John B. Sanfilippo & Son, Inc.

Thank you for standing by. My name is Gail and I will be your operator for today's call. At this time, I would like to welcome each and every one of you to the John B. Sanfilippo & Son, Inc. Third Quarter Fiscal Year 2025 Operating Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker demarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, kindly press star one again. It is now my pleasure to turn today's call over to John B. Sanfilippo and Sun Inc. Chief Executive Officer Jeffrey Sanfilippo. Please go ahead.

Thank you, Gail. Good morning, everyone, and welcome to our 2025 Third Quarter Earnings Conference Call. We appreciate you joining us. On the call with me today is 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 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. I'm encouraged to share the positive results and improvements we've made in our financial performance this quarter. Although we saw a decrease in sales volume during the third quarter, we improved our gross profit and achieved a 50% increase in diluted earnings per share. This was driven by, among other things, strategically controlling our costs and the continued alignment of our selling prices with increasing commodity acquisition costs. When we exclude the impact of inventory valuation on the current quarter's gross profit, there is a modest sequential improvement. Like other snack food companies, our third quarter performance was impacted by a challenging macroeconomic and consumer environment. The sales line decline, coupled with the risk of additional declines due to rising retail selling prices and changing consumer behavior, underscores our strategic priority to execute on our long-range plan and adapt our strategies to meet involving customer needs. To support this, we are committed to investing in our future growth, planning to spend approximately $90 million on equipment to expand our domestic production capabilities and improve our related infrastructure by the end of fiscal 2026. This historic investment in production equipment and infrastructure in our U.S. facilities reflects our confidence in domestic manufacturing. There is a great deal of uncertainty in the market with macroeconomic factors out of our control that may have an impact on our business. But there is so much that we can control within our company to drive efficiencies, deliver innovation, differentiate our products and services, and optimize our cost structure. The investments we are making demonstrate our commitment to growing our business, being a more valued partner to our customers, and providing more job opportunities for the dedicated team members throughout our organization. I would like to thank all our employees who have worked with passion, dedication, and a sense of urgency to manage our business through these challenging times. As we face several headwinds impacting the demand for nuts, trail mixes, and bars, let me share how our company is responding to mitigate negative impacts on our business while investing in growth. There are higher commodity costs for most nuts we procure, including almonds, walnuts, pecans, and cashews, due to supply and demand volatility. And the cocoa market has continued to stay at almost record prices. We are having difficult discussions with our customers to pass on necessary price increases. At the same time, we are offering options to change product formulas, pack sizes, and product mixes to mitigate these cost increases. Second, the impact of tariffs, actual pending implementation or threatened by the U.S. government or other governments on our costs and supply chain. There are items such as cashews, pepitas, pine nuts, and macadamias that do not grow in the U.S. or have little production here. So most of these items are incurring a 10% tariff today, with other products incurring over 140% tariff. We are working very closely with our major customers to define the financial impact of these costs on their finished products and deciding how best to manage purchases, inventories, and potential demand destruction. Our procurement team is doing an extraordinary job looking for alternative suppliers where possible to mitigate supply chain disruptions. Third, changing industry trends as consumers' purchasing preferences evolve. There are so many factors impacting consumers today, including inflation, economic volatility, health and wellness, reduced government support through programs such as SNAP, or a variety of other macroeconomic reasons. And even where and how consumers get their information about food has dramatically shifted. JBSS has invested heavily in a robust consumer insights team to track consumption, monitor consumer behavior, and assess price elasticity models and recommend opportunities for our retail partner to optimize their portfolios with the right products, prices, and promotions. These same recommendations from our Consumer Insights team are also being applied to our brand portfolio, including Fisher Snack, Fisher Recipe, and our Orchard Valley Harvest brand. It is a difficult environment for most brands across the snack category, as consumers have tightened their wallets due to current inflationary pressures. but we continue to focus on expanding distribution, building brand awareness, and trial with innovative marketing programs, and allocating a portion of the sales to support our partner, Conscious Alliance, to help end child hunger. I will now turn the call over to Frank to discuss our financial performance.

Thank you, Jeffrey. Starting with the income statement, net sales for the third quarter of fiscal 2025 decreased 4% to $260.9 million, compared to net sales of $271.9 million for the third quarter of fiscal 2024. The decrease in net sales was due to a 7.9% decrease in sales volume, or pounds sold to customers, which was partially offset by a 4.2% increase in the weighted average sales price per pound. The increase in the weighted average selling price primarily resulted from higher commodity acquisition costs for all major tree nuts. Sales volume declined for substantially all major product types in the third quarter. Sales volume decreased 9.2% in the consumer distribution channel, primarily due to an 8.3% decrease in private brand sales volume. The private brand volume decrease was due to a 16% reduction in bars volume, mainly due to reduced sales to a mass merchandising retailer following an increase in bar sales from a national brand recall in the third quarter of fiscal 2024. Our strategic decision to reduce sales to our grocery retailer and lost distribution in our grocery retailer further contributed to the decline in bars value. Additionally, decreases in sales of almonds, snack nuts, and trail mix caused by higher retail prices and the discontinuation of peanut butter at the same mass merchandising retailer contributed to the overall reduction in sales volume. These declines were partially mitigated by increased sales of walnuts and pecans at the same retailer, along with new distribution at two grocery store customers. Sales volume decreased 12.9% for our branded products, primarily driven by a 33.8% reduction in orchard value harvest sales, mainly due to delayed orders from a major customer in the non-food sector. Sales volume decreased 8.3% in the commercial ingredients distribution channel, mainly driven by decreased sales volume due to competitive pricing pressures and decreased food service peanut butter sales. Sales volume increased 6% in the contract manufacturing distribution channel, primarily due to increased granola volume processed in our Lakeville facility. Sales to new customers and opportunistic sales to the current customer also contributed to the overall increase. These gains were significantly offset by reduced peanut sales volume to major customers due to soft consumer demand. Gross profit increased by $6.7 million, or 13.7% to $55.9 million, compared to the third quarter of last year, driven by inventory valuation adjustments that we anticipated driven by rising commodity input costs, which may not recur next quarter. The inventory valuation adjustment was primarily driven by a transition from a lower cost to a higher cost crop year for walnuts and pecans. To a lesser extent, gross profit benefited from favorable manufacturing efficiencies. These gains were partially offset by higher commodity acquisition costs for all major tree nuts. Third quarter gross profit margin as percentage of net sales increased to 21.4%, compared to 18.1% for the third quarter fiscal 2024, due to the reasons previously mentioned. Total operating expenses for the third quarter decreased 3.1 million compared to prior quarter, mainly due to reduction incentive compensation expense, which was partially offset by an increase in rent expense from our new Huntley, Illinois facility. Total operating expenses for the third quarter of 2025 decreased to 10.6% of net sales from 11.3% for last year's third quarter due to the reasons previously mentioned and was partially offset by a lower net sales base. Interest expense was $1.1 million for the third quarter of fiscal 2025 compared to $800,000 for the third quarter of fiscal 2024. Net income for the third quarter of fiscal 2025 was $20.2 million, or $1.72 per diluted share, compared to $13.5 million, or $1.15 per diluted share for the third quarter of fiscal 2024. Now taking a look at inventory. The total value of inventories on hand at the end of the current third quarter increased $47.1 million, or 22.4%, compared to the total value of inventories on hand at the end of the prior year comparable quarter. The increase was mainly due to higher quantities and cost of finished goods, work in process, and almonds, as well as higher commodity acquisition costs for walnuts and pecans. The weighted average cost per pound of raw nut and dried fruit increased 33.9% 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 three quarters of fiscal 2025 increased 5.1% to $838.2 million compared to the first three quarters of fiscal 2024. Excluding the 2025 first quarter impact, the Lakeville acquisition, net sales remain relatively unchanged, rising slightly from $792.2 million to $797.7 million. sales volume increased 6.7%, primarily due to Lakeville acquisition. Excluding the impact of the Lakeville acquisition, sales volume remained relatively unchanged. Gross profit margin decreased from 20.6% to 18.5% of net sales. The decrease was mainly attributable to increased commodity acquisition costs for substantially all major nuts. As well as competitive pricing pressures and strategic pricing decisions, which were offset by factors cited previously and improved profitability on BARs due to manufacturing efficiencies. Total operating expenses for the current year today decreased by $3.5 million to $90.1 million, compared to $93.6 million for the first three quarters of fiscal 2024. The decrease in total operating expenses was mainly driven by decreases in incentive compensation, advertising, and consumer insight expenses. These decreases were partially offset by a one-time bargain purchase gain from the Lakeville acquisition, which did not repeat in the current year-to-date period, as well as increases in salary and wages, freight, and rent expenses. Interest expense was 2.3 million for the first three quarters of fiscal 2025, and 2.1 million for the first three quarters of fiscal 2024. Net income for the first three quarters of fiscal 2025 was 45.4 million, or $3.87 per diluted share, compared to net income of $50.2 million, or $4.30 per diluted share for the first three quarters of fiscal 2024. Please refer to our 10-Q for additional details regarding our financial performance for the third quarter of fiscal 2025. Now I'll turn the call over to Jeffrey to provide additional comments on our operating results for the third quarter of fiscal 2025 and discuss category trends.