Local Bounti Posts 28% Sales Gain in Q2

Key Points

• GAAP sales rose 28% year over year to $12.1 million in Q2 2025 but missed the GAAP analyst estimate of $12.4 million.

• Adjusted EBITDA loss improved to $6.5 million, but profitability remains delayed, with positive adjusted EBITDA now expected in early 2026.

• Operating expenses and administrative costs declined on an adjusted basis, with further cost reductions targeted.

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Local Bounti (NYSE:LOCL), a controlled environment agriculture company specializing in sustainably grown produce, reported its second quarter 2025 earnings on August 13, 2025. The most significant news from this release was that while sales grew significantly compared to the prior-year quarter, GAAP revenue of $12.1 million fell short of the $12.4 million analyst consensus and management’s upper guidance range. Adjusted gross margin inched higher to 30%, and net loss (GAAP) narrowed due to lower interest costs following recent debt restructuring. While the company continued to make headway on disciplined cost controls and showcased further improvement in operational efficiency, the quarter’s results did not meet revenue growth expectations and profitability targets were pushed further out.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Business Overview and Strategic Focus

Local Bounti (NYSE:LOCL) operates indoor agriculture facilities that use its proprietary Stack & Flow Technology to produce leafy greens, herbs, and salad kits. The company grows vegetables in hybrid facilities, combining vertical farming and greenhouses, which enables it to maximize production yield per square foot and reduce input costs like water and land. It supplies produce to approximately 13,000 stores across 35 states, with major retail partnerships in place.

In recent quarters, the company has focused on increasing production efficiency, controlling expenses, and scaling up retail distribution. Key priorities include expanding commercial output from newly upgraded facilities, launching new product lines, and leveraging sustainability standards as a market differentiator. The business's long-term success hinges on converting facility investments into higher sales, improving profit margins, and sustaining retail demand through innovation, efficiency, and strategic partnerships.

Quarter Highlights: Financials, Operations, and Product Initiatives

GAAP sales reached $12.1 million, up 28% from the previous year. This growth was driven by increased volume from the Georgia facility and contributions from newer sites in Texas and Washington. However, this GAAP revenue result was approximately $0.3 million below the consensus projection of $12.4 million, and landed at the low end of management’s earlier guidance. Analysts watched this closely, as production ramp-up did not fully translate into revenue momentum.

Adjusted gross margin, which excludes non-cash costs like depreciation and stock-based compensation, nudged up to 30.0%. This small improvement reflected gains in production efficiency, notably from upgrades at key facilities and yield optimization initiatives. Net loss (GAAP) narrowed to $21.6 million, compared to a $25.3 million loss in Q2 2024. The primary driver of this improvement was reduced interest expense following an early-2025 debt restructuring, as described in management’s remarks. Adjusted EBITDA – which strips out certain non-cash and non-core expenses to provide a clearer measure of operating performance – showed a loss of $6.5 million, better than the $8.3 million adjusted EBITDA loss in Q2 2024 and improved from the prior quarter's $8.8 million adjusted EBITDA loss.

The quarter saw several operational milestones. In Texas, a major facility reconfiguration finished in late July, and by early August, the plant reached full harvestable capacity. New automated harvesting equipment was installed and is expected to deliver cost savings and margin improvement in the coming months. The Georgia site is completing a series of tower upgrades to maximize output, with the same enhancements planned for Texas and Washington later in the year. Management highlighted a seed cost optimization program, rolled out in Georgia earlier and now being extended company-wide, with aims to further reduce input costs throughout the third and fourth quarters.

Product innovation and distribution expansion were also important themes. The company introduced a salad kit line in April 2025, adding to its portfolio of grab-and-go convenience products. New listings, such as a family-size Caesar salad kit with a major multinational retailer, are slated for launch early in the fourth quarter. The partnership with a leading home delivery service continued to expand, with a total of six private-label offerings rolling out by mid-September. Walmart distribution now encompasses 13 regional centers for conventional Living Butter Lettuce and 191 stores for baby leaf varieties. These moves are part of a broader retail strategy to drive growth through both in-store and online channels.

On the sustainability front, the company continues to use 90% less land and water versus traditional outdoor agriculture. These environmental claims remain an important part of its positioning and brand promise for both consumers and retail buyers.

From a capital and liquidity perspective, the company closed a $10 million convertible note and reduced senior debt principal by $10 million. As of June 30, 2025, cash and cash equivalents and restricted cash totaled $13.2 million. Despite improvements from recapitalization and the cancellation of $197 million in legacy debt, the company remains highly leveraged, with total liabilities of $559.5 million (GAAP; as of June 30, 2025) and potential for considerable share dilution in future periods due to warrants and preferred equity issued to fund growth.

Outlook and What to Watch

Management expects modest sequential sales growth in Q3 2025, followed by faster gains in Q4 as full benefits from facility upgrades, increased yields, and new product offerings begin to flow through. The company again acknowledged, however, that the pace of revenue ramp will depend on the rollout schedules of large retailer partners and on successful retail activations.

The company now targets positive adjusted EBITDA (non-GAAP) in early 2026, revising its previous goal of reaching this milestone in Q3 2025. Management indicated that ongoing cost control, the outcome of new product releases, and the realization of efficiency gains will be critical to meeting future targets. Persistent cash burn and sustained leverage make liquidity an area to monitor closely in coming quarters.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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