Lifeway Foods Inc (LWAY) 2015 Q4 法說會逐字稿

Greetings and welcome to Lifeway Foods fourth-quarter and full-year 2015 financial results.

At this time all participants are in a listen-only mode.

A brief question-and-answer session will follow the formal presentation.

(Operator Instructions).

As a reminder, this conference is being recorded.

I would now like to turn the conference over to Hunter Wells.

Thank you, please go ahead.

Good morning and welcome to Lifeway Foods earnings conference call to discuss the Company's results for the fourth quarter and 2015 fiscal year.

On the call with me today are Julie Smolyansky, President and Chief Executive Officer; Ed Smolyansky, Chief Operating Officer; and John Waldron, Chief Financial Officer.

By now everyone should have access to the release which went out yesterday afternoon at approximately 4:05 PM Eastern time.

If you have not received a release, it is available on the investor relations portion of Lifeway's website at www.lifewaykefir.net.

This call is being webcast and a replay will be available on the Company's website.

Before we begin, we would like to remind everyone that the prepared remarks contain forward-looking statements and management may make additional forward-looking statements in response to your questions.

These statements do not guarantee future performance and therefore undue reliance should not be placed on them.

Similarly, descriptions of Lifeway's objectives, strategies, plans, goals or targets contained herein are also considered forward-looking statements.

Actual results could differ materially from those projected in any forward-looking statement.

Lifeway assumes no obligation to update any forward-looking projection that may be made in today's release or call posted on our website.

And with that I would like to turn the call over to Lifeway CEO, Julie Smolyansky.

Thanks, Hunter.

Good morning to everyone who's joined us on the call today.

I will begin with an overview of our business for the fourth quarter and fiscal 2015 and then provide an update on our strategic initiatives.

Next we will discuss our financial results in more detail and then we will open up the call to take your questions.

Before we begin, I'd like to welcome John Waldron, who's been appointed to Lifeway's new CFO at the end of last year.

Our former CFO, Ed Smolyansky, will remain with us as Chief Operating Officer.

John brings over 25 years of financial experience most recently as a financial business consultant at Tatum where he consulted a large company on effective controllership capabilities.

Prior to his position, he served as Vice President, Controller and Chief Accounting Officer at Campbell Soup Company and has also held various financial leadership positions with private and public companies including Navistar, RR Donnelley, Dominic's Supermarkets and Arthur Anderson.

We are really excited for John to join our team and he looks forward to meeting with many of you at upcoming investor events.

Welcome, John.

Now I'd like to discuss our recent business performance.

In 2015, we achieved net sales of approximately $119 million.

Our top-line results demonstrate that the continued demand for Lifeway's diverse portfolio of unique and healthful products, Kefir products.

And 2015 was a transformative year for us.

We made a strategic investment to strengthen our business, launched innovative new products, grew distribution across new and exciting and existing retail channels and planted seeds for international expansion.

Most excitingly, we believe that many of our new and upcoming product launches will enable us to enter entirely new sales channels not previously penetrated such as drug stores, gyms, specialty fitness locations and even schools and universities.

I will share a bit more about my future vision for Lifeway later on today's call but I'd like to review some of our highlights from this past fiscal year.

In 2015, increased sales volumes of our Kefir products coupled with the benefit of lower milk prices enabled us to achieve gross margin expansion of approximately 230 basis points to 26.6% and diluted earnings per share of $0.12.

We expect milk prices to be comparable in 2016.

In August, we commenced Kefir production at our new facility in Waukesha, Wisconsin.

This was a vital and important step for our organization.

As discussed in our third-quarter call, capacity constraints in the third quarter of 2015 hindered our ability to continue to grow sales.

However, as we have made significant progress in ramping up this plant and now we have two additional production lines up and running, this facility will also enable us to process raw milk and produce our own 32 ounce bottles.

More importantly, we believe this facility will support our growth for the next several years and we will further scale up the facility to meet growing demands.

I'd also like to acknowledge the important contributions that our Waukesha team has made over the past several months with this initiative.

It's been remarkable working with them.

I would now like to provide you all with an update on our strategic plan and long-term vision for Lifeway.

We continue to be focused on three key initiatives expected to propel our growth in 2016.

These initiatives include, number one, increasing Lifeway's brand awareness.

Number two, developing new innovative products.

And finally, number three, expanding distribution across sales channels and geographies.

Introducing Kefir and Lifeway brands to new consumers continues to be an important component of our marketing strategy.

Last year we embarked on a series of initiatives to highlight Lifeway as the leading brand in Kefir that we have worked for almost 30 years to grow.

This year we will be continuing that trend with messaging that will give consumers a deeper understanding of our brand and assortments of products.

This will be an effort with multiple components including media placements and coordinated product demo strategy to introduce shoppers of mass retail grocers to our ProBugs for kids line, which has traditionally been one of our top-performing items at Whole Foods.

As the leader of and producer of Kefir, we want to take steps to continue to share the healthy benefits associated with consuming probiotics through our drinkable Kefir.

Bacteria has become a hot topic and media trend pieces on the micro biome often reference Kefir as one of the best sources of probiotics.

Lifeway even provided refreshments for a special event at the American Museum of National History's new micro biome exhibit called The Secret World Inside You.

Day by day new research points to the link between gut health and overall health and we've established our role as thought leaders on this popular topic.

This has led to partnerships with some highly influential people who have helped us share the benefits of Kefir.

American actress Sophia Bush was recently seen drinking Lifeway protein Kefir for post-workout fuel.

She was recently featured in US Weekly shopping for Lifeway and even shared -- Us Weekly, excuse me -- and even shared a picture of her drinking protein Kefir with her 2 million fans on Instagram.

Chef Seamus Mullen has incorporated Lifeway organic whole milk Kefir products into his menu at his New York restaurant and Chef Paul Kahan filmed a recipe video at Publican in Chicago that included Lifeway Farmer's cheese.

Additionally in February, we teamed up with designer Cynthia Rowley to launch a limited edition Hibiscus rhubarb pie for spring.

This bottle features a bold floral pattern in celebration of Rowley's new line of fitness apparel.

This collaboration has already generated press and we were recently featured in Fast Company for our successful unconventional marketing strategy and ability to make Kefir relevant and exciting.

The new flavor is hitting stores now and is just another way we have successfully integrated both components of a healthy lifestyle across multiple platforms in affordable, fresh and fashionable ways.

One of my most exciting jobs as CEO is working with my team to develop new flavors, products and completely new ways to realize the benefits of probiotics.

2016 is expected to be another year of exciting product launches and we gave our first peek last week at Natural Products Expo.

In addition to the Cynthia Rowley flavor I mentioned earlier, we have also introduced new organic whole milk flavors including strawberries and cream, peaches and cream, coconut and cream and lemon meringue.

Taste preferences change with the seasons and we are increasingly focused on introducing new products that are relevant to specific time of the year in order to generate excitement around a new flavor and allow us to secure additional shelf space.

We also believe that our new flavors not only bring variety to our existing consumer base but also present another way to attract consumers who have yet to yet discover Kefir.

Our R&D department has been working diligently to develop products that we believe have the potential to leverage our brand leadership position in the probiotics space.

A key area of interest for us is in the supplement aisle and we are currently refining concepts that we expect to launch.

Moving on to our next area of focus, we expect to make continued progress in expanding our distribution.

Some recent highlights include ProBugs and protein Kefir added over to 1000 Walmart stores, private label distribution at two major chains, five new SKUs of organic low-fat Kefir to 75 new (inaudible) baskets representing a significant increase in our shelf presence at that location.

ProBugs Blast movies to be added at 15 Stratford schools, accelerated preschools, campuses in Silicon Valley.

Harris Teeter and ShopRite have expanded their space and additionally, Lifeway Culture Shop, a concept that we feature at Freshy Food retail restaurants has received a national rollout authorization and so we are expanding with one of the hottest grab-and-go retail outlets.

We've also made important progress towards expanding our distribution internationally.

Last year we announced that we've entered Mexico and although still a small percent of our overall sales, early signs of success indicate the potential for a meaningful future growth within this market.

Today in Mexico we are selling to Suprema, Costco and Walmart locations.

We continue to make progress in our robust business and comprehensive marketing plans to support future expansion with Mexico.

We will start distribution in Ireland in the late spring and will be distributed in roughly half of the Irish market.

2016 is expected to be an exciting year of improved performance for Lifeway and the successful changes we've instituted in fiscal 2015 have strengthened our foundation and better positioned us to achieve long-term growth and profitability.

We continue to focus on our strategic initiatives and are confident that our plans for future growth will result in strong business performance and increased value for our shareholders.

I will now turn the call over to John to discuss our financial results in more detail.

John.

Thank you, Julie.

Thank you for the kind words and the warm welcome.

I'm grateful and pleased to be able to serve here at Lifeway.

It's a pleasure to be with all of you on the call this morning.

I look forward to working with all of you and speaking with you over the coming months to develop a relationship of confidence and trust.

I'd like to take some time now to review our financial results for the fourth quarter and the full-year ended December 31, 2015.

Fourth-quarter net sales decreased 2% to $29.5 million from $30.2 million in the same period last year.

Fourth-quarter net sales were favorably impacted by volume which contributed 4.9% to net sales performance and it was driven by growth in our drinkable Kefir lines.

The overall volume expansion was unfavorably impacted by significantly higher customer promotional allowances which reduced net sales by approximately 6.9%.

Gross margin improved to 24.2% from 22.9% in the year-ago period, or approximately 130 basis points.

The margin improvement was driven primarily by lower milk prices partially offset by an increase in trade promotion and higher labor costs.

Selling expenses decreased approximately 28% to $3.3 million during the fourth quarter of 2015 from $4.6 million in the year-ago period, reflecting lower salaries and lower travel costs.

General and administrative expenses increased $2.5 million to $4.8 million from $2.3 million compared to the same period last year.

The increase is primarily a result of higher professional fees reflecting inefficiencies associated with the change in our certified public accountants and legal fees associated with matters related to our delayed SEC filing.

The effective tax rate was 50.6% in the fourth quarter of 2015 compared to 71.4% in the fourth quarter of 2014.

The elevated tax rate in the year-ago period is due in large part to the nearly breakeven performance of that quarter coupled with the provision we made for tax exposures in that quarter.

Net income in the fourth quarter was approximately $328,000 or $0.02 per diluted share compared to a loss of $26,000 or $0.00 per diluted share in the same period last year.

Turning now to our full-year results, net sales were $118.6 million during the year ended December 31, 2015 compared to $119 million last year.

Gross margin improved to 26.6% from 24.3% in the year-ago period.

As Julie mentioned earlier, this improvement was driven primarily by lower milk prices partially offset by an increase in trade promotion and higher labor costs.

Selling expenses decreased approximately 12% to $12.8 million in fiscal 2015 from $14.5 million in the prior year.

The decline was driven by lower salaries and travel costs partially offset by higher advertising costs.

General and administrative expenses increased $4.3 million to $13.7 million in fiscal 2015 from $9.4 million last year.

The increase reflects higher salaries and increased professional fees.

Again, the increase in professional fees is primarily associated with inefficiencies associated with the change in our certified public accountants and elevated legal fees associated with matters related to our delayed SEC filings.

The 2015 effective tax rate for the full year was 50.6% compared to 53.4% last year.

The higher tax rate for 2014 period reflects provisions we made in 2014 for income tax exposures of prior periods.

Net income was $2 million or $0.12 per share for the full year ended December 31, 2015, unchanged from the $2 million or $0.12 per share we reported in fiscal 2014.

Under our share repurchase program, we bought back 136,000 shares of common stock during the fourth quarter of 2015.

The share repurchase had no remarkable impact on earnings per share.

That concludes my planned remarks and now I'd like to turn the call back over to Julie.

Thanks, John.

A year of transformative changes is now behind us and we are more confident than ever in our future opportunities.

We are better positioned over the long term to meet the increased demand for our products, support our continued growth both domestically and internationally, grow our top and bottom line and drive value for our shareholders.

That concludes our overview for the fourth quarter of fiscal 2015.

Ed, John and I would now like to open your call for questions.

Operator?

(Operator Instructions).

Eric Gottlieb, D.A. Davidson.

I'm looking a little bit at SG&A.

I know you gave some details there.

Commissions were down.

Advertising was down a little.

Employee expenses were down.

Salaries up.

I'm curious what's your expectations for next year because as you look at where it was versus where we were prior in the year, it's a little below that growth rate.

This is John.

Good morning and it is nice to meet you.

I would tell you firstly as you know, we are not yet at the point where we are providing guidance into the future and it's always a little challenging to give some dimensionality to the profile of future profits.

But I can call out a couple of items and one in particular would be that we have some elevated costs here in 2015 that we are clearly working towards not recurring in the area of professional fees.

And so we would expect there to be favorability in that dimension of the G&A line.

And then as it relates to things like advertising, I would tell you that we are being thoughtful about how to make investments in 2016 and we've kind of got a stepped-up level of spending that we will step into as the volumes move north.

And so the objective here is to invest for growth.

If the growth comes, we would intend to step up things like advertising in 2016.

Aside from that, I think most of the cost profile, particularly on a percent of sales basis we would expect to see similar results to what we've reported for 2015.

Got it.

Okay.

The distribution gains that you talked about, have they all taken hold yet, or are some yet to be impactful to the fourth quarter?

I was just going to suggest that this business is one where unlike obviously the larger more mature companies, distribution gains are in front of us for sure and some of the distribution gains that I think Julie commented on are just -- they are very recent and so we do anticipate distribution gains in 2016.

I can't measure it and I couldn't give it the color that I think Julie or Ed could but distribution gains are on the horizon for us.

Yes, and those rollouts, they tap in throughout the year and throughout the quarter like the Freshy deal for example will be a rollout over the course of the year store-by-store.

That's one that takes a little more of an extensive effort by multiple partners.

And then the retailers all roll out through the course of their product changes, shelf changes as well.

So it sort of a steady build over the course of quarters but we are looking at a lot of exciting trends.

Whole milk is really back in style, I guess and really trending up.

And so there's a lot of excitement around whole milk, Kefir, and other whole milk products.

You might have noticed a label change that we made recently on our conventional line sort of continuously to make the look of the product modern and update the fonts as our eyes and look for labels and design changes over the course of time.

So you'll see lots of those little changes happening.

But yes, distribution gains kind of happen continuously.

All right, great.

So I'm looking at the growth sales, growth and gross sales for drinkable Kefir.

It seemed to outpace the rest of your product line.

So are there many components to drinkable Kefir that we can break out and I'm wondering if there's any particular product lines that have been somewhat of a source of strength and any have been struggling of late?

That's a big question.

So the category in general of Kefir grows dramatically, is continuing to grow.

The category within probiotics are growing globally and in the next five years will double over five years and just really as I mentioned on the call, the micro biome and the bacteria research is really driving and pushing a lot of that growth and awareness around gut health and the benefits from everything from digestion to mental health and stress and anxiety, which is all new research just in the last three years.

But there's new research happening around cancer.

There's research happening around obesity.

So there's a lot of science behind the push for why I think that we are going to grow and we are in a position of strength with a strong foundation for 30 years being the leader in fermented dairy products.

And also have now the capacity to build out and the history and experience to lead the ship forward where a lot of companies that might be just jumping into this are going to make their 30 years of mistakes.

And so I think that puts us in a strong position in capacity.

This new Waukesha facility was very critical for us to elbow and push our way out.

When we knew two years ago let's say before we had Waukesha that we were going to be running into capacity restraints at this level that you kind of hold the horses a little bit and not push as hard.

But now that Waukesha facility was really a key to the future of Lifeway.

And so the drinkable line is expanding because there's gradual awareness by Americans but the world population around Kefir, specifically Kefir, that was a product in the Eastern European market that has expanded globally.

And in the United States, we still have a huge percentage of households that still don't know what that word is and what the product is.

So we have still lots of opportunities to grow our conventional line and our organic line because more and more consumers are looking for organic labeling.

They are looking for transparency and clean labels.

They are looking for alternative brands.

They are swaying away from the big food companies, big dairy companies so looking for these alternative brands, these more artisan, and Lifeway is definitely still a small brand even though we are one of the top dairies in the world, definitely in the United States and the leader in Kefir.

And then like so ProBugs, for example, is an excellent example of a product line that has tons of opportunity to scale.

We started that concept and innovated the pouch and started that distribution in 2007.

We are really the leaders on pouches and the kid's probiotics capturing a whole new generation of people that will know what Kefir is, feel comfortable with a sour culture dairy product.

And we've really expanded their taste palette, so then just as they grow up, we will move into different varieties of our line.

And because of Waukesha and the new facility and the new machinery that we've invested into expand ProBugs, that gives us the opportunity to now go to Walmart and go to a lot of other locations that we just simply could not even attempt to try to go because we just did not have the capacity.

But the difference on the machinery, we have four machines in Morton Grove that pouch 12 pouches a minute.

That's a very slow fill rate.

The new machine that we invested in in Waukesha is filling about 100 pouches per minute, so the difference is night and day.

And we know that it's successful, that it's a product that drives people to the category at Whole Foods.

We have the ability to capture that as stores like Target and Walmart are changing their shelf offerings to reflect the changing needs of consumers.

And so these are opportunities where we can really grow.

I just spent some time with the CEO of Target yesterday and listened to where they are focusing and one of their big areas of growth is wellness and incorporating better for you foods and healthier for you foods and transparency in the foods that they are offering.

And so Lifeway just becomes a really great partner in the changing patterns of consumer eating habits.

There certainly are products that are not doing as well as we'd like and we evaluate those, that data all the time and look for what's the purpose of that line.

It might serve a different purpose than just "sales revenue".

There are strategic results for why certain products are in our portfolio and some are not.

And then like I mentioned, the pills and supplements.

We know that some people are traveling too much and don't have accessibility to Lifeway all the time in their refrigerator, or maybe they are just being somewhat lazy about making sure that they are eating good for you foods and they just want the quick fix of a pill.

Or maybe we know that so many consumers are on various restrictive dieting from dairy free to Paleo or this or that, whatever name your current trend in diets and so some people might not want the dairy product, or are cleansing and are not doing dairy this week.

They can still consume Lifeway and we can still be the leader for them in their probiotic -- in their choice for probiotic.

So the supplement was very important in my opinion to also be a choice for consumers if they are not for some reason drinking Lifeway Kefir products.

Probably didn't answer your question or went too far but it's something that I'm very passionate about.

No, I appreciate the color.

That was very good.

One last question.

Promotions as a percentage were much higher than I expected.

I think you said last quarter that we should expect roughly the same level going forward.

Is there -- do you still agree with that?

Why the uptick this quarter and then what do you think we can look forward to?

Yes, I think promotions are really important.

It shows a retailer that we are interested in working with them and all the marketing support that you get out of running a promotion is important.

And of course I'm not naive to not see that there's going to be competition in the space.

We are doing so well.

We have 95% of the market share.

It's a hot space.

People are going to want to chomp a little bit away at that and so our goal is to continue to own the market share, to be the category leader and to fight our way for additional space when there are new things coming into the space.

And so we are very conscious of that and we know that we have to be strategic, but we also are the value -- we are the high premium product.

We don't want to over discount because we are a premium product and people should pay for a premium product.

So we look at that balance and try to strike it based on all various things happening in the environment from raw milk prices to other promotions that other companies are running or things happening on the shelf and all the various components that make those -- that we make decisions around.

But we are conscious of it and looking at it with a microscope, I think.

Okay, great.

Thank you.

With that, I will pass it on.

Howard Halpern, Taglich Brothers.

I guess to ask the question, a little more color on the promotional allowances.

Again, I know you just talked about it but going forward would you hope to be able to achieve gross sales growth and not have the promotional allowances take net sales to flat or down in future quarters?

(multiple speakers)

Let me just give a little bit better color on the promotion side.

So last year we had promotions at about 14% to 15%.

Historically we've targeted between 9% and 11%.

And last year was an anomaly year for us and what we tried to do and what we've tried to do with other years in the past is play around with the promotions.

And what we've seen is that we made a large investment last year in promotions that's already started to pay off very nicely in 2016.

But we are going to bring that number back down.

We are going to back to target normal historical levels between 9% and 11%.

And as competition does increase, like Julie alluded to, maybe in 2017 or 2018 we will again ramp up promotions and kind of bring more customers into the tent and then pull it back.

So I think what we saw last year was an increase in investment if you will and then I think in 2016 we are bringing it back down to our more historical levels.

Okay.

Could you talk a little bit about I guess sales in Canada and how brand awareness may be driving customers to purchase more as time has gone on?

Okay, so we launched in Canada in the middle of 2015 and we are really starting to get really good traction in Canada and of course utilizing our social media and all the different advertising avenues that we have, we are really starting to see a good push in Canada as well as Mexico.

And I think obviously those two countries being our neighbors are not really, they are international but they are not overseas or anything like that, giving us a really good ability to leverage what we've done in the states and bring that over across the border.

So I think we will slowly start to see Canada and Mexico be a really good addition to our portfolio.

Yes, but I also want to give perspective specifically on Canada.

Canada in general is a small market though.

It's the size of the United States with the population of California.

So just to give perspective, Canada is not any magic unicorn by any means.

Actually I'm more excited about Mexico because of the sheer volume is phenomenal, it's a very useful market, lots of young children and young parents and families which gives us a huge opportunity for our children's line.

And we know that obesity and diabetes is a big problem for the Mexican consumer in the market and there's a big attention on bringing healthier products to the Mexican people.

So that's gives us the strong position and they are very excited to work with us.

They were looking for higher-quality dairy products and they are excited to work with us and it's been just a really wonderful pleasure to work with the Mexican people.

And talking I guess about Mexico, how many SKUs do you have in Mexico now and then once it takes hold there, what's the -- how many SKUs do you hope to have maybe by the end of 2016?

Well, each retailer is different so some retailers are stocking our 8-ounce bottles and they have eight facings, four SKUs, eight facings.

Some have like in the club channel, we are doing like these box units, so they are bigger facings, larger shelf space.

So each account is different but they've got our 8-ounce product and they are looking to expand into a variety of other ones over the next three years.

We sort of have a rollout plan to expand with ProBugs and a whole bunch of other products, but it's definitely growing and the excitement is building around it.

And I guess I'm curious, what is the sales cycle or time of the year if you are going after schools and universities in the United States?

It's pretty much all year.

It's not like a particular cycle.

There's always ongoing meetings and appointments and rollouts.

It's all throughout the year.

It's not like a particular cycle.

Okay.

One final one for John, I guess.

Do you have maybe a range what we could expect for the tax rate going forward?

Yes, so I think in the last quarter we talked about the idea that the Company was experiencing an elevated tax rate and some of that we thought we could mitigate with some tax planning strategies which in fact we've now implemented at least some of those.

And so from a rate perspective, I would expect us to go back to something in the very low 40%s for 2016.

Okay.

Thanks a lot, guys.

Ivan Zwick, private investor.

Yes, my first question has to do with a couple of filings you made.

I want to be sure I totally understand them and I have a question on your (technical difficulty).

You had a filing on this bonus arrangement if you achieve certain levels.

I believe on revenues it was 50% in the quarter and on EBITDA it was 50% over a six-month period and then you also had a filing this morning, a 10-K that will be filed late.

I want a little comment on that also.

(multiple speakers)

Good questions; thank you.

I will just take the late filing reference that you made.

It's something that we would rather have not had to file but in fact if you look at the SEC's website, you'll see both the 10-K and the thing called (inaudible) and that was simply a mechanical problem we had last evening in getting the 10-K filed that pushed us beyond the 4:30 cutoff.

In fact by 5:30 last night, all the documents were filed, so there is no future filing that is yet to come with regards to the 10-K.

It's there and it's filed.

Okay.

I wanted to make sure there was no additional cost with it.

And what about the bonus arrangement?

Am I correct on them the way I understand it?

Yes.

It's there for you.

I would tell you that, I think what's important about this is that we've now got a program that more clearly aligns performance with executive compensation whereas in the past that linkage wasn't as tight.

And so I think that's the positive way to think about that compensation program.

And then I would tell you from a performance perspective, elevated performance will yield higher executive compensation (technical difficulty) the executive competition would remain flat.

And so things are tied to performance, which I think is a good thing.

I don't have a problem with that.

If those goals can be achieved I think if there's any increase in sales in the quarter it's going to change the whole complexion of the Company.

So I have no problem with that compensation.

I just want to be sure that I understood it clearly.

Ivan, I don't think you are reading the filing correctly.

It's not saying that the incentivization is at 50% in revenue or a 50% increase in EBITDA.

There's a different way -- John, can you maybe better explain that?

All I can tell you is I think that what you are referencing is a weighting factor with regards to the performance.

The performance window is from 0% bonus effectively to 200% bonus and it is a graduated level of performance awards that goes in tandem with the growth.

And so for example as I said a minute ago, with 0% growth, there is no bonus opportunity and it elevates as we move up to the 20% level.

And I don't think there's an expectation of 20% lift at least with this next coming year.

So I think the performance will be wired to that -- compensation will be wired to that level of performance and we will comment on that matter as we proceed through the quarters.

Okay, so then I misinterpreted what I read there.

In other words, (multiple speakers)

As much as we'd all love to see 50% lift in the first quarter, that's not the way to read that.

Well the way Edward commented on the targeted growth of 9% to 11%, I didn't see how that was doable but I did want to ask the question.

Now I have a question on growth and I think as and Julie and Edward probably know, I'm an older competitive athlete who competes in weightlifting.

And this protein Kefir that you have, which I've tasted, I think has tremendous potential.

I know the place I work out has a tremendous amount of members.

And so I think there's a lot of people in that area today and more and more as health awareness becomes more important.

And I think that the protein Kefir has big legs, so to speak.

And I want to know just how you intend to really promote it.

I know I've told some people about it myself although it is not in our area and I want to know just how you are going to promote it because I think that could be a super product on your SKU.

Right, well as I mentioned, we are looking at influencers in the health space to be brand ambassadors like Sophia Bush, who after yoga was caught -- was photographed walking out and drinking her Protein Kefir.

So there's things like that, really relying on those influencers.

There is a global growth and global demand for protein, so we know that we are in the right place with our product that we developed.

And the -- connecting health and wellness lifestyle to the protein, messaging a little bit more with the men because traditionally yogurt-like products have been marketed towards women as they still tend to be the person making the buying decisions.

But with the protein, we do have the opportunity.

Protein is something that men actually do spend time thinking about and buying and shopping for.

So messaging a little bit more to our male consumer base and expanding and growing that is an opportunity as well.

And yes, reaching out, supporting different athletic events from yoga to bicycle events to tennis.

We sponsored for example Taste of Tennis Food Festival with celebrity tennis players who then were introduced to our line and who really have incorporated it into their workout and diets, so things like that.

Okay.

All right.

Well, lots of luck going forward next year and I hope to see some improved growth from this year and I know(multiple speakers).

Definitely.

Sort of like a push-pull, push-pull, push-pull.

It's a stepping ladder over with a long-term trajectory.

If you look at where we were 30 years ago when our dad started, mom and dad started our Company, that was a different time.

And when I came to work at Lifeway, we had $6 million in revenue and when our dad passed away, we were a $12 million revenue Company and look at where we are thirteen and a half years later.

So it is sort of a long-term growth and one that we are always conscious about remaining and keeping strong foundation and thinking about things with that view.

Well, I know when I first got involved with your Company I think your quarter was a $3 million quarter.

So it was well over 20 years ago.

It was a long time ago.

(multiple speakers).

There's been a lot of building.

And also I think the thing in Wisconsin will make a huge difference because I realize you didn't have the capacity for the additional business at that point in time.

Yes, because if you start pushing so hard and then you realize oh, we really can't ship more than a few hundred cases more out of this facility, we better not push so hard.

You got to relax a little bit.

So now when you have that knowledge that's kind of your bumping up against that capacity restraint, this was really important.

And, yes, so it's exciting and I think there's a lot of great excitement around the whole category and Lifeway specifically.

Well, thanks for answering the questions and I probably will try to get a hold of you guys.

I have some ideas on the Protein Kefir (multiple speakers) that maybe stimulate it, okay?

Awesome, great.

Thank you.

Thank you.

We have no further questions at this time.

I'd like to turn the floor back to management.

Great.

Well, thank you all for participating in today's call.

We appreciate the hard work and dedication of our entire team and employees and all the support of our loyal customers and shareholders.

We look forward to sharing our 2016 first-quarter results with you in the coming months.

Thank you very much.

Thank you.

Ladies and gentlemen, this concludes today's teleconference.

You may disconnect your lines at this time and thank you for your participation.