Good morning. Welcome to Lifeway Foods' second quarter 2026 conference call. On the call with me today is Julie Smolyansky, President and Chief Executive Officer. By now, everyone should have access to the press release that went out this morning. If you have not received the release, it is available on the investor relations portion of Lifeway's website at www.lifewayfoods.com. A recording of this call will be available on the company's website. Before we begin, we would like to remind everyone that the prepared remarks contain forward-looking statements. The words believe, expect, anticipate, plan, will, and other similar expressions generally identify forward-looking statements. These statements do not guarantee future performance and therefore undue reliance should not be placed on them. Actual results could differ materially from those projected in any forward-looking statements. Lifeway assumes no obligation to update any forward-looking projections that may be made during today's call, except as required by law. All of the forward-looking statements contained herein speak only as of the date of this call. Since our last earnings call, I'm excited to share that Julie Smolyansky, LifeWay's president and chief executive officer, was honored for the second consecutive year as one of Progressive Grocers' top women in grocery for 2026. This recognition reflects her leadership and the sustained impact she has had on both the company's and the category's growth trajectory. Congratulations, Julie. And with that, I'll turn the call over to you.

Thank you so much, John, and good morning to everyone joining us. As always, we greatly appreciate your interest in Lifeway Foods. Before I get going into the numbers, I want to take a moment to thank our Lifeway team. What we have delivered so far this year doesn't happen without discipline and energy you all bring to work every day. Let's begin with the headline. and Julie Smolyansky. and Julie Smolyansky. In the first half of 2026 alone, net sales reached $129.9 million, up 29.9% year over year, and equal to approximately 61% of our full year 2025 net sales. We believe that consistency demonstrates the durability of consumer demand, the strength of our brands, and the repeatability of our growth model. Drinkable Kefir remains the core engine of our business. Lifeway is the brand that introduced kefir to generations of American consumers. And for 40 years, we have defined what authentic, real kefir means in this market. our heritage, proprietary know-how, trusted retail relationships, nationwide distribution, and deep consumer recognition reinforce our leadership of the U.S. Kiefer category. We intend to keep strengthening that position through product quality, innovation, cultural relevance, and investment behind the Lifeway name. Farmer Cheese is equally rooted in our history. and Julie Smolyansky. at the same time, a growing population of GLP-1 users is seeking nutrient-dense foods that can support protein intake, digestive health, and satiation. LifeWay's portfolio sits at the intersection of these needs, culturally relevant, widely accessible products with protein and probiotics that consumers can incorporate into their everyday routines. Turning to profitability, gross margin was 19.5% in the second quarter. Elevated milk prices were the primary headwind, together with temporary increases in resin costs for packaging and oil-related transportation costs associated with the conflict in the Middle East. We currently expect these incremental resin and transportation pressures to subside as conditions normalize. While the cost pressure was significant, it does not change the strength and the underlying consumer demand or our confidence in Lifeway's long-term earning power. SG&A was 18.4% of net sales compared with 17.6% last year, reflecting continued investment in brand building and consumer acquisition. Importantly, the year-to-date picture demonstrates operating leverage. SG&A decreased by 100 basis points as a percentage of net sales to 17.8%, while first half net sales increased nearly 30% to $129.9 million. We believe this is clear evidence that our investments are generating demand and scaling efficiently. and Julie Smolyansky and Julie Smolyansky. and Julie Smolyansky. Our priorities are clear. Win new consumers, earn more shelf space, accelerate velocities, and convert today's heightened interest and life way into durable repeat purchasing. We believe executing against those priorities can support sustained growth and long-term shareholder value. National Kiefer Day and Lifeway's 40th anniversary showed what our consumer acquisition strategy looks like in action. Activations in New York, Chicago, Miami, and Los Angeles brought Lifeway directly to consumers through custom smoothies, sampling, and exclusive merchandise and high visibility talent. at our 40th anniversary celebration in New York, U.S. soccer star Rosie Lavelle joined us for a VIP preview and cannons performed live. We also brought the celebration into energy surrounding the World Cup with in-person activations in host cities and an online extension featuring recipes designed for at-home viewing parties. Eric Hanson, Julie Smolyansky These moments demonstrate the scale of organic consumer interest we can create around Lifeway and our ability to meet consumers where culture is happening. We are expanding our creator relationships, producing content that reaches millions of consumers and directing that interest to retail. In stores, we are concentrating spending at high impact points in the shopping journey to convert awareness into trial, repeat purchase, and stronger velocities. and Julie Smolyansky. Bush's is adding the full Muscle Maze lineup and all three Lifeway Kiefer Butter varieties. These wins broaden our reach and give more consumers new reasons to enter the Lifeway portfolio. Our legacy product lines are also gaining meaningful new shelf space. Farmer Cheese, a Lifeway favorite for 40 years, is newly available nationwide at Walmart and is coming soon to approximately 450 Target stores this fall, bringing this established line to an even broader mass market audience. Target now carries Lifeway Kefir Butter. Meyers is adding Lifeway Kefir Butter in approximately 270 stores this fall, and Big Y added the butter this month. The timing gives consumers more access to Lifeway farmer cheese and kefir butter, just in time for fall and holiday baking, cooking and entertaining. Together, these placements expand the occasions we serve and give us multiple avenues to deepen relationships with major retailers. Our focus now is disciplined execution, replenishment and velocity. We are also opening new channels through Cisco on the East Coast, supporting food service customers, college campus dining halls, and fast-growing frozen yogurt concepts, including Mimi's and Drugstore in New York and MikaNo in Chicago. This is strategically important because it creates trial outside the traditional grocery aisles and introduces Lifeways to consumers in new consumption occasions. We are investing in the capacity required to support this expanding opportunity. The Waukesha facility expansion remains on track for completion in early 2027. Once complete, we expect the project to meaningfully increase production capacity, enhance operating efficiency, and give Lifeway greater flexibility to serve growing demand across retail and food service. This is a strategic investment in our next stage of scale. To close, the second quarter demonstrated both the strength and the resilience of Lifeway's growth platform. We delivered the highest quarterly sales in the company's history, extended our growth streak to 27 consecutive quarters, expanded distribution for both legacy and innovative products, and advanced the capacity investments designed to support our future. and Julie Smolyansky. Eric Hanson, Julie Smolyansky We remain deeply grateful to our retail partners, loyal customers, and the growing number of consumers discovering Lifeway for the first time. Forty years after my father founded the company, our mission remains the same. Make the best-in-class probiotic foods, rich in bioavailable nutrients, accessible to more people. Thank you for your continued support. We look forward to updating you on our progress when we report third quarter results in November. Have a great rest of your summer.