All right. It's the top of the hour, so we'll go ahead and get started. Welcome to day three of the 2025 Stephens Investment Conference. I'm Mac Etoch, the life science tools and pharma services analyst over here at Stephens. I'm pleased to be joined today by Lifecore Biomedical's CEO, Paul Josephs, and CFO, Ryan Lake. Paul, Ryan, I'll turn it over to you for any opening comments while we jump into Q&A. Mac, thank you so much. Thank you to you and the entire Stephens team to have us here at your 2025 Investment Conference in Music City. We're excited to be here. Thank you so much. Appreciate it. All right. We'll get into it. Paul and Ryan, you both joined Lifecore over the past 24 months. Can you just walk us through what the journey the company's been on? What attracted you to the business to start? Sure. You know, the business itself has been transitioned out of, I would say, a food conglomerate into a standalone CDMO. In a lot of ways, that's what's excited me to join the company. Looking at the organization itself, I love CDMOs. They're great businesses. About 50% of products that are manufactured are outsourced in some sort. The sterile injectable side of the business is the fastest-growing segment of the CDMO market at a plus or minus 10%. What I saw was a company at an inflection point that had been through some challenging times transitioning out of the food conglomerate. The requisite growth CapEx had been spent and was in place. We have a strong technical team and capability. I think the moat around the Hyaluronic acid serving as a foundation with long-term sticky customer relationships ranging from 20-40 years serves as a tremendous foundation from which to grow. The final piece was the clean regulatory track record and compliance track record is really what attracted me. I saw an opportunity to build something special at Lifecore. I remain very excited about that and optimistic about where we're going. I would say, you know, it's been a great opportunity to partner with Paul. He's a tremendous leader and, to boot, a great human being. You know, and I see a lot of potential to unlock a lot of hidden value, as Paul mentioned, that was really clouded by the transition and divestiture of those low-margin commodity food businesses to a high-performing publicly traded CDMO. Certainly, to be part of the leadership team and have the ability to do that is extremely important. We've been extremely busy over the past year, very proud of those accomplishments. In addition to the leadership team that is primarily completely new, we have built out a completely fantastic new finance team. We've taken costs out of the business, improved our cash flow, improved our investor relations, and media visibility as well. We went from two to five covering research analysts. Thanks again to Stephens and Mac and Hannah for your continued interest and excitement around the story. It's exciting what we're building here. We've made incredible strides from an improvement in liquidity perspective as well as really starting to yield the benefits of a lot of system and process improvements, including an ERP implementation that will go live in Q1 of 2026. Oh, yes, we are also changing our fiscal year to a traditional calendar year. Could not be more proud of the team and what we've been able, what they have been able to accomplish over the past year. In general, CDMO businesses are very durable businesses, kind of characterized by sticky customers, high switching costs, also good margin at scale. Importantly, the work that we do is really important in helping improve the lives of patients. You know, I think this CDMO industry and business is nice because we get to work with a bunch of portfolio companies that have high science and innovation. And from an investment perspective, you do not have the binary risk around one asset. I think you kind of highlighted this, but as you said, the company's been a little bit more of a transition. So what gives you confidence that the company is better positioned today versus, say, called a year ago to capture new CDMO programs? That's a great question. You know, I'll start first. It starts with the people. As Ryan talked about, you know, we have, for all intents and purposes, an entire new CDMO leadership team or senior team that combined has almost 150 years of proven and successful experience in the CDMO and pharmaceutical industry. Equally as important, there's just such a talented group of directors that next level down that we've really been able to engage with and, I would say, maybe make a more meaningful part of what we're trying to fix, solve, and accomplish. I also think as we've implemented what we characterize as monthly operating reviews, where we look at the business from a 360-degree perspective every month, you know, we're seeing continued trending of all our key KPIs in a positive manner. That tells me that the business is running well both from an operational and quality perspective. We had a recent FDA general audit that resulted in two minor 43 observations, which was a tremendous success for us, fully remediated. Voluntary action indicated gives our customers and us even greater confidence about where we're going and that the business is running well. Some of the things that Ryan mentioned about continuing to take, we've taken cost out of the business, allows us to be incrementally more competitive as we look to pursue additional new and impactful opportunities. The final piece, but very important, is our revamped commercial strategy. There had been more of an account manager type strategy to build new business and bring new business into Lifecore, mining our existing customer base, you know, growing within that customer base. That's critically important to us. We want to continue to do that. In order to maximize the opportunity in front of us, we knew we had to be more on our front foot, have a more aggressive commercial strategy with proven business development talent and a requisite marketing strategy to tie together with that. We have basically turned over the entire sales and marketing team, implemented a new strategy, and we are starting to reap the benefits of that going forward. I appreciate the context there. You know, as you highlighted, pretty sticky business, you know, relatively long sales cycle. You highlighted these KPIs. What are the internal proof points that you generally point to to validate the progress that you're making? I think, again, some of the, if I look at what we've done from a business development perspective, you know, we closed, I believe it's 14 or so opportunities since I joined the organization, nine in the last 12 months. The quality and quantity of our pipeline continues to trend in the right direction. We're seeing more and more large multinational pharmaceutical companies coming into Lifecore. It tells me that we're moving in the right direction. We announced a few weeks, maybe three weeks ago now, that we closed an impactful Site transfer with a large multinational pharma company. In August, we announced a late-stage GLP-1 opportunity. If you look at our pipeline now, while HA will continue to remain a strong foundation of everything we do, it's our core and allows us to build and grow. It's becoming more and more a subset of the business. If I think about the late-stage pipeline and how we're going to see growth over the coming years, you can now see multiple potential launches, one in 2026, I believe it's three in 2027, four in 2028, four in 2029. That is what gives me, gives me great confidence about our future along with the strong commercial foundation. We'll jump into those here in a second. Maybe to level set for the audience here today, what capabilities does Lifecore have, and then what makes outsourced filtering service such an attractive offering in the current environment? First of all, 50% of the programs that are, as far as the market is concerned, 50% of the programs that are in the drug development pipeline here in the U.S. or the approvals that we get each and every year are injectables. You have a strong market from a development perspective. I think what's going on in the news also gives you a trend that shows the trend and growth in the market. That's the regionalization of U.S.-based manufacturing, the Onshoring, Reshoring of pharmaceuticals. I believe it started with COVID, you know, from an essential medicines perspective and security risk. Then you had the supply, all the supply chain issues associated with COVID. I really think that started the trend. It's just now become highlighted by our new administration. We see the fruits of that or the potential opportunity with what we see in our pipeline, our business development pipeline. We see potential Onshoring opportunities from Asia-Pacific, Europe, Middle East, Israel because of Middle East unrest, India with complex generics. You know, I've been in this business 30+ years now. Majority of my time has been leading commercial organizations or running CDMOs. I've always thought Site transfers as more of a tactical or opportunistic type endeavor. Now, with everything going on and what we're seeing in the market, it's really become more and more strategic because the intensity of these Site transfers within our pipeline as a percent is greater than I've certainly seen anywhere else I've been. It's always great to hear. Maybe just stepping back and looking at your capabilities as a whole and starting with Hyaluronic acid, it seems to be a fairly unique offering. Can you just speak to the history of the company and why that's an important part of the business today? Yeah. We are one of a few suppliers that manufacture the drug substance or API, Hyaluronic acid. I think the only one in the US that can create basically the purity level as well as the high-grade variants of that to reliably be used in the manufacturing of Sterile injectables and Medical devices. Why that's so important for Lifecore is the foundation of that business as well as the moat that it creates from being able to retain existing customers and make them sticky. You know, when we think about, in general, CDMOs, there's a saying, the product is the process and the environment in which the product is manufactured. Typically what that means is when you look at the ingredients that you use, the process and the facility that it's manufactured in, that's all part of the regulatory approval, FDA approval process. Anytime you want to change any one of those components, it's a very costly and regulatorily risky endeavor to do that, which makes those customers sticky for us. Makes sense. You know, just stepping back, I think Hyaluronic acid is actually how this company was founded, if I'm not mistaken, the original capability. I think this provides you a lot of depth within your customer relationships. Can you just speak to that and then remind us how many commercially approved drugs you support with Hyaluronic acid? Yeah. We have a strong legacy in HA. We've been doing it for about 40 years. It's a very complex and highly viscous material. Many years ago, because of that expertise, a lot of trade secrets and know-how surrounding that, our customers started asking us to kind of advent into the sterile and Fill finishing of those products. That's really led to relationships with 20, 30, and even 40 years with customers that we have, primarily in the ophthalmic space. We're playing with the largest ophthalmic companies in the world. We also produce products for orthopedic and non-opioid pain as well. You know, those relationships continue to grow. You know, we have a strong commercial foundation, about 20+ commercial products that were Sterile injectable programs. That represents about 80% of our commercial revenue. Interesting. Just out of curiosity, how much revenue generating capacity do you have with HA at the moment? Yeah. You know, when we think about overall capacity at Lifecore, a couple of years ago, we were at about 40% of our available capacity. The company made a decision then to invest for the future. You know, over the past five years, we've spent about $90 million in CapEx to enable that growth that we have. That was really predicated based on some escalating contractual commitments that we have with one of our existing customers. Those volumes are expected to more than double in 2027. That investment was in preparation for that, as well as the line of sight and visibility that we have related to our late-stage development pipeline and those programs that Paul mentioned that are coming online between 2026 and 2029. Today we sit at about 20% of utilization after those investments that we've made to be able to expand our capacity. We have about $300 million of revenue generating capacity on an annual basis across the whole portfolio. Across the whole portfolio. That's right. Maybe just touching on the Fill finish side, I think you kind of touched on this already, but what sort of processes do you support today? Yeah. I think, so as far as processes are concerned, or I'll call it in segments of the pipeline, we do all the way from formulation development, analytical and method development, all the scale-up activities to support commercialization and commercial manufacturing, both Fill finish and then secondary packaging, along with the high fermentation of Hyaluronic acid. I appreciate that. As you highlighted, $300 million in revenue capacity, it's quite a bit. I think you're sitting around $130 million. Remind me what your guidance is today. Last year we were about $130 million in revenue and $20 million in EBITDA because of the calendar year transition of the fiscal year that I mentioned before. Right now we're in the middle of a stub period that will end on December 31st, 2025. We've guided the street to $74-$76 million in revenue and $12-$14 million in EBITDA for that seven-month period. Because of this, you've highlighted some mid and long-term targets, just suggesting a low double-digit CAGR over the next, call it three to four years. You know, what gives you confidence in this outlook today? Great confidence and optimism in our growth strategy of the 12% CAGR over the midterm and then expanding our EBITDA margins from 15-25%. My optimism is based on this, the strong foundation that I mentioned with regard to our existing commercial business. Ryan mentioned the escalating minimum volume commitments with our largest customer, where we have an escalation in demand that's contractually committed that will more than double their demand in 2027. We have communicated our late-stage pipeline of 12 different programs that have launches between 2026 and 2029, where we have been very thoughtful with regard to our conversion rate on those at approximately 50% conversion rate. You know, the ongoing impact we believe that we'll have from a business development perspective based on some of the tailwinds that I talked about in the market. The US-based manufacturing push provides Site transfer opportunities, which when we initiated our 12-month, excuse me, our midterm guidance, we certainly hadn't contemplated to the extent that we believe now may be potentially possible. That is what gives me great confidence. I appreciate the context. I think there's a few pieces that you've highlighted within that long-term double-digit CAGR. Can you just highlight what remains, what's within that construct and then what remains go-get? Yeah. I think I would say very, you know, there's still a little bit of go-get in there. Just like any sporting event, you put a game plan in place and then real life starts or the game starts. Certainly everything's trending as we expected. The addition of a late-stage Site transfer only helps to buoy our midterm projections. Appreciate that. As you highlighted, there is a number of moving pieces in the geopolitical sphere that ultimately will benefit U.S. manufacturing. Can you just highlight between Biosecure and Annex 1, which are coming into consideration, the Onshoring of pharmaceutical manufacturing? How is Lifecore positioned today and how are customer conversations trending thus far? Great question. I think one of the things is having capacity that's already built is a significant advantage. The other piece that's critically important is our multi-compendial regulatory system. Our ability to support multiple geographies is a benefit to large multinational pharmaceutical companies who may be looking for a provider. In addition, I think it is a benefit to some of the leading specialty pharma companies who may only have a domestic commercial strategy and then may be looking to out-license into international markets while they can potentially partner with Lifecore as a manufacturer for their domestic commercial needs. Also know that if they were working with a licensing partner, the licensing partner in another geography does not need to worry about finding another supplier since Lifecore has the ability to support Asia-Pacific, TGA, which is Australia and New Zealand. As you mentioned, Annex 1, so Europe, we can support Brazil, et cetera. I think those, I say, market needs fare favorably to our capabilities from a regulatory perspective, as I mentioned, and also the capacity that we have readily built and available. Is there one of these dynamics that's driving the most customer conversations today? I think it's a combination. It's not one or the other. I think the available capacity certainly is critical. I think the multi-compendial regulatory system is also important, but maybe even more important, but tied to that regulatory piece is the clean regulatory track record. There has been a lot of public news around compliance-related issues at some of our competitors, some of the largest competitors. And a customer, when they outsource with a CDMO, really they are, you know, outsourcing the invisible because they're not in our site. So we have to give them great confidence that when they're not there, that they can trust what's being done and being executed on their behalf. Our clean regulatory track record, the proven history of the leadership team, some of the key metrics from an operational quality perspective, I think give great confidence to our customers and potential customers about why Lifecore is the right partner. Yeah. Maybe just touching on that, you highlighted having available capacity as being a pretty strong draw for your customers. What is your capacity at today and what's the utilization rate of that? 20% utilized today, 45 million units of Fill finish capacity. We believe in the midterm, as we meet our midterm objectives, we will be approximately 40% utilized. Still lots of room to grow. While not visual today, we have option on additional space or capacity in what we call site three, where we could, in the right situation, build up to three additional Fill finish lines in that building. At the same time, we have still a long way to go in building out or filling out our capacity within what we characterize as our site one. Appreciate that. I think on the last quarterly conference call, you highlighted the fact that you signed four new contracts over the past quarter or so. One of these included a second project for a large multinational pharma company. How large of an opportunity could that be for you all? Yeah. We're really excited about it, Mac. It's one where, once commercialized, based on today's revenue, we believe will be a top five customer for us. It is impactful. We anticipate that the timing of the transition will take between 24 and 30 months. Like you mentioned, it's our second program with this customer. I believe we're proving to be the right partner for them since it is a second program. We continue to have ongoing discussions about additional opportunities as well. Is there a way to frame up how much of a revenue opportunity between that project might be? Sure. So, you know, at peak sales, once we fully transition the product, we believe it will be in that, you know, that $10 million range or so, or potentially higher. We have that identified within our Investor deck in our late-stage pipeline, I believe, as of earlier this week. Appreciate that. Do you see these large pharma announcements as really key to filling the existing capacity long-term, or is it more of a broader set of customers? A broader set of customers, but certainly I think that large multinational pharmaceutical companies provide a broader partnership because they typically have more programs. If you choose to be a trusted partner, you have the opportunity to expand with them. It is a requisite and important part of our strategy. We want, it does not necessarily need to be an either/or. It is sort of an and strategy for us. We want to partner with leading specialty pharma companies who have a need for technical expertise and capacity and be a great partner for large multinational pharmaceutical companies who provide, I will say, multiple program opportunities for us as we continue to earn them. Appreciate that. You also highlighted this GLP-1 project that you're working on. How large of an opportunity could that be? Is that already a commercial customer? No, it's not a commercial customer. It programs in phase three. We anticipate, similar to the Site transfer, that that opportunity at peak sales will be above $10 million in annualized revenue if it gains approval and based on commercial success. Always those little. Little caveats. Little caveats that we got to bring. Yeah. Before I move forward, does anybody in the audience have any questions for us before we touch on margins? Just like a quick question. You talked about Reshoring and regionalization. Just from like a day-to-day operation and business standpoint, how have the customer conversations changed since that narrative kind of took off? You know, talking with multinationals and how those conversations have changed a little bit. What's the, you know, how would you delineate how things have changed in the previous years? Just before you respond, let me repeat for the transcript here. The question is, is how conversations trended since the Onshoring efforts have kind of come about? Great question. I think that a year ago, 18 months ago, more of the discussions were around, I would say just your, I'll call it organic growth, where you develop, you bring a new program on, phase one, phase two, and then support its clinical development right through commercialization. That was about 90% of the conversations that we were having. With our revamped commercial strategy, I think that's a big part of it. The customers we're talking to today, I would say it's flipped to maybe a 50-50 or discussion around Site transfers and then your organic development. That becomes a bigger and bigger piece. This available capacity in the near term is proving to be very important to our customers. Appreciate the question. Does anybody else have one before we move on? All right. Thank you. On the margin side, you've highlighted 25% + adjusted EBITDA margins in the midterm. Is this driven by, you know, call it mostly volume growth, or are there any other levers to pull to drive further margin expansion from here? Yeah. Volumes are a critical element to achieving that 25% + EBITDA margin growth. You know, we believe though that, you know, there are still a lot of opportunities from further expense reductions to help that margin improvement. We kind of believe that will be the first mover. We've seen a lot of progress over the past year. This past quarter represented our fourth or fifth kind of period over period decline in operational expenses. In the quarter itself, operational expenses were down by $6 million compared to a year ago. As we think about the stub period itself, the seven-month stub period, we're expecting those to start approaching approximately $9 million. I do think that there's continued, right, opportunities to further improve expenses through strategic initiatives that we have, through procurement initiatives that we have, through system and process improvements to be able to help us continue to kind of bolster that 25%+ EBITDA margin. I appreciate that. Maybe on the last call, I think you highlighted opportunities to push SG&A below $8 million, which is pretty impressive. What needs to occur to achieve that, and what's the timeframe to achieving that? Yeah. I think the burn-in period for the new ERP implementation that will go live or expected to go live in Q1 of 2026, full remediation of our SOX control environment, continued kind of system and process enhancements, and then, you know, getting to some closure on some of the legacy legal matters that the company has had, I think will be important in being able to do that. You know, I think we're going to start to see that next year, by the end of next year and into 2027. I appreciate the color there. As you look towards your $300 million revenue capacity and as you approach that, what do you think long-term, what do you think the long-term run rate for adjusted EBITDA could be at that point? Yeah. I mean, I think you're going to continue to see that incremental improvement as we get to those midterm objectives. Certainly, you know, the volume improvements beginning in 2027 with the expansion of our existing commercial business. And as some of those, as we get more clarity around the timing and launch of some of those late-stage development programs, right, that will be an important measure. I think that, you know, as you can, you know, imagine, it's going to become incrementally harder and harder to get at some of those expense savings. But we recently hired a business transformation professional that has a tremendous amount of experience. She's done this with over 30 other companies in the space and driving these types of initiatives. You know, those will be really important in addition to as we get more clarity around those step-ups related to the increased volumes as well as those late-stage pipeline products. I appreciate that. I mean, you kind of highlighted this, but are there any areas that you would need to invest in to reach that $300 million revenue run rate? Yeah. The investments have been made. You know, we believe that, you know, what we have done is sufficient to be able to achieve that $300 million over the long term. Including personnel and people that you need to bring on? Yeah. I mean, there certainly could be some incremental personnel as well as some system and process improvements that we would need to implement over that period of time. Okay. Yeah. We'll definitely need to increase our direct labor, but I think that, you know, with our improved processes and procedures, we anticipate getting significant leverage on our indirect and SG&A going forward. From here, what would you consider your key priorities for capital allocation? Where are you making the investments in the business, making investments in the business today? Yeah. I think importantly, you know, we ended last quarter with $42.5 million of liquidity. That included $18.9 million of cash and about $23.5 million of availability under our Revolver. As I kind of stated earlier, we've made significant improvements from a liquidity and as well as free cash flow perspective. You know, as I look at, you know, the past kind of this year-to-date stub period through September, for that roughly four-month period, we generated cash from operations of about $7 million and free cash flow kind of approaching $5 million. That really marks a trend over the past couple of quarters where we've had those significant expense reductions as well. We believe that, you know, the cash from operations will be able to fund that maintenance, compliance, and growth CapEx that we have. After adding all this capacity, what is the outlook for CapEx from here? Yeah. I would generally say, you know, we currently think that that will be in the, you know, $7.5 million-$10 million range on an annualized basis. You know, I think, again, you know, as I think about the split of that, about 50-50 in terms of maintenance and compliance versus growth CapEx. I appreciate that. You know, as we wrap up today, I would just like to turn it back over to you all for any, you know, maybe closing arguments, not arguments, but closing statements. I think it's been kind of congenial. Yeah. Absolutely. Just any closing statements, anything that you'd like to get across the investor base, things that might be misunderstood by the investor base today that you might want to clear up? Nothing misunderstood, but I just want to reinforce that, you know, as Ryan said, incredibly proud of how we've executed over the past 18 months. What I see is predictable growth over that midterm, expanding margins. Based on comparables that have transactions in the recent past, I believe that we're an undervalued opportunity. I continue to have great optimism and excitement about continuing to lead Lifecore on our journey to be an impactful player not only in the CDMO market, but improving healthcare, not only here in the U.S., but on a broader basis as we continue to commercialize our late-stage pipeline and expand our impact with our existing commercial customers. Paul, Ryan, thank you for joining us. Thank you so much. Thank you. Thank you. Thanks, Sam. Thanks, guys. Thanks, Paul. Appreciate it. Yeah. Absolutely. Good to have you. Sometimes I've got.