Local Bounti Corporation — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023; comparisons are to FY2022. This is an annual report, not a standalone fourth-quarter earnings release. Local Bounti grows and sells fresh produce using controlled-environment agriculture (CEA), including its patented Stack & Flow system.
Financial performance
| Metric | FY2023 | FY2022 | Change |
|---|---|---|---|
| Sales | $27.6 million | $19.5 million | +42% |
| Gross profit | $2.2 million | $2.2 million | Essentially flat |
| Gross margin | 8.0% | 11.4% | Down 3.4 percentage points |
| Operating expenses | $119.1 million | $96.7 million | +23% |
| Operating loss | $(116.9) million | $(94.5) million | Loss widened |
| Net loss | $(124.0) million | $(111.1) million | Loss widened 12% |
| Net cash used in operations | $(33.2) million | $(48.8) million | Use decreased |
| Net cash used in investing | $(162.3) million | $(172.4) million | Use decreased |
- Revenue growth primarily reflected a full year of Pete’s acquired operations in 2023, compared with nine months in 2022, and higher sales from Georgia and Montana.
- Cost of goods sold rose 47% to $25.3 million, faster than sales. Management cited higher production, labor, utilities and supply costs, plus $0.7 million of California utility-price and weather-related costs that affected yields in the first half.
- FY2023 net loss included a $38.5 million goodwill impairment, a noncash $18.5 million gain from remeasurement of the Cargill warrant liability, and $25.7 million of net interest expense. The impairment followed a decline in the Company’s stock price and market capitalization.
- Cash and cash equivalents were $10.3 million at year-end; restricted cash was $6.6 million, for combined cash and restricted cash of $16.9 million. Restricted cash includes a $6.5 million letter of credit for the California facilities lease.
- Cargill credit-facility principal outstanding was $317.5 million at year-end, with $9.8 million of accrued interest. Reported long-term debt, net of debt issuance costs, was $278.0 million. The filing gives a 12.5% rate for the subordinated facility and a variable Senior Facility rate; its payment-obligation schedule uses 13.86% for the Senior Facility effective January 1, 2024.
Material changes and operating developments
- Georgia production run-rate doubled after Stack & Flow was installed in Q4 2023. The Company reported subsequent yield increases that brought production to approximately three times the level a year earlier.
- The Company spent $162.3 million on property and equipment in 2023, primarily for Washington, Georgia and Texas facilities. Construction-in-progress increased to $196.3 million from $56.8 million.
- The Pete’s acquisition goodwill balance of $38.5 million was fully impaired in 2023. Selling, general and administrative expenses fell 22% to $64.6 million, mainly because stock-based compensation declined by $22.3 million and prior-year acquisition transaction costs were lower; the reduction was partly offset by higher disposal losses and professional fees.
- At December 31, 2023, four facilities were operating or in production: Montana, two California sites and Georgia. Texas and Washington were under development at year-end; the Company said seeding and commissioning began in late January 2024, with customer shipments expected in Q2 2024.
- The Company reported distribution to more than 13,000 retail locations in 35 states. Three customers each represented more than 10% of FY2023 revenue; together they represented approximately 37%.
Outlook, liquidity and risks
- Management’s target is positive adjusted EBITDA in early 2025, supported by scaling Georgia, commencing Texas and Washington operations, and transitioning most of Montana from R&D to commercial production during 2024. This is a goal, not a guarantee.
- Management anticipated new baby-leaf products, including spinach, arugula and blends, by Q3 2024. It also planned additional network capacity and a Midwest facility, with construction targets in 2024.
- After year-end, Cargill amendments permitted interest to be paid in kind through 2024 and made up to $15 million of working capital available; $5 million was drawn, with $10 million remaining available. Management said cash, sales proceeds and these arrangements were expected to fund planned operations for at least 12 months after issuance of the financial statements.
- Four conditional commitment letters provided for approximately $228 million of potential financing for 2024 expansions, a Midwest facility and repayment of certain construction financing. The Company expected to close in Q2 2024, subject to definitive agreements and customary conditions; these commitments were not described as completed financing.
- The Company reported covenant noncompliance with a specified financial covenant at year-end; Cargill waived it for the quarters ended September 30 and December 31, 2023. Cargill debt is secured by substantially all Company and subsidiary assets, including intellectual property, and includes restrictions and future financial covenants.
- Key risks include ongoing losses and capital needs, execution and ramp-up of larger facilities, energy and labor costs, crop disease or pests, food safety, customer concentration, competition and the ability to achieve lower unit costs. The Company reported an accumulated deficit of $303.3 million and stated it may need additional financing; financing may be unavailable or dilutive.
- FY2023 investing cash outflows were largely funded through $152.6 million of debt proceeds and $35.0 million from the California sale-leaseback transaction. Both the California and Montana sale-leasebacks are accounted for as financing obligations rather than completed sales; future aggregate payments on these obligations were reported at $147.3 million.
Important facts for investors to verify
- Whether the conditional $228 million financing closed, on what terms, and whether planned facility expansion can be funded without further dilution or restrictive debt.
- Current liquidity, remaining Cargill availability, cash-interest deferrals, covenant compliance and the impact of debt service as payments resume.
- Whether Texas and Washington began shipments on schedule, and whether Georgia’s higher output converts into sales and improved gross margins.
- Progress toward the early-2025 adjusted EBITDA target, including cost per unit, facility utilization, yields and the commercial transition of Montana.
- Customer concentration and retention, particularly given the limited-contract nature of produce sales; also verify the scale and terms of the Sam’s Club offtake agreement.
- The potential dilution and market effects of Cargill’s 5,353,846-share warrant, whose exercise price was amended to $6.50 in January 2024, and the Company’s NYSE listing compliance.
Other filing notes: The auditor issued an unqualified opinion on the financial statements. Management concluded disclosure controls and internal control over financial reporting were effective as of December 31, 2023; the auditor did not provide an internal-control attestation because the Company is an emerging growth company. The Company reported no material pending litigation.