Full Year 2023 Local Bounti Corp Earnings Call

Operator: Good morning, and welcome to Local Bounty's full year 2023 earnings conference call. All participants will be in a listen-only mode.

Good morning, and welcome to local Apaches full year 2023 earnings conference call. All participants will be in a listen only mode. After today's presentation there'll be an opportunity to ask questions. Please also note. Today's event is being recorded at this time I'd like to turn the conference call over to Jeff Sonic.

Operator: After today's presentation, there will be an opportunity to ask questions. Please also note that today's event is being recorded. At this time, I'd like to turn the conference call over to Jeff Sonnek, Investor Relations at ICR. Please go ahead.

Jeff Sonnek: Investor Relations at ICR. Please go ahead Sir.

Jeff Sonnek: Thank you and good morning. Today's presentation will be hosted by Local Bounties Chief Executive Officer Craig Hurlbert and Chief Financial Officer Kathleen Valisek. The comments made during today's call contain forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Therefore, all statements other than statements of historical facts are considered forward-looking statements.

Jeff Sonnek: Thank you and good morning, today's presentation will be hosted by local Bonnie's, Chief Executive Officer, Craig Hurlbert, and Chief Financial Officer, Kathleen <unk>. The comments made during today's call contain forward looking statements within the meaning of the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.

Jeff Sonnek: All statements other than statements of historical facts are considered forward looking statements. These statements are based on management's current expectations and beliefs as well as a number of assumptions concerning future events.

Jeff Sonnek: These statements are based on management's current expectations and beliefs, as well as a number of assumptions concerning future events. Such forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those discussed in the forward-looking statement. Some of these risks and uncertainties are identified and discussed in the company's filings with the SEC.

Jeff Sonnek: Such forward looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from the results discussed in the forward looking statements. Some of these risks and uncertainties are identified and discussed in the company's filings with the SEC. We will also refer to certain non-GAAP financial measures today. Please refer to the press release.

Jeff Sonnek: We'll also refer to certain non-GAAP financial measures today. Please refer to the press release, which can be found on our Investor Relations website, investors.localboundy.com, for the reconciliations of non-GAAP financial measures to their most directly comparable GAAP measures. With that, I'd now like to turn the call over to Craig.

Jeff Sonnek: Can be found on our Investor relations website investors that local bounding dotcom.

Jeff Sonnek: Conciliations of non-GAAP financial measures to their most directly comparable GAAP measures.

Jeff Sonnek: I'd now like to turn the call over to Craig Craig.

Craig M. Hurlbert: Thank you, Jeff, and good morning everyone. 2023 was a defining year for local bounty. We completed the stack implementation in our Georgia facility with amazing results. We also completed two new major build-outs in Texas and Washington. That significantly expands our capacity going forward, and we are advancing the development of new products to fill out our offering. We streamlined our organization, and the icing on the cake was being granted a patent for our stack and flow technology, which was a huge endorsement of the innovation that we have brought to the CEA industry. I'll touch on these accomplishments briefly before passing the call to Kathy for her financial remarks.

Craig M. Hurlbert: Thank you, Jeff and good morning, everyone 2023 was a defining year for local Bonnie we completed the stock implementation in our Georgia facility with Amazing results.

Craig M. Hurlbert: We completed two new major build outs in Texas, and Washington that significantly expands our capacity going forward.

Craig M. Hurlbert: We advanced the development of new products to fill out our offering.

Craig M. Hurlbert: We streamlined our organization and the icing on the cake was being granted a patent for our stock and flow technology, which was a huge endorsement of the innovation that we've brought to the industry.

Craig M. Hurlbert: I'll touch on these accomplishments briefly before passing the call to Cathy for financial remarks, first and foremost is the completion of the stack implementation at our Georgia facility and more importantly, the resultant increase in production that was even better than anticipated.

Craig M. Hurlbert: First and foremost, the completion of the stack implementation at our Georgia facility and, more importantly, the resultant increase in production that was even better than anticipated. The throughput in the facility reflects the iterative improvements that we've been making across our growing operations and highlights the advantages of our efficient and data-driven stack-and-flow model, where we are able to apply learnings rapidly. I'm excited to share that we increased production by an additional 50% versus the update we provided in December, which equates to production that is approximately three times that of a year ago. Further, this enhanced productivity can also be seen in our first quarter 2024 results, which we pre-announced today with a 22% sequential increase to approximately 8.4 million. This is precisely the sort of result that we were after when conceiving of the hybrid stack and flow model, and to see it operating efficiently in a scaled facility like Georgia is extremely rewarding for our entire team.

Craig M. Hurlbert: The throughput in the facility reflects the iterative improvements that we've been making across our growing operations and highlight the advantages of our efficient and data driven stock and flow model, where we are able to apply learnings rapidly I'm excited to share that we increase production.

Cathy: By an additional 50% versus the update we provided in December which equates to production that is approximately three times that of a year ago. Further this enhanced productivity can also be seen in our first quarter 2024 results as well, which we pre announced today with a.

22% sequential increase to approximately $8 4 million.

Cathy: This is precisely the sort of result that we were after when conceiving of the hybrid stock and flow model.

Cathy: And to see it operating efficiently in a scaled facility like Georgia is extremely rewarding for our entire team.

Craig M. Hurlbert: The great news is that we've taken all of these learnings and applied them to both our projects in Texas and Washington, both of which have entered the commissioning process with the first seats in January. We expect to begin shipping product to customers from both facilities in the second quarter, and I look forward to sharing our progress on these units in the future. I'd add that these are truly purpose-built facilities.

Cathy: The great news is that we've taken all of these learnings and apply them to both our projects in Texas and Washington.

Cathy: Both of which have entered the commissioning process with the first seeding in January.

Cathy: We expect to begin shipping product to customers from both facilities in the second quarter and I look forward to sharing our progress on these these units in the future.

Cathy: I'd add that these are truly purpose built facilities well, Georgia is a new facility. It is one that was already designed when we acquired piece and required significant retrofitting to meet the needs of our stock and flow strategy.

Craig M. Hurlbert: While Georgia is a new facility, it was already designed when we acquired Pete's and required significant retrofitting to meet the needs of our stack and flow strategy. At our new greenfield buildouts, both in Texas and Washington, we have all of our collective learnings implemented, from site selection to floor plan layout to operational design, to ensure we get the most out of the square footage and ultimately maximize capital efficiency. These facilities are not only critical to the scale-up of our growing network to reach more customers, but they're equally important in providing us with the physical space to start growing additional produce types. Our R&D and product innovation teams have continued to work on new offerings to meet customer and retailer demand. In 2024, we will be expanding our baby leaf product assortment by introducing several high-velocity offerings, including spinach, arugula, 50-50 blend, and power grain.

Cathy: At our new Greenfield build outs, both in Texas and Washington.

Cathy: All of our collective learnings implemented from site selection to fore plan lay out the operational design to ensure we get the most out of the square footage and ultimately maximize capital efficiency.

Cathy: These facilities are not only critical to scale up of our growing network to reach more customers, but they're equally important in providing us the physical space to start growing additional produce types.

Our R&D and product innovation teams have continued to work on new offerings to meet customer and retailer demand.

Cathy: In 2024, we will be expanding our baby leaf product assortment by introducing several high velocity offerings, including spinach, a rule a 50 50 blend.

Cathy: And powertrains, while we aren't wrapped up across all of these new products quite yet or spinach initiative is on track and we were pleased to have delivered our first shipment to customers in March out of our Georgia facility.

Craig M. Hurlbert: While we aren't wrapped up across all of these new products quite yet, our Spinach Initiative is on track, and we are pleased to have delivered our first shipment to customers in March out of our Georgia facility. We are also building momentum with our Grab and Go Salad Kit. Starting in the second quarter of 2024, we will expand distribution to several existing and new retail partners throughout the Pacific Northwest and the southern and Southeastern United States.

Cathy: We are also building momentum with our grab N go salad kits starting in the second quarter of 2024, we will expand distribution to several existing and new retail partners throughout the Pacific northwest Southern and southeastern United States.

Craig M. Hurlbert: The first phase of this expansion will add approximately 700 doors of incremental distribution to our current footprint. We continue to work closely with our retail partners across the country to expand distribution further. I mention these wins as they reflect the incredible response we are seeing, both in terms of consumer demand for a better product, as well as retailer demand for consistent national supply. This is why we are so bullish on our own prospects to be a disruptor in the CEA industry.

The first phase of this expansion will add approximately 700 doors of incremental distribution to our current footprint. We continue to work closely with our retail partners across the country to expand distribution further.

Cathy: I mentioned these wins as they reflect the incredible response, we are seeing both in terms of consumer demand for a better product as well as retailer demand for consistent national supply. This is why we are so bullish on our own prospects to be the disruptor in the industry.

Craig M. Hurlbert: To keep up with demand, today we announced our intent to expand capacity across our network of facilities enabled with our stack and flow technology. We are not quite ready to announce the location and the degree of expansion, but we have plans developed and expect construction to begin late in the second quarter of 2024. The planned expansions are designed to provide additional capacity and support our growing product assortment to meet existing demand. In addition to these expansions, we've also decided to transition the majority of our one-acre Hamilton, Montana facility from its current R&D focus to one that is more commercially oriented and grows produce for sale to customers. This shift is expected to be implemented this summer and will help us quickly bolster our capacity to ship to customers in the surrounding region, in turn improving our overall profitability of that facility to help drive the company towards our goals of achieving positive adjusted EBIT Finally, we are also really excited to announce our next greenfield facility in the Midwest. We chose this region because of its close proximity to our existing customers' distribution networks, which will help serve the growing retail demand we are seeing for our products across the Midwest, with the added benefit of improving our access to the Northeast.

Cathy: To keep up with demand today, we announced our intent to expand capacity across our network of facilities enabled with our stack and flow technology, we aren't quite ready to announce the location and the degree of expansion.

Cathy: But we have plans developed and expect construction to begin late in second quarter of 2024.

Cathy: Planned expansions are designed to provide additional capacity and support our growing product assortment to meet existing demand.

Cathy: In addition to these expansions we've also decided to transition the majority of our one acre Hamilton, Montana facility from its current R&D focus to one that is more commercially oriented and growing produce for sale to customers.

Cathy: This shift is expected to be implemented this summer and will help us quickly bolster our capacity to ship to customers and the surrounding regions.

Cathy: In turn improving our overall profitability of that facility to help drive the company towards our goals of achieving positive adjusted EBITDA in early 2025.

Cathy: Finally, we're also really excited to announce our next greenfield facility in the Midwest. We chose this region because of its close proximity to our existing customers distribution networks, which will help serve the growing retail demand, we're seeing for our products across the Midwest with.

Cathy: The added benefit of improving our access to the northeast.

Craig M. Hurlbert: The facility will be comprised of a six-acre greenhouse that is supported by multiple stacked zones, and we expect to name the future location following completion of negotiations. We are targeting construction to begin in the third quarter of 2024. None of this would be possible without the hard work and focus of our entire team, and I'd like to thank our group of talented individuals who have each contributed to our success this past year. Moreover, these projects also require capital for investment.

Cathy: The facility will be comprised of a six acre greenhouse that is supported by multiple stack zones, and we expect to name the future location. Following completion of negotiations we are targeting construction to begin in the third quarter of 2024.

Speaker Change: None of this was possible without the hard work and focus of our entire team and I'd like to thank our group of talented individuals who have each contributed to our success this past year Mauro.

Moreover, these projects also require capital for investment and on this front I would like to recognize our CFO Cathy valid sac for tireless focus on ensuring that we have the access and flexibility with our lending partners to continue scaling up this amazing business.

Kathleen Valiasek: And on this front, I would like to recognize our CFO, Kathy Valisek, for her tireless focus on ensuring that we have the access and flexibility with our lending partners to continue scaling up this amazing business so that we can reach our near-term goal of achieving positive cash flow. With that in mind, I will turn the call over to Kathy for her review of the financials. Thank you, Craig.

Cathy: So that we can reach our near term goal of achieving positive cash flow with that in mind I will turn the call over to Kathy for her review of the financials.

Cathy: Thank you Craig I'll start by reviewing our full year 2023 results then provide an update on our capital structure before finishing with an update on our year to date progress in 2020 for full.

Kathleen Valiasek: I'll start by reviewing our full year 2023 results, then provide an update on our capital structure, before finishing with an update on our year-to-date progress in 2024. Full year 2023 sales increased 42% to $27.6 million, as compared to $19.5 million in the prior year. Our results largely reflected the inclusion of the Pete's Acquisition for the full 12 months and revenue growth from our Georgia and Montana facilities. Full year 2023 adjusted growth margin, excluding depreciation, stock-based compensation, and other non-recurring items, was approximately 27 percent.

Kathy: Full year 2023 sales increased 42% to $27 6 million as compared to $19 5 million in the prior year our results largely reflected the inclusion of the pizza acquisition for the full 12 months and revenue growth from our Georgia, and Montana facilities full year 'twenty two 'twenty three.

Kathy: Adjusted gross margin, excluding depreciation and stock based comp and other nonrecurring items was approximately 27%. Our adjusted gross margin performance was driven by weather related variables at our California facilities that temporarily impacted yields lower utilization at our Georgia facility due to the implementation of this.

Kathleen Valiasek: Our adjusted growth margin performance was driven by weather-related variables at our California facilities that temporarily impacted yields, lower utilization at our Georgia facility due to the implementation of the stack towers, and general cost inflation. We continue to expect that, over time, our adjusted growth margin will increase as a percentage of sales as a result of the continued scaling of our business and ongoing efforts to optimize production costs. SG&A for the full year decreased $18.1 million to $64.6 million, driven by lower stock-based compensation and lower transaction-related costs.

Kathy: That towers and general cost inflation, we continue to expect that over time, our adjusted gross margin will increase as a percentage of sales as a result of the continued scaling of our business and ongoing efforts to optimize production costs.

SG&A for the full year decreased $18 1 million to $64 6 million driven by lower stock based comp and lower transaction related costs.

Kathleen Valiasek: As a result of our recent actions to streamline our organizational structure, we expect to realize incremental savings of approximately $5 million on an annualized basis. Net loss was $124 million in 2023, as compared to a net loss of $111.1 million in the prior year, with the vast majority of the difference attributed to a non-cash goodwill impairment charge of $38.5 million. The Adjusted EBITDA loss was $34.1 million, as compared to a loss of $29.8 million last year.

Kathy: As a result of our recent actions to streamline our org structure, we expect to realize incremental savings of approximately $5 million on an annualized basis net loss was $124 million in 2023 as compared to a net loss of $111 1 million in the prior year, but the vast majority of.

Kathy: The difference attributed to a noncash goodwill impairment charge of $38 5 million adjusted EBIT loss of $34 1 million as compared to a loss of $29 8 million last year.

Kathleen Valiasek: From a capital structure perspective, as of December 31, 2023, we had cash, cash equivalents, and restricted cash at the amount of $16.9 million. We expect to close on four conditional commitment letters from a commercial finance lender in the second quarter of 2024, subject to finalizing documentation and customary closing conditions. Together, the CCLs provide for total financing of approximately $228 million to fund our 2024 facility expansions, our new Greenfield facility in the Midwest, and to repay certain existing construction financing, which will lower our cost of capital. We are very pleased with the growing support for Local Bounties' unique CEA approach. From these combined sources, we continue to believe that we have access to the necessary capital to fund our operations, complete the construction of our ongoing projects, and reach break-even adjusted EBITDA in early 2025.

Kathy: From a capital structure perspective as of December 31st 2023, we had cash cash equivalents and restricted cash at the amount of $16 9 million.

Kathy: We expect to close on for conditional commitment letters from our commercial finance lender in the second quarter of 2024 subject to finalizing documentation and customary closing conditions together. The ccl's provides for total financing of approximately $228 million to fund our 'twenty 'twenty four facility.

Kathy: <unk>, a new Greenfield facility in the Midwest and to repay certain existing construction financing, which will lower our cost of capital. We are very pleased with the growing support for local boundaries unique C. A approach from these combined sources. We continue to believe that we have access to the necessary capital to fund our upper.

Kathy: <unk> complete the construction of our ongoing projects and reach breakeven adjusted EBITDA. In early 2025 is a very important milestone that our entire organization has been working hard to achieve we expect that the combination of increased revenue contribution from our new facilities decreased S. J.

Kathleen Valiasek: This is a very important milestone that our entire organization has been working hard to achieve. We expect that the combination of increased revenue contribution from our new facilities, decreased SG&A costs of $5 million, and decreased R&D costs from shifting our Montana facility toward more commercial activities will get us there in early 2025. Additionally, we continue to pursue opportunities to lower our cost of capital and replace our construction financing, including sale-leaseback transactions and our work with a licensed USDA lender. As of December 31, 2023, we had approximately 8.3 million shares outstanding.

Kathy: In a class a $5 million and decreased R&D costs from shifting our Montana facility toward more commercial activities are what will get us there in early 'twenty 'twenty five.

Additionally, we continue to pursue opportunities to lower our cost of capital and replace our construction financing, including sale leaseback transactions and our work with a license USDA lender.

Kathy: As of December 31st 2023, we had approximately $8 3 million shares outstanding on a pro forma basis, including warrants in our employees' restricted stock units outstanding we have a fully diluted share count of approximately $15 2 million shares.

Operator: On a pro forma basis, including warrants and our employees' restricted stock units outstanding, we have a fully diluted share count of approximately 15.2 million shares. With respect to our outlook, we are waiting until our first quarter reporting cycle to provide full year 2024 guidance. With the recent completion of growing operations at our new Texas and Washington facilities, we are now moving through the commissioning process, which will provide us with greater visibility on their contributions this year. We'd really like to have that completed before providing the market with an estimate of our 2024 revenue. Nonetheless, as Craig mentioned, we are off to a very strong start in 2024, with revenue expected to be approximately $8.4 million for the first quarter of 2024, which represents a sequential increase of approximately 22% and demonstrates the enhanced productivity that we are realizing at our Georgia facility.

Kathy: With respect to our outlook, we are waiting until our first quarter reporting cycle to provide full year 2024 guidance with the recent completion of growing operations at our new Texas and Washington facilities. We are now moving through the commissioning process, which will provide us with greater visibility on their contribution to this year, we'd really like.

To have that completed before providing the market with an estimate of our 2024 revenues. Nonetheless as Craig mentioned, we are off to a very strong start in 2024 with revenue expected to be approximately $8 4 million for the first quarter of 'twenty 'twenty, four which represents a sequential increase of approximately 22%.

Kathy: And demonstrates the enhanced productivity that we are realizing at our Georgia facility that concludes our prepared remarks, operator, please open the call for questions.

Operator: That concludes our prepared remarks. Operator, please open the call for questions. Thank you. Now we'll be conducting a question and answer session. If you'd like to be placed in the question queue, please press star 1 on your telephone keypad. A confirmation tone will then be provided in the question... You may press star 2 if you'd like to remove your question from the queue.

Speaker Change: Thank you well now be conducting a question and answer session if you'd like to be placed in the question queue. Please press star one on your telephone keypad, a confirmation tone will indicate.

Speaker Change: Question queue, you May press star two if you'd like to move your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing star one one moment. Please while we poll for questions.

Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing star 1. One moment, please, while we poll for questions. Our first question is coming from Kristen Owen from Oppenheimer. Your line is now live. Hi, good morning.

Speaker Change: Our first question is coming from Christopher <unk> from Oppenheimer. Your line is now live.

Christopher: Hi, Good morning, Thank you for the question.

Kristen E. Owen: Thank you for the question. I just wanted to ask, given what you have been able to achieve out of the Georgia facility over the last several months and the learnings of that brownfield strategy over the last year, I'm wondering if you can provide an update in terms of how you think about maybe unit economics or return on invested capital as you start to ramp up the Washington and Texas fight. Yes, good morning, Kristen.

Speaker Change: And I.

Christopher: About given what you have been able to achieve additive Georgia facility over the last several months.

Christopher: And the learnings of that.

The strategy over the last year I'm wondering if you can provide an update in terms of how you think about unit economics, or what's kind of invested capital as we start to ramp.

Christopher: But the Washington impact.

Christopher: Hi.

Speaker Change: Yes, good morning, Kristen a great to hear your voice.

Craig M. Hurlbert: Great to hear your voice. It's such a great question, and I think The, we will be providing that in the future. We still are. We're seeing upside in our Georgia facility, so we would rather give it a little more time. We're bringing Texas and Pasco up here as we speak.

Speaker Change: It's such a great question and I think.

Speaker Change: Okay.

Speaker Change: We will be providing that in the future we're still.

Speaker Change: Seeing upside in our Georgia facility. So we would rather give it a little more time or bringing Texas and pass go up here as we speak and I think what I would say to you is those numbers are coming but they keep getting better and better as we tweak little things here and there and we're finding a lot.

Craig M. Hurlbert: And I think what I would say to you is that the numbers are coming, but they keep getting better and better as we tweak little things here and there. And we're finding a lot of upside. And I'll note all of the efficiencies are really capital-free.

Speaker Change: Lot of upside and I'll I'll note all of the efficiencies are really capital free these are things that are happening.

Craig M. Hurlbert: These are things that are happening because of the way we designed the system with back and flow. And we're still learning little things here and there that are helping the yields. So improving yields is a capital-free thing, and we want to make sure we've got that dialed in before we give you those numbers. Kathy, you may want to comment. Yeah, thanks, Craig. And good morning, Kristen.

Speaker Change: Because of the way we designed the system with back in flow and we're still learning a lot.

Speaker Change: Little things here and there that are helping the yields so improving yields is a capital for anything and we want to make sure. We've got that dialed in before we give you those numbers.

Speaker Change: You may want to comment.

Speaker Change: Yeah, Thanks, Craig and good morning, Chris and Great to hear your voice. So it's you know we we talked about it the original or when we first implemented stack right. The impact on production and then as we continue to tweak the facility the the yields just increase.

Kathleen Valiasek: Great to hear your voice. So, you know, we talked about it, the original, when we first implemented STAC, right, the impact on production. And then as we continue to tweak the facility, the yields just increased even more, revenue and ROI. So we just want to wait a little bit before we come out with some numbers on the new facilities and even just how Georgia is performing. Okay.

Speaker Change: Stephen Moore, so what we're what we wanted to do is just wait now that Texas and Washington are up we want to wait to see how they also perform right because it just increases.

Speaker Change: You know revenue and Rois. So we just want it want to wait a little bit before we come out with some numbers on the new facilities and even just how Georgia is performing.

Kristen E. Owen: Yeah, I mean, it would be helpful to understand sort of the capital efficiency as you're thinking about this new facility, but maybe another way that we can sort of get after some of this economics is if you could talk about the SKU strategy. So, you know, you're expanding the value-added kits and starting to work with spinach, which, you know, I think we know is a difficult plant to work with.

Stephen Moore: Okay, Yeah, I mean, it would be helpful to understand that.

Stephen Moore: The capital efficiency as you're thinking about this the new facility and then maybe another way that we can kind of get get get actors.

Now Nate is and if you can talk about the strategy there.

Stephen Moore: You know you're at your meeting the value added CAD and starting to work with finance, which you know I think we know it is a difficult place to work with maybe talk about how you're thinking about at PS.

Kathleen Valiasek: Maybe talk about how you're thinking about ASPs or price per pound coming out of the facility. That seems a little bit more tangible given what you've outlined on the SKU side. Kathy, do you want to take that one?

Stephen Moore: Per pound coming out at the facility that seemed a little bit more tangible and given what you outlined on the scale side.

Stephen Moore: Kathy you want to take that one.

Kathy: Yeah sure so.

Kathleen Valiasek: Yeah, sure. So, our commercial team is telling us it's incredibly important to have grab-and-go foods, incredibly important to have spinach and arugula. So, we really doubled down, especially since we already had grab-and-go out in the Northwest.

Kathy: Skus.

So our commercial team is telling us incredibly important to have grab N. Go is incredibly important to have spinach and arugula. So we we really double down, especially we already had grab and go out in the northwest what we did was obviously we expanded it throughout the country and shipping to major customers in Q2, but also.

Craig M. Hurlbert: What we did was, obviously, expanded it throughout the country and shipped to major customers in Q2, but also, we really just doubled down on spinach. And, literally, we set up a small trial in Georgia, and we're shipping to customers within 60 days. So, that is, you know, it gets us into more doors because we have a broader SKU set to offer, right, and then we'll be able to do the spinach, and we actually are relatively far along in developing arugula, and we'll be able to do both of those SKUs out of all of the facilities. And, thank you for asking about the ASP because we are also very focused on trying to garner Yeah, hey, Kristen.

Kathy: We really doubled down on spinach and literally we set a small trial in Georgia, and we're shipping to customers within 60 days.

Kathy: So that is you know it gets us into more doors, because we have a broader SKU set to offer right.

Kathy: And then we'll be able to do the spinach and we actually are a relatively far along also in developing arugula and we'll be able to do both of those skus out of all of the facilities and we are it's I. Thank you for asking about the a F. P. Because we are also very focused on on trying to garner as much retail business.

Kathy: As we think about them you know the product mix and the customer mix within each of the facilities.

Speaker Change: Yeah, Hey, Kristen also.

Kristen E. Owen: Also, the fact that we have stack and flow with better unit economics allows us to grow other things that can get us into more retail doors that will gradually move that average sales price up. And so having a broader offering makes you more relevant to customers. I'm actually in Pasco and had dinner with a customer last night. What they're talking about are things like, you know, what can we do together to develop products? And, you know, they're very interested in our new products that are coming, especially, as you mentioned, the grab-and-go and now potentially spinach as we kind of work our way through that. You mentioned it's a difficult plant to grow, but we're learning things with Stack and Flow that allow us to have confidence that we can get there. And so that's very exciting, not just for us, but for the customers as well, and I think it puts us in a really strong position to, on average, move that ASP up. Great, that's super helpful.

Speaker Change: The fact that we have stack and flow with better unit economics allows us to grow other things that can get us into more retail doors that will gradually move that that average sales price up and so having a broader having a broader offering makes you more.

Speaker Change: With the with the with the customers and actually in Pasco and I had dinner with a customer last night and what they're talking about are things like you know what can we do together.

Speaker Change: To develop products.

Speaker Change: And you know, they're very interested in our new products that are coming in especially as you mentioned the grab and go and now potentially spinach as we kind of work our way through that you mentioned, it's a difficult plant to grow, but we're learning things with stack and flow that allow us to.

Speaker Change: I have confidence that we can get there and so that's very exciting not just for us but for the customers as well and I think puts us in a really strong place to on average move that S. P up.

Speaker Change: Okay. That's super helpful and one last one for me before I turn it over.

Kristen E. Owen: One last one for me before I turn it over. Just if I can ask you to comment on the goodwill impairment in the quarter. I understand it's non-cash, but can you just comment on that, please?

Speaker Change: Just if I can ask you to comment on that the goodwill impairment in the quarter.

Speaker Change: I understand it's noncash, but can you just comment on that please thank you.

Kathleen Valiasek: Thank you. Yeah, sure. It's really just the share price activity that, you know, at year end, all companies have to do their impairment analysis.

Speaker Change: Yeah sure. It's it's really just on the share price activity that that you know at year end all companies have to do their impairment analysis and because of the change in the share price year over year, we had to to write off the goodwill related to the Pea.

Kathleen Valiasek: And because of the change in the share price year over year, we had to write off the goodwill related to the pizza acquisition. We still obviously have the assets of the customer list, etc. But again, just a one-time non-cash transaction.

Speaker Change: The acquisition, we still obviously have the assets at the customer lists et cetera, but again, just a one time noncash transit are.

Kristen E. Owen: ENTRY, Perfect. Thank you so much. Thank you. The next question is coming from Ben Klieve from... Capital Markets. Thanks for taking my questions. First of all, looking back at 23, the adjusted gross margin line, I understand that the contributions on the top line were almost entirely from California and that you had some issues with weather, but that adjusted gross margin number fell each quarter sequentially. I'm just wondering if you can talk about the extent to which you have confidence that margins from that kind of legacy production have stabilized. If you think this is kind of permanently reset downward, anything that you can elaborate on that would be great.

Speaker Change: Entry.

Speaker Change: Perfect. Thank you so much.

Speaker Change: Yeah.

Speaker Change: Thank you next question is coming from Ben <unk> from Lake Street capital markets, one of my life.

Ben: Thanks for taking my questions first of all lifting back into 'twenty three are the adjusted gross margin line I understand that that the contributions on the topline were almost entirely from California and that you had some issues with.

Ben: With weather, but.

Ben: Adjusted gross margin number fell each quarter sequentially.

Ben: I'm just wondering you can talk about the extent to which you have confident the margins out of that kind of legacy production stabilized.

Ben: If you think this is kind of permanently reset downward.

Ben: Anything that you can elaborate on that would be great.

Kathleen Valiasek: Kathy, why don't you just start on that one? Yeah, sure, sure, sure. Hi, Ben. Great to hear your voice. Good morning.

Ben: Kathy why don't you just start on that one yeah sure sure sure how high that in great great to hear your voice good warning them. So thank you for asking that question. It's it's 2023 was a difficult year out of the California facilities, but I'm happy to say is I mean, interestingly enough. We did have significant rains.

Kathleen Valiasek: So, thank you for asking that question. 2023 was a difficult year out of the California facilities. What I'm happy to say is, interestingly enough, we did have significant rains out here in California again in Q1, but we actually performed incredibly well. And from a revenue perspective, the company, you know, we're on budget, actually, for California. I'm not going to comment today on the gross margin for Q1, because I don't have it off the top of my head, but we are on budget in terms of top-line revenue And it's that facilities are just performing, frankly, better than they have since we acquired them, which is fantastic, and I'll thank the team out there. We have increased our operational performance out there, our operational excellence. Our operational team has just done a great job. And we're very, very pleased with where we're sitting in Q1 of 2024. Okay, very good. Thank you. Next question. If this was in the press release, I'm not seeing it, but catbacks in 2023.

Kathy: Out here in California, again in Q1, but we actually performed incredibly well and from a revenue perspective. The company you know where we're on budget actually for California, I'm not going to comment today on the gross margin for Q1, because I don't have it off the top of my head, but but we are on budget in terms of top line revenue.

Out of California, and its debt facilities are just performing frankly better than they have since we acquired Pete's, So which is fantastic and I think the team out. There. We are has increased our operational performance out there our operational excellent excellence our operational.

Kathy: Team has done a great job and we're very very pleased with where we're sitting in in Q1 of 2024.

Speaker Change: Okay very good thank you.

Speaker Change: Next question.

Speaker Change: In the press release, I am I'm, not seeing it up but the Capex in 2023 wondering if you can comment on what that number was in 'twenty three and then any Oh, and then help us understand the degree to which excuse me. If you can quantify the amount of Capex left on the GA on Washington, Texas facilities.

Benjamin David Klieve: Let me read a comment on what that number was in 23, and then any others, and then help us understand the degree to which, excuse me, if you can quantify the amount of catbacks left on the Georgia, Washington, and Texas facilities that's going to bleed into 2024. Yeah, sure. So, I mean, the CapEx on the balance sheet is $313, it looks like, right? The Georgia facility, as of 12-31, had very, very little left in spend.

Speaker Change: That's going to bleed into 2024.

Speaker Change: Yeah sure. So I mean, the capex on the balance sheet is 313, it looks like Rice, Georgia facility is as of 12 31 had very very little left in spend we did have some finishing things that we're working on in Q1 that are exterior.

Kathleen Valiasek: We did have some finishing things that we're working on in Q1 that are exterior to the facility. And then, in terms of spend left on Texas and Washington, you know, likewise, although we are growing in the facilities and, you know, shipping in Q2, we still have some construction costs that we are incurring in this quarter. Okay, very good. And then last one for me, and I'll get back in line, you know, with these three new facilities coming online in Georgia, Texas, and Washington, I'm wondering if you can comment on how much of the production you expect to come out of these facilities this year is already committed with your existing customer base, as opposed to your sales force now having to go out and find a home for that production once it becomes available. Yeah, hey Ben, that's a good question. We don't have a percentage number yet.

Speaker Change: The facility and then in terms of spend left on Texas and Washington.

Speaker Change: Wise, although we are growing in the facilities and and are you.

Speaker Change: You know shipping in Q2, we still have some construction class at where we are occurring and this quarter.

Speaker Change: Okay very good and then last one for me and I'll get back in line with these three new facilities coming online in June.

Speaker Change: Georgia, Texas, and Washington, I'm wondering if you can comment on.

Speaker Change: How much of the production you expect to come out of these facilities. This year is already committed what's your existing customer base.

Speaker Change: As opposed to your sales force all having to go out and find a home for that production once it.

Speaker Change: Once it becomes available.

Speaker Change: Yeah, Hey, Ben that's a good question.

Ben: It's it's we don't have a percentage number we haven't shared that number yet what I will tell you is.

Craig M. Hurlbert: We haven't shared that number yet. What I will tell you is this industry is very transactional as we look at it today, but I think that's beginning to change over time.

Ben: This industry is very transactional.

Ben: As we look at it today I think that's beginning to change over time.

Craig M. Hurlbert: And what's happening is, and I'll give you a good example, in Texas, now that the facility has got plants in the facility living and growing, we've been able to bring customers there. We just closed a rather large account based on a site visit from the executive team. They wanted to see it before they were really willing to commit to buying products from us.

Ben: And what's happening is and I'll give you a good example in Texas now that the facility has.

Ben: Got plants in the facility I'm living in growing we've been able to bring customers. There. We just closed a rather large account based on our site visit from the executive team. They wanted to see it before they really were willing to to commit to buying product from us.

Craig M. Hurlbert: So there's a little bit of that involved in this space still as a transactional-based kind of industry. But as you know, with some of our relationships, we're moving more to contractually-based customers. And because of our great unit economics, there's a lot of potential there. So I don't have a percentage for you on that.

Ben: So there's a little bit of that involved in this space still as a transactional based kind of industry.

Ben: But as you know with our some of our relationships, we're moving more contractually based.

Ben: Customers and because of our great unit economics.

Ben: There's a lot of potential there a lot of potential there. So I don't have a percentage for you on that I will tell you that we have a high degree of confidence when we do come out with our revenue forecast for the year, which I believe are Kathy can talk to that.

Craig M. Hurlbert: I will tell you that we have a high degree of confidence when we do come out with our revenue forecast for the year, which I believe Kathy can talk about, we will have a high degree of confidence we're going to hit it because there are customers there for a product. We know who they are, and we're in the process of knocking down the rest of that. And the team is losing sleep on that as we speak, but we don't have a percentage primarily because it's a transactional-based industry, but we're moving in that direction. And I would just quickly add to it, Ben, obviously we haven't named the sites, but we are expanding on our existing sites, which is, you know, obviously just a great level of confidence that the existing facilities are sold out. Right. Very good indeed. I hear you there. Yeah.

Kathy: We will have a high degree of confidence we're going to hit it because there are customers there for product, we know who they are and we're in the process of knocking down the rest of that and you know the team is losing sleep on that as we speak but don't have a percentage pri.

Kathy: Merrily, because it's a transactional based industry, but we're moving in that direction.

Speaker Change: And I would just quickly add to what Ben you know obviously, we haven't named the site, but we are expanding on our existing sites, which is you know obviously, it's just a great level of confidence that the existing facilities are sold out.

Speaker Change: Right very good I did I hear you there.

Kathleen Valiasek: Okay. Very good. Well, I appreciate you taking my questions. I'll get back in queue.

Speaker Change: Yeah Okay.

Speaker Change: Very good well I appreciate you taking my questions I'll get back in queue.

Craig M. Hurlbert: Thanks, Ben. Thanks. Hey, one thing Ben said, I know he's back in queue, I'd like to just comment broadly for all the listeners. The progress we made in 2023 is astounding, and is a testament to our team and our stakeholders that are involved. You know who you are, all the way from the board, right down the entire organization.

Speaker Change: Thanks, Dan. Thanks, Hey, one thing one thing Ben said I know he's back in queue I'd like to just comment broadly for all the listeners. The progress. We made in 2023 is astounding and is a testament to our team and our stakeholders that are involved you know who you are.

All the way from the board right down the entire organization.

Craig M. Hurlbert: The progress we've made is absolutely amazing. We're extremely excited, and I can tell you the whole team is more focused than we've ever been on making Local Bounty the preeminent CEA business. And every day, I've been doing this for a long time, every day I come to work, I'm more and more motivated to be around the people that comprise and really make up Local Bounty.

Speaker Change: The progress we've made is absolutely amazing we're extremely excited and I can tell you. The whole team is more focused than we've ever been on making local Bernie the preeminent C E business and every day I've been doing this a long time every day I come to work.

Speaker Change: Work on more and more motivated to be around the people that comprise and really make up local downey, it's an absolute honor to be able to lead them and I just want to say a heartfelt. Thank you for both cathie and I to everybody on the team for all of your hard work in 2023, it's a very tough environment as many of you know.

Craig M. Hurlbert: It's an absolute honor to be able to lead them, and I just want to say a heartfelt thank you from both Kathy and me, to everybody on the team, for all of your hard work in 2023. It's a very tough environment, as many of you know, and we make our way through it, and here we are with a heck of a lot of great news today, and we're all super excited about it, and it couldn't have happened without our amazing team. So, thank you to everyone, and I'll turn the call back over to you. We have reached the end of our question and answer session. I would like to turn the call back over to you for any further questions or closing. Kathy, do you have anything you'd like to close with?

Speaker Change: Oh, and we maneuver our way through and here, we are with a heck of a lot of great news today, and we're all Super excited about it and it couldn't have happened without our amazing team. So thank you to everyone and I'll turn the call back over again.

Speaker Change: We have reached the end of our question session I would like to turn the floor back over for any further or closing comments on that now.

Speaker Change: Kathy do you have anything you'd like to close with.

Kathy: I you know I'm good other than I mimic your thoughts on thanking the team and our strategic partners.

Craig M. Hurlbert: I, you know, I'm good, other than I mimic your thoughts on thanking the team and our strategic partners. It's just, I'm amazed where we are. I'm so thrilled and, you know, just thank everyone. Everyone's been working so hard. I just thank everyone. Thank you. That does conclude today's teleconference and webcast. You may disconnect your lines at this time and have a wonderful day. Thank you for

Kathy: It's just I I'm amazed wherever Arab so thrilled and you know just think everyone's everyone's been working so hard I just thank everyone.

Kathy: Thank you.

Speaker Change: That does conclude that does conclude today's teleconference and webcast. You may disconnect. Your lines at this time and have a wonderful day, we thank you for your participation today.