Good morning, and thank you for joining Landec's First Quarter of Fiscal Year 2020 Earnings Call. With me on the call is Dr. Albert Bolles, Landec's Chief Executive Officer, and Greg Skinner, Landec's Chief Financial Officer.During today's call, we may make forward-looking statements that involve certain risks and uncertainties that could cause actual results to differ materially. These risks are outlined in our filings with the Securities and Exchange Commission, including the Company's Form 10-K for fiscal year 2019.Let me turn the call over to Albert.

Thank you, and good morning, everyone.As a leading innovator in diversified health and wellness solutions, Landec is comprised of two operating businesses, Lifecore Biomedical and Curation Foods. Lifecore Biomedical is a fully integrated contract development and manufacturing organization or CDMO, that offers highly differentiated capabilities for development, fill and finish of difficult to manufacture pharmaceutical products distributed in syringes and vials.As a leading manufacturer of premium injectable Hyaluronic Acid or HA, Lifecore brings over 35 years of expertise as a partner for a global and emerging biopharmaceutical and biotechnology companies across multiple therapeutic categories to bring their innovations to market.Curation Foods, our natural foods business is focused on innovating plant-based foods of a 100% clean ingredients to retail club and food service channels throughout North America. Curation Foods is able to maximize product freshness to its geographically dispersed network of growers, refrigerated supply chain and patented BreatheWay packaging technology, which naturally extends the shelf life of fruits and vegetables. Curation food brands include, Eat Smart fresh packaged vegetables and salads, Olive premium artisan oil and Vinegar products and Yucatan and Cabo Fresh avocado products.We are focused on creating shareholder value by delivering against our financial targets, strengthening our balance sheet, implementing our strategic priorities to improve operating margins at Curation Foods and investing in growth and driving top line momentum at Lifecore.For the first quarter of fiscal '20, consolidated revenues increased 11% to $138 million compared to the first quarter of last year. However, we experienced that planned net loss and a decrease in gross profit in EBTIDA during the first quarter of fiscal '20 compared to the first quarter of last year. This resulted in a first quarter net loss of $0.16 which met our guidance.We are reiterating our full year fiscal '20 guidance, which calls for consolidated revenue from continuing operations to grow 8% to 10%. EBITDA of $36 million to $40 million and earnings per share of $0.28 to $0.32. As we communicated last quarter, we expect to generate substantial profits in the second half of the fiscal year, and we are positioned to achieve our goals for fiscal '20, well our team is fully engaged in our strategy.As a reminder, the second half acceleration is due to three factors. Number one, the timing of revenues and profits at Lifecore. Number two, the timing in revenues and profits from the sale of the avocado products. And number three, the impact from our cost out initiatives, which we expect to yield significant cost savings in the second half of fiscal '20.Before I go into more detail concerning plans or fiscal '20 and beyond, let me turn the call over to Greg for some financial highlights.

Thank you, Al and good morning, everyone.Revenues increased during the first quarter of fiscal 2020, primarily due to the $16.2 million revenue contribution from avocado products, which were acquired on December 1, 2018, and from a $2.2 million or 4% increase in solid revenues compared to the first quarter of last year. These increases were partially offset by first, a $3.2 million decrease in green bean revenues, due to the extremely heavy rains and flooding in the Ohio Valley during May and June, resulting in yields of 35% to 50% of normal.Second, a planned $1.4 million decrease in revenues in the packaged vegetables in bags and trays business. And third, a $576,000 planned decrease at Lifecore. The Lifecore decrease was a result of lower fermentation revenues during the first quarter of fiscal 2020 compared to the prior year, due - primarily due to the timing of customer shipment within the fiscal year.The Lifecore revenue decrease was partially offset by a 49% increase in product development revenues, due to an increase in development activities during the quarter. Gross profit decreased during the first quarter of fiscal 2020 compared to the first quarter of last year, primarily due to a $548,000 decrease in the Curation Foods segment from an unfavorable product mix. And from a $453,000 decrease in Lifecore segment, as a result of a decrease in revenues and the timing of production within the fiscal year.Net income decreased during the first quarter of fiscal 2020 compared to the first quarter of last year, due to first, a $1 million decrease in gross profit. Second, a $3.1 million increase in operating expenses, primarily from the addition of Yucatan Foods.Third, a $1.3 million increase in interest expense due to the increase in debt from the acquisition of Yucatan Foods. And fourth, no increase…

Thanks Greg.We are confident about our plans to drive profitable growth in fiscal '20. Let me go into more detail about the progress we are making in our Lifecore, Curation Food business units. Lifecore continues to see momentum, benefiting from three industry trends. Number one, a growing trend among pharmaceutical and medical device companies to outsource development services and manufacturing.Number two, a growing number of products seeking FDA approval. And number three, the increasing trend toward injectable drugs. According to report, by global data [indiscernible], the projected incremental demand for injectable drug products is expected to increase by 75 million to 100 million units by 2023. As a highly differentiated and fully integrated CDMO, Lifecore is uniquely positioned to capitalize on these tailwinds.Through Lifecore's 35 years as a global leader in manufacturing premium injectable grade HA, Lifecore has developed the knowledge to process and manufacture, difficult to formulate and fill pharmaceutical products in both syringes and vials.This has allowed Lifecore to establish high barriers to competition and create unique business development opportunities, which will continue to augment its businesses on the pipeline of new projects to fill its long-term growth. This has been demonstrated by the 49% increase in our business development revenue during the first quarter of fiscal '20, compared to the prior year period.Lifecore is also making progress in late stage development customers from Phase 3 clinical studies to commercialization. The planned decrease in Lifecore revenues in the first quarter of fiscal '20 was due to time. We are on track to meet our 10% to 12% Lifecore revenue growth goal for fiscal '20 and Lifecore will be profitable for the remaining three quarters of fiscal '20.To meet future demand at Lifecore, we'll be investing an approximately $13 million of capacity expansion in fiscal '20. We continue to…

[Operator Instructions] Our first question comes from line of Brian Holland with DA Davidson. Please proceed with your question.

If you mentioned setting aside in guidance some cushion for sourcing volatility, where do we stand today within that range of outcomes? So in other words, to what extent did the rains and flooding in the Ohio Valley stretch that contingency? And then how quickly can the new produce sourcing initiatives you've spoken to - help to ease some of those pressures?

While a lot of our - Brian that's correct. A lot of our - from history, when you look at that - a lot of our contingency uses in the past are probably sourcing issues in the past, have been more of a second quarter, third quarter item. So when we were talking about originally what we had set aside for contingencies, most of that was associated with those quarters.By time we went out with our guidance for the year in July, we already knew about the green bean issues and the - for the first quarter. So that was factored into our guidance. So we still have a reasonable and what we feel is adequate - more than adequate contingency for the last nine months of the year.

Yes. I just want to add, that the over planning strategy is a new approach for us. You know, historically we have not been able to supply green beans, which is a very good product for us, during the holiday season.And we knew I mean, hurricanes happen every year. So we diversified a geographic regions over plan it and now we are in position, we believe to not be pro-rating customers as we have done historically, which we hope will begin to build that confidence in what we're doing.

Thank you, appreciate the color and clarity there. With respect to Yucatan, what else do we need to do with respect to heavy lifting there, right? So you've got the production started on time. Sounds like the staff is fully trained. What else do you need to implement there and what is the timing on that look like as we move through the balance of the year? And I'm thinking long-term about initiatives that you have there.

Well, you know, we've done a lot of heavy lifting during the summer months to build our staffs. Last year we had a high degree of turnover and we put in extensive training programs this year. So we have the staff in place. We are not seeing high turnover.And of course, we have started up on time with the low fruit. So that was an heavy lifting we did this year. I think, I've mentioned before we're putting in metrics that weren't there before, around, amount of pounds per day yields, et cetera.Looking forward, it's about automation for us. We still have a lot of people, particularly under second and tertiary packaging lines doing a lot of handwork. So we see automation there is a way that we will continually improve our margins, just like we're doing it in the Guadalupe facilities. We see that as an opportunity in the future as we get the capital to automate Yucatan.

Last one for me on the Yucatan, the Guacamole Squeeze product. Curious where the placement is in Walmart for the test? Are you sort of with the dips or with the condiments and where optimally would that product be placed as you think about broader distribution?

Yes. So we are roughly 1,300 Walmart's geographically dispersed. We are in the dairy section right now. We have some 16 ounce clock there and we work to the buyer to put it in there. So that's where we are now. We're just accumulating the data and we expect that from that we'll be doing lots of follow-ups with the buyer specific regions, stores to get and understand and mind the data and find the optimal place for us to put and might be a product that goes in more than one spot in the store.

Our next question comes from line of Anthony Vendetti with Maxim. Please proceed with your question.

Just to talk about a little bit more about the cost out initiatives and, you know, Al, since you came in, you've been focused on exiting low margin businesses or businesses that didn't make sense as part of the strategy going forward and focusing on high margin products. Can you just give a little more color about - around the exact specificity of those initiatives and what has caused them to get pushed out just a little bit into the second half of this year?

Well, there is actually several things that are going on, in the cost out program. We have been fairly aggressive where we can be taking out the low cost - or the high cost low margin SKUs, primarily in our fresh cut vegetable tray and bag line. So that's an ongoing process that we continually doing. The big part of cost out is the installation of the capital that allows us to automate. So that is ongoing. We - as we said, we are a little behind in Q2, but that's only a timing issue because of equipment. We fully expect that to recover in the second half. So we're really focused there on your automation side.And then thirdly, we have gotten very aggressive in terms of looking at - the kind of packaging we have - how much plastic do we have in the package? Do we have the optimal formulations? All those things we are actively looking at reformulating it, so that we don't disappoint our consumers, but we optimize what we're putting into our bags. That's ongoing and it's pretty much the third leg, if you will, the cost out opportunity that I see.

Any chance that this gets pushed out into - not just the second half, but into the fourth quarter? Or is it really just right now sounds like a little bit of a timing issue nothing major. And then as you're moving towards these high margin products and calling some of the lower margin products, do you expect because this quarter, right, be the revenue if we exclude Yucatan, which was down, I think 1.5% to 2% - 1.7% I think. Do you expect organic revenue growth to start to show an acceleration as we move into the second half of the year? Or is the current process going to prevent that from happening until fiscal 2021?

We see that the organic revenue will grow in the second half. As I mentioned, you know, our single serve salads are really growing - really well for us at retail. We've got a lot of work going on, improve the margins. I think, I mentioned we haven't proved by 460 basis points. So you know our sales continue to grow. We also have a whole new line of restage coming with Eat Smart. It's been a long time since that brand has been refreshed, that consumer data that says, we can drive velocities by the improvements and changes that we have done to the brand restage.And you'll see that, it's going to be implemented in January. And we have a whole lot coming on as well, which we're projecting a bumper crop and that will continue. And then the second half as well, we see more organic growth coming from our Yucatan line and from Squeeze, continuing to national roll-off.And you know, just your first question, I don't see - we're not forecasting - we're confident about our cost out number for the year. But cost out is going to be a way of life here. And, we see more in further years, as I mentioned, there is opportunity in Yucatan, and we'll continue to be cost out as part of our culture to improve our margins and our profitability as we continue. And you know, the one area that we still have under investigation is optimizing the network.There were lot of facilities and we're looking at those - some of the non-strategic assets, procurement logistics. We have a full team dedicated to that and expect to start to see some impact of that, not only in the second half, but in the fiscal year '21 as well.

[Operator Instructions] Our next question comes from the line of Chris Krueger with Lake Street Capital Markets. Please proceed with your question.

Just a couple of questions on the new products. First, on the Guacamole Squeeze product, I believe you stated you're testing at about 1,300 Walmart stores. Is there a timeline for that? How long the test phase will take?

Yes. Typically, it's around - about three months, it is the typical test. We've been out there three weeks now, maybe four. We haven't been at all Walmart's, for that a lot of time. But I will tell you, we're getting into the data store-by-store and are seeing some encouraging results.So we plan on continuing that task. There is a lot going on here with placement, price point - all these things that we just want to test with a partner learn and then we're making plans now for the national launch. You'll see the national launch will be available in the second half of the year, Q3.

We'll see national launch not just Walmart but other stores as well?

Yes.

Okay

We're planning on other retailers and maybe even clubs.

And then just on the curiosity, how long did it take to develop that product?

Well there were some early prototypes done in Q1. I think Q4, Q1 and frankly when I saw and we got into the consumer insights, we accelerated the launch of that product. We wanted to be first mover in the category, and we also have some opportunities to create some competitive barriers to competition.You'll probably see other Squeeze packages come some follow us, but right now the feature that we are really emphasized on is that we have this proprietary nozzle closure principal package that once you use it, air doesn’t go back in the package and it doesn’t brown which is one of the number one consumer complaints of guacamole.So there is very little waste with this product. So we - it’s that when we move from the back burner to the front burner got focuses resource designer, put my project management team in place, and executed it I think very well given the short period of time we did.

Okay. And my last question is on the BreatheWay Technology to be used for the supply chain of perishable items. I believe in your initial press release you indicated you had a customer already using it for raspberries. Is there a supply - is there a pipeline building within that product and what you see as the market opportunity?

So we started with - we started testing with Driscoll's is the largest berry manufacturer in the world and they want to start with raspberries because that's the most perishable berry there is. So we are testing with it now. We're supplying the film and our BreatheWay patch and then we will be retrofitting it on their existing berry launch. So it's in test now, we’re working with them on the details for ramping it up.But it's a great opportunity for us because it's a low capital play for us and it takes advantage of scaling the BreatheWay Technology which we historically have not really been able to do and provide great value to not only just those but to the customers and to consumers. And we have plans for other adjacent fresh categories as well that are separate from berries that we’ll be testing in the upcoming months.

Our next question comes from the line of Mike Petusky with Barrington Research. Please proceed with your question.

So on the acceleration guidance in salad going forward how much of that hinges on new products et cetera?

Well, as I said our single serve salads are growing and have been growing fairly rapidly. So our focus there is to continue to fuel that at retail that's where we are growing and to improve our margins. We do have a new line that we plan to introduce in the second half of the year. We have a major customer who has already agreed to put it into test with us. So we will continue to add innovation to our salads but we’re going to be very, very targeted in what we do.And we have hired a outside firm innovation firm to help us in terms of being able to find insights with consumers that we can apply to salad. So you're not going to see what we have historically done which just to put a lot of salads out there and see if they stick. We’re doing a much better job upfront and in consumer insights partnering with customers and putting a test and learn process that we can learn together and not pay a high cost of [tuition] in case it doesn't work.So we have taken a far more targeted approach, but certainly the Eat Smart salads is an area that given where things are going with plant based proteins and just people eating more as I mentioned in my upfront talk that the whole area is plant based foods is really growing. We have a lot of tailwinds here and there, and I think we’re just need to take better advantage of.

So it’s not entirely clear, so is the second half - really be acceleration for the rest of the year as I am reading normally, is that around an acceleration in single serve and on new products introduction or is that…

So, there is three things so just to be clear, so one is single serve is growing and our focus is to improve the margin as it grows. Number two as we’ll be testing a new line in the second half of the year. And third as I had mentioned on the previous call that, we have a whole restage going out in the Eat Smart brand that we've done several months of testing on and believe that’s going to drive velocities of our existing products.It's been long time since it’s been a refresh of the Eat Smart brand and it’s frankly outdated and we have some temporary packaging graphics that we believe will improve our velocities.

And just a question around the guidance, the third consecutive quarter there wasn't any bump from the fair market value of Windset investment running through the income statement. And I guess what I’m wondering is what’s assuming for the year in terms of that income statement line in your guidance? Thanks.

Well right now we just got a new five-year plan from them and whenever we get a new one it kind of reset everything, and then they will be given us their new budget for 2020 coming up probably not until the third quarter. So I would assume for now that the growth as we get closer to the call date is going to slowdown. And so I would think somewhere in the 300,000 range per quarter is probably a reasonable estimate going forward.

And you’re seeing 300,000 in the second quarter?

That is part of our guidance.

And then just last question, just in cash flow if you mentioned that cash flow from ops and CapEx for the quarter? Thanks.

Going forward.

No, no for Q1?

The CapEx - I'm sorry say that again.

Cash flow from ops and CapEx?

CapEx for the quarter was about 10 million which is about a quarter of the low end of our range for the year and cash flow from operations going to approximate our loss.

All right, very good. Thanks guys.

Slightly higher.

Mr. Bolles we have no further questions at this time. I would now like to turn the floor back over to you for closing comments.

Once again thank you for joining us today and for your ongoing interest in Landec. Thank you.

Ladies and gentlemen this does concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.