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Good morning, and thank you for joining Lifecore's earnings call for the first quarter ended March 31, 2026. [Operator Instructions]

Now I would like to turn the call over to Stephanie Diaz, Manager of Investor Relations for Lifecore.

Good morning, and thank you for joining us. Today, Lifecore Biomedical will provide its earnings for the first quarter ended March 31, 2026, and corporate update. As the company has recently changed its fiscal year-end to align with the calendar year, we will be comparing our results for the first quarter ended March 31, 2026, with the comparable prior year quarter ended February 23, 2025.

Hosting the call today from Lifecore are Paul Josephs, President and Chief Executive Officer; and Ryan Lake, Chief Financial Officer. Before we begin, I'd like to remind everyone that today's conference call will contain 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, May 6, 2026, and the company's actual results could differ materially from those projected in such forward-looking statements.

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 earnings press release, which was furnished to the Securities and Exchange Commission this morning on Form 8-K and is available on our corporate website at lifecore.com as well as our other filings with the Securities and Exchange Commission, including, but not limited to, the company's Form 10-Q for Q1 2026, which was filed with the SEC this morning and is also available on our website.

In addition, our earnings press release includes a discussion of and during this call, we will reference certain non-GAAP financial information. You can find relevant non-GAAP reconciliations in our earnings press release.

With that, I would like to turn the call over to Paul Josephs, President and Chief Executive Officer.

Thank you, Stephanie. Good morning, everyone, and thank you for joining us today. During the first quarter of 2026, we continue to execute on each of the 3 pillars of our growth strategy: maximizing our existing commercial business, advancing our development pipeline towards commercialization and adding high-quality new programs to our pipeline through business development. We believe consistent execution across these pillars positions Lifecore for sustained long-term growth, supporting our goal of achieving a 12% revenue CAGR and EBITDA margins above 25% by the end of 2029. We remain confident in our full year expectations and reaffirm our 2026 guidance. Ryan will provide additional details on our financial results following my overview of our Q1 achievements.

I will begin today with the progress made with each of our growth strategy pillars, starting with our revamped commercial strategy and priority to add high-quality programs to our development pipeline. I am encouraged by the progress made with regard to this initiative. As previously discussed, we have transformed our business development strategy and team to expand our target market and drive an increase in the number of high-quality customer wins. This effort generated a strong expansion of our pipeline in 2025, and we are encouraged by the continued progress we have seen in 2026.

In the first quarter alone, we have signed 3 new commercial site transfer programs. In March, we announced the signing of a manufacturing services agreement for the commercial site transfer of a marketed approved product with a new aesthetics customer. Under the terms of the agreement, we will perform technical transfer activities for a product that is currently manufactured outside the U.S. Our clients' goal is to establish U.S.-based manufacturing for products sold in the U.S. This is an exciting opportunity for us with a customer relationship that we expect to grow over time.

Importantly, we believe this product may generate commercial revenue in 2028.

In addition, during the first quarter, we announced the signing of 2 CDMO manufacturing services agreements with an existing U.S. biopharmaceutical customer. This customer is a publicly traded U.S.-based pharmaceutical company that has successfully developed multiple marketed products and continues to drive growth in its commercial pipeline. The first of these agreements is a commercial site transfer under which we will assume manufacturing of a currently marketed product produced by another CDMO. This is a new product to Lifecore. We will perform technical transfer services required to support regulatory approval at our site. Upon successful approval of this transfer, the agreement provides for the commercial manufacturing of this product at Lifecore. Consistent with previously discussed commercial site transfers, we believe this product may generate commercial revenue in 2028.

The second agreement with the same customer reflects an expansion of our relationship. Lifecore currently manufactures this commercial ophthalmic product in one delivery format and will now begin to manufacture it in a second delivery system. This additional delivery system is currently manufactured in Europe. We believe the secondary -- second delivery system will be additive to our existing commercial revenue for this product.

We are motivated to have been selected for all these high-value programs as we believe it reflects the continued progress in becoming a partner of choice for our current and future customers. Our unwavering commitment to best-in-class quality and strong technical expertise are key drivers for those customers that continue to place a trust in us for the development and manufacturing of their important programs.

During the quarter, our business development team spent considerable time and effort strengthening our business development pipeline, resulting in a growing number of meaningful meetings with customers and prospects. A meaningful highlight for us was the significant engagement our team experienced with our customers at the recent Drug, Chemical & Associated Technologies or DCAT Association meeting in New York. DCAT is our largest and most important sales and marketing event in North America. This year's engagement was unprecedented for us with our team participating in a record number of meetings with both existing and potential customers.

Given the strong engagement and the growing momentum of our business development team is building, we believe we are well positioned to capitalize on the positive market dynamics, including the growth of manufacturing in the United States, and the fact that approximately 50% of the U.S. drug development pipeline are injectable therapies. We believe that this current environment points in our favor and leaves us well positioned to aggressively pursue new business and capitalize on the opportunity in front of us.

With respect to our first growth strategy, expanding our existing commercial business, we continue to work closely with our commercial partners during the quarter to deliver outstanding service with a clear focus on readying our organization for the doubling of commercial demand with our largest customer, which is expected to begin in 2027. Concurrently, we remain committed to commercial excellence. And during the quarter, we implemented targeted pricing initiatives to maintain and expand our product margins.

Turning to the second growth strategy pillar of advancing development programs to commercialization. We are encouraged about our growing and diverse pipeline. One of the highlights during the quarter was the expansion of our work with Indomo, a clinical-stage therapeutics company. In January of this year, we signed a second agreement with Indomo, having previously been selected to provide formulation and process optimization activities in support of their DT-001 program. Under the terms of our latest agreement, we will be responsible for producing and supplying clinical batches of DT-001, planned studies designed to prepare the product for advancement into Phase II clinical trials in 2026.

We also made significant progress regarding our late-stage development pipeline, which includes 13 late-stage programs with the addition of the 3 programs mentioned earlier in my comments. 5 of these programs are commercial site transfers. Unlike development programs, commercial site transfers have existing market demand and are significantly derisked. They do not require additional clinical trials and only require qualification at Lifecore, which gives us greater confidence in their financial projections. Given our quality track record and proficiency in producing similar products, we are confident in our ability to successfully transfer all 5 products to Lifecore. Depending on timing of regulatory approvals, we expect that they will all generate commercial revenue at our site in 2028. It is also important to note that 2 of our late-stage customers nearing commercialization achieved important milestones that support their path towards regulatory approval and commercialization.

One of our late-stage ophthalmic customers recently announced positive top-line Phase III results. And after securing funding, another customer has a clear and actionable path toward commercialization potentially in 2028. Beyond the achievements specific to our growth strategy, we made meaningful progress across several key areas of our business, including SG&A, operations and quality. Within SG&A, we continue to identify and act on opportunities for cost reductions and intend to continue to implement changes that we believe will drive sustained margin improvement over time.

In addition to our operational achievements, during the quarter, we successfully launched our enterprise resource planning or ERP system in January. To date, this implementation has been smooth, and we ultimately expect the system to improve efficiencies in financial management, cost containment, productivity and inventory control. With regard to quality, our commitment to industry-leading quality was again demonstrated during the quarter.

During the quarter, we completed multiple inspections with new business prospects and existing customers. Each of these inspections had a positive outcome, which we believe further validates Lifecore's growing reputation as a leading CDMO and partner of choice for customers seeking high quality. Importantly, these inspections consistently serve as a learning opportunity for us, and allow us to strengthen our quality systems that are the foundation for all our development and commercial manufacturing activities.

During the first quarter of 2026, our team successfully executed against each pillar of our growth strategy. Concurrently, we continue to optimize our organization to drive cost reductions and improve efficiencies to support margin improvement, all while continuing to elevate our quality systems. I am energized by our achievements during the quarter, and we remain committed to building on this momentum with discipline throughout the year.

That concludes my update.

I will now turn the call over to Ryan Lake to provide an overview of our financial results for the first quarter ended March 31, 2026.

Ryan?

Thank you, Paul, and good morning, everyone. In conjunction with my comments, I'd like to recommend that participants refer to Lifecore's Form 10-Q filing, which we filed with the SEC earlier today. As a reminder, today, we will compare our first quarter, which ended on March 31, 2026, with the comparable prior year quarter ending on February 23, 2025. Before providing the quarter's financials, I'd like to state that I concur with Paul's optimism for the path ahead, and I'm pleased to reaffirm our 2026 guidance for revenue and adjusted EBITDA. As a reminder, for 2026, Lifecore expects total revenue to be in a range of $120 million to $125 million, net loss to be in the range of $35.4 million to $30.9 million and adjusted EBITDA to be in the range of $20.5 million to $25 million.

Turning now to the quarter. Revenues for the first quarter of 2026 were $23.2 million, a decrease of $12 million or 34% compared to $35.2 million for the comparable prior year quarter ended February 23, 2025. The decrease in revenues was primarily a result of the factors we described during our fourth quarter earnings announcement, and we remain on track to deliver our stated revenue guidance by the end of 2026.

Gross profit for the quarter was $4.5 million, a decrease of $5.4 million compared to $9.8 million for the comparable prior year quarter ended February 23, 2025. The $5.4 million decline in gross profit was primarily due to decreased revenues. Selling, general and administrative expenses for the first quarter were $7.9 million, a decrease of $2.1 million or 21% compared to $10 million for the comparable prior year quarter ended February 23, 2025.

SG&A decreased by $2.1 million, driven by $1.6 million of lower recurring legal and accounting costs, lower compensation and lower credit losses and $0.5 million of lower nonrecurring expenses primarily related to legacy legal matters. The company recorded a net loss of $15 million and $0.43 of loss per diluted share as compared to a net loss of $14.8 million and $0.42 of loss per diluted share for the comparable prior year quarter ended February 23, 2025.

Adjusted EBITDA for the quarter was $1 million, a decrease of $4.7 million compared to $5.7 million for the comparable prior year quarter ended February 23, 2025. The decrease in adjusted EBITDA was primarily due to the decrease in revenues and was partially offset by favorable operating expenses. We are pleased with the company's financial performance during the first quarter and remain on track to achieve the guidance that I reiterated at the beginning of my comments.

Today, I'm pleased to report that the first quarter of 2026 represents the sixth consecutive quarter of period-over-period declines in SG&A and R&D expenses. Since initiating our expense reduction initiatives in late 2024, Lifecore's SG&A and R&D expenses have been reduced cumulatively by almost $8 million, including substantial reductions in accounting, consulting and legal expenses. These reductions drove the incremental improvements we recorded in EBITDA margins during 2025. And as reflected in our 2026 guidance, we expect continued reductions to support that trend in the future.

I'd now like to turn to liquidity, which has improved significantly since late 2024. We ended the first quarter of 2026 with overall liquidity of approximately $38 million, including approximately $21 million in cash and cash equivalents and approximately $17 million of availability under our revolver. Importantly, the first quarter of 2026 marked our fifth consecutive quarter generating positive cash flow from operations and excluding the registration rights payment in the fourth quarter of last year, represents the fourth consecutive quarter of being free cash flow positive.

During the first quarter of 2026, we generated $4.7 million in cash from operations and free cash flow of $3.6 million. We are pleased with the improvements we've been able to achieve since late 2024, and we remain committed to further strengthening our financial standing with continued expense reductions and strategic financial management going forward.

This concludes my financial overview. I'll now turn the call back over to Paul for his final comments.

Paul?

Thank you, Ryan. During the first quarter, we believe that we continue to demonstrate that we are on the right path. We executed against our growth strategy, supporting our clients as they advance towards commercialization, expanding our capacity and capabilities to meet growing demand and addressing new modalities and aggressively pursuing and winning new business opportunities. In addition, we continue to strengthen our organization by driving efficiencies, improving our cost discipline while maintaining exceptional quality as a foundation that supports everything that we do.

We believe we are well positioned to achieve our 2026 objectives and have a clear strategy that we have built and are continuing to make progress that give us every reason to look forward to our midterm goals with great optimism. This concludes our prepared remarks for today.

Operator, you may now open the call for questions.

[Operator Instructions] Our first question comes from Michael Petusky with Barrington Research.

Congrats on all the progress related to the contract -- new contracts, et cetera. So Ryan, I guess I wanted to take -- get the sort of the numbers and how that connects to the full year guide. Both the revenue and EBITDA came in sort of meaningfully below what we were expecting. And it just feels like the decline in Q1 was considerably above sort of the -- certainly the run rate of the headwinds that you guys identified last conference call, meaning $12 million down this quarter versus I believe it was something like an $18 million headwind for the full year.

Can you sort of help me bridge that and just talk about maybe how this plays for the rest of the year in terms of -- are you expecting sequential revenue growth? Like how -- percentage of revenue in the second half versus first half? Can you just speak to some of that?

Thanks, Michael. So I guess maybe to start with the second part of your question first. And as we communicated on the year-end earnings call, we expect revenue to roughly be in the mid-40% range in the first half of the year and then in the mid-50% range in the second half of the year. So that hasn't changed. I think that it's really just timing or split between Q1 and Q2. So I think in terms of the way that you're looking at some of your models, I think it's basically just pushing that, I guess, miss for Q1 and putting that in Q2. We didn't give specific guidance previously between the breakouts, between Q1 and Q2.

But I'd say largely, we're still on track for that mid-40% range in the first half and then mid-50% range in the second half. And I would also say just from an EBITDA perspective that we remain kind of committed to that in terms of roughly split in the 40% range in the first half for adjusted EBITDA and 60% range in the second half. As far as some of the items that we communicated at year-end in terms of the headwinds with regard to one of our customer supply chain initiatives as well as the termination of agreement. I'd say a big part of that is really front-loaded into this year in terms of timing and comparison.

So I want to say like 50% of that was roughly in Q1. And I think as we look at the first half of the year, roughly 80% of that impact will be kind of bled through the financials.

Okay. All right. That's super helpful. Okay. So Paul, I guess one of the -- I guess, to me, one of the early indicators in terms of future success for you guys is getting folks to Chaska. Can you just talk about potential customer traffic in Chaska to whatever extent you can? I mean, are you seeing sort of a pickup relative to where it was 6, 12 months ago? Is the quality of the projects that are potentially being looked at increasing? Can you just sort of talk, I guess, to traffic in terms of getting folks to travel to Minnesota and just the potential customers you're talking to?

Michael, thank you for the question. Yes, we're very encouraged and energized by the amount of traffic that we're seeing from potential new customers, not only from a business perspective, but a key or a leading indicator of new business is quality audits. So we have a significant increase in the number of audits that we're seeing from prospective customers. And now we're actually into mid-June before we're able to entertain audits from new customers. So that gives me great optimism.

And in fact, we'll have the CEO or U.S. CEO of a large multinational in our site this week talking about new opportunities. So the quality of visitors that we're seeing from -- on the business side is up and the increase in the number of audits are up from prospective customers as well, which give us, again, as leading indicators of new business. they're trending in a positive manner.

Our next question comes from Matt Hewitt with Craig-Hallum Capital Group.

Regarding that pipeline and that increasing pipeline, you noted that the aesthetic win, the tech transfer was because they were looking to onshore manufacturing here in the United States. I'm curious, as you look at your pipeline, as you look at the existing tech transfers as well as those that are in the pipeline, how much of that is a function of the tariffs and the desire to repatriate or to add manufacturing here in the States versus how much of it is because of the market that you serve, the sterile injectables and some of the capacity constraints that, that market is facing globally?

Matt, thanks for the question. I think it's meaningful, certainly not the majority, but I'd say maybe low double digits as it relates to reshoring. So it's a meaningful part of it. The other thing that's really manifested itself, if you don't mind me conflating this answer is there is meaningful FDA enforcement or increase in FDA enforcement or actions that is going on in the industry. So when I think about high quality and maybe some of the situations that our competitors are in with regard to warning letters or FDA enforcement, that has also increased the opportunity for a company like Lifecore, which has a high-quality track record.

So as I think about the site transfers, it's not only now the reshoring, but it's also the opportunity to take advantage of the regulatory market because we think that's a strong tailwind based on our quality systems led by Jackie Klecker, our EVP of Quality. So it's exciting times for us, and we're energized moving forward.

That's helpful. I guess maybe just to extrapolate on that a little bit. With some of your peers facing [indiscernible] and in some cases, warning letters, does that create an opportunity for maybe some of these or one of these at least tech transfers to accelerate, meaning instead of having to go through the full 18-plus month process, the FDA recognizes, hey, we're going to be in a shortage situation if we don't address this faster and maybe they help move things along a little bit faster.

I think we saw that with some [ bags ] a couple of years ago where they basically knocked down some of the barriers to get product to market faster because of some companies that were having issues.

Thanks for the question, Matt. Certainly, it's a possibility. As I think about one opportunity within our pipeline, there may be that opportunity. But that is something that Lifecore doesn't necessarily control. It's on our -- it's really within the control of our customers as we partner with them on their regulatory strategy. So nothing that we could say today that would point to an acceleration of anything within our pipeline, but certainly something that may become a reality in the future.

Our next question comes from Mac Etoch with Stephens.

This is Hannah on for Mac. HA performance was relatively strong this quarter and carries a higher margin profile for you guys. So were there any production inefficiencies, scrap or other dynamics that you would point to that may have impacted this quarter?

Nothing specifically, Hannah, to call out for the quarter in terms of fermentation production, nothing in particular there. I mean I would say, and maybe just to reiterate a prior comment, we do have good visibility in general to our revenue coverage for the year. I think about 85% -- from an aseptic volume perspective, we have firm POs for. And then I think from an HA side, close to 100% PO coverage for the year, which gives us great confidence in the guidance that we've put out.

That's helpful. And then given demand trends across onshoring GLP-1s, et cetera. How do you view current industry capacity for injectable fill/finish?

Hannah, thanks for the question. I would say this that as it relates to prefilled syringes and cartridges, there still remains opportunity where demand exceeds current available capacity for your traditional vials that where you're supported, whether it's your flu vaccine or COVID vaccine, et cetera. There remains a lot of capacity because of the drop in COVID demand. And we're seeing the majority of our pipeline is in the prefilled syringes and cartridges.

Our next question comes from Max Smock with William Blair.

It's Christine Rains on for Max. Ryan, maybe a question for you. You pointed a pretty significant sequential uptick in Q2 revenue, primarily a result of the timing. And I believe you said that half of the impact from the 3 headwinds you announced last quarter impacted Q1. So very helpful context there. But also, I think you said that 80% of the headwind is expected in 1H. So correct me if I'm wrong here, but it sounds like another outsized roughly 30% headwind will impact Q2.

So really hoping you can talk through what the offsets from a timing perspective are there on the positive? And what gives you confidence in the sequential growth next quarter?

Thanks, Christine. Yes, I mean, at this point, right, we have all orders in for the quarter, for the second quarter. So we've got really good visibility to that. And I think at the midpoint of the guidance, it's roughly in the $32 million to $34 million revenue range.

Got it. That's helpful. And then congratulations on the new wins. Hoping you can discuss the potential incremental revenue to 2028 from each of -- I believe there was 3 commercial tech transfers that you announced since last quarter.

Yes, Christine, so the 3 that we signed, we believe that they would generate commercial revenue in the 2028 time frame. And those programs, as we think about those, they would be mid-7-figure opportunities for us.

Great. And then just one last one. Last quarter, you pointed to modest revenue growth expectation for 2027, but talked about how this could be impacted either positively or negatively by timing or outcomes of your customer programs. So now that you have another quarter in your belt, hoping maybe you can put a finer point on this or help us frame out a range of possibilities or even just what the most important levers are that are influencing how this outlook ultimately shapes up?

Yes, Christine. So again, we're not providing guidance for 2027 at this point. Certainly, as we get further in the year, I think we'll see some of those things. I think importantly, when you look at our 30-plus development programs, a number of very key important milestones associated with each of those programs this year, where a lot of those customers are either waiting for clinical results or we're doing some very late-stage manufacturing work. So for example, PPQ batches for those customers, we'll get a better sense of timing of not only of success of those products, what their commercial strategies are that will help inform those outlooks for 2027.

And I would also say, right, like we do not have some of the forecast from our customers that go out into 2027 and through 2027 yet. So as those become clear and as we start to inflect on the more than doubling of volumes with our largest customer, we'll be able to provide that additional clarity.

Great. That's helpful. I did try to sneak in a guidance...

Our next question comes from Paul Knight with KeyBanc.

Paul, are you having most success in auto-injector pen or a prefilled syringe?

Prefilled syringe, Paul.

What's driving that?

I think it's a lot of the -- just the trend in health care moving more to the patient and away from the hospital and the clinic. But -- so that seems to be where the majority of the therapeutic modalities are going to moving away from your traditional vials that you have to either go to the hospital or the doctor to -- at every point to get your injection. So I think that's really what's driving it. And that's why I think 50% of the injectable pipeline is -- excuse me, 50% of the U.S. drug pipeline is injectables more taking into the more home health care related is how I see it.

And then with the $45 million, I believe, capacity at your facilities, is that a gating factor for some customers is $45 million adequate?

That's a great question. I think that as I think about it, certainly, if somebody has an immediate -- I'll just make -- give you an example, 100 million unit GLP-1 opportunity, Lifecore is not the immediate partner of choice for that. Now we have optionality to grow into what we call Site 3 to meet those growing needs, if necessary, but there would be timing-related aspects to that. I think where we fit a nice role in this market is for boutique, midsized opportunities where somebody -- there's a level of complexity and technical expertise that's required in development and commercial manufacturing in volumes that range from 5 million to 10 million units of market demand. And we're seeing that. There's just a great growth in our pipeline. And Mark DaFonseca, our Chief Commercial Officer and his team are doing a great job of continuing to expand and build upon our current pipeline.

And within your sales group, any changes in that group?

We continue to optimize and upgrade that group, Paul. We want to ensure that we have the best possible talent in those roles to drive meaningful and impactful opportunities into our site. So we've made some minor changes in -- over the past quarter to continue to upgrade our talent.

Thank you. I would now like to turn the call back over to Paul Josephs for any closing remarks.

Thank you, operator. I wish to thank all of Lifecore's stakeholders and supporters, including our investors, customers and collaborators for their ongoing support and partnership. I also wish to thank our dedicated employees for their commitment to our success as well as the success of our customers. We are very pleased with the progress made during the first quarter of 2026 and look forward to future success in the growth ahead.

That concludes our call today. Thank you for participating.

Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.

Good day, and welcome to the Lifecore Biomedical Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this call is being recorded. I would now like to turn the call over to Stephanie Diaz, Manager of Investor Relations. Please go ahead.

Good morning, and thank you for joining us. Today, Lifecore Biomedical will provide its earnings results for the fourth quarter and transition period ended December 31, 2025, and a corporate update. As the company has recently changed its fiscal year-end to align with the calendar year, we will be comparing our 2025 results to the closest comparable period in the prior year. Today, we will be comparing our fourth quarter ended December 31, 2025, with the previously reported quarter ended November 24, 2024. We will be comparing our 7-month transition period ended December 31, 2025, with the unaudited 7-month period ended December 31, 2024.

Hosting the call today from Lifecore are Paul Josephs, President and Chief Executive Officer; and Ryan Lake, Chief Financial Officer. Before we begin, we'd like to remind everyone that today's conference call will contain 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, March 16, 2026, and the company's actual results could differ materially from those projected in such forward-looking statements.

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 earnings press release, which was furnished to the Securities and Exchange Commission this morning on Form 8-K and is available on our corporate website at lifecore.com as well as our other filings with the Securities and Exchange Commission, including, but not limited to, the company's Form 10-KT for the transition period ended December 31, 2025, which was filed with the SEC this morning and is also available on our website.

In addition, our earnings press release includes a discussion of and during this call, we will reference certain non-GAAP financial information. You can find relevant non-GAAP reconciliations in our earnings press release. With that, I'd like to turn the call over to Paul Josephs, President and Chief Executive Officer.

Thank you, Stephanie. Good morning, everyone, and thank you for joining us today. 2025 was a highly productive year for Lifecore Biomedical, during which we strengthened our pipeline, capabilities, leadership and our standing as a differentiated CDMO. During the year, we continued to successfully execute against our strategy to position Lifecore for sustained growth through which we aim to achieve a 12% revenue CAGR and improved EBITDA margins to above 25% in the midterm. Our many achievements during the year included maximizing our existing commercial business, advancing our development portfolio towards commercialization, adding multiple new programs to our pipeline through our revamped business development strategy and implementing key initiatives throughout the organization that have improved our margins and will continue to drive improvement towards our EBITDA goal.

Our financial performance was also strong during the transition period. During the fourth quarter of 2025, we recorded revenues of $35.7 million, a 10% increase as compared to the most comparable prior year quarter. And for the approximately 7-month transition period from May 26, 2025, through December 31, 2025, we recorded revenues of $75.5 million, an increase of 20% compared to the prior year comparable period. Gross margin and adjusted EBITDA also improved during the 2025 fourth quarter and transition period as compared to the prior year comparable periods in 2024, reflecting the growth in our fermentation business as well as the benefit of the many efficiencies incorporated throughout our organization in 2025. Ryan will elaborate on these financial results as well as guidance for 2026 following my overview of our 2025 achievements, beginning with the successful expansion of our commercial business.

As noted previously, our company is preparing for it to support a significant increase in aseptic fill/finish demand from our largest customer that is expected to begin in 2027. In 2025, Lifecore achieved several milestones in support of this anticipated event. In particular, the company successfully qualified our 5-head isolator filler to supply the European and Asian markets for this customer. Expansion into these markets is expected to help drive a more than doubling of this customer's aseptic fill/finish demand, and we are pleased to have achieved this key milestone.

Another milestone supporting this expansion is the successful qualification of our hyaluronic acid for supply to the Japanese market. Meeting Japan's strict HA specification requirements is difficult to achieve, and we believe our success in meeting this challenge speaks to our expertise and capabilities. With these hurdles achieved, we believe that we are well positioned to support this critical expansion and financial inflection point. We continue to work closely with this important customer as we approach this inflection point, and we are grateful for their continued trust that they have placed in Lifecore.

The impact of our revamped business development strategy was demonstrated as we recently added several new high-value programs to our late-stage pipeline, including two commercial site transfers in 2025. Unlike development programs, commercial site transfers have existing demand and are substantially derisked as they do not require additional clinical trials and only require qualification at Lifecore. Based on our quality track record and expertise in producing similar products, we believe that both products will be successfully transferred to Lifecore and generate commercial revenue at our site in 24 to 30 months. These two products represent important additions to our late-stage pipeline, strengthening a growing portfolio of programs that we are actively advancing towards commercialization.

As we have previously disclosed, the company has a promising late-stage pipeline. In prior quarters, we have stated that we expect launch dates for these programs to take place between 2026 and 2029. And while the company has made substantial progress with many of these programs in 2025, we are adjusting the expected launch time line to between 2027 and 2030. The shifting of these timelines is not due in any way to Lifecore's performance, capabilities or capacity. Rather, they are due to matters outside of Lifecore's control, including typical changes in customers' development plan strategies and the impact of financing challenges in 2025 that two of our customers experience. We remain optimistic that the 10 late-stage programs in our 30-plus program development pipeline will continue to advance and have the potential to reach commercialization before or during 2030. And while we cannot provide assurances that all programs will achieve regulatory approval, we believe that even the commercial success at a modest conversion rate of 50% of these programs could drive a significant increase in revenue in the years ahead.

Lifecore continued to make strong progress in 2025, successfully advancing key initiatives despite external headwinds. Notable advancements of our development pipeline during 2025 include the installation and operational qualification of an automated manufacturing equipment to accommodate the scale-up and commercialization of a customer program. This particular customer is a large pharma company, and we are currently preparing to produce validation batches for this project in 2026. We expect this program to be a meaningful growth driver upon regulatory approval, having the potential to contribute more than half of the commercial revenue we anticipate for our late-stage pipeline by 2030.

Several other programs met key advancement milestones in 2025, paving the way for continued progress in 2026. These include the completion of development work in advance of the production of validation batches for another late-stage customer; the successful completion of two Phase III clinical batches for a separate late-stage program; and finally, the onboarding of a late-stage transfer work for the company's GLP-1 customer. We believe that we are on track to achieve our financial goals and reiterate our expectation that a significant number of programs in our late-stage pipeline will launch within the midterm window, specifically between 2028 and 2029.

The advancement of our development pipeline remains central to our mid- and long-term growth strategy. And in 2025, we successfully delivered multiple key customer milestones that meaningfully advance these programs towards commercialization. The third pillar of our growth strategy is the addition of new programs to our pipeline. In 2025, the company revamped its business development strategy and team in an effort to expand our service market and increase the number of high-quality customer wins.

In 2025, Lifecore expanded its strategy from a primary focus on supporting complex, highly viscous formulations towards a strategy of promoting our strong technical capabilities and our ability to support products across multiple modalities. This effort is being executed and led by a new team of seasoned industry professionals, and the successes achieved in our first year were impressive. Employing an aggressive hunting model, the momentum achieved by this team over the last year has resulted in five new programs in the transition period, including the aforementioned two commercial site transfers and a late-stage GLP-1 program. Our business development pipeline has not only grown in its number, but in the quality of new business wins has improved significantly.

Given the value and opportunity presented by commercial site transfers and the growing trend of regionalized manufacturing in the United States, our team is strategically and aggressively pursuing additional commercial site transfer programs, and we are optimistic regarding the potential to add more in 2026. We believe other factors may positively impact our ability to further grow our pipeline and customer base in the midterm. Among these, we believe we will continue to benefit from the fact that approximately 50% of the drug development pipeline in the United States is injectables, a trend that is expected to grow in the coming years. We believe that Lifecore's exceptional track record in compliance and quality distinguishes us and so gives further support for our business development efforts with existing and new customers.

In early 2025, the company successfully completed an unannounced FDA inspection. During the transition period, we also conducted 10 customer audits and 1 regulatory inspection. All were positive, reinforcing our confidence in the organization's ability to support the high-quality demands of our customers. Given the strength of our revamped business development organization, the successes achieved in 2025 and the quality standards that Lifecore employed throughout the organization, I am highly optimistic for continued growth in the future.

In addition to supporting revenue growth, we continue to improve our adjusted EBITDA margins through the implementation of cost improvement initiatives throughout the organization. We believe that targeted cost control and optimized procurement strategy provide other opportunities to improve EBITDA margins in the near term. A key tool in this effort will be our enterprise resource planning system, or ERP, for which substantial preparatory work was completed in 2025, enabling a successful launch in January 2026. Lifecore expects this system to strengthen inventory control, support improved financial management and help reduce costs in 2026 and as the company grows.

Another key factor that we believe will drive Lifecore's growth in the midterm is the company's current and anticipated capacity utilization. As we look forward, our capacity in aseptic fill/finish is 45 million units. During the last year, we utilized approximately 20% of our available capacity. As we scale our production towards our goals in 2029, we expect our utilization to reach an estimated 60% of our current installed production capacity. Our long-term plan is to fill the remaining unused capacity, which we expect will drive revenues to over $300 million and further improve EBITDA margins. Importantly, reaching this long-term capacity utilization plan is tied to commercializing wins that already exist in our development pipeline, the expansion of our existing customer relationships and adding new programs to our pipeline.

In conclusion, 2025 was a strong year for Lifecore. We executed effectively across each pillar of our growth strategy. This manifested in strong revenues and improved EBITDA margins for the period. At the same time, our organization today is leaner, more efficient and more productive than at any time in the recent past. Our quality track record remains strong, and our business development team is aggressively pursuing and winning the projects that we expect to fuel our future growth. I'm very pleased with our progress in 2025, and I believe it has created a strong foundation for us to achieve both our mid- and long-term goals. That concludes my update. I will now turn the call over to Ryan Lake to provide an overview of our financial results for the fourth quarter and the 7-month transition period ended December 31, 2025, and to provide calendar year 2026 guidance. Ryan?

Thank you, Paul, and good morning, everyone. In conjunction with my comments, I'd like to recommend that participants refer to Lifecore's Form 10-KT for the transition period ended December 31, 2025, which we filed with the SEC earlier today. As a reminder, today, we will be comparing our fourth quarter, which ended on December 31, 2025, with the most comparable prior year quarter ending November 24, 2024. For the 7-month transition period ended December 31, 2025, we will be comparing to the unaudited 7-month period ended December 31, 2024.

Before I jump into the numbers, I'd like to echo Paul's sentiment. We are very pleased with the company's 2025 performance, and I'm happy to share our financial results with you today. Revenues for the quarter ended December 31, 2025, were $35.7 million, an increase of 10% compared to $32.6 million for the most comparable prior quarter ended November 24, 2024. The increase in revenues of $3.1 million was due to a $5.6 million increase in HA manufacturing, primarily due to timing of revenues from Lifecore's largest customer supply chain initiatives. CDMO revenues decreased $2.4 million, which was primarily from the absence of take-or-pay revenue in the comparable period and lower aseptic sales volumes, partially offset by higher development revenue driven by timing of project work for two major customers.

During the 7-month transition period ended December 2025, revenues were $75.5 million, an increase of 20% compared to $63 million in the comparable prior year period. This increase in revenues of $12.6 million was primarily due to a $10.1 million increase in HA manufacturing, primarily due to timing of revenues from Lifecore's largest customers' supply chain initiatives. In addition, CDMO revenues increased by $2.4 million, which was primarily from overall higher sales volumes. These increases were partially offset by the absence of $1.6 million of take-or-pay revenue recognized in the prior year comparable period.

Gross profit for the quarter ended December 31, 2025, was $12.8 million compared to $11.1 million for the most comparable prior quarter ended November 24, 2024. The increase of $1.7 million in gross profit is due to a $3.2 million increase in HA manufacturing due to increased sales volume, partially offset by a $1.5 million decrease in CDMO gross profit. The CDMO gross profit decline was primarily due to a decrease in aseptic gross profit of $3 million, which included the absence of a prior period take-or-pay, partially offset by an increase in development gross profit of $1.5 million.

During the 7-month transition period ended December 2025, gross profit margins improved to 31% compared to 26% in the comparable prior year period. The 5% increase in gross margin was primarily due to an increase in HA manufacturing from increased sales volume and manufacturing absorption. Selling, general and administrative expenses for the quarter ended December 31, 2025, were $7.5 million compared to $11.1 million for the most comparable prior quarter ended November 24, 2024. The $3.6 million decrease in SG&A expenses is primarily due to a $2.8 million decrease in nonrecurring expenses primarily related to legacy matters and prior period restructuring and a $1.2 million decrease in stock-based compensation.

During the 7-month transition period ended December 2025, SG&A expenses were $19.5 million compared to $30.8 million for the same period last year. The $11.4 million decrease in SG&A expenses is primarily due to a $6.6 million decrease in nonrecurring expenses, primarily related to legacy matters and prior period restructuring, a $2.5 million decrease in recurring professional fees and a $1.8 million decrease in stock-based compensation. For the quarter ended December 31, 2025, the company recorded a net loss of $5.1 million and a loss of $0.16 per diluted share as compared to a net loss of $6.6 million and a loss of $0.25 per diluted share for the most comparable prior quarter ended November 24, 2024. In addition to the reasons previously described, the noncash debt derivative adjustment contributed $1.1 million to the net loss in 2025, while partially offsetting $1.2 million of the net loss in 2024.

During the 7-month transition period ended December 2025, the company recorded a net loss of $18 million and a loss of $0.54 per diluted share as compared to a net loss of $30.6 million and a loss of $0.99 per diluted share for the same period last year. In addition to the reasons described previously, the noncash debt derivative contributed $1.6 million to the net loss in 2025, while partially offsetting $1.9 million of the net loss in 2024. Adjusted EBITDA for the quarter ended December 31, 2025, was $8.6 million, an increase of $2.1 million compared to $6.5 million in the most comparable prior quarter ended November 24, 2024. The improvement in adjusted EBITDA was primarily due to the increase in gross profit.

During the 7-month transition period ended December 2025, adjusted EBITDA was $13.1 million, a $10.5 million increase from $2.6 million in the prior year period. The improvement in adjusted EBITDA was primarily due to the increase in gross profit and the reduction in recurring selling, general and administrative expenses. We are very pleased with Lifecore's strong financial performance in 2025 as we met 2025 transition period financial guidance for revenue, net loss and adjusted EBITDA. A critical part of our strategy to strengthen the company's financial standing has been expense reduction. Since announcing our growth strategy in late 2024, we have worked aggressively to streamline and reduce the company's operating expenses, and we are pleased to report that the fourth quarter of 2025 represents the sixth consecutive quarter of period-over-period declines in operating expenses.

For the 7-month transition period ended December 2025, operating expenses decreased $11.1 million compared to the prior year 7-month period. Cumulatively, over the past 18 months, Lifecore's operating expenses have been reduced by over $7 million, including substantial reductions in accounting, consulting and legal expenses. These reductions are driving the initial improvement we are now seeing in margins with EBITDA margins improving from 15% during fiscal 2025 to 17% in the 7-month transition period ended December 2025.

I'd now like to turn to liquidity. As with other financial measures, Lifecore's liquidity has improved significantly over the last 18 months as we ended the year with overall liquidity of approximately $39 million, including approximately $17.5 million in cash and cash equivalents and approximately $21 million under our revolver, all of which remains available. It is noteworthy that the fourth quarter of 2025 marked our fourth consecutive quarter generating positive cash flow from operations and excluding the $4.7 million preferred stock registration rights payment in the fourth quarter, it represented the third consecutive quarter of being free cash flow positive. During the 7-month transition period ended December 2025, we generated $7.3 million in cash from operations and free cash flow of $3.6 million.

Over the past 18 months, our capital structure has also improved, including the paydown of approximately $20 million in debt and the reduction of other obligations, including the full satisfaction of the $4.7 million preferred registration rights payment. Overall, I am very pleased with the successful achievement of our financial objectives for 2025 and the resulting improvement in Lifecore's financial structure and standing. For the past 18 months, our team has executed an expense reduction strategy designed to eliminate costs without impeding growth or progress, and we are very pleased with the outcome of this strategy. We continue to work with leadership throughout the organization to optimize spending, and we expect continued benefit from these ongoing efforts.

I now wish to address our transformation strategy outlook and guidance for 2026. For the full year, Lifecore expects total revenue to be in the range of $120 million to $125 million, net loss to be in the range of $28.9 million to $33.4 million and adjusted EBITDA to be in the range of $20.5 million to $25 million. This 2026 guidance reflects several variables within our customer base. These are: one, the anticipated loss of a customer due to a change in that customer supply chain strategy; two, a customer decision to build excess hyaluronic acid inventory in 2025 to affect its transition of aseptic volume demand to Lifecore in 2027; and third, a commercial launch that was targeted for 2026, but has been delayed due to customer funding challenges.

As noted on our press release, our outlook does not contemplate any redemption of shares of our outstanding Series A convertible preferred stock or any prepayments of outstanding debt. We expect to generate modest revenue growth in 2027 with significant revenue growth continuing into 2028, driven by expansion of existing customer programs, including a planned doubling of aseptic demand from our largest customer, along with increasing revenue contributions from development programs and the commercialization of our late-stage pipeline. During this period, we also expect to broaden and diversify our customer base to include additional specialty pharma and large pharma companies to generate a more balanced revenue mix, increase our capacity utilization and reduce our dependency on any one customer.

Through 2029, we expect our strategies to achieve sustained growth, resulting in a targeted 12% revenue CAGR for the 2025 through 2029 period and reaching our targeted EBITDA margins of greater than 25%. We continue to expect significant revenue growth in future years based on management's visibility to leading revenue indicators such as identified contractually committed volumes of one of our key customers, expansion opportunities in our commercial business, growing traction in the number of customer deals and technology transfers, commercialization of our late-stage pipeline and an increasing number of deals at later stages of development.

Our outlook regarding revenue growth is based on current expectations regarding the likelihood of success and the expected launch timelines from the late-stage development portfolio. However, in light of current customer and program concentrations, projected growth starting in 2027 may be impacted positively or negatively by changes in the timing or specifics of expected customer programs. Throughout this entire period, we intend to continue executing our transformation initiatives and anticipate making substantial progress in improving EBITDA margins through efficiency gains across all areas of the business. We reiterate that we remain highly optimistic for the midterm and long term. And as I hope we have demonstrated to date, we are building a strong and stable business that can withstand the fluctuations caused by hurdles in the financing markets, supply chain and other issues.

There is a natural pipeline erosion that occurs with every CDMO and the strongest among us possess the financial stability and the organizational agility to respond without detriment to our mid- or long-term goals. We believe Lifecore has the ability to do exactly that, bolstered by our strong relationships with large and long-term customers, expert CDMO leadership and enhanced business development effort and an optimized and highly efficient organization. We are confident that our midterm and long-term goals remain on track. This concludes my financial overview. I'll now turn the call back over to Paul for his final comments.

Thank you, Ryan. In closing, I would like to address our recent path as well as our roadmap we see ahead for the next several years. Since my start with the company in 2024 through calendar year 2026, Lifecore has been in a period of stabilization. From 2024 to present, we have brought in new leadership, improved efficiencies and productivity, significantly lowered expenses, including headcount, expanded our technical and service capabilities and reorganized our business development infrastructure, leading to multiple new customer wins last year, and we expect additional wins on the horizon.

In the 2027 to 2028 time frame, we expect our growth to primarily be driven by an increase in commercial demand as well as the development revenues and the commercialization of late-stage portfolio projects. We believe that we are well positioned to achieve our midterm objectives in 2029. We look forward with confidence and optimism, supported by a clear strategy for a strong future. This concludes our prepared remarks for today. Operator, you may now open the call for questions.

[Operator Instructions] Our first question comes from Max Smock with William Blair.

It's Christine Rains on for Max. So hoping you can talk a little bit about your strategy for targeting customers in Asia. I think at recent conferences, you've talked about an increase in conversations from customers from the region given the trend in regionalization and manufacturing. And you also talked about today your steps that you've taken in terms of allowing the use of HA as well as finished product in the region. So wondering if these investments are due to Lifecore already being approached from potential promising customers or sort of a more proactive approach to go out and win clients in the region?

Christine, thanks for the question. I hope you're well. The majority of inquiries we get from Asia are in -- well, they are all inbound, taking advantage of the regionalization of manufacturing. As Lifecore's brand continues to create broader and broader knowledge across the market, we expect that trend to continue. But most of the -- again, all of the inquiries that we received to date from Asia have been inbound. We have no intent or plans of putting figuratively speaking, feet on the street in the Asian markets.

Great. That's super helpful context. And then in your outlining of the three factors impacting your 2026 guide, one of them you noticed the delay in the commercial launch that was targeted for 2026 due to funding challenges. So just hoping you can unpack this a bit in terms of the incremental revenue impact is expected to have for the year and just how confident you are that this program is just being pushed out to 2027 and not canceled?

It's a great question. So it is already a commercialized program in other markets, which gives us great confidence that it will move forward. This is a smaller company. It was, I would say, a small launch for us in 2026 that has now been moved to 2028. We expect to have more granularity and visibility to the customers' future plans in the summer time period.

Our next question comes from Matt Hewitt with Craig-Hallum Capital Group.

Maybe first up, so obviously, last year and since you guys joined, there's been some pretty heavy lifting on the operational side of things to drive efficiencies to increase margins. Is there still some lifting to do there? Or at this point, is it large -- is the margin expansion largely going to come from volume growth?

Matt, thanks for your question. So as we've previously stated, we still believe expenses will be the first mover. We've seen that now, and we expect to see continued improvements in adjusted EBITDA due to all those efficiencies and cost-cutting measures that we've implemented over the past 18 months. But yes, there are further opportunities, in particular, in procurement, in our strategic investments and organizational efficiencies as well as systems and processes that will help us achieve those further reductions.

Got it. And then regarding the commercial tech transfers, I think today, you mentioned 28 to 30 months for those to kind of flip over. And pardon me, I mean, I feel like historically, it's 18 to 24 months. Is there something unique about these specific candidates? Is it the regulatory environment that things are just taking a little bit longer? Maybe walk us or provide a little bit of color on these specific targets.

No. Great question, Matt. I can take that one. So we -- what I stated, I believe, was 24 to 30 months. These -- while these are products that Lifecore certainly has proven capability to manufacture, but the overall overriding environment is really focused around safety and reliability when it comes to sterile injectable programs. So we believe based on timing, discussions with our customers and the regulatory environment that it will take 24 months because it will require what they characterize as a pre-approval inspection. And by the time the customer files, we expect it would be a 9- to 12-month approval process of Lifecore. So that's what ultimately drives that 24- to 30-month time frame.

Our next question comes from Paul Knight with KeyBanc Capital.

Paul, could you talk about your sales force changes? And are you done with this change in what you've done for distribution?

Thanks, Paul. Thanks for the question. Yes, we're done, I would say, structurally. We've brought in a very experienced leader, Mark DaFonseca, to lead our business development efforts. He has over 20-plus years of sales leadership experience within the CDMO industry. We have a well-experienced marketing leader within the team and a very well-experienced business development team with a grounded in experience in sterile injectables. So we feel really good about the team we have in place, and it's all about continuing the momentum that we built within 2025 and that we expect to have more meaningful and impactful programs closed in 2026.

And then the other macro question I would have would be what's the status of the fill/finish capacity globally right now? Is it an advantage that it's tight? Or is it not that tight? If you could talk about where -- what's the status is of fill and finish? It seems like some firms are adding a lot of capacity, but where are we right now?

I would say that's a very good question, and we talk about this a lot. I would say on your traditional vials that you would go and get your flu vaccine from CVS or Walgreens on an annual basis. There is an adequate amount of capacity in the market for that dosage form or delivery system. But when it comes to prefilled syringes and cartridges, there's available, there is a dearth of capacity at this point. Ultimately, capacity will catch up, but Lifecore continues to differentiate itself based on our technical capability and quality. And I think that's what will sustain us and help us grow over the long haul.

And then last question would be regarding inshoring. I mean, there's a lot of numbers being thrown about. But does it make you reconsider that 12% long-term CAGR? Or is it just too much -- too early to tell?

I think too early to tell, Paul. I would say right now, the leading indicators are strong. Christine asked a question about Asian markets. We have Asian late-stage programs within our pipeline, programs from Europe. I've mentioned this in the past, programs from Israel as well and complex injectables from India. So I believe the regionalization trend is real and something that we're certainly working very hard to capitalize on, and I don't see it changing anytime soon.

Our next question comes from Mac Etoch with Stephens Inc.

Maybe just a couple for me. Maybe double-clicking on the 2026 guidance. The customer decision to build excess HA inventory in 2025. I think previously, you had mentioned that there's a customer moving away from an external third party and bringing manufacturing in-house. So I guess my question is, did you all see a benefit in 2025 from that stocking? And yes, I'll leave it there and follow up.

Mac, thanks for the question. Yes, from an HA perspective, it's really been a 2-year strategic initiative by our -- one of our customers as they look to bring more aseptic volume to Lifecore. And as they transitioned away from -- they've always been dual source with regard to HA, and they were moving away from one source and also building stock within their existing site, their other existing site as they transition volume to Lifecore, which went to -- led to a 24-month, I would say, increase with regard to our HA demand. You see a leveling out of that starting in 2026 with approximately a $10 million reduction, which Ryan articulated. And then you'll see a further leveling out as we move into 2027, and you can see that in our earnings presentation, our investor presentation. We see that leveling out moving forward from '27 forward.

I appreciate the color there. And then given the dynamics that you highlighted for 2026, how should we think about the revenue and margin cadence throughout the course of the next year?

Yes. Thanks for the question, Mac. So from a revenue perspective, we currently expect the revenue split to be roughly in the mid-40% range in the first half and the mid-50% range in the second half. From an operating expense or gross margin perspective, we expect margins to be in the 30% range with some variability between quarters based on the product mix, volume, timing of shipments, that's going to result in an anticipated split similar to revenue. R&D expenses, we expect R&D to remain at a similar run rate as Q4, so about in that $1.5 million to $2 million a quarter. And SG&A for calendar year '26, we expect to be in a range of approximately $28 million, and that will represent approximately a $6 million decrease compared to the prior year comparable period because of all those cost-saving initiatives, the legacy matters and efficiencies that we've realized. And we expect the cadence of the SG&A expenses to be split approximately a little over 50% in the first half and slightly south of 50% in the second half. So the goal, and as we've talked about too, it's currently expecting that, that run rate to be approximately $7 million a quarter exiting the year. And then just from an EBITDA margin perspective, in the $20.5 million to $25 million, that will be split about 40% or in the 40% range for the first half and 60% in the second half. And that really shows that continued progression of adjusted EBITDA margins, as we mentioned previously, from 15% to 17% to now between 17% and 20% or 18.5% at that midpoint.

Our next question comes from Michael Petusky with Barrington Research.

I guess, Paul, I just wanted to talk a little bit more about the site transfer success that you guys have had here recently. Just in terms of the impact, and I know you're not going to give like super specific guidance, but if you could look at each of these site transfers, I mean, how meaningful in terms of top line incremental contribution? Is it a few million? Is it north of $10 million? Like what are we actually talking about in terms of the upside of these site transfers?

Mike, thanks for the question. We've risk adjust these accordingly in our forward-looking projections. But if you look at our late-stage pipeline slide, both at, I would say, peak sales have the opportunity to be in, I would say, 8 figures of commercial revenue. So they're exciting and impactful programs for us. We think they'll be very sticky because of the technical nature of them and proud to win both of those programs with relatively new customers for Lifecore.

Okay. Terrific. And then Ryan, I guess in '27, I had assumed maybe a little bit more than the modest revenue growth you guys sort of put out there in the press release. I'm just curious, what sort of the puts and takes on that modest revenue growth or the biggest puts and takes on that modest revenue growth? And then I guess, in terms of just what that means, is that low single digits, is that mid-single digits? What does modest revenue growth in '27 actually mean in your view?

Yes. Thanks for the question, Michael. So I think as we talked about some of the puts and takes in revenue for calendar year '26 with the loss of the customer, that has an expected annualized impact of about $7 million. And then what Paul talked about with regard to HA and the impact to '26, there's about another $10 million impact to that in '27. So that mutes that growth a little bit, but also in '27 is when you have those contractual commitments beginning from our largest customer as well as some of those commercial launches that are anticipated.

Okay. All right. Great. And just in terms of when you talk about modest revenue growth, what are you guys actually envisioning, a range?

Yes. I mean those are just goals right now. We haven't provided that outlook for '27 yet.

Okay. And then just last question. You provided some historical information, which I really appreciate on the free cash generation, obviously. And I'm just curious, you didn't give formal guidance, I don't believe, around free cash and CapEx expectations. Is there anything you can sort of say on that just to be helpful in terms of our models?

Thanks, Michael. So beyond the operational expense improvements and continued reduction in the nonrecurring costs from legacy matters, those all have a real cash impact. So we expect cash flow to continue to improve. There are a number of puts and takes for our cash outlook for calendar year '26, but I expect our base case will be generating free cash flow in excess of $10 million. But that could be impacted and dependent on a number of items, including future expenses incurred related to legacy matters, timing of CapEx. And as I mentioned in my opening remarks, any potential redemptions of our convertible preferred stock or prepayments of our debt.

Is there a ballpark estimate around CapEx?

Yes, it's in the $8 million range.

Okay. I'm showing no further questions at this time. I'd like to turn the call back over to Paul Josephs for closing remarks.

Thank you, operator. I wish to thank all of Lifecore's stakeholders and supporters, including our investors, customers and collaborators for their ongoing support and partnership. I also wish to thank our dedicated employees for their commitment to our success as well as the successes of our customers and the patients they serve. We are pleased with the progress we made in 2025 and look forward to future growth ahead. That concludes our call today. Thank you for participating.

Thank you. You may now disconnect. Everyone, have a great day.

Good afternoon, and thank you for joining us today to discuss Lifecore Biomedical's Third Quarter 2025 Earnings results for the 3 months ended September 30, 2025. As we announced in August, the company has changed its fiscal year-end to align with the calendar year, beginning with today's Q3 2025 results for the 3 months ended September 30, 2025.

We will be comparing our 2025 results to the closest comparable period in the prior year. Today, we will be comparing our Q3 2025 period for the 3 months ended September 30, 2025, with the period ending August 25, 2024. Going forward, our fiscal year-end will end on December 31, and we plan to announce results for Q4 and the approximately 7-month transition period from May 26 to December 31, 2025, and March of 2026.

Hosting the call today from Lifecore are Paul Josephs, President and Chief Executive Officer; and Ryan Lake, Chief Financial Officer. Before we begin today, we'd like to remind everyone that certain statements made in the course of this conference call contain 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, November 6, 2025, and the company's actual results could differ materially from those projected in such forward-looking statements.

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 earnings press release for our third quarter ended September 30, 2025, which was furnished to the SEC today on Form 8-K and is available on our corporate website at lifecore.com as well as our other filings with the Securities and Exchange Commission, including, but not limited to, the company's Form 10-Q for the third quarter ended September 30, 2025, which was filed this afternoon and is also available on our website.

In addition, our earnings press release includes a discussion of and during this call, we will reference certain non-GAAP information. You can find relevant non-GAAP reconciliations in our earnings press release. With that, I'd like to turn the call over to Paul Josephs, Chief Executive Officer.

Thank you, Stephanie. Good afternoon, everyone, and thank you for joining us for our third quarter 2025 update for the 3 months ended September 30, 2025. Lifecore is a differentiated injectable CDMO with a strong foundation in high-grade hyaluronic acid that has served as our entry point into this exciting and growing market. We are well positioned for future growth with a forecasted inflection point with our largest customer in 2027, a promising late-stage pipeline, which has significant revenue potential and finally, a revamped commercial strategy that has expanded our target market and is already delivering impressive results.

Collectively, we believe these strengths will drive meaningful growth in the midterm while increasing EBITDA margins. We are thrilled with the progress made during this period as we made advancements in all key areas. Our financial outcomes were strong as we recorded a 26% increase in revenue as compared to the comparable prior year period with other significant improvements in adjusted EBITDA and associated margins.

These financial results reflect management's disciplined approach to cost control and the continued improvement in our workforce productivity driven by initiatives we implemented earlier this year. From a quality perspective, following our successful FDA inspection in March, we conducted five customer audits during the period, including a due diligence audit with a large multinational pharmaceutical company. All audits were positive, reinforcing our confidence in the organization's ability to support the growing quality demands of our clients.

From a growth perspective, we achieved critical milestones in expanding our commercial business and advancing our late-stage pipeline programs. Finally, we continue to accelerate our business development efforts, and we are seeing progress. During the third quarter, we signed two new business wins and made substantial progress on two additional new projects that were signed subsequent to quarter end. On all fronts, this third quarter was a very productive time at Lifecore, and I'll now provide a little bit more detail on our achievements during this period.

During my initial year at Lifecore, I spent considerable time learning our business and laying the foundation for our future by recruiting our first-class leadership team and building the right culture. Today, we have the right team. We are aligned and we have collectively turned our attention to growth. In the period, we continue to strengthen relationships with our existing commercial customers by delivering outstanding service and support.

During the third quarter, we achieved significant milestones in supporting the aseptic fill/finish expansion program for one of our key customers. These milestones included successfully producing qualification batches on our new 5-head isolator filler. Qualification of our isolator filler was a critical milestone as we prepare to support European and Asian markets for this key customer. This geographic expansion is a key component of an inflection point as this customer is projected to more than double its aseptic fill/finish demand in 2027.

For this customer, we also developed and qualified our hyaluronic acid to meet the rigid specifications of the Japanese market. Meeting this specification will allow us to utilize our HA as part of the 2027 inflection point contemplated with this customer. We believe that this progress speaks to the trust our existing customers continue to place in our technical expertise and our excellent quality management system. I'll now turn to the progress made in advancing our development pipeline towards commercialization.

As I mentioned earlier, we have built a promising late-stage pipeline of 11 programs that have potential launch dates between 2026 and 2029. We believe that commercial success at a modest conversion rate of 50% provides meaningful revenue potential in the mid and long term. During the third quarter, Lifecore achieved a number of milestones supporting multiple late-stage aseptic customers.

The highlights include the installation and operational qualification of automated manufacturing equipment to accommodate the scale-up and commercialization of a large pharma customer's program. We expect to produce validation batches for this customer in early 2026. For another late-stage customer, the company successfully completed critical development work, setting the stage for validation batches to be produced in the first half of 2026.

During the quarter, we also completed two Phase III clinical batches for another late-stage customer and initiated transfer work for one of the latest additions to our late-stage pipeline. This refers to the GLP-1 program we announced during our last earnings call. I am pleased with the collective progress we made with our development customers and look forward to sharing additional progress in the future.

From a business development perspective, I am pleased to report that during the third quarter, we signed two new customers, and we have signed an additional two customers subsequent to quarter end. For clarity, please note that the two customers signed during the current quarter were previously referenced in our August 7 earnings announcement as being one subsequent to the prior Q4 2025 period. This included a late-stage GLP-1 program with a leading specialty pharma company.

Those referenced today as one subsequent to the Q3 period ended September 30, 2025, were initially announced on October 29, 2025. One of the programs that closed subsequent to quarter end represent a significant development for our organization. This opportunity is a commercial site transfer of product that based on existing commercial volumes will make this large multinational pharmaceutical company one of our top customers once commercialized.

This represents our second opportunity with this customer, and we are excited about the future potential of our working relationship. Collectively, these wins continue to speak to the aggressive sales and marketing strategy that we have implemented and the talented professionals we have added to this group. As a result of these enhancements, the quality and number of new business opportunities has steadily increased.

In addition, there are a number of tailwinds that we believe support our efforts, including the expected ongoing regionalization of injectable manufacturing in the United States, along with 50% of the drug development pipeline in the United States being injectables. Our talent, strategy, technical capabilities and high-quality standards, combined with these tailwinds, give me great confidence that we will continue to drive new and impactful business into our site going forward.

Concurrent with the execution of our growth strategy, we are committed to increasing our adjusted EBITDA margins through operational excellence and disciplined cost control. An example of the progress we are making is in the productivity of our workforce and our ability to produce similar production volumes despite a reduction in our manufacturing workforce by more than 20% over the last 18 months. This is a testament to the performance-based culture that we have instilled and the engagement of our entire team.

Looking forward, we continue to evaluate opportunities to improve our midterm target of 25% in adjusted EBITDA margins. We see great opportunity to further maximize efficiencies and productivity across our organization with further cost improvement primarily via improved procurement strategies. We believe that a key catalyst in this effort will be the launch of our new enterprise resource planning system, which we expect to go live in Q1 2026.

We expect this system to strengthen inventory control, support sharper financial management and help reduce costs as we grow. To further accelerate momentum in this area, we recently hired a seasoned industry professional in the role of Head of Business Transformation. This newly created position will champion our efforts to improve our cost structure, productivity and efficiencies to maximize the EBITDA opportunity in front of us.

In conclusion, we continue to execute according to plan. We've made significant progress related to our growth strategy, including important wins with new customers that have the potential to meaningfully contribute to our revenue growth in the midterm. We believe that these results, combined with our disciplined cost structure and our uncompromising quality, position us well to achieve our midterm objectives and to capitalize on the favorable market conditions for CDMOs here in the United States.

That concludes my update. I will now turn the call over to Ryan Lake to provide an overview of our financial results for the Q3 2025 period ended September 30, 2025.

Thank you, Paul, and good afternoon, everyone. In conjunction with my comments, I'd like to recommend that participants refer to Lifecore's Form 10-Q filing with the Securities and Exchange Commission, which we filed today. As a reminder, today, we will be comparing our Q3 2025 period, which ended on September 30, 2025, with the period ending August 25, 2024. Revenues for the 3 months ended September 30, 2025, were $31.1 million, an increase of 26% compared to $24.7 million for the comparable prior period ended August 25, 2024.

The increase in revenues of $6.4 million was primarily due to a $4.8 million increase in HA manufacturing revenues, primarily from increased demand from a customer due to its supply chain initiatives. In addition, CDMO revenues increased $1.6 million, which was primarily from $2.6 million of higher sales volumes and $0.3 million of pricing and other revenue, partially offset by $1.3 million of lower development revenue due to completion of a discrete development project in the prior comparable period and timing of customer project life cycle.

Gross profit for the 3 months ended September 30, 2025, was $7.8 million compared to $5.4 million for the comparable prior period ended August 25, 2024. The increase of $2.4 million in gross profit is due to $4.3 million increase in HA manufacturing gross profit due to increased sales volume and manufacturing absorption, partially offset by $1.9 million decrease in CDMO gross profit. The CDMO decline was due to lower development revenues of $1.4 million and a decrease in aseptic gross profit of $1.9 million due to product mix and costing, partially offset by favorable manufacturing absorption of $1.4 million.

Selling, general and administrative expenses for the 3 months ended September 30, 2025, were $8.9 million compared to $14.8 million for the comparable prior period ended August 25, 2024. The $5.9 million decrease in SG&A expenses included a reduction of $2.2 million in recurring accounting, legal and consulting expenses and a net $3.7 million reduction in nonrecurring expenses primarily related to legacy matters. For the 3 months ended September 30, 2025, the company recorded a net loss of $10 million and a loss of $0.29 per diluted share as compared to a net loss of $16.2 million and a loss of $0.53 per diluted share for the comparable prior period ended August 25, 2024.

In addition to the reasons described previously, the loss in 2025 included a small effect from an unfavorable debt derivative adjustment, while the loss in 2024 included a small net effect from a favorable debt derivative adjustment that was partially offset by registration rights penalty expense. Adjusted EBITDA for the 3 months ended September 30, 2025, was $3.1 million, an increase of $4.9 million compared to a negative $1.8 million in the comparable prior period ended August 25, 2024.

The improvement in adjusted EBITDA was primarily due to the increase in gross profit and the reduction in recurring selling, general and administrative expenses. In addition to reporting results for the period, we also wish to reaffirm the guidance that we previously provided for the approximately 7-month transition period from May 26 through December 31, 2025. Specifically for this transition period, the company expects revenue to be approximately $74 million to $76 million, net loss to range from $18.4 million to $16.4 million and adjusted EBITDA to range from $12 million to $14 million based on the expectations that Lifecore would exclude for items similar to its historic definition of adjusted EBITDA.

This guidance takes into consideration existing market forces, contracts and customer order timing as well as the company's current beliefs and estimations with respect to success and timing related to growing and diversifying the company's new business development revenue. This concludes my financial review. I'll now turn the call back over to Paul for his final comments.

Thank you, Ryan. In closing, I would like to emphasize our discipline and effective execution over the last 18 months. We have learned a tremendous amount in this period. We have improved our business in a number of meaningful ways, and we have now turned our full efforts to growth of both our top and bottom line.

We are energized by the progress we have made to date and highly optimistic about the future that lies ahead. This concludes our prepared remarks for today. Operator, you may now open the call for questions.

[Operator Instructions] Our first question comes from Matt Hewitt from Craig-Hallum Capital Group.

Congratulations on your progress. Maybe first up, obviously, with the stub period, it makes it a little bit difficult to run the math here, but I'm trying to get a sense for what the missing month would have been or what that would have meant implied maybe even for Q4, just as we're looking at the period-to-period numbers.

Matt, thanks for your question. So the June estimated revenues were about $8.7 million with about $6.6 million of that coming from CDMO revenues and $2.1 million from HA revenues. So year-to-date, through September 30, the stub period revenue is expected to be approximately $39.8 million. So that leaves for the remaining stub period revenue guidance for Q4 to be in a range of $34 million to $36 million or about $35 million at the midpoint, which represents for the fourth quarter, about an 8% increase over the comparable prior year quarter.

And then for adjusted EBITDA, June estimated adjusted EBITDA was $1.5 million. So year-to-date through September 30, the stub period adjusted EBITDA would have been approximately $4.6 million. So that leaves the remaining stub period guidance to be in a range of $7 million to $9 million or about $8 million at the midpoint for Q4.

Super helpful. And then just kind of looking and listening to your prepared remarks, you guys have made some substantial improvements on the cost side. I think you mentioned some pretty significant reductions on the recurring piece as well as some of those legacy. Is there much left to do on that front? Or as we look out, whether it's Q4 or now the new fiscal/calendar year '26, are there some additional levers to pull there? Or at this point, does it become more about driving incremental volume through the facility?

Thanks, Matt. So I'm really excited to talk about the positive results this quarter that reflects some of the great progress that we've made across the organization. First, I think this represents our fourth or fifth sequential quarter of period-over-period declines in operational expenses. The operational expenses were down over $6 million or 36% compared to the prior year comparable quarter. And over $2 million of that is primarily related to the reduction in the recurring accounting, legal and consulting expenses and $4 million was related to legacy matters.

I think that to the second part of your question, there's a lot of hard work left, but I'm even more encouraged than I was earlier on kind of in this journey that we have the ability to continue to strengthen the foundation of the company and set us up for continued growth. I think overall, over time, as we get past some of these legacy matters, I think we could see another $1.5 million or so a quarter in SG&A that it could come down so that we were at a quarterly run rate of like in that $7.5 million to $8 million range.

Our next question comes from Mac Etoch from Stephens.

This is actually Hannah on for Mac. Given the recent manufacturing capacity announcements, can you just talk about how early conversations are progressing given the current macro dynamics and how those might translate to the pipeline over time?

Hannah, thanks for the question. This is Paul. I think that the -- I'll call it, the regionalization of manufacturing and the investments that have been announced recently are only a tailwind for CDMOs in general and certainly for Lifecore.

We have seen a buoying in our pipeline of, I would say, commercial site transfer opportunities from other regions, whether it's Asia, Europe, Israel, India that heretofore, we haven't seen. I've been in this commercial side of the CDMO business now, had exposure to it for 31 years, and I've never seen this many or this amount or percentage of commercial site transfers become -- that you have the opportunity to compete on. So I look at it as only buoying the market from a CDMO perspective.

Awesome. That's helpful. And then on performance in 3Q and then current guidance, it seems to suggest a pretty strong calendar second half compared to normal seasonality. And I believe you had prior expectations for a flat fiscal 2026 using your prior fiscal year. So can you just talk about what's driving the uptick in revenue?

Thanks, Hannah. So we had a very strong kind of back half of what was our fiscal year '25 that ended in May. And comparatively, primarily due to timing and customer ordering patterns, revenue for the 7-month stub period or essentially the second half of calendar year '25 are expected to be up significantly.

So over 20% or about $14 million compared to an estimate of that same period of the prior year. Because of that nice uptick in revenue for the stub period in calendar year '25 due to the timing and customer ordering patterns, we currently expect the back half of calendar year '26 to be stronger than the first half of calendar year '26 with revenue split probably in that 45% in the first half and about 55% in the back half.

Our next question comes from Lucas Baranowski from KeyBanc.

This is Lucas on for Paul Knight here at KeyBanc. You recently won a tech transfer for a commercial product from a large pharma company. I know those types of transfers typically take over a year to complete. But what are you expecting in terms of the time line for this particular agreement?

Lucas, this is Paul. Thanks for the question. We expect that, that commercial site transfer will take approximately 24 to 30 months. We're working with our customer on the exact time line, but we'll obviously work to accelerate as quickly as we can. But based on current projections, I would anticipate 24 to 30 months.

Yes, that's good color. You recently also signed a collaboration agreement with a peptide-based CDMO called polypeptide. Based upon your discussions with them, would you expect the opportunities coming out of that collaboration to be centered around GLP-1 where you got your first win last quarter? Or do you think it could be broader than that?

I think it could be broader than that, Lucas. Certainly, that GLP-1s are contemplated as part of that, but certainly, it could be broader.

Our next question comes from Max Smock from William Blair.

It's Christine Rains on for Max. So kind of piggybacking a little bit off the last question in terms of the commercial injectable win. Just hoping if you could give a little bit more context here. So it was helpful that 24 to 30 months potentially as being sort of fully ramped commercially, but wondering if you expect revenues before this full transfer is complete and if you expect to be the sole product manufacturer? And just anything you can give in terms of the scope of the contract in terms of annual revenue expected?

No. Christine, thank you so much for the question. We do expect to be the sole manufacturer and fully qualified. Based on 2025 revenues, once this product is commercialized, demand remains the same, we anticipate this will be a top 5 customer or top 5 product at Lifecore and consume, I will say, material capacity within the facility between 5% and 10%.

We will make what I call or characterize as onetime development revenue where we qualify and validate the program and product within our facility. And then once we get regulatory approval, obviously, we'll get into that recurring revenue cadence.

Great. That was very helpful. So maybe one for you, Ryan, echoing kind of what we said before, there's a lot of moving pieces with the transition period and your financials. So I apologize for a bit of the rough approach here. I kind of already asked on the revenue side, but thinking simplistically in terms of margins.

Looking at your implied EBITDA margin guide of 17% at the midpoint for the stub period compared to roughly 10% adjusted EBITDA margin in this 3-month period. I'm hoping you can speak to the factors driving margin expansion in the remainder of the stub period in order to achieve your stub margin target.

Yes. I think one of the pieces that you're missing and I gave was the EBITDA for, I guess, the year-to-date stub period, right? And it's pretty significant. Again, if you add $1.5 million or so to the year-to-date stub period from the June period, so about $4.6 million. So leaving that roughly $9 million to -- $7 million to $9 million or $8 million at the midpoint for that.

And again, a lot of that has to do with the improvement in revenue over the period as well as all the improvements we've made from a gross profit perspective as well as improvements in the SG&A line. So overall, I think that the improvement is about a 200 basis point improvement for the stub period to get you to roughly those 17% EBITDA margins.

At this time, I'm showing no other questions. So this concludes the Q&A portion of this program. I would now like to hand it over to Paul Josephs of management for closing remarks. The floor is yours.

Thank you, operator. I wish to thank all of Lifecore's stakeholders and supporters, including our investors, customers and collaborators for their ongoing support and partnership. I also wish to thank our talented and committed employees for all they do to elevate Lifecore and maximize our successes. We are very pleased with the progress we made during this period, which we believe puts us on a path to achieving growth and sustained profitability for the years ahead. Thank you very much.

Thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.

Good afternoon. Thanks for joining us. I'm Daniel Cohen. I'm a Managing Director in the -- at Morgan Stanley. I do have to read a disclosure before we start. For important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative.

And with that, we will kick it off. Very honored to have my friend, Paul Josephs, CEO of Lifecore, here with us today. Paul is coming -- you're coming up on about 18 months in the role, I think. Maybe 16 months, approaching 18 months?

Absolutely.

But I thought maybe why don't we start out by talking a little bit about what Lifecore does as a CDMO. And in particular, what area of the market is Lifecore focused on?

Sure. Great. Thanks for having me, Daniel. Lifecore Biomedical is a differentiated CDMO competing in what I think is the most exciting part of health care manufacturing, and that's sterile injectables. We're well known for our ability to solve complex injectable programs from an ophthalmic and orthopedic perspective, tremendous regulatory compliance capability along with technical expertise.

And as I think about where we're going in the future, it's moving into an [ adventing ] into more a broader range of injectable programs, from a biologics perspective, GLP-1s, peptides, et cetera. We have a tremendous commercial base, a strong commercial base of programs, which are projected to grow over the midterm. And then it's buoyed in addition by our late-stage development programs of 11 different programs, which span a broad range of modalities. And at a 50% conversion rate, we expect to generate significant revenue over the midterm. So that's really all about Lifecore Biomedical.

That's great. You've had a career, spent time with -- in the CDMO space for many years, different types of CDMOs. Maybe tell us a little bit about, as you have come into the role, gotten your feet under you, what do you -- what surprised you perhaps on the positive? And perhaps what's been more challenging for you as you've embarked on your transformation at Lifecore?

Yes. It's been a strong combination, I think, of -- or a unique combination of strength and opportunity. So what did I learn? I was tremendously impressed with the technical capability of our team here at Lifecore. I didn't fully appreciate that technical capability. A large multinational pharmaceutical company told me earlier this year that after a visit, that our technical capability is world-class.

So what that's done is really allow and give confidence to prospects and existing customers to invest in their program at Lifecore. So that's been a great learning for me, that technical capability, that can do attitude of the group. I think from a surprising perspective, and therein lies the opportunity is just the market awareness of Lifecore's broad capabilities.

The investments that were made prior to my joining with the 5-head filler, which has opened up a wider spectrum of opportunities for us to go after and compete on, the aforementioned biologics, peptides, GLP-1s, et cetera. The market -- there's a level of market awareness that we had to generate within the CDMO industry. And I think the team has done a great job thus far, and we've made great progress in the first 15 months.

Maybe talking a little bit about the market. You've mentioned different modalities like GLP-1s and biologics. What is the dynamic in the market right now? Obviously, over the last -- I mean, really probably going back to COVID, you have -- we've had -- it's been a very dynamic market as it relates to injectable fill/finish CDMOs and perhaps pharma companies as well.

In the most recent -- there have been transactions involving companies that have perhaps taken some capacity out of the market. Like where -- what do you see in the market today? Is the dynamic still one of a shortage of qualified suppliers? Is that -- does that apply to only specific parts of the market? And how does that cross over where Lifecore Biomedical has capabilities?

Yes. I think it's hard to replicate what we have, the strong technical capability, the great regulatory compliance that we have and then the capacity. So I think all those provide a unique and compelling value proposition to our customers. And then from an investment perspective, I don't think it's fully appreciated, the durability of the business we have today and the great growth potential we have in front of us.

I think about recent transactions that have had with the go private, it's maybe the things that you're alluding to, whether it's 6x sales or 11x sales from a valuation perspective. Lifecore is an organization that's trading on 3x revenue, so half the value of previous transactions. So I don't think the market fully appreciates who we are and what we do today, but maybe more importantly, where we're growing to tomorrow.

So that leads me to my next question, which is really about the strategy. Obviously, as a new CEO, you have unveiled a 3-pronged strategy. Maybe talk a little bit about that strategy and where you are today and what the outlook looks for the next few years?

Yes. Great question. So I think with a 3-pronged strategy is really focusing on key areas around maximizing our existing commercial business. Two is the commercialization of our late-stage pipeline, and three is the addition of new and impactful programs into the site.

So on the underpinning of number one is we have a contractual minimums based commitments built into our -- many of our commercial agreements, the most important one being our largest commercial customer, who is projected to more than double their volume or demand in 2027. That will be a significant part of our growth over the midterm.

Then that you tie that to our late-stage pipeline of 11 programs with launches to be between 2025 and 2029 with -- a spanning modalities including GLP-1s, medical devices, ophthalmic products at a conversion rate of 50% we believe will provide meaningful demand and meaningful revenue growth over the midterm as well.

And the third part of that strategy is the addition of new and impactful business through our sites. One of the first things that I did is evaluate the sales and marketing team. And while a high-quality team, the competencies of the team were a little bit different. It was more of what I characterize as a farming mentality where we mine our existing customer base and look to grow within that base. Yes, we want to continue to do that. But in order for us to meet the aggressive goals that we do have and maximize the overall market, I knew we needed to make a change.

So we have completely rebuilt that team. We have a proven industry leader who's been very successful in the private equity side of the business, Mark DaFonseca, who joined us as our Chief Commercial Officer. He understands being in the private equity side, the immediate urgency of now. So he's really driving improvements.

And I will say, the right metrics from a sales and marketing perspective. And then we, in turn, turned over the entire sales team to a group of hunters. So we have a set and defined geography to mine, and they're the CEOs of their territories. And we've changed our compensation plan also to reward them for their results. So I'm really excited about what they've done over the, I'll say, the past 90 to 120 days. And we see if we're able to keep up these leading indicators of success that is to come.

What is the right -- what's the ideal customer for Lifecore? Is it large pharma? Is it emerging biopharma? Is it both?

I think it's both. So I think that what we provide for specialty pharma, Daniel, is the hands and the brain. So the hands is the equipment, but the brain is that technical expertise to solve problems for our customers. Because regardless of the opportunity that comes in, whether it's big pharma or small pharma, they're coming to us with a problem.

They have a problem with regard to capacity support or they have a problem to note whether it's the method or the formulation that they need to solve to get to market. And our technical expertise, combined with our capacity and add-on our regulatory expertise, provide a great complement to specialty pharma.

From a large pharma perspective, you look bigger enough to compete against your larger players whether they're Catalent or Simtra or Thermo Fisher, but we also provide that unique technical entrepreneurial ability to tailor our solutions to our customers' manufacturing or development needs. So I think that's what makes us attractive to large pharma, that ability to tailor our solutions to them and be very responsive and have access to senior leadership at a moment's notice. And then the specialty pharma again to provide both the hands and the brain.

You mentioned a new Chief Commercial Officer that you're very excited about, and it has had an impact on the business. Were there other functions that required change and maybe talk about your leadership team and how that's evolved?

Yes. We turned over virtually the entire leadership team, Daniel. So starting with Ryan Lake, who's in the audience today. So Ryan is a well experienced and proven Chief Financial Officer. He has over 25 years of health care experience. He joined me in September of last year. He's been a great partner in rebuilding the entire finance department, making finance a true complement to the rest of the organization.

We brought in Tom Salus, who's our Chief Legal and Administrative Officer, to support us both from a legal and HR perspective. Tom has well over 20 years of experience in the pharmaceutical industry, can help us from also from a strategy perspective. He was in the boardroom at Viatris. He just -- for him to join our organization, it's a great addition as well. I talked about Mark.

The other final person that we brought on board and maybe most importantly or equally as important is Thomas Guldager as our Senior VP of Operations. So Thomas joined us from a Novo Holdings subsidiary. He has well over 20 years of experience in the pharmaceutical industry, finance background, OpEx background, running and leading a site in Denmark. He had enough confidence in Lifecore and what we are trying to build, to move his family from Denmark to join us in Minneapolis because he believes in the growth story that we have in front of us.

So I love the team we put in place, and we also rebuilt the sales team. So we've done and accomplished a lot in the first 15 months. I'm very proud of what the group has done.

I apologize for bouncing around a little bit. It just came to me, question came to me as you were talking. You -- one of the positives of the CDMO industry is that products tend to be sticky. On the flip side, one of the negatives of the CDMO industry is that products tend to be sticky. So as a company that's looking to bring on new products to your funnel. Can you talk about -- a little bit about the KPIs that investors should be watching in terms of -- how do we -- how do investors measure progress on bringing new products? You talked about 2027 being an important year for one customer. But I imagine that there's -- and you have a new sales team that's focused on bringing on new products. How long does that take? How do we measure that?

Yes. We'll be very vocal with regard to our sales success as we close more and more deals and gain successes down the road. I would continue to look at the evolution of our late-stage pipeline in terms of numbers and launch years and the valuations of those opportunities. And we'll also communicate as we make progress with regard to the expansion project with our largest customers as we look to double that demand by 2027.

When you ask how long it takes, so one of the things that is clear in the macroeconomic environment now is that -- I've been in this business for 30 years and a little over 30. There's never been, in my opinion, a greater demand for domestic manufacturing. So we feel as though and then we see it in our pipeline, we have more potential commercial site transfers to our site. Those are products that are commercially approved, just like this water, moving it from a site in Europe to Lifecore. We see more of those type of products in our pipeline than we ever have or we have heretofore.

It takes about 2 years from the time that we signed one of those commercial site transfers to move it into our site and commercially manufacture. It's critically important because, yes, we'll make onetime revenue along the way, but it's all about recurring revenue and generating that commercial revenue down the road.

Okay. Good. Could you talk about -- you mentioned your lead product, lead customer. Can you talk a little bit about -- the -- you're somewhat unique in that you are also making a substance in addition to the fill/finish. Can you talk about the HA part of your business and the strategic importance of that to your business and the outlook for it?

I would say the HA side of the business, hyaluronic acid, think of it as a lubricant that's used in pharmaceutical products as a natural lubricant within your body. So it's critically important because it provides a stable -- that HA base or that sub API substance, as we call it, serves as a stable core in our long-term future. It'll always be a critical component of our overall business. But where we see the growth is in that -- in the sterile fill/finish.

Now what does HA do as an advantage for us? Really, what it does, and it gives confidence to our partners, whether they have HA and a product or not, they know that we can solve complex problems. Because HA-related injectables are probably the hardest injectables to make. So if we can make HA-based sterile injectable products, there's no doubt that we can make a GLP-1 peptide, a biologic, et cetera. So it serves not only a quantitative importance, but also to a certain extent, a qualitative importance in our future.

And for your products -- what form are you filling them into? Is it into vials or prefilled syringes? Or...

Vials and prefilled syringes, and we also have the ability to do cartridges as well. So we span the gamut of all sterile injectables. I would say that our pipeline right now, Daniel, is leaning more to, what I would say, cartridges and prefilled syringes. I feel like the market itself, and we were -- I think you were alluding to this earlier, on the vial side post-COVID, great capacity there. But where there is, I will say, the ability or a demand need is really in the prefilled syringes and cartridges.

Got it. Maybe talk a little bit about the financials of Lifecore, maybe current revenue, margin structure versus optimized or future?

Yes. We just -- so we just finished our fiscal year in May of this year, and we're transitioning to a calendar fiscal year, traditional with 95% of the rest of the industrial world. But coming off our last fiscal year, approximately $129 million in revenue, $19.6 million in adjusted EBITDA. We have a midterm strategy that will take us to the midpoint about $200 million with expanding EBITDA margins of 25%. So that would put us about $50 million in EBITDA.

And then our total revenue generating capacity with the addition of the 5-head filler and the improvements we made, we see a $300 million in revenue-generating capacity. And our belief is that we have the opportunity to continue to improve EBITDA margins beyond the 25% as we continue to go up that revenue scale.

What about -- can you talk a little bit about capital intensity?

Yes. So the big investments have been made, so the addition of the 5-head filler, that build-out all has been made. Our annual, I would say, maintenance and compliance related, maybe some minor growth CapEx in that neighborhood of about $10 million or so. If there was a transformational deal, we would anticipate that one of our customers would meaningfully participate in that. So again, we're budgeting sort of that $10 million range on a go-forward because of the capacity investments have already been made.

A great example of that, if I could, because we have a late-stage program in, that is projected to get regulatory approval in 2027. It's a major program for us. We couldn't be more excited about that. I think -- it's with a large multinational partner. I think it's an example of the tailored solutions we can provide, but they made a multimillion dollar investment in a specialized production line within our site.

We were allowed -- we were afforded, based on our size, the ability to dedicate space to them to support that exciting program. So that customer also is committed to a 7-figure development program to scale up and get ready to commercialize that program. So the reason we're so excited about the program is because of the investments that they're making in that program.

And are products like that -- the opportunities like that, do they tend to be only working with you? Or do you know if they were -- are they working with multiple CDMOs? Or how is that the dual versus single-source nature?

At this point, we believe we're exclusive, and we are in discussions with this partner too about even a second line if they're able to meet their projections. On a broader scale, I would say that in today's environment, companies are dual sourcing more so now than they ever have. At the same time, I think based on the team that we have, my commercial experience of more than 30 years in the industry, Ryan's of 25 plus, Tom Salus, who's on the legal side, we have, I think, a tremendous playbook where we'll be able to protect our floor and raise our ceiling as we look to negotiate agreements with customers.

Are there any other areas of pharma manufacturing that you think about? Or are you pretty dedicated to fill/finish manufacturing?

Dedicated to fill/finish manufacturing right now. At the same time, are there things -- we're head down, executing against our organic strategy. At the same time, there's a lot going in the market, as you know. So we'll always keep our eye open for things. But we'll only consider those things that allow us to advance our midterm strategy. That is nonnegotiable. It has to be something that either increases our chance of success, accelerates or even increases it. So now that's how I think about it. I haven't seen anything yet that piques my interest, but -- and again, I'm excited about our organic strategy.

Yes. I mean, you've been around a long time in this industry. What -- or how would you characterize the CDMO industry right now relative to where you've seen it in the past? Is this an exciting time? Is it a stable time of growth? Like how do you see the...

Exciting time. Most exciting time in -- it's funny, when I got -- when I entered this industry, I was in -- I was 29 or so. Now I just turned 60, and I've never been more excited about the industry. We're competing in a $10 billion market that's growing at double digits. The valuations of CDMOs have never been higher. 30 years ago, generic companies were trading at CDMO multiples and CDMOs were trading at low single-digit multiples. And now, it's really reversed. And I never thought I'd see a CDMO like Catalent trade at 11x multiple to go private or Abbott at 6x multiple to go private. It's just a different and exciting time.

Revenue.

Revenue. Sorry. Revenue. Did I say EBITDA?

Clarifying revenue.

Yes. Revenue. There's never been a more exciting time. And I think from a pharmaceutical industry as well, just in general, if I think about it, CDMOs were tactical back in the 90s, purchasing related. Now it's strategic from a pharmaceutical perspective. So there are departments built around external manufacturing versus it just being a side job for somebody in purchasing in pharmaceuticals. So this business is resilient. It's here to stay, and it's growing at double digits, which makes it very exciting for a quality organization such as ourselves.

Do you see that in the -- have you seen an evolution in terms of who you talk to at the pharma company, whether procurement versus someone else in the organization? Or has that...

Yes. So when I think about when I started in this business, it was hard to get above a purchasing manager to a director. Now you're -- you could be speaking to the CEO or the CFO depending on the size and scope of company because, again, this is a strategic initiative for a lot of organizations. So decisions that are being made about sourcing, I was actually trading e-mails today with a senior level external manager at a large multinational who's making CEO decisions on sourcing. So that's a different world from what it was before when you were just talking about maybe tactical decisions to outsource a specific amount of volume.

And I didn't specifically ask it, but can you just address like the quality track record of Lifecore and where the company has been? Has it been a good track record historically and where is it today?

Great track record. Critically important from my perspective, we're just coming off of March, unannounced 2-week general inspection of our facility. The results were phenomenal, very favorable for us. The audit has been closed, and it resulted in what they characterize as VAI, voluntary action indicated. So we couldn't be more pleased with the results from a customer perspective, they couldn't be more happy. Those who are with us, it gives them confidence to continue. And for those prospects that we're talking to, it checks that box, which is critically important.

The other thing that I'll say, just in general, is beyond just the FDA, we have regulatory -- we're regulatory compliant with what I would characterize as figurative speaking most of the industrial world. Our expansion project with our largest customer, we're going to be producing for the Asia Pacific market shortly. We have the ability to support TGA, so Australia, New Zealand. EMA, Europe, Canada, United States, Brazil. So our ability to reach multiple geographies is also a key value proposition for our customers because the ability to source out of one site also is -- provides a lot of advantages for our customers on a go-forward basis.

Yes. Obviously, the quality track record is critical. It's not always the case as we've seen in news stories around companies in the space. And obviously, you're doing what's probably the hardest part of the CDMO sector, which is sterile manufacturing. And so the bedrock of having a solid quality organization is critical.

You mentioned earlier, one of the things about, the things that maybe not surprised me, that I was pleased with was the quality track record. I knew it was good on the surface, but to come into the organization, experience it, spend time with the team, go through our quality management reviews, tremendous, really, really high quality. And that's why you have some of the leading pharmaceutical companies in the world outsourcing with Lifecore. It's amazing.

It's amazing. That's great. What else? Is there anything that I should have asked you that I didn't? I'll open it to you, Paul.

No. I think -- the one thing I would say, I think that we have -- one thing I'd leave you with is strong commercial base with predictable revenue growth over the midterm, promising late-stage development pipeline that even on a conservative conversion rate will provide meaningful growth for our organization. And I think an undervalued opportunity based on some of the things we talked about, about recent transactions and valuations. But I couldn't be more excited about the future at Lifecore, proud to be part of it, and I love what we're doing day in, day out in Minneapolis.

It's certainly an exciting time in the CDMO space, particularly in the sterile fill/finish space. So congrats on the success you've had and the outlook ahead of you.

Thanks.

Thank you. Thanks for doing this. Okay.

Good afternoon, and thank you for joining Lifecore's Fiscal 2025 Fourth Quarter and Full Year Earnings Call. [Operator Instructions] Now I would like to turn the call over to Stephanie Diaz, Manager of Investor Relations for Lifecore. Please go ahead.

Good afternoon, and thank you for joining us today to discuss Lifecore Biomedical's Fourth Quarter and Full Year Fiscal 2025 Earnings Results. Hosting the call today from Lifecore are Paul Josephs, President and Chief Executive Officer; and Ryan Lake, Chief Financial Officer.

Before we begin today, we'd like to remind everyone that certain statements made in the course of this conference call contain 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, August 7, 2025, and the company's actual results could differ materially from those projected in such forward-looking statements. 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 fourth quarter and fiscal year 2025 earnings press release, which was furnished to the SEC today on Form 8-K and is available on our corporate website at lifecore.com as well as our other filings with the Securities and Exchange Commission, including, but not limited to, the company's Form 10-K for the fiscal year ended May 25, 2025, which was filed this afternoon and is also available on our website.

In addition, our earnings press release includes a discussion of and during this call, we will reference certain non-GAAP information. You can find relevant non-GAAP reconciliations in our earnings press release.

With that, I'd like to turn the call over to Paul Josephs, Chief Executive Officer.

Thank you, Stephanie. Good afternoon, everyone, and thank you for joining our fiscal 2025 fourth quarter and full year update. Fiscal 2025 was a strong year for Lifecore Biomedical. As you may recall, I joined the company in May 2024 and immediately began to tackle a number of challenges. I am pleased to report that with a new strategic plan and proven CDMO leadership, we were highly successful in achieving a number of important goals during this transition year.

Key among these is upgrading our business development and marketing strategy. During the year, we signed multiple development -- new development agreements with new and existing customers, including 9 new programs with 9 new customers and multiple wins subsequent to the end of the fourth quarter, including a late-stage clinical GLP-1 program. These wins will help to drive our near-term momentum and have us excited about our performance in 2026.

Additional achievements from fiscal 2025 include rightsizing our workforce, significantly improving our productivity, raising capital to strengthen our balance sheet and meeting our stated financial guidance for both revenue and adjusted EBITDA for the fiscal year. We are very pleased indeed with Lifecore's performance during fiscal 2025 as we remain on track to achieve our stated goals of achieving a 12% revenue CAGR and increasing EBITDA margins to more than 25% over the midterm.

During the company's first Investor Day presentation in November 2024, we outlined our strategic plan for achieving these goals, which focuses on the following 3 growth strategies: maximizing our existing customer business; advancing programs currently within our late-stage development pipeline towards commercialization; and finally, winning new and impactful business that will continue to fill our project pipeline from early-stage work to commercialization. During the fourth quarter and full year, Lifecore made significant progress in executing against each of these growth strategies.

I will first address our efforts to maximize our existing customer business. Existing customers are advancing programs and expanding aseptic business at Lifecore. These companies are a rich source of potential new business, and we have dedicated significant effort to growing with each of our current customers. To that end, we remain on track to realize a significant inflection point related to one of our current customers in 2027. This inflection point contemplates a significant increase in the minimum take-or-pay commitments from this customer and an expansion in regions supported by Lifecore to include Asia Pacific markets.

This expansion in geography is only possible due to Lifecore's strong, multi-compendial quality system and regulatory compliance framework. We are very pleased to have the confidence of this customer who is choosing to work with us as their development and manufacturing needs grow, and we continue to view all of our existing commercial customers as an important part of our growth strategy.

I will now turn to our efforts to advance programs currently within our late-stage development pipeline as they move towards commercialization. As previously disclosed, many of our late-stage pipeline programs are poised for potential regulatory approval and commercialization by 2028. And while there is no guarantee that they will all reach the finish line, even a modest subset of this group could generate substantial and impactful growth for the company in the midterm.

We recently announced that we have signed a new 10-year commercial manufacturing and supply agreement with one of our late-stage customers that is planning for commercialization of their novel ophthalmic therapeutic drug. In addition to the commercial manufacturing and supply agreement, Lifecore has also signed a multimillion-dollar statement of work, detailing a range of CDMO services that will further advance this program towards potential regulatory approval and commercialization.

Under the terms of this new statement of work, Lifecore will be responsible for manufacturing a variety of batches of the drug candidate, including multiple process performance qualification or PPQ batches. As a reminder, PPQ programs are particularly important milestones as they are a pre-commercialization requirement. And while we caution that the execution of a PPQ campaign is only the beginning of a 1- to 2-year journey towards a potential commercial approval and associated recurring revenue and demand, these multimillion-dollar programs reflect our customers' ongoing trust in our capabilities and team.

For the year, we have successfully supported the advancement of other late-stage programs towards commercialization, including a significant statement of work with a large multinational customer progressing its injectable medical device product, reflecting what we believe is their ongoing confidence in this program. This customer also made a multimillion-dollar investment in a dedicated production equipment. We are very pleased with the progress we've made in advancing programs, this program and other late-stage programs, and we look forward to supporting those that achieve commercial launch.

The third area of focus that we believe is critical to our ability to reach our financial goals is winning high-value programs with new customers in various stages of development. And as we -- with each of the previous efforts, we made progress towards this goal, we continue to add new programs across a variety of development stages. And during the fourth quarter, we signed 3 new early-stage programs in respiratory disease and ophthalmology.

One highlight is our agreement with Humanetics, which is focused on the company's BIO 300 program. BIO 300 is a novel and highly selective modulator of inflammation that is currently in development for multiple indications. We believe the program may expand as it advances towards commercialization, supporting not only Lifecore's growth but also our capacity utilization. Under the terms of our agreement with Humanetics, Lifecore will be responsible for conducting tech transfer of the existing fill and finish process for BIO 300, including formulation development, gap assessment and filling of a pilot batch. This will be followed by analytical method work, including feasibility assessments, which will help estimate future development work for the product candidate.

In summary, we have added a total of 9 new programs during the fiscal year 2025. These programs span a broad spectrum of modalities and add meaningful revenue potential to our development pipeline. I am thrilled to announce that subsequent to the quarter end, we signed multiple new customer agreements. These include a late-stage product with a leading developer of GLP-1 therapeutics for obesity and a Phase II dermatology program. Both programs are in the process of being onboarded by our project management team. The GLP-1 program will be in addition to our late-stage pipeline, and we look forward to collaborating with both of these new customers going forward.

We are encouraged by the momentum that we have been building within our business development team and the talent within that team. Led by Mark DaFonseca as our new Chief Commercial Officer, we have rebuilt our sales organization with industry professionals, including the recent addition of a proven business development veteran with more than 20 years of pharmaceutical experience. Equally as important, we have aligned our internal organization to maximize our business development selling time and to ensure that our team has the support necessary to pursue new opportunities.

In FY '25, in addition to making meaningful progress in executing our strategy, we also made important changes to the organization to facilitate our success. During the year, Lifecore appointed multiple -- a number of seasoned and successful leaders to elevate the company's operations, including Ryan Lake, a highly experienced CFO; Thomas Guldager, our new Senior VP of Operations; Tom Salus, Lifecore's first Chief Legal and Administration Officer; and as I mentioned earlier, our newest appointment, Mark DaFonseca, the company's Chief Commercial Officer. This new team working with me and Jackie Klecker, our Executive VP of Quality and Development Services, has upgraded processes and implemented changes across our company to create a more efficient, productive and customer-oriented organization. We have accomplished this while reinforcing our proven quality management system, ensuring that we maintain quality as we grow. I'm very pleased with these organizational enhancements, which have resulted in measurable improvements across our company.

Further demonstrating the effectiveness of our quality management system and expertise of our quality team, the Food and Drug Administration conducted a general audit of our quality systems and processes during the fourth quarter. The audit, which spanned over 2 weeks, resulted in a highly favorable outcome for our organization and feedback regarding the audit results from our customers and prospective customers has been overwhelmingly positive.

As we turn to our operations, I'm pleased to share that we have made meaningful improvements across the board. Over the past year, our HA fermentation, aseptic and packaging teams have delivered consistent gains in productivity, each contributing to the stronger, more efficient organization we're building. One standout, our fermentation department achieved record output for our fiscal year at Lifecore. That milestone is a powerful example of what happens when strong leadership and engaged workforce and a mindset of continuous improvement come together. It's a reminder that performance follows culture, and we're seeing the impact.

Our commitment to customers remains unwavering. We closed the fiscal year with an on-time in-full delivery rate of 97%, an improvement over FY '24 and a direct reflection of the pride we take in delivering high-quality products on time every time.

Looking ahead, I'm especially encouraged by the progress we've made towards launching our new enterprise resource planning system, which remains on track for our Q1 2026 go live. This isn't just a technology upgrade. It's an enabler of our long-term strategy. Once implemented, our cloud-based ERP will enhance efficiency, strengthen our inventory control, support sharper financial management and help reduce costs as we grow.

And finally, I want to recognize the team's continued focus on safety, our most important responsibility. We maintained an injury -- recordable injury rate well below industry average this year, and that's not by chance. It's a result of intentional proactive work to ensure that every associate feels confident and safe in the work they do every day.

We're building momentum, and these operational achievements give me great optimism in our future. I'm extremely pleased with the cohesiveness and speed with which our team has identified areas of improvement and implemented value-added solutions. In a short amount of time, we have achieved measurable increases in efficiency and productivity across our organization, and we plan to continue this effort to realize our overarching growth strategies.

That concludes my update. I will now turn the call over to Ryan Lake to provide an overview of our fourth quarter and fiscal 2025 financial results. Ryan?

Thank you, Paul, and good afternoon, everybody. In connection with my comments, I'd like to recommend that participants refer to Lifecore's Form 10-K filing with the Securities and Exchange Commission, which we filed today. I'll now go over results for the fourth quarter and 12 months ended May 25, 2025, beginning with results for the quarter.

Revenues for the 3 months ended May 25, 2025, were $36.4 million, a decrease of 4% compared to $37.9 million for the comparable prior year period. The decrease in revenues was primarily due to a $5.6 million decrease in CDMO revenues, which was primarily impacted by $4.4 million of lower development revenue, primarily due to completion of a discrete development project in the prior comparable period and timing of customer project life cycles. In addition, hyaluronic acid manufacturing revenues increased $4.1 million, primarily from increased demand due to our largest customer supply chain initiatives.

Gross profit for the 3 months ended May 25, 2025, was $14 million compared to $17.3 million for the same period last year. The decline of $3.3 million in gross profit is primarily due to a $6 million decrease in CDMO gross profit, which was primarily impacted by sales mix, including lower development revenue and aseptic manufacturing volumes. The decline in CDMO gross profit was partially offset by a net $2.8 million increase in HA manufacturing gross profit due to increased volumes and manufacturing variances.

Selling, general and administrative expenses for the 3 months ended May 25, 2025, were $9 million compared to $12.2 million for the same period last year. The $3.2 million decrease in SG&A expenses was primarily due to a $1.6 million of lower legal, personnel and finance and accounting consulting expenses as a result of focused efforts to reduce operational expense and bringing in new leadership. Also included in SG&A expenses is $2 million for the current period and $3.6 million for the prior period related to legacy matters.

For the 3 months ended May 25, 2025, the company recorded a net loss of $1.1 million and $0.06 of loss per diluted share as compared to a net loss of $7.1 million and $0.19 of loss per diluted share for the same period last year. The decrease in net loss also included a couple of other nonoperating income or expense items detailed in our filings.

Adjusted EBITDA for the 3 months ended May 25, 2025, was $9.1 million, a decrease of $1.3 million compared to $10.4 million in the prior year period. The decrease in adjusted EBITDA was primarily due to the decrease in gross profit, partially offset by favorable recurring selling, general and administrative expenses.

I'll now review the results for the 12 months of fiscal '25. Revenues for the 12 months ended May 25, 2025, were $128.9 million, an increase of 0.5% compared to $128.3 million for the comparable prior year period. The increase in revenues was due to a $7.1 million increase in HA manufacturing demand, primarily due to our largest customer supply chain initiatives. The HA manufacturing revenue increase was partially offset by a $6.5 million decline in CDMO revenues that is primarily due to a $6.2 million of lower development revenue due to completion of a discrete development project in the prior comparable period and timing of customer project life cycles as well as various other offsetting customer fluctuations detailed in our Form 10-K.

Gross profit for the 12 months ended May 25, 2025, was $40.3 million compared to $41.9 million for the same period last year. The $1.6 million decrease in gross profit is due to a $5.9 million decrease in CDMO gross profit, which was primarily impacted by sales mix, including lower development revenue and aseptic manufacturing volumes and was partially offset by a net $4.3 million increase in HA manufacturing gross profit due to increased volumes and manufacturing variances.

Selling, general and administrative expenses for the 12 months ended May 25, 2025, were $44 million compared to $40.5 million for the same period last year. The increase in SG&A expenses was primarily due to a $3.7 million increase in noncash stock-based compensation, the majority of which was related to new higher performance stock unit grants to the company's executive officers. Also included in SG&A expenses is $11.6 million for the current period and $11.9 million in the prior period related to legacy matters.

For the 12 months ended May 25, 2025, the company reported a net loss of $38.7 million and $1.27 of loss per diluted share as compared to net income of $12 million and $0.33 of income per diluted share for the same period last year. The loss in 2025 included a $7.7 million loss on the sale or disposal of assets as compared to the same period in 2024, which included a favorable $39.5 million noncash fair market value adjustment to the debt derivative liability.

Adjusted EBITDA for the 12 months ended May 25, 2025, was $19.5 million, a $0.7 million decrease from $20.2 million in the prior year period. The decrease in adjusted EBITDA was primarily due to the decrease in gross profit. As Paul stated earlier, we are very pleased to have met the company's stated guidance for both revenue and adjusted EBITDA for the fiscal year. Fourth quarter adjusted EBITDA was the strongest of the year. Further, subsequent to quarter end, the company's balance sheet was significantly strengthened through the receipt of the remaining $10 million in proceeds from the sale of the noncore assets, which took place earlier this year to align our capital assets with operational and commercial needs.

In other financial news, I'm pleased to announce that the company will be moving its fiscal year-end to align with the calendar year effective for the December 31, 2025, calendar period. In the coming months, our internal finance and accounting team will be working closely with our public accounting firm to prepare the financial statements and disclosures needed to meet the reporting requirements under the new fiscal calendar. Concurrently, we'll be working to recast financial statements for a 2025 fiscal year that will end on December 31, 2025, and to prepare supporting documentation to bridge the statements filed today to the recasted 2025 statements that will be filed following the December 31, 2025, year-end.

This decision to move our fiscal year-end, which had been based on the legacy business' seasonality, will allow Lifecore to report in a timely manner with the majority of our peer companies, customers and other stakeholders, which we believe is an important factor in evaluating operating and financial performance and also aligns with the launch of the new ERP system and expected associated benefits that Paul discussed earlier. The company will provide additional updates on this transition in the coming months.

As a result of the communicated change in fiscal year, we are providing financial guidance for the approximately 7-month transition period from May 26 through December of 2025. For this 7-month transition period, we expect revenue to be between approximately $74 million to $76 million and adjusted EBITDA to be in the range of $12 million to $14 million. We wish to reiterate that we are only providing guidance at this time with respect to the 7-month transition period, and we caution against extrapolating quarterly results or this guidance to estimate full year results.

This concludes my financial overview. I'll now turn the call back over to Paul for his final comments.

Thank you, Ryan. In closing, I would like to reiterate how thrilled I am with the company's achievements during this transition year. We have restructured our organization and implemented numerous upgrades and enhancements across our company. We have improved efficiency by rightsizing our head count and reducing expenses as a percent of revenue, all while increasing revenue per direct labor employee. Our stronger, more productive organization made substantial progress.

This concludes our prepared remarks for today. Operator, you may now open the call for questions.

[Operator Instructions] Our first question will be coming from Max Smock of William Blair.

Maybe just starting with, one, on your commentary here around your largest customer supply chain initiatives. A two-parter for me. I know when we talked in the past, you mentioned about $20 million of incremental revenue as part of those annual minimum commitments. Is that still the right number to think about here? Or has that gone up at all?

And then you also previously mentioned the potential for volumes to ramp ahead of that minimum volume commitment kicking in, in 2027. Are you seeing that happen given the noise out there around tariffs? Or are volumes going to remain more or less the same until we get closer to -- or get into 2027?

So Max, maybe -- this is Ryan. Thanks for the question. So I guess I would first just mention that the increases that we're seeing from an HA demand perspective, we think one of our customers' strategic supply chain initiatives is to move away from another third party, and that's bringing that additional aseptic manufacturing volumes to both Lifecore and in-house with this partner. And we believe it's part of their overall strategy to increase Lifecore's aseptic production in the coming years.

Okay. Understood. Maybe one quickly on the new GLP-1 agreement you signed. Can you just frame out for us what that agreement looks like in terms of size of the engagement, the potential time line for approval and then just the role that you all have been engaged to play, assuming that drug does eventually reach approval at some point in the future?

Thanks, Max. This is Paul. Appreciate the question. At this point, we're not in a position to disclose all the terms of our agreement, but I can tell you, we're extremely excited to collaborate with our client on this opportunity. GLP-1 market is projected to triple over the near term as I think about towards 2030. And we're looking towards driving meaningful impact with our client as they work towards commercialization, I would say, in that 2029, 2030 period.

Okay. That's helpful. And then maybe one last one for me, and then I'll hop back in the queue. On the margin side, Ryan, I appreciate it's a little tricky here because of the seasonally weak fiscal first quarter historically. The 17%, I mean, a pretty big step down relative to the back half of the year here. But again, you're disproportionately reflecting the soft margins in Q1. So can you just walk us through or give us some sense for maybe what margins look like over the next 12 months just so we have a better frame of reference to how that compares to what you all just posted for fiscal 2025?

Yes. So maybe just to touch on the quarter. I mean, from a margin perspective, this was a pretty significant step-up. This was our highest quarter at about 38% margins for the quarter. And that was due to timing of the manufacturing. We also had good absorption of our fixed costs. I think as we look out kind of -- we've only provided guidance for the 7-month stub period. But I think, overall, we expect gross margins for the 7-month stub period to be in the low 30% range but improved from the overall 31% gross margins that we experienced in fiscal year '25.

And then with some variability between quarters based on product mix, volume and timing of the shipments, we expect a pretty even split of that expected gross profit, about 45% of that gross profit to come in the first 4 months and then about 55% of that to come in the last 3 months of calendar year '25. So over the comparable prior year period, that represents about a $6 million improvement in gross profit.

And then just to take that a little bit further in terms of the adjusted EBITDA margins and roughly 15% that we had for fiscal year '25, we'd expect the adjusted EBITDA for the 7-month stub period to be in that range of $12 million to $14 million, and that's split between kind of the 4-month stub, about 40% of that, and then the other 60% is really in the last 3 months of calendar year '25.

And our next question will be coming from Matt Hewitt of Craig-Hallum Capital Group.

Maybe another way to ask the question is, if you were not going through the calendar year change here, what would your FY '26 guidance have looked like?

Matt, thanks for the question. So had we not changed the reporting calendar, we would have expected fiscal 2026 ending in May of 2026, revenues to be probably in a similar range as fiscal 2025 despite some potential headwinds on volumes going down. But from an expense side, I think what's important here is that will be the first mover. And we expect to see improvements in adjusted EBITDA due to all the efficiencies and cost-cutting measures that we've implemented over the past year.

So just a reminder, a large portion of those cost savings and efficiencies were realized in our FY '25 results. So they're not as pronounced in those forward-looking results, but we continue to strive for more. And an example of this is the reduction in force that we had at the beginning of fiscal year '25, so we realized the benefit of that in fiscal year '25. So you won't see that incremental benefit from that action in the comps because it's essentially savings in both periods. And then similarly, as you can see with our SG&A expenses, they came down almost $6 million in Q4 compared to Q1 of fiscal year '25.

So I think -- another important fact is that we've previously communicated the key inflection point to the ramp and us achieving our financial goals over the midterm is really based on that expansion project that Paul mentioned with one of our largest multinational customers and the associated contractual minimums that are expected to begin in calendar '27. Also crucial to this is achieving the goals. There's this ongoing progression of our late-stage development pipeline, and we remain confident in achieving that 12% CAGR for revenue over the midterm, which, at that time, we had defined as kind of the next 3 to 4 years or approximately calendar year '27 or '28. And then in addition, we continue to make material progress, as we discussed, on reducing costs as a percentage of revenue, and we believe we'll reach our EBITDA margin targets in a similar time frame.

That's very helpful. Shifting gears a little bit. There's been a lot of noise here over the past month or so with tariffs on imported pharmaceuticals. I think initially, it was big, was the term used. And then I think just this past week, there was talk of 150% to 250% tariffs in 18 months.

I'm just curious how your conversations have been evolving as those kinds of numbers have kind of thrown out. Obviously, it sounds like you've had some success already here in this quarter signing some new deals. Is that a function of those tariff threats? Or is there still more to come on the new development side?

Matt, thanks so much for the question. This is Paul. I can't tell you how many texts I get, e-mails I get about tariffs and policy going up -- happening in Washington. And personally, I consider that just noise. I don't think anybody in the industry really believes that we'll have tariffs at the 250% level.

With that said, it's undeniable, really undeniable that pharmaceutical manufacturing here in the United States is incredibly strong. You see it in the recent announcements about investments large multinational players are making. I think about J&J, Eli Lilly, AstraZeneca and Novartis come to mind. But they can't manufacture everything. And not every organization is going to be able to make those types of investments. And it is clear that the most economical and efficient way to onshore manufacturing demand is utilizing a CDMO. And I truly believe that Lifecore is strongly positioned to maximize on the opportunity, and that's why we're playing offense.

We're making significant increases in our investment in sales and marketing for FY '26, our transition period, and on into '26. And we're seeing it manifest itself in our pipeline. I think about my review with the team earlier this week. We have opportunities that we're looking at Asia Pacific market, European market, out of Israel, all part of potential onshoring.

So again, we're going to really play significant offense with regard to our sales and marketing team. I expect, personally, I'll spend an inordinate amount of time working with that team, hopefully complementing their efforts. And we're really excited about the opportunity that's in front of us.

And then if I think about how we manage the business internally, just building off Ryan's comments before, we're going to continue to manage the business aggressively as it relates to cost so that we are -- don't see any significant impact due to tariffs. So again, great tailwinds for the market. 50% of the programs that get FDA approval are injectables. We believe we're strongly positioned to maximize our potential success in this area.

And our next question will come from Michael Petusky of Barrington Research.

Paul, if I could just sort of follow up on that last question. When you're having conversations or your senior people are having conversations with drug manufacturers, I mean, are these guys like genuinely viewing this as like a catalyst for near-term action? Are they kind of sort of like you are with the 250% tariff sort of rolling their eyes and saying, well, we'll see where this heads and we'll see over time and we'll sort of make -- like I'm trying to get a sense of how much of this is real within the industry where it could drive near-term results, say, over the next 12 to 18 months for you guys.

Well, I think it's -- thanks, Mike. Appreciate the question. I just believe it's part of the overall momentum. If I think about where we were a year ago when I -- my first earnings call as part of Lifecore, and we had a farming type mentality from a sales and marketing perspective, our pipeline was weak clearly. But we rebuilt our sales and marketing team. And now with Mark onboard, I couldn't be more excited and optimistic about where we're going.

I just think the overall quality of our pipeline is better. Tariffs play a part of that, but we're just seeing more opportunities based on our strategic shift with regard to how we build this business by taking a very aggressive hunting approach to that.

With that said, again, as I mentioned, we have real and tangible opportunities that are -- we see in our pipeline coming out of Europe that maybe heretofore we didn't see out of Asia Pacific and Israel. So not all of that's tariffs. Some of it is political unrest as an example of out of Israel, but the momentum is clear. There is U.S. manufacturing momentum within the pharmaceutical industry.

Fair enough. Two more, I guess, quicker questions. Paul, I didn't hear it if you mentioned it. What's the current number of late-stage projects that you guys have?

Together -- now as of today, 11, Mike, late-stage programs that we have from 10 that we announced -- or have communicated previously.

Okay. Great. And then one for Ryan real quick. I didn't catch it if you mentioned it. Did you mention what cash flow from ops and CapEx was in the fourth quarter?

No, I didn't. So we had positive cash flow from operations for the fourth quarter of a little over $5 million and free cash flow of over $3 million. And I'd just remind you that that's despite having some onetime kind of nonrecurring legacy expenses of about $2 million in the quarter. So it would have been $2 million better had that not been included.

Okay. And then let me sneak one more quick one in for you, Ryan. The ERP, any estimate in terms of the time to implement and the cost of implementation?

Yes. Thanks, Mike. So in terms of timing, we're targeting Q1 of 2026 -- of calendar 2026. It's roughly $600,000 to $1 million ERP investment. I think what's important to mention about that is we've had over a dozen subject matter experts that have been directly engaged in all phases of the design and development of that. We've had third-party validation testing that's aligned with FDA and GMP standards that's executed months in advance of the go live. We've also been engaged with SOX kind of testing from a SOX testing perspective, months in advance of the go live. We've got defined go/no-go criteria and rollback plans and the new ERP will run parallel with our legacy ERP system as well. And then we are planning the go live during a planned manufacturing shutdown as well to minimize any risk with that.

And I would now like to turn the call back to Paul Josephs for closing remarks.

Thank you, operator. I wish to thank all Lifecore's stakeholders, including our investors, customers and collaborators for their ongoing support and partnership. I also wish to thank our incredibly hard working and talented team for driving each of the successes here at Lifecore. We are very pleased with our progress made in fiscal 2025, and we remain optimistic regarding our potential to achieve growth and sustainable profitability in the coming years. Thank you.

And this concludes today's conference call. Thank you for participating. You may now disconnect.