John B. Sanfilippo & Son, Inc.

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the John B. Sanfilippo and Son Incorporated Second Quarter Fiscal Year 2025 Operating Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. you will then hear an automated message advising your hand is raised. To withdraw your question, please press star one again. Please be advised that today's conference is being recorded. I would now like to turn the call over to Jeffrey Sanfilippo, CEO. Please go ahead.

Thank you, Lisa. Good morning, everyone, and welcome to our 2025 Second Quarter Earnings Conference Call. Thank you for joining us. On the call with me today is Jasper Sanfilippo, our COO, and Frank Pellegrino, our CFO. We may make some forward-looking statements today. These statements are based on our current expectations and may involve certain risks and uncertainties. The factors that could negatively impact results are explained in the various SEC filings that we have made, including our Forms 10-K and 10-Q. We encourage you to refer to the filings to learn more about these risks and uncertainties that are inherent in our business. We are pleased to report our largest quarterly sales volume and highest net sales in our company's history in the second quarter. This achievement was driven by the second consecutive quarter of sales volume increases across all three of our distribution channels as we execute our long-range plan. Additionally, our bar sales volume increased by approximately 28% over the prior year quarter. We remain encouraged by the sales line growth across our company and are focused on enhancing profitability through operational efficiencies and optimized pricing strategies. Our Fisher recipe brand had a very successful holiday season in Q2 and performed better than the category. We have a great branded program that complements a retailer's private brand recipe program to enhance the baking category. Our sales and marketing team are sharing the success story with our retail partners to demonstrate how Fisher can build their business. And we're excited about the opportunities to expand our distribution. To support our growth, the company has successfully moved our warehouse distribution in Elgin to the new facility we are leasing in Huntley, Illinois. It was an enormous task to complete the relocation of our customer shipping activities. And I want to thank the leaders in our administration, customer solutions, demand planning, engineering, logistics, IT, operations, and warehouse teams for their hard work and dedication to complete this important initiative. Now that the warehouse distribution move is complete, work has started to expand our production capabilities in Elgin, utilizing the 300,000 square feet of space we freed up. Over the next 18 months, The company will add additional manufacturing capacity to support our growth plans and to provide new innovative product platforms for our customers and consumers. We expect some of this new equipment to be in production by the end of this fiscal year. As we shared in our earnings release, gross profit and margins have been negatively impacted by several factors. Competitive pricing pressure, and strategic pricing decisions to maintain and grow our volume brought down average selling prices. Despite stabilized civilization and inflation rates, there are input costs in our industry that remain elevated and in some cases continue to increase, such as chocolate and now walnuts. This created significant margin compression before price increases could be executed. but we have initiated selling price adjustments for all our brands and private brand customers which take effect in Q3, the majority of which will occur in January and February. In addition to pricing, the company is also laser focused on cost optimization and organizing our structure and processes for growth. Key areas of opportunity include efficiencies and operations, supply chain, plate, SG&A, commissions, trade spend, and business and formula creation. There are key leaders across the nation reimagining how we do business and go to market. I'm excited about the margin enhancement initiatives this team will look at and execute. There are common things among other CPG companies in the food space that are navigating this current environment. Consumer behavior shifts where people are increasingly seeking value influenced by economic uncertainties and inflation. This continues to create a shift to discount retailers and smaller pack sizes or bulk purchases during promotions. We continue to assess our price pack architecture and focus on retailers, such as those in the Club Channel, to grow our business and provide consumers with innovative products. I'll now turn the call over to Frank Pellegrino, our CFO, to provide additional information on our financial performance for our second fiscal quarter.

Thank you, Jeffrey. Starting with the income statement, net sales for the second quarter of fiscal 2025 increased 3.4%, $301.1 million, compared to net sales of $291.2 million for the second quarter of fiscal 2024. The increase in net sales was due to a 7.1% increase in sales volume, which is defined as pounds sold to customers, which was partially offset by a 3.4% decrease in the weighted average sales price per pound. Decrease in the weighted average selling price primarily resulted from higher sales volume of lower-priced bars, granola, and private brand recipe nuts. Additionally, strategic pricing decisions and competitive pricing pressures contributed to the overall decrease in the weighted average selling prices and contributed to increased sales volume. Sales volume increased to 2.9% in the consumer distribution channel, primarily due to a 4% increase in private brand sales volume. The private brand volume increase was due to a 27.6% growth in bars volume, from a mass merchandising retailer returning to normalized inventory levels. Sales volume increased 3.4% for our branded products, which includes Fisher Recipe Nuts, Fisher Snack Nuts, Orchard Valley Harvest, and Southern Style Nuts. The increase in branded sales volume was mainly attributable to a 3.8% increase in sales volume of Fisher Recipe Nuts due to increased merchandising activity at several customers. Additionally, sales volume of selling-style nuts increased 11.8%, driven by a return to normalized inventory levels and increased sales velocity at a club store customer. Sales volume increased 1.4% in the commercial ingredients distribution channel due to higher sales of peanut crushing stock to peanut oil processors and distribution to a new food service customer, which was partially offset by lost business to another customer. Sales volume increased 55.6% on the contract manufacturing distribution channel, primarily due to increased granola volume processed in our Lakeville facility. This increase was partially offset by reduced peanut and cashew sales volume to major customers due to soft consumer demand. Gross profit decreased 5.7 million, or 9.8%, compared to the second quarter of last year, driven by competitive pricing pressures and strategic pricing decisions, as well as higher commodity acquisition costs for most tree nodes. The decrease was partially offset by improved profitability of borrowers. Second quarter gross profit margin as a percentage of net sales decreased to 17.4% compared to 19.9% for the second quarter of fiscal 2024 due to the reasons previously mentioned. Total operating expenses for the second quarter increased 2.5 million as compared to the prior year quarter, due to a one-time $2.2 million bargain purchase gain associated with the late-through acquisition, which did not recur in the current quarter. The increase was also driven by higher freight, rent, and compensation expenses, which were significantly offset by decreases in incentive compensation, consulting, and market expense. Total upward expenses for the second quarter of 2025 increased to 10.9% net sales from 10.4% for last year's second quarter due to the reasons previously mentioned and partially offset by a higher net sales base. Interest expense was $800,000 for the second quarter of fiscal 2025 compared to $1.1 million for the second quarter of fiscal 2024, primarily due to lower average debt levels. Net income for the second quarter of fiscal 2025 was $13.6 million, or $1.16 per diluted share, compared to $19.2 million, or $1.64 per diluted share for the second quarter of fiscal 2024. Now let's take a look at inventory. The total value of inventories on hand at the end of the current second quarter increased $8.5 million, or 4.3%, compared to the total value of inventories on hand at the end of the prior year, The increase was mainly due to higher commodity acquisition costs for almost all major tree nuts and chocolate, as well as higher on-hand quantities of almonds and cashews. The weight average cost per pound of raw nut and dried fruit increased 33.7% year-over-year, mainly due to higher commodity acquisition costs for almost all major tree nuts. Moving on to year-to-date results. Net sales for the first two quarters of current year increased 9.9% to $577.3 million compared to the first two quarters of fiscal 2024. Excluding the 2025 first quarter impact related to requisition, net sales increased 2.2% to $536.8 million. The increase in net sales was primarily attributed to a 4.1% increase in sales volume, which was partially offset by a 1.9% decrease and the weighted average selling price per pound. Sales volume increased by 14.9% due to increased sales volume in all channels, mainly driven by the impact of the LACO acquisition. Gross profit margin decreased 4.8% to 17.1% of net sales. The decrease was mainly attributable to lower selling prices due to competitive pricing pressures and strategic pricing decisions, along with increased commodity acquisition costs for almost all major non-commodity. This was partially offset by improved profitability of borrowers. Total operating expenses for the current year to date remain relatively unchanged at $62.4 million compared to $62.8 million for the first two quarters of fiscal 2024. Interest expense was $1.3 million for both the first two quarters of fiscal 2025 and fiscal 2024. Net income for the first two quarters of fiscal 2025 was $25.3 million $2.16 per diluted share, with an net income of $36.8 million, or $3.15 per diluted share, for the first two quarters of fiscal 2024. Please refer to our thank you, which was followed yesterday, for additional details regarding financial performance for the second quarter of fiscal 2025. Now I would turn the call over back to Jeffrey to provide additional comments on our operating results for the second quarter of the industry category term.