Operator: Good morning. Welcome to LifeWay Foods first quarter 2026 conference call. On the call with me today is Julie Smolyansky, president and chief executive officer. 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. 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 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. With that, I would like to turn the call over to LifeWay’s president and chief executive officer, Julie Smolyansky.

Julie Smolyansky: Thank you, John, and good morning to everyone joining us. As always, we greatly appreciate your interest in LifeWay Foods. I am absolutely thrilled to share. What was a record breaking first quarter for LifeWay Foods. We carried the momentum from 2025 into 2026 with blowout results that showcase the incredible strength of our business, both on the top and bottom line while exceeding the top end of the strong preliminary outlook that we provided in April. Before getting into the specifics, I want to recognize our outstanding LifeWay team. The phenomenal results we are consistently achieving are a testament to your hard work, passion, and seamless execution. Your efforts fuel this business, and I am grateful.

Now I will walk through our first quarter 2026 results. This was a historic quarter as we crossed the $60 million threshold. For the first time ever, delivering net sales of $63 million a remarkable 36.7% surge year over year. This record breaking achievement extends our growth streak to 26 consecutive quarters and represents entirely volume led expansion. Fueled by our flagship Lifeway Kefir, and high protein LifeWay farmer cheese. We continue to set new standards at LifeWay. And as a result, each year, we face more challenging year over year comparisons. It is also worth noting that in the 2025, we gained significant distribution as well as improved shelf assortments which have helped propel the incredible results we have driven over the previous 12 months, and we have begun to lap that now.

Beyond our exceptional revenue performance, we saw the growth flow clearly throughout the P and L. Our gross profit margin for the first quarter was 27.5%, up 360 basis points from 23.9% last year. This impressive expansion was driven by robust volume increases in our core LifeWay branded offering. Which generated enhanced manufacturing efficiencies supported by our ongoing Waukesha facility, upgrades and favorable conventional milk pricing during that period. As a reminder, our Waukesha facility expansion remains on track for completion by the end of this year. Once the full initiative comes online in Q1 2027, we will be positioned to materially increase production capacity improve operational efficiencies, grow our workforce, and further establish the Midwest as the country’s center for kefir manufacturing.

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Selling, general, and administrative expenses totaled $10.9 million, a 16.8% increase from the prior year reflecting our ongoing commitment to marketing initiatives and brand building. As a percentage of revenue, SG&A leveraged a significant 300 basis points this quarter, underscoring the strong returns that we are generating from our investments. Our marketing approach is clearly delivering results evidenced by our growth. We are driving trial and cultivating lasting consumer relationships while our product velocities are accelerating. Net income for the first quarter came in at $4.7 million or $0.31 per basic and $0.30 per diluted common share. Compared to net income of $3.5 million or $0.23 per basic and diluted common share last year. This represents a sizable 32% expansion highlighting our effectiveness and translating revenue strength into earnings growth with excellent flow through from the top to bottom line.

Our exceptional first quarter performance was propelled by several critical factors that continue to drive our business. We remain uniquely positioned at the convergence of powerful consumer trends driving demand in our space. Today’s consumer is more health conscious than ever, Gut health awareness continues to increase, and the rapidly growing number of GLP-1 users is actively seeking nutrient dense probiotic foods that support digestive health and satiation. Adding to the momentum was the validation we received from the government, which included full fat dairy in the updated USDA food pyramid. And kefir in the supporting documents while underscoring the significance of fermented foods and digestive health to well-being. LifeWay delivers all of these benefits with our flagship product, and we expect these trends to build as consumers continue to educate themselves and focus on their health.

The consistent performance of our core LifeWay drinkable kefir and LifeWay farmer cheese demonstrates our positioning and ability to capitalize on these consumer tailwinds. Our drinkable kefir remains the bellwether of our business, driving a brand strength as well as the entire kefir category, while our farmer’s cheese continued to grow as we broaden its reach and drive trial opportunities. These products, alongside our innovative new products, are capitalizing on consumer demand for functional nutrition, and we will continue to invest behind them to drive their performance. Speaking of innovation, I will quickly highlight some of our recent developments. After the positive feedback we received presenting them at Expo West in March, We look forward to sharing our LifeWay Muscle Mates and Kefir Butter.

With a wider group of retailers and consumers as we expand our reach across the dairy landscape with these incredible items. These pioneering products bring the benefits and attributes that consumers are looking for along with LifeWay signature probiotic blend and reputation for quality. I am also pleased to announce our innovative partnership with Open Farm, which incorporates life way ingredients into a premium pet food line called GoodGut, We collaborated with Open Farm to formulate a canine culture, a specialized blend of probiotic strains that also feature prebiotic fiber, and postbiotic elements to support the thriving gut microflora for pets. The expanding consumer emphasis on health extend beyond humans. Pet owners are prioritizing nutrition for their beloved companion and digestive health is a cornerstone to long term pet wellness.

This partnership brings LifeWay into an entirely new category where we can apply our decades of cultured dairy and probiotic expertise to pet nutrition and we are excited about the potential here. of high-protein, probiotic-packed bites. These experiential collaborations help drive trial with fresh consumers and further define LifeWay as a lifestyle brand, not just a product in the dairy aisle. Digitally, we are continuing to position LifeWay at the heart of viral content. A great example of this was our advertising campaign with Chicago football stars Colston Loveland and D’Andre Swift released just prior to big game weekend. Since its launch in February, the spot has gone truly viral. Generating over 10 million views across the social platforms.

Through our content, we are sharing helpful nutrition information and creating recipes to help our community enjoy LifeWay products in fresh, delicious ways. Millions of impressions help connect us with consumers who are moving from the kefir curious to dedicated fans of the brand. We are steadily growing our influencer network to build awareness of the portfolio and drive shoppers into retailers to discover their new favorite LifeWay kefir and farmer’s cheese items on the shelf. In retail environments, we continue to strategically allocate our marketing spend and have been successful driving velocities through high impact programs that engage consumers at key decision points through their shopping journey. Alongside our sales and marketing investments, our retail relationships remain robust.

We recently secured an expansion of our Costco presence in select markets with a new twin pack of plain Lifeway kefir. Our dialogues with major partners continue as we seek out incremental distribution wins across channels that align with LifeWay’s growth strategy. To wrap up, these results marked a truly extraordinary launch to 2026. We achieved record breaking sales, strong gross margin expansion and significant bottom line growth while our core products are continuing to resonate with consumers. Through our continued execution, we have built a strong foundation for growth and the strategic investments we are making today in sales and marketing, innovation, and manufacturing capacity will enhance our ability to serve our growing customer base gain share, and capitalize on the structural tailwinds of our category.

We remain deeply committed to our mission of bringing best in class probiotic and nutritious foods to our loyal and growing consumer base. Thank you for your continued support, and we look forward to updating you on our progress when we report our second quarter 2026 results. Have a wonderful day.

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