Q1 2021 Lifeway Foods Inc Earnings Call

Executive Officer.

By now everyone should have access 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 is website at Www Dot Lifeway key for Dot com.

A recording of this call will be available on the company's website.

Before we begin we'd like to remind everyone of the prepared remarks contain forward looking statements and management may make additional forward looking statements and response to your questions.

Words believe expect anticipate and other similar expressions generally identified 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 and any forward looking statements lifeway.

<unk> assumes no obligation to update any forward looking projections that may be made in today's release or call.

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 as Chief Executive Officer, Julie small yes.

Thank you John and good morning to everyone joining us.

It is my pleasure to be speaking with you regarding our first quarter 'twenty 'twenty 1 earnings report and thank you as always for your interest and Lifeway foods the.

The first quarter of 2021 marks yet another quarter of revenue growth, our sixth and a row and has provided us the strong platform for what we know will be of great year here at Lifeway.

I want to start today by thanking our employees for their commitment to take care of our customers throughout these unique times.

Looking to the future. We are encouraged by the vaccine rollout and remain optimistic that by year and we will be emerging from this pandemic.

Despite a volatile environment over the last 18 months Lifeway has deepened our relationship with our valued retail partners and customers, while pivoting to meet the operational and marketing challenges of the current landscape.

Our of dynamism and and agility. During this time has served us well and we continue to pursue and successfully execute on our plan to drive growth and deliver value to our shareholders.

Today I'll review, our first quarter, 2021 results, which I am proud to say deliver our sixth consecutive quarter of year over year net sales increases.

Net sales were $29.4 million for the quarter ended March 31, 'twenty, 'twenty, 1 and increase of $4 million or 15, 7% versus 2020. This.

This increase was primarily driven by higher volumes of our brands of drinkable Keefer approximately 30 percentage of the increase in sales resulted from the farmers to family Foods box program with the United States Department of Agriculture, which began during the middle of the first quarter 2021.

The farmers to families and food box program, which began in May of last year was designed as the temporary relief effort and response to the economic disruption caused by the pandemic to date the.

The USDA contractors have delivered nearly 166 million boxes of fresh produce milk dairy and cooked meets to disadvantaged Americans across the country. When we were contacted by partners assisting the USDA about manufacturing nutritious keefer for for the boxes, we were prepared and.

And proud to participate.

Operating leverage and to a lesser extent favorable milk pricing has also driven an increase and our gross profit margin from 23, 6% and the first quarter of 2020 to 27 point for per cent for 2020.1.

And finally with increased revenues and greater margins. Our net income increased nearly 800 per cent from approximately of 150000, and the first quarter of 2020 to $1.3 million and 'twenty 'twenty 1.

We continue to make progress and profitability as the result of our previously outlined lifeway to point out strategy.

Depreciation expenses increased reflecting our continued investments and manufacturing improvements and capital spending was approximately $500000 and the first quarter and these expenditures will help support the efficiency production of our best in class products.

Our capital spending is focused in 3 core areas growth.

Cost reduction and facility improvements the.

The growth capital spending to support new product innovation, and and have enhancements the cost reduction and facility improvements support manufacturing efficiency safety and productivity.

While we understand that our results in 2020 benefited from increased demand due to stay at home trends and strong increase and grocery sales our first quarter results underscore our confidence the strong demand for our healthy product will continue as we emerge from the pandemic and awareness around gut health and <unk>.

For his contribution to the immune system as well as the contribution to mental health becomes more widely known.

According to a 'twenty 'twenty 1 survey conducted by the consumer market research firm Hunter.

71% of U S consumers say, they will continue to cook more at home after the pandemic and.

Also with structural shifts towards working at home and therefore eating at home. We believe our products will continue to gain traction with new consumers and have a high retention rate among existing consumers.

Lifeway is positioned very well with regards to today's consumer interest exciting scientific research surrounding keeper rising health consciousness increase.

Increasing attention to high protein products, such as lifeway keeper and the benefits of keeper for of lactose sensitive individuals' are expected to drive growth and the global key for market by an estimate of compound annual growth rate of 5 per cent and expect it to reach.

$146 billion by 2020.7 according to announce the analysis by Grand view research.

We are well positioned to capitalize on this growth and the market because Archie for your products are healthy tastes, great and connected the key ingredients and smoothies soups dips dressing desserts and so much more.

Lifeway works for celebrated chefs and nutrition experts to offer up healthy ingredients swap recipes and snack ideas and social media, which can be found also be found on our website.

As we have mentioned and our previous quarters, we have stepped up our marketing campaigns to reach new consumers and Reengage lapsed buyers.

In the first quarter of 'twenty 'twenty, 1 we ran extended TV and digital marketing campaign supplemented by brand integrations on the drew Barrymore show, the Doctor and show and more.

Further we highlight our new distribution channel to Costco locations in Hawaii, and California, as being exciting opportunities and additive to our results.

From a business standpoint, targeting todays health oriented and tech savvy consumer has paid dividends.

We continue to acquire new customers and the increased sales at our key retailers building.

Building off the strong momentum from last year sales attributed to advertising as well as our organic sales through online retailers are up substantially year over year.

Our products provide customers with probiotics vitamin D and protein and that helps to support their gut health and unity and mental well being.

And the probiotics and keep her support of healthy microbiome and approximately 80% of the immune defense come from the gut.

Probiotic products, such as Keith or are the focus of intense research related to the microbiome throat and stress depression and anxiety.

We now know that up to 90 per cent of the body serotonin comes from got cells and that the brain got access.

Which links the emotional and cognitive centers of the brain with our intestinal function plays a major role and happiness and wellbeing.

Consumers are more interested and these back than ever before and that is why lifeway continues to resonate with consumers.

We are very pleased with our first quarter 'twenty 'twenty 1 results.

For he is emerging from the crisis focused on delivering profitable strategic growth.

Our mission remains the same we're here to provide top class probiotic, and nutritious foods and to improve the health and wellbeing of our customers.

I'm looking for for I am looking forward to furthering our mission through the remainder of 'twenty 'twenty, 1 and into 2020.2.

And the financial update once again net sales were $29.4 million for the quarter ended March 31, 'twenty 'twenty, 1 and increase of 15.7% from $25.4 million and the first quarter of 2020.

Selling expenses increased $2.6 million or $25, 1 per cent to $3.2 million and the first quarter of 2021 from $2.6 million and the prior year quarter.

Quarter.

And we reported earnings of 0.8 cents per diluted share for the first quarter of 'twenty 'twenty, 1 and increase from earnings of 1 cent per diluted share and the first quarter of 2020. We're very encouraged by the strong start to 'twenty 'twenty, 1 and believe we are well positioned for long term growth and value creation.

And look forward to serving consumers with focus on increased and self care and unity and gut health.

And clothing, thank you for listening to the call today and for your interest and Lifeway. This concludes our overview for the first quarter of 'twenty 'twenty..1 we hope everyone will continue to remain safe and we look forward to updating you are on our ongoing progress and business momentum on our next call have a great day.