Local Bounti (NYSE:LOCL) released first-quarter financial results and hosted an earnings call on Wednesday. Read the complete transcript below.

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The full earnings call is available at https://event.choruscall.com/mediaframe/webcast.html?webcastid=dhbcI4S0

Summary

Local Bounti reported a 15% year-over-year revenue growth to $13.3 million for Q1 2026, with a 35% improvement in adjusted EBITDA loss and a 30% decrease in adjusted G&A expenses.

The company secured a $15 million investment from an existing strategic investor and was granted a US patent for its computer vision and AI-driven growing optimization technology.

Operational highlights include running facilities at full capacity, launching new retail accounts, and improving yields with technological upgrades.

Management expressed confidence in continued revenue growth, gross margin stability, and progress towards achieving positive adjusted EBITDA.

The financial trajectory is supported by strategic moves, including a $25 million equity raise, debt restructuring, and additional financing arrangements, providing financial flexibility for growth.

Full Transcript

OPERATOR

Good morning and welcome to Local Bounty's first quarter 2026 earnings conference call. All participants will be noticed in only mode. Please note today's event is being recorded at this time. I'd like to turn the conference call over to Jeff Sonic, Investor Relations at icr. Please go ahead.

Jeff Sonic (Investor Relations)

Thank you and good morning. Today's presentation will be hosted by Local Bounti's Executive Chairman Craig Hurlbert, President and Chief Executive Officer Kathleen Valasek, and Interim Chief Financial Officer and Chief Accounting Officer Tony Hughes. 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. 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 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 and 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.localbounti.com for reconciliations of non-GAAP financial measures to their most directly comparable GAAP measures. And with that, I would now like to turn the call over to Craig.

Craig Hurlbert (Executive Chairman)

Thank you Jeff and good morning everyone. As I always do, I want to start by recognizing the work the Local Bounti Team has put into delivering these results. It's an honor to be able to work with each and every one of you. The first quarter is the next data point in the trajectory we've been building toward disciplined execution quarter after quarter across every part of the organization. We told you what we were going to do and we're doing it. When I spoke with you in March, I described 2025 as a year we did the hard work to position Local Bounti for what comes next. Q1 reinforces that view. Two specific developments this quarter underscore where we're headed. First, in February we were issued a US patent covering our computer vision and AI driven growing optimization. This formally protects the proprietary technology that underpins our stack and flow platform. The same capabilities Kathy will speak to in detail when she walks through our operational progress. Second, the $15 million investment from an existing strategic investor that we discussed last quarter closed during Q1. That's a partner who has watched this business closely for years and chose to commit additional capital at this stage. Both signals one technical, one financial point in the same direction. Local Bounty has earned the right to be selective about its next moves and that gives me great confidence in the path ahead. And with that I will now turn it over to Kathy.

Kathleen Valasek (President and Chief Executive Officer)

Thank you Craig. The themide wraparound Q1 2026 is straightforward continued progress. The work we did throughout 2025 laid a foundation and Q1 is the next data point showing how that foundation is producing Results. Revenue grew 15% year over year, adjusted EBITDA loss improved 35% and adjusted G&A came down 30%. Each metric extends the trajectory we showed quarter by quarter through last year and in several cases shows additional sequential improvement on top of an already strong fourth quarter. We're doing what we said we'd do and it's showing up in our results. Following the facility optimization work we completed last year, each of our three state of the art facilities continues to operate at full harvestable capacity with our entire run rate capacity committed to customers. I'd characterize our progress through two complementary threads Commercial momentum and operational discipline at scale. Both continued to advance in Q1, starting with our commercial progress and ongoing strategic partnership discussions. Those conversations remain active and are central to Local Bounti's long term growth strategy. The quality and velocity of our engagements continues to build. The market shift we described last quarter is real and it's holding. Retailers and strategic partners who were once cautious about controlled environment agriculture are designing supply chains today that contain CEA as permanent infrastructure. They are actively seeking the right partners to build with and that's the position we have been working toward. We remain deliberate in how we approach these opportunities so we can best position Local Bounty to realize durable long term value. Our commercial strategy continues to focus on the quality of our volume rather than simply adding capacity, specifically on achieving targeted diversification of our channel mix to enhance our margin profile. The two new retail accounts we announced last quarter have launched. The first is a six-queue placement with a large premier retail customer covering more than 250 stores. The second is a large regional retailer. We are also seeing extensions to supply agreements within our existing customer base. In the first and early second quarter of 2026, we were awarded new bids covering supply arrangements that advance these relationships through the first quarter of 2027. These commitments span several of our key product lines including Baby Leaf Lettuce and Organic Butter lettuce. The awards underscore the strength of our relationships with blue chip retail partners and reflect those customers continued confidence in our ability to deliver consistent high quality products over the long term. These are precisely the sort of outcomes our commercial team has been targeting and they reinforce the channel mix improvement that has been a core priority moving through 2026. Our pipeline reflects the strong commercial momentum we've been building and we continue to have visibility to additional distribution opportunities as we move through the year. Our Caesar Romano Salad Kit is another good example of the focused commercial strategy I described last quarter. The product continues to gain traction with consumers after realizing a 75% increase in its baseline velocity or units sold per store per Week during 4Q25. We were awarded an additional distribution center with a national retail customer in the first quarter of 2026 that is set to launch this month. When customers and consumers provide feedback, we listen, and Caesar Romano demonstrates what Local Bounti can deliver when we apply that approach. That same discipline extends to our Baby Leaf Greens portfolio, which remains an area in particular where there's a notable supply gap in the market. Our retail customers continue to tell us that the conventional arugula supply is unreliable and falling short of customer needs. We intend to maximize our stack and flow capabilities to capture that demand with a more reliable, longer lasting, ready to eat greenhouse grown arugula supply, a message we are actively reinforcing with retail partners throughout 2026. Shifting over to Operations the cohesion between our commercial and operations teams has continued to strengthen and the operational rhythm we built through 2025 carried directly into Q1. We are seeing continued progress on our service performance, freight lane management, packaging, standardization and labor efficiencies. The same building blocks I walked through in March are compounding. Running at full capacity continues to enable a level of network wide consistency that translates directly into stronger yields. Our yields remain at their highest levels in our company's history. The tower upgrades we completed across Georgia, Texas and Washington, paired with the computer vision and AI driven growing optimization are delivering as promised with approximately a 10% increase in run rate yield capacity. Texas continues to benefit from the steady state operational rhythm that comes with running consistently at full harvestable capacity and we are seeing throughput and labor productivity gains that the new automated harvester was designed to deliver. Beyond our stack and flow facilities, we are also focused on expanding a number one market position in Living Butterhead Lettuce. In support of this, we are making selective investments in our California facilities to improve operational efficiency in those legacy assets. We believe these investments can improve yields by as much as 20%, resulting in increased throughput and enhanced margins. As those projects progress through the year, running at full capacity is also informing our ongoing cost optimization efforts within each facility, allowing for better visibility into cost drivers and the tools to address them. That has translated into a more consistent adjusted gross margin profile and meaningful sequential and year over year declines in adjusted G and A. The net effect is showing up clearly in our rapidly improving adjusted EBITDA trajectory. Before I turn it over, I'd like to take a moment to introduce Tony Hughes to those of you joining us today. Tony has served as local bounties senior VP of finance and chief accounting officer since June 2022 and was appointed Interim CFO in December of last year. Tony has been instrumental in the financial work we have executed over the past several years and he brings more than 30 years of finance leadership experience to this role. We are fortunate to have him in this seat and I'm pleased to hand it over to him for the financial review today.

Tony Hughes (Interim Chief Financial Officer and Chief Accounting Officer)

Tony thank you Kathy and good morning everyone. While this is my first earnings call in the interim CFO role, I've had the privilege of working alongside Kathy in various finance and accounting leadership roles for more than a decade across several organizations and I'd like to thank Kathy and the Board for this opportunity. The financial trajectory we are reporting on this morning reflects the combination of positive forces that are making a measurable impact in our results, including the great work we've done to improve our capital structure. Now turning to our results, first quarter revenue grew 15% to $13.3 million, reflecting continued sequential and year over year growth driven by consistent production improvement across our full network of facilities. On a sequential basis, revenue was up approximately 7% from Q4, which speaks to the underlying production consistency we are now achieving. Beyond the incremental distribution, we continue to see strong contribution from our focus accounts including the E Commerce and Direct to Consumer customer relationship. We highlighted last quarter which continued to support year over year growth in the first quarter. Adjusted gross margin for the first quarter was approximately 29% excluding depreciation, stock based compensation and other non core items in line with the prior year period and consistent with the gross margin profile we delivered throughout 2025. Gross margin stability has been a deliberate part of the story we are telling. Predictable performance at this level becomes the foundation for operating leverage as we scale adjusted G and A expense for the first quarter was $4.1 million, down from $5.8 million in Q1 2025 representing a reduction of approximately 30% year over year on a sequential basis that is also down $4.3 million in Q4. Combined with our COGS related savings actions, we are now seeing the full benefit of of the roughly $10 million reduction in annualized expenses we delivered in 2025, adjusted EBITDA loss for the first quarter improved to $5.7 million compared to a loss of $8.8 million in Q1 2025. A 35% year over year improvement and a modest sequential improvement from the $5.8 million loss in Q4. Revenue growth stable adjusted gross margins and lower adjusted G and A continue to converge to improve adjusted EBITDA performance. This is exactly the operating leverage we said would compound as the network matured. I'd also like to Highlight that our Q1 GAAP net loss was $12.7 million compared to $37.7 million in the prior year period. The improvement reflects both substantially lower interest expense resulting from our 2025 debt restructuring and the operational progress underway. With respect to the balance sheet, we ended the quarter with cash cash equivalents and restricted cash of approximately $18.8 million, up from $10.7 million at year end. The improvement reflects the $15 million investment we received during the quarter from an existing strategic investor. As Craig noted, this is a meaningful signal a partner who knows our business and our technology chose to increase their stake. It provides additional financial flexibility as we continue to advance our commercial and strategic priorities. As a reminder on our broader capital structure, we completed a $25 million equity raise and executed a comprehensive debt restructuring in the first quarter of 2025 that canceled approximately $197 million of debt, principal and accrued interest and deferred cash repayments until April 2027. In the third quarter of 2025, we secured an incremental $10 million of working capital through a convertible note investment, which was paired with a corresponding $10 million reduction in our senior secured debt principal. We were also able to secure additional financing through an equipment sale leaseback arrangement, and in the first quarter of 2026 we secured an additional $15 million through a convertible note investment. Combined, these transactions position local bounty with the financial flexibility to be strategic about growth and partnership decisions as we advance towards profitability. In terms of our outlook, we expect the trajectory of improvement we demonstrated throughout 2025 and into the first quarter to continue revenue growth, gross margin stability and declining G and A all point toward continued progress against our goal of achieving positive adjusted ebitda. There's still work to do to get there, and we want to be clear eyed about that, but everything we're seeing reinforces our confidence in the path. With that, I'll turn it back to Kathy for closing remarks.

Kathleen Valasek (President and Chief Executive Officer)

Thank you, Tony. In closing, the strategic and commercial environment around us remains favorable. The operational rhythm we built last year is compounding, and the financial trajectory continues to move in the right direction. The cumulative progress we have made will become even more visible as we move through the rest of 2026. I'm grateful to the entire local Bounty team for their commitment and to our investors and partners for their continued confidence. That concludes our prepared remarks. Thank you for joining us today and for your continued interest in Local Bounti.

OPERATOR

Ladies and gentlemen, that concludes today's conference call. We thank you for attending.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.