Financial Release Details

Lifecore segment revenues increased 27.9% in fiscal third quarter, as compared to prior year period

Reiterates fiscal 2022 full year guidance

SANTA MARIA, Calif., April 05, 2022 (GLOBE NEWSWIRE) -- Landec Corporation (Nasdaq: LNDC) (“Landec” or the “Company”), a diversified health and wellness company with two operating businesses, Lifecore Biomedical, Inc. (“Lifecore”) and Curation Foods, Inc. (“Curation Foods”), reported results for the fiscal 2022 third quarter ended February 27, 2022. As previously reported, on December 13, 2021 the Company closed on the sale of its Curation Food’s fresh packaged salads and vegetables business (the “Eat Smart Disposition”), and as such, those results are now reflected as discontinued operations in all periods presented within the Company’s financial statements. Looking forward, Landec continues to focus on creating shareholder value through strengthening its balance sheet, accelerating growth at Lifecore, and seeking opportunities to optimize its remaining assets.

CEO COMMENTS:

Dr. Albert Bolles, Chief Executive Officer of Landec Corporation commented, “Lifecore continued to build its development pipeline in the fiscal third quarter, adding two additional projects, which speaks to the ongoing demand for its specialized CDMO capabilities for complex projects. As expected, Lifecore delivered a strong quarter of revenue growth in the fiscal third quarter, as it resumed a more typical ordering cadence with its customers following a normalization of channel inventory that was temporarily inflated due to lower procedure volumes during the COVID pandemic peaks. While the timing of sales impacted mix, and as a result margin in the fiscal third quarter, we remain on track with the expectations we previously set forth for the full year and anticipate a strong finish to the year in the fiscal fourth quarter with respect to revenues and gross margins.”

Dr. Bolles added, “We continue to push ahead with Project SWIFT and following the Eat Smart Disposition in December, our focus has shifted to our remaining assets. We believe that our avocado products business remains well positioned within a growing industry supported by favorable consumer trends. While this business has been impacted by the inflationary environment, we expect our fiscal fourth quarter pricing actions combined with significant operational improvements to largely mitigate the associated margin pressure and put us in a position to meet our full year segment guidance from continuing operations. Our Board remains committed to enhancing shareholder value as we seek to optimize our remaining Curation Foods assets.”

FISCAL THIRD QUARTER 2022 BUSINESS HIGHLIGHTS:

• Revenues of $53.1 million, an increase of 18.8% year-over-year
• Gross profit of $13.9 million, a decrease of 3.8% year-over-year, primarily due to the timing and revenue mix at Lifecore
• Net loss from continuing operations of $7.1 million, which includes $4.6 million of restructuring and other non-recurring charges such as legal expenses, both net of tax
• Adjusted EBITDA of $6.4 million, compared to $7.3 million in the prior year period, a decrease of 12.3% year-over-year
• Lifecore segment adjusted EBITDA of $8.6 million, compared to $8.1 million in the prior year period, an increase of 5.9% year-over-year
• Curation Foods segment adjusted EBITDA from continuing operations of $(0.9) million, compared to $1.2 million in the prior year period, driven by temporary margin headwind associated with inflation which is expected to be offset by price actions in fiscal fourth quarter

FIRST NINE MONTHS FISCAL 2022 BUSINESS HIGHLIGHTS:

• Revenues of $138.2 million, an increase of 9.1% year-over-year
• Gross profit of $39.0 million, a decrease of 8.8% year-over-year
• Net loss from continuing operations of $10.5 million, which includes $7.3 million of restructuring and other non-recurring charges such as legal expenses, both net of tax
• Adjusted EBITDA of $17.2 million, compared to $12.2 million in the prior year period, an increase of 41.1% year-over-year
• Lifecore segment adjusted EBITDA of $20.0 million, compared to $16.8 million in the prior year period, an increase of 18.8% year-over-year
• Curation Foods segment adjusted EBITDA from continuing operations of $2.2 million, compared to $1.9 million in the prior year period

FISCAL THIRD QUARTER 2022 RESULTS:
Fiscal third quarter 2022 results compared to fiscal third quarter 2021 are as follows:

Revenues increased $8.4 million year-over-year, which was primarily a result of a 27.9% increase in Lifecore segment revenues and a 4.6% increase in Curation Foods segment revenues.

Gross profit decreased $0.5 million year-over-year. Gross margin decreased 610 basis points as compared to the prior year principally due to the timing and mix of revenue earned in the third quarter, which management expects to largely reverse in the fiscal 2022 fourth quarter.

Net loss from continuing operations increased $5.6 million to a loss of $7.1 million for fiscal third quarter, which includes $4.6 million of restructuring and non-recurring charges, net of taxes, related to consolidating and optimizing operations associated with Project SWIFT. This compares to a net loss of $1.5 million in the prior year period, which includes $2.2 million of restructuring and non-recurring charges, net of tax, related to consolidating and optimizing operations associated with Project SWIFT.

Adjusted EBITDA decreased $0.9 million, or 12.3%, year-over-year, to $6.4 million for fiscal third quarter 2022, which excludes restructuring and other non-recurring charges. This compares to adjusted EBITDA of $7.3 million in the prior year fiscal third quarter. At the segment level during fiscal third quarter 2022, Lifecore generated $8.6 million in adjusted EBITDA, which represents an increase of $0.5 million, or 5.9%, versus the prior year period, and Curation Foods generated $(0.9) million in adjusted EBITDA as compared to $1.2 million in 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 utilizing its specialized capabilities 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 fiscal third quarter 2022, Lifecore realized total revenues of $34.8 million, a 27.9% increase as compared to the prior year period driven by a 33.1% increase in its CDMO business and a 16.4% increase in its fermentation business. The Company believes that this increased performance is primarily due to a resumption in more typical ordering patterns after moving through the excess inventory levels caused by lower procedures being performed during COVID.

Lifecore added two projects to its development pipeline in fiscal third quarter, with 24 projects as of February 27, 2022. These projects were delineated as follows: early phase or proof of concept clinical development (6), phase 1 & 2 clinical development (9), and phase 3 clinical development and scale-up commercial validation activity (9). Lifecore currently manufacturers 26 commercial products, which remains unchanged from fiscal second quarter 2022.

Curation Foods Segment (Continuing Operations):

Curation Foods is the Company’s natural food business. The Company continued its focus on execution of Project SWIFT – the Company’s value creation program that aims to strengthen the Curation Foods segment by simplifying the business, improving operating cost structure, and enhancing profitability with a focus on higher margin products. On December 13, 2021 the Company closed on the Eat Smart Disposition for $73.5 million in cash, subject to certain adjustments; those results have been reclassified as discontinued operations within the Company’s financial statements.

Curation Foods realized total revenues from continuing operations of $18.3 million for the fiscal third quarter, an increase of 4.6% versus the prior year period, primarily driven by a 31.6% increase in sales velocity from O Olive and a 1.9% increase in Avocado Products.

CASH FLOW & BALANCE SHEET
Cash used in operations was $24.4 million for the nine month period ended February 27, 2022 compared to cash provided by operations of $10.6 million in the prior year period. Cash from investing activities increased $99.7 million versus the prior year period, primarily driven by proceeds from the Eat Smart disposition of $73.5 million plus sale of the Windset investment of $45.1 million. Capital expenditures were $18.5 million for the nine month period ended February 27, 2022 primarily focused on supporting Lifecore’s long-term growth initiatives. Cash used in financing activities was $76.2 million for the nine month period ended February 27, 2022 driven by repayments on the Company’s term debt.

During fiscal 2022, the Company repaid a total of $109.1 million in borrowings through the utilization of its net proceeds from the Windset investment sale and the Eat Smart Disposition, which was partially offset by additional borrowings during the year. The Company had cash and cash equivalents of $1.9 million as of February 27, 2022. Total bank debt, net of cash, at fiscal third quarter end was $117.6 million, consisting of its line of credit and long-term debt, compared to $192.7 million at fiscal 2021 year end.

FISCAL 2022 OUTLOOK:
The Company is reiterating its previously announced guidance on a pro forma consolidated basis, and at the segment level. Guidance continues to reflect the Curation Foods’ Eat Smart Disposition on December 13, 2021, and incremental inflationary and supply chain headwind within the remaining Curation Foods business. Guidance metrics are provided below with growth figures that are compared to fiscal 2021:

Revenue from continuing operations (full year fiscal 2022):

• Pro forma consolidated: range of $179 million to $185 million (+4% to +8%)
• Lifecore segment: range of $105 million to $108 million (+7% to +10%)
• Pro forma Curation Foods segment (fiscal 2022, pro forma for the completion of the Eat Smart Disposition as if it occurred on May 31, 2021): range of $74 million to $77 million (+1% to +5%)
  

Adjusted EBITDA from continuing operations (full year fiscal 2022):

• Pro forma consolidated: range of $20.5 million to $23 million (+10% to +24%)
• Lifecore segment: range of $26 million to $27 million (+6% to +10%)
• Pro forma Curation Foods segment (fiscal 2022, pro forma for the completion of the Eat Smart Disposition as if it occurred on May 31, 2021): range of $3 million to $4 million (flat to +33%)
• Other (Corporate Expense): range of ($8.0) million to ($8.5) million; reflects a $3.5 million reallocation of corporate expense from the Eat Smart Disposition to the Other segment

Conference Call
The live webcast can be accessed via Landec’s website on the Investor Events & Presentations page. The webcast will be available for 30 days.

Date: Tuesday, April 5, 2022

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.

A replay of the call will be available through Tuesday, April 12, 2022 by calling toll-free: (844) 512-2921 or direct (412) 317-6671, and entering code 13728030.

About Landec Corporation
Landec Corporation (Nasdaq: LNDC) is a leading innovator of diversified health and wellness solutions with two operating businesses: Lifecore Biomedical, Inc. and Curation Foods, Inc. Lifecore Biomedical is a fully integrated contract development and manufacturing organization (CDMO) that offers highly differentiated capabilities in the development, fill and finish of complex 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. Curation Foods is focused on innovating and distributing plant-based foods with 100% clean ingredients to retail, club and foodservice channels. Curation Foods brands include Yucatan® and Cabo Fresh® avocado products and O Olive Oil & Vinegar® premium artisan products. 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, including with respects to EBITDA, adjusted EBITDA, Lifecore segment adjusted EBITDA, Curation Foods segment adjusted EBITDA, and Other segment adjusted EBITDA. 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, Lifecore segment adjusted EBITDA, Curation Foods segment adjusted EBITDA, and Other segment adjusted EBITDA.

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.

LANDEC CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands, except par value)

LANDEC CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(Unaudited)
(In thousands, except per share amounts)

LANDEC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and in thousands)

LANDEC CORPORATION
SEGMENT RESULTS
(Unaudited and in thousands)

Non-GAAP Financial Information and Reconciliations

EBITDA and adjusted EBITDA are non-GAAP financial measures. We define EBITDA as earnings before interest, income tax expense (benefit), and depreciation and amortization. We define adjusted EBITDA as EBITDA before certain restructuring and other non-recurring charges. 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