Q1 2025 Local Bounti Corp Earnings Call

[music].

Operator: [music] Good morning and welcome to Local Bounties First Quarter 2025 Earnings Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please also note, today's event is being recorded.

Good morning, and welcome to local Bounties first quarter 2025 earnings conference call all participants will be in a listen only mode.

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

Jeff Sonnek: At this time, I'd like to turn the call over to Jeff Sonnek, Investor Relations at ICR. Please go ahead. Thank you and good morning.

Speaker Change: Thank you and good morning, today's presentation will be hosted by local borrowings executive Chairman, Craig Hurlbert, and President Chief Executive Officer, and Chief Financial Officer Kathleen <unk>.

Jeff Sonnek: Today's presentation will be hosted by Local Bounties Executive Chairman Craig Hurlbert and President, Chief Executive Officer, and Chief Financial Officer Kathleen Valiasek. 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. 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. 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.

Speaker Change: 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 1095, 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 the number of.

Speaker Change: <unk> 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 the results discussed in the forward looking statements.

Jeff Sonnek: Some of these risks and uncertainties are identified and discussed in the company's filings with the SEC.

Speaker Change: 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, which can be found on our Investor Relations website investors <unk> local Bonnie Dot com.

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 reconciliations of non-GAAP financial measures to their most directly comparable GAAP measures.

Speaker Change: Reconciliations of non-GAAP financial measures to their most directly comparable GAAP measures and with that I'd now like to turn the call over to Craig Greg. Please go ahead.

Craig Hurlbert: And with that, I'd now like to turn the call over to Craig. Craig, please go ahead. Thank you, Jeff, and good morning, everyone.

Jeff Sonic: You, Jeff and good morning, everyone.

Craig Hurlbert: I want to start by taking a moment to express my sincere gratitude.

Speaker Change: I want to start by taking a moment to express my sincere gratitude.

Craig Hurlbert: hired local bounty team. The dedication and commitment I've witnessed across the company has been truly remarkable as we navigate this important phase of our company's journey. We have assembled an exceptional group of people who continue to drive our mission forward with passion and focus. I'm pleased to see the continued validation from our customers. whose increasing desire for CEA products reinforces the market opportunity ahead of us. The foundation we've built over these past years has positioned Local Bounty to achieve positive adjusted EBITDA in the near term.

Speaker Change: Higher local bounty team.

Speaker Change: The dedication and commitment I've witnessed across the company has been truly remarkable as we navigate this important phase of our company's journey.

We have assembled an exceptional group of people, who continue to drive our mission forward with passion and focus.

Speaker Change: I'm pleased to see the continued validation from our customers.

Speaker Change: Whose increasing desire for C E products reinforces the market opportunity ahead of us.

Speaker Change: Base shouldn't we built over these past years has positioned local bounty to achieve positive adjusted EBITDA in the near term.

Craig Hurlbert: And I'm confident that under Kathy's leadership, we'll continue to execute on our strategic vision to create meaningful value for all stakeholders.

Speaker Change: And I'm confident that under Kathy's leadership will continue to execute on our strategic vision.

Speaker Change: A meaningful value for all stakeholders with that I'll now turn it over to Kathy.

Kathleen Valiasek: With that, I'll now turn it over to Kathy. Thank you, Craig, and good morning, everyone. First, I completely echo Craig's sentiment and want to acknowledge the incredible dedication and focus of our entire organization. As Craig alluded, our team has fully embraced our mission to reach positive adjusted EBITDA in the third quarter of this year. From operations to sales to finance, everyone is aligned around this critical goal, and I couldn't be prouder of the collective effort. To that end, our first quarter progress, including all of our commercial and operational initiatives, are converging toward a significant revenue lift in the second half of 2025 and our achievement of this positive adjusted EBITDA milestone we are positioned to reach in Q3.

Kathy: Thank you Craig and good morning, everyone first I completely echo Craig's sentiment and wanted to acknowledge the incredible dedication and focus of our entire organization as Craig alluded. Our team has fully embraced our mission to reach positive adjusted EBITDA in the third quarter of this year.

Kathy: Operations to sales to finance everyone is aligned around this critical goal and I couldn't be prouder of the collective effort.

Kathy: To that end, our first quarter progress, including all of our commercial and operational initiatives are converging toward a significant revenue lift in the second half of 2025 and our achievement of this positive adjusted EBITDA milestone we are positioned to reach in Q3 importantly, the discipline.

Kathleen Valiasek: Importantly, the disciplined approach we've taken from product diversification to operational efficiencies to cost management is creating a strong foundation that will support our long-term growth and profitability as we scale our business to meet growing retail demand for our products. Starting with our operational progress, the product mix recalibration work at our Texas facility continues to advance as planned. We are in the final stages of completing this work and expect to begin full commercial production in this section starting this month. As we discussed previously, the purpose-built automated harvesting equipment will be installed early in the third quarter, replacing the temporary harvester we will use this quarter.

Kathy: The approach we've taken from product diversification to operational efficiencies to cost management is creating a strong foundation that will support our long term growth and profitability as we scale our business to meet growing retail demand for our products.

Kathy: Starting with our operational progress the product mix Recalibration work at our Texas facility continues to advance as planned we are in the final stages of completing this work and expect to begin for full commercial production in this section starting this month.

Kathy: As we discussed previously the purpose built automated harvesting equipment will be installed early in the third quarter, replacing the temporary harvest or we will use this quarter. The new harvester is expected to drive significant operational efficiencies and margin improvement.

Kathleen Valiasek: The new harvester is expected to drive significant operational efficiencies and margin improvement. I'm particularly excited to share that our yields in our Georgia facility have increased by 20% in the first quarter compared to our fourth quarter rate. This improvement is largely attributable to the refinement of our growing system with the stack phase, which has outperformed our internal expectations. Our next step is to implement this program in our Texas and Washington facilities, where we expect to achieve similar yield increases. These yield improvements over our existing performance create an excellent opportunity for a sales team to engage prospective retail partners who are looking for CEA suppliers that can deliver consistent performance, something that truly differentiates us at a time when retailers are increasingly taking interest in CEA products.

Kathy: I'm, particularly excited to share that our yields in our Georgia facility and increased by 20% in the first quarter compared to our fourth quarter rate. This improvement is largely attributable to the refinement of our growing system with the stack phase, which has outperformed our internal expectations. Our next step is to implement.

Kathy: This program in our Texas, and Washington facilities, where we expect to achieve similar yields increases these yield improvements over our existing performance create an excellent opportunity for our sales team to engage prospective retail partners, who are looking for suppliers that can deliver consistent performance.

Kathy: Something that truly differentiates us at a time when retailers are increasingly taking interest in C. U E products.

Kathleen Valiasek: Regarding our plans to enter the Midwest with a new facility, I'm pleased to report significant advancement in our strategy there. We are actively engaged in promising discussions with multinational and national retailers to include the Midwest region in their sourcing plans. While we're very far along in this process, it's still too early to announce anything definitive. These developing relationships represent important validation of our expansion strategy and our ability to serve retail partners across multiple regions.

Kathy: Regarding our plans to enter the Midwest with the new facility I'm pleased to report significant advancement in our strategy. There. We are actively engaged in promising discussions with multinational and national retailers to include the Midwest region in their sourcing plants, while we're very far along in this process.

Kathy: It's still too early to announce anything definitive these developing relationships represent important validation of our expansion strategy and our ability to serve retail partners across multiple regions.

Kathleen Valiasek: Turning now to our commercial progress. Building on the incredible momentum from last year, in Q1 2025, we expanded our Texas-grown arugula offering with Brookshire's in approximately 80 stores and began distributing organic living butter lettuce from California to H-E-B. We also started shipping living basil to an existing large retail customer across 60 stores and secured distribution with several other wholesalers for our basil products. Notably, our relationship with Walmart continues to strengthen. In addition to the 191 stores we are already serving with premium baby leaf varieties as of Q4, we've secured an additional commitment to serve 13 Walmart distribution centers with our conventional living butter lettuce.

Kathy: Turning now to our commercial progress.

Kathy: Building on the incredible momentum from last year, and Q1 2025, we expanded our Texas grown arugula offering with Berkshire is in approximately 80 stores and began distributing organic living butter lettuce from California to H D. D. We also started shipping living Basil to an existing large retail.

Kathy: Though customer across 60 stores and secured distribution with several other wholesalers for our basal products, notably our relationship with Walmart continues to strengthen in addition to the 191 stores. We are already serving with premium baby leaf varieties as of Q4, we secured on it.

Kathy: Additional commitment to serve 13, Walmart distribution centers with our conventional living butter lettuce.

Kathleen Valiasek: with those shipments having commenced just a couple weeks ago from both our California and Texas facilities.

Kathy: But those ship shipments having commenced just a couple of weeks ago from both our California, and Texas facilities.

Kathleen Valiasek: We've also evolved our grab-and-go salad kit offerings to better serve retail partners and consumer trends. This includes the launch of new salad kits in Q1 2025 with additional flavors expected to be introduced in Q3 as well as the creation of a new product line that meets the needs of today's value-oriented consumer. We're particularly excited about our upcoming exclusive launch of a new larger, approximately 12-ounce family-sized Caesar salad kit with a large multinational retailer in the Pacific Northwest beginning in the third quarter. We also continue to expand our relationship with the leading meal subscription business that is now seeking additional SKUs from us.

Kathy: We've also evolved our grab and go salad kit offerings to better serve retail partners and consumer trends. This includes the launch of new salad kits in Q1 2025 with additional flavor is expected to be introduced in Q3 as well as the creation of a new product line that meets the needs of today's value oriented consumer.

Kathy: We're particularly excited about our upcoming exclusive launch of a new larger approximately 12 ounce family size Caesar salad kit with a large multinational retailer in the Pacific northwest beginning in the third quarter.

We also continue to expand our relationship with a leading meal subscription business that is now seeking additional skus from us.

Kathleen Valiasek: These commercial wins demonstrate the strong pull we're seeing from our customers and their increasing desire to purchase more CEA products, validating our mission and reinforcing the long-term market opportunity ahead of us.

Kathy: These commercial wins demonstrate the strong pull we're seeing from our customers and their increasing desire to purchase more C. A product's validating our mission and reinforcing the long term market opportunity ahead of US turning briefly to our first quarter results. Our first quarter sales were $11 6 million in line with our <unk>.

Kathleen Valiasek: Turning briefly to our first quarter results, our first quarter sales were 11.6 million in line with our expectations and representing a 38% increase compared to the first quarter of 2024 and a 15% sequential increase compared to the fourth quarter of 2024. This growth was driven by increased production and sales from our Georgia, Washington, and Texas facilities, partially offset by the ongoing product mix recalibration work at our Texas facility, which has temporarily decreased capacity. Our adjusted growth margin for the first quarter improved approximately 500 basis points versus the prior year and approximately 400 basis points versus the fourth quarter 2024.

Kathy: Spectation and representing a 38% increase compared to the first quarter of 2024, and a 15% sequential increase compared to the fourth quarter of 2024.

Kathy: This growth was driven by increased production and sales from our GA, Washington, and Texas facilities, partially offset by the ongoing product mix for calibration work at our Texas facility, which has temporarily decreased capacity.

Kathy: Our adjusted gross margin for the first quarter improved approximately 500 basis points versus the prior year and approximately 400 basis points versus the fourth quarter 2024.

Kathleen Valiasek: This improvement is particularly encouraging as it demonstrates that our product mix recalibration work and operational efficiency initiatives are yielding tangible results. 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 the business and ongoing efforts to optimize costs.

Kathy: This improvement is particularly encouraging as it demonstrates that our product mix recalibration work and operational efficiency initiatives are yielding tangible results. 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 the business and ongoing.

Kathy: Efforts to optimize costs.

Kathleen Valiasek: Net loss for the quarter was $37.7 million compared to a net loss of $24.1 million in the prior year period, which largely reflects higher interest expense. Our adjusted EBITDA loss for the quarter was $8.8 million compared to $6.9 million in the prior year period, and importantly, representing an improvement of half a million dollars from our fourth quarter 2024 loss of $9.3 million. We remain on track to achieve our third quarter target to reach positive adjusted EBITDA driven by the full realization of our ongoing cost reductions alongside our anticipated revenue lift that we expect to be more fully visible in the third quarter of 2025.

Kathy: Net loss for the quarter was $37 7 million compared to a net loss of $24 1 million in the prior year period, which largely reflects higher interest expense, our adjusted EBITDA loss for the quarter was $8 8 million compared to $6 9 million in the prior year period and importantly, representing.

Kathy: An improvement of half a million dollars from our fourth quarter 2020 for a loss of $9 3 million.

Kathy: We remain on track to achieve our third quarter target to reach positive adjusted EBITDA driven by the full realization of our ongoing cost reductions alongside our anticipated revenue lift that we expect to be more fully visible in the third quarter of 2025 to.

Kathleen Valiasek: To emphasize the cost reduction point, we took out approximately $3 million of annualized G&A expenses in the first quarter, and during the second quarter to date period, we've actioned another $4 million of annualized expenses across both G&A and cost of goods sold. These initiatives are a direct result of our operational focus, which is resulting in significantly improved consistency across all facets of our growing operations and allowing us to deliver those efficiencies through our income statement.

Kathy: To emphasize a cost reduction point, we took out approximately 3 million of annualized G&A expenses in the first quarter and during the second quarter to date period, we've action to another 4 million of annualized expenses across both G&A and cost of goods sold.

Kathy: These initiatives are a direct result of our operational focus which is resulting in significantly improved consistency across all facets of our growing operations and allowing us to drive those efficiencies through our income statement.

Kathleen Valiasek: Turning to our balance sheet, we ended the quarter with a significantly strengthened financial position with cash and cash equivalents and restricted cash of $28.4 million.

Kathy: Turning to our balance sheet, we ended the quarter with a significantly strengthened financial position with cash and cash equivalents and restricted cash of $28 4 million.

Kathleen Valiasek: That said, I do want to provide some clarity on how our debt restructuring appears on our financial statements. While we eliminated approximately $197 million of debt through our March restructuring, accounting rules require us to maintain the original carrying value of the pre-restructuring debt amount on our balance sheet, with the reduction being recorded as a debt premium that is amortized over the new loan term. You'll see this as a new line item on our first quarter balance sheet. This means that our reported debt balance won't immediately show the reduction, but the economic benefit remains unchanged and will be reflected through lower interest expense over time.

Kathy: That said I do want to provide some clarity on how our debt restructuring appears on their financial statements. While we eliminated approximately $197 million of deaths were much restructuring accounting rules require us to maintain the original carrying value of the pre restructuring that amount on our balance sheet would there be.

Kathy: Adoption being recorded as of that premium that is amortized over the new loan term, you'll see this as a new line item on our first quarter balance sheet.

Kathy: This means that our reported debt balance won't immediately show the production, but the economic benefit remains unchanged and will be reflected through lower interest expense overtime. This accounting treatment is standard for transactions of this nature and does not impact the fundamental improvement of our capital structure.

Kathleen Valiasek: This accounting treatment is standard for transactions of this nature and does not impact the fundamental improvement of our capital structure.

Kathleen Valiasek: Now for some comments on our outlook. For the second quarter, we expect revenue in the range of $12 to $12.5 million, which reflects the partial impact from our Texas facility transition, which is expected to be complete in the third quarter.

Kathy: Now for some comments on our outlook for the second quarter, we expect revenue in the range of 12 to $12 5 million, which reflects a partial impact from our Texas facility transition, which is expected to be complete in the third quarter looking at the cadence for the balance of the year, we expect to see a material lift in the second half of 2025.

Kathleen Valiasek: Looking at the cadence for the balance of the year, we expect to see a material lift in the second half of 2025, resulting from a convergence of activity, including the aforementioned full quarter contribution from our Texas facility transition and the additional capacity from our Georgia yielding. Additionally, new product introductions and expansions with existing customers are anticipated to also support our expectations for sequential growth in the second half of the year.

Kathy: Resulting from the convergence of activity, including the aforementioned full quarter contribution from our Texas facility transition and the additional capacity from our GA yield improvement. Additionally, new product introductions and expansions with existing customers are anticipated to also support our.

Kathy: And for sequential growth in the second half of the year.

Kathleen Valiasek: I'd also like to briefly comment on our EBITDA progression from Q4 to Q1 and highlight how we expect to improve on this in Q2. In Q1, we experienced temporary cost increases that we expect will be eliminated in Q2. These included higher utilities associated with weather anomalies and higher G&A expenses, which were impacted by the combination of a higher mix of product donations associated with the better-than-anticipated yield improvements in Georgia, lower capitalization of labor now that the construction projects have been completed, and lastly, higher severance associated with our cost optimization work. These collectively impacted our EBITDA by approximately 900,000 in the first quarter and are not expected to reoccur in second quarter.

Kathy: I'd also like to briefly comment on our EBIT progression from Q4 to Q1 and highlight how we expect to approve on this in Q2 and Q1, we experienced temporary cost increases that we expect will be eliminated in Q2. These included higher utilities associated with weather anomalies.

Kathy: And higher G&A expenses, which were impacted by the combination of a higher mix of product donations associated with the better than anticipated yield improvements in Georgia lower capitalization of labor now that the construction projects had been completed and lastly, higher severance associated with our cost optimization.

Kathy: These collectively impacted our EBITDA by approximately 900000 in the first quarter and are not expected to reoccur in second quarter. These dynamics combined with our second quarter to date cost actions are providing us some tailwind toward our goal of achieving positive adjusted EBITDA in the third quarter of 2025.

Kathleen Valiasek: These dynamics, combined with our second quarter to date cost actions, are providing us some tailwind toward our goal of achieving positive adjusted EBITDA in the third quarter of 2025.

Kathleen Valiasek: In conclusion, we're energized by the progress we're making across all areas of our business. Our entire organization is aligned behind our mission to reach positive adjusted EBITDA in the third quarter, and I couldn't be prouder of the collective effort of our team.

Kathy: In conclusion, we're energized by the progress, we're making across all areas of our business. Our entire organization is aligned behind our mission to reach positive adjusted EBITDA in the third quarter and I couldn't be prouder of the collective effort of our team.

Operator: With that, please open the call for Q&A. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question.

Kathy: With that please open the call for Q&A.

Kathy: Thanks.

Speaker Change: If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question Kim.

Operator: You may press star 2 if you'd like to remove your question from the For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start button.

Speaker Change: You May press star two if you'd 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.

Kristen Owen: Our first question comes from the line of Kristen Owen with Oppenheimer and Company. Please proceed. Hi, good morning and thank you for taking my question. Congratulations on the nice progress made in the first quarter here.

Speaker Change: Our first question comes from the line of Christian <unk> with Oppenheimer and company. Please proceed.

Speaker Change: [laughter].

Speaker Change: Hi, Good morning, and thank you for taking my question and congratulations on the nice progress made in the first quarter here and Chuck are you you touched on this in familiar I know our prepared comments here, but I wanted to talk about on sort of what's driving that material land.

Kristen Owen: Kathy, you touched on this in some of your final prepared comments here, but I want to double click on sort of what's driving that material lift coming into the back half of the year. You know, you noted Texas transition, the Georgia yield improvement, some new products. I want to double click on that Georgia yield improvement. I think you said 20% over fourth quarter.

Speaker Change: Coming into the back half of the year, you noted, Texas transmission, the Georgia yield improvement new products.

Speaker Change: I wonder if that looks like on that so I think they all of them sort of met him I think he said 20% of her.

Speaker Change: Fourth quarter, but help us understand you know what what's changing in the production process, how you're achieving that yield and then on the commercial side sort of the velocity of sales and your ability to sort of sell out that incremental yield as they're thinking about that.

Kathleen Valiasek: Just help us understand, you know, what's changing in the production process, how you're achieving that yield, and then on the commercial side, sort of the velocity of sales and your ability to sort of sell out that incremental yield as you're thinking about the next couple of years.

Speaker Change: Yes.

Kathleen Valiasek: Yeah, great series of questions, Kristen, and good morning to you. Thank you. So, yeah, the 20% yield increase in Georgia is an R&D program that was developed last year. We were able to finally put it in place in Georgia, and it actually exceeded our expectations in terms of yield increases, which is fantastic, right?

Speaker Change: Yeah, Great Great series of questions Kristen and good morning to you. Thank you. So yeah, the 20% yield increase in Georgia is and R&D program that was developed last year, we were able to finally put it in place in Georgia.

Speaker Change: And it was it actually exceeded our expectations in terms of yield increases which is fantastic right.

Kathleen Valiasek: So, as I said in my comments, we will also be implementing that program in Texas and Washington in Q3. So, we expect to see that similar level of bump in yield in both of those facilities. If you think about it, so out of Georgia, when the yield increases that much, your production increases, right? And so, it takes a little bit of time for our sales team to place the product, right, which is normal.

Speaker Change: So as we said in my as I said in my comments, we will also be implementing that program in Texas and Washington in Q3, So we expect to see that similar level of bump in yields in both of those facilities.

Speaker Change: If you think about it so out of Georgia, when when the yield increases that much your production increases right and so it takes a little bit of time for our sales team to place the product right, which is normal so.

Kathleen Valiasek: So, and then in terms of the ramp in the back half, right, it's several things going on with all of our customers, right? We talked about all of the Walmart projects, the grab-and-go salads, the increased revenue that we will anticipate out of Montana. Several things are impacting the uptick, including, you know, also, as we discussed, the yield. So hopefully that's helpful. That's great.

Speaker Change: And then in terms of the ramp in the back half right. It's it's several things going on with all of our customers right. We.

Speaker Change: <unk> talked about all of the the the Walmart.

Speaker Change: Projects, the grab and go salads. The increased revenue that we will anticipate out of Montana. Several things are are impacting the uptick including you know also as we discussed the yields.

Speaker Change: So hopefully that's helpful.

Speaker Change: That's right.

Ben Klieve: The follow-up question that I have is a little bit more modeling-oriented. Just given some of the nuance around the restructuring that you announced last quarter, you mentioned the balance sheet implications. I'm trying to think about the income statement implications in particular, how to think about the interest expense that you're reporting, what if that is cash versus non-cash, and how that will change with this restructuring. Just a little bit of nuance on the model there would be helpful. Thank you.

Speaker Change: The follow up question that I haven't it's a little bit more modeling oriented just given some of the nuance around the restructuring that you announced last quarter, you mentioned that the balance sheet implications I'm trying to think about that.

Income statement infestation in particular, how to think about the interest expense. They are reporting what is that in past, firstly non patch and and how that will take with this restructuring.

Speaker Change: But any nuance on the model there would be helpful. Thank you yeah, yeah for sure. So so you know GAAP accounting right you would have anticipated that we would be able to recognize the full gain of the bad debt write off of 197 million, but we're actually having to take it over 10 years, which actually in effect is it.

Kathleen Valiasek: Yeah, for sure.

Kathleen Valiasek: So, you know, GAAP accounting, right? You would have anticipated that we would be able to recognize the full gain of the debt right off of $197 million, but we're actually having to take it over 10 years, which actually, in effect, is fantastic because every quarter it will reduce our interest expense on the face of our P&L, right? So the accrual every quarter is the debt balance times the interest rate, which, again, as we disclosed, it's 50% of what it used to be. And then the amortization of the premium will reduce the interest expense on the face of the P&L.

Speaker Change: Fantastic because every quarter it will reduce our interest expense on the face of our P&L right. So the accrual every quarter is that the debt balance times, the interest rate, which again, we we as we disclosed its you know 50% of what it used to be and then the amortization of the premium will reduce.

Speaker Change: The interest expense on the face of the P&L. So in effect every quarter. The interest expense as it appears on the P&L will be less than $5 million.

Kathleen Valiasek: and also keep in mind, yeah, let me just add one more comment there, keep in mind the restructure with Cargill allows for two full years of no cash interest or amortization payments, but obviously, right, there's still the accrual. Perfect. Thank you.

Speaker Change: Okay, and then also keep in mind yeah yeah.

Speaker Change: Yeah, Let me just add one more comment there keep in mind that the restructure with cargo allows for two full years of no cash interest or of AMETEK amortization payments, so, but obviously right there theres still the accrual.

Speaker Change: Perfect. Thank you I'll pass it on.

Ben Klieve: I'll pass it on. Okay.

Operator: Thanks, Kristen. Thank you.

Speaker Change: Okay. Thanks Kristen.

Speaker Change: Yeah.

Ben Klieve: Our next question comes from the line of Ben Klieve with Lake Street Capital Markets. Thanks for taking my questions. I want to circle back to this 20% yield enhancement. I'd like to kind of better understand. I think, Kathy, in your prepared remarks, you said that this was a project explicitly around the stack phase of the Georgia facility. And so I'm wondering, is this a situation where you have 20% more plants coming out of the stack phase, just from a pure kind of per square foot perspective? Are the same number of plants coming off 20% faster?

Speaker Change: Thinking our next question comes from the line of Ben cleaning with Lake Street Capital markets. Please proceed with your question.

Ben: Thanks for taking my questions I wanted to circle back to this 20% yield enhancement.

Ben: To kind of better understand I think Kathy in your prepared remarks, you said that this was a project explicitly around the stack phase.

Ben: The Georgia facility and so I'm wondering is this a.

Ben: Situation, where you have 20% more plants coming out of the stack phase or just from a pure.

Ben: Kind of per square foot perspective are they coming are the same number of plants coming off 20% faster or are you kind of changing the the varieties to maybe faster growing options. What exactly is the is the.

Kathleen Valiasek: Are you kind of changing the varieties to maybe faster growing options? What exactly is the driving force behind that?

Ben: A driving force behind that.

Kathleen Valiasek: Yeah, sure.

Kathleen Valiasek: Great question, and good morning, Ben. Yeah, so it's really within the stack phase. It's very simply light optimization, OK? And it's something we nicknamed it Zohr, our R&D scientists who are amazing developed the program, you know, actually early last year. What it does is it increases the output out of the stack phase. And basically, you know, even all the way through then the process through the greenhouse, we're literally seeing 20% increase in pack pounds every single week. It's actually pretty amazing. But it's basically within the stack, it's light optimization. And what it does is it increases the output of number of plants, sorry, poundage of plants out of the coming out of the stack phase.

Speaker Change: Yes, a great question and good morning, Ben Yeah. So it's really within the stack pays it's it's very simply laid optimization, okay and it's it's.

Speaker Change: Something we nicknamed it Thor our R&D scientists, who are amazing developed the program actually early last year.

Speaker Change: What it does is it just it increases the output out of the stack fades and basically you know even all the way through then the process through the greenhouse where we're literally seeing 20% increase in pack pounds every single week.

Speaker Change: It's.

It's it's actually pretty amazing, but it's basically within the stack, it's light optimization and what it does is it increases the output of number of plants, sorry, poundage of plants out of that coming out of the fulfill the status.

Ben Klieve: Got it. So, so four is light optimization on the same number of plants that makes those plants. grow 20% faster. Correct. Got it.

Speaker Change: Got it so so for us wide optimization on the same number of plants that makes those plants grow 20% faster.

Speaker Change: Correct.

Ben Klieve: Okay. Very impressive.

Speaker Change: Got it okay very.

Ben Klieve: So then... Yeah, it sounds like it.

Speaker Change: Very impressive so then incredible.

Speaker Change: Yeah, so it sounds like it.

Kathleen Valiasek: My other question then before I'll get back in queue is, you know, you talked, it seems like it was a bit more kind of conviction regarding the future of the Midwest facility. And I'm wondering if you can talk about, you know, how you're thinking about financing that facility. Are you looking at kind of project-specific financing, the external parties leaning back into the existing credit facilities that you have, a mix of those two or something else?

Speaker Change: My My other question then before I'll get back in queue is you talk it seems like it was a bit more kind of conviction regarding the future of the Midwest facility and I'm wondering if you can talk about.

Speaker Change: How you're thinking about financing that facility are you looking at kind of project.

Speaker Change: Specific financing.

Speaker Change: The external parties.

Speaker Change: You don't leaning back into the existing credit facilities that you have.

Speaker Change: A mix of those two hours or something else.

Kathleen Valiasek: So we're, you know, as any company, right, you're always trying to bring new capital providers in the capital stack. So we are talking to sort of very project-specific financing, but you know, I think we'll probably be bringing new, you know, obviously non-dilutive partners into the capital stack. Okay, very good. That's helpful.

Speaker Change: So we're you know as any company right, you're always trying to bring new capital providers in the capital stack. So we are talking to sort of.

Speaker Change: Very project specific financing, but you know I think will probably be bringing new you know obviously non dilutive partners into the capital stack.

Speaker Change: Okay very good that's helpful well.

Ben Klieve: Well, I appreciate you taking my questions. Best of luck here in what should be a pretty interesting next few months for you guys. I'll get back in queue. Thanks. Thank you.

Speaker Change: Well I appreciate you taking my questions best of luck here in what should be a.

Speaker Change: <unk>.

Speaker Change: Pretty interesting next few months for you guys I'll get back in queue.

Speaker Change: Thanks.

Speaker Change: Yes.

Speaker Change: Thank you, ladies and gentlemen, I'm showing no other questions at this time I'll turn the floor back to yourself for any final comments.

Operator: Ladies and gentlemen, I'm showing no other questions at this time.

Kathleen Valiasek: I'll turn the phone back to Ms. Valiasek for any... You know, I just would like to thank everybody for joining us today and we look forward to updating you on our progress as we further scale and grow Locoboni's business in the coming quarters. Thank you very much. Thank you.

Speaker Change: You know I I, just would like to thank everybody for joining us today, and we look forward to updating you on our progress as we further scale and grow local bonnie's business in the coming quarters. Thank you very much.

Operator: This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.

Speaker Change: Thank you. This concludes today's conference call you may disconnect. Your lines at this time. Thank you for your participation.