Lifeway Foods Inc (LWAY) 2023 Q2 法說會逐字稿

Good morning. Welcome to Lifeway Foods Second Quarter 2023 Earnings Conference Call. On the call with me today is Julie Smolyansky, President and Chief Executive Officer.

早安.歡迎參加 Lifeway Foods 2023 年第二季財報電話會議。今天與我一起通話的是總裁兼執行長朱莉·斯莫揚斯基 (Julie Smolyansky)。

By now, everyone should have access to the press release that went out this morning. If you have not received the release, it is available on the Investor Relations portion of Lifeway's website at www.lifewayfoods.com. A recording of this call will be available on the company's website.

現在，每個人都應該可以看到今天早上發布的新聞稿。如果您尚未收到該新聞稿，您可以在 Lifeway 網站的「投資者關係」部分（www.lifewayfoods.com）上查看。此次通話的錄音將在公司網站上發布。

Before we begin, we would like to remind everyone that the prepared remarks contain forward-looking statements. The words believes, expect, anticipate and other similar expressions generally identify forward-looking statements. These statements do not guarantee future performance, and therefore, undue reliance should not be placed on them.

在開始之前，我們想提醒大家，準備好的評論包含前瞻性的陳述。相信、期望、預期和其他類似的表達通常表示前瞻性陳述。這些聲明並不能保證未來的表現，因此，不應過度依賴它們。

Actual results could differ materially from those projected in any forward-looking statements. Lifeway assumes no obligation to update any forward-looking projections that may be made in today's release or call. All of the forward-looking statements contained herein speak only as of the date of this call.

實際結果可能與任何前瞻性陳述中的預測有重大差異。 Lifeway 不承擔更新今天發布或電話會議中可能做出的任何前瞻性預測的義務。本文所包含的所有前瞻性陳述僅代表本次電話會議發布之日的觀點。

And with that, I'd like to turn the call over to Lifeway's Chief Executive Officer, Julie Smolyansky.

接下來，我想將電話轉給 Lifeway 的執行長 Julie Smolyansky。

Thank you, John, and good morning to everyone joining us today. As always, we greatly appreciate your interest in Lifeway Foods. I am thrilled to report yet another brilliant quarter for our business today. Yet before I detail the great results, I'd like to give thanks to the entire Lifeway team whose devotion and seamless execution have allowed us to perform for our customers and partners so remarkably so far in 2023.

謝謝你，約翰，向今天參加我們的每個人表示早安。像往常一樣，我們非常感謝您對 Lifeway Foods 的關注。今天，我很高興地向大家報告，我們公司又度過了一個輝煌的季度。然而，在我詳細介紹這些出色的成果之前，我想感謝整個 Lifeway 團隊，他們的奉獻精神和無縫執行使我們能夠在 2023 年迄今為止為客戶和合作夥伴提供如此出色的表現。

With that, I will now review our second quarter 2023 results, highlighted by our largest ever recorded net sales and very positive gross margin expansion. Net sales were $39.2 million for the period ended June 30, 2023, an increase of $5.7 million or 17.1% compared to the second quarter in 2022. The net sales increase, our 15th consecutive quarter of strong year-over-year growth, was primarily driven by higher volumes of our branded drinkable kefir and to a lesser extent, the impact of price increases implemented during the fourth quarter of 2022.

現在，我將回顧我們 2023 年第二季的業績，其中最突出的是，我們創下了有史以來最大的淨銷售額和非常積極的毛利率擴張。截至2023 年6 月30 日的淨銷售額為3,920 萬美元，與2022 年第二季相比增加570 萬美元或17.1%。是這主要得益於我們品牌的可飲用開菲爾銷量的增加，以及在較小程度上受到 2022 年第四季度實施的價格上漲的影響。

This net sales growth is particularly impressive as we continue to lap some strong quarters of our record-setting 2022. And when we compare to the second quarter of 2021, our net sales were up 34.5%. This value-driven growth accompanied by continued accelerating unit velocities in our core kefir line is encouraging as it once again illustrates the wide acceptance of our inflation justified price increases by our loyal and new consumers focused on high-quality, better-for-you offering.

隨著我們繼續在創紀錄的 2022 年取得一些強勁增長，這一淨銷售額增長尤其令人印象深刻。這種以價值為導向的成長，伴隨著我們核心開菲爾產品線的持續加速的單位速度，令人鼓舞，因為它再次表明，我們的忠實和新消費者廣泛接受了我們因通貨膨脹而合理的價格上漲，他們專注於提供高品質、更適合您的產品。

It's worth noting that our next quarter, we will be lapping a very difficult comparison in the third quarter of 2022, our second largest quarter in history.

值得注意的是，下一季，我們將在 2022 年第三季進行一次非常艱難的比較，這是我們歷史上第二大季度。

In addition, we reported a gross profit margin of 28.7% for the period ended June 30, 2023, increasing 1,170 basis points, compared to 17% in the second quarter of 2022. Compared to the first quarter of this year, when we reported another very strong year-over-year expansion, this quarter represents an expansion of 710 basis points. This remarkable gross margin expansion was primarily due to higher volumes of our branded products and to the favorable impact of milk pricing and to a lesser extent, the aforementioned price increases in the fourth quarter. We have consistently stated gross margin recovery was a priority of ours, and we are thrilled that the combination of our operational efficiency and subsiding inflationary impacts are now delivering us enhanced profitability.

此外，我們報告稱，截至 2023 年 6 月 30 日的毛利率為 28.7%，較 2022 年第二季度的 17% 增加了 1,170 個基點。去年同期相比，本季的擴張非常強勁，擴張了710 個基點。毛利率的顯著擴大主要歸因於我們品牌產品銷售的增加、牛奶價格的有利影響，以及在較小程度上上述第四季度的價格上漲。我們一直表示，恢復毛利率是我們的首要任務，我們很高興看到，我們的營運效率和通膨影響的緩解相結合，正在為我們帶來更高的獲利能力。

Milk is our largest raw material and was largely impacted by inflationary price increases. As the price has normalized, we have certainly benefited. We couldn't be more pleased with this result and are looking forward to consistently maintaining better levels of margins like these moving forward. We will continue to prioritize our gross margin moving forward, and we are constantly in search of incremental productivity and profitability measures.

牛奶是我們最大的原料，受到通貨膨脹價格上漲的嚴重影響。隨著價格恢復正常，我們確實受益了。我們對這個結果非常滿意，並期待在未來繼續保持更好的利潤水平。我們將繼續優先考慮未來的毛利率，並不斷尋求提高生產力和獲利能力的措施。

Underscoring these exceptional results is the environment we are delivering them in. Similar to last quarter, consumers across the United States are becoming more elastic in light of recessionary trends. With that has come price sensitivity and some trade down from more premium offerings to value alternatives. That said, our results have continued to prove that Lifeway premium offerings come with plenty of value. Even with price increase implemented in quarter 4 of 2022, our consumers remain steadfast in their commitment to improved health, immunity and gut health, demonstrated by our consumption trends and velocities within our key retailers, which remain strongly positive.

我們所處的環境突顯了這些卓越的成果。隨之而來的是價格敏感性，有些人從更高端的產品轉向價值替代品。儘管如此，我們的結果繼續證明 Lifeway 優質產品具有很大的價值。即使在2022 年第四季度實施了價格上漲，我們的消費者仍然堅定地致力於改善健康、免疫力和腸道健康，這從我們主要零售商的消費趨勢和速度仍然保持強勁增長中可以看出。

Today, on a sales basis, Lifeway Foods is the ninth largest yogurt manufacturer in the United States and a portion of our growth efforts surround attracting new customers and increasing retention rates through effective advertising and marketing. Recent data shows that customers new to Lifeway are delivering greater velocities and proving to be more valuable than lapsed buyers.

如今，以銷售額計算，Lifeway Foods 是美國第九大優格製造商，我們的部分成長努力圍繞著透過有效的廣告和行銷來吸引新客戶和提高保留率。最近的數據顯示，Lifeway 的新客戶交付速度更快，比流失的買家更有價值。

Now moving on to expenses. Selling, general and administrative expenses increased $1.1 million to $6.4 million for the period ended June 30, 2023 compared to $5.3 million in the second quarter of 2022. We continue to strategically invest in our core products through targeted advertising and marketing programs to increase awareness and capture incremental customers.

現在來談談費用。截至2023 年6 月30 日的期間，銷售、一般及行政開支增加110 萬美元至640 萬美元，而2022 年第二季為530 萬美元。核心產品進行策略性投資，以提高知名度和吸引增量客戶。

Our net income during the period ended June 30, 2023 was $3.2 million, reflecting EPS of $0.22 per basic and $0.21 per diluted common share compared to net income of $0.1 million or $0.01 per basic and diluted share during the second quarter in 2022.

我們截至2023 年6 月30 日期間淨收入為320 萬美元，反映每股基本收益0.22 美元和每股稀釋收益0.21 美元，而2022 年第二季淨收入為10 萬美元或每股基本收益和稀釋收益0.01 美元。

We are very pleased to see our continued top line and margin expansion now flowing down to the bottom line, a testament to the execution of our Lifeway 2.0 strategy and recovery from the high inflationary impacts we saw in the past couple of years.

我們非常高興地看到，我們持續的營收和利潤率擴張現在已經轉移到了營收上，這證明了我們 Lifeway 2.0 策略的實施以及從過去幾年的高通膨影響中復甦的成果。

Capital spending increased by approximately $0.2 million from $1.7 million to $2 million during the 6 months ended June 30, 2023 compared to the same period in 2022, aligned with our plan. Our capital spending is focused on 3 core areas: growth capital, cost reduction and facility improvements. Growth capital spending supports new product innovation and enhancement; cost reduction and facility improvements support manufacturing efficiency, safety and productivity; our continued capital commitment reflects our goals as a business to continue growing and improving our internal efficiencies.

截至 2023 年 6 月 30 日的 6 個月期間，資本支出與 2022 年同期相比增加了約 20 萬美元，從 170 萬美元增加至 200 萬美元，與我們的計劃一致。我們的資本支出集中在三個核心領域：成長資本、降低成本和設施改善。成長資本支出支持新產品創新與提升；降低成本和改善設施支援製造效率、安全性和生產力；我們持續的資本承諾反映了我們作為一家企業繼續發展和提高內部效率的目標。

Overall, the second quarter was exceptional. Our net sales of $39.2 million is outstanding and a Lifeway record performance, and we are equally pleased that it was accompanied by a very strong 1,170 basis points gross margin expansion. Our business continues to grow in spite of the macro pressures that have challenged some of the broader industry, and we're yet to see our consumers act with restraint or trade down from our premium healthy offering.

總體而言，第二季度表現出色。我們的淨銷售額達到 3,920 萬美元，非常出色，創下了 Lifeway 的紀錄，同時我們同樣高興的是，我們的毛利率也隨之強勁增長了 1,170 個基點。儘管宏觀壓力給整個行業帶來了挑戰，但我們的業務仍在繼續成長，我們尚未看到消費者採取克制行為或放棄購買我們的優質健康產品。

An outstanding quarter like this would not be possible without the industry-leading and core driver of our business, drinkable Lifeway kefir. Net sales of our drinkable kefir increased 20% for the period ended June 30, 2023, when compared to the second quarter in 2022.

如果沒有業界領先和業務核心驅動力——可飲用的 Lifeway 克菲爾，我們就不可能取得如此出色的季度業績。截至 2023 年 6 月 30 日的期間，與 2022 年第二季相比，我們的飲用克菲爾淨銷售額成長了 20%。

With the dominant market share in the United States kefir industry, we remain well positioned to capitalize on continued expansion of the global kefir market and the tailwinds behind health and wellness amongst consumers.

憑藉在美國開菲爾行業的主導市場份額，我們仍處於有利地位，可以利用全球開菲爾市場的持續擴張以及消費者健康和保健的順風。

Lifeway's kefir products are tart and tangy and provide customers with probiotics, vitamin D and protein to help support their gut health, immunity and mental wellbeing. The probiotics in kefir support a healthy microbiome and approximately 80% of immune defense comes from the gut. Probiotic products such as kefir are the focus of intense research related to the microbiomes' role in stress, depression and anxiety.

Lifeway 的克菲爾產品酸酸的，為顧客提供益生菌、維生素 D 和蛋白質，有助於維持腸道健康、免疫力和心理健康。克菲爾中的益生菌支持健康的微生物群，大約 80% 的免疫防禦來自腸道。克菲爾等益生菌產品是與微生物群在壓力、憂鬱和焦慮中的作用相關的深入研究的重點。

We now know that up to 90% of the body's serotonin comes from the gut cells and the gut-brain axis, which links emotional and cognitive centers of the brain with our intestinal function plays a major role in happiness and well-being.

我們現在知道，人體高達 90% 的血清素來自腸道細胞和腸腦軸，它將大腦的情緒和認知中心與我們的腸道功能聯繫起來，在幸福感和健康中發揮著重要作用。

Health and wellness remain a powerful tailwind to customer preferences in today's environment. And as the modern consumer learns and focuses more on their health, they will care even more about their microbiome. It is no secret that our recent strong results are driven by the fact that our customers love our healthy, delicious drinkable kefir and they keep coming back for it. Selling that kefir is both our primary focus and exactly what we do best. To sustain our growth, we'll continue to dedicate the majority of our time and investments behind our core products, both through targeted marketing investments and additional distribution opportunities in an effort to strategically effect as much exposure and customer awareness as we can.

在當今的環境下，健康和保健仍然是影響顧客偏好的強大推動力。隨著現代消費者對健康的了解和關注，他們會更加關心自己的微生物群。毫無疑問，我們最近的強勁業績得益於我們的客戶喜愛我們健康、美味的飲用克菲爾，並且不斷回頭購買。銷售克菲爾是我們的首要任務，也是我們最擅長的。為了保持成長，我們將繼續把大部分時間和投資投入到我們的核心產品上，透過有針對性的行銷投資和額外的分銷機會，努力在策略上盡可能地提高曝光率和客戶知名度。

I'll now touch on another one of the great offerings within our portfolio of products, Lifeway Farmer Cheese. Lifeway Farmer Cheese is a premium cultured, soft cheese and a highly sought-after favorite in many specialty stores. While not as widely distributed as our drinkable kefir, our Farmer Cheese has been a staple since introduction 37 years ago.

現在我將談談我們的產品組合中的另一個優質產品—Lifeway Farmer Cheese。 Lifeway Farmer Cheese 是一種優質培養的軟乳酪，在許多專賣店中備受追捧。儘管我們的農家起司不像可飲用的克菲爾那樣廣泛分佈，但自 37 年前推出以來一直是主食。

For those listeners who are active on social media, you may have seen the recent emergence of cottage cheese recipes with the term blended cottage cheese, now having over 320 million views on TikTok while also trending on Instagram.

對於那些活躍在社群媒體上的聽眾來說，你可能已經注意到最近出現了一種帶有「混合起司」一詞的起司食譜，現在在TikTok 上的觀看次數已超過3.2 億，同時在Instagram 上也很流行。

Lifeway Farmer Cheese has that smooth, blended texture consumers are looking for. So our Farmer Cheese, saves a step when substituted in all of these popular recipes. With its creamy, spreadable texture and versatile flavor that works well for both sweet and savory dishes, we believe that Lifeway Farmer Cheese would be a logical fit for many of these blended cottage-cheese recipes as well as an alternative addition to new retail shelves.

Lifeway 農家起司具有消費者所尋求的柔滑、混合口感。因此，在所有這些流行的食譜中，使用我們的農場起司代替起司可以省去一個步驟。我們相信 Lifeway 農家起司具有奶油狀、易塗抹的質地和多種多樣的風味，適合甜味和鹹味菜餚，非常適合用於許多混合起司食譜，也可以作為新零售貨架上的替代品。

Our Farmer Cheese available nationwide has seen an increase in interest from consumers and retailers in recent years, and we are acting now to meet the growing demand. We will be increasing cheese production and investing in technology to cut production times by more than half, accompanied by new automation and efficiency plans to ensure the brand is equipped for future demand and distribution opportunities. We are excited about this product and plan to put calculated marketing efforts behind to support its growth and introduce it to new customers.

近年來，我們在全國範圍內銷售的農家起司受到了消費者和零售商的越來越多的關注，我們正在採取行動來滿足日益增長的需求。我們將增加乳酪產量並投資技術，將生產時間縮短一半以上，同時推出新的自動化和效率計劃，確保品牌能夠滿足未來的需求和分銷機會。我們對這款產品感到非常興奮，並計劃投入精心策劃的營銷努力來支持其成長並將其介紹給新客戶。

Additionally, we are seeing continued progress with our guava low-fat kefir and our new organic whole milk products. We will continue to test and develop new flavors and offerings in an effort to consistently satisfy our consumers with differentiated assortments.

此外，我們的番石榴低脂克菲爾和新有機全脂乳製品也不斷取得進展。我們將繼續測試和開發新的口味和產品，以便透過差異化的產品持續滿足消費者的需求。

I'll now touch on some of our marketing and advertising, where we have been working to create opportunities directly focused on incentivized consumer trial. As we announced on our last call, following our successful pop-up experience in Miami Beach during its busy season, we shifted our focus to places like New York City, where we have embarked upon a yoga and kefir sampling program at Bryant Park, a pop-up with SHOWFIELDS sampling drinkable kefir in Williamsburg and various other activations such as movies in the park. We also just completed another successful year as the Kidzapalooza sponsored at Lalapalooza in Chicago. Attendees were welcomed by the Lifeway team and treated to kefir and ProBugs throughout the festival.

現在我將談談我們的一些行銷和廣告，我們一直致力於創造直接專注於激勵消費者試用的機會。正如我們在上次電話會議上宣布的那樣，繼邁阿密海灘旺季成功舉辦快閃體驗活動之後，我們將重點轉移到紐約市等地，在那裡，我們在布萊恩特公園開展了瑜伽和開菲爾品嚐計劃，這是與 SHOWFIELDS 一起在威廉斯堡品嚐可飲用的開菲爾以及進行各種其他活動，例如在公園裡看電影。由於 Kidzapalooza 在芝加哥的 Lalapalooza 進行了贊助，我們也剛剛度過了另一個成功的一年。 Lifeway 團隊對與會者表示熱烈歡迎，並在整個節日期間為與會者提供克菲爾和 ProBugs 飲料。

Additionally, we continue to partner with influencers, chefs and nutrition experts with notable social media presence to suggest healthy ingredient swaps, recipes and snack ideas that incorporate Lifeway products. These partnerships are distributed across Lifeway social media platforms, and we continue to realize positive impact through increased web traffic and steadily increasing followers to our Lifeway social accounts. We also partner these digital campaigns with in-store campaigns to incentivize retention rates and attract new eyes to the product.

此外，我們繼續與在社交媒體上具有影響力的人士、廚師和營養專家合作，建議結合 Lifeway 產品的健康成分交換、食譜和零食創意。這些合作遍佈於 Lifeway 各個社群媒體平台，我們透過增加網路流量和穩定增加 Lifeway 社群帳號的追蹤者，繼續實現正面影響。我們也將這些數位行銷活動與店內行銷活動結合起來，以激勵留存率並吸引新的目光關注產品。

Lastly, I would like to note a positive development for Lifeway that's come out of the recent Barbie craze. I was pleased to see the news that in an effort to give the actors and actresses, Barbie-like skin, the skin health specialist onset was recommending the consumption of kefir. The Daily Mail, among others, reported that she gave the main star, Margot Robbie kefir to improve her gut help. Many of the articles on the topic highlighted the skin health and beauty benefits that come from supporting gut-skin axis.

最後，我想指出的是，最近的芭比娃娃熱潮為 Lifeway 帶來了積極的發展。我很高興看到這個消息，為了讓演員們擁有芭比娃娃般的皮膚，皮膚健康專家建議食用克菲爾。根據《每日郵報》等媒體報道，她給主演瑪格羅比餵了克菲爾來改善腸道健康。關於這個主題的許多文章都強調了支持腸道皮膚軸帶來的皮膚健康和美容益處。

Now I will touch on some distribution updates. We've recently gained distribution at roughly 140 CVS stores, a new retail partner for us. We have been placed in the premium set in their West Coast stores. While we don't anticipate this to be a large volume driver initially, we plan on keeping an eye on the performance and are very excited to gain incremental brand exposure to the vast amount of CVS shoppers.

現在我將談一些分發更新。我們最近獲得了約 140 家 CVS 商店的分銷權，它們是我們的新零售合作夥伴。我們已被安置在他們西海岸商店的優質區域。雖然我們最初不認為這會帶來很大的銷售成長，但我們計劃密切關注其表現，並且非常高興能夠在大量 CVS 購物者中不斷提高品牌知名度。

We also continued to perform solidly at Wawa. We are maintaining consistent unit movement slightly above the initial velocities upon our introduction in late 2022. Last quarter, we announced placements of our new Lifeway Organic Whole Milk at Sprouts and Fresh Thyme. Wegmans, Fresh Thyme and Meijers have also recently authorized our new guava flavor.

我們在 Wawa 也繼續表現優異。我們保持著穩定的單位流動，略高於我們在 2022 年底推出時的初始速度。 Wegmans、Fresh Thyme 和 Meijers 最近也授權了我們的新番石榴口味。

Finally, we continue to maintain our strong relationships and active dialogues with our key retail partners in traditional grocery and are actively pursuing additional distribution opportunities across a variety of channels to increase the visibility and performance of the great products we have to offer. We believe there is still opportunity for our top-performing kefir flavors and Farmer Cheese to secure additional distribution.

最後，我們繼續與傳統雜貨領域的關鍵零售合作夥伴保持牢固的關係和積極的對話，並積極尋求透過各種管道獲得的更多分銷機會，以提高我們所提供優質產品的知名度和性能。我們相信，我們表現最佳的開菲爾口味和農場起司仍然有機會獲得更多的分銷。

To wrap it up, the second quarter was a phenomenal record-breaking quarter for Lifeway Foods. Our core business continues to rapidly grow, and we have improved our profitability substantially. Today, we are in a great position with an incredible team in place to continue delivering on this growth. I am very excited for the second half of this year, where I expect to further our mission to provide best-in-class probiotic and nutritious foods to improve the health and well-being of our customers.

總而言之，第二季度對於 Lifeway Foods 來說是創下紀錄的非凡季度。我們的核心業務持續快速成長，獲利能力大幅提高。今天，我們擁有一支優秀的團隊，處於良好的地位，將繼續實現這一成長。我對今年下半年感到非常興奮，我希望進一步實現我們的使命，提供一流的益生菌和營養食品，以改善客戶的健康和福祉。

Thank you all very much for listening to the call today and, of course, for your interest in Lifeway Foods. We look forward to updating you on our progress and business momentum on our third quarter earnings call. I hope you all enjoy your day.

非常感謝大家今天收聽電話會議，當然也感謝大家對 Lifeway Foods 的關注。我們期待在第三季財報電話會議上向您通報我們的進度和業務發展動能。我希望你們今天過得很愉快。