Lifeway Foods — Third Quarter 2026 Earnings Summary

Financial Performance:

• Net sales for the quarter ended September 30, 2026, reached a record $67.8 million, an 18.6% year-over-year increase driven by higher volumes of branded drinkable kefir.
• Year-to-date 2026 net sales totaled $197.7 million, up 25.8% year-over-year.
• Gross profit margin for the quarter was 18.0%, down from 28.7% in the prior-year period, primarily due to elevated input costs including milk, resin-based packaging, ingredients, and transportation.
• Year-to-date gross profit margin was 21.5%, compared to 27.3% in the prior-year period.
• Selling, general, and administrative (SG&A) expenses were 16.2% of net sales for the quarter, down from 19.6% last year, reflecting continued investment in marketing.
• Year-to-date SG&A expenses were 17.2% of net sales, compared to 19.1% last year.
• Net income for the quarter was $0.3 million ($0.02 per basic and diluted share), compared to $3.5 million ($0.23 per share) in the prior-year period.
• Year-to-date net income was $5.1 million ($0.33 per basic and diluted share), compared to $11.3 million ($0.75 basic / $0.74 diluted per share) in the prior-year period.
• Operating cash flow for the nine months ended September 30, 2026, was $4.9 million, down from $10.7 million in the prior-year period.
• Cash and cash equivalents stood at $6.98 million as of September 30, 2026, up from $5.57 million at December 31, 2025.
• Total liabilities increased to $47.2 million as of September 30, 2026, from $19.8 million at December 31, 2025, driven by new debt instruments.
• The company utilized a line of credit with a balance of $11.95 million and a note payable of $12.03 million as of September 30, 2026, whereas these were zero at the end of 2025.
• Purchases of property and equipment for the nine months ended September 30, 2026, were $22.8 million, compared to $9.7 million in the prior-year period.
• The company repurchased $4.9 million of treasury stock during the nine months ended September 30, 2026.

Guidance and Future Outlook:

• Management expects cost pressure to persist into the fourth quarter.
• Planned price increases across the portfolio are expected to take effect with distributors and retailers on a rolling basis through the end of 2026 and into the first quarter of 2027.
• The company anticipates gross margin expansion and improved profitability in 2027 driven by pricing actions and productivity gains from capacity investments.
• The Waukesha facility scale-up is scheduled for completion in early 2027 to eliminate capacity challenges.
• Lifeway is on pace to shatter its annual net sales record in 2026, with year-to-date sales equating to approximately 93% of full-year 2025 net sales.

Business Segments and Product Lines:

• Growth is primarily driven by authentic Lifeway Kefir and Lifeway Farmer Cheese.
• Farmer Cheese is expanding to mass retail.
• The company's portfolio includes Kefir Butter, Muscle Mates™, various cheeses, and ProBugs® for kids.
• Products are sold across the United States, Mexico, the United Arab Emirates, Central America, and the Caribbean.

Market and Competitive Landscape:

• Lifeway is recognized as the leading U.S. supplier of kefir and fermented probiotic foods.
• The company secured the No. 45 spot on Fortune's 2026 list of the 100 Fastest-Growing Companies.
• CEO Julie Smolyansky was inducted into the Specialty Food Association Hall of Fame for transforming kefir from a niche product into a mainstream functional-food category.
• The company has achieved 28 consecutive quarters of year-over-year net sales growth, including seven years of uninterrupted quarterly growth.
• Annual net sales increased from $141.6 million in 2022 to $212.5 million in 2025, a cumulative increase of 50.1%.

Risks and Challenges:

• Elevated input costs for milk, resin-based packaging, ingredients, and transportation are pressuring gross margins.
• Forward-looking statements highlight risks including price competition, consumer decisions, competitor actions, commodity pricing changes, government regulation, and delays in new product introductions.
• Actual results may vary materially from expectations if underlying assumptions prove inaccurate or risks materialize.

Management Commentary and Tone:

• CEO Julie Smolyansky described the quarter as "record breaking" and highlighted "extraordinary" volume-led growth reflecting deep consumer trust.
• Management expressed confidence in meeting rising demand for fermented dairy and functional, high-quality protein offerings.
• The tone indicates strong momentum, with management stating the company is "uniquely positioned to meet the moment" and expects to extend category leadership.

Other Key Points:

• A live conference call and webcast regarding these results was held on November 12, 2026.
• The company's balance sheet shows total assets of $132.7 million as of September 30, 2026, compared to $105.6 million at December 31, 2025.
• Property, plant, and equipment, net, increased to $67.4 million from $48.3 million at the end of 2025, reflecting capacity investments.
• The company maintains a 40-year legacy in the U.S. kefir market.