Lamb Weston Holdings Inc (LW) Q3 2025 Earnings Report

1) Revenue and profitability snapshot
- Third quarter revenue: $1.5205 billion; gross profit $422.5 million; gross margin 27.8%; operating income $248.7 million; EBITDA $350.9 million; net income $146.0 million; diluted EPS $1.03.
- YoY and QoQ: Revenue YoY +4.27%, QoQ -5.02%; Gross profit YoY +4.66%, QoQ +52.09%; Operating income YoY +11.08%, QoQ +1,244.32%; Net income YoY -0.07%, QoQ +504.43%; EPS YoY +1.98%, QoQ +512.00%.

2) Segment and margin dynamics
- North America net sales +4% YoY; volume +8% YoY; price/mix down 4% YoY.
- International net sales +5% YoY; volume +12% YoY; price/mix down ~7% YoY (constant currency ~4% decline).
- Adjusted EBITDA: North America $301 million (+$15 million YoY), International $93 million (-$8.5 million YoY).
- Overall adjusted gross profit rose sequentially but was offset by higher transportation and warehousing costs and a higher depreciation charge reflecting capacity expansion investments.

3) Balance sheet and liquidity
- Cash and equivalents: $68 million; total liquidity ~ $1.1 billion including revolver availability. Net debt: ~$4.20 billion; trailing-twelve-month leverage ~3.4x.
- Total assets $7.4228 billion; total liabilities $5.7892 billion; stockholders’ equity $1.6336 billion.
- Working capital and capex: capex YTD ~$563 million; full-year 2025 capex target $750 million; guidance indicates continued working-capital optimization.

4) Cash flow and capital allocation
- Operating cash flow (nine months) ~$485 million; Q3 net cash from operating activities ~$56 million; free cash flow for the quarter was negative $19.8 million.
- Free cash flow impact driven by working-capital needs during ERP execution and ongoing inventory build; plan to reduce working capital via line curtailments and downtime.
- Shareholder returns: $151 million returned in the quarter (including a $100 million buyback); $51 million in cash dividends; ~ $458 million remaining under the buyback authorization.

5) Guidance and outlook
- FY2025 revenue target: $6.35–$6.45 billion; adjusted EBITDA target: $1.17–$1.21 billion.
- Expectation of a mid-to-high single-digit increase in international volume; North America volume to slightly decline; price/mix down low-to-mid single digits overall.
- Anticipated gross margin decline of ~700 basis points year-over-year in the fourth quarter, driven by seasonal fixed-cost absorption and higher factory burden from curtailed lines; SG&A guidance lowered to $665–$675 million for the full year; tax rate target ~28% (excluding comparability items).
- Tariff impact not baked into the outlook; company emphasizes local/regional supply and yet-to-be-assessed tariff effects on exports and certain inputs.

Overall analysts should view the QQ3 2025 results as a material progress milestone in a broader transformation agenda, with evidence of volume recovery and select contract wins supporting a path to margin stabilization and potential expansion as the value-creation program matures and ERP-related efficiencies fully amortize.