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

LFCR 01.02.2025

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--Recorded Revenues of$32.6 Millionfor 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 --

Conference Call Today at4:30pm ET

CHASKA, Minn.,Jan. 02, 2025(GLOBE NEWSWIRE) --Lifecore Biomedical, Inc.(NASDAQ: 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,” statedPaul 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 includedNirsum Laboratoriesselecting 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 millionannually, 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 theNasdaq Listing Qualifications Departmentstating 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 millionprivate 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 includedRyan Lakeas chief financial officer, Brikkelle Thompson as senior vice president of human resources,Thomas Guldageras vice president, operations, andJackie Kleckeras executive vice president, quality and development services.

Consolidated Second Quarter Fiscal 2025 Financial Results

Revenues for the three months endedNovember 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 millionincrease in CDMO revenues, which increase comprised$3.8 millionof higher sales volume from the company’s largest customer, partially offset by$1.9 millionof lower sales volume from other CDMO customers. In addition, hyaluronic acid (“HA”) manufacturing revenues increased$0.5 millionprimarily from increased revenue from a customer due to timing, with increased shipments in the second quarter of 2025.

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

Selling, general and administrative expenses for the three months endedNovember 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 millionfor the three months endedNovember 24, 2024, an increase compared to$4.1 millionfor the same period last year. The increase was primarily a result of$1.0 millionof 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 milliondue to decreased fixed asset construction activities.

For the three months endedNovember 24, 2024, the company recorded net loss of$6.6 millionand$0.25of loss per diluted share, as compared to net income of$14.2 millionand$0.39of income per diluted share, for the same period last year, which included an unusually large favorable$20.7 millionnon-cash fair market value adjustment to its debt derivative liability associated with its term loan credit facility. Adjusted EBITDA* for the three months endedNovember 24, 2024, was$6.5 million, an increase of$1.1 millioncompared 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 endedNovember 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 millionincrease in HA manufacturing revenues primarily due to higher sales volume from the company’s largest customer and a$0.6 millionincrease in CDMO revenues, which increase comprised$3.3 millionof 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 endedNovember 24, 2024, was$16.5 million, compared to$12.7 million for the same period last year. The$3.8 millionimprovement in gross profit is due to a$5.1 millionincrease in CDMO gross profit which reflected a$3.2 millionincrease due to price increases to certain customers and a$1.9 millionincrease due to a favorable sales mix, partially offset by a$1.0 millionwrite-down on existing inventories to their net realizable value and a$0.3 milliondecrease in HA manufacturing gross profit due to manufacturing variances.

Selling, general and administrative expenses for the six months endedNovember 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 millionincrease in professional fees, including legal fees related to the civil litigation related toYucatan Foodsand 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 millionfor the six months endedNovember 24, 2024, an increase compared to$8.0 millionfor the same period last year. The increase was primarily a result of$1.9 millionof 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 milliondue to decreased fixed asset construction activities.

For the six months endedNovember 24, 2024, the company recorded net loss of$22.8 millionand$0.76of loss per diluted share, as compared to net income of$3.5 millionand$0.10of income per diluted share, for the same period last year, which included an unusually large favorable$20.9 millionnon-cash fair market value adjustment to its debt derivative liability associated with its term loan credit facility. Adjusted EBITDA* for the six months endedNovember 24, 2024, was$4.7 million, a$1.3 millionincrease 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).

Earnings Webcast

Lifecore Biomedical will host a conference call today,January 2, 2025, at4:30 p.m. ETto discuss the company’s second quarter fiscal 2025 financial results. The webcast can be accessed via Lifecore’s Investor Events & Presentations page at:https://ir.lifecore.com/events-presentations. An archived version of the webcast will be available on the website for 30 days.

About Lifecore Biomedical

Lifecore Biomedical, Inc.is a fully integrated contract development and manufacturing organization (CDMO) that offers highly differentiated capabilities in the development, fill and finish of sterile injectable pharmaceutical products in syringes, vials and cartridges, including complex formulations. As a leading manufacturer of premium, injectable-grade hyaluronic acid, Lifecore brings more than 40 years of expertise as a partner for global and emerging biopharmaceutical and biotechnology companies across multiple therapeutic categories to bring their innovations to market. For more information about the company, visit Lifecore’s website atwww.lifecore.com.

Non-GAAP Financial Information

This press release contains non-GAAP financial information, including Adjusted EBITDA. The company has included a reconciliation of Adjusted EBITDA to Net (loss) income, the most directly comparable financial measure calculated in accordance with GAAP. See the section entitled “Non-GAAP Reconciliations” in this release for the company’s definition of Adjusted EBITDA and a reconciliation thereof to Net (loss) income.

The company has disclosed these non-GAAP financial measures to supplement its consolidated financial statements presented in accordance with GAAP. These non-GAAP financial measures exclude/include certain items that are included in the company’s results reported in accordance with GAAP. Management believes these non-GAAP financial measures provide useful additional information to investors about trends in the company’s operations and are useful for period-over-period comparisons. These non-GAAP financial measures should not be considered in isolation or as a substitute for the comparable GAAP measures. In addition, these non-GAAP financial measures may not be the same as similar measures provided by other companies due to the potential differences in methods of calculation and items being excluded/included. These non-GAAP financial measures should be read in conjunction with the company’s consolidated financial statements presented in accordance with GAAP.

Important Cautions Regarding Forward-Looking Statements

This press release contains forward-looking statements regarding future events and our future results that are subject to the safe harbor created under the Private Securities Litigation Reform Act of 1995 and other safe harbors under the Securities Act of 1933 and the Securities Exchange Act of 1934. Words such as “anticipate”, “estimate”, “expect”, “project”, “plan”, “intend”, “believe”, “may”, “might”, “will”, “should”, “can have”, “likely” and similar expressions are used to identify forward-looking statements. In addition, all statements regarding our current operating and financial expectations in light of historical results, anticipated capacity and utilization, anticipated liquidity, and anticipated future customer relationships usage are forward-looking statements. All forward-looking statements involve certain risks and uncertainties that could cause actual results to differ materially, including such factors among others, as the company’s ability to successfully enact its business strategies, including with respect to installation, capacity generation and its ability to attract demand for its services, its ability expand its relationship with its existing customers or attract new customers, the impact of inflation on the company’s business and financial condition, indications of a change in the market cycles in the CDMO market; changes in business conditions and general economic conditions both domestically and globally including rising interest rates and fluctuation in foreign currency exchange rates, access to capital; and other risk factors set forth from time to time in the company’sSECfilings, including, but not limited to, the Annual Report on Form 10-K for the year endedMay 26, 2024(the “2024 10-K”). For additional information about factors that could cause actual results to differ materially from those described in the forward-looking statements, please refer to our filings with theSecurities and Exchange Commission, including the risk factors contained in the 2024 10-K. Forward-looking statements represent management’s current expectations as of the date hereof and are inherently uncertain. Except as required by law, we do not undertake any obligation to update forward-looking statements made by us to reflect subsequent events or circumstances.


LIFECORE BIOMEDICAL, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands, except share and par values)

	November 24, 2024			May 26, 2024
	(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	9,455		$	8,462
Accounts receivable, less allowance for credit losses		20,177			20,343
Accounts receivable, related party		10,126			10,810
Inventories, net		39,214			39,979
Prepaid expenses and other current assets		2,886			1,439
Total Current Assets		81,858			81,033

Property, plant, and equipment, net		150,576			149,165
Operating lease right-of-use assets		2,304			2,442
Goodwill		13,881			13,881
Intangible assets, net		4,200			4,200
Other long-term assets		2,567			3,239
Total Assets	$	255,386		$	253,960

LIABILITIES, CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	14,967		$	16,334
Accrued compensation		4,631			6,165
Other accrued liabilities		9,866			9,354
Current portion of lease liabilities		4,116			4,133
Deferred revenues		426			1,088
Deferred revenues, related party		511			1,025
Current portion of long-term debt, related party		773			773
Total Current Liabilities		35,290			38,872

Long-term debt, less current portion, net, related party		110,528			100,819
Revolving credit facility		8,500			19,691
Debt derivative liability, related party		23,300			25,400
Long-term lease liabilities, less current portion		7,423			4,944
Deferred taxes, net		552			543
Deferred revenues, less current portion, related party		4,880			4,703
Other non-current liabilities		5,153			5,086
Total Liabilities		195,626			200,058

Convertible Preferred Stock,$0.001par value; 2,000,000 shares authorized; 44,068 and 42,461 shares issued and outstanding, redemption value$44,619and$42,991		44,311			42,587

Stockholders’ Equity:
Common Stock,$0.001par value; 75,000,000 and 50,000,000 shares authorized; 36,980,790 and 30,562,961 shares issued and outstanding		37			30
Additional paid-in capital		206,868			177,808
Accumulated deficit		(191,456	)		(166,523	)
Total Stockholders’ Equity		15,449			11,315
Total Liabilities, Convertible Preferred Stock, and Stockholders’ Equity	$	255,386		$	253,960

LIFECORE BIOMEDICAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) (In thousands, except share and per share values)

	Three Months Ended						Six Months Ended
	November 24, 2024			November 26, 2023			November 24, 2024			November 26, 2023
Revenues	$	19,534		$	20,522		$	36,327		$	37,475
Revenues, related party		13,030			9,628			20,942			17,197
Total Revenues		32,564			30,150			57,269			54,672
Cost of goods sold		21,480			20,193			40,798			41,987
Gross profit		11,084			9,957			16,471			12,685

Operating costs and expenses:
Research and development		1,924			2,098			4,110			4,244
Selling, general, and administrative		11,119			9,342			25,904			18,538
Total operating costs and expenses		13,043			11,440			30,014			22,782
Operating loss		(1,959	)		(1,483	)		(13,543	)		(10,097	)

Interest expense, net		(842	)		(832	)		(1,810	)		(1,625	)
Interest expense, related party		(4,623	)		(3,241	)		(9,023	)		(6,385	)
Change in fair value of debt derivative liability, related party		1,200			20,700			2,100			20,900
Other expense, net		(304	)		(967	)		(507	)		(1,138	)
(Loss) income from continuing operations before income taxes		(6,528	)		14,177			(22,783	)		1,655
Income tax (expense) benefit		(43	)		65			(18	)		(23	)
(Loss) income from continuing operations		(6,571	)		14,242			(22,801	)		1,632
(Loss) income from discontinued operations		—			(24	)		—			1,832
Net (loss) income		(6,571	)		14,218			(22,801	)		3,464
Fair value of conversion ratio improvement to preferred stockholders		(2,132	)		—			(2,132	)		—
(Loss) income available to common stockholders	$	(8,703	)	$	14,218		$	(24,933	)	$	3,464

Basic income or loss per share:
(Loss) income from continuing operations available to common stockholders	$	(0.25	)	$	0.47		$	(0.76	)	$	0.05
Income from discontinued operations		—			—			—			0.06
Basic (loss) income per share	$	(0.25	)	$	0.47		$	(0.76	)	$	0.11

Diluted income or loss per share:
(Loss) income from continuing operations available to common stockholders	$	(0.25	)	$	0.39		$	(0.76	)	$	0.05
Income from discontinued operations		—			—			—			0.05
Diluted (loss) income per share	$	(0.25	)	$	0.39		$	(0.76	)	$	0.10

Shares used in income or loss per share computations:
Basic		34,360,657			30,458,032			32,609,808			30,430,712
Diluted		34,360,657			36,419,103			32,609,808			36,397,352

Non-GAAP Financial Reconciliations

Adjusted EBITDA is a non-GAAP financial measure. We define Adjusted EBITDA as net income or loss before (i) interest expense, net of interest income, (ii) income tax expense (benefit), (iii) depreciation and amortization, (iv) stock-based compensation, (v) change in fair value of debt derivatives, (vi) financing fees (non-interest), (vii) reorganization costs, (viii) restructuring costs, (ix) franchise tax equivalent to income tax, (x) contract cancellation costs, (xi) loss (income) from discontinued operations (xii) stockholder activist settlement costs, and (xiii) start-up costs, as well as any items that may arise from time to time that, in management’s judgment, significantly affect the assessment of earnings results between periods. See “Non-GAAP Financial Information” above for further information regarding the Company’s use of non-GAAP financial measures.

	Three Months Ended						Six Months Ended
(in thousands)	November 24, 2024			November 26, 2023			November 24, 2024			November 26, 2023
Net (loss) income (GAAP)		(6,571	)		14,218			(22,801	)		3,464
Interest expense, net		5,465			4,073			10,833			8,010
Income tax expense (benefit)		43			(65	)		18			23
Depreciation and amortization		2,044			1,987			4,037			3,934
Stock-based compensation		3,372			1,577			5,791			3,110
Change in fair value of debt derivatives		(1,200	)		(20,700	)		(2,100	)		(20,900	)
Financing fees (non-interest)		368			1,108			643			1,361
Reorganization costs (a)		2,463			2,162			6,055			4,899
Restructuring costs (a)		404			157			887			147
Franchise tax equivalent to income tax		50			94			100			176
Contract cancellation costs		—			297			—			297
Loss (income) from discontinued operations		—			24			—			(1,832	)
Stockholder activist settlement (a)		78						1,260			—
Start-up costs		—			487			—			726
Adjusted EBITDA	$	6,516		$	5,419		$	4,723		$	3,415

^{(a) Restructuring, reorganization and stockholder activist settlement costs of$2.9 millionand$8.2 millionwere incurred for the three and six months endedNovember 24, 2024, respectively. Restructuring, reorganization and stockholder activist settlement costs of$2.3 millionand$5.0 millionwere incurred for the three and six months endedNovember 26, 2023, respectively. These costs primarily related to elevated accounting fees associated with the fiscal 2024 audit, legal expenses, consulting fees and severance costs from the restructuring reductions in force and former CEO in fiscal year 2024 and former CFO departure in fiscal year 2025.}2025 Guidance Compared to Fiscal Year 2024 Results

(in thousands)	Fiscal Year Ending	Fiscal Year Ended
(in thousands)	May 25, 2025	May 26, 2024
	(estimate)
Net (loss) income (GAAP) (a)	$(28,600)—$(26,600)	$12,013
Interest expense, net	22,000	18,090
Income tax expense (benefit)	—	183
Depreciation and amortization	8,300	7,954
Stock-based compensation	10,900	6,201
Change in fair value of debt derivatives	(4,900)	(39,500)
Financing fees (non-interest)	700	3,513
Reorganization costs (b)	7,600	9,796
Restructuring costs (b)	1,400	1,656
Franchise tax equivalent to income tax	300	272
Contract cancellation costs	—	567
Loss (income) from discontinued operations	—	(2,682)
Stockholder activist settlement (b)	1,300	459
Start-up costs	—	1,684
Adjusted EBITDA	$19,000—$21,000	$20,206

^{(a) We previously estimated net loss to be$25.9 millionto$23.9 million, which we now estimate will be$28.6 millionto$26.6 million. The increase is due to higher stock-based compensation, interest expense, former CFO severance, and elevated legal expenses related to the civil litigation.}^{(b) We previously estimated restructuring, reorganization, stockholder activist settlement costs to be$9.9 million, which we now estimate will be approximately$10.3 millionof which$8.2 millionwas incurred in the six months endedNovember 24, 2024. The overage is due to former CFO severance and elevated legal expenses related to the civil litigation.}

Lifecore Biomedical, Inc. Contact Information:Stephanie Diaz (Investors)Vida Strategic Partners415-675-7401sdiaz@vidasp.comTim Brons (Media)Vida Strategic Partners415-675-7402tbrons@vidasp.comRyan D. Lake (CFO)Lifecore Biomedical952-368-6244ryan.lake@lifecore.com

Source: Lifecore Biomedical, Inc.

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

LFCR 01.02.2025

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