Lifeway Foods Inc (LWAY) 2025 Q3 法說會逐字稿

Good morning. Welcome to Lifeway Foods third quarter 2025 conference call. On the call with me today is Julie Smolansky, President and Chief Executive Officer.

(Operator Instructions)

Before we begin, we would like to remind everyone that the prepared remarks contain forward-looking statements. The words believe, expect, anticipate, plan, will, 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.

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 during today's call, except as required by law.

All of the forward-looking statements contained herein speak only as of the date of this call, and with that, I would like to turn the call over to Lifeway's President and Chief Executive Officer Julie Smolansky.

Thank you, John, and good morning to everyone joining us. As always, we greatly appreciate your interest in Lifeway Food. I'm thrilled to announce yet another record-breaking quarter for Lifeway Foods. This quarter significantly surpassed our previous high set in Q2 and further showcases our unique and powerful growth as we continue to define our industry and deliver outstanding results across the board.

Before diving into the details, I want to applaud our incredible lightweight team. Your relentless execution, innovation, and commitment to excellence are the driving force behind our consistently extraordinary results, and you continue to raise the bar every quarter.

In the third quarter we delivered record net sales of $57.1 million a 24% increase year over year, and an approximate 29% increase on a comparable basis when adjusted for two strategic modifications to customer relationships that we initiated in late 2024 to prioritize high value brand strengthening opportunities. This growth was entirely volume-led and driven by the explosive demand for our flagship lifeway keifer and high protein lifeway farmer cheese.

This growth is even more impressive when considering we delivered it on top of a strong 13% increase in Q3 of 2024. This marks our 24th consecutive quarter of year over year net sales growth. In other words, six full years of uninterrupted growth.

To put that in perspective, year-to-date, we achieved net sales of $157.1 million which is an incredible 123% increase when compared to the same nine-month period six years ago in 2019. We're consistently setting records at Lifeway and have been doing so for years.

Our growth trajectory is consistent and sustainable, and it's accelerating strongly as we continue to cement our position as the undisputed leader in Kefir and help drive growth in the functional dairy space. Our outstanding track record of growth recently garnered nationwide attention as we were named to the Time America's Growth Leader 2026 list.

We secured the 33rd position out of 101 distinguished companies and ranked as the number two food and beverage company, highlighting our strong growth, financial stability, and leading market performance. Our business is rooted in humble beginnings and has succeeded through resilience, community, and the unwavering belief that healthy food can change people's lives.

This recognition is truly an honor. The Lifeway portfolio is positioned at the intersection of numerous consumer. Trends, including the demand for protein-rich probiotic functional foods, heightened awareness of the gut's critical role in overall wellness, and the rising prevalence of Americans on GLP1s seeking nutrient-dense foods that naturally support digestive health. As consumers have increasingly embraced the vast nutritional and gut health benefits of our delicious products, they are flying off the shelves faster and faster, which is driving our surging product velocity.

We are at the forefront of these trends which show no signs of slowing down, and we're investing heavily in our marketing efforts and manufacturing capabilities to support our accelerating velocities and comfortably meet the growing demand for the Lifeway brand. Alongside our outstanding top-line performance, we delivered meaningful growth across our core profitability metrics.

Our gross profit margin in Q3 was 28.7%, up an impressive 300 basis points from last year and up sequentially compared to our strong Q2 margin performance. This margin expansion reflects strong volume growth of our core lifeway products, manufacturing efficiencies aided by our Waukesha facility improvements, and favorable conventional milk pricing.

Selling expenses were $5 million up slightly from last year as we continue to invest in marketing, sales activations, and retail expansions to heighten brand awareness and sustain our significant growth. Our sales performance in 2025 demonstrates that these investments are paying off. Product velocities are accelerating. We are driving trial, and our loyal customers keep coming back for more.

Net income was $3.5 million or $0.23 per basic and diluted share compared to $3 million or $0.20 per basic and $0.19 per diluted share last year. This strong double-digit growth on the bottom line further shines a light on our operational excellence and our ability to seamlessly convert top-line strength into profitable results. I'll now touch on ongoing modernization of our state of the art Waukesha facility.

This strategic expansion continues to progress as planned, and we are on track to double manufacturing capacity and enhance our operational efficiencies by the end of 2026. In September, we completed the first step of our facility optimization with the successful installation of additional fermentation tanks, which are used to combine raw milk and the live keeper culture during the fermentation process to make our Kefir.

As for next steps, we have recently initiated critical infrastructure enhancements to our refrigeration capabilities and milk processing systems with plans to break ground on the facility expansion in early 2026. We will realize the bulk production capacity benefits and efficiencies, including more than tripling our bottling speeds upon completion of the project in Q4 of 2026, enabling us to meet the accelerating demand for our products while maintaining our exceptional product quality standards.

To date, in 2025, we have invested over $9 million in this project, and upon completion, we estimate the total investments of approximately $45 million in capital expenditures. This expansion is a pivotal investment in Lifeway's Future as we position ourselves to further capitalize on the rapid growth in functional dairy, consumer appetite for protein, and associated GLP1 trends.

Beyond our operational investments, we're simultaneously keeping a pulse on the consumer and their evolving taste to stay ahead of the curve on emerging trends. We recently announced Muscle Mates, a revolutionary ready to drink functional beverage that delivers a powerful trifecta of 20 g of protein, 5 g of creatine.

And our 12 live and active probiotic cultures. This product taps into the exploding creatine market, which has seen significant triple digit growth at certain retailers in recent years and is notably serving a growing percentage of women.

With this product, we are advancing functional nutrition by delivering performance and wellness in one convenient and delicious bottle, and we're extremely excited for it to begin shipping to retailers. Our first of its kind probiotic smoothies with collagens continue to perform very well and are resonating comfortably with the global, growing global market for collagen, which is projected to exceed $8 billion by 2030.

We are also expanding our brand reach through strategic partnerships that introduce Lifebuoy to new consumers through innovative product launches and experiential settings. Our Trust Your gut smoothie is an exciting collaboration with Joe and the Juice, bringing Lifeway Kefir to a wide audience of Gen Z. And millennial consumers in cafes across the United States.

Our second partnership with Air One delivered a delicious love your gut pumpkin spice smoothie exclusively for the month of October, perfectly timed for seasonal wellness trends at LA's iconic wellness destination.

I'm also excited to highlight Lifeway's nationwide sorority tour. We are currently connecting with young women across the country to introduce them to the brand and the benefits of gut health. The Gut Health Glow Up Tour is yet another opportunity to build community and sample our core products, and innovative keifer flavor fusion with the next generation of Lifeway keifer consumers.

Our digital marketing strategy continues to launch Lifeway into the center of viral moments. Across TikTok and Instagram. Millions of users are engaging with authentic customer stories about the daily wellness benefits that they're experiencing from Lifeway Kefir, and we continue to expand our influencer partnerships to drive awareness of our product offerings, educate on their benefits, and showcase the recipes with Lifeway Kefir and Farmer's cheese.

In stores, we continue to be strategic with our marketing dollars and are effectively driving velocities with high visibility programs that meet consumers at interruptive moments during their shopping experience. We also continue to expand distribution across our key products and channels. We recently gained everyday placements at BJ's and are currently in rotation at Costco in San Diego. Additionally, in Q4, we have visibility into a significant nationwide distribution expansion for our lifeway farmers' cheese as it continues to capture the attention of consumers nationwide.

What we have accomplished is extraordinary, but our momentum is only intensifying. We're well on pace to deliver our strongest annual sales in the company history in 2025, and we're reiterating our target to achieve between $45 million and $50 million in adjusted EBITDA by fiscal year 2027.

We are operating from a position of strength, dominating the keeper category, heavily investing behind our key products, and expanding into high growth adjacent, all while scaling profitability. With our improving production capabilities and our accelerating tailwind behind consumer health and wellness, we're perfectly situated to sustain this remarkable momentum.

The results speak for themselves, and we on an incredible growth trajectory as we finish off 2025 and head into the new year. We remain committed to our mission of bringing best in class bio available probiotic and nutritious foods to our loyal and growing customer base.

Thank you for your continued support, and we look forward to updating you on our continued progress when we report our fourth quarter and full year results in March 2026. I hope you all have a wonderful holiday season.

Thank you.