Landec(LFCR)2023-06-01 16:55Financial Data and Key Metrics Changes - Lifecore segment revenue for Q3 2023 decreased by 24% to $26.3 million, driven by a 28% decrease in the CDMO business and a 15% decrease in HA raw material manufacturing [51] - Lifecore segment gross profit decreased by $6.8 million to $6.1 million, resulting in a gross margin of 23.1%, down from 37.1% in the prior year [52] - Adjusted EBITDA for the Lifecore segment was $3 million for Q3 2023, representing an adjusted EBITDA margin of 11.6% [40] Business Line Data and Key Metrics Changes - The decrease in CDMO revenue was primarily due to a shift in the timing of scaled-up processes for commercial products and a higher mix of earlier-stage projects with lower net revenue [51] - The HA raw material manufacturing revenue decline was attributed to the timing of customer shipments compared to the prior year [22] - The corporate and other segment reported an adjusted EBITDA of approximately negative $2 million for Q3, which was slightly above expectations [41] Market Data and Key Metrics Changes - Lifecore is the only manufacturer of pharmaceutical injectable-grade HA with CDMO expertise in the market, with approximately 55% of all new drug applications being injectables [30] - The demand for prefilled syringes is growing at an estimated 13% compound annual rate [30] Company Strategy and Development Direction - Lifecore is focused on becoming a standalone CDMO following the divestment of the Curation Foods segment and is exploring strategic alternatives to maximize shareholder value [6] - The company aims to leverage its unique expertise and ongoing industry trends towards outsourcing new drug development to expand its growth opportunities [31] - Lifecore has entered into a significant supply agreement with Alcon, which has the potential to increase HA raw material manufacturing by approximately 70% over the next several years [33] Management's Comments on Operating Environment and Future Outlook - Management expects a sequential improvement in Q4 2023, the largest quarter of the year, due to the shift in project timing and an improved revenue mix [24] - The company anticipates returning to more normalized revenue and adjusted EBITDA levels realized in fiscal year 2022, reflecting substantial growth over fiscal year 2023 results [54] - Lifecore is well positioned for significant growth ahead, with a strong foundation and ongoing investments in commercial capabilities [48] Other Important Information - The company incurred $8.9 million in restructuring and non-recurring charges in Q3 due to divestment and refinancing activities [42] - CapEx for Q3 was $6.3 million, focused on supporting long-term growth initiatives, including two multiuse isolator fillers [43] - Lifecore's net bank debt decreased to $120 million from $143.7 million at the end of fiscal 2022, following refinancing efforts [25] Q&A Session Summary - The company did not conduct a live Q&A session during the call due to ongoing exploration of strategic alternatives [5]