Greetings and welcome to Local Bounti's Fourth Quarter 2024 Earnings Conference Call. At this time, all participants will be in a listen-only mode. [Operator Instructions] A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder this conference is being recorded. It is now my pleasure to turn the call over to Jeff Sonnek, Investor Relations. Jeff, please go ahead.

Thank you and good afternoon. Today's presentation will be hosted by Local Bounti's Executive Chairman, Craig Hurlbert; and President and 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. 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'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.localbounti.com for 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. Craig, please go ahead.

Thank you, Jeff, and good afternoon everyone. Today marks an important transition for Local Bounti as I step into the role of Executive Chairman and we welcome Kathy Valiasek as our new Chief Executive Officer. After co-founding this company and serving as its CEO through our formative years, I believe this is the right time for this next step in our leadership evolution. Kathy has been instrumental in driving our organization forward as the President and CFO, demonstrating exceptional leadership and strengthening our commercial and financial relationships. Kathy's strategic vision, operational expertise and financial acumen make her the ideal person to lead Local Bounti forward. I look forward to continuing my support of the company's strategic initiatives and commercial efforts. I'm incredibly confident that with her guidance, we will continue to innovate, optimize our operations and create meaningful long-term value for our stakeholders. We believe we are at a true inflection point for Local Bounti, marked by the transformative financing we secured and the restructuring of our balance sheet. These achievements position us well for the next chapter of growth under Kathy's leadership. Before I continue, I'd like to take a moment to express my sincere gratitude to our exiting board members, Ed Forst and Jennifer Carr-Smith for their dedicated service to Local Bounti. Particularly, Ed's guidance and expertise were invaluable during our restructuring process and I'm personally grateful for his contributions during this critical period. What's particularly encouraging is the strong pull we're seeing from our customers. Their increasing desire to purchase more CEA products validates our mission and reinforces the market opportunity ahead of us. We're committed to meeting this growing demand with our sustainable, locally grown produce. None of our progress would be possible without the remarkable team we've built here at Local Bounti. I'm constantly inspired by the passion and dedication of our employees. Their commitment to our vision has been the driving force behind our achievements and we truly have a tremendous team that will continue to propel us forward. With that, I'll now turn the call over to Kathy.

Thank you, Craig and good afternoon everyone. I'll begin with our recent financing and debt restructuring announcements, then review our commercial and operational progress and conclude with some brief financial remarks. Let me start by saying that I'm honored and thrilled to step into the role of CEO at this transformative moment for Local Bounti, following this past year as President leading our focus on operational improvement. 2024 was a pivotal year for our company with significant achievements across multiple fronts. We simultaneously opened two new facilities in Washington and Texas, completed our Georgia buildout and transitioned Montana to commercial operations. We also introduced several new products that our customers love. We have a strong and growing customer base who are ecstatic with our products and with our newly strengthened financial position, we are poised for tremendous success. I truly look forward to working with our team and our Board to build on the foundation already established and drive value for all of our stakeholders. Moving on to the transactions we announced today, we're pleased to have secured $27.5 million of new funding, including $25 million of equity from new and existing investors. We also entered into a term sheet with a commercial finance lender for approximately $2.5 million in CapEx financing. In tandem with this new funding, we completed the restructuring of our existing credit agreement with our lender. The restructuring results in a nearly 40% reduction in our debt through a debt extinguishment of approximately $197 million. The restructured agreement allows for more favorable terms including no cash payments until April 2027, an extended maturity date to 2035 and a significantly reduced interest rate to approximately 6% today, which I'd add is approximately half of what the rate was previously. The updated agreement also allows for additional non-dilutive…

Certainly. [Operator Instructions] One moment, please while we poll for questions. Our first question is coming from Kristen Owen from Oppenheimer. Your line is now live.

Hey, guys, it's Colin filling in for Kristen this afternoon. So can you talk a little bit about the changes you've made in your Georgia and Texas production and how it's impacting overall unit economics? And then I have a quick follow up around price and mix.

Yes, sir. Hey, Colin, how are you? Good to hear your voice.

I got you.

Yes, we've not really changed what we're doing in Georgia. It's primarily Texas, where half of the facility is shipped primarily to Sam's Right? It's a cut product, and that's under our long-term offtake agreement with them. And then the second three acres in that facility, it's six acres in total, we are basically converting it, so it can do both living head product and also cut product. And basically the cut product, you know, we talked about in our earnings release that, I mean, we're selling it obviously already and also in April we'll start shipping that product to Walmart, but we also have quite a bit of demand for cut product, including Arugula, et cetera, out of that side of the facility.

And I guess how much pricing power do you have right now and how should we think about volume benefiting pricing mix for you guys going forward?

So pricing power for us, it's primarily either retail or club. And what I would say in terms of our ability to negotiate pricing is that as our customers become more and more familiar with our products, it gives us more leverage to negotiate better pricing. In fact, with one of our retailers, we implemented a price increase that will go into effect in April.

Okay. And just the last one from me is, just the relationship with Walmart and getting shelf space with some of these larger retailers, can you talk about, you know, the dynamics with the industry, you know, really getting its footing in a little bit more substantial way with the balance sheet restructuring and how you think that will impact your ability to drive sales and shelf space with some of these customers?

Yes, hey Colin.

Yes, hey Colin.

Yes, go ahead, Craig.

Kathy, maybe I can take that one real quick and then you can jump in. Colin, how you doing? Good to hear your voice. I think what we're seeing from the major retailers is a definite interest in more and more and more CEA products. They're seeing the benefits from it and their customers are seeing the benefits from it. The challenge that they've had is each of them have, to some degree or another, taken on certain relationships that have, to some degree or another, left them unsatisfied. And I think what we've been telling them is we're here for the long haul. And so I think they're desirous of finding a partner that they know they can count on and secure their supply chain accordingly. And I think that wind is blowing in the sail of the CEA industry at large. But the industry, as you know, has wildly kind of underperformed and has left many of these retailers wanting for something they can't have. So today, our announcing this restructuring really puts local bounty in very, what I'll call rare air as it relates to other CEA providers. And I think it only really has is going to help us solidify even further our relationships with all of our customers.

That's super helpful, guys. I'll hop back in queue. I appreciate it.

Thanks, Colin.

Thanks Colin.

Thank you. Next question is coming from Ben Klieve from Lake Street Capital Markets. Your line is now live.

All right, thanks for taking my questions and congratulations to both of you personally on the move to Chairman and CEO. First question on the Georgia facility, maybe most specifically, because it sounds like that's the location that's had the most kind of consistent, you know, utilization relative to its intended footprint at first. Can you talk about the variable cost structure of maybe that facility specifically and the kind of major buckets of variable costs, be it, you know, utilities, labor, seed and fertilizer inputs, how are those variable costs meeting your expectations now that that facility is, you know, up and running?

Yes. Thanks, Ben, for the question. Great question. So what we're seeing, especially in the Georgia facility, because it is the facility that's been up and running the longest, is that we are absolutely able to reduce seed costs and also primarily, I would say labor. In terms of our seed costs, our innovation team is constantly focused on reducing seed costs, but also collectively, our GM and our Head of Operations is dialing in the labor costs significantly. So we were seeing that actually across all of the facilities, but even more so, I would say in Georgia, because again, it's the one that's been up and running the longest.

Got it, thanks, Kathy. And then on your expansion updates, did you mention your, the prior initiative to expand it in the Midwest at all on this call and I missed it. If not, can you give us an update there? Has that been scrapped in lieu of all these various ongoing initiatives, or is that still an intention of yours?

No, it has absolutely not been scrapped at all and it's definitely an intention of ours along with the expansions of the existing facilities. In fact, we are probably having meetings every other day of the week with our retailers about the Midwest facility. And we're just, you know, again, what we're trying to do is listen and listen hard to each of the retailers and what they want, because each of them want different products, different SKUs, and we want to be sure that we nail the design of the building before we break ground.

Got it. And then that leads into my last question, which is this. The ongoing challenges throughout the industry, both in the greenhouse and vertical side. As you look at the build versus buy dynamic, do you have any kind of bias for buying a modern but underperforming greenhouse versus a vertical farm and then stacking greenhouse on top of that? Is there one or the other that you would particularly find appropriate, or does it all just really depend?

Yes, sure. So we've looked at many, many, many vertical, standalone farms and have passed on them. Right? We definitely very easily can consider existing greenhouses that are relatively new that we can acquire, start selling out of them immediately, and then implement the stack phase to the facility. In fact, that's exactly what we did with Georgia. Right? We built the first three acres, started selling out of it, built the second three acres, selling out of the full six acres, and then we implemented the stack and flow or the stack to the greenhouse, and that increased productivity by like 40%, 30 to 40%. So that's really if we buy an existing greenhouse facility, that's what we would do.

Got it. Okay, very good. Well congratulations, especially on the capital structure improvements. Thanks for taking my questions and I'll get back in queue.

Okay, thank you.

Thanks, Ben.

Thank you. We reached the end of our question-and-answer session. I'd like to turn the floor back over for any further closing comments.

Well, Craig and I would love to thank everyone for joining us today, and we look forward to updating you on our progress as we further scale and grow Local Bounti's business in the coming quarters. Thank you.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.