Landec(US:LFCR)2019-08-02 23:22Financial Data and Key Metrics Changes - Consolidated revenues increased 8% to $152.8 million in Q4 2019, compared to $141.1 million in the same quarter last year [7][29] - Adjusted EBITDA for Q4 2019 increased 19% to $11.8 million, compared to $9.9 million in the year-ago quarter [33] - Net income from continuing operations for Q4 2019 was $367,000 or $0.01 per share, down from $6.7 million or $0.24 per share in the prior year [30] - For fiscal 2019, revenues increased 6% to $557.6 million from $524.2 million in fiscal 2018 [33] Business Line Data and Key Metrics Changes - Lifecore Biomedical's revenues grew 49% in Q4 2019 and 16% for the fiscal year, driven by increased demand for commercial production [13][33] - Curation Foods saw a 3% revenue increase in Q4 2019 and a 5% increase for the fiscal year, with challenges in lower-margin products impacting gross profit [29][31] - Lifecore's EBITDA grew 46% in Q4 2019 and 13% for the fiscal year compared to 2018 [13][33] Market Data and Key Metrics Changes - The Eat Smart brand leads the $2.8 billion salad kit market in North America, with a 9.7% growth in U.S. retail sales of multi-serve salad kits [20][21] - The guacamole category is growing at a 10.7% rate, with Yucatan and Cabo Fresh brands commanding a combined 16% market share [24][25] Company Strategy and Development Direction - The company aims to drive profitability through food innovation, simplifying operations, and improving quality while focusing on fewer impactful projects [9][50] - Lifecore is positioned to benefit from the trend of outsourcing specialty services in the pharmaceutical industry, with plans for capacity expansion [46][48] - Curation Foods is transitioning to a natural food company, focusing on high-margin products and sustainable practices [49][51] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving fiscal 2020 guidance, projecting consolidated revenue growth of 8% to 10% [37] - The first quarter of fiscal 2020 is expected to be a loss due to production timing and high avocado prices, but profitability is anticipated in subsequent quarters [40][42] - The company is implementing cost-saving initiatives expected to yield $20 million in savings for fiscal 2020 [56][81] Other Important Information - The company has approximately $149 million in debt, with a debt-to-equity ratio of 55% and a fixed coverage ratio of 2.2 [44] - Lifecore's capacity expansion will involve an investment of approximately $13 million in fiscal 2020 [48] Q&A Session Summary Question: Concerns about Lifecore's projected loss in Q1 - Management explained that Q1 is typically the lowest revenue quarter for Lifecore, with a mix of lower-margin sales contributing to the loss [65][68] Question: Breakdown of revenue guidance for fiscal 2020 - Management indicated that the revenue growth for both Lifecore and Curation Foods will be a combination of volume and pricing [70][72] Question: Cost-out program and its impact - Management confirmed that the $20 million in cost savings is expected to be realized in fiscal 2020, offsetting cost increases [80][82] Question: Organic growth expectations for Yucatan - Management expects organic growth from Yucatan, with plans for new product launches and a strong market for guacamole [98][132] Question: Current vegetable supply situation and margins - Management reported no major supply issues and confidence in maintaining strong margins for salad kits [123] Question: Plans for new product launches - Management emphasized a focus on fewer, impactful product launches rather than a set number per quarter [125][127]