Lifecore Biomedical Q2 2026 Earnings Report

Lifecore Biomedical EPS Results

• Actual EPS: -$0.19
• Consensus EPS: -$0.19
• Beat/Miss: Met Expectations
• One Year Ago EPS: N/A

Lifecore Biomedical Revenue Results

• Actual Revenue: $34.17 million
• Expected Revenue: $34.18 million
• Beat/Miss: Missed by -$13.00 thousand
• YoY Revenue Growth: N/A

Lifecore Biomedical Announcement Details

• Quarter: Q2 2026
• Date: 8/5/2026
• Time: Before Market Opens
• Conference Call Date: Wednesday, August 5, 2026
• Conference Call Time: 8:00AM ET

Lifecore Biomedical (NASDAQ:LFCR) is a contract development and manufacturing organization (CDMO) that provides services to pharmaceutical, biotechnology and medical device companies. The company specializes in complex sterile injectable products and supports customers through product development, process development, manufacturing, aseptic filling, packaging and related regulatory services.

Lifecore’s capabilities include the production of injectable products using fermentation and other specialized manufacturing processes. The company is also known for its expertise in hyaluronic acid, which is used in pharmaceutical, ophthalmic and medical device applications. Its services are designed to support products from early development through commercial-scale production.

The company operates a manufacturing facility in Chaska, Minnesota, and serves customers in the United States and international markets. Lifecore Biomedical was formerly part of Landec Corporation. Following the divestiture of Landec’s food business, Landec changed its name to Lifecore Biomedical in 2023 to reflect its focus on pharmaceutical and life sciences manufacturing.

Lifecore Biomedical Q2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Reaffirmed 2026 guidance for revenue of $120 million–$125 million and adjusted EBITDA of $20.5 million–$25 million, with stronger CDMO revenue expected in the second half, particularly in Q4.
• Positive Sentiment: Contractually committed fill-finish demand from Lifecore’s largest customer is expected to double in 2027 and increase more than 200% in 2028 versus 2026, while a successful PMDA inspection supports potential expansion into Japan.
• Positive Sentiment: The company added six pipeline programs during the quarter and nine year-to-date, including late-stage and commercial site-transfer opportunities; management believes 11 existing development programs could commercialize by the end of 2028.
• Negative Sentiment: Second-quarter revenue fell 6.2% to $34.2 million, while six-month revenue declined 19.9% to $57.4 million; adjusted EBITDA decreased to $8.6 million in the quarter and $9.6 million for the six-month period, and the quarterly net loss widened to $6.2 million.
• Neutral Sentiment: Liquidity improved to approximately $38.8 million, but potential Series A preferred payments are not due until December 2028 and would require lender approval; unpaid amounts would accrue interest at 1% per month.

Presentation

[Operator]

Good morning, and thank you for joining us. Today, Lifecore Biomedical will provide its earnings results for the second quarter and six months ended June 30th, 2026, 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 results for the second quarter ended June 30th, 2026, with the comparable prior year quarter ended May 25th, 2025. For the six-month period, we will be comparing our results from January 1st through June 30th, 2026, with the prior year period from November 24th, 2024 through May 25th, 2025. Posting 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.

[Operator]

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 5th, 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 for the Securities and Exchange Commission, including but not limited to the company's Form 10-Q for Q2 2026, which was filed with the SEC this morning and is also available on our website.

[Operator]

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

[Paul Josephs, President and CEO at Lifecore Biomedical]

Thank you, Stephanie. Good morning, everyone, and thank you for joining us today. During the second quarter, Lifecore continued to execute with focus and discipline against the strategic objectives we implemented over the last 24 months. We are energized by the success and progress we are making in achieving the three pillars of our growth strategy. As a reminder, these pillars are maximizing our existing commercial business, advancing our development pipeline towards commercialization, and adding high-quality new programs to our pipeline through business development. This is a thoughtful and deliberate strategy that is designed to drive durable growth over the medium to long term and create value for our shareholders as well as our employees, customers, and other key stakeholders. Building on our successful quarter and our visibility into the months ahead, we remain confident in our full-year expectations and reaffirm our 2026 guidance.

[Paul Josephs, President and CEO at Lifecore Biomedical]

Ryan will provide additional details on our financial results following my overview of our Q2 achievements. I'll begin with an update on the progress we have made across all three pillars of our growth strategy. During the second quarter, we achieved important milestones in each of these areas. With respect to maximizing existing commercial business, we continue to work closely with our largest customer to support a significant increase in demand. Contractually committed fill-finish demand is expected to double beginning in 2027, with committed demand increasing by more than 200% in 2028 as compared to 2026. We now have clear understanding of how this inflection point in demand with our partner will be effectuated, and we are in the process of ensuring that we are operationally ready to successfully execute this important milestone.

[Paul Josephs, President and CEO at Lifecore Biomedical]

As part of this growth in demand, we will be entering new markets in partnership with this customer. In particular, I'd like to highlight the Japanese market and the inspection conducted by the Japanese Pharmaceuticals and Medical Devices Agency, or PMDA. This agency is known for its rigorous technical assessments and high-quality standards. This inspection was successful, and we are pleased with the results, marking a critical step in opening a future new market for our hyaluronic acid and aseptic fill finish products for this customer. For the quarter, we hosted seven separate audits and inspections, representing one of the highest numbers performed in a single quarter for Lifecore. Five of these were with existing and new customer audits, and two were regulatory agency inspections. It is important to note that the time associated with these activities by teams across our organization made this a uniquely demanding period at Lifecore.

[Paul Josephs, President and CEO at Lifecore Biomedical]

We are very pleased to report that we successfully completed each of these inspections and audits with no material issues reported, all while meeting the development and manufacturing needs of our current customers. During the quarter, we also made progress with regard to the second arm of our growth strategy, advancing our development pipeline towards commercialization. We believe that 11 existing development programs have the potential to commercialize by the end of 2028, and we continue to work to advance each of these programs daily. A highlight of the second quarter was Lifecore's successful completion of several process performance qualification, or PPQ batches for a customer approaching commercialization in 2027. While PPQ programs are particularly impactful as they are a pre-commercialization requirement, we caution that the execution of a PPQ campaign is the beginning of a one to two-year journey towards a potential regulatory approval and subsequent recurring commercial revenue.

[Paul Josephs, President and CEO at Lifecore Biomedical]

We have a diverse and exciting late-stage pipeline with the potential to significantly impact future revenues, capacity utilization, and improved margins. We continue to execute this important work and to support each of our development programs as they move closer towards commercialization. Recognizing the importance of the late-stage programs to our mid and long-term growth objectives, we recently added a seasoned industry veteran with more than 15 years of experience with multiple CDMOs to lead our project management efforts. She leads a team of highly talented experts who are responsible for driving our development programs towards commercialization in a professional and efficient manner. Complementing our project management efforts, our manufacturing science and technology, or MS&T team, is charged with transitioning our development stage programs towards commercialization as efficiently and as effectively as possible.

[Paul Josephs, President and CEO at Lifecore Biomedical]

This team includes experienced professionals in pharmaceutical development, and their combined focus on this important objective has improved our processes and productivity. As our development programs continue to mature towards late-stage, we believe this pipeline will be an important driver of our mid- and long-term success, and we intend to continue to invest in this team and capabilities required to successfully execute this transition. We were extremely productive with the first two arms of our growth strategy. Our greatest success during the period was the addition of high-quality new programs to our pipeline by our business development team, the third pillar of our growth strategy. Since I joined Lifecore in 2024, we have reorganized our commercial team with new leadership and proven business development professionals to complement our talented marketing team.

[Paul Josephs, President and CEO at Lifecore Biomedical]

We have successfully rebuilt this team with an aggressive hunter-like approach to our sales and marketing efforts, and we are building strong momentum. During the second quarter, we added six new programs to our pipeline, two of which are expected to generate commercial revenue in the 2028-2029 timeframe. These agreements are with a combination of existing and new customers, ranging in scope from pre-clinical to the commercial transfer of two currently marketed products. Three of these programs were signed during the month of June alone, reflecting the momentum of our business development team's efforts. Since the end of the quarter, we have closed another late-stage injectable program with a specialty biopharmaceutical company. This program is in addition to our nine year-to-date new business wins through June 30 and 13 new business wins over the last 12 months.

[Paul Josephs, President and CEO at Lifecore Biomedical]

Importantly, many of the leading indicators within our business development activity and pipeline continue to trend positively. As an example, since mid-last year, more than 60% of the opportunities for which we have competed on have been late-stage programs or commercial site transfers. These late-stage programs and commercial site transfers are de-risked from clinical approval and come with demonstrated commercial demand, reducing the market risk associated with new drug products. Based on our current proposal activities, we are optimistic that we will continue to close additional late-stage and commercial site transfer programs during the remainder of 2026. Adding to our confidence in our ability to close additional late-stage programs are two significant industry tailwinds. One, the increase in FDA enforcement actions that we have recently seen at other contract manufacturers, and two, the ongoing trend of regionalized drug manufacturing in the U.S.

[Paul Josephs, President and CEO at Lifecore Biomedical]

These two discrete trends have led to an increase in the number of potential customers seeking high-quality, technically capable contract manufacturers like Lifecore. In summary, we believe that our revamped commercial strategy, combined with favorable market dynamics, we will continue to add new and impactful opportunities to our pipeline in 2026 and beyond, contributing to our 12% revenue CAGR by the end of 2029 and providing the next wave of growth into the long term. In addition to the successes with our growth strategy objectives, we continue to make important improvements and create value across our organization. With respect to SG&A, our leadership team remains focused on identifying opportunities for enhanced efficiencies, productivity, and cost reductions.

[Paul Josephs, President and CEO at Lifecore Biomedical]

We are currently progressing more than 40 projects, each intended to explore specific cost reductions or process and productivity improvements that we expect to positively impact margins and contribute to exceeding our 25% adjusted EBITDA margin targets by 2029. It is important to note that we are not only focused on cost reductions, but also how we continue to improve the operations of our business. Enhanced systems and processes will be critical as we look forward towards the inflection point in demand with our largest customer and the potential addition of up to 11 product approvals through 2028. That concludes my update. I will now turn the call over to Ryan Lake to provide an overview of our financial results for the second quarter and six months ended June 30, 2026. Ryan?

[Ryan Lake, CFO at Lifecore Biomedical]

Thank you, Paul, and good morning, everyone. In conjunction with my comments, I would like to recommend that participants refer to Lifecore's Form 10-Q filing, which we filed with the SEC this morning. As a reminder, we will be comparing our results for the second quarter ended June 30th, 2026 with the comparable prior year quarter ended May 25th, 2025. For the six-month period, we will be comparing our results from January 1st through June 30th, 2026 with the prior year period from November 24th, 2024 through May 25th, 2025. Before providing our financial results, I wish to reaffirm our 2026 guidance for revenue and adjusted EBITDA. As a reminder, for 2026, Lifecore expects total revenue to be in the range of $120 million-$125 million, and adjusted EBITDA to be in the range of $20.5 million-$25 million.

[Ryan Lake, CFO at Lifecore Biomedical]

Turning now to the quarter, revenues for the second quarter of 2026 were $34.2 million, a decrease of $2.3 million or 6.2% compared to $36.4 million for the comparable prior year quarter ended May 25th, 2025. The decrease in revenues was primarily a result of the factors that we described during our fourth quarter earnings announcement, as well as timing, mix, and volume of other customers, including lower development revenue and a contractual take-or-pay arrangement in the prior year period, all of which were partially offset by increases in HA manufacturing revenue. We expect a step-up in CDMO revenues in the back half of the year, including higher aseptic and development revenues, and remain on track to deliver our stated revenue guidance by the end of 2026.

[Ryan Lake, CFO at Lifecore Biomedical]

Gross profit for the quarter was $12.1 million, a decrease of $1.9 million compared to $14 million for the comparable prior year quarter ended May 25th, 2025. The decline in gross profit was primarily due to decreased revenues, unfavorable manufacturing costs, and the contractual take-or-pay arrangement in the prior period, partially offset by favorable HA sales volume. Selling, general, and administrative expenses for the second quarter were $8 million, a decrease of $1 million or 11.2% compared to $9 million for the comparable prior year quarter ended May 25th, 2025. The decrease in SG&A expenses was primarily due to lower recurring legal and accounting expenses and lower compensation, in addition to less non-recurring expenses primarily related to legacy legal matters.

[Ryan Lake, CFO at Lifecore Biomedical]

The company recorded a net loss of $6.2 million, or $0.19 of loss per diluted share, as compared to a net loss of $1.1 million and $0.06 of loss per diluted share for the comparable prior year quarter ended May 25th, 2025. Adjusted EBITDA for the second quarter was $8.6 million, a decrease of $0.5 million compared to $9.1 million in the comparable prior year quarter ended May 25th, 2025. I'll now review the results for the six months ended June 30th, 2026. Revenues for the six months were $57.4 million, a decrease of $14.2 million or 19.9% compared to $71.6 million for the six-month comparable prior year period ended May 25th, 2025. The decrease in revenues was similar to the explanations provided for the three-month period.

[Ryan Lake, CFO at Lifecore Biomedical]

Gross profit for the six months was $16.5 million, a decrease of $7.3 million compared to $23.8 million for the six-month comparable prior year period ended May 25th, 2025. The decline in gross profit was primarily due to decreased revenues, product mix, unfavorable manufacturing costs, and the contractual take-or-pay arrangement in the prior period. Selling, general, and administrative expenses for the six months were $15.9 million, a decrease of $3.2 million or 16.7% compared to $19.1 million for the six-month comparable prior year period ended May 25th, 2025. The decrease in SG&A expenses was primarily due to lower recurring legal and accounting expenses and lower compensation, in addition to a reduction in non-recurring expenses primarily related to legacy legal matters.

[Ryan Lake, CFO at Lifecore Biomedical]

The company recorded a net loss of $21.1 million and $0.61 of loss per diluted share as compared to a net loss of $15.9 million and $0.48 of loss per diluted share for the six-month comparable prior year period ended May 25th, 2025. Adjusted EBITDA for the six-month period was $9.6 million, a decrease of $5.1 million compared to $14.8 million for the six-month comparable prior year period ended May 25th, 2025. I'd like to expand upon Paul's comments regarding our cost reduction activities. We are pleased to share that the second quarter of 2026 represents the fifth consecutive quarter of period-over-period declines in SG&A and R&D expenses, and a cumulative total of $16.2 million since we started these initiatives in late 2024.

[Ryan Lake, CFO at Lifecore Biomedical]

These include substantial reductions in accounting, consulting, and legal expenses, which 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. Finally, I'd like to note that liquidity has improved significantly since late 2024. We ended the second quarter of 2026 with approximately $38.8 million in liquidity, including cash of $17.2 million and revolving credit availability of $21.6 million. That concludes my financial overview. I'll now turn the call back over to Paul for his final comments. Paul?

[Paul Josephs, President and CEO at Lifecore Biomedical]

Thank you, Ryan. To summarize, the second quarter was highly productive. We believe that many of our accomplishments during the period affirm the effectiveness of our new business development strategy, the growing value of our pipeline, our commitment to optimizing the transition of our development pipelines towards commercialization, and our focus on maintaining our exceptional track record in quality and compliance. Furthermore, we now have line of sight to the doubling of the fill finish demand with our largest customer beginning in 2027. In addition, Lifecore continues to invest in the talent, processes, and improvements that we believe will support our growth in the midterm and allow us to achieve sustainable long-term profitability into the future. This concludes our prepared remarks for today. Operator, you may now open this call for questions.

[Operator]

Thank you. As a reminder, if you would like to ask a question, please press star one one on your telephone. You will hear an automated message advising your hand is raised. If you would like to remove yourself from the queue, please press star one one again. We also ask that you wait for your name and company to be announced before proceeding with your question. One moment while we compile the Q&A roster. Our first question will be coming from the line of Matt Hewitt of Craig-Hallum. Please go ahead.

[Matt Hewitt, Analyst at Craig-Hallum]

Good morning. Congratulations on all of the progress that you made this quarter. Maybe first question, with the Alcon ramp that's expected to start next year, does that start on day one, January 2nd? Will you see that inflection, or is that going to ramp over the course of the year?

[Paul Josephs, President and CEO at Lifecore Biomedical]

Morning, Matt. Thanks for the question. I would say that it starts earlier in 2026, I would say, with a slightly heavier weighting on the back end of 2027. Excuse me. Starting early in 2027 with a slightly heavier weighting on the back end.

[Matt Hewitt, Analyst at Craig-Hallum]

Got it. Obviously, you've had a lot of success over the past year with new wins. I'm just curious, I think you touched on this a little bit in your prepared remarks, is this a function of reshoring? Is this a function of some of the excess capacity that you have that maybe others don't? Is it because of your ability to manufacture and implement special fill finish capabilities? What do you think is ultimately driving the wins that you've announced?

[Paul Josephs, President and CEO at Lifecore Biomedical]

Yes, is how I would answer that, Matt. It's the regionalization of manufacturing, it's also FDA enforcement is up, I mentioned that in my prepared remarks. FDA warning letters are up approximately 50% year-over-year. We're seeing the benefit of customers looking for high-quality sterile injectable suppliers with strong technical capabilities like Lifecore. When you tag that along with the fact that 50% of the FDA or the drug development pipeline are injectables, they're strong tailwinds in our market, we have a highly talented team that's taking advantage of that.

[Matt Hewitt, Analyst at Craig-Hallum]

That's great. Thank you.

[Paul Josephs, President and CEO at Lifecore Biomedical]

Yeah.

[Operator]

Thank you. One moment for the next question. Our next question is coming from the line of Paul Knight from KeyBanc Capital Markets. Please go ahead.

[Paul Knight, Analyst at KeyBanc Capital Markets]

Yeah, good morning. I know there was some press release regarding the preferred. Paul, where are you with that particular instrument?

[Ryan Lake, CFO at Lifecore Biomedical]

Hi, Paul. Thanks for the question. A few items. Our liquidity position is the best it's been in years with the performance and operational improvements that we've made. I think as you think about the Series A preferred, any potential payment first would not be due until December 28th. We believe that we would also need approval under our credit agreements to make any of those payments, and any outstanding amounts, if not paid, would accrue interest at 1% per month until resolved.

[Paul Knight, Analyst at KeyBanc Capital Markets]

Okay. Paul, on these wins, when you talk about fill finish, is it vials? Is it cartridges for auto-injectors and pins? What type of fill finish are you seeing?

[Paul Josephs, President and CEO at Lifecore Biomedical]

Good morning, Paul. Thanks for the question. I would say heavily weighted to the prefill syringe.

[Paul Knight, Analyst at KeyBanc Capital Markets]

Typically, of course, I guess biologics is in it.

[Paul Josephs, President and CEO at Lifecore Biomedical]

Yeah. The nice thing for us, Paul, or what we're seeing, I think, is evidence that our strategy is working. We see it now a broader scope of modalities that we're working on, including biologics. I think you'll see in our investor updated investor deck now nine different modalities that we've won deals on over the past year or so. Yeah, the strategy is working, and we're taking advantage of the opportunities within the market.

[Paul Knight, Analyst at KeyBanc Capital Markets]

Lastly, are you seeing any interest due to the onshoring efforts that might be going on?

[Paul Josephs, President and CEO at Lifecore Biomedical]

Absolutely. A number of the programs, I don't have the exact number in front of me, but we've won opportunities now that will come to us from Europe, Asia Pacific, excuse me, Europe, Israel and India.

[Paul Knight, Analyst at KeyBanc Capital Markets]

Great. Thank you very much.

[Paul Josephs, President and CEO at Lifecore Biomedical]

You're welcome.

[Operator]

Thank you. One moment for the next question. Our next question is coming from the line of Mac Etoch of Stephens. Please go ahead.

[Mac Etoch, Analyst at Stephens]

Hey, good morning, and thank you for taking my questions. Apologies if you addressed this in the prepared remarks, but the HA manufacturing pretty strong in the quarter. Given some of the timing aspects that you highlighted at the start of the year, was there any change in how those flowed through versus initial expectations?

[Ryan Lake, CFO at Lifecore Biomedical]

Hey, Mac. Thanks for the question. We are very excited about the performance in the quarter and all the new business momentum that we've seen over the past 12 months, and even a higher accelerated level of adding new and impactful programs to our pipeline over the past six months. Based on our performance in the first half, revenue expectations in the second half, at the midpoint of our guidance range, is in the $65 million range, and adjusted EBITDA is in the $13 million range. HA demand was strong in the quarter, but really just timing first half versus second half and in line with our full year expectations.

[Ryan Lake, CFO at Lifecore Biomedical]

We do expect a strong performance in CDMO revenues in the back half of the year, including higher aseptic demand as well as higher development revenues, and remain on track to deliver both our revenue and EBITDA guidance by the end of 2026. Based on the timing of orders that we do have in hand, it will be a little bit more weighted toward Q4. I'd also say that just generally speaking from an EBITDA and cost perspective, we're ahead of where we anticipated to be, both costs and timing, in terms of improving our operating costs. You will have seen SG&A slip down below $8 million a quarter for the past couple of quarters, and we expect further improvements in the back half of the year and anticipate that SG&A, excluding any one-time items, would be in the $6 million quarter range.

[Mac Etoch, Analyst at Stephens]

I appreciate that. Given the elevated level of new wins that you've been announcing over the last year or so, I guess I just want to understand how utilization expectations for the midterm targets has evolved. Is there any incremental CapEx or could you move towards the Site 3 optionality? Essentially, could that become more relevant quicker than expected?

[Paul Josephs, President and CEO at Lifecore Biomedical]

Mac, thanks for the question. I would say that we couldn't be more excited about the progress, and certainly the organization is energized by it. I think the new business wins continue to give us great optimism with regard to our midterm objectives, the 12% CAGR and greater than 25% EBITDA margins by the end of 2029, and we feel as though we're right on track. Based on that, we'd be utilizing 60% of our already installed and capacity that's available to us. As we move closer, we'll continue to evaluate opportunities, whether it's Site 3 for incremental capacity or other options as we continue to move down the road. Right now, we have all the capacity to meet our midterm objectives and still with headroom to grow beyond that.

[Mac Etoch, Analyst at Stephens]

Thank you for taking my questions.

[Operator]

Thank you. One moment for the next question. Our next question is coming from the line of Jared Haase of William Blair. Please go ahead.

[Christine Rains, Analyst at William Blair]

Hi, good morning, Paul and Ryan. It's Christine Rains on for Jared. First, congrats on the quarter. As for the question, hoping maybe Ryan, you can dig a little bit more into your comments on more back half Q4 results, more being weighted to Q4, if that's more of a revenue or an EBITDA comment or both. It seems like related to order timing, but maybe if you could provide some rough sort of quantification of the split between Q3 and Q4.

[Ryan Lake, CFO at Lifecore Biomedical]

Yeah, Christine, thanks for the question. It's really just timing of the orders that we have in-house already, causing that waiting to be a little bit more back-end weighted to Q4. Again, I think importantly, we're on track to deliver both our revenue and EBITDA guidance for the year.

[Christine Rains, Analyst at William Blair]

Great. That's good to hear. Looking a bit ahead at your anticipated revenue and volume inflection in 2027 and 2028, it sounds like from a capital allocation standpoint, in terms of CapEx, you guys seem to be in a good place with evaluating based on your pipeline. Curious if capacity is ample for your pipeline, would this be an opportunity to shift more of your free cash flow towards debt reduction and sort of lowering your interest costs?

[Ryan Lake, CFO at Lifecore Biomedical]

I would say the investments that we've made over the past five years really support our growth throughout the midterm. Our projections have us being at about 60% capacity in 2029. We've continued to make really important strides from a free cash flow perspective, and I do think there's opportunities for us. I think notably, even within the quarter, Christine, we began paying a portion of our debt service in cash, as opposed to payment in kind. That's what we've done in the prior quarters, and we view that as a milestone and continued reflection of our improving free cash flow generation. Really pleased as well with all the work that we've been doing from a working capital perspective to reduce inventories and to be able to start paying some of that debt service.

[Christine Rains, Analyst at William Blair]

Great. Thank you for that. That was helpful. Thanks for taking our questions.

[Operator]

Thank you. One moment for the next question. Our next question is coming from the line of Michael Petusky of Barrington Research. Please go ahead.

[Michael Petusky, Analyst at Barrington Research]

Hey, good morning. Ryan, I just want to make sure I heard something correctly. Were you saying essentially that the sort of the $7 million, $9 million, $8 million a quarter in SG&A, you think that can trend down towards $6 million? Did I hear that correctly? Per quarter?

[Ryan Lake, CFO at Lifecore Biomedical]

You did, Michael.

[Michael Petusky, Analyst at Barrington Research]

That starts somewhere in the second half?

[Ryan Lake, CFO at Lifecore Biomedical]

That's correct.

[Michael Petusky, Analyst at Barrington Research]

Wow, okay. All right. Just sort of following on to the previous question around free cash. You guys have generated, looks like almost $4.5 million for the first half, and I'm just curious, would you expect sort of roughly something similar in the second half in terms of true free cash or possibly anything above that?

[Ryan Lake, CFO at Lifecore Biomedical]

I think that we are expecting free cash flow generation for the year to be probably in that $7 million-$10 million range. It would kind of say that the second half, and obviously based on the EBITDA performance in the second half as well being stronger than the first half, that that would follow the free cash flow generation. I think some of the one-time items were higher in the first half than what we previously anticipated. There's still a lot of puts and takes as it relates to the cash outlook for 2026. It's dependent on a number of things, including those items related to legacy matters, the timing of some of our CapEx, and any potential payments of Series A.

[Michael Petusky, Analyst at Barrington Research]

Okay. Just quickly, jumping back to the preferred holder redemption notice from, I guess, a month or so ago. When you guys think about your liquidity needs, where can you comfortably run this business? You're at $38.8 million now. If you wanted to pay off those preferred holders, what kind of liquidity do you feel like you need to run the business on a sort of comfortable basis? I understand we're looking ahead several months here before you have to sort of make decisions around this, I'm just curious if you would be willing to share just a sense of what level of liquidity is sort of a comfort level for you guys.

[Ryan Lake, CFO at Lifecore Biomedical]

Michael, I'd say it's really going to be dependent on the facts and circumstances at that time. Certainly, we want to make sure that we retain enough cash to meet the compliance requirements under our debt agreements, as well as to be able to fund the future growth of the business.

[Michael Petusky, Analyst at Barrington Research]

Okay. I guess, Paul, one for you. Obviously, you guys have had some really fantastic success in terms of new business wins and obviously you got the larger customer going to be ramping up here in the next year to two years in a meaningful way. As you sort of think about the employee footprint of the business, what you're going to need to sort of service these customers, I would assume that you have to add people resources and obviously somebody else was talking about Site 3, et cetera. Can you just talk about how you might need to prepare as 2027 turns to 2028 and then beyond? Thanks.

[Paul Josephs, President and CEO at Lifecore Biomedical]

Mike, thanks for the question. What I would tell you is that first, certainly from an indirect and SG&A perspective, we don't expect a significant amount of incremental adds to support the demand. We really believe that we'll be able to get leverage over our existing headcount. There'll be some nominal adds in that area. We will, though, spend time and effort in adding resources and potentially different resources to support our development efforts as that continues to grow a bigger and bigger piece of what we do day in, day out in supporting those projects from development through commercialization. Primarily, it will be a direct labor and direct supervision equation as it relates to the incremental headcount that we'll add to the organization.

[Paul Josephs, President and CEO at Lifecore Biomedical]

As a CDMO of our size, we want to make sure that we don't get too far ahead of ourselves, that we have the right labor in place for the demand that we have today. We have a great HR team. We have a plethora of talent here within the Minneapolis-Saint Paul area. I'm very confident in our ability to, again, add the right talent at the right time to support the ongoing needs of our customers, both from a development and commercialization perspective.

[Michael Petusky, Analyst at Barrington Research]

Paul, can I sneak one final one in for you?

[Paul Josephs, President and CEO at Lifecore Biomedical]

Sure.

[Michael Petusky, Analyst at Barrington Research]

Just in terms of the success you've had in terms of new business signings and particularly late-stage and commercial site transfers, does the success you've had, does it sort of change the hurdle rate as you move forward in terms of new business agreements you're willing to sign and not willing to sign? Essentially, I'm asking you, do early-stage or smaller deals essentially almost become not worth signing given the momentum you've got and how much you have to do and seemingly the pipeline of potentially late-stage deals that you still are working on? Thanks.

[Paul Josephs, President and CEO at Lifecore Biomedical]

Mike, thanks for the question. It sounds like you were actually in our leadership meeting a little over a month ago. We've had great success, which now we're very humbled by it, but remain very hungry. As we think about our ideal customer profile, that's beginning to evolve based on our success. We'll always continue to put a heavier lean on late-stage and commercial site transfers because they are de-risked from a commercial standpoint, and this is all about This is a recurring revenue business. We won't shy away from the early-phase programs. We'll certainly price those maybe a little bit differently, knowing that the success and churn rate is certainly a lot higher than your late-stage or commercial site transfers. Great question. It's something that we've been talking a lot about lately.

[Michael Petusky, Analyst at Barrington Research]

All right. Terrific. Thanks, guys.

[Operator]

Thank you. That concludes today's Q&A session. I would like to turn the call back over to Paul for closing remarks. Please go ahead.

[Paul Josephs, President and CEO at Lifecore Biomedical]

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. Our accomplishments during the first half of the year continue to fuel our optimism. We look forward to the opportunities ahead. That concludes our call today. Thank you for participating.

[Operator]

That concludes today's program. Thank you so much for participating. You may now disconnect.

Participants

Executives

• Paul Josephs, President and CEO
• Ryan Lake, CFO

Analysts

• Matt Hewitt, Analyst at Craig-Hallum
• Paul Knight, Analyst at KeyBanc Capital Markets
• Mac Etoch, Analyst at Stephens
• Christine Rains, Analyst at William Blair
• Michael Petusky, Analyst at Barrington Research