Shares of Landec (LNDC -1.00%) plunged after the company delivered disappointing earnings results for the fiscal first quarter of 2022. The stock was trading down 10.5% as of 11:28 a.m. EDT on Thursday.
The natural foods producer reported a revenue decline of 5.5% year over year, which was roughly in line with analyst estimates. However, the bottom line performed worse than expected, with Landec reporting an adjusted net loss of $0.23 per share, compared to expectations for a narrower net loss of $0.11.
The Curation Foods business was the main culprit, which posted a 6% decline in revenue and a 129% drop in earnings before interest, taxes, depreciation, and amortization (EBITDA). Management has been simplifying operations at Curation Foods to improve profitability in that segment, but it continues to be an anchor on the company overall.
While management was pleased with Curation's gross profit margin of 11%, it overshadowed EBITDA growth of 57% in the Lifecore biomedical segment. As Lifecore President James Hall explained on the earnings call, the business is a "beneficiary of the significant trends toward outsourcing of new drug development. Hall added that Lifecore's "syringe and bio-filling capabilities align perfectly with the powerful trends in new injectable drug applications that are utilizing those modalities."
Management is sticking with its full-year outlook, despite the recent earnings shortfall. The company is calling for revenue from continuing operations, which excludes the strategic contraction of the Curation Foods business, to be flat to up 1.8% in fiscal 2022, while adjusted EBITDA should improve between 6% to 13% year over year.
Going forward, CEO Albert Bolles sees a "nimbler organization," which translates to better margins. While there is more work to do, Bolles said, "We have a solid foundation at both our businesses and expect to drive more consistent results going forward as we work toward delivering enhanced shareholder value."