Lifecore Biomedical Reports Second Quarter Fiscal 2025 Financial Results and Provides Corporate Update

-- Recorded Revenues of $32.6 Million for Q2 Fiscal 2025 --

-- Signed Multiple Development Agreements with New Customers --

-- Strengthened Balance Sheet with Financing Raising Approximately $24.3 Million, and Favorable Restructuring of Credit Facility with BMO --

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CHASKA, Minn., Jan. 02, 2025 (GLOBE NEWSWIRE) -- Lifecore Biomedical, Inc. $(LFCR)$ ("Lifecore"), a fully integrated contract development and manufacturing organization ("CDMO"), today announced its financial results for the second quarter of fiscal 2025.

Highlights from Second Quarter of Fiscal 2025:

"The second quarter was a very productive time at Lifecore. Our achievements during the period spanned finance, operations and business development, all of which supported our overall growth strategy. Revenues in the period were strong and in line with our fiscal year guidance. Gross margins improved during the period as compared to our first quarter margins, reflecting greater leverage of our overhead costs across increased revenues and favorable sales mix. Our business development team was successful in signing multiple new projects. And importantly, our balance sheet was materially strengthened during the period with the combination of the successful completion of our previously announced equity financing, and the restructuring of our revolving credit facility with BMO on significantly improved terms to Lifecore," stated Paul Josephs, president and chief executive officer of Lifecore.

Second Quarter Developments

New Business

   -- The company signed two new project agreements during the second quarter 
      with new customers, adding to its early stage development pipeline. This 
      included Nirsum Laboratories selecting Lifecore to provide CDMO services 
      focused on supporting Nirsum's clinical development of its lead 
      development candidate, NRS-033. 

Capabilities and Capacity

   -- During the quarter, the company successfully completed the installation 
      and qualification of its high-speed, multi-purpose 5-head isolator filler, 
      which is now GMP-ready. With the addition of the 5-head isolator filler, 
      which is designed for fill/finish activities for vials, cartridges, and 
      pre-filled syringes, the company has more than doubled its capacity, 
      creating maximum revenue-generating potential of up to $300 million 
      annually, based on historical fiscal year 2024 revenues, projected 
      development pipeline, and new business pricing, volume and other 
      assumptions. 

Financial and Corporate

   -- In September, Lifecore announced that the company received written notice 
      from the Nasdaq Listing Qualifications Department stating that it had 
      regained compliance with the filing and annual meeting requirements in 
      the Nasdaq Listing Rules, and Nasdaq had ceased any action to delist the 
      company's common stock. 
   -- In October, the company announced the successful closing of a $24.3 
      million private placement of 5,928,775 shares of its common stock with 
      new and existing shareholders. 
   -- In November, the company announced the successful amendment and extension 
      of its revolving credit facility with its existing lender, BMO. The terms 
      of the amendment provide for, among other things, a three-year extension, 
      as well as a reduction in interest rates that the company believes has 
      further strengthened its balance sheet and overall financial position. 
   -- During the second quarter, the company executed multiple key leadership 
      changes, appointing exceptional talent across the organization to execute 
      its ambitious growth strategy. Appointments included Ryan Lake as chief 
      financial officer, Brikkelle Thompson as senior vice president of human 
      resources, Thomas Guldager as vice president, operations, and Jackie 
      Klecker as executive vice president, quality and development services. 

Consolidated Second Quarter Fiscal 2025 Financial Results

Revenues for the three months ended November 24, 2024, were $32.6 million, an increase of 8% compared to $30.2 million for the comparable prior year period. The increase in revenues was primarily due to a $1.9 million increase in CDMO revenues, which increase comprised $3.8 million of higher sales volume from the company's largest customer, partially offset by $1.9 million of lower sales volume from other CDMO customers. In addition, hyaluronic acid ("HA") manufacturing revenues increased $0.5 million primarily from increased revenue from a customer due to timing, with increased shipments in the second quarter of 2025.

Gross profit for the three months ended November 24, 2024, was $11.1 million, compared to $10.0 million for the same period last year. The $1.1 million increase in gross profit is primarily due to a $1.6 million increase in CDMO gross profit as a result of price increases to certain customers partially offset by a $0.5 million decrease in HA manufacturing gross profit due to manufacturing variances.

Selling, general and administrative expenses for the three months ended November 24, 2024, were $11.1 million, compared to $9.3 million for the same period last year. The increase was primarily due to increases in non-cash stock-based compensation expense of $1.8 million, the majority of which was related to new hire performance stock unit grants to principal executive officers.

Interest expense was $5.5 million for the three months ended November 24, 2024, an increase compared to $4.1 million for the same period last year. The increase was primarily a result of $1.0 million of increased interest expense related to the Alcon term loan debt, primarily related to amortization of the debt discount. There was also a reduction in capitalized interest of $0.3 million due to decreased fixed asset construction activities.

For the three months ended November 24, 2024, the company recorded net loss of $6.6 million and $0.25 of loss per diluted share, as compared to net income of $14.2 million and $0.39 of income per diluted share, for the same period last year, which included an unusually large favorable $20.7 million non-cash fair market value adjustment to its debt derivative liability associated with its term loan credit facility. Adjusted EBITDA* for the three months ended November 24, 2024, was $6.5 million, an increase of $1.1 million compared to $5.4 million in the prior year period. The increase in Adjusted EBITDA was primarily due to the increase in gross profit.

Consolidated First Six Months Fiscal 2025 Financial Results

Revenues for the six months ended November 24, 2024, were $57.3 million, an increase of 5% compared to $54.7 million for the comparable prior year period. The increase in revenues was due to a $2.0 million increase in HA manufacturing revenues primarily due to higher sales volume from the company's largest customer and a $0.6 million increase in CDMO revenues, which increase comprised $3.3 million of higher sales volume from that customer, partially offset by a customer working down inventory levels built in the prior year period of $2.6 million.

Gross profit for the six months ended November 24, 2024, was $16.5 million, compared to $12.7 million for the same period last year. The $3.8 million improvement in gross profit is due to a $5.1 million increase in CDMO gross profit which reflected a $3.2 million increase due to price increases to certain customers and a $1.9 million increase due to a favorable sales mix, partially offset by a $1.0 million write-down on existing inventories to their net realizable value and a $0.3 million decrease in HA manufacturing gross profit due to manufacturing variances.

Selling, general and administrative expenses for the six months ended November 24, 2024, were $25.9 million, compared to $18.5 million for the same period last year. The increase was primarily due to a $4.4 million increase in professional fees, including legal fees related to the civil litigation related to Yucatan Foods and the stockholder activist settlement. Additionally, non-cash stock-based compensation expense increased by $2.7 million, the majority of which was related to performance stock unit grants to principal executive officers.

Interest expense was $10.8 million for the six months ended November 24, 2024, an increase compared to $8.0 million for the same period last year. The increase was primarily a result of $1.9 million of increased interest expense related to the Alcon term loan debt, primarily related to amortization of the debt discount. There was also a reduction in capitalized interest of $0.6 million due to decreased fixed asset construction activities.

For the six months ended November 24, 2024, the company recorded net loss of $22.8 million and $0.76 of loss per diluted share, as compared to net income of $3.5 million and $0.10 of income per diluted share, for the same period last year, which included an unusually large favorable $20.9 million non-cash fair market value adjustment to its debt derivative liability associated with its term loan credit facility. Adjusted EBITDA* for the six months ended November 24, 2024, was $4.7 million, a $1.3 million increase from $3.4 million in the prior year period. The increase in Adjusted EBITDA was primarily due to the increase in gross profit, partially offset by increased legal and audit costs.

*Adjusted EBITDA is a non-GAAP financial measure (see reconciliation of non-GAAP financial measures in this release).

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