Local Bounti (NYSE:LOCL) reported second-quarter revenue growth and a narrower adjusted EBITDA loss as the controlled-environment agriculture company expanded retail distribution, reduced overhead expenses and continued operational improvements across its facilities.
Revenue for the quarter rose 14% year over year to $13.9 million, compared with $12.1 million in the prior-year period. Revenue also increased about 4% sequentially from $13.3 million in the first quarter. Interim Chief Financial Officer and Chief Accounting Officer Tony Hughes said the growth was driven by increased production and higher sales from the company’s Texas, Georgia and Washington facilities.
Retail expansion and salad-kit pilot
President and Chief Executive Officer Kathleen Valiasek said Local Bounti is relaunching its single-serve salad kit line following discussions with a major retailer. The company and retailer agreed to a pilot launch across approximately 400 Mid-Atlantic stores this fall.
The company’s existing commercial base continued to serve roughly 13,000 retail doors. Two previously announced customer programs—a six-SKU rollout at more than 250 Harris Teeter stores and an agreement with a regional retailer operating 160 stores—are fully launched and performing in line with expectations, Valiasek said.
- In July, Local Bounti launched with a new Mid-South retail partner, offering five SKUs at approximately 66 stores.
- In early August, the company launched with a new Rocky Mountain retail partner, offering four SKUs at approximately 110 stores.
- Between the first and second quarters, the company won bids extending supply agreements with multiple national retail accounts across baby leaf lettuce and organic butter lettuce product lines.
Valiasek said the company’s Caesar Romaine salad kit continued to perform well. An additional distribution center secured in the first quarter began operating in May and was tracking in line with the product’s prior velocity, she said.
The company also sees an opportunity in arugula, where Valiasek said conventional supply chains have struggled to meet demand. Local Bounti is continuing discussions with retailers about its greenhouse-grown arugula offerings.
Food-safety discussions gain prominence
Valiasek said recent industry developments have increased retailer interest in food safety, traceability, water sourcing and environmental control. She said retailer conversations that historically focused on cost and availability are increasingly considering how and where produce is grown.
Local Bounti’s controlled-environment agriculture model grows plants from seed to finished package in a captive environment, which the company said can shorten the supply chain and support traceability. Valiasek said indoor production removes certain risk pathways associated with open-field farming, including exposure to contaminated irrigation water and wildlife, while acknowledging that no system eliminates risk entirely.
She said the changing retailer focus is not expected to create demand immediately but could support long-term growth as retailers and consumers place greater emphasis on product sourcing and production methods.
Margins and operating initiatives
Second-quarter adjusted gross margin was 27%, excluding depreciation, stock-based compensation and other non-core items. That compared with 30% in the year-ago quarter and about 29% in the first quarter.
Hughes attributed the lower margin to Local Bounti’s effort to diversify its channel mix at the Georgia facility, which created temporary packing inefficiencies. He said those processes have since been refined and implemented. The company expects higher retail-channel penetration and lower input costs to support margins over time.
Adjusted general and administrative expense declined 17% year over year to $4.1 million from $5 million, and was unchanged from the first quarter.
Valiasek said tower upgrades completed last year at facilities in Georgia, Texas and Washington are delivering roughly 10% higher yield capacity than before the upgrades. Yields remain at the highest levels in the company’s history, she said.
Selective investments at Local Bounti’s California facilities are intended to improve efficiency in legacy assets and strengthen its living butterhead lettuce operations. The company continues to believe the projects can increase yield by as much as 20% as they advance through the year. Initial investments at one California facility have already resulted in an approximately 10% increase in total production from the prior-year period, according to Valiasek.
The company also cited lower seed costs, which declined approximately 20% year over year through more efficient seeding practices. Local Bounti expects further savings from procurement, maintenance, labor efficiency and freight management initiatives.
Net loss, liquidity and outlook
GAAP net loss was $19.8 million, compared with $21.6 million in the prior-year quarter and $12.7 million in the first quarter. The year-over-year improvement reflected a $1.5 million improvement in loss from operations, lower operating expenses and a modest reduction in net interest expense, Hughes said.
The sequential increase in GAAP net loss was largely due to non-cash items. The fair value change in warrant liabilities shifted from a $5.2 million gain in the first quarter to a $1.4 million loss in the second quarter, driven by changes in the company’s stock price.
For the first half, revenue increased 15% to $27.2 million, while adjusted EBITDA loss improved about 24% to $11.5 million from $15.3 million a year earlier.
Local Bounti ended the quarter with $10.1 million in cash equivalents and restricted cash, down from $18.8 million at the end of the first quarter due to cash used in operations. Subsequent to quarter-end, the company received an additional $12.5 million investment from an existing strategic investor. Hughes said the investment was not included in the reported quarter-end cash balance and follows a $15 million investment received in March.
Management said revenue growth and continued cost discipline remain its primary levers toward achieving positive adjusted EBITDA.
About Local Bounti (NYSE:LOCL)
Local Bounti Inc is a technology-driven indoor farming company that cultivates non-GMO leafy greens, microgreens and culinary herbs in controlled environment agriculture (CEA) facilities. By leveraging its proprietary Hybrid Growing System, the company maintains precise control over lighting, temperature and nutrient delivery, enabling year-round production of high-quality produce free from pesticides and seasonality constraints.
Headquartered in Montana, Local Bounti operates multiple cultivation centers across the United States, each designed to maximize water efficiency and minimize land use.
