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LF

Lifeway Foods, Inc. (LWAY)·Q3 2025 Earnings Summary

Executive Summary

  • Record net sales of $57.1M, up 24.0% year-over-year and ~29% on a comparable basis; revenue beat consensus by ~$2.1M while EPS missed by $0.05, reflecting higher SG&A investment and tax expense .
  • Gross margin expanded 300 bps to 28.7% on volume strength, manufacturing efficiencies (Waukesha), and favorable conventional milk pricing; sequential margin held strong vs Q2 (28.6%) .
  • Management reiterated the long-term FY2027 Adjusted EBITDA target of $45–$50M and said FY2025 is pacing to the strongest annual sales in company history .
  • Operational catalysts: phase two of the $45M Waukesha expansion commenced; distribution partnerships and high-visibility collaborations (Joe & The Juice, Erewhon, Drugstore) bolster brand velocity .
  • Preannouncement set expectations ($55.8–$57.0M), and the company delivered at the high end ($57.1M), with margin expansion a positive stock-reaction catalyst despite the EPS miss vs consensus .

What Went Well and What Went Wrong

  • What Went Well
    • Volume-led growth: Net sales of $57.1M set a company record; comparable sales growth ~29% after adjusting for 2024 distribution changes .
    • Margin expansion: Gross margin rose 300 bps to 28.7% YoY on volume mix and Waukesha efficiencies; sequentially maintained near Q2 levels .
    • Strategic innovation and brand reach: Muscle Mates and collagen smoothies advance functional nutrition; partnerships with Erewhon and Joe & The Juice expand visibility among wellness-conscious consumers. “We delivered another exceptional quarter that further solidifies Lifeway’s dominant position in the kefir category…” .
  • What Went Wrong
    • EPS vs Street: Diluted EPS of $0.23 missed consensus of $0.28, with investment in marketing and distribution contributing to higher SG&A .
    • Elevated operating expenses: G&A rose to $6.2M vs $3.6M prior year (Q3 2024), weighing on operating leverage despite higher gross profit .
    • EBITDA below consensus: Actual EBITDA trailed estimates; continued capex for Waukesha and higher marketing spend dampened near-term EBITDA conversion from topline growth (see Estimates Context table)*.

Financial Results

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Net Sales ($USD Millions)$46.095 $46.091 $53.901 $57.143
Diluted EPS ($USD)$0.19 $0.23 $0.28 $0.23
Gross Margin (%)25.7% 24.0% 28.6% 28.7%
Operating Income ($USD Millions)$4.189 $1.574 $5.795 $5.040

Segment breakdown: The company does not report segments; topline driven by Lifeway Kefir and Farmer Cheese categories .

KPIs and Balance Sheet Highlights

KPIQ3 2025Notes
YTD Net Sales ($USD Millions)$157.135 Nine months ended Sept 30, 2025
Cash and Cash Equivalents ($USD Millions)$22.990 Balance sheet at Sept 30, 2025
Cash from Operations YTD ($USD Millions)$10.681 Nine months ended Sept 30, 2025
Capital Expenditures YTD ($USD Millions)$(9.675) Nine months ended Sept 30, 2025
Record Weekly Gross Sales$5.5M (July) Highest week in company history

Q3 2025 Actual vs Consensus

MetricConsensus MeanActualSurprise
Revenue ($USD Millions)$55.0*$57.143 $+2.143M — bold Beat
Primary EPS ($USD)$0.28*$0.23 $-0.05 — bold Miss
EBITDA ($USD Millions)$6.85*$6.089*$-0.761M — bold Miss

Values retrieved from S&P Global*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales (Q3)Q3 2025$55.8–$57.0M preannouncement $57.143M actual Achieved high end (raised/achieved)
Adjusted EBITDA (long-term target)FY 2027$45–$50M $45–$50M reiterated Maintained
FY2025 Sales TrajectoryFY 2025N/A“On pace to deliver the strongest annual sales in Company history” Positive qualitative update
Capex Plan (Waukesha expansion)2025–2026~$45M project ~$45M project, Phase Two underway Maintained/executing

No dividend guidance or tax rate guidance was provided .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3 2025)Trend
Manufacturing capacity/WaukeshaPlan to nearly double capacity and triple bottling speeds; ongoing investments Phase One completed (added fermentation tanks); Phase Two cooling system commencing Progressing
GLP-1/gut health tailwindsAmplified demand from GLP-1 users; wellness driving probiotic foods Continued focus on GLP-1 and gut health driving velocities Strengthening
Product innovationCollagen smoothies launched; category leadership Launching Muscle Mates; collagen smoothies performing well Expanding
Distribution reachCostco San Diego rotation; BJ’s, Target, Publix, Whole Foods adding placements Everyday BJ’s placements; Costco rotation continues; nationwide expansion visibility for Farmer Cheese Broadening
Tariffs/macro“We see no impact of tariffs…” No new tariff impacts discussed –Unchanged
Governance/Shareholder actionsN/ARights plan extended one year; Danone cooperation disclosures & S-3 for Danone shares Guardrails in place
Supply chain/logisticsDistributor pickup changes; June cyber attack noted (Q2) No new logistics disruptions –Stabilizing

Management Commentary

  • “With record net sales of $57.1 million… we will continue to capitalize on the powerful health and wellness consumer trends, including the surge in GLP‑1 medication use and gut health awareness” — Julie Smolyansky, CEO .
  • “We delivered 300 basis points of gross margin expansion year‑over‑year… [Waukesha] expansion… increased capacity and helped power operational efficiency gains” .
  • “We’re reiterating our target to achieve between $45 and $50 million in adjusted EBITDA by fiscal year 2027” .
  • “Our Trust Your Gut smoothie… with Joe & The Juice… [and] Love Your Gut Pumpkin Spice Smoothie [with Erewhon]” highlight brand collaborations to drive velocity .
  • Phase Two of Waukesha expansion underway: “installing a state-of-the-art cooling system… designed to double overall production capacity…” .

Q&A Highlights

  • The available transcript captures prepared remarks; no analyst Q&A content was included in the materials reviewed – –.
  • Clarifications in prepared remarks focused on manufacturing expansion timelines (Phase One complete; Phase Two underway; ground-breaking early 2026) and capex (~$45M) .
  • Management reiterated long-term Adjusted EBITDA targets and near-term distribution visibility rather than providing quarterly guidance .

Estimates Context

  • Revenue beat: Actual $57.143M vs consensus $55.0M (beat by ~$2.1M) — driven by volume-led growth in kefir and Farmer Cheese, distribution gains, and strong product velocities *.
  • EPS miss: $0.23 vs $0.28 (miss by $0.05); higher selling and G&A expenses to support marketing and distribution likely pressured EPS despite gross margin expansion *.
  • EBITDA miss: $6.089M vs $6.85M consensus; continued capex and investments temper near-term EBITDA conversion even as topline accelerates*.
  • Forward estimate implications: Models likely to raise revenue trajectories and sustain higher gross margin assumptions; EPS/EBITDA trajectories may reflect elevated SG&A run-rate tied to growth investments*.

Values retrieved from S&P Global*

Key Takeaways for Investors

  • Revenue momentum remains robust: Lifeway continues to stack record quarters; distribution gains and wellness tailwinds should support near-term sales growth .
  • Mix and scale driving margin: Gross margin expansion from 25.7% (Q3’24) to 28.7% (Q3’25) reflects manufacturing efficiencies and volume; monitor milk cost mix (conventional vs organic) and ramp of Waukesha .
  • Investment phase pressuring EPS: Near-term EPS misses vs consensus are plausible as SG&A supports distribution and innovation; medium-term thesis benefits from capacity expansion and brand momentum .
  • Capacity catalyst: Waukesha phase two launch and targeted tripling of bottling speeds by Q4’26 are material to throughput and efficiency; capex (~$45M) is on plan .
  • Governance backdrop: Rights plan extension and Danone cooperation disclosures/S‑3 introduce overhangs but also clarity; monitor shareholder dynamics and potential liquidity events .
  • Trading setup: Near-term stock reaction may key off the revenue beat and margin expansion vs the EPS miss; watch for Q4 distribution wins and Waukesha milestones as catalysts .
  • Long-term target intact: Reiteration of FY2027 Adjusted EBITDA $45–$50M supports multi‑year scaling thesis; execution on capacity and velocity will be critical .