are building the sales force and it's a newer company. It takes a little longer so typically in the first.
Fiscal year after launch the builds are relatively slower and ramps up margins.
Margins are.
Typically in line with what our targets are for our fill finish business right out of the gate otherwise, we wouldn't be working on that product.
And.
And as market penetration and happens quicker and it happens faster it ramps up so.
And we work on new products with <unk>.
And typically a 6 month rolling forecast.
And that adds on.
A quarter every time, we get an update and so it just depends on.
All of those things.
Now I'll pass the they really penetrate the market so hopefully that helps.
Okay. Thank you.
And and sorry, John I May have I may have missed this but.
Capex expectations for this coming fiscal.
Yeah, So Mike Cora we suggest.
Did the 32 billion and up to 7 million net curation foods for this year.
I'm, assuming then almost.
Almost certainly a negative free cash flow expectation for the for the fiscal year.
Well, if you if you count the and.
The cash received for wind set will be and.
On a positive free cash flow.
Okay.
And in terms of sort of operating.
But would you expect to have it and more negative free cash set aside winds up but you would expect them.
On a higher negative free cash flow this year than last year.
Yeah.
Yeah.
Based upon the guidance today that that would probably be true yes.
Okay Alright.
And just and in terms of sorry in terms of the cadence of the Capex spend and.
Our fiscal 'twenty 2 is there any guidance there I mean is that can be lumpy or is that can be fairly.
Straight line can you speak to that.
Yeah, I mean I think it's.
I think you can almost assume it's going to be fairly linear for the year.
Okay.
And then could you guys speak to what.
Ah you're seeing going on and the avocado business you know obviously the year over year comp wasn't great and maybe there was some hope that with left COVID-19 impact that.
Avocado would've would've looked better can you just speak to.
And what you're seeing there and and what's your what's your what's.
And your hopes or as you sort of move forward.
Yeah, So what we're seeing the avocado category slow down a bit.
And some was called that is on some new competitors that are.
We entered the marketplace, but we remain confident.
You know what growth rates of avocado products that.
We're going to be in a.
And the mid to high single digits.
With our with our products.
<unk> product is.
Doing very well and I'm very excited about it.
We have extremely high repeat on that business.
And we've got some money this year and set aside.
And that had in previous years for.
For sales and marketing.
We are and a test right now and Cincinnati.
We just rolled out a new repositioning.
Repositioning of the product.
All around building awareness.
And the glass.
Lots of moving our products. So we have a fair amount of dollars that we have set.
Set aside to do some marketing testing.
And how we can build.
Build that product.
And and get awareness because once we get awareness.
It really does well, it's been extremely well and at Walmart for.
For us.
And they've gotten behind the products and we continue to want to grow that because we have exclusive position.
With that product and where we're fairly excited about about that so.
The category is slowing down a bit lot of private label pressure, but we feel really good and we're well positioned we are to see.
And all men to single a.
Did your growth, which is going to outpace the category.
Hey, Mike I think last year, the category grew and the mid single digits and if you back out the extra 50 <unk> week last year for the full year. We grew 4.3% so very close.
<unk> and <unk>.
And actually fairly consistent with the category.
Right.
Yeah, So and 52 to 53, yeah, it's on 2 point too, but for 3 backing out the 50 <unk> week.
Right I gotcha.
So I think that squeeze.
I mean, it's just my opinion, but I think that squeeze products, probably the best thing you guys have have come out with and Sweet Kale and is there any you know openness to sort of disclosing either either a revenue number there or just sort of growth rates, you're seeing there or something to sort of give us a sense because I do think that's a.
You know a special product for you guys potentially not just now but going forward.
Yeah, we don't disclose those growth rates.
I will tell you we have launched a spa.
Spicy Sweet Kale that we did up in Canada.
Last year.
And.
And get to where the customer and Quebec region. They have now expanded that to.
All of Canada.
And we're seeing uptick was some club mass channel customers.
Spicy sweet Kale and the.
And Canada, as well as retailers and the U S began and we'll take it so.
Sweet Kale continues to be strong for us we've switched to <unk>.
And the slim bag, and where we are in market and the U S sales.
And retail.
Seeing very.
Nice uptick and velocities with a slim bag and sweet Kale, along with all of our salads and we have some tests that are ongoing now with.
Our mass club channels to.
Test some more different packaging.
Variations of the Sweet Kale.
So and so it continues to be a big driver of.
Profitability for us.
And we are flagging it with the.
And the right new items, because we think we at least take the approach that sweet Kale is a platform for us to innovate off and so some of the packaging changes flavor.
And.
We're expecting our.
Growth rates are this year.
Okay, Alright, very good thanks, guys I appreciate it.
Thanks, Mike.
Our next question is from Gerry Sweeney of Roth Capital Partners. Please state your question.
Changes and good morning, or good afternoon, everyone and thanks for taking my call.
Question is probably more for Jim just wanted to ask a question around.
The Capex and I think I got my numbers right $32 million investment and everything.
I think it was 5 years.
And on our helps take.
Phil.
And capacity from 10 million units 37 million units.
Just curious as to.
What gives you the confidence that business is going to expand by that much and then 2 if you hit that 37 million type of film.
And what does that mean.
And for incremental revenue and and Ah.
Profitability, obviously, there's business development and other revenues behind it within by corporate I'm, just curious as to what.
What that would do to the P&L.
Yes, Jim.
Yeah, Yeah yeah.
Go ahead, Yeah, Hi, Gerry and I and we can talk about this.
And are too but yeah.
Yeah.
Yeah.
Yeah, I'll try I'll touch on and on the.
On.
And the build and confidence really it's.
Modeling are the commercialization right from our.
And development pipeline and.
And right now out of the 21 things, we have 5 things and qualification and 6 of them are in phase III, you saw pretty far along and are the primary drivers of future.
Future capacity needs.
And looking at approval rates over the next several years that really gets us to how much capacity.
Capacity, we need to be prepared for and as you know and we've talked about you know it's a several year process to add additional filling capacity. So that's where we are.
Focus on the spend also focuses on building out some preclinical and early phase clinical manufacturing capability to segregate back from the commercial lines since we're going to need all of that for commercial product.
And so there's that focus to as we continue to expand and build build our pipeline and.
And really.
Like we said and.
And I said during the call we look at building on and maximizing the revenue generating capacity.
At this facility by building out that filling capacity and doubles that revenue generating capacity and so that should give you.
Hum, where we see this going in and how it supports the business moving forward.
Ladies and AJ its al.
We have reached we have several question and answer session and I will now turn the call back over to your Doctor.
Summit for closing remarks.
Thank you again for your interest and land deck and your participation on the call today.
We look forward to talking to you once again, when we release our first quarter.
Thank you very much.
This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation and have a great day.