BUDA NYSEAMERICAN: BUDA reported second-quarter revenue growth of 26.4% as its core beverage business expanded organically and the company began selling products in 246 Walmart stores across nine states. The company also introduced its Ultra Fresh dressings line, although startup costs associated with that business weighed on gross margin.
Revenue for the quarter totaled $4.5 million, compared with $3.6 million in the prior-year period. Chief Executive Officer Horatio Lonsdale-Hands said the acceleration arrived earlier than management had anticipated, after the company had previously expected stronger growth during the second half of the year.
“The second quarter was a real step forward for Buda,” Lonsdale-Hands said. “Two things drove that. Our core beverage business continued to grow organically with our existing customers. It picked up a partial quarter contribution from our second quarter expansion into 246 Walmart stores across nine states.”
Early Third-Quarter Sales Trends
Management said preliminary, unaudited net sales for the first six weeks of the third quarter were up more than 40% from the corresponding period last year. According to Lonsdale-Hands, roughly half of that growth came from same-store sales, with the remainder primarily tied to Walmart and restaurant business.
The CEO described Buda’s strategy as focused on “Ultra Fresh” juice products distributed through its Fresh35° cold chain and sold in produce sections. He said the company’s Buda Fresh single-serve and multi-serve products at Walmart are priced from $1.47 to $5.99.
Lonsdale-Hands said the company believes consumer demand is shifting toward fresh, clean-label juice products that are refrigerated and sold near produce. He cautioned, however, that an early observation from one new store at a large national retailer should not be viewed as conclusive, even though the company believes its fresh juice section may be outselling the adjacent pasteurized juice selection at that location.
During the question-and-answer session, Lonsdale-Hands said the company is seeing substantial interest in the Ultra Fresh category from retailers, but did not provide details on potential new customer wins. He added that Buda is also seeking to expand business with existing customers.
Gross Margin Pressured by Startup and Input Costs
Gross margin declined to 36.6% in the second quarter from 46.7% a year earlier, a decrease of 1,010 basis points. Chief Financial Officer Clint Bowers attributed the pressure to several identifiable items, including third-party co-packing costs for the new dressing line, elevated inbound freight expenses, labor investments, product mix and higher produce costs.
- About 320 basis points of margin pressure came from third-party co-packing of Ultra Fresh dressings.
- Approximately 270 basis points came from higher inbound freight costs, which Bowers said were tied to elevated fuel prices.
- About 100 basis points resulted from added labor for training and audit-readiness activities related to facility upgrades and customer expansions.
- Roughly 30 basis points were related to product and customer mix.
- About 290 basis points reflected higher produce costs, principally elevated lime costs following a first-quarter supply disruption.
Bowers said produce costs had returned to normal levels toward the end of the second quarter. He also said that, excluding elevated transportation costs, dressing co-packing costs and added labor investments, gross margin would have returned to the company’s historical level above 40%.
The company expects to begin producing dressings at its Dallas facility during the first quarter of 2027, ending the need for third-party co-packing. Bowers said management expects both dressing margins and consolidated gross margin to improve when production moves in-house. Inbound freight costs remain less predictable, though Bowers said the company may choose to pass along those costs if they persist.
Profitability, Cash and Investment Spending
Operating expenses rose to $1.2 million, or 26.8% of revenue, from $500,000, or 14.7% of revenue, in the prior-year quarter. Bowers cited $185,000 in public-company costs, $213,000 in stock-based compensation expense and investments in commercial capabilities supporting Walmart and the dressing business.
Operating income was $400,000, compared with $1.1 million a year earlier. Net income totaled $500,000, or $0.04 per diluted share, based on 12.9 million weighted-average diluted shares. Adjusted EBITDA was $700,000, or 16.1% of revenue, compared with $1.2 million, or 33.8% of revenue, in the prior-year period.
Buda ended the quarter with $18.8 million in cash and no debt. Cash used in operating activities was approximately $365,000, compared with operating cash flow of $741,000 in the year-earlier quarter. Bowers said a principal factor was the company’s decision to shift a large customer from an early-payment discount arrangement to standard net-30 payment terms, which increased accounts receivable but was described as a one-time change with no impact on collectibility.
The company spent approximately $470,000 on property and equipment during the quarter and $700,000 in the first half, directed toward juice capacity expansion, automation and the dressing-line buildout. Free cash flow was negative $800,000, compared with positive $700,000 a year earlier. Bowers said the payment-terms change and higher capital spending collectively reduced quarterly free cash flow by $1.9 million.
Management said it remains focused on executing growth initiatives while maintaining profitability and funding expansion from its balance sheet.
About BUDA (NYSEAMERICAN:BUDA)
Buda Juice Inc is a juice category for the supermarket fresh produce department with its cold-crafted, UltraFresh(TM) citrus juices. Buda Juice Inc is based in DALLAS.
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