Q3 2025 Local Bounti Corp Earnings Call
Good morning and welcome to Local Bounti's third quarter 2025 earnings conference call. All participants will be in a listen-only mode at this time. I'd like to turn the conference call over to Jeff Sonnek, Investor Relations at ICR. Please go ahead.
Thank you and good morning. Today's presentation will be hosted by Local Bounti's 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
You're based on Management's, current expectations, and beliefs, as well as a number of assumptions. Concerning future events.
Some of these risks and uncertainties are identified and discussed in the company's filings with the SEC.
Also, refer to certain non-gaap Financial measures today.
refer to the press release which can be found on our investor relations website investors, Loco bounty.com
Thank you, Jeff, and good morning, everyone.
Or exploratory and measured.
Today, they're active strategic discussions about long-term Supply Partnerships.
Retailers. Who once questioned cea? Viability are now designing Supply chains that assumed its permanent infrastructure.
This shift from if to how much and how fast represents the market validation, we've been charging towards and it's why we're being deliberate about the partnership structures that create long-term value not just near-term Revenue.
And with that, I will now turn the call over to Kathy
Thank you, Craig. And good morning, everyone. Third quarter results. Demonstrate our operational momentum is building as planned. We delivered 19% year-over-year Revenue, growth improved. Our adjusted Evita last year over year and completed critical facility upgrades. Our Texas automated harvesting system is now operational and the Georgia tower upgrades are driving further yield improvements.
Let me start with Texas because completing this transition successfully with our critical Q3 Milestone. We finish the facility reconfiguration in Late July and reached full harvestable capacity in early August, essentially doubling the productive output of that facility. The automated Harvester is now fully operational and the efficiency gains are quantifiable and significant.
From July to October, we've increased labor productivity by approximately 19% measuring pounds tax per labor hour. While simultaneously, reducing our direct labor cost per pound by approximately 17% these improvements, demonstrate the scalability of the company's stack and flow technology as volume increases. This operating leverage will be specially impactful as the Texas facilities. Now sold out on a run rate basis which will help us accelerate toward our broader goal of enhancing, our Consolidated cash flow,
On yield improvements and cost optimization, we're seeing tangible results across the network. We completed tower upgrades in Texas, in Washington, and early September. These upgrades are designed to achieve better climate control through the stack phase to enhance production, efficiency, and increase yield capacity across our stack and flow technology platform.
Form.
We expect to complete optimization in the fourth quarter of 2025, anticipating yield increases of more than 10% to follow. These are not incremental tweaks; they are structural improvements to our production efficiency that will continue ramping as the systems are optimized.
In connection with these ongoing yield Improvement. Efforts are previously filed patent. Application in 2022 titled optimizing growing process in a high hybrid. Growing environment using computer vision and AI continues to advance and we are now anticipating that this patent will be issued in the coming months. Perhaps, as early as next month, we've been utilizing computer vision at all of our facilities to analyze. Plant growth data in conjunction with environmental data to identify patterns that drive improved consistency, and yield with great results and I want to commend the team on their Relentless pursuit of efficiencies, which is remarkable. We're also advancing our seed cost Reduction Program at our Texas and Washington facilities with the implementation. Continuing in the third quarter of 2025 and further implementation expected in the fourth quarter and throughout 2026 building on previous successful, implementations that our Georgia facility
Ability that have demonstrated meaningful cost. Reductions this program is designed to optimize seed costs while maintaining the high quality standards that local bounti, customers expect.
Looking ahead, we have targeted additional cost reduction initiatives in the range of $1.5 to $2 million annualized to be actioned in the fourth quarter of 2025 and realized in the first half of 2026, with additional measures to follow in 2026.
Structure, that will compound as we scale and are a critical piece to our past to positive adjusted IBA.
Now, let me talk about what's happening commercially because this is where Craig's inflection point. Comment becomes really tangible. I want to commend Dana massie's leadership as our new Chief commercial officer as well as that of our entire commercial team. They're executing at an incredibly high level amid. Our operational improvements driving both new door expansion and deeper penetration with existing Partners. In fact, several key accounts have doubled month over month as a result of our added capacity, and new product, introductions
1 area where the team is. Focusing is Right. Sizing, our price pack architecture to better, align with Marketplace needs.
We're working on packaging formats, that increase product visibility putting what we grow front and center. For consumers, this demonstrates our confidence and our quality and addresses. What Shoppers consistently tell us. They want the ability to see the fresh premium. Leafy greens. They're buying at the point of purchase.
As these initiatives progress through the development and Retail reset Cycles. We Believe they'll be meaningful differentiators and how we compete.
On the distribution front, we're excited about our Walmart expansion in the Pacific Northwest. Launching our new 10 oz Romano, Caesar family size salad kit across 89 stores on October 13th. This is more than a new SKU. It's a proof point for our regional facility strategy, and our ability to deliver product Innovation that meets consumer demand
The Pacific Northwest has historically struggled with consistent access to fresh, locally grown greens.
Our Washington facility solves that delivering Harvest to shelf in days versus the weeks plus conventional Supply chains require
The packaged salad Market is expected to grow at 8.6% annually to 2029 and the family size, format addresses, robust consumer demand in this underserved segment.
Following this specific Northwest launch, we're planning to roll out the same product to customers across the Southern States from our Texas facility in early 2026, extending our geographic reach in this fast-growing category.
The Walmart expansion is part of our broader commercial Story. The launch of the Romano. Caesar kit is just the next step in our growth and increases our footprint in 89 of the 191 stores. Carrying premium, baby weed products.
We also continue to service the 13, Walmart distribution centers, out of our California and Texas facilities with conventional living butter lettuce.
During the third quarter, we also expanded distribution of our salad kit line across additional Regional retailers in the Pacific Northwest demonstrating ongoing demand for convenient and fresh meal options.
In the home delivery Channel, we successfully launched 4 new, grab-and-go offerings with a leading partner in the depths of our assortment and further positioning ourselves for growth in the direct to Consumer segment.
Additionally, we entered into an agreement to pack. Private label living butter lettuce for Mark on Cooperative, which serves as the purchasing Logistics information and marketing partner for its 5 member Distributors and their North American Food Service. Customers
This partnership highlights the trust and credibility Local Bounti has established with its partners.
As Craig briefly touched upon at the beginning of the call, what's different now versus 6 months ago is the nature of our conversations with retailers. We're seeing strategic partners actively helping us to expand our footprint with major customers.
We're getting earlier visibility into their deployment timelines and reset schedules.
The velocity of engagement reflects market recognition that CEA has crossed the threshold from emerging technology to essential and permanent infrastructure.
Let me just repeat that.
DEA has crossed the threshold from emerging technology to essential and permanent infrastructure.
Beyond volume growth. We're focused on product, mix optimization. The new product launches were executing family size salad, kits, expanded living butter, lettuce offerings. Private label Partnerships carry more attractive margin profiles than our base business.
And we'll help us drive toward our goal of achieving positive, adjusted Ava.
Turning to our third quarter results, our third quarter Revenue increased 19% to 12.2 million driven by increased production from our Georgia, Texas and Washington facilities. Sequentially Revenue growth was constrained by the Texas transition work through July but that facility is now positioned to contribute meaningfully going forward.
Our adjusted growth margin percentage, was approximately 29%, excluding depreciation and stock-based comp and other non-core items with Texas at full capacity. In Q4 following our work on harvest Automation and optimizing our product mix and as our tower upgrades mature across all facilities. We expect that over time, our adjusted gross margin will increase as a percentage of sales.
Our adjusted EVA loss was $7.2 million, which improved from $8.4 million in Q3 of last year, representing meaningful year-over-year progress.
With Texas. Now operating at full capacity and our costs initiatives, reaching full run rate, we expect an improved adjusted Evita performance in Q4
Notably, our Q3 net loss improved to 26.4 million from 34.3 million prior year, primarily reflecting lower interest expense from our q1 debt restructuring.
Now turning to our balance sheet, we ended the quarter with cash and cash equivalents and restricted cash of $12.7 million.
The 10 million convertible note. We closed in August paired with 10 million, in debt reduction was strategically significant, it wasn't just Capital. It was our existing, strategic investors doubling down at an inflection point while simultaneously improving our balance sheet.
We also closed in equipment Leasing and transaction that we expect to provide cash of approximately 2 million in the coming weeks.
Combined with the March for structuring where we brought in 25 million in new equity and amended, our debt agreement to defer cash payments, until April 2027. We've transformed our capital structure in 2025
This capital structure transformation provides us with added Financial flexibility to be strategic with Partnerships and growth Investments.
Looking ahead. Let me provide prospective on Q4 and our trajectory heading into next year.
Revenue growth and product mix optimizations are key levers to achieving positive adjusted EBITDA, which we continue to expect in early 2026.
Let me break down the drivers that will get us there. First volume and mix as our new value, added product, launches ramp through late Q4, and particularly to the first half of 2026, they improve our overall unit level economics.
Second.
Operational efficiency from the tower upgrades across Georgia, Texas, and Washington, combined with automated harvesting in Texas and our seed cost reduction programs, are improving our cost structure. These initiatives take time to reach full productivity.
We're seeing early benefits now, but the full impact materializes as the systems optimized into 2026.
And third cost discipline, the nearly 8 million in annualized cost reductions we've actioned through the first 9 months of the year spanning both cogs and operating expenses plus the. Additional 1.5 to 2 million were implementing through year end represents sustainable. Structural improvements that flow directly to adjusted Eva as Revenue scales.
Taking all of this together. We expect a theme of ongoing sequential Improvement in adjusted even to a loss rates. Over the coming quarters with an aim to achieve positive, adjusted Eva in early 2026
For pacing our growth alongside retail partner development schedules to ensure. We're building sustainable profitable Revenue.
To close Q3 represents a foundational quarter. Where we completed critical infrastructure Investments, particularly Texas, reaching full capacity, demonstrated commercial traction, with strategic launches, like Walmart in the Pacific Northwest and continue to improve our cost structure year-over-year. We're entering Q4 with more operational capacity, better unit. Economics being built into our operations and stronger commercial momentum than at any point in our history.
Capitalize on it while building for long-term durability.
That concludes my prepared remarks. Thank you for joining us today, and for continued interest in local bounti.
Ladies and gentlemen, that concludes that concludes today's conference call. We thank you for attending. You may now disconnect your lines.