Q1 2025 Lifecore Biomedical Inc Earnings Call
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Unknown Executive: Good morning, and thank you for joining Lifecore's fiscal 2025 first quarter earnings call. During the presentation, all participants will be in a listening mode.
Speaker Change: Good morning, and thank you for joining life course fiscal 'twenty 25 first quarter earnings call.
During the presentation, all participants will be in a listen only mode.
Stephanie Diaz: Now I'd like to turn the call over to Stephanie Diaz, Manager of Investor Relations for Lifecore. Good morning, and thank you for joining us today to discuss Lifecore Biomedical's first quarter fiscal 2025 earnings results.
Now I'd like to turn the call over to Stephanie Diaz manager of Investor Relations for life score.
Speaker Change: Good morning, and thank you for joining us today to discuss life core bio Medicals first quarter fiscal 2025 earnings result.
Unknown Executive: Putting the call today from Lifecore are Paul Joseph, President and Chief Executive Officer, and Ryan Lake, Chief Financial Officer.
Speaker Change: Leading the call today from my car I apologize that President and Chief Executive Officer, and Ryan Lake Chief Financial Officer.
Stephanie Diaz: Before we begin today, I'd like to remind everyone that certain statements made in the course of this conference call contained forward-looking statements. It is important to note that the forward-looking statements made during this call reflect management's judgment and analysis only as of today, October 4, 2024, and the company's actual results could differ materially from those projected in such forward-looking statements.
Speaker Change: Before we begin today I'd like to remind everyone that certain statements made in the course of this conference call contain forward looking statements.
Speaker Change: To note that the forward looking statements made during this call reflect management's judgment and analysis only as of today October four 2024, and the company's actual results could differ materially from those projected in such forward looking statements.
Stephanie Diaz: For a more thorough discussion of the risks and uncertainties associated with any forward-looking statements, please see the disclaimer regarding forward-looking statements that is included in our fiscal 2025 first quarter earnings release, which was furnished to the SEC today on Form 8-K, as well as our other filings for the Securities and Exchange Commission, including but not limited to the company's Form 10-Q for Q1 fiscal 2025, which was filed this morning.
Speaker Change: For a more thorough discussion of the risks and uncertainties associated with any forward looking statements. Please see the disclaimer regarding forward looking statements that is included in our fiscal 2025 first quarter earnings release, which was furnished to the SEC today on form 8-K, as well as our other filings with the Securities and Exchange Commission, including but not limited to the.
Speaker Change: Company's Form 10-Q for Q1 fiscal 2025, which was filed this morning with.
Paul Joseph: With that, I'd like to turn the call over to Paul Joseph, Chief Executive Officer. Thank you, Stephanie. Good morning, everyone, and thank you for joining our fiscal 2025 first quarter update. I joined Lifecore last spring with a commitment to position the company for long-term success. Today, I'm pleased to report that in my first 100 days, Lifecore had streamlined its operations, added talented new leaders, signed multiple new customers, regained compliance with NASDAQ's listing requirements, and successfully raised funds. As a result of these achievements, I am even more confident that our company is now on a path to reaching its business potential and creating great value for our customers, employees, partners, and shareholders.
Speaker Change: With that I'd like to turn the call over to Paul Joseph <unk>, Chief Executive Officer.
Paul Joseph: Thank you Stephanie good morning, everyone and thank you for joining our fiscal 2025 first quarter update.
Joining me like for last spring with a commitment to position the company for long term success.
Paul Joseph: I am pleased to report that in my first hundred days like four and streamline its operations added talented new leaders signed multiple new customers regained compliance with nasdaq's listing requirements and successfully raised funds.
Paul Joseph: As a result of these achievements I am even more confident that our company is now on a path to reaching its business potential and creating great value for our customers employees partners and shareholders.
Paul Joseph: I will provide additional details on business development and operations for the period, following an overview of our first quarter fiscal 2025 financial results.
Paul Joseph: I will provide additional details on business development and operations for the period. Following an overview of our first quarter fiscal 2025 financial results for that I will turn the call over to Ryan.
Ryan Lake: For that, I'll turn the call over to Ryan. Thank you, Paul. Good morning, everyone.
Ryan Lake: Thank you Paul Good morning, everyone before discussing our results I'd like to say that I'm very pleased to be joining you today in my first earnings results call with life core <unk>.
Ryan Lake: Before discussing our results, I'd like to say that I'm very pleased to be joining you today in my first earnings results call with Lifecore. My prior experience as a CFO and a public CDMO is highly relevant to the work here at Lifecore, and I'm excited to bring my skill set to the company. I am grateful to all of our stakeholders, including our employees, shareholders, debt holders, vendors, and customers, for the support they have shown me as I've come up to speed over the past month. I believe the company will have an exciting future, and I look forward to the many opportunities that lie ahead.
Ryan Lake: My prior experience as a CFO and a public CMO is highly relevant to the work here at life core and I'm excited to bring my skill set to the company.
Ryan Lake: I'm grateful to all of our stakeholders, including our employees shareholders debtholders vendors and customers for the support they have shown me as I've come up to speed over the past month.
Ryan Lake: I believe the company will have an exciting future and I look forward to the many opportunities that lie ahead.
Ryan Lake: I'll now provide an overview of Lifecore's first quarter results. Revenues for the quarter ended August 25th, 2024, were $24.7 million compared to $24.5 million for the comparable 2023 period. The increase of 0.2 million was primarily driven by a million and a half dollar increase in HA manufacturing revenues from our largest customer due to timing shipments, partially offset by a $1.3 million decrease in CDMO revenues. Primarily as a result of one customer working down inventory levels built in the prior year period.
Ryan Lake: Now I'll provide an overview of life course first quarter results revenues for the quarter ended August 25, 2024 were $24 7 million compared to 24 5 million for the comparable 2023 period.
Ryan Lake: The increase of <unk> 2 million was primarily driven by a 1 million $5 increase in manufacturing revenues from our largest customer due to timing of shipments partially offset by a $1 $3 million decrease in <unk> revenues, primarily as a result of one customer working down inventory levels built into price.
Ryan Lake: Per year period.
Ryan Lake: David. Gross profit for the quarter ended August 25th, 2024, was 5.4 million compared to 2.7 million for the comparable period of 2023. The increase of 2.7 million was primarily due to a favorable sales mix between customers and price increases to our customers within CDMO revenues.
Ryan Lake: Gross profit for the quarter ended August 25, 2024 was $5 4 million compared to $2 7 million for the comparable period of 2023 the.
Ryan Lake: The increase of $2 7 million was primarily due to a favorable sales mix between customers and price increases to our customers within CMO revenues selling general and administrative expense for the first quarter of fiscal 2025 was $14 8 million compared to $9 2 million for the comparable prior year.
Ryan Lake: Selling, general and administrative expense for the quarter of fiscal 2025 was 14.8 million compared to 9.2 million for the comparable prior year period. The increase of 5.6 million was primarily due to increases in professional fees of 4.7 million, consisting of 2.4 million in auto fees and legal fees of 2.3 million in non-cash stock based compensation expense, primarily due to the impact of performance stock unit grants of 0.9 million. Interest expense was 5.4 million for the three months ended August 25th, 2024, and increased compared to 3.9 million for the comparable period of 2023. The increase of 1.4 million was primarily a result of increased interest expense, primarily related to the amortization of the debt discount on the Alcon term loan debt facility, along with the reduction in capitalized interest compared to the prior period.
Ryan Lake: Our period the increase of $5 6 million was primarily due to increases in professional fees of $4 7 million consisting of $2 $4 million in audit fees and legal fees of $2 3 million and noncash stock based compensation expense, primarily due to the impact of performance stock unit.
Ryan Lake: Grants of <unk> 9 million.
Ryan Lake: Interest expense was $5 4 million for the three months ended August 25, 2024, an increase compared to $3 9 million for the comparable period of 2023 the.
The increase of $1 4 million was primarily a result of increased interest expense primarily related to the amortization of the debt discount on the Alcon term loan debt facility, along with a reduction in capitalized interest compared to the prior period.
Ryan Lake: For the quarter ended August 25th, 2024, the company recorded a net loss of 16.2 million or 53 cents per diluted share as compared to a net loss of 10.8 million or 35 cents per diluted share for the comparable period of 2023. EBITDA as adjusted for the period of negative 1.8 million was consistent with the negative 2 million in the prior year period.
Ryan Lake: For the quarter ended August 25, 2024, the company recorded a net loss of $16 2 million or <unk> 53 per diluted share as compared to a net loss of $10 8 million or <unk> 35 per diluted share for the comparable period of 2023.
Ryan Lake: EBITDA as adjusted for the period of negative $1 8 million was consistent with the negative $2 million in the prior year period.
Ryan Lake: This morning we were pleased to announce the successful closing of a $24.3 million PIPE offering with various new and existing shareholders. This is a great sign of confidence and support of management by our shareholder base, our plan for value creation, and the tremendous opportunity we have in this growing market. We believe this offering, along with other non-deluded actions, will address the company's near-term liquidity needs. We currently do not have plans to raise additional capital in the near term. Importantly, we believe that the financial stability created with this financing will allow management to focus on growing the business aggressively and without distraction.
Speaker Change: This morning, we were pleased to announce the successful closing of a $24 $3 million pipe offering with various new and existing shareholders. This is a great sign of confidence and support of management by our shareholder base, our plan for value creation and the tremendous opportunity we have in this growing market we built.
Speaker Change: This offering along with other non dilutive actions will address the company's near term liquidity needs.
Speaker Change: We currently do not have plans to raise additional capital in the near term importantly.
Importantly, we believe that the financial stability created with this financing will allow management to focus on growing the business aggressively and without distraction.
Ryan Lake: In one final note, as previously announced on September 12th, we were pleased to announce that the company received written notice from the NASDAQ listing qualifications department, stating that the company has regained compliance with the filing and annual meeting requirements in the NASDAQ listing rules, and NASDAQ has ceased any action to deal with the company's common stock.
And one final note as previously announced on September 12, we were pleased to announce that the company received written notice from the NASDAQ listing qualifications department, stating that the company has regained compliance with the filing and annual meeting requirements in the NASDAQ listing rules and NASDAQ has ceased any action to delist the company's common stock.
Ryan Lake: This concludes my financial overview.
Speaker Change: This concludes my financial overview for those interested in reviewing our non-GAAP reconciliations. Please refer to our 8-K filing or the press release issued today I'll now turn the call back over to Paul for an update on operations and achievements during the period.
Ryan Lake: For those interested in reviewing our non-GAAP reconciliation, please refer to our 8-K filing or the press release issued today.
Paul Joseph: I'll now turn the call back over to Paul for an update on operations and achievements during the period. Thank you, Ryan.
Paul Joseph: Thank you Ryan and let me just say welcome as many of you know Ryan joined our company. The first week of September and he has been in a full sprint since its first day.
Paul Joseph: Let me just say welcome. As many of you know, Ryan joined our company the first week of September, and he's been in a full sprint since his first day. During this short time with us, he's recognized the need for capital, but he executed this initiative in record time, working hand in glove with our management team, our board, and our shareholders, achieving a very positive result. Welcome, Ryan. I couldn't be more excited to have you on board and to partner with you going.
During this short time with US he has recognized the need for capital, but he executed. This initiative in record time working hand in glove with our management team, our board and our shareholders and achieving a very positive result, welcome Ryan I couldnt be more excited to have you onboard into partnering with you going forward.
Paul Joseph: As discussed last quarter, following a comprehensive evaluation of our company's facility and operations, we implemented a growth strategy based on three primary elements: maximizing our existing base business, advancing our development pipeline towards commercialization, and aggressively pursuing new business. I'm pleased to report that during the first quarter, our operational and business development achievements supported each of these initiatives.
Speaker Change: As discussed last quarter following a comprehensive evaluation of our company's affiliated operations.
And our growth strategy based on three primary elements maximizing our existing base business advancing our development pipeline towards commercialization and aggressive.
Speaker Change: Doing new business I am pleased to report that during the first quarter, our operational and business development achievements supported each of these initiatives.
Paul Joseph: I would like to first address operations. Subsequent to the quarter end, the company successfully completed the installation and qualification of its high-speed multipurpose five-head isolator filler. It is now GMP ready. The new system positions our company to offer existing and future customers the speed and a acetic isolation benefits associated with the state-of-the-art closed system platform. With the addition of this five-head isolator filler, which is designed for vials, cartridges, and pre-filled syringes, our company has more than doubled its prior capacity and significantly increased its maximum revenue generating capacity up to $300 million annually. This new system further extends like-cores leadership position in the filth finish of highly viscous and complex formulations.
I would like to first address operations subs.
Speaker Change: Subsequent to the quarter end the company successfully completed the installation and qualification of its high speed multi purpose <unk> had isolator filler. It is now GMP ready the new system positions, our company to offer existing and future customers.
Speaker Change: Speed and a septic isolation benefits associated with the state of the art close system platform.
Speaker Change: With the addition of this five had isolator pillar, which is designed for vials cartridges in pre filled syringes are company has more than doubled its prior capacity and significantly increased its maximum revenue generating capacity up to $300 million.
Ali.
Speaker Change: This new system further extends <unk> leadership position in the fill finished of highly viscous and complex formulations.
Paul Joseph: We have near-term plans to utilize this system to qualify existing commercial products to support planned future growth for existing customers. In addition, we believe this isolated filler creates an opportunity to win new previously non-targetive business opportunities, including fulfilling the needs of customers with less viscous, less complex protein peptide and antibody products. We have already received significant interest from existing customers as well as new customers in accessing our state-of-the-art isolator filling system.
Speaker Change: We have we have near term plans to utilize the system to qualify existing commercial products to support planned future growth for existing customers.
Speaker Change: In addition, we believe this isolated thriller creates an opportunity to win new previously non targeted business opportunities, including fulfilling the needs of customers with less viscous less complex protein peptide and anti body products.
Speaker Change: We have already received significant interest from existing customers as well as new customers in accessing our state of the art Isolator for legal system.
Paul Joseph: Beyond their efforts to sell into this isolator filler, our business development team had a very solid first quarter. During the period, we signed agreements with four new customers, each of which brings a new novel program to life core. The highlight of these new business wins is our agreement with Lindy Bial Sciences, focusing on and streamlining the formulation process for Lindy's innovative micro-glassification technology and scaling it for commercial manufacturing for their partners. In addition, we continue to sign expansion agreements with our current development customers. These new and expanded projects span the range of our capabilities. We are pleased to continue to be the partner of choice for so many of our existing and new customers.
Speaker Change: Beyond their efforts to sell into this isolator filler our business development team had a very solid first quarter.
Speaker Change: During the period, we signed agreements with four new customers each of which brings a new novel program to life for the highlight of these new business wins as our agreement with <unk> biosciences, focusing on streamlining the formulation process for <unk> innovation innovative micro gasification technology and scaling it for.
Speaker Change: Commercial manufacturing for their partners.
Speaker Change: In addition, we continue to sign expansion agreements with our current development customers.
Speaker Change: These new and expanded project span the range of our capabilities. We are pleased to continue to be the partner of choice for so many of our existing and new customers.
Paul Joseph: Our project management team currently manages an impressive development portfolio of 25 different programs amongst the diverse group of customers. Ten of these programs are in late-stage development and have the potential to provide impactful commercial revenue if and when approved.
Speaker Change: Our project management team currently manages an impressive development portfolio of 25 different programs amongst a diverse group of customers 10 of these programs are in late stage development and have the potential to provide impactful commercial revenue if and when approved.
Paul Joseph: As part of our growth strategy, the company is investing in both our business development infrastructure and our outreach. During the first quarter, we added two new sales representatives who are expanding our reach into key pharma and biotech hubs in the United States. We also have plans to add at least one additional industry veteran to our business development team to provide additional resources to maximize the sizable opportunity in front of us.
Speaker Change: As part of our growth strategy. The company is investing in both of our business development infrastructure and our reach.
Speaker Change: During the first quarter, we added two new sales representatives, who are expanding our reach into key pharma and biotech hubs in the United States.
Speaker Change: We also have plans to add at least one additional industry veteran to our business development team to provide additional resources to maximize the sizable opportunity in front of us.
Paul Joseph: In addition, the company is increasing its participation in industry conferences and events. In September and October alone, our team has met with and will meet with prospective and existing customers at multiple industry conferences, including the Medical, Aesthetic, Injectable Summit in Spain, CPHI and Milan, PDA, the Parental Drug Association meeting in Phoenix, and PODD, Partnering Opportunities and Drug Delivery. Importantly, we will be leveraging our leadership position in the field of sterile injectables, with Lifecore management presenting and sitting on panels at several of these meetings.
In addition, the company is increasing its participation in industry conferences and events in September and October alone. Our team has met with and we'll meet with <unk>.
Speaker Change: Prospective and existing customers at multiple multiple industry conferences, including the medical aesthetic injectable summit in Spain <unk>.
Speaker Change: <unk> in Milan PDA, the parental drug Association meeting in Phoenix and DB partnering.
Opportunities in drug delivery importantly, we will be leveraging our leadership leadership position in the field of sterile Injectables with life core management, presenting and sitting on panels at several of these meetings.
Paul Joseph: We are pleased with the performance of our business development team during the quarter, and we look forward to additional success in the coming quarters. In closing, I believe the achievements of the first quarter demonstrate our early success in executing against our three-pronged road strategy that I outlined previously. We continue to focus on providing best-in-class services and our responding to our current customers' needs while working closely with them on expansion projects to support their planned growth. I'm encouraged by the activity and progression of our development portfolio. Through the signing of numerous agreements from the follow-on work, we are aggressively working with our customers to advance these programs towards commercialization.
Speaker Change: We are pleased with the performance of our business development team during the quarter and we look forward to additional success in the coming quarters.
Speaker Change: In closing I believe the achievements of the first quarter demonstrate our early success.
Executing against our three pronged growth strategy that I outlined previously.
We continue to focus on providing best in class services.
Speaker Change: And are responding to our current customers' needs, while working closely with them on expansion projects and support their planned growth.
Speaker Change: I am encouraged by activity and progression of our development portfolio through the signing of numerous agreements from our follow on work we are aggressively working with our customers to advance these programs towards commercialization.
Paul Joseph: And finally, through multiple new customer wins during the period, as well as the addition of our two new sales representatives, we continue to invest and expand our new business development efforts to secure our future pipeline.
Speaker Change: And finally.
Speaker Change: Through multiple new customer wins during the period as well as the addition of our two new sales Representatives, we continue to invest and expand our new business development efforts to secure our future pipeline.
Paul Joseph: With this as a backdrop, we are reaffirming our guidance for fiscal 2025 for both revenue and adjusted EBITDA. Looking forward, we have established media in terms of objectives, which target a range of double-digit revenue growth, improved adjusted EBITDA margins that are consistent with those in the most reputable peers in the ejectable CDMO sector.
With this as a backdrop, we are reaffirming our guidance for fiscal 2025 for both revenue and adjusted EBITDA.
Speaker Change: Looking forward, we have established medium term objectives, which target a range of double digit revenue growth.
Speaker Change: Improved adjusted EBITDA margins that are consistent with those in the most reputable peers in the injectable <unk> sector.
Paul Joseph: Finally, I wish to invite you all to join us at LifeCore's upcoming virtual investor day to be held on November 21st of this year. During the event, we plan to provide additional detail in color regarding our growing pipeline, projections for future revenue, and adjusted EBITDA margins. We are excited to offer this expanded look into the company's operations and objectives, and we hope you all participate.
Speaker Change: Finally, I wish to invite you all to join us at <unk> upcoming virtual Investor day to be held November 21 of this year.
Speaker Change: During the event, we plan to provide additional detail and color regarding our growing pipeline projections for future revenue and adjusted EBITDA margins.
Speaker Change: We are excited to offer this extended look into the Companys operations and objectives and we hope you all participate.
Paul Joseph: This concludes our prepared remarks for today.
Speaker Change: This concludes our prepared remarks for today operator, you may now open the call for questions.
Unknown Executive: Operator, you may now open the call for questions. Thank you. To ask a question, please press star one on your telephone and wait for your name to announce. To withdraw your question, please press star one again.
Speaker Change: Thank you.
Speaker Change: To ask a question. Please press star one wanting your telephone and wait for your name to be announced.
Speaker Change: Draw. Your question. Please press star one again.
Unknown Executive: Our first question comes from the line of Matt Hewitt with Craig Hallum Capital Group.
Speaker Change: Our first question comes from the line of Matt Hewitt with Craig Hallum Capital Group. Your line is now open.
Matthew Hewitt: Your line is now open. Good morning, and thanks for taking the questions. Maybe first up on some of the new wins. Obviously, congratulations on the efforts there. Obviously, you provided some details on the Lindy opportunity. I guess regarding that one, and you noted this in your press release, they have recently signed in a new contract.
Good morning, and thanks for taking the questions maybe first up on some of the new wins, obviously congratulation congratulations on the efforts there.
You provided some details on the Lindy opportunity.
I guess regarding that one.
Speaker Change: Noted this in your press release that they had recently signed a.
Speaker Change: New contract is there an opportunity for you to kind of once you've proven that you can manufacture.
Matthew Hewitt: Is there an opportunity for you to kind of, once you've proven that you can manufacture to their needs, that you could expand into some of their partner base?
Speaker Change: To their needs that you could expand into some of their.
Speaker Change: Partner base, and then secondly could you provide a little bit of color on the other wins, maybe market size early or the early stage late stage any additional color on those would be helpful.
Matthew Hewitt: And then, secondly, could you provide a little bit of color on the other wins? Maybe market size, early stage, late stage, any additional color on those would be helpful.
Paul Joseph: Paul.
Paul Joseph: Please check your mute button. Can you hear me now? Yes, Matt, I can hear you.
Speaker Change: Please check your mute button.
Can you hear me now.
Yes, Matt I can hear you.
Unknown Executive: Paul and Ryan, please check your mute button.
Speaker Change: Hey, Paul and Ryan Please check your mute button.
Unknown Executive: Ladies and gentlemen, please stand by; your conference will resume momentarily. Once again, please stand by; your conference call will resume momentarily.
Speaker Change: Ladies and.
Speaker Change: Gentlemen, please standby your conference will resume momentarily once again, please standby your conference call over to a momentarily.
Speaker Change: Okay.
Speaker Change: Okay.
Unknown Executive: Paul, I see you rejoined. You may resume the conference.
Speaker Change: Policy you rejoin you may resume your conference.
Speaker Change: Okay.
Unknown Executive: Ladies and gentlemen, please stand by; your conference call will resume momentarily. Once again, please stand by; your conference call will resume momentarily.
Speaker Change: Ladies and gentlemen, please standby your conference call will resume momentarily once again, please standby your conference our visa momentarily.
Paul Joseph: Hi, Paul. Can you hear us? Thank you very much.
Speaker Change: Hi, Paul can you hear us.
Speaker Change: Yes.
Speaker Change: [music] okay.
Speaker Change: Yes.
[music].
Matthew Hewitt: Matthew Hewitt, Ryan Lake, Michael Petusky, Stephanie Diaz, John Morales, Lifecore Matthew with Craig Hallum Capital Group.
Speaker Change: Matt Hewitt with Craig Hallum Capital Group could you. Please proceed with your question again.
Matthew Hewitt: Could you please proceed with your question again? Absolutely. All right.
Matt Hewitt: Absolutely alright, good morning, gentlemen, thank you for taking the questions maybe congratulations on the wins here. This past quarter first off on the Linda you provide a little bit of detail in the press release, but I'm. Just curious if you could expand on that a little bit you noted that they had recently won.
Matthew Hewitt: Good morning, gentlemen. Thank you for taking the questions. Maybe congratulations on the wins here this past quarter. First off on the Lindy, you provide a little bit of detail in the press release, but I'm just curious if you could expand on that a little bit. You noted that they had recently won a new contract themselves. Will there be an opportunity once you've gotten through the process development for you to kind of expand into their customer base? And then, as a second part to that, if you could provide a little bit of color on the other three wins in the quarter, whether they're early stage, later stage, size of the company, any additional color there would be helpful.
Our new contract themselves will there be an opportunity once you've gotten through the process development for you to kind of expand into their customer base and then as a second part to that if you could provide a little bit of color on the the other three wins in the quarter, whether they're early stage later stage size of the company any additional color there would be helpful.
Paul Joseph: Sure, Matt.
Matt Hewitt: Sure, Matt sorry about that too.
Paul Joseph: Sorry about that too.
Paul Joseph: You know, that interruption was brought to you by Verizon; just a little joke there. Certainly, as it relates to Lindy, we couldn't be more excited about that opportunity and a partner with them. I think it's just indicative of the technical strength of our technical talent here at Lifecore. It was a very competitive process, one in which they looked at a broad range of competitors and shows us not because of price, but because of our technical capability. And it just validated one of the reasons I'm so excited to be part of the organization with regard to the deal itself.
Speaker Change: Interruption brought to you by Verizon.
Speaker Change: It'll whole joke there.
Speaker Change: Certainly as it relates to Lindy, we couldnt be more excited about that opportunity.
Speaker Change: And a partner with them I think it's just indicative of the technical strength of our technical talent here at life core.
Speaker Change: It was a very competitive process, one in which they looked at a broad range of competitors and shows us not because of price, but because of our technical capability and it just validated one of the reasons I'm. So excited to be part of the organization.
Speaker Change: With regard to the deal itself it gives us the opportunity to scale.
Paul Joseph: It gives us the opportunity to scale Lindy's proprietary technology to commercial scale. And then from there on out, partner with their licensees on the commercial manufacturing of their various programs. So that's how we see it playing out over a period of time. Obviously, is there more successful signing on more and more partners like the global multinational pharmaceutical company that they announced in the past month. It will add to our development portfolio going forward. As it relates to the three other opportunities that we close, those are all early stage, really specialty pharma, or two of them being specialty pharma, one being a large multinational pharmaceutical company.
Speaker Change: <unk> proprietary technology to commercial scale, and then from there on out the partner with there.
Speaker Change: License fees on the commercial manufacturing of their various programs. So that's how we see it playing out over a period of time.
Speaker Change: Obviously as they're more successful signing on more and more partners like the global multinational pharmaceutical company that they announced in the past month, it will add to our development portfolio going forward.
Speaker Change: As it relates to the three other opportunities that we close those are all early stage.
Specialty pharma or two of them being specialty pharma, one being a large multinational pharmaceutical company.
Paul Joseph: Got it. And then you noted, obviously, some puts and takes in the revenues this quarter. Regarding that the CDMO customer, do you feel like they've gotten their inventories that you have a sense of they've gotten their inventories in line and whether they'll be coming back here in Q2 or Q3. As it relates to that, Matt, I think that that will play itself out through the fiscal year. We've sort of factored that into our fiscal year plans and revenue projections. We anticipate that they will return to what I'll call normalized demand in FY26.
Got it and then the.
Speaker Change: You noted obviously some puts and takes in the revenues this quarter regarding that the C. D M O cull.
Speaker Change: Customer do you feel like they've gotten their inventories or do you have a sense of they've gotten their inventories in line and whether there'll be coming back here in Q2 or Q3.
Speaker Change: As it relates to that.
Speaker Change: I think that that will play itself out through the fiscal year, we sort of factored that into our fiscal year plans and revenue projections, we anticipate that they will return to what I'll call normalized.
Speaker Change: Demand in FY 'twenty six.
Matthew Hewitt: Got it.
Speaker Change: Got it Okay. One last one for me.
Matthew Hewitt: Okay.
Matthew Hewitt: One last one from me. Regarding that you've added two new sales hires. It sounds like you're going to be adding one more. What is the size of that team now? And once you've got the third person added, do you feel like you're in a good position?
Speaker Change: Regarding that you've added two new sales hires it sounds like youre going to be adding one more what is the size of that team now in India at once you've got this the third person added do you feel like you're in a good position. Thank you.
Paul Joseph: Thank you. That would bring our entire and our full sales force to four individuals, Matt, along with the Vice President of Sales, and then we have marketing resources on top of that. We're prepared to add additional resources if required, but I feel good with a team of four.
Speaker Change: That would bring our entire <unk> and our full salesforce before individuals.
Speaker Change: That.
Speaker Change: Along with our Vice President of sales and then we have marketing resources on top of that we're prepared to add additional resources if required but I feel good with a team of four.
Matthew Hewitt: Understood.
Speaker Change: Understood. Thank you.
Unknown Executive: Thank you.
Speaker Change: Thank you.
Michael Petusky: As a reminder to ask a question at this time, please press star 11 or your touchstone telephone. Our next question comes from the line of Stephen Etalk, which Stephen thinks your line is now open. Good morning. This is Mack on for Jacob, just a few quick ones. Ryan, good to hear from you again. Given it's been your first 30 days in the seat, I figured I'd tell you a question real quick.
Speaker Change: A reminder to ask a question at this time, please press star one one or a touchstone telephone.
Steven <unk>: Our next question comes from the line of Steven <unk> with Stephens, Inc. Your line is now open.
Steven <unk>: Good morning. This is Matt on for Jamie just a few quick ones Ryan good to hear from you again given its been your.
Matt Hewitt: First 30 days in the seat I figure I'd tell you the question real quick.
Ryan Lake: So where are you focusing your efforts in the near term, and what do you see the opportunities to improve margins beyond what has already been announced over the past couple of months? And do you feel appropriately sized to support sustainable growth moving forward from here? Yeah, thanks, Mack, for the questions, and it's nice to be talking to you as well. Please give Jacob my regards. I think just in terms of my key areas of focus here the first month, it's been one on the team, primarily the finance team. It's also been on quite a few SEC filings that we've had come due over the past 30 days, and then also capital financing with the recent announcement with the capital race as well.
Speaker Change: So where where are you focusing your efforts in the near term and.
Speaker Change: Where do you see the opportunities to improve margins beyond what has already been announced over the past couple of months and do you feel appropriately sized.
Speaker Change: Support sustainable growth moving forward from here.
Thanks Mac.
Speaker Change: Questions and it's nice to be talking to you as well please give.
Jacob: Jacob My regards.
Speaker Change: I think just in terms of my key areas of focus here. The first month, it's been one on the team.
Jacob: Primarily the finance team.
Jacob: <unk> been on.
Right a few SEC filings that we've had come due.
The past.
30 days, and then also capital financing kind of with the.
Jacob: The recent announcement with the capital raise as well I think.
Ryan Lake: I think, you know, this touches on mass question as well, but I think, and this will get to kind of the EBITDA question that you have. But I think, you know, as we look at the revenue guidance for the year of 120 and a half to 130 million, we expect that to be split kind of in the low 40% range in the first half of the year, and we expect that to ramp. So in the mid 50% range in the back half of the year, and, you know, this is a tremendous workload and complexity our teams are managing as the business evolves.
And this touches on.
Jacob: <unk> question as well, but I think this will get to kind of the EBITDA question 90 have but I think as we look at the revenue guidance for the year of $125 million to $130 million.
Speaker Change: We expect that to be kind of in the low 40% range in the first half of the year and we expect that to ramp so in the mid 50% range in the back half of the year and this is a tremendous workload and complexity. Our teams are managing as the business evolves their supply chain <unk>.
Ryan Lake: There's supply chain juggling and timing of production runs, completion of those services and also kind of the complexity of, you know, trying to figure out the expectation of timing to sign some of the new top, the top new business opportunities that we have that are either, you know, outside the pipeline or top of the pipeline and, you know, when we expect to be able to earn that backlogs. Overall, you know, we expect gross margins to be relatively consistent with the prior year and it's in the low 30% range with some variability between quarter to quarter based on product mix and timing and shipments and that's split for the year.
<unk> and timing of production runs and completion of those services and also kind of the complexity.
Speaker Change: Trying to figure out the expectation of timing to sign some of the new.
Speaker Change: Top 10 of the top new business opportunities that we have that are either outside the pipeline on top of the pipeline and when we expect to be able to earn that backlog. So overall, we expect gross margins to be relatively consistent with the prior year.
Speaker Change: In a low 30% range with some variability between quarter to quarter based on product mix and timing of shipments.
Speaker Change: And that split for for the year will probably be about 30% of the.
Ryan Lake: We'll probably be about 30% of the overall gross profit in the first half versus 70% in the second half. And I think, as we think about that over time, the majority of our costs are fixed. So once we absorb our fixed costs, we should be able to see leverage improvement as. And then, you know, in terms of areas where we're looking to improve, you know, overall for the year, we believe OPEX will be in a similar range as the prior year. SGNA expenses in particular this year, you know, include some expenses that we don't expect to recur on a normalized basis.
Speaker Change: Overall gross profit in the first half versus 70% in the second half.
Speaker Change: And I think as we think about that over time. The majority of our costs are fixed so once we absorb our fixed costs, we should be able to see leverage improvement as volumes increase.
Speaker Change: And then.
Speaker Change: In terms of areas, where we're looking to improve.
Speaker Change: Overall for the year, we believe opex will be in it.
Speaker Change: A similar range as the prior year SG&A expenses in particular this year.
Speaker Change: Include some expenses that we don't expect to recur on a normalized basis.
Ryan Lake: And they're going to be heavier in the first half of the year, primarily as a result of some increased professional fees, and then the cadence, you know, would be anticipated to be kind of split about 60, you know, versus the back half of about 40% based on expected reductions and cost savings initiatives that we expect to be able to help improve the run rate. And, you know, we estimate kind of in the back half, you know, that we'll be able to take out kind of mid-ingle-digit millions out of the OPEX base and, you know, overall that'll mean adjusted EBITDA because of those items that I mentioned, including kind of those increased professional fees, particularly in the first half of the year. We would expect the adjusted EBITDA to be split, and in the 5% range for the first half of the year and 90% in the back half of the year.
Speaker Change: And theyre going to be heavier in the first half of the year, primarily as a result of some increased professional fees and then the cadence would be anticipated to be kind of split about 60.
Speaker Change: Versus the back half of about 40%.
Speaker Change: Based on expected reductions and cost savings initiatives that we expect to be able to help improve the.
Speaker Change: The run rate.
Speaker Change: We estimate kind of in the back half.
Speaker Change: We'll be able to take out kind of mid single digit millions out of the Opex base.
Speaker Change: Overall that will mean adjusted EBITDA.
Speaker Change: Because of those items.
Speaker Change: That I've mentioned <unk>.
Speaker Change: Including kind of those increased professional fees, particularly in the first half of the year, we would expect adjusted EBITDA to be split.
Speaker Change: The 5% range for the first half of the year and 90% in the back half of the year, but I think theres a lot of opportunities for us.
Ryan Lake: But I think there's a lot of opportunities for us to improve that as time goes on, as look at our kind of medium term guidance, and you know, I would just note that we did could a deck out is or a slide out in our investor deck as well, kind of alluding to what those expectations are over the medium term, and you know, how we expect to be able to improve both, you know, the revenue caker as well as aspirations as it relates to our goal or targeted EBITDA margin range. Great. Thank you for the color.
Speaker Change: To improve that as time goes on.
Speaker Change: Look at our kind of medium term guidance and.
Speaker Change: I would just note that we did could.
Speaker Change: A deck out or a slide out in our investor deck, as well kind of alluding to what those expectations are over the medium term and how we expect to be able to improve both the revenue CAGR as well as <unk>.
Speaker Change: Aspirations as it relates to our.
Speaker Change: Goal, our targeted EBITDA margin range.
Speaker Change: Great. Thank you for the color I'll leave it there.
Michael Petusky: I'll leave it there.
Michael Petusky: Thank you. Our next question comes from the line of Michael Patusky with Bearington Research. Your line is now open.
Speaker Change: Thank you.
Michael <unk>: Next question comes from the line of Michael <unk> with Barrington Research. Your line is now open.
Michael Petusky: Good morning. So Paul, I wanted to make sure that I was tracking with a comment you made in your program, Mark. When you said, I think you said 25 development programs, including 10 late stages, so the 10 late stage are not in addition to 25 other development programs, is 25 total, is that correct? 25 total correct. Okay. So I guess I want to understand. So I think when you guys reported in the spring, obviously prior to you being in the chair, there was something like, I think, 33 development programs you guys look like you've added for in this quarter, which to me, with the math, which seemed to leave 12 that either you guys shut down or that, you know, ended, or can you just sort of speak to that gap if you keep on doing the math right?
Michael <unk>: Hi, good morning.
Michael <unk>: Paul I wanted to make sure that I was tracking with that.
Comment you made in your prepared remarks, when you said I think you said 25 development programs, including 10 late stage. So the 10 late stage or not in addition to twenty-five other development programs was 25 total is that correct 225 total correct.
So I guess I want to understand so I think when you guys reported in in the spring obviously prior to being in the chair there were some there was something like I think 33 development programs you guys look like you've added.
Michael <unk>: And in this quarter.
Speaker Change: Which to me with the math would seem till two.
Speaker Change: To leave 12 that either you guys shut down or that.
Speaker Change: Ended or can you just sort of speak to that that gap, if I'm doing the math right.
Paul Joseph: You're doing the math right, Mike, and you know, so first of all, thank you for the question. Here's how I look at it, and I want to be very clear, is that we have these 25 programs that we believe are active, or we know are active, that we're working on towards commercialization with our partners. We do have another approaching 10 or so programs that are in some level quiescent period that we've taken out of our forward looking projections. So, to your point, whether it's a clinical stall or financing related, we've just sort of taken those out of our forward-looking projections.
Speaker Change: Youre doing the math right Mike.
Speaker Change: So first of all thank you for the question curious how I look at it and I want to be very clear is that we are these 25 programs that we believe are active but we know our active that we're working on towards commercialization with our partners. We do have another approaching 10 or so programs that are in some level of <unk>.
Speaker Change: So period that we've taken out of our forward looking projections so to your point, yes, whether its a clinical stall or financing related.
Speaker Change: Just sort of taken those out of our forward looking projections and then the other piece I would add there was a couple of programs that were in there.
Paul Joseph: And then the other piece I would add, there's a couple of programs that were in there that also were just H.A. Related, I will say, no. Forward-looking, commercial, potential revenue, but it was just a single-stage development program, sort of taken that out of our forward-looking projections as well. And just real quickly to sort of finish it up. On the ones that you sort of describe as a clinical stall or et cetera, et cetera, is it possible that some of those sort of revive or that really we should sort of just, you know, essentially look at this as 25 programs 10 late stage.
But also we're just HCA related I will say no forward looking commercial potential revenue, but it was it was just.
Speaker Change: A single stage development programs sort of taken that out of our <unk>.
Speaker Change: Our forward looking projections as well.
Speaker Change: Okay.
Speaker Change: Just real quickly to sort of finish it up on the ones that you sort of describe as clinical stall or et cetera, et cetera or is it possible that some of those sort of revive or is it really we should sort of just.
Speaker Change: Essentially.
Speaker Change: Look at this is 25 programs 10 late stage.
Paul Joseph: No, there is a potential for them to come back 100%. We just we just taken them out at this point. Got to be very clear with regard to our active self pipeline.
Speaker Change: There is a potential for them to come back.
Speaker Change: 100%, we just we'd have taken them out at this point.
Got to be very clear with regard to our active pipeline.
Michael Petusky: Excellent.
Speaker Change: All right excellent and then Brian I guess.
Michael Petusky: And then Ryan, I guess, you know, obviously congrats on the on the cap rates because you guys have some room to sort of focus on growing this business. But I'm sure that people are still really super interested in cash flows. Looks like, you know, in terms of cash flow from up, slightly negative, free cash flow about negative 4 million. Would you expect that the just reported quarter would be sort of the low watermark in terms of cash flow generation, or is there anything you can just sort of speak to in terms of cash flow cadence throughout the year?
Obviously, congrats on the on the cap rates.
It gives you guys some room to sort of focus focus on growing this business.
I'm sure that people are still really super interested in cash flows looks like in terms of cash flow from ops slightly negative free cash flow about negative 4 million.
Speaker Change: Would you expect that.
Speaker Change: The just reported quarter would be sort of a low watermark in terms of cash flow generation or is there anything you can just sort of speak to in terms of cash flow cadence throughout the year. Thanks.
Michael Petusky: Thanks. So we are expected to burn cash in the first half of this fiscal year and then the cash neutral during the second half of the year as a result of the items I mentioned previously regarding cadence. We believe the equity raised that we just completed, along with, you know, other non-dilutive initiatives that we have ongoing, including cost savings initiatives, will address the company's near-term liquidity needs and don't have any plans to raise additional capital in the near term. Okay, let me just make sure, and then I just want to clarify in terms of cash neutral in the second half that includes the impact of catbacks, right? So we're talking about free cash neutral, not cash flow from up to neutral, correct?
Speaker Change: Yeah. Thanks, So we are expected to burn cash in the first half of this fiscal year and then be cash neutral during the second half of the year as a result of the.
Items I mentioned previously regarding cadence.
Speaker Change: We believe the equity raise that we just completed along with.
Speaker Change: Other non dilutive initiatives.
Speaker Change: That we have on going including cost savings initiatives will address the company's near term liquidity needs and don't have any plans to raise additional capital in the near term.
Okay.
Speaker Change: Let me, let me just make sure.
Speaker Change: I just wanted to clarify in terms of cash neutral in the second half that includes the impact of.
Speaker Change: Capex right. So we're talking about free cash neutral not cash flow from ops neutral correct.
Michael Petusky: That is the expectation, yes. Okay, and would you expect the somewhat of an improvement in terms of free cash understanding it will still be likely negative in the second quarter? Would you expect some improvement in into two versus Q1. I don't have that in front of me, but we are expecting to be negative in the first half versus the second half.
Speaker Change: That is the expectation yes.
Speaker Change: Okay and would you expect somewhat of an improvement in terms of free cash understanding it will it will still be likely negative in the second quarter would you expect some improvement in Q2 versus Q1.
Speaker Change: I don't have that in front of me.
But we are expecting to be negative in the first half versus the second half.
Michael Petusky: All right, very good guys. Thank you so much. Thanks, Michael.
Speaker Change: Alright, very good guys. Thank you so much thanks.
Michael <unk>: Thanks, Michael.
Unknown Executive: Thank you, and I'm currently sure no further questions at this time.
Speaker Change: Thank you and I'm currently showing no further questions at this time I'd like to hand, the call back over to Paul Joseph for closing remarks.
Paul Joseph: I like to hand the call back over to Paul Joseph for closing remarks. Thank you so much.
Paul Joseph: Thank you so much and clothing I wish to thank our investors, who continue to support our growth strategy for the future.
Paul Joseph: In closing, I wish to thank our investors who continue to support our growth strategy for the future. I wish to acknowledge our customers and collaborators who continue to trust Life Core as a partner of their partner of choice. And most importantly, I wish to extend my deepest gratitude to our incredibly hardworking and talented team for driving each of the successes at Life Core. Your dedication is inspiring, and no doubt will continue to elevate our organization in the industry. We have a bright future ahead of us with the actions we've taken over the last hundred days, as well as a recently announced achievement.
Paul Joseph: I wish to acknowledge our customers and collaborators who continue to entrust <unk> as a partner as their partner of choice and most importantly, I wish to extend my deepest gratitude to our incredibly hard working and talented team for driving each of the successes at life core your dedication is inspiring and no doubt will continue to elevate our organization and the industry.
Paul Joseph: Three we have a bright future ahead of us with the actions that we've taken over the last 100 days as well as our recently announced achievements I believe our company is positioned to achieve sustainable success in the future as a best in class CMO.
Paul Joseph: I believe our company has positioned to achieve sustainable success in the future as a best in class CDMO. Thanks.
Paul Joseph: Thank you.
Unknown Executive: This concludes today's concert call. Thank you for your participation. You may now disconnect. Thank you. .
This concludes today's conference call. Thank you for your participation you may now disconnect.
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