Q3 2023 Lifeway Foods Inc Earnings Call - Pre Recorded
Speaker 1: call. On the call with me today is Julie Smolenski, President and Chief Executive Officer. By now, everyone should have access to the press release that went out this morning.
With me today is Julie Smolinski, President and Chief Executive Officer by now everyone should have access to the press release that went out this morning.
Speaker 1: 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.
If you have not received the release it is available on the Investor Relations portion of <unk> website at Www Dot Lifeway foods Dot com.
A recording of this call will be available on the company's website.
Speaker 1: Before we begin, we'd like to remind everyone that the prepared remarks contain forward-looking statements.
Before we begin we'd like to remind everyone that the prepared remarks contain forward looking statements.
Speaker 1: The words believe, expect, anticipate, 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.
The 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.
Speaker 1: Actual results could differ materially from those projected in any forward-looking statements. Lifeway 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'd like to turn the call over to Lifeway's Chief Executive Officer, Julie Smolanski.
Actual results could differ materially from those projected in any forward looking statements life.
Lifeway 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.
And with that I'd like to turn the call over to Lifeway as Chief Executive Officer, Julie Smolinski.
Speaker 2: Thank you, John , and good morning to everyone joining us today. As always, we greatly appreciate your interest in life like this. I'm excited to report a phenomenal start to the second half of 2023 as we once again set a company record for net sales and continue to deliver vastly improved profitability. Our results are a testament to the sound execution of our entire Lifeway team, and I could not be more pleased with their efforts.
Thank you John and good morning to everyone joining us today.
As always we greatly appreciate your interest in <unk>.
I'm excited to report a phenomenon.
Second half of 2023, and we once again that a company record for net sales and continued to deliver vastly improved profitability.
Our results are a testament to the sound execution of our entire lifeway team and I could not be more pleased with their appetite.
Speaker 2: With that, I will now review our third quarter 2023 results. Net sales were $40.9 million for the period ended September 30, 2023, an increase of $2.8 million, or 7.2%, compared to the third quarter in 2023.
That I will now review our third quarter 2023 result.
Net sales were $40 9 million for the period ended September 32023, an increase of $2 8 million or seven 2% compared to the third quarter in 2023.
Speaker 2: The increase was primarily driven by higher volumes of our Lightweight branded drinkable kefir, and to a lesser extent, the impact of price increases implemented during the fourth quarter of 2022.
Increase was primarily driven by higher volumes of our lifeway branded drinkable keefer and to a lesser extent the impact of price increases implemented during the fourth quarter of 2022.
Speaker 2: We are encouraged to see our growth driven by volumes, yet again, more so than pricing, with continued accelerating unit velocities in our flagship Lifeway Kiefer line. This once more demonstrates widespread acceptance of our inflation justified price increases as our loyal and new customers maintain their commitment to our better for you high quality product offering.
We are encouraged to see our growth driven by volume yet again more so than pricing with continued accelerating unit velocities in our flagship lifeway keep her line. This one's more demonstrates widespread acceptance of our inflation justified.
This increases add ons loyal and new customers maintained their commitment to our better for you high quality product offering.
Speaker 2: This was our 16th consecutive quarter of strong year-over-year growth.
Was our 16th consecutive quarter of strong year over year growth.
Speaker 2: our second consecutive quarter setting a lifeway record for total net sales.
Our second consecutive quarter setting a lifeway record for total net sales.
Speaker 2: The growth this quarter was even more notable when considering that the third quarter of 2022 was now our third largest quarter ever. When compared to the third quarter of 2021, we were up 38.4 percent.
The growth this quarter was even more notable when considering that the third quarter of 2022 was now our third largest quarter ever when compared to the third quarter of 2021, we were up 38, 4%.
Speaker 2: The year-over-year lapse will continue to become more difficult, yet we are excited by the challenge to continue growing.
The year over year lap will continue to become more difficult yet we are excited by the challenge to continue growing.
Speaker 2: Further underscoring the strong sales we delivered is the environment in which we deliver them. It's no secret that the current U.S. macro environment is challenging consumers. A number of factors, including high interest rates, the reinstatement of student loan repayments, inflation, among others, are weighing on consumer optimism, and they are becoming more price sensitive.
Further underscoring the strong sales we delivered is the environment in which we deliver that.
It's no secret that the current U S macro environment is challenging consumer.
A number of factors, including high interest rates, the reinstatement of student loan repayments inflation, among others are weighing on consumer optimism and they are becoming more price sensitive.
Speaker 2: Despite that, and in light of the price increases we implemented in the fourth quarter of 2022, our loyal customers continue to affirm our belief that Lifeline's premium product offerings come at a great value, illustrated by our great consumption trends and velocities in our key retailers.
Despite that and in light of the price increases we implemented in the fourth quarter of 2020 to our loyal customers continue to affirm our belief that lifeway is premium product offering at a great value illustrated by a great consumption trends and velocities and our key retailers.
Speaker 2: Moving on, we reported a growth profit margin of 27.2% for the period end of September 30, 2023, increasing 730 basis points compared to 19.9% in the third quarter of 2023. This strong margin expansion was primarily due to higher volumes of Lifeway branded products and the favorable impact of milk pricing, and to a lesser extent, the aforementioned price increases and decreased transportation costs.
Moving on we reported a gross profit margin of 27, 2% for the period ended September 32023, increasing 730 basis points compared to 19, 9% in the third quarter of 2023.
This strong margin expansion was primarily due to higher volumes of lifeway branded product and the favorable impact of milk pricing and to a lesser extent the aforementioned price increases and decreased transportation cost.
Speaker 2: We have consistently stated that growth margin recovery was a top priority of ours. And with our proactive operating discipline, along with subsiding inflationary impact, the largest being favorable milk pricing, we are now delivering much enhanced profitability.
We have consistently stated that gross margin recovery was a top priority of ours and with our proactive operating discipline, along with subsiding inflationary impact the largest being favorable milk pricing. We are now delivering much enhanced profitability.
Speaker 2: Year-to-date, our growth profit margin has increased 810 basis points.
Year to date, our gross profit margin has increased 810 basis points looking forward, we will always seek out incremental productivity and profitability measures in pursuit of margin enhancement.
Speaker 2: Looking forward, we will always seek out incremental productivity and profitability measures in pursuit of margin enhancement. Now to our expenses.
Now to our expenses selling general and administrative expenses increased <unk> 3 million to $6 million for the period ended September 32023, compared to $6 3 million in the third quarter of 2022. The decrease was due to decreased G&A expenses, partially offset by.
Speaker 2: selling general and administrative expenses increased $0.3 million to $6 million.
Speaker 2: for the period ended September 30, 2023, compared to $6.3 million in the third quarter of 2022. The decrease was due to decreased G&A expenses, partially offset by a small increase in selling expenses as we continue to strategically invest in our core Lifelike Kefir products and farmer cheese through targeted advertising and marketing programs in pursuit of additional brand expansion.
Small increase in selling expenses as we continue to strategically invest in our core likely keep her product and farmer achieved through targeted advertising and marketing programs in pursuit of additional brand exposure.
Speaker 2: Our net income during the period ended September 30, 2023, with $3.4 million reflecting EPS of $0.23 per basic and diluted common share compared to net income of $1 million or $0.06 per basic and diluted share during the third quarter of 2022. Our continued top line and margin expansion is flowing through the bottom line as our team continues to execute efficiently and inflationary impacts subside. Capital spending
Our net income during the period ended September 32023 was $3 $4 million, reflecting EPS of <unk> 23 per basic and diluted common share compared to net income of $1 million or <unk> per basic and diluted share during the third quarter of 2022, our continued top line in <unk>.
<unk> expansion is flowing through the bottom line as our team continues to execute efficiently and inflationary impacts subside.
Speaker 2: marginally during the nine months ended September 30, 2023, compared to the same period in 2022, aligned with our capital spending plan for the year. Our capital spending is focused on three core areas, growth capital, cost reduction, and facility improvement.
Capital spending increased marginally during the nine months ended September 32023, compared to the same period in 2020 to align with our capital spending plan for the year.
Our capital spending is focused on three core areas growth capital cost reduction and facility improvement gross capital spending supports new product innovation and enhancement cost reduction and facility improvements support manufacturing efficiencies safety and productivity.
Speaker 2: Gross capital spending supports new product innovation and enhancement, cost reduction and facility improvement support, manufacturing efficiencies, safety and production.
Speaker 2: Our continued capital commitment reflects our goals as a business to continue growing and improving our internal efficiencies. This was a phenomenal quarter for LifeWise.
Continued capital commitment reflects our goals as a business to continue growing and improving our internal efficiencies.
Speaker 2: Our customers continue to prove resilience, not trading down, and delivering positive unit velocities at our core Lifeway product in spite of the macro pressures that have weighed on consumers and some of the broader industry.
Phenomenal quarter for lightweight our customers continue to prove resilient not trading down and delivering positive unit velocities on our core lifeway product in spite of the macro pressures that have weighed on consumers and some of the broader industry because of that we had another life play record on topline, beating last quarter's record sales match.
Speaker 2: Because of that, we set another Lifeway record on top line, beating last quarter's record sales metrics by $1.7 million while maintaining strong profitability measures. As usual, this incredible quarter was driven by the industry-leading drinkable Lifeway kefir, the core driver of our business.
<unk> by $1 $7 million, while maintaining strong profitability measures.
As usual this incredible quarter was driven by the industry, leading drinkable lifeway keep her the core driver of our business.
Speaker 2: Net sales of our drinkable kefir increased 9% to $33 million for the period ended September 30, 2023, compared to the third quarter in 2022.
Net sales of our drinkable keefer increased 9% to $33 million for the period ended September 32023, compared to the third quarter in 2022.
Speaker 2: LifeWise Kiefer products are tart and tangy and provide customers with probiotics, vitamin D, and protein to help support their gut health, immunity, and mental well-being.
Lifeway keys, where products are tightened tingey and provide customers with probiotics vitamin D and proteins to help support their gut health immunity and mental well being.
Speaker 2: The probiotics in kefir support a healthy microbiome and approximately 80% of immune defenses come from the gut.
The probiotics and keeps our support a healthy microbiome and approximately 80% of the immune defenses come from the gut.
Speaker 2: Probiotic products such as fever are the focus of intense research related to the microbiome's role in stress, depression, and anxiety. We now know that 90% of the body's serotonin comes from gut cells and the gut-brain access, which links the emotional and cognitive centers of the brain with our intestinal functions, plays a major role in happiness and well-being.
Probiotic products such as <unk> are the focus of intense research related to the microbiome is role in stress depression and anxiety, we now know that 90% of the body's aratana and comes from got solved and the gut brain access, which links the emotional and cognitive centers of the brain with our intestinal function plays a major role in happiness and why.
Speaker 2: health and wellness remains a powerful tailwind to customer preference in today's environment. And as the modern consumer learns and focuses more on their health, they will care even more about their microbiome.
Being.
Health and wellness remains a powerful tailwind to customer preference in today's environment and as a modern consumer learns and focuses more on their house, they will care, even more about their microbiome.
Speaker 2: Our Kiefer products are better for you and taste incredible, which is why customers keep coming back for more.
Archie for products are better for you and tastes incredible which is why customers keep coming back for more.
Speaker 2: Selling our drinkable kefir is our primary business focus and exactly what we do best. We will continue to dedicate the majority of our time and investments behind our core products through both targeted marketing and incremental distribution opportunities to strategically attract further brand awareness and trial.
Selling our drinkable Kiefer is our primary business focus and exactly what we do that we will continue to dedicate the majority of our time and investment behind our core products through both targeted marketing and incremental distribution opportunities to strategically attract further brand awareness and trial.
Speaker 2: In doing so, we hope to further our dominant U.S. key for market share and to better position ourselves to capitalize on the health and wellness tailwind driving today's consumers and continued expansion of the global key for market.
So we hope to further our dominant U S keeps our market share and to better position ourselves to capitalize on the health and wellness tailwind driving today's consumers and continued expansion of the global keep our market.
Speaker 2: While we remain focused on growing our core key for sales, as we announced in August , we have recently mapped a strategy to capitalize on current consumer interest by further investing in Lifeway Farmer Cheese. Lifeway Farmer Cheese is a premium cultured soft cheese and a highly sought-after favorite in many specialty stores. Our Farmer Cheese has been a cult favorite since its introduction and shows strong sales relative to distribution. It's available now.
While we remain focused on growing our core keefer sales as we announced in August we have recently mapped our strategy to capitalize on current consumer interests by further investing in lifeway farmer cheese Lifeway farmer cheese is a premium culture sauce cheese and a highly sought after favorite and many specialty stores.
Farmer cheese has been a cult favorite since its introduction.
Shows strong sales relative to distribution.
It's available nationwide.
Speaker 2: As we described on our call last quarter, one of this year's surprise trends has been the emergence of cottage cheese recipes on TikTok and Instagram.
As we described on our call last quarter. One of this year surprise has been the emergence of cottage cheese recipes on tech talk on Instagram.
Speaker 2: Our Farmer's Cheese is versatile, has smooth, blended texture that consumers are looking for, and we believe it would be a logical fit for many of those blended cottage cheese recipes. We are currently running a series of Farmer's Cheese marketing campaigns to capture the attention of those seeking a probiotic upgrade to their cottage cheese recipes. Outside of this year's social media buzz, over the past few years, our Farmer's Cheese has drawn heightened interest from consumers and retailers organically.
Our farmer cheese as births at Al has smoothed blended texture that consumers are looking for and we believe it would be a logical fit for many of those blended cottage cheese recipes. We are currently running a series of farmer cheese marketing campaign to capture the attention of those seeking a probiotic upgrade to their cottage cheese recipes.
Outside of this years, social media buys over the past few years, our farmer team has drawn heightened interest from consumers and retailers organically.
Speaker 2: We are acting to meet this new demand. We have initiated plans to increase cheese production and that's...
We are acting to meet this new demand, we have initiated plans to increase production and invest.
Speaker 2: in technology to improve production time by more than half and implement new automation and efficiency plans to ensure the brand is equipped for future demand and distribution opportunities. Additionally, we are seeing continued progress with our Guava Loaf at Keeper and our new organic whole milk product. We will continue to test and develop new flavors and offerings in an effort to satisfy our consumers with differentiated assortments.
In technology to improve production time by more than half and implement new automation and efficiency plans to ensure the brand is equipped for future demand and distribution opportunities.
Additionally, we are seeing continued progress with our guava, lowfat keeper and our new organic whole milk product, we will continue to test and develop new flavors and offerings in an effort to satisfy our consumers with differentiated assortment.
Speaker 2: I will now touch on some of the marketing and advertising updates, where our focus remains dedicated to driving increased consumer trial. Lightway has invested heavily in advertising to consumers who are using grocery pickup and delivery options. We will be expanding our efforts with additional marketing programs in Q1 to catch new customers as they set their healthy intentions for the new year.
I will now touch on some of the marketing and advertising updates where our focus remains dedicated to driving increased consumer trial likely has invested heavily in advertising to consumers, who are using grocery pickup and delivery option and you will be expanding our efforts with additional marketing programs in Q1 protects new customers as they sat.
They're healthy intention for the new year.
Speaker 2: We have also been advertising digitally on Instacart, where we have seen great success in driving trial and introducing consumers to additional varieties of Lifeway products. Coincidentally, I was recently at the Fortune Most Powerful Women Summit, where I had the opportunity to meet some of Instacart's amazing leadership team. I was pleased to hear that they are already familiar with Lifeway from our appearance on their company leader boards week after week.
We have also been advertising digitally on the car, where we have seen great success in driving trial and introducing consumers additional varieties of lifeway product choices that Lee I was recently at the Fortune most powerful women summit, where I had the opportunity to opportunity to meet some of into cars. The amazing leadership team I was pleased to hear that.
They are already familiar with lifeway from our appearance on their company Leaderboards week after week.
Speaker 2: Additionally, this summer, we continued our experience-based marketing, focusing on places like New York City, where we embarked upon a yoga series with Kiefer Sampling Program in Bryant Park, a pop-up with Shellfield, sampling our products in Brooklyn, and various other activations. With the warm season having ended, we are pleased to report the pop-ups were a success.
This summer we continued our experience based marketing focusing on places like New York City, where we embarked upon a yoga series with Kiefer sampling program in Bryant Park, a pop up with shell field sampling our product in Brooklyn, and various other activity shot with the warm season. Having ended we are pleased to report the pop up four six.
Speaker 2: To keep the momentum, we have staffed up with new field marketing team members and are looking forward to a winter season full of events, including the Magnificent Nile Lights Festival in Chicago, where Lifeway will have a holiday float again this year.
Got.
To keep the momentum we have staffed up with new field marketing team members and are looking forward to a winter season full of events, including the magnificent mile life basketball in Chicago, where life, we will have the holiday flow again this year as.
Speaker 2: As we look forward, we continue to partner with our target social media influencers, including celebrities, chefs, and nutrition experts with notable presence on TikTok, Instagram, or Pinterest to suggest healthy ingredients, recipes, and snack ideas incorporating our Healthy Lifeway offering.
As we look forward, we continue to partner with our target social media influencers, including celebrity chef and nutrition experts with notable presence on Tictac Instagram or pinterest.
Suggest healthy ingredients recipes and snack ideas, incorporating our healthy likely offering we're spending meaningful dollars on our social media advertising and we continue to realize a positive impact on our web traffic and social following from those digital campaign, which we have also partnered with in store program to incentivize retention rates and increased.
Speaker 2: We are spending meaningful dollars on our social media advertising, and we continue to realize a positive impact on our web traffic and social following from those digital campaigns, which we have also partnered with in-store programs to incentivize retention rates and increase brand exposure.
Brand exposure.
Speaker 2: Now I will touch on some distribution updates. Since our last call, I'm pleased to report we have gained a couple of new distributions.
Now I will touch on some distribution updates since our last call I am pleased to report we have gained a couple of new distribution.
Speaker 2: First, I'm pleased to announce that we are working with a new food service partner that will be stocking our single serve Lifeway Keeper at select airport retail and travel retail locations.
First I'm pleased to announce that we are working with our new foodservice partner that will be stocking or single serve lifeway Keefer I select airport retail and travel retail location.
Speaker 2: This exposure will help the brand find new customers as they look for healthy options while traveling.
Exposure will help the brand find new customers as they look for healthy options. While traveling we also recently received notice of new pharmacy distribution coming to Cub foods, a Midwest based grocery chain orders will begin shipping in Q4.
Speaker 2: We also recently received notice of new farmers sheep distribution coming to Cub Foods, a Midwest-based grocery chain. Orders will begin shipping in Q4. On the last call, we announced distribution at roughly 140 CVS locations, our first partnership with them, where we placed in premium sets in their West Coast stores.
On the last call, we announced distribution at roughly 140 Cvs locations, our first partnership with them, where we placed and premiums that's in their west coast doors as well.
Speaker 2: As we alluded to, we don't expect this to be a large volume driver, but that said, we are quite excited to be placed in the front of traffic that a store like CVS draws.
We alluded to we don't expect this to be a large volume driver, but that said we are quite excited to be placed in the front of traffic that a store like Cvs drives.
Speaker 2: We also continue to perform solidly at Wawa and are maintaining consistent unit moving slightly above the initial velocities upon our introduction in late 2022. Lastly, we continue to maintain our strong relationships with key retail partners and will continue to seek out incremental distribution opportunities across a variety of channels that make sense for all great products we have to offer.
We also continued to perform solidly at Wawa and are maintaining consistent unit moving slightly above the initial velocities upon our introduction in late 2022.
Lastly, we continue to maintain.
Our strong relationships with key retail partners and we will continue to seek out incremental distribution opportunities across a variety of channels that makes sense for all great product we have to offer.
Speaker 2: Specifically, we believe there are still plenty of distribution opportunities for our top-performing kefir flavors, ProBugs, and Farmer's Chief.
Typically we believe there are still plenty of distribution opportunities for our top performing keefer flavors pro bugs and farmer cheese.
Speaker 2: To wrap up this call, I would like to once again highlight the third quarter marked incredible record-breaking results.
Wrapping up this call I would like to once again highlight the third quarter marked an incredible record breaking results are core products continue to excel, while our team continues to deliver operating discipline and enhanced profitability I believe we have the right team in place to maintain the positive momentum going forward and I'm excited to finish off 2012.
Speaker 2: Our core products continue to excel, while our team continues to deliver operating discipline and enhanced profitability. I believe we have the right team in place to maintain this positive momentum going forward, and I'm excited to finish off 2023 strong as we continue our mission to provide best-in-class probiotic and nutritious food to improve the health and well-being of our customers.
Three strong as we continue our mission to provide best in class probiotic and nutritious food to improve the health and wellbeing of our customers.
Speaker 2: Thank you all very much for listening to the call today, and of course, for your interest in Lifeway Foods.
You all very much for listening to the call today and of course for your interest in Lifeway foods.
Speaker 2: We look forward to updating you on our progress and momentum in 2023 year-end call and in the new year.
We look forward to updating you on our progress and momentum in 2023 yearend call and in the new year.
Speaker 2: Let me be one of the first to wish you a happy holiday season, and I hope you have a great day.
Let me deal with one of the first to wish you a happy holiday season.
And I hope you have a great day.