Landec(LFCR) - 2025 Q4 - Annual Results

Executive Summary & Corporate Update Fiscal Year 2025 Highlights Lifecore Biomedical achieved its fiscal year 2025 revenue guidance of $128.9 million, driven by organizational restructuring, efficiency improvements, and strategic growth initiatives. The company signed nine new programs with new customers, expanding into new modalities beyond ophthalmic therapeutics, and is progressing its late-stage pipeline towards commercialization. Lifecore maintains its mid-term outlook of achieving a 12%+ revenue CAGR and expanding adjusted EBITDA margins to over 25%. - Lifecore Biomedical met its fiscal year 2025 revenue guidance, recording $128.9 million[1] - The company signed nine new programs with new customers during fiscal 2025, reflecting growth into modalities beyond traditional ophthalmic therapeutics[1][6] - Lifecore implemented numerous efficiencies, right-sized headcount, and reduced expenses as a percentage of revenue, while increasing revenue per direct labor employee[3] - Mid-term outlook targets a 12%+ revenue CAGR and adjusted EBITDA margins exceeding 25%[3] New Business & Operations Update Lifecore continued to make significant operational improvements under new leadership, leading to reduced operational expenses and improved productivity. The company secured nine new programs in FY2025, including three in Q4, and expanded into new therapeutic areas. Post-quarter, new agreements include a late-stage GLP-1 therapeutic product and a Phase 2 dermatology program. A new ERP system is slated for launch in Q1 2026 to further enhance efficiencies and cost savings. - Lifecore signed three early-stage programs in Q4 FY2025, including one with a large, multinational pharmaceutical company[6] - Subsequent to quarter end, Lifecore signed new customer agreements for a late-stage GLP-1 therapeutic product and a Phase 2 dermatology program[6] - Operational improvements led to reduced expenses and improved productivity, fostering a performance-driven culture[5] - A new ERP system is planned for launch in Q1 2026, expected to drive further operational efficiencies and cost savings[7] Financial and Corporate Announcements Lifecore announced a change in its fiscal year end to align with the calendar year, effective December 31, 2025. This change aims to improve timely reporting alignment with peers, customers, and stakeholders, and coincides with the launch of the new ERP system. - Lifecore will move its fiscal year end to align with the calendar year, effective December 31, 2025[8] - The fiscal year change is intended to improve timely reporting alignment with peer companies, customers, and stakeholders, and aligns with the new ERP system launch[8] Consolidated Financial Results Fourth Quarter Fiscal 2025 Financial Results In Q4 FY2025, Lifecore reported a 4% decrease in total revenues to $36.4 million, primarily due to a decline in CDMO revenues, partially offset by increased HA manufacturing demand. Gross profit decreased by $3.3 million, while SG&A expenses saw a $3.2 million reduction. The company recorded a net loss of $1.1 million, a significant improvement from the prior year's $7.1 million loss, and Adjusted EBITDA decreased by $1.3 million. Q4 Fiscal 2025 Key Financials (YoY Comparison) | Metric | Q4 FY2025 (in thousands) | Q4 FY2024 (in thousands) | Change (YoY) | | :-------------------------------- | :----------------------- | :----------------------- | :----------- | | Total Revenues | $36,444 | $37,886 | -4% | | CDMO Revenues | - | -$5,600 (decrease) | - | | HA Manufacturing Revenues | - | +$4,100 (increase) | - | | Gross Profit | $13,982 | $17,272 | -$3,290 | | Selling, General & Administrative Expenses | $8,980 | $12,226 | -$3,246 | | Interest Expense, net | $5,500 | $5,800 | -$300 | | Net Loss | $(1,147) | $(7,085) | +$5,938 | | Loss per Diluted Share | $(0.06) | $(0.19) | +$0.13 | | Adjusted EBITDA | $9,052 | $10,410 | -$1,358 | - The decrease in CDMO revenues was primarily due to the completion of a discrete development project and timing of customer project lifecycles[9] - HA manufacturing revenues increased due to increased demand from Lifecore's largest customer's supply chain initiatives[9] - Net loss improved significantly due to a gain from the settlement of a legacy business obligation and a favorable debt derivative adjustment[13] Full Year Fiscal 2025 Financial Results For the full fiscal year 2025, Lifecore's revenues increased slightly by 0.5% to $128.9 million, driven by HA manufacturing demand, offsetting a decline in CDMO revenues. Gross profit decreased by $1.6 million. SG&A expenses rose by $3.5 million, mainly due to increased non-cash stock-based compensation. The company reported a net loss of $38.7 million, a significant shift from the prior year's net income, largely influenced by a loss on asset disposal and the absence of a large favorable debt derivative adjustment seen in the prior year. Adjusted EBITDA also saw a slight decrease. Full Year Fiscal 2025 Key Financials (YoY Comparison) | Metric | FY2025 (in thousands) | FY2024 (in thousands) | Change (YoY) | | :-------------------------------- | :-------------------- | :-------------------- | :----------- | | Total Revenues | $128,867 | $128,261 | +0.5% | | HA Manufacturing Revenues | - | +$7,100 (increase) | - | | CDMO Revenues | - | -$6,500 (decrease) | - | | Gross Profit | $40,298 | $41,850 | -$1,552 | | Selling, General & Administrative Expenses | $44,046 | $40,463 | +$3,583 | | Interest Expense, net | $21,835 | $18,090 | +$3,745 | | Net Loss (Income) | $(38,717) | $12,013 | -$50,730 | | Loss (Income) per Diluted Share | $(1.27) | $0.33 | -$1.60 | | Adjusted EBITDA | $19,481 | $20,206 | -$725 | - The increase in SG&A expenses was primarily due to a $3.7 million increase in non-cash stock-based compensation related to new hire performance stock unit grants[16] - The significant shift from net income to net loss was influenced by a $7.7 million loss on asset disposal in FY2025 and the absence of a $39.5 million favorable non-cash fair market value adjustment to debt derivative liability present in FY2024[18] Financial Guidance Calendar Year 2025 Transition Period Financial Guidance For the seven-month transition period from May 26 to December 31, 2025, Lifecore projects revenues between $74 million and $76 million. The company expects a net loss ranging from $19.8 million to $17.8 million and Adjusted EBITDA between $12 million and $14 million. Calendar Year 2025 Transition Period Guidance (May 26 - Dec 31, 2025) | Metric | Estimated Range (in millions) | | :---------------- | :---------------------------- | | Revenue | $74 - $76 | | Net Loss | $(19.8) - $(17.8) | | Adjusted EBITDA | $12 - $14 | - This guidance considers existing market forces, contracts, timing of customer orders, and the company's current beliefs regarding new business development revenue growth and diversification[20] Company Information Earnings Webcast Lifecore Biomedical hosted a conference call on August 7, 2025, to discuss its Q4 and FY2025 financial results. A webcast of the event is available on the company's investor relations website. - A conference call was held on August 7, 2025, to discuss Q4 and FY2025 financial results[22] - The webcast is accessible via Lifecore's Investor Events & Presentations page and will be archived for 30 days[22] About Lifecore Biomedical Lifecore Biomedical, Inc. is a fully integrated contract development and manufacturing organization (CDMO) specializing in sterile injectable pharmaceutical products, including complex formulations, in syringes, vials, and cartridges. With over 40 years of expertise in premium, injectable-grade hyaluronic acid, Lifecore partners with global biopharmaceutical and biotechnology companies. - Lifecore Biomedical is a fully integrated CDMO offering highly differentiated capabilities in sterile injectable pharmaceutical products[23] - The company is a leading manufacturer of premium, injectable-grade hyaluronic acid, with over 40 years of expertise[23] Non-GAAP Financial Information Definition and Use of Non-GAAP Measures Lifecore Biomedical uses Adjusted EBITDA as a non-GAAP financial measure to supplement its GAAP financial statements. This measure excludes certain items not reflective of core or ongoing operations, providing additional insights into operational trends and facilitating period-over-period comparisons. Management utilizes Adjusted EBITDA for monitoring operations, decision-making, planning, forecasting, and compensation, but cautions that it should not be considered in isolation or as a substitute for GAAP measures. - Adjusted EBITDA is a non-GAAP measure that excludes certain items from Net income (loss) to provide insights into core operations[24][27] - Management uses Adjusted EBITDA for monitoring trends, comparing operating results, financial and operational decision-making, planning, forecasting, and compensation decisions[27] - Non-GAAP measures should not be considered in isolation or as a substitute for comparable GAAP measures and may differ from similar measures used by other companies[28] Important Cautions Regarding Forward-Looking Statements This press release contains forward-looking statements subject to various risks and uncertainties that could cause actual results to differ materially from expectations. These risks include timing of expenses and revenue, ability to maintain customer relationships, grow new business, comply with credit covenants, raise capital, macroeconomic impacts, supplier performance, personnel retention, regulatory compliance, and litigation outcomes. Readers are advised to refer to the company's SEC filings, including the 2025 Form 10-K, for additional risk factors. - Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially[29][30] - Key risk factors include timing of expenses and revenue, customer relationships, new business growth, compliance with credit agreements, capital raising, macroeconomic events, supplier performance, personnel retention, regulatory compliance, and litigation[30] - The company does not undertake any obligation to update forward-looking statements, except as required by law[30] Consolidated Financial Statements Consolidated Balance Sheets As of May 25, 2025, Lifecore's total assets decreased to $239.3 million from $254.0 million in the prior year. This was primarily driven by a decrease in property, plant, and equipment and inventory, partially offset by an increase in current portion of note receivable and contract assets. Total liabilities also decreased to $191.9 million from $200.1 million, mainly due to reductions in accounts payable and debt, net of current portion. Total stockholders' equity significantly decreased to $1.3 million from $11.3 million. Consolidated Balance Sheet Highlights (in thousands) | Metric | May 25, 2025 | May 26, 2024 | Change | | :------------------------------------------ | :----------- | :----------- | :------- | | Total Assets | $239,342 | $253,960 | -$14,618 | | Current Assets | $85,677 | $81,033 | +$4,644 | | Property, Plant, and Equipment, net | $129,006 | $149,165 | -$20,159 | | Total Liabilities | $191,909 | $200,058 | -$8,149 | | Current Liabilities | $30,178 | $38,872 | -$8,694 | | Debt, net of current portion, related party | $121,198 | $100,819 | +$20,379 | | Total Stockholders' Equity | $1,336 | $11,315 | -$9,979 | Consolidated Statements of Operations The Consolidated Statements of Operations show a net loss of $1.1 million for Q4 FY2025 and $38.7 million for the full FY2025. Total revenues for the full year were $128.9 million, a slight increase from the prior year. Gross profit decreased for both the quarter and the full year. Operating income for Q4 was $5.3 million, while the full year saw an operating loss of $17.2 million. The full year net loss was significantly impacted by increased interest expense and a loss on asset disposal, contrasting with a net income in the prior year that benefited from a large fair value adjustment. Consolidated Statements of Operations Highlights (in thousands) | Metric | Three months ended May 25, 2025 | Three months ended May 26, 2024 | Year ended May 25, 2025 | Year ended May 26, 2024 | | :------------------------------------------ | :------------------------------ | :------------------------------ | :---------------------- | :---------------------- | | Total Revenues | $36,444 | $37,886 | $128,867 | $128,261 | | Gross Profit | $13,982 | $17,272 | $40,298 | $41,850 | | Operating income (loss) | $5,327 | $2,147 | $(17,245) | $(8,844) | | Net (loss) income | $(1,147) | $(7,085) | $(38,717) | $12,013 | | Diluted (loss) income per share | $(0.06) | $(0.19) | $(1.27) | $0.33 | - Full year interest expense, net, increased to $21.8 million in FY2025 from $18.1 million in FY2024, primarily due to Alcon term loans[17][35] - The year ended May 25, 2025, included a $6.9 million loss on sale or disposal of assets, which was not present in the prior year[35] Non-GAAP Financial Reconciliations Adjusted EBITDA Reconciliation Lifecore provides a reconciliation of Net (loss) income to Adjusted EBITDA, defining Adjusted EBITDA by excluding items such as interest expense, income tax, depreciation, stock-based compensation, changes in fair value of debt derivatives, financing fees, loss on asset disposal, reorganization and restructuring costs, and other specific non-recurring or non-operational items. For Q4 FY2025, Adjusted EBITDA was $9.1 million, and for the full FY2025, it was $19.5 million. - Adjusted EBITDA is defined as net income or loss before interest expense, income tax, depreciation and amortization, stock-based compensation, change in fair value of debt derivatives, financing fees, loss on sale or disposal of assets, reorganization costs, restructuring costs, franchise tax, contract cancellation costs, income from discontinued operations, stockholder activist settlement costs, and start-up costs[39] Adjusted EBITDA Reconciliation (in thousands) | Metric | Three months ended May 25, 2025 | Three months ended May 26, 2024 | Year ended May 25, 2025 | Year ended May 26, 2024 | | :------------------------------------------ | :------------------------------ | :------------------------------ | :---------------------- | :---------------------- | | Net (loss) income (GAAP) | $(1,147) | $(7,085) | $(38,717) | $12,013 | | Interest expense, net | $5,521 | $5,790 | $21,835 | $18,090 | | Income tax expense (benefit) | $33 | $(57) | $43 | $183 | | Depreciation and amortization | $1,913 | $2,014 | $8,027 | $7,954 | | Stock-based compensation | $1,815 | $1,597 | $10,158 | $6,201 | | Change in fair value of debt derivatives | $1,091 | $2,400 | $(409) | $(39,500) | | Loss on sale or disposal of assets | $91 | — | $7,729 | — | | Adjusted EBITDA | $9,052 | $10,410 | $19,481 | $20,206 | Remainder of 2025 Guidance Due to Fiscal Year Change and Reconciliation Lifecore provides a reconciliation for its financial guidance for the seven-month transition period (May 26 to December 31, 2025), aligning with the fiscal year change. The reconciliation details the adjustments from estimated Net loss to estimated Adjusted EBITDA, using similar exclusions as its historical definition. The estimated Net loss range is $(19.8) million to $(17.8) million, reconciling to an Adjusted EBITDA range of $12 million to $14 million. - The fiscal year end is moving to December 31, 2025, to align with the calendar year, peer companies, customers, and the launch of a new ERP system[41] Estimated Adjusted EBITDA Reconciliation for 7-month Transition Period (in thousands) | Metric | May 26, 2025 to December 31, 2025 (estimate) | | :------------------------------------------ | :------------------------------------------- | | Net (loss) (GAAP) | $(19,800) – $(17,800) | | Interest expense, net | $15,800 | | Depreciation and amortization | $5,200 | | Stock-based compensation | $5,300 | | Change in fair value of debt derivatives | $2,100 | | Reorganization costs | $3,300 | | Franchise tax equivalent to income tax | $100 | | Adjusted EBITDA | $12,000 – $14,000 |