Executive Summary

Record net sales of $53.9M (+9.7% YoY; ~18% volume-led growth on a comparable basis) with gross margin expanding to 28.6% (+160 bps YoY; +460 bps QoQ), and diluted EPS of $0.28; Lifeway flagged continued momentum with Q3-to-date unaudited net sales of $26.4M through Aug 11 (+>20% YoY) and a record $5.5M weekly gross sales in July .
Against Wall Street consensus, Lifeway delivered a significant EPS beat ($0.28 vs $0.18*) and a slight revenue beat ($53.9M vs $53.0M*) for Q2 2025, reflecting strong branded volume growth and improved operating efficiency .
Management reiterated the long-term Adjusted EBITDA target of $45–$50M for FY 2027 and expressed confidence in delivering the strongest annual sales in company history in 2025, supported by expanding distribution (Target, Costco) and innovation (collagen smoothies, Flavor Fusions) .
Near-term stock reaction catalysts: accelerating Q3 run-rate (+20% first two months of Q3; $39.1M through Aug 31), record weekly gross sales, and category leadership recognition (Dairy Foods Processor of the Year) .

What Went Well and What Went Wrong

What Went Well

“We delivered $53.9 million in net sales, our highest quarter ever… strong, volume-led growth across our core portfolio,” highlighting sustained demand for flagship Kefir and Farmer Cheese .
Margin expansion: gross margin reached 28.6% (+160 bps YoY; +460 bps QoQ) on branded volume growth, manufacturing efficiencies, and favorable conventional milk pricing; net income rose to $4.2M and diluted EPS to $0.28 .
Distribution and brand momentum: Target adding ~1,100 new 32oz Kefir placements; Lifeway began shipping 8oz Kefir 12-packs to ~60 Costco locations in San Diego region, plus cultural marketing amplifiers (TikTok virality, NASCAR) .

What Went Wrong

Input cost mix: higher organic milk costs partially offset margin gains; planned trade investments increased spend to support distribution and innovation .
SG&A mix: SG&A was 17.6% of net sales in Q2 reflecting continued investment, while Q1 SG&A was 20.2%; near-term profitability lever is operating leverage as volumes scale .
Operational disruption: a partner distributor experienced a cyber attack in early June causing temporary sales lag, though momentum remained strong .

Financial Results

Consolidated P&L Metrics (USD)

Metric	Q2 2024	Q1 2025	Q2 2025
Revenue ($)	$49.157M	$46.091M	$53.901M
Gross Profit Margin (%)	27.0%	24.0%	28.6%
Income from Operations (EBIT, $)	$5.386M	$1.574M	$5.795M
Net Income ($)	$3.783M	$3.540M	$4.249M
Diluted EPS ($)	$0.25	$0.23	$0.28

Against Consensus (Q2 2025)

Metric	Consensus	Actual
Revenue ($)	$53.0M*	$53.901M
EPS ($)	$0.18*	$0.28

Additional KPIs and Operating Items

KPI	Q2 2024	Q1 2025	Q2 2025
SG&A as % of Net Sales	—	20.2%	17.6%
Weekly Gross Sales Record	—	$5.0M (last full week of April)	$5.5M (week ending July 13; +66% YoY)
Q3-to-date Net Sales (unaudited)	—	—	$26.4M through Aug 11 (+>20% YoY)
Q3 first two months Net Sales (unaudited)	—	—	$39.1M through Aug 31 (+20% YoY)

Segment breakdown: Lifeway reports as a single consolidated operation; no segment reporting disclosed .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Adjusted EBITDA (non-GAAP)	FY 2027	$45–$50M target	Reiterated $45–$50M target	Maintained
Annual Net Sales (GAAP)	FY 2025	—	“Confidence in delivering strongest annual sales in Company history”	Qualitative raise in confidence

Note: Company does not provide GAAP operating income guidance or reconcile forward-looking non-GAAP measures to GAAP due to uncertainty .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2024, Q1 2025)	Current Period (Q2 2025)	Trend
Capacity expansion (Waukesha plant)	Upgrades to nearly double production capacity and >3x bottling speed planned in 2025	“State-of-the-art Waukesha plant is already enhancing efficiencies; once complete, nearly double capacity and >3x bottling speed”	Accelerating execution
Health & wellness tailwinds / GLP-1	Emphasized rising demand for protein-rich, probiotic foods; GLP-1 consumer cohort expanding addressable market	Explicitly cites GLP-1 tailwind for nutrient-dense foods supporting digestion, satiety, and natural GLP-1 hormone production	Strengthening
Distribution expansion	2,000+ incremental points of distribution; airport presence expansion	Target ~1,100 new placements; Costco San Diego region (~60 warehouses)	Broadening
Product innovation	Flavor Fusions launch; Probiotic Smoothies + Collagen	Collagen smoothies resonating; Berry Blast wins Good Housekeeping Snack Award; Flavor Fusions nominated for Dairy Product of the Year	Positive validation
Tariffs / macro	“No impact of tariffs… foreseeable future”	Not flagged as a current issue; focus on demand and capacity	Neutral
Regulatory/legal (Danone proposal)	Referenced in forward-looking statements section	Continued reference in forward-looking statements (uncertainty related to shareholder proposals and Danone)	Ongoing backdrop
Operational risk	—	Temporary sales lag from distributor cyber attack in early June	Transient headwind

Management Commentary

“This was another quarter that reinforces Lifeway’s position as the undisputed leader in the kefir category… with strong, volume-led growth across our core portfolio” — Julie Smolyansky, CEO .
“We expanded gross margin by 160 basis points year-over-year and more than 460 basis points sequentially, translating into double-digit net income and diluted EPS growth” .
“Our early Q3 results show continued acceleration… unaudited estimate Q3 net sales through 8/11 have surpassed $26.4M, over a 20% increase” .
“Target is adding over 1,100 new 32oz kefir placements… we began shipping 8oz Kefir 12-packs to over 60 Costco locations in San Diego” .
“We are reiterating our target to achieve between $45–$50 million in adjusted EBITDA by fiscal year 2027” .

Q&A Highlights

The quarter’s investor communication utilized prepared remarks and a webcast; no live analyst Q&A was provided in the transcript, so no additional guidance clarifications beyond press release and prepared commentary were available .

Estimates Context

Q2 2025 EPS beat: $0.28 actual vs $0.18 consensus*; Revenue beat: $53.9M actual vs $53.0M consensus*; coverage remains limited (1 estimate for EPS and revenue*), suggesting potential for meaningful estimate revisions as more data points emerge .
Given Q3 run-rate indications (+20% YoY through first two months; $39.1M), Street may adjust near-term revenue and margin expectations upward, particularly if mix shift to branded products sustains gross margin above prior-year levels .

Estimates marked with * are values retrieved from S&P Global.

Key Takeaways for Investors

Strong execution with record net sales, margin expansion, and EPS beat; momentum supported by accelerating Q3-to-date sales and record weekly gross sales .
Branded mix shift, expanding distribution (Target, Costco), and innovation (collagen smoothies, Flavor Fusions) underpin topline durability and operating leverage .
Gross margin trajectory is favorable; watch conventional vs organic milk input costs and trade investments as key drivers of sequential margin performance .
Operational resilience: temporary distributor cyber incident did not derail growth; capacity upgrades at Waukesha should support scaling and efficiencies into 2H and 2026 .
Limited sell-side coverage increases potential for estimate volatility; positive pre-announcements (Q3-to-date sales) can be catalysts for upward revisions and stock narrative .
Corporate backdrop (Danone-related references) persists in forward-looking statements; monitor any shareholder actions or proposals for potential strategic optionality .
Near-term focus: sustained >20% Q3 growth cadence, gross margin sustainability, and continued distribution wins will drive sentiment and valuation re-rating if maintained .

Lifeway Foods, Inc. (LWAY)·Q2 2025 Earnings Summary