Financial Release Details

• Lifecore Biomedical Generates Year-to-date Revenue Growth of 20%, Net Income Growth of 39%, and Adjusted EBITDA Growth of 34%
  
• Reiterates Fiscal 2021 Lifecore Biomedical Guidance
• Revises Curation Foods Fiscal 2021 Guidance to Reflect COVID-19 Headwinds

SANTA MARIA, Calif., April 07, 2021 (GLOBE NEWSWIRE) -- Landec Corporation (Nasdaq: LNDC), a diversified health and wellness company with two operating businesses, Lifecore Biomedical, Inc. and Curation Foods, Inc., reported results for the fiscal 2021 third quarter and year-to-date period ended February 28, 2021. Looking forward, Landec’s strategy to create shareholder value is to deliver against its long-term targets, strengthen its balance sheet, drive top-line growth at Lifecore, and selectively invest in innovation and growth while implementing strategic priorities to improve operating margins at Curation Foods.

CEO COMMENTS:
Dr. Albert Bolles, Landec’s President and CEO stated, “Lifecore produced another strong quarterly performance which helped propel year-to-date segment revenue growth of 20% and adjusted EBITDA growth of 34% for the fiscal nine-month period ended February 28, 2021. We believe that the business is extremely well positioned to benefit from several strong industry trends which include the rise in drug development, a need for capable partners to outsource complex development and manufacturing projects, and growing demand for vial and syringe capacity. Taken together, we believe that Lifecore is prepared to utilize its highly specialized CDMO capabilities and is uniquely positioned to provide solutions to complex manufacturing needs and benefit from an expected acceleration in new drug application approvals in the coming years. Lifecore remains on-track to meet its guidance for the year and we continue to support the team’s efforts to invest for sustainable long-term double-digit growth.”

Dr. Bolles continued, “At Curation Foods, our turnaround efforts continue to progress, but we were met with several new challenges in our third quarter that temporarily stalled our momentum. Although we realized year-over-year improvement in the segment’s gross margin, this performance came in below our plan due to COVID-19-related variables that weighed on results. Our team is working diligently and creatively to navigate this fluid environment and we remain confident that the steady-state gross margin targets of 11% - 14% that we laid out for the end of fiscal 2021 are still within reach.  We still have much to accomplish and recognize that Lifecore and by extension Landec is an undervalued asset, and we are working with focus to transform Curation Foods. We have made many accomplishments as seen by our year-to-date performance and will continue to utilize the framework within Project SWIFT to improve shareholder value.”

FISCAL THIRD QUARTER 2021 BUSINESS HIGHLIGHTS:

• Revenues of $137.8 million, a planned decrease of 9.9% year-over-year
• Gross profit of $19.7 million, an decrease of 1.8% year-over-year
• Net loss of $5.5 million, which includes $2.9 million of restructuring and other non-recurring charges such as legal expenses net of tax
• Diluted net loss per share of $0.19; adjusted diluted net loss per share of $0.09, which excludes $0.10 per share of restructuring and other non-recurring charges net of tax
• Adjusted EBITDA of $7.6 million, compared to $6.8 million in the prior year period
• Lifecore segment adjusted EBITDA of $8.1 million, compared to $7.6 million in the prior year period
• Curation Foods segment adjusted EBITDA of $0.3 million, compared to a loss of $0.1 million in the prior year period

FIRST NINE MONTHS FISCAL 2021 BUSINESS HIGHLIGHTS:

• Revenues of $404.3 million, a planned decrease of 6.9% year-over-year
• Gross profit of $56.7 million, an increase of 11.3% year-over-year
• Net loss of $29.8 million, which includes $15.8 million of restructuring and other non-recurring charges such as expenses incurred by consolidating and optimizing operations associated with Project SWIFT, as well as a Windset non-cash fair market value adjustment of $9.5 million, both net of tax
• Diluted net loss per share of $1.02; adjusted diluted net loss per share of $0.15, which excludes $0.54 per share of restructuring and other non-recurring charges, as well as a $0.32 per share negative Windset fair market value adjustment, both net of tax
• Adjusted EBITDA of $19.3 million, compared to $7.9 million in the prior year period
• Lifecore segment adjusted EBITDA of $16.8 million, compared to $12.6 million in the prior year period
• Curation Foods segment adjusted EBITDA of $5.1 million, compared to a loss of $2.9 million in the prior year period
• Cash flow provided by operations was $10.6 million, an improvement of $14.9 million year-over-year

THIRD QUARTER 2021 RESULTS:
Fiscal third quarter 2021 results compared to fiscal third quarter 2020 are as follows:

* See “Non-GAAP Financial Information” at the end of this release for more information and for a reconciliation of certain financial information.

Revenues decreased $15.1 million, or 9.9%, year-over-year, which was primarily a result of a 13.3% decrease in Curation Foods’ segment revenues, as described below, which was partially offset by a 7.0% increase in the Lifecore segment revenues.

Gross profit decreased $0.4 million, or 1.8%, year-over-year, and gross profit margin increased approximately 120 basis points to 14.3% compared to 13.1% in the prior year period.

Net loss improved $6.0 million to a loss of $5.5 million for fiscal third quarter, which includes $2.9 million of restructuring and non-recurring charges, net of taxes. This compares to net loss of $11.5 million in the prior year period, which includes $12.7 million of restructuring and non-recurring charges, net of taxes. Excluding these restructuring and non-recurring charges, adjusted net loss was $2.6 million for the fiscal third quarter, compared to adjusted net income of $1.2 million in the prior year period.

Adjusted EBITDA increased $0.8 million, or 13%, year-over-year, to $7.6 million for fiscal third quarter which excludes restructuring and other non-recurring charges. This compares to adjusted EBITDA of $6.8 million in the prior year third quarter. At the segment level during fiscal third quarter, Lifecore generated $8.1 million in adjusted EBITDA, which represents an increase of $0.5 million versus the prior year period and Curation Foods generated $0.3 million in adjusted EBITDA, which represents an increase of $0.4 million versus the prior year period.

SEGMENT RESULTS:

Lifecore Segment:

Lifecore is the Company’s CDMO business focused on product development and manufacturing of sterile injectable products. Lifecore continues to expand its presence in the robust CDMO marketplace by finding additional opportunities to partner with and provide value added services to biopharmaceutical and medical device companies. Lifecore continues to drive growth and profitability with a focus on building its business development pipeline, maximizing capacity and advancing product commercialization for innovative new therapies that improve patients’ lives.

In the third quarter, Lifecore realized total revenues of $27.2 million, or a 7.0% increase versus the prior year period driven by a 33.0% increase in its CDMO business, which was partially offset by a 24.9% decrease in its fermentation business. The year-over-year quarterly variance in the fermentation business was due to timing of shipments.

Lifecore drove a $0.7 million increase in gross profit year-over-year and gross margin was relatively consistent at 42.5% compared to 42.8% in the prior year period.

Curation Foods Segment:

Curation Foods is the Company’s natural food business. Curation Foods is focused on providing access to innovative and nutritious 100% clean ingredient plant-based food. Through the execution of Project SWIFT – its value creation program that aims to strengthen the Curation Foods business by simplifying the business, improving operating cost structure, and enhancing profitability with a focus on higher margin products – the Company believes that it is on a clear path towards improving the overall financial performance of Landec, enhancing its ability to drive long-term shareholder value.

Curation Foods realized total revenues of $110.6 million for the fiscal third quarter. The total segment revenues decreased 13% versus the prior year period, primarily driven by the planned reduction in Curation Foods’ legacy vegetable and tray business in connection with Project SWIFT and COVID-19 pandemic headwinds. The pandemic has delayed customer store resets and the penetration of new product innovations, and continues to pressure the foodservice channel. As a result, the fresh packaged salads and vegetables business revenue decreased $16.1 million, or 15%, to $94.7 million. Partially offsetting the revenue decrease in the fresh packaged salads and vegetables business segment was growth in the avocado products business, which increased 6%, to $15.4 million due to expansion of its Avocado Squeeze product and growth in the Cabo Fresh brand. Revenue in Technology decreased 79% due to an unfavorable comparison in the prior year period where the Company recognized a one-time licensing benefit of $1.5 million.

Curation Foods generated gross profit of $8.1 million, which decreased 11.3% year-over-year largely due to lower revenues. Gross margin of 7.4% compares to 7.2% in the prior year period and was below the Company’s expectations due to increased COVID-19 related challenges associated with labor inefficiency, distribution cost inflation, costs associated with sales cancellations, and higher variable costs such as minimum wage increases. The Company remains committed to improving segment gross margin and is focused on this metric as a key performance indicator. Management believes that it can achieve at the low end of its previously stated goal of reaching a Curation Foods segment steady-state gross margin rate in the range of 11-14% in the fiscal fourth quarter of 2021.

CASH FLOW & BALANCE SHEET
Cash provided by operations was $10.6 million for the nine month period ended February 28, 2021 compared to cash used by operations of $4.3 million in the prior year period, representing a $14.9 million improvement year-over-year. Cash from investing activities improved $20.8 million versus prior year, driven by a capital expenditure decrease of $10.7 million and fixed asset sales proceeds of $12.9 million. Capital expenditures were $11.4 million for the nine month period ended February 28, 2021 compared to $22.1 million in the prior year period.

The Company had cash and cash equivalents of $2.2 million as of February 28, 2021. Total debt at fiscal third quarter end was $186.1 million, consisting of its line of credit and long-term debt.

FISCAL 2021 OUTLOOK:
The Company is reiterating its full year fiscal 2021 guidance for Lifecore Biomedical and revising its full year fiscal 2021 guidance for Curation Foods and Consolidated Landec to reflect the challenges experienced in fiscal third quarter and expectations for lower than expected sales in fiscal fourth quarter. Guidance continues to exclude restructuring and other nonrecurring charges as well as any tax implications.  The Company’s updated fiscal 2021 outlook is detailed below with growth figures that are compared to fiscal 2020.

Revenue from continuing operations:

• Consolidated Revenues: range of $523 million to $532 million (-11.5% to -10%)
• Lifecore: range of $93 million to $97 million (+8% to +13%)
• Curation Foods: range of $430 million to $435 million (-15% to -14%)

Adjusted EBITDA:

• Consolidated: range of $27 million to $29 million (+23% to +32%)
• Lifecore: range of $22.5 million to $24.5 million (+12% to +22%)
• Curation Foods: range of $8 million to $9 million (+80% to +103%)
• Other (Corporate Expense): range of ($3.5) million to ($4.5) million

Conference Call
The live webcast can be accessed directly at http://ir.Landec.com/events.cfm or on Landec’s website on the Investor Events & Presentations page. The webcast will be available for 30 days.

Date: Wednesday, April 7, 2021

Time: 5:00 p.m. Eastern time (2:00 p.m. Pacific time)

Direct Webcast link: http://ir.Landec.com/events.cfm 

To participate in the conference call via telephone, dial toll-free: (877) 407-3982 or (201) 493-6780. Please call the conference telephone number 5-10 minutes prior to the start time so the operator can register your name and organization. If you have any difficulty with the webcast or connecting to the call, please contact ICR at (646) 277-1263.

A replay of the call will be available through Wednesday, April 14, 2021 by calling toll-free: (844) 512-2921 or direct (412) 317-6671, and entering code 13717239.

About Landec Corporation
Landec Corporation (NASDAQ: LNDC) is a leading innovator of diversified health and wellness solutions with two operating businesses: Curation Foods, Inc. and Lifecore Biomedical, Inc. Landec designs, develops, manufactures, and sells products for the food and biopharmaceutical industry. Curation Foods is focused on innovating and distributing plant-based foods with 100% clean ingredients to retail, club and foodservice channels throughout North America. Curation Foods is able to maximize product freshness through its geographically dispersed family of growers, refrigerated supply chain and patented BreatheWay® packaging technology. Curation Foods brands include Eat Smart® fresh packaged vegetables and salads, O Olive Oil & Vinegar® premium artisan products, and Yucatan® and Cabo Fresh® avocado products. Lifecore Biomedical is a fully integrated contract development and manufacturing organization (CDMO) that offers highly differentiated capabilities in the development, fill and finish of sterile, injectable pharmaceutical products in syringes and vials. As a leading manufacturer of premium, injectable grade Hyaluronic Acid, Lifecore brings 35 years of expertise as a partner for global and emerging biopharmaceutical and biotechnology companies across multiple therapeutic categories to bring their innovations to market. For more information about the Company, visit Landec’s website at www.landec.com. 

Non-GAAP Financial Information
This press release contains non-GAAP financial information relating to EBITDA, adjusted EBITDA, and adjusted net income or (loss) per share. The Company has included reconciliations of these non-GAAP financial measures to their respective most directly comparable financial measures calculated in accordance with GAAP. See the section entitled “Non-GAAP Financial Information and Reconciliations” in this release for definitions of EBITDA, adjusted EBITDA, and adjusted net income or (loss) per share, and those reconciliations.

The Company has disclosed these non-GAAP financial measures to supplement its consolidated financial statements presented in accordance with GAAP. These non-GAAP financial measures exclude/include certain items that are included in the Company’s results reported in accordance with GAAP. Management believes these non-GAAP financial measures provide useful additional information to investors about trends in the Company’s operations and are useful for period-over-period comparisons. These non-GAAP financial measures should not be considered in isolation or as a substitute for the comparable GAAP measures. In addition, these non-GAAP financial measures may not be the same as similar measures provided by other companies due to the potential differences in methods of calculation and items being excluded/included. These non-GAAP financial measures should be read in conjunction with the Company’s consolidated financial statements presented in accordance with GAAP.

Important Cautions Regarding Forward-Looking Statements
This press release contains forward-looking statements regarding future events and our future results that are subject to the safe harbor created under the Private Securities Litigation Reform Act of 1995 and other safe harbors under the Securities Act of 1933 and the Securities Exchange Act of 1934. Words such as “anticipate”, “estimate”, “expect”, “project”, “plan”, “intend”, “believe”, “may”, “might”, “will”, “should”, “can have”, “likely” and similar expressions are used to identify forward-looking statements. All forward-looking statements involve certain risks and uncertainties that could cause actual results to differ materially, including such factors among others, as the timing and expenses associated with operations, the ability to achieve acceptance of the Company’s new products in the market place, weather conditions that can affect the supply and price of produce, government regulations affecting our business, the timing of regulatory approvals, uncertainties related to COVID-19 and the impact of our responses to it, the ability to successfully integrate Yucatan Foods into the Curation Foods business, and the mix between domestic and international sales. For additional information about factors that could cause actual results to differ materially from those described in the forward-looking statements, please refer to our filings with the Securities and Exchange Commission, including the risk factors contained in our most recent Quarterly Report on Form 10-Q and Annual Report on Form 10-K. Forward-looking statements represent management’s current expectations and are inherently uncertain. Except as required by law, we do not undertake any obligation to update forward-looking statements made by us to reflect subsequent events or circumstances.

Non-GAAP Financial Information and Reconciliations

EBITDA, adjusted EBITDA, adjusted net income (loss), and adjusted diluted net income (loss) per share are non-GAAP financial measures. We define EBITDA as earnings before interest expense, income tax expense (benefit), and depreciation and amortization. We define adjusted EBITDA as EBITDA before the fair market value change of the Company’s investments in Windset, certain restructuring and other non-recurring charges and before impairment of goodwill and intangibles charges. We define adjusted net income (loss) and adjusted diluted net income (loss) per share as net income (loss) and diluted net income (loss) per share, respectively, before certain restructuring and other non-recurring charges and before the fair market value change of the Company’s investment in Windset, net of tax, and before impairment of goodwill and intangibles charges, net of tax. The table below presents the reconciliation of these non-GAAP financial measures to their respective most directly comparable financial measures calculated in accordance with GAAP and other supplemental information. See “Non-GAAP Financial Information” above for further information regarding the Company’s use of non-GAAP financial measures.

Contact Information:
Investor Relations
Jeff Sonnek
(646) 277-1263
jeff.sonnek@icrinc.com 

Source: Landec Corporation