Lifeway Foods, Inc. Q4 FY2025 earnings call

• 2025 was a remarkable year: Achieved record annual net sales, significant margin expansion, and net income growth of 54%. Strategic investments in capacity, marketing, and innovation were made.
• Consumer trends: Demand for protein-rich probiotic functional foods is strong, and the government's Dietary Guidelines for Americans naming kefir and emphasizing fermented foods and gut health is a tailwind.
• Product highlights: Drinkable kefir is a key driver of trial and awareness. Lifeway Farmer's Cheese expanded distribution to 2,000 Walmart stores.
• Partnerships and innovations: Strong retail partnerships, including extending rotation at Costco in San Diego. Launched innovations like probiotic smoothies with collagen, Muscle Mates, LifeWake Kefir Butter. Entered a new licensing deal with Open Farms for pet food Good Gut. Engaged in strategic partnerships and experiential marketing, and had a new advertising campaign with Chicago's Bear Stars.

Full year 2025: Record-breaking full-year net sales stood at $212.5 million, marking a 13.7% year-over-year increase. Driven by higher volumes of Lifeway brand and drinkable kefir, as well as growth in Lifeway farmer cheese. The full-year gross profit margin was 27.4%, a 140 basis points improvement from the previous year. Selling, general, and administrative expenses as a percentage of net sales were 19.6% for the full year. Full-year net income was $13.9 million, or $0.91 per basic and $0.89 per diluted common share, compared to $9 million or 61 cents per basic and 60 cents per diluted common share in the prior year. Fourth quarter 2025: Net sales reached $55.4 million, a 18% year-over-year rise. The fourth-quarter gross profit margin was 27.8%, a 250 basis points increase from the prior year. SG&A as a percentage of net sales for the fourth quarter was 20.7%. Fourth-quarter net income was $2.5 million or 17 cents per basic and 16 cents per diluted common share compared to a prior-year net loss of $0.2 million or 1 cent per basic and diluted common share. Key segments: Drinkable kefir drives trial and awareness for the kefir category. Lifeway Farmer's Cheese saw distribution expand to 2,000 Walmart stores in the fourth quarter.

• Reiterated long-term target of $45 to $50 million in adjusted EBITDA for fiscal year 2027.
• Poised to deliver record-breaking sales in fiscal year 2026.
• Waukesha facility expansion is progressing as planned, on track to double manufacturing capacity by the end of 2026 with phase two focusing on a state-of-the-art cooling system for fermentation and bottling operations.