Revenue Soars 92% to $5.6M in Q1 While Margins Slide to 18%
First-quarter revenue rose 92% year-over-year to $5.6 million, surpassing management’s $5.0–$5.2 million guidance range on strength from Arps Dairy’s milk processing operations. Gross margin declined to 18% from 31% as lower-margin milk mix and facility start-up costs weighed on profitability, while adjusted EBITDA loss narrowed to $0.24 million.
1. Q1 Financial Results
The company reported revenue of $5.6 million in Q1, a 92% increase over prior year, driven by higher volumes from Arps Dairy’s milk processing contribution. Adjusted EBITDA loss narrowed to $238,000 from $506,000 a year earlier, and net loss improved to $661,000.
2. Margin Pressure Drivers
Gross margin fell to 18% from 31% year-over-year due to the lower-margin milk processing mix and startup costs at the newly acquired Defiance facility. Selling and distribution expenses declined to $697,000 from $824,000, and G&A remained flat at $755,000, reflecting ongoing cost discipline.
3. Facility Ramp and Integration
The Arps Dairy processing facility supplied about 50% of frozen beverage and food volume in Q1, while co-manufacturers covered remaining production during a staged transition. The larger 44,000-square-foot Defiance plant is on track for commissioning by year-end 2026, backed by a $2.4 million equipment grant and $7.5 million convertible note financing.
4. Outlook and Guidance
FY26 revenue guidance of $28–$32 million and adjusted EBITDA target of $3.2–$3.8 million assume stronger H2 conversion as school-year education volumes ramp. Active bid season and recent large-district awards support demand visibility for core products in the back half of the year.