The funding comes from existing investors including Fidelity Management & Research Company and BNP Paribas.
Under the terms of the offering, Local Bounti has agreed to issue and sell in a private placement an aggregate of approximately 9.3 million shares of the company's common stock at a price per share of $2.50, the closing price of the company's common stock on October 20, 2022.
Local Bounti said it would use the funding to significantly improve crop turns, increase output, and improve unit economics at its controlled environmental agriculture (CEA) facilities in California, Georgia, and Montana with plans underway to open facilities in Texas and Washington.
"We are very focused on delivering high quality, great tasting produce grown locally and closer to the consumer and this financing allows us to continue to strategically expand our national footprint to meet robust demand from our existing customer base," said Kathleen Valiasek, CFO of Local Bounti.
The company is currently produced packaged leafy greens and premium salad kits, but has longer-term plans to explore to expand into high-value crops such as berries.
Driving efficient unit economics and profitability
Efficient unit economics have been the key to Local Bounti's success since launching in 2018, which co-CEO Craig Hurlbert credits to its Stack & Flow Technology combining the best of vertical and horizontal farming along with shrewd business decisions such as its acquisition of indoor leafy greens grower Pete's in March 2021, which immediately doubled its store footprint to 10,000 retail locations.
"The option to do either [buy vs. build] is something that will be part of our strategy we believe forever even as we grow out of the United States we’ll be looking for those kinds of things... the buy side of things will be part of the Local Bounti strategy because of Stack & Flow for a long time," Hurlbert said on the company's Q2 2022 earnings call.
And with the implementation of the company's patent-pending Stack & Flow growing technology, the yield output is on average 30-35% higher than the competition leading to more efficient unit economics, according to the company.
"You’re turning the farm more each year, with the same CAPEX and Op X so, by definition, your unit economics get better," Hurlbert previously explained to FoodNavigator-USA.
At its Montana facility (the company's first), for instance, annualized yields have improved 20% in the year-to-date ended July 22, 2022, compared to the prior year illustrating the company's ability to drive higher yields for current and future facilities.
The goal? To be cash flow positive
According to its Q2 2022 financial results, Local Bounti reported sales of $6.3m compared to $108,000 in the prior year period.
Adjusted gross margin percentage was 38% for the quarter (excluding depreciation, stock-based compensation, business combination-related integration costs, and business combination fair value basis adjustment to inventory).
Net loss was $31.7m in the Q2 2022 including $11.7m in stock-based compensation, $5.5m in interest expense, $1.3m of depreciation, $2.1 million of amortization, and other business-related expenses.
The company's management team reaffirmed its 2022 sales guidance of at least $20m and a drive towards further capital efficiency.
"Our primary objective is preserving cash, utilizing equity and debt and scaling up revenue as quickly as possible. All in an effort to get to cash flow positive. This performance was consistent with the plan and we are very pleased with the progress that we are making to expand capacity and generate growth," said Valiasek.