Cal-Maine Foods, Inc.

Good morning, everyone, and welcome to the Cal Maine Foods third quarter fiscal 2026 earnings conference call. All participants are in a listen-only mode. After today's prepared remarks, there will be a question and answer session. At that time, I'll provide instructions for those wishing to ask a question. Please note this call is being recorded. I will now turn the call over to Sherman Miller, President and Chief Executive Officer of Cal Maine Foods. Please go ahead.

Good morning. Thank you for joining us today. I want to remind everyone that today's remarks may include forward-looking statements. These are based on management's current expectations and are subject to risk and uncertainties described in our SEC filings. Let me start by sincerely thanking our teams across the organization whose execution, focus, and commitment to excellence drive the operational and financial performance that underpins everything we do. The hard work and dedication continue to set us apart, and these results are a direct reflection of their efforts. In February, we shared the sad news of the passing of longtime board member Jim Poole. Over more than two decades, Jim made a lasting impact on the company, and we extend our heartfelt condolences to his family and loved ones. Today, we announced the appointment of Dudley Woolley to the board to fill the vacancy left by Jim. Dudley brings deep expertise in risk management and governance, along with a strong track record of leading growth-oriented organizations and driving operational performance. We look forward to the perspective he will add as we continue to strengthen our business, enhance earnings visibility, and focus on long-term value creation. Before Max walks you through our results in detail and provides additional color on our financial performance, I'd like to spend a few minutes discussing how we think about the long-term direction of the business and how the strategy we're executing is designed to create durable value over time. When investors evaluate CalMain, they often focus on the consistency of our execution. That reputation has been built over time, not in any single quarter. It reflects the accountability, operational excellence, and continuous improvement embedded across the organization. At CalMain, our objective is straightforward. to compound intrinsic value per share over time through thoughtful portfolio evolution, efficient operations, and prudent capital allocation. While short-term earnings will naturally fluctuate in a cyclical industry, our focus remains on strengthening the long-term earnings power and resilience of the business. In practical terms, that strategy centers on several priorities. First, we continue to expand our specialty egg mix specialty eggs represent a larger portion of our portfolio. They support structurally stronger margins, more stable demand characteristics, and improved returns on invested capital. Second, we're continuing to evolve our pricing structures. Over time, we're increasing the share of our business that operates under structured pricing arrangements, which we believe helps improve the stability and predictability of realized pricing across the cycle. Third, we're expanding our prepared foods platform. Prepared foods broadens our addressable market, leverages our vertically integrated shell egg inputs, and establishes a complimentary long-term growth platform alongside our core shell egg business. At the same time, we continue to reinforce the operational strengths that have long defined the company. Investments in biosecurity, productivity, and vertical integration strengthen our cost leadership and support reliable operating performance across cycles. Together, we believe these actions will steadily improve the quality and durability of our normalized earnings power while strengthening the company's long-term competitive position. Against that backdrop, let me highlight a few key developments from the third quarter and the first three quarters of our fiscal year that reflect how this strategy is translating into execution. Unless otherwise indicated, all comparisons are to the comparable period of fiscal 2025. In the third quarter of fiscal 2026, specialty eggs drove a greater portion of shell egg sales, accounting for 50.5 percent of total shell egg sales compared to 24.4 percent. Prepared foods accounted for 9.5 percent of net sales compared to 0.8 percent. Specialty eggs and prepared foods combined accounted for 52.9% of net sales compared to 24%. In the first three quarters of fiscal 2026, specialty eggs drove a greater portion of shell egg sales, accounting for 42.7% of total shell egg sales compared to 29.2%. Prepared foods accounted for 9.3% of net sales compared to 1%. Specialty eggs and prepared foods combined accounted for 45.7% of net sales compared to 28.6%. Importantly, the egg market in the third quarter of fiscal 2026 provided a real-time test of our strategy. Periods of price softness can create noise around near-term performance, but they also provide an opportunity to demonstrate that our results are not simply a function of spot market conditions. Our performance reflects how effectively we manage mix, pricing structures, cost, and capital across the cycle. What we're really seeing is a market that's still being impacted by High Path AI, but to a much lesser extent than last year. The disruption hasn't gone away. It's still a reality, but it's not driving the same level of supply shock or panic-driven purchasing. Supply has improved, and retailers and food service operators aren't rushing to build inventory. which has put downward pressure on wholesale prices, with retail adjusting more gradually. The key data points for December to February make that clear. The average layer hen flock is up about 2.2% year over year, and depopulations are down 70.6% year over year. So while high path AI is still present, the magnitude of disruption is meaningfully lower, and that's what's showing up in pricing. On the demand side, consumption remains stable to improving, with a few timing dynamics influencing near-term trends. And retail volumes are up about 3% year to date. What's important is that our market is broad-based. Growth is showing up across both value and premium segments. In food service, demand is beginning to recover, with increased traffic and egg servings increasing, particularly in quick service. More broadly, eggs continue to benefit from strong structural tailwinds. They align with high-protein and health-focused diets, fit well with convenience and portable meal formats, and remain a non-discretionary item once a consumer is in the channel. So overall, demand is holding up well, and what we're seeing in the market today is much more about supply recovery and timing shifts than any fundamental change in consumption. You can see our strategic framework reflected in the acquisition of the shell egg, egg products and prepared foods assets of Creighton Brothers and Crystal Lake that we announced during the quarter. This transaction expands the geographic scale of our shell egg platform and adds nearby liquid egg capacity that supports our internal sourcing strategy for egg-based ingredients. We believe that over time, integrating shell egg production, egg products, and prepared foods more tightly within our value chain will help strengthen supply security, improve operational efficiency, and reinforce the economics of our prepared foods platform. With that, let me turn the call over to Max to drill down into our financial results and discuss our capital allocation framework. Max?

Thanks, Sherman, and good morning, everyone. As a reminder, we published our third quarter earnings release in the 10Q this morning. Additionally, we published a brief earnings presentation on our website. These documents contain detailed information on our financial results. I'll touch on the highlights for the third quarter of fiscal 2026, unless otherwise indicated, all comparisons are to the comparable period of fiscal 2025. For the third quarter of fiscal 2026, Net sales were 667 million compared to 1.4 billion, down 53%. Conventional egg sales were 283.2 million compared to 1 billion, down 72.1%, with 70.1% lower selling prices and 6.7% lower sales volumes. Specialty egg sales were 289.1 million compared to 328.9 million, down 12.1% with 16.9% lower selling prices and 5.8% higher sales volume. Our average breeder flocks grew 13%, total chicks hatched rose 41.7%, and the average number of layer hens expanded 2%. Prepared food sales were 63.6 million compared to 11.8 million, up 441.2% year-over-year and compared to 71.7 million, down 11.2% quarter over quarter. Our majority-owned subsidiary, Crepeni Foods, delivered strong momentum, with sales increasing by 283%, contributing positively to the overall prepared foods portfolio. In prepared foods, Q3 represents a trough driven by the timing of previously announced planned network optimization and expansion activities. The near-term margin pressure is largely volume-driven, reflecting temporary downtime and under-absorption of fixed costs, along with some mixed headwinds as the network transitions, and we increase the use of cost-type pricing arrangements that enhance stability. As capacity comes back online, we expect a progressive recovery beginning in Q4, with margins trending back towards baseline through fiscal 2027 and 2028, as scale and network efficiencies are realized. We expect prepared foods capacity to increase more than 30% over the next 18 to 24 months. Importantly, demand remains intact. This is a function of execution timing, not structural weakness, and these investments position prepared foods as a more durable, high-margin growth platform. Overall, gross profit was $119.3 million compared to $716 million down 83.3%, primarily driven by 56.5% lower shelled egg selling prices, partially offset by decrease in the price and volume of outside egg purchases. As our percentage produced to sold increased 3.1 percentage points to 91.5%. Operating income was 35.9 million compared to 635.7 million, down 94.3%, with an operating income margin of 5.4%. Net income attributable to CalMain was 50.5 million, compared to 508.5 million, down 90.1%. Diluted earnings per share were $1.06, compared to $10.38, down 89.8%. Cost of sales decreased 21.9%. Lower costs associated with ag purchases and egg products more than offset the increase in prepared food costs due to the acquisition of Echo Lake Foods, as well as the increase in our farm production and processing, packaging, and warehouse costs. SG&A expenses increased 4.2% due to the addition of Echo Lake Foods and increased professional and legal fees. This was partially offset by lower employee-related costs. Net cash flow from operations was 103.6 million compared to $571.6 million, down 81.9%. We ended the quarter with cash and temporary cash investments of $1.152 billion, down 17.3%. We remained virtually debt-free. We repurchased 329,830 shares of common stock under our current share repurchase authorization during the quarter for a total of $24.3 million. Repurchase program permits us to purchase up to $500 million, of which $350.8 million remains available. For the third quarter of fiscal 2026, we will pay a cash dividend of approximately $0.36 per share to holders of our common stock pursuant to our variable dividend policy. The dividend is payable on May 14, 2026 to holders of record on April 29, 2026. The final amount paid will be based on the number of outstanding shares on the record day. From a financial perspective, our priorities remain centered on strengthening the durability and predictability of CalMain's earnings profile while maintaining a structured and flexible capital structure. Our capital allocation framework is designed to support long-term per share value creation while preserving the financial resilience necessary to navigate a cyclical industry. First, we will prioritize investment in high return organic growth opportunities. This includes investments that expand specialty egg capacity, improve productivity and operational efficiency, and support the continued development of our egg products and prepared food capabilities. To that end, our prepared foods expansion initiatives are progressive on schedule and in line with plans previously communicated. At Echo Lake Foods, a network optimization and capacity expansion project is underway and expected to add approximately 17 million pounds of annual scrambled egg production capacity throughout fiscal 2027. In addition, the previously announced 14.8 million high-speed pancake line continues to advance this plan and is expected to contribute an additional 12 million pounds over the course of fiscal 2027. Separately, our joint venture, Kilpenny Foods, is investing $7 million through fiscal 2028 to expand production capacity by approximately 18 million pounds through the installation of new equipment and production lines. Collectively, these initiatives remain on track and are expected to increase Kyle Main's prepared food production capacity by more than 30% over the next 18 to 24 months as the projects are completed and ramp up as planned. We pursue selective acquisitions that strengthen the company's strategic positioning and meet stringent return thresholds. Our acquisition of certain assets of Creighton Brothers and Crystal Lake is a good example of this approach. The transaction expands the geographic scale of our Shell Egg platform while also adding nearby liquid egg capacity that we believe will strengthen our integrated value chain. Third, we return excess capital to shareholders through our variable dividend framework and when appropriate, opportunistic share repurchases. Underlying this entire framework is a commitment to maintaining balance sheet strength. A strong liquidity position provides a flexibility to invest across the cycle, respond to strategic opportunities, and navigate industry volatility. This systematic approach allows us to balance growth, resilience, and shareholder returns while preserving the long-term optionality that is critical in our industry. Over time, we believe the combination of portfolio evolution, discipline, capital allocation, and balance sheet strength will continue to enhance the company's normalized earnings power per share and support durable value creation for shareholders. That concludes my review of the financial results. I will now turn the call back to Sherman.