Q1 2022 Landec Corp Earnings Call
Good afternoon, and thank you for joining land Act fiscal 2022 first 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 <unk> Investor Relations at ICR.
Good afternoon, and thank you for joining us today to discuss land at corporations first quarter fiscal 2022 earnings results on the call today from the company are Dr. Albert Bolles, President and Chief Executive Officer, John <unk>, Chief Financial Officer, and Jim Hall.
President of life core by now everyone should have access to the press release went up which went out today, just after one pm Pacific or for eastern.
Not received the release, it's available on the Investor Relations portion of land decks website at IR Dot land that dot com before.
Before we begin today I'd like to remind everyone of 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.
Information concerning risk factors that could cause actual results to differ materially from those in the forward looking statements is contained from time to time in the company's filings with the SEC, including but not limited to the company's Form 10-K for fiscal year 2021 copies of these filings maybe obtained from the companies.
Website with that I'd now like to turn the call over to al.
Thanks, Jeff Good afternoon, everyone and thank you for joining us today.
On today's call I.
I will provide highlights from our fiscal 2022 first quarter results.
Jim Hall will then review recent developments at life core.
I'll cover our operational progress at curation foods and.
John Moore Berg will discuss our financial results.
So 2022 outlook.
We will then open the call for your questions.
We had a strong start to fiscal 2022.
Our first quarter performance, where.
While we generated consolidated revenues of $129 million and consolidated adjusted EBITDA of.
A four point for me.
As we anticipated the drivers of our margin related.
A 7% increase in consolidated gross profit and a 42% increase in adjusted EBITDA.
All of which were achieved despite a 5% decrease in our revenue.
Which is explained by the planned contraction within our curation foods segment.
Moreover, I am pleased with our ability to drive adjusted EBITDA growth at both of our operating segments.
Fiscal first quarter.
<unk> core grew revenue by a modest 1% drove adjusted EBITDA growth of 57% based on some mix related benefits.
And at Curation Foods, we were pleased to generate segment gross profit margin of 11% will grow adjusted EBITDA by 25%.
Despite the ongoing strategic contraction of revenue as we continued to rationalize skus and simplify that business.
We are on plan through the first quarter and continue to feel good about our fiscal 2022 outlook.
As a result, we are reiterating those objectives here today.
What's your call for our full year consolidated revenues.
545 to 554 million and consolidated adjusted EBITDA.
<unk> 33.3 to $40.0 million.
We have the benefit of a nimbler organization, which as I hope you can see this translating to improving margins.
We have more work to do but we are on the right track.
We have a solid foundation at both of our businesses.
Back to drive more consistent results going forward as we work towards delivering enhanced shareholder value.
With that.
I'll turn the call over to Jim.
Thank you al.
Building on our fiscal fourth quarter update we continue to make headway with our operating initiatives, including the $7.0 million dollar investment in sales and marketing that are planned for fiscal 'twenty. Two that we discussed last quarter I'm pleased to report that we're on track with the build out of our development pipeline.
As we prepare for the future.
In the fiscal first quarter, we signed development agreements with two additional companies and started work on one new project. This brings our development pipeline to 'twenty three projects, which are spread across early phase clinical development with five customers phase one and two clinical development with a customer.
And phase III clinical development and scale up commercial validation activity with 10 customers.
We have also completed one development project, which received FDA regulatory approval and have transition that product into commercial production and.
In addition, as we continue to build and prepare the organization to advance and expand our development pipeline activity remains strong and we remain in active discussions with many potential new project candidates to continue to build on our pipeline moving forward.
We operate and the Amazing C D M O industry with strong fundamentals.
And life course perfectly positioned to take advantage of the growing C. D M O opportunities to deliver attractive financial returns to all of our stakeholders.
We are a beneficiary of the significant trends towards outsourcing of new drug development, and our syringe and vial filling capabilities align perfectly with the powerful trends and new injectable drug applications that are utilizing those modalities.
Limited injectable drug manufacturing capacity creates an opportunity for life core to grow and also extend our reach through investments in new capabilities to meet the industry's ever growing needs.
Our expertise in viscous materials, and our world class quality system that supports drugs biologics medical devices and combination products enables us to stand out as a specialized leader and the C. D M all industry.
We are preparing for the future through operational and capital investments with the $7.0 million dollar investment in the P&L of this fiscal year through sales and marketing and development resource expenses to expand our reach with new customers and to increase our development service capabilities, which ultimately.
We allow us to continue to expand our development pipeline and open new sales channels that complement our existing capabilities.
From an operational perspective, we are intensely focused on enhancing our organization to ensure that we remain prepared to meet our growth objectives. This really comes down to attracting and retaining great people with the pertinent technical capabilities to help life core grow.
In response, we recently established life Korea University to educate and train our next generation of technical professionals and the critical operations of a septic filling processes.
In August we graduated our first class, who will now use our knowledge to make an impact on our sales growth and lean culture.
On the capital side of the house, we are focused on maximizing the revenue generating capacity within our current infrastructure and looking to the future to source and qualify the necessary equipment to keep up with growth and expected capacity needs. We continue to expect capital in.
<unk> in fiscal year, 'twenty, two of approximately $32 million towards expanding our filling capacity beyond our current 10 million units to reach approximately 37 million units over the next five years. This investment will support future capacity needs and nearly double.
Life quarters revenue generating capacity of our ace epic fill finish business.
Finally, a brief update on the channel inventory that we spoke about last quarter as a reminder, in the fourth quarter of fiscal 'twenty. One we learned that many of our commercial customers carried larger inventories of finished products during COVID-19 due to the temporary deceleration and proceed.
<unk> volume.
In the fiscal 'twenty two first quarter. This dynamic explains a flattish year over year revenue growth and we continue to expect a similar situation in fiscal second quarter.
The expectations for inventory to rebalance remain focused on mid fiscal year based on the latest communication with our customers, but could change based on market forces and procedure volumes now I would like to turn the call back to al.
Thanks, Jim.
Curation foods started fiscal 'twenty, two strong and perhaps most importantly, we are hitting the gross margin targets that we've been working towards as a result of project Swift.
We delivered on our steady state target of 11% to 14% in fiscal 'twenty, one and fourth quarter, which was a significant milestone for the business.
Fiscal 'twenty, two first quarter, we achieved 11%.
We are standing by our commitment to deliver that same range of 11% to 14% for the full fiscal year.
Which speaks to the massive operational enhancements that we've made over the past two years to put this business on firm footing.
We prepare we'll shift our energies toward growth.
Our focus this year has evolved to drive efficiencies at our operational performance.
Maturing our operational excellence program.
Which we referred to as zest.
Zero waste.
Employee engagement.
Standardization and training.
This is an approach based on the lean principles that are well recognized for improving operational performance.
That is only possible now that we have done the work to simplify the business through strategic moves to reduce organizational complexity dive.
Divest non core assets.
Our Arden leadership Accountabilities.
Flattened our management structure.
Of course inflation is having a significant impact across a variety of industries.
At curation foods as well.
While we will continue to believe that we are in a relatively better position given all of the operational enhancements. We've made over the past two years of project Swift.
Categories, such as packaging freight.
Supplier related costs are things that we are dealing with daily.
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 are also working with our sales teams.
Implement price increases as we are committed to maintain gross margins.
The 11% to 14% steady state range that I have previously discussed.
Many supply chains remain dysfunctional post COVID-19 as well.
We are seeing issues with some suppliers are salad dressing and other inputs that are complicating our operation.
[noise] alumina extent subduing our ability to meet demand.
As expected, our fresh packaged salads and vegetable business declined 7% in the first quarter of fiscal 'twenty, two due to veggie trades being discontinued from club stores as a result of coker when fewer people being able to congregate.
We are now just starting to see retailer interest in bringing back craze, while we see an opportunity for the business to pick up.
Full year 'twenty two progresses.
Our avocado products business was essentially flat in Q1 fiscal 'twenty, two partly due to SKU rationalization with certain customers.
A timing delay in our promotional activity as a guacamole now or squeeze product test.
It was delayed from Q1 Q2.
We remain excited about our growth and the squeeze product we continue to pick up additional customers.
We're now capable of bidding on private label Guacamole opportunities.
H P. P line is now in production.
On the commercial front.
Our retailing and merchandising efforts related to resets and new items are continuing to build.
As we hold additional top level customer meetings.
As planned we are now so introduction of our new products starting to hit the shelves. These products have been delayed or as long as a year.
Colby and include our Buffalo Cauliflower, spicy Sweet Kale salad.
And we're ready to walk kits.
Also introduced a unique packaging design.
Settle back into one of our large club store customers.
It is outperforming expectations.
The saddlebag replaces a 28 hour cell with 2014, our salad.
That are in separate bags, but fused at the top there.
This allows consumers to open one cell at a time with a smaller portion.
<unk> retaining freshness.
On the on open back.
We see the packaging format rolling out beyond the test and improving our overall sales in the salad category later in the year.
So on the whole I feel like we are in a good spot.
We have the innovations ready to go we have distribution accelerating across North America.
We expect to see momentum with resets that will move through fiscal second quarter.
Into the second half of the year.
Now I will turn the call over to John.
Thank you al.
I'm pleased to share with you our financial results for the first quarter of fiscal 'twenty two.
I will begin with a summary review of each segment before concluding with the consolidated financial review.
Starting with our life core segment.
First quarter revenues ended at 22 million, a 7% increase over the same period of the prior year.
C D M O revenues posted an increase of 8% to.
The $25.0 million from the prior year, primarily due to the timing of Aseptate commercial shipments.
Fermentation revenues decreased 22%.
The $6.0 million, primarily due to the channel inventory rebalancing.
Jim discussed as well as difficult growth comparison in the prior year.
This revenue category was up 620%.
Gross profit margin improved by approximately 330 basis points versus the prior year to 26, 3% largely due to improved product mix.
Segment, adjusted EBITDA totaled $5.0 million for the quarter, a 57, 2% increase over the prior year and.
And adjusted EBITDA margin was 10, 4%.
<unk> 375 basis points of improvement versus the prior year.
Let's turn to our curation foods segment results for the fiscal first quarter.
Revenues totaled $114.0 million, a six 2% decline from the prior year first quarter.
Packaged salads, and vegetables declined 7%, which was primarily due to the planned reduction of our lower margin legacy vegetable and trade business.
Avocado products revenues were approximately flat versus the prior year.
Gross profit margin improved by 100 basis points versus the prior year to 11%.
Which is consistent with our expectations to achieve steady state segment gross margins in the range of 11% to 14%.
For full year fiscal 2022.
Adjusted EBITDA for the quarter totaled $3 million with a corresponding margin of two 8%.
Briefly turning to our consolidated financial performance.
First quarter revenues declined five 1% to $136.0 million.
Selling general and administrative expenses decreased 2 million versus the prior year to $24.0 million in the first quarter.
And consolidated adjusted EBITDAR grew.
<unk> grew 42% to.
4.4 million for the first quarter.
As compared to $4.0 million in the prior year period.
Let's now turn to our cash flow performance.
Cash provided by operations was <unk> 8 million for the first fiscal quarter ended August 29, 2021, compared to cash provided by operations of $17 million in the prior year period.
Cash from investing activities improved by 38 million compared to the prior year.
Driven primarily by proceeds from the sale of the wind investment of $46.0 billion.
At the end of the first quarter, our net debt was $163.0 million.
We continue to work toward improving our financial position and create greater financial flexibility.
To ensure that we can execute our strategic plans as we similarly, and strategically review each and every aspect of our businesses to ultimately enhance shareholder value.
With that I'll transition to our outlook for fiscal 'twenty, two which we are reiterating today across the board.
We continue to estimate consolidated revenues in the range of $545 million to $554 million.
Representing a range of flat to plus 2%.
And consolidated adjusted EBITDA remains in the range of $36.0 million.
The $40.0 million, representing an increase of 6% to 13%.
At the segment level, we are guiding life core revenues to a range of $105 million to a 108 million representing growth of approximately 7% to 10%.
And in our adjusted EBITDA in the range of 26 million to 27 million reps.
Representing an increase of approximately 6% to 10%.
<unk> foods revenues are expected in the range of 440 million to 446 nine reps.
Representing a slight year over year decrease are flat to down one 4%.
And adjusted EBITDA is expected in the range of 12 million to $13 million.
Representing an increase of approximately 9% to 18%.
And 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 last quarter, while life course topline growth in fiscal 'twenty. Two is hindered by approximately 500 basis points due to excess customer inventory.
As a result of the delay in elective procedures.
The expectation is that this will rebound once at the end of our fiscal second quarter.
Which results in flattish expectations for growth in the first half.
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 quarters long term expectations for compound annual revenue growth in the low to mid teens.
From an adjusted EBITDA perspective, we now expect the first half to approximate less than 30% of the full year guidance that we anticipated previously due to shifts in expected sales mix.
For the fiscal second half.
Growth should recover in a very material fashion to meet our guidance for the fiscal year, which implies an increase of approximately 6% to 10%.
From a gross margin perspective.
For the first half of the fiscal year 'twenty, two as compared to the prior year first half, we anticipate a lower gross margin rate due to product mix.
And as Jim discussed please keep in mind that the business is investing in sales marketing and development activities to drive longer term development revenues and to enhance some capabilities in anticipation of future growth.
So adjusted EBITA margin expansion on higher revenues is temporarily muted, but expected to resume over the intermediate and long term.
Shifting over to the curation Foods segment, we continue to expect a fairly consistent year flat to modest quarterly revenue growth in the next three quarters.
Gross margin has been an important kpis for curation since embarking on project Swift.
And we expect to drive additional gains in fiscal year 'twenty two.
As a result of those operational enhancement and simplification efforts that al spoke to.
We ended the fiscal first quarter with segment gross margin of 11% and we believe that we will meet our steady state goals.
11% to 14% and a full year basis for fiscal year 'twenty two.
The inflationary pressures, we are now seeing in our business like so many other companies will negatively impact our second quarter.
However, we anticipate that these headwinds will be offset by future price increases and cost saving initiatives in the second half of fiscal 'twenty two.
From an adjusted EBITDA perspective, we expect to realize a decrease in Q2 as a result of the near term inflationary impacts. However, as we look out to the fiscal second half adjusted EBITDA growth is expected to resume to achieve the full year segment guidance we are.
Reiterating today.
And finally from a Capex perspective in addition to the $32 million at life core we plan to spend more modestly at curation was up to $7 million on projects, primarily related to maintenance Capex and some minor automation enhancements.
And with that operator, please open the call for Q&A.
Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
Confirmation tone will indicate that your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
One moment, please while we poll for questions.
Thank you. Our first question is from Mark Smith with Lake Street Capital markets. Please proceed with your question.
Hi, guys. A first couple of questions on curation just wanted to check you guys talked last quarter, a little bit about you know grocery store shelf reset what are you seeing here you know what have you seen being pushed out.
And kind of your expectations as we move through the next couple of months.
Yeah, Hi, Mark how are you today.
Thanks.
Yes.
Are starting to happen.
I think you noticed that.
We guacamole now test.
The reset.
It's pushed out a couple of months, which delight our testing, but that's still happening.
Getting our new products into.
Into many customers were excited about our Buffalo cauliflower product that's off to.
To a great start.
We're ready to launch is off to a good start and.
Our spicy sweet Kale resets happened in Canada, we're now national in Canada.
That product and have begun to ship to other customers here in the U S. So it's really good mark to see that.
Resets are happening, where we're kind of getting back to normal here.
Although the timing of those things.
Okay and then similar question just as we look at foodservice, where we're hearing a little bit more negative.
Kind of chatter coming out of foodservice here over the last maybe two months any update on kind of you know.
You've got good fingers on the pulse of that business on what you're seeing within foodservice.
Yeah, we're actually doing a wallet foodservice.
We've picked up some new distribution.
What's that green beans.
Other salad so.
We're not seeing Oh.
A slowdown in foodservice, it's nicely ramping for us.
We also see the away from home.
Hello fresh products.
Demand is very strong on that.
We're also off to a very good start in our ecommerce business.
Was with Amazon.
Okay, Great and then just turning to life a little bit could you just.
Walked through it a little bit the gross margin there and some of that Delta was this.
Product mix was driven primarily by the inventory stocking you know walk us through any additional insight you can give us on the gross margin there.
Sure, we can do that but John do you want to take mark through that.
Yeah sure I mean, it's primarily just product mix right. So the combination of the products within the the CDMA side with the aseptic filling the manufacturing principally describing.
The gross margin story there.
Okay. So it's not as much an impact from the inventory stocking or is that maybe some of the impact just as that then impacts of the product mix.
Yeah, No I'd just add.
But it really just on the sales side.
On a subject drilling side, just really really strong demand, there really driving and assisting with the margins.
For the quarter itself so.
Okay.
It really really pleased to see that.
That strong performance the gross margin for the quarter.
Okay, great. Thank you.
Thank you. Our next question comes from Anthony Vendetti with Maxim Group. Please proceed with your question.
Thanks, Yeah, I just wanted to check on me.
Logistics contract with Kathleen do you think it is.
Where is that.
Because I know youre outsourcing that but where is that in terms of being completely rolled out is it partially rolled out and then when it is completely rolled out.
What type of savings either on a.
You know a dollar amount or.
Gross margin improvement.
What can you tell us about that and the opportunity there because that seems like a good opportunity to take out some costs.
Hi, Anthony.
We are just starting to roll it out in Q1.
So we are fully.
Hold out and.
Beginning to ramp it up.
We are seeing.
Already with a couple of customers.
One of the Big reasons, we wanted to do this was to get down to be more efficient and more effective.
We're shipping to several customers.
Six days, a week now and before we were only.
Really doing three so that's having a positive impact for us.
And I am really pleased that we got that partnership done because I think you know.
The impact of freight costs these days.
And I can't imagine, where we would be if we would not have done.
That debt.
Project, having a really strong partner with cast waning.
Been a cincinnati twice met with their CEO.
We're getting our teams integrated so we're rolling it out.
And.
Really happy to see that we're expecting.
Somewhere in neighborhood of around $1 million of improvement this year.
And that's.
That's where we are.
Okay, great. So so overall.
Did you say a few million dollars, but it's not just the savings.
It's the efficiency the benefits to the customer.
The on time delivery all of that is is.
It's critical rate going forward.
Yeah, Anthony you're absolutely right that that's the real reason why we did it.
To save cost.
Obviously, they're professionals at this we were not.
They are able to hedge their fuel we weren't we'd never had the scale to do that but.
But the real opportunity is to get more fresh product onto shelves.
It's to decrease our or shrinkage on the shelf, which we're starting to see that happen.
Customers, where we are getting the <unk>.
$1 six day delivery.
Per week program in and where you are.
Now just talking about white space, because I think as I've mentioned before Anthony.
He drew a circle from Minnesota, Texas.
There's a lot of white space that we were not able to get to before.
Now with cast Delaney.
We're able to.
Start talking about with our sales force how can we get after that white space White space, particularly on the eat smart side and really begin.
Uh huh.
To get growth and it's growth that I call.
You know news without Skus, we don't have to invent anything new it's just to get the customers.
We couldnt get to before.
Okay lastly on the on.
On the cost side are there any other any other costs that youre looking at or that you've identified.
Right.
You can take out of the of the system in general not just logistics to offset some of the inflationary prices that youre seeing.
We're we're taking a look at.
On the.
Procurement side opportunities that we're looking at to partner stronger with our key our key growers.
To work closer with them on a grill contracts, that's an opportunity.
We spend a $150 million a year there and we are.
Beginning to work a whole lot closer.
With them, but I know John is is doing some work in.
And in the space of our inventories.
Inventories so John anything you want to add there.
Yeah, I mean, I think the other big thing is it.
So much of the year and integrating other facilities as well.
It takes a lot of time and effort and now now that we've finished that we can really concentrate on the four walls.
Of our current facilities and our teams are.
No really focused on trying to sweat the assets that we have in trying to get more efficiencies in and what's not.
Project zest and the continuous improvement, we think theres still great opportunities for us and we've got several business initiatives that we're tracking that are in place.
And a big part of of.
I was really trying to offset these inflationary pressures.
Going forward. So we're really excited about those.
Yeah, Anthony R. R. <unk> facility in Mexico is operating extremely well.
We got zest really up and going in the second half of last year, you saw the impact in Q4.
We have a really highly engaged workforce.
A lot of loopy.
And we just are in the first quarter of this year.
Got it all institutional lives in bowling Green facility, which.
Is starting to pay.
Pay dividends for us as well.
It's exciting to see the.
The engagement in the workforce.
Inside our four walls, we're not having.
Labor issues like you may hear from all other companies.
So that's a it's exciting to see us being able to.
Roll that out get them, moving and get it institutionalize and really begin to sweat the assets.
Okay excellent guys. Thanks, I appreciate that I'll hop back in the queue.
Thank you.
As a reminder, if you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the question queue.
Thank you. Our next question is from Mitch Pinheiro with third event and company. Please proceed with your question.
Hey, good evening.
Hey, so a couple of things here first.
Just two housekeeping for a second.
And then in the press release.
Structuring charges and nonrecurring.
As part of the adjusted EBITDA was $3.3 million.
And I realize there's some tax benefits, but in the footnote. It says 4.9 million whats the difference between those two.
Fortunately not restructuring charges and a 3.3.
357, and I'm seeing in the table.
Yeah, John you want to take that.
Hey, Mitch.
I, probably need to look at that and get back to you.
On an answer to that.
Okay, that's fine.
And then that's fine.
As far as yes.
I'm bouncing around here.
So the debt ended at $155 million.
Youre spending obviously some capital.
It's fair to assume that that will be at 155 million or maybe slightly higher at fiscal year end 'twenty two.
No.
With Capex and everything we still see that as.
As we discussed last last quarter and somewhere around $180 million of net debt by the end of the year.
$180 million net okay.
Yeah.
With players just under.
Well that would put us just under five times leverage that's.
Thats, considering we're doing around $62.0 million.
Capex for life core.
Up to $7 million for curation.
Yes, it assumes some operating cash flow on the GAAP statement.
Probably $6 million to $8 million $15 million or so of free cash flow after the ones that investment.
Obviously, the wind investment helps us by doing it.
And allowing us to do that type of investment.
Okay excellent.
And then.
You may have mentioned this.
I might've missed.
In the U K 10 business wholly guacamole business, where.
How have margins well.
Margins in that business like year over year.
Yeah, well, we don't actually we don't.
Give margins out individually for those the gross margins itself.
But they substantially improve for sure.
We said in previous.
Conversations al took that over that business silver.
We were essentially didn't hardly have margins and that was a big part of project Swift was.
Yes, it really operating and fixing that facility.
And.
And now we're having.
That's been a big part of fixing.
The whole curation story.
Is that still a high 20, 30% kind of gross margin business.
Well, we have you know we don't give guidance, it's not that high.
Yeah to that level.
But we haven't given guidance on gross profit at the segment level.
It's not that high but.
But it's a good margin.
Okay.
I thought that's what the target margin wise.
Memory, maybe a little.
Uh huh.
Okay and then.
One for <unk>.
For Jim.
Hi.
Any color on the Zimmer leaf rollout has gone smoothly and any feedback from.
From Heron on.
Ill.
Feedback, they're getting any any.
Uh huh.
Oh yeah.
Any color would be helpful.
Yeah from our perspective things are going according to plan productions right in line with.
What we projected.
I'll refer you to.
Aaron's recent releases in Barry's comments, I think theyre happy with the way things are going.
Getting good feedback, but I really can't provide much more than that but from our perspective, it's right on track.
And nothing out of the ordinary for us.
And then I guess the last question.
Going back to curation.
Okay.
What.
I'll see many of you may have talked about this but.
As you look at pricing and your cost savings combined.
We will help offset the inflationary pressures, what's like the mix there or is it 50.50 do you need more pricing and cost savings is it going to be more cost savings and price.
Well for the.
For the fiscal year.
I'd say its a.
So it's double on our productivity through our <unk>.
Our <unk> program and then.
Over what we're going to take for for pricing.
During this fiscal year.
I'm sorry.
I didn't understand that.
So you asked for the for the mix so.
Productivity would be to ask of savings versus what does it mean.
Got it okay, yeah, Yeah got it okay.
I didn't hear the X and then I guess last last question is is it.
I guess, we should finally see.
I mean, it's been a long time revenue growth.
In the third quarter is that when things is that when you know.
As a company on a consolidated basis, the third quarter is.
Yeah.
Back in the black on growth.
Is that.
A good assumption.
Yeah, I mean, we.
We have confidence in our guidance for the year.
By the time, we get.
Productivity plans start to.
Come to fruition.
Pricing taking hold.
And then as I said, we are very excited and we're off to a good start.
With our innovation.
We're picking up.
New customers that we haven't had before.
In the Midwest as well as some other channels and we have a big focus on foodservice this year.
We expect those things to start to really pay off for us to see.
You know better profits and better better topline growth.
In the second half of the year.
Yeah from an overall perspective, yeah definitely.
There is definitely a meaningful growth with the life core side too from the top line.
Hit the overall, 7% to 10% so we'll definitely start seeing overall consolidated revenue growth in the third quarter.
Okay.
Yes that would be nice.
You need to get the revenue growing again and it's.
It's been quite you know quite a year year and a half but.
Yeah, it's sort of closer than it's ever been I suppose so.
Thank you for your time.
Thank you.
Thank you. Our next question is from Mike Pitofsky with Barrington Research. Please proceed with your question.
First one for Jim did you want to say that our second core second quarter life core revenue should be roughly flat year.
Year over year is that did I hear that or no.
Yeah.
This is John yeah, it should be somewhat flattish okay.
Really the year over year in the first half is somewhat flattish basically okay. So so if you're if you then sort of proceed with the math to get to the lower end of the yearly guide in topline growth at life core life core F&B clicking off sort of mid teens.
Our growth in the second half and I guess, Mike.
<unk> is why why why should that occur.
Yeah, we're very comfortable with what's what's in the pipeline.
And what our customers are forecasting to have a very strong second half.
As well as you remember we're also investing in the P&L.
And we're already starting to see.
With our investment in the sales and marketing side.
Including.
Starting to add to the.
The pipeline.
That we're seeing the opportunity there.
Translate into the <unk>.
The top line sales.
Yes, Mike This is Jim basically things are back to full speed ahead in the second half of the year, we're seeing.
Inventories work through like we projected and project that can be done in the second half that includes.
Uptick in production in the second half, which is an uptick in H E.
We have a lot of activity in.
In our pipeline.
Development revenue front in the second half of the year or so.
You are right the second half of the year growth is high but it says we project with the first half of the year is playing out exactly.
Like we had expected.
Q1, we're happy with where that finished looking at what we see from our customers barring any you know COVID-19 surprises things are back on track. So the second half of the year is gonna be a big growth your growth path.
That brings us into our guidance.
So the price increases that youre going to put through I guess on the food side has any of that been done or is that to be done.
It's the majority of it.
Is this being done now.
It takes.
A little time at the retail sector to get the.
Prices are and so most of the dollars will be realized.
In the second half of the year.
But we are taking some.
Surcharges on freight to where we can for instance.
The foodservice side, we are taking these those as we speak now, but the majority will be.
We'll hit.
The January timeframe.
And when you when you guys sort of model out Hey, we've got to offset these inflationary pressures and you talk about.
Cost savings and you talk about price increases I heard the two ex <unk> on the cost savings versus pricing.
Can you give us a sort of a and I may have missed it. If you gave this forgive me, but what what is the dollar figure were talking about in terms of your estimated inflationary pressures for for for fiscal 'twenty two.
Yeah, John what we're saying, yes, what were seeing Mike as you know it.
We think there's a couple of hundred basis points in the second quarter.
Really what we're saying.
We're basically trying to cover that.
And we will cover it you know really through the <unk>.
The balance of the year with pricing and with cost savings and we really feel like the pricing itself.
On an annualized basis would cover all of the inflation.
Okay. So 200 basis points is what I sit here.
What I should take away.
Yeah in the second quarter.
Yes.
Alright, and then on on avocado, what's your current outlook for topline growth.
Growth in that business in this fiscal year.
Yeah, I mean right now we think it's okay well we're in now we think it is around the low single digit growth.
Growing right.
Okay, so like two or 3% for the year.
Yeah.
We were saying it was probably mid single digits, just a little bit of delay with the.
With the test year.
Yeah.
But.
We did mention I don't know if you caught it.
<unk> invested in the.
The high pressure line into nuc.
And that enables our sales force now to go after private label.
Is the fastest growing part of our avocado products.
So we are actively bidding private label business as well most of which would not probably hit till later in the year just by how they are they do their bidding.
But we're excited about the opportunity now that we can go after private label.
We were blocked before because we did not have high pressure.
Just one other question.
Forgive if I missed this are you guys gave a lot of information our expectation for gross margin in Q2, do you expect that to be better than gross margin in Q2, a year ago or do you expect that to be.
You know flattish or or worse.
Yes no.
We still think it's going to have some impact this year, but we still believe it's going to be better than last year and the curation side.
No I'm, sorry, we still intend to I'm wondering if I can.
I'm talking about consolidated gross margin.
Okay.
Yes, I think it's going to be still a little bit better than last year, but we're a little bit because of.
On the creation side will be a little bit better.
Then last year and not quite as strong.
On the life core side so.
In summary, you're in total it should still be a little bit better than last year.
Okay very good. Thanks, Thanks, guys I appreciate it.
Mhm.
Thank you.
Thank you there are no further questions at this time I would like to turn the floor back over to Dr. Bolles for any closing comments.
Thank you again for your interest in land at Corporation and your participation on our call today.
We look forward to talking to you once again when.
When we release, our fiscal second quarter results.
Thank you very much.
This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation have a wonderful evening.