The Marzetti Company

Good morning. My name is Liz, and I will be your conference call facilitator today. At this time, I would like to welcome everyone to the Marzetti Company's fiscal year 2025 fourth quarter conference call. Conducting today's call will be Dave Suszynski, President and CEO, and Tom Piggott, CFO. All lines have been placed on mute to prevent any background noise. After the speakers have completed their prepared remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star 1-1 on your telephone keypad. If you'd like to withdraw your question, please press star 11 again. Thank you. And now, to begin the conference call, here is Dale Konopczyk, Vice President of Corporate Finance and Investor Relations for the Marzetti Company.

Good morning, everyone, and thank you for joining us today for the Marzetti Company's fiscal year 2025 fourth quarter conference call. Formerly known as Lancaster Colony Corporation, our business rebranded at the Marzetti Company effective June 27th. This rebranding honors the 130-year history of our flagship Marzetti brand and signals our future as a food company with an ongoing commitment to delivering high-quality, flavorful products that make every meal better. While Lancaster County will always be an important part of our heritage, we believe the Marzetti name is critical to positioning our business in today's food industry and communicating the value we deliver to all of our stakeholders. We felt that our discussion this morning may include forward-looking statements which are subject to the State Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are subject to a number of risks and uncertainties that could cause actual results to differ materially, and the company undertakes no obligation to update these statements based upon subsequent events. A detailed review of these risks and uncertainties is contained in the company's filings with the SEC. Also note that the audio replay of this call will be archived and available on our website, investors.marzetticompany.com, later today. For today's call, Dave Kaczynski, our president and CEO, will begin with a business update and highlights for the quarter. Tom Tiggott, our CFO, will then provide an overview of the financial results. Dave will then share some comments regarding our current strategy and outlook. At the conclusion of our prepared remarks, we'll be happy to respond to any of your questions. Once again, we appreciate your participation this morning, and I'll turn the call over to Marzetti Company's president and CEO, Dave Kaczynski. Dave? Thanks, Dale, and good morning, everyone. It's a pleasure to be here with you today as we review our financial results and provide you with an update on our business. Before I provide comments on our fiscal fourth quarter results, I am pleased to share that we completed fiscal year 2025, which ended June 30th, with record high net sales, gross profit, and operating income. I want to extend a sincere thank you to all of our teammates throughout our business for their countless contributions to this achievement, as well as their continued commitment to our ongoing success. Moving on to our results for our fiscal fourth quarter, which ended June 30th, we are pleased to report that consolidated net sales grew 5% to a fourth quarter record $475.4 million. and gross profit advanced 8.7% to a fourth quarter record $106.1 million. In our retail segment, net sales increased 3.1% to $241.6 million, driven by growth from both our licensing program and our own brand. During the quarter, we increased our marketing investments with proven strategies, and noted improved household penetration trends for our brands in several key categories. In licensing, sales growth was led by expanding distribution for our popular Texas Roadhouse dinner rolls and new club channel sales for Chick-fil-A sauce. Buffalo Wild Wing sauce is also added to the growth of our licensed items. Our category-leading New York Bakery frozen garlic bread remains a key contributor to the growth of our retail segment. driven by contributions from our recently introduced gluten-free Texas toast. Our Sister Schubert's brand frozen dinner rolls also performed well, including the benefit of the later Easter holiday that shifted some sales into the fiscal fourth quarter. Excluding all sales attributed to the Prevent or Restore bakery items that we have exited in fiscal year 2024, The retail segment's fourth quarter net sales increased 3.6%, and retail sales volumes measured in pound-shifts increased 2.9%. Circona scanner data for the quarter ending June 30th showed strong results with both sales dollars and volume for our branded products up 5.5%. In the frozen general category, our own Sister Schubert's brand and our licensed Texas Roadhouse brand combined to grow 52.4%, resulting in a market share increase of 690 basis points to a category-leading market share of 63.8%. In the frozen garlic bread category, our New York Bakery brand continues to perform very well as sales grew 10% versus a 3.5% increase for the category, driving New York Bakery's market share up 260 basis points to a category-leading 43.3%. In the shelf-stable sauces and condiments category, sales at Chick-fil-A saw grew 17.2%. with market share up 30 basis points as we introduced the popular sauce into the club channel during the quarter. In the produce dressing category, sales of Chick-fil-A dressings grew 2.6%. When combined with our Marzetti brand dressings, our market share totaled a category-leading 27.6%. In the food service segment, excluding non-core sales attributed to a temporary supply agreement, sales improved 1.4%, while sales volume declined 1.7%. In addition to the benefit of inflationary pricing, food service segment net sales reflect increased demand from some of our national chain restaurant account customers, as well as sales gains for our own Marzetti-branded food service products. Our focus on supply chain productivity, value engineering and revenue management all remain core elements to further improve our margins and financial performance. I'll now turn the call over to Tom Piggott, our CFO, for his commentary on our fourth quarter results. Tom? Thanks, Dave. Overall, this quarter, the company delivered improved top line and gross margin performance and continues to invest to drive growth. Fourth quarter consulted at sales increased by 5% to $475.4 million. Breaking down the revenue performance, higher core volume in product mix drove 190 basis point increase. Net pricing was accreted by approximately 60 basis points. In addition, the company reported $12.2 million in sales or 270 basis points of growth that resulted from a temporary supply agreement with Wendland Foods, the seller of the Atlanta-based manufacturing facility that we acquired in mid-February. We entered into this agreement to facilitate the closing of the transaction. It's important to note that these temporary and non-course sales are expected to end by March of 26. And finally, last year's exit of the perimeter of the store bakery product lines accounted for a 20 basis point decline. Consolidated gross profit increased by $8.5 million or 8.7% versus a prior year quarter $106.1 million, and gross margin expanded by 70 basis points. The gross profit growth was driven by higher volume and mix in our retail segment and our ongoing cost savings programs. Note that excluding the $12.2 million in sales from the temporary supply agreement, which did not contribute to gross profit, gross margin expanded by 130 basis points. selling general and administrative expenses grew $8.9 million or 16.7%. This increase reflects a higher marketing spend in our retail segment to drive growth, higher personnel costs, increased legal spend, and costs related to the integration of the Atlanta facility. During the quarter, the company reported $5.1 million of restructuring and impairment charges, $4.5 million of the charges are attributed to the planned closure of our sauce and dressing facility in Lapidus, California that we announced last quarter. This closure is part of our ongoing initiative to optimize our manufacturing network. Production at that facility is expected to conclude during the quarter end of September 30th. In our prior year quarter, restructuring impairment charges of $2.7 million were attributed to our decision to exit our perimeter of the store bakery product lines. Consolidated operating income increased $2.8 million due to higher SCNA expenses and increased restructuring impairment costs, partially offset by the improved gross profit performance. Our tax rate for the quarter was 19.7% versus 20.5% in the prior year quarter. We estimate our tax rate for fiscal 26 to be 23%. fourth quarter diluted earnings per share decreased to 8 cents or 6.3% to $1.18. The restructuring impairment charges I mentioned reduced UPS by 15 cents in the current year quarter and 8 cents in the prior year quarter. In the current year quarter, we also incurred the last of our Atlanta facility integration costs in the SG&A line, which accounted for 1 cent per share. With regard to capital expenditures, our payment for property additions totaled $58 million for the full year. In addition, we invested $78.8 million to acquire the Atlanta-based dressing and sauce facility. For fiscal 26, we are forecasting total capital expenditures of between $75 and $85 million. We will continue to invest in both cost savings projects and other manufacturing improvements, as well as the newly acquired Atlanta facility. In addition to investing in our business, we also return funds to shareholders. Our quarterly cash dividend of 95 cents per share paid on June 30th represents a 6% increase from the prior year's amount. Our enduring streak of annual dividend increases stands at 62 years. Our financial position remains strong with a debt-free balance sheet and $161.5 million in cash. In regard to the full-year results, overall, the company delivered against its growth algorithm. Net sales grew 2%, primarily driven by volume. Gross margins expanded by 80 basis points due to cost savings initiatives and some modest cost deflation. Reported operating income grew 10.5%. When you adjust operating income for structuring impairment costs recorded in both years, the current year's acquisition costs as well as last year's inventory write-down for business exit, operating income was up 5.7%. This growth was driven by higher volumes and the gross margin expansion. To wrap up my commentary, our fourth quarter and full-year results demonstrate strong execution across a number of areas in a more difficult operating environment. In addition, we continue to make investments to support further growth and cost savings. I will now turn it back over to Dave for his closing remarks. Thank you. Thanks, Tom. Going forward, the Marzetti Company will continue to leverage the combined strength of our team, our operating strategy, and our balance sheet in support of the three simple pillars of our growth plan. One, accelerate core business growth. Two, to simplify our supply chain to reduce our costs and grow our margins. And three, to expand our core with focused M&A and strategic licensing. Looking ahead to fiscal year 2026, we anticipate retail segment sales will continue to benefit from volume growth, with contributions from both our licensing program and our core Marzetti, New York Bakery, and Sister Schuber brands. The popular Texas Roadhouse Dinner Rules will begin shipping nationally to all major retailers this fall, and we also have some new items planned for our core brands that will launch in the year ahead. In the food service segment, we expect sales to be supported by growth from select QSR customers in our mix of national chain restaurant accounts as our culinary team continues to provide our food service partners with a wide range of innovation initiatives and craveable flavors to help them drive menu excitement and ultimately traffic growth. Like many of you, we continue to monitor external factors including U.S. economic performance and consumer behavior that may impact the demand for our products. With respect to input costs, in the aggregate, we anticipate a modest level of cost inflation in 2026 that we plan to offset through contractual pricing and our cost savings programs as we remain focused on continued margin improvement in the year ahead. We also look forward to incorporating our newly acquired Atlanta-based sauce and dressing plant into our manufacturing network When combined with the closure of our sauce and dressing facility in Milpitas, California that we announced last quarter, we believe our supply chain is well positioned to cost-effectively support the growth of our key customers in fiscal year 2026 and beyond. This concludes our prepared remarks for today, and we'd be happy to answer any questions that you might have.

At this time, I'd like to remind everyone, in order to ask a question, Please press star 11 on your telephone keypad.

Your first question comes from Jim Solera with Stevens.

Hi, Tom. Good morning. Thanks for taking our question. Dave, I want to start with a list of thoughts around food service because there's a lot of noise right now around the consumer. It seems like, you know, there's certain QSR platforms that are really focusing on value. but other ones that continue to do well kind of despite the backdrop. And a lot of the menu innovation seems to be more focused around chicken, which I would anticipate benefits your business. So can you maybe just walk us through, as we think about FY26, what are your expectations around QSR industry traffic as a whole and innovation for the accounts that you service and maybe how we put that all together to come up with you know, expectations for the food service business in 26?

Yeah, well, great question, Jim. And maybe I'll start by framing it as follows. If you go back, let's say, 18 months or a year ago, the industry was still wrestling with inflation and passing through pricing. And I think that pricing that went through created, you know, value issues for a range of consumers, particularly consumers in the middle and the lower incomes that started to manifest itself in trade down. I think as we've rolled forward now, most of the operators have cycled past that pricing. And as we look at our core operators, we can see that they're not passing through pricing like they've had. And I would tell you, as a whole, it looks like commercial food service has modestly, is either flat or very modestly improving within, let's say, the last couple of months. But when I say modestly, I mean about one point, you know, approaching closer to flat. Now, within there, it becomes somewhat divergent and a little bit different than we've seen in prior periods. We're seeing segments with higher price points like casual dining that are struggling a little bit more, and you've read about that. I know you follow the space. You're seeing the casual dining guys, the likes of Chili's and even Applebee's starting to perform a little bit better as they've really focused on simplifying their menus, their back-of-house operations, and striving to give consumers value. In the QSR space, I think we've seen them over the last, let's say, three quarters struggle with getting on the better side of pricing, and now we're starting to see their traffic get closer to flat overall. And that's, in fact, true with a lot of our customers. It's still below what we would have seen historically, but I would tell you it's modestly improving. So as we go forward, you know, what we would expect is neither a catalyst for a significant downturn nor a significant improvement. I think we're just going to continue to operate in this sort of broader macro environment. Now, bringing it closer to us, where is it that we're going to find pockets of growth? I think there are several themes that remain true. One is you're going to see these operators continue to look for ways to present value. In the casual dining space, the Chili's and guys like that, I think you're going to see them continue to hover around meals at the $15 mark to attract guests and then look to plus that up with incremental items. In QSR, I wouldn't be surprised if we see things like what McDonald's has done around snacking and with chicken. And then I think the trend that really is going to continue to benefit us is going to play probably a couple of ways, and it's in chicken. The chicken operators continue to do better than most of the others, let's say hamburger, et cetera. So I think that's going to present an opportunity for continued growth and an opportunity for us to continue to innovate with those operators that are out there. I also think – I didn't talk about pizza QSR. I think pizza QSR will continue to be relevant, particularly as they focus on absolute price points. At the end of the day, consumers, I think, are trying to – balance their sources and uses of cash. And they're still looking for affordable ways to feed their family and find sources of happiness. And I think food service will continue to factor into that. You know, the onus is on us to figure out ways to help these operators present that and grow.

That's great. And then, Tom, if I could ask one of you on the commodity side. Sounds like you guys have a pretty robust productivity program coming, you know, continuing into FY26. We've heard some commentary around soybean oil specifically and potential supply crunch there with some of the domestic production going towards biofuels. And I'm no commodity expert, but I know if I just look at the spot price for soybean oil, it's up pretty significantly year to date and kind of took a leg up. you know, more recently when the EPA announced some news around biofuel. So, can you just give us any thoughts around your visibility into soybean oil pricing? If you're able to tell us, you know, how much of the commodity basket that is for you guys, if you're edge, just kind of any thoughts around that and, you know, potential variability as we go into the new year and have kind of this biofuel demand that could potentially pool.

So, Jim, it's a great question. It's an important part of our commodity basket. Maybe I'll lead off and then let Tom get into it. some of the specifics as well. As you noted, over the last probably seven or eight years, we started to see soybean oil play a more prominent role in renewable diesel. As we got to the end of the Biden administration, there was some uncertainty regarding how much volume would be renewed in RVOs or the amount of gallons that are going to go towards renewable diesel. Earlier this summer, the EPA came out with guidelines that elevated the soybean oil being diverted into renewable diesel. And to your point, it resulted in a spike. Up until that point on the board, it was probably trading, I would say, in the mid-40s or thereabout. And then it jumped into the mid-50s. It got up to as high as 55 cents. And now it's eased off. I looked at it this morning, actually, on the board, and it was about 51 cents. There are still a couple of areas that have yet to be resolved in this space that I think could ultimately dictate where the price nets out. Ordinarily, what they do is they allow an exception for small refiners. And if they continue to grant that exception, what you might see is those commodity costs for soybean oil continue to fall back a little bit more. It remains within our expectations, so we don't see it as a near-term headwind for our business. We do take hedging positions with our suppliers on this, and maybe with that I'll turn it over to Tom, and he can provide you with a little bit more. Yeah, I think Dave said on the broader market indicators, and what I would share with you is that we do utilize a consultant to help us analyze this market because it's very complex. And we have a team that goes out and takes positions when we think they're advantageous to us. So as we look at the total cost as a percent of our cost, soybean oil is about 10%, depending on the market at that point. And in terms of our outlook for next year, from our internal cost projections, based on the current markets, our hedging positions, it's neither a big headwind or tailwind for us. Yeah. Yeah. We've been layering in on this for a while, Jim, anticipating this. So these changes aren't anything new. Let me just give you an idea. If we went back seven years ago, took a bean and you crushed it, the meal went to feed, you know, essentially chickens and cattle and hogs and everything else, and the oil then would be diverted into the food supply. Now virtually half of that oil is being directed into renewable diesel. So this is sort of a phenomenon that we've been watching here very carefully today. And not only do we buy for ourselves, but we sit down on a regular basis with all of our big customers and QSR space, and we advise them and work with them to take positions as well so we can create an element of predictability with this important commodity.

Great. Well, I appreciate all the detail, guys. I'll hop back in the queue.

Thanks, Jim. Your next question comes from Todd Brooks from the Benchmark Company.

Hey, good morning. Thanks. Two questions for me as well. First, if we look at the G&A spend, I know we talked about some incremental marketing investment behind the retail operation. I think you called out about $500,000 of one-time costs related to the new facility. I'm just wondering, I'm seeing kind of a 140 basis point uptake year over year. How much of that was the marketing spend? And were there some other one-time items around the corporate name change or anything that didn't get called out in the release? And how should we think about maybe a normalized type of percent of sales spending for G&A as we think about fiscal 26?

Great question, Todd. So, you know, the spend was up for three factors. One was the marketing, which was almost half of the increase. And I'll let Dave talk to that. Other two drivers were As you mentioned, the Atlanta integration and the legal costs, those are more transient items. We don't expect them to continue. And then the third driver is some timing of costs from Q3 that float into Q4. So broadly, you know, we don't expect to grow that line more than inflation, and we're very happy with the reinvestment we made into the marketing spend. I'll let Dave talk a little bit about that. Yeah. So as Tom pointed out, half of it was directed into marketing. And essentially what we're doing, Todd, is we have a new leader in the marketing organization that's doing a great job digging into the data that we have and looking at the digital tools at our disposal. And we invested in some very specific programs that helped us drive household penetration. If you look across our shares, we were up share-wise in five of our seven categories. And I'll give you sort of anecdotally why we feel good about it. You look at our own Texas Toast brand. Right now we have, you know, we ended the quarter with about a 43 share. With that product, our household penetration was up eight points in the quarter. And our repeat rate on that item is almost 60%. And our belief continues to be if we can make smart marketing investments, at reasonable prices, and we can drive household penetration, the performance of that product keeps those consumers in the fold and allows that business to continue to grow, period on period. And we took that same sort of formula and we used it across a range of different products in a very point-specific basis. And, you know, we think it's, along with innovation, going to be an important part of our overall algorithm that allows us to deliver profitable volumetric growth.

That's great. And then just to follow up on that, Tom, before I get to the other question, when we talk about kind of growth in line with inflation for 26, what's the normalized base that we should be thinking about growing that off of?

I would take the reported number, pull out the Atlanta integration cost, and that would be your base.

Okay, perfect. Thanks. And then my second question, and you talked about this as one of your offsets for the moderate inflation that you're expecting in fiscal 26. Can we talk to, and this is something you've long been expert at, the cost savings that the team was able to realize in 25, and then the outlook for 26 on cost savings, just thinking that we've got some chunkier opportunities around the Milpitas exit and ramping that volume to the right spots in the rest of the sauce and dressing production system.

Yeah, so when you look at 25, the team did an outstanding job against a number of pillars, procurement, savings, negotiating, more favorable contracts for us, value engineering, which is optimizing our product production, our products to make them more efficient and less costly to produce. You know, labor management. We also benefited from the SAP implementations. We got better information on our costs. So, a number of things contributed to the performance that the team was able to achieve in 25. As we look at, as we look forward into 26, What I would add to that list is the network reset that we're doing. So, essentially, between closing the Milpitas facility and ramping up College Park, that gives us another pillar to drive cost savings into 26. And I think as we look at it, you know, right now, we're in the midst of that transition. So, we're decommissioning lines in California, commissioning lines in Atlanta, and moving volume into Horse Cave as well. There's a lot of change going on right now in our networks, and we're executing well against those. As we get into the back half of fiscal 26, I think we'll begin to see more of those benefits flow through to our margin as the year progresses. Okay, great. Thank you both.

Thank you, Todd. Your next question comes from Alton Stump from Loop Capital.

Great. Thank you. Good morning, guys, and thanks for taking my question, as always. Just to clarify, from a model perspective, which you mentioned, Tom, that he's definitely swaggering. We'll go through March, obviously, the first three fiscal quarters. Should we kind of think about the revenue contribution from that similar to what it was in the most recent 4Q?

And you're referring to the temporary supply agreement that we have and the rate of sales on that consistent throughout the first three quarters. Yep. So, our preference would be that you exclude that revenue from your model just because it's temporary and non-cohort and project off of a more organic number, which would exclude that revenue.

Got it. Okay. Okay. Thank you for that. uh on the modeling front um and then you know i think just fundamentally um you know there's actually a lot of mixed signals as far as the consumer you know you guys of course um you know have and also good fewer things because of course you know your food service business you know has a benefit when consumers eat more at home and you know whereas after retail well i'm sorry vice versa that you know your food service benefits and people are eating out more why where's retail benefits when they're staying at home even more so i guess you know as kind of look at that Overall dynamic, you know, how do you think the consumer environment, you know, will impact each of your businesses separately?

Well, maybe I'll take a shot at that. Tom can add in. You know, as we kind of roll our way through the end of this calendar year and we go into the next, you know, as long as we don't see things like inflation spike, I think there are two things that could be potential catalysts for tailwinds. One is the fact that we see interest rates start to recede. I think that could be a net benefit. I think the other is we're watching crude oil prices and gas prices, which remain flat to down, and if they continue to pull back, I think we've seen in the past that gives consumers discretionary spending to be able to use on eating out or spending more to eat at home. The other is we've read a fair amount about the fact that With the OB3, the one big, beautiful bill, the sense is when we get into the calendar year, there's going to be potentially tax benefits to consumers that could give them an incremental discretionary spending to use. So I think as we look into the future, we're cautiously optimistic that the consumer might start to see some modest tailwinds as long as we can keep inflation in check. You come around then and you say, what does that mean to our business overall? You know, I would expect to see the food service situation continue to sequentially improve for all of our customers, really. And I think as long as we remain in this sort of value environment, there are going to be winners and losers. And I think that we tend to line up more with the winners. I think on the retail business, you know, sort of independent of the macro environment, we're excited about the pipeline of new items that we're bringing to the marketplace. We're just now starting to roll out Texas Roadhouse rolls to all of retail. We think that's going to be a source of continued growth for our business. We have a range of other new items for Texas Toast and Sister Schubert that we're excited about. We have a new item of Olive Garden, the Dusty Italian, which allows us to attack a part of that category that we don't play in today, which we think is just growth waiting for us. So we have kind of a continuation of different pockets that we're working on that Allow us to look at the environment as it stands today without a material change and see line of sight to low single-digit volume-led growth. If the environment gets better, particularly in food service, well, you know, we'd be happy to go back and revisit those numbers. But that's kind of our view right now. And I would say the consumer has proven to be resilient so far. And I think adaptable organizations, CPG organizations, are in tune with that. They're figuring out how to meet those consumers' needs, and the good ones will figure out how to grow. Yeah, I'll just add, overall, I think we expect 26 just to be a continuation of our growth algorithm, where we see revenue growing in the low single digit, really driven by volume in retail and some pricing via commodity. Food service, I think we're looking at more of a flattish profile in 26. And then on the gross profit, we expect to continue to grow our margins probably in the, you know, around the 50 basis point range. And SCNA, as I mentioned, growing with inflation. So that's kind of the broader outlook of how we're forecasting 26, which gets us overall to, you know, low single digit on the top line, mid single digit on the bottom line, sort of a continuation of our outlook for this year.

Great. Thank you so much, John and Dave, for all of the color. I'll hop back in the queue.

Thank you all.

Your next question comes from Scott Marks from Jefferies.

Hey, good morning, guys. Thanks for taking our questions.

Hey, thank you.

Good morning. One technical question as it relates to the you know, $5 million restructuring charges, were those associated with the retail segment or were they kind of unallocated?

Those were unallocated, yeah. Unallocated. And that was either disclosure because it includes both segments. Okay.

Okay. understood. And I guess that leads me into my next question on the retail segment, which is obviously put up a pretty good top line number. But I think profitability came in a little bit below what some folks were looking for. And it sounds like there was some incremental marketing expense that was kind of the reason for that. So how do you think about or how should we be thinking about you know, the marketing investments that you spoke to. I know you spoke about change in leadership on that part of the business, some incremental investments up front. Should we anticipate maybe some higher spend up front with the expectation that growth will come down the line? Just trying to gauge the right level of profitability for the segment that we should be kind of thinking about going forward.

Yes, so it's an excellent question, and you're right. We did choose to take advantage of some good potential programs to invest in in the quarter, and it did impact retail's profitability. There are a couple other things I'll mention, and then I'll let Dave talk a little bit about the marketing. The other thing on retail is we had a very difficult talk this particular quarter. The prior year quarter was a record loss. Q4 on operating income for the retail segment. And then the other thing that impacted the profitability was, you know, this particular quarter, PNOC was a little bit negative due to the ag inflation. In time, we expect that PNOC to balance out. So that's kind of some additional color on the retail operating income line. I'll let Dave talk a little bit about the marketing spending and how we're thinking about it. Yeah. So, you know, Scott, bringing it around to you, we don't expect a reset on marketing for the retail segment. We saw an opportunity in this period to raise it. And I think as we continue to generate cost savings in other areas of the P&L, I think we're going to look for opportunities to plow some back into the business longer term. And I think to Tom's point on this business, you know, I would expect our operating margins to remain in line here. So if you're looking at both gross margins and operating margins over the We expect those to be flat or grow in line with our productivity programs.

Understood. Thank you for that.

And then maybe one on the food service side. I know last quarter you called out the impact from some larger customers of yours who kind of pulled back on some LTOs. As we think about this quarter's performance, you know, down 1.7 on the volume side, excluding those TSA sales. Does that mean that those kind of like one-off headwinds are still in there, but you saw growth elsewhere in the portfolio? Just trying to gauge how we should be thinking about the volume trajectory here. you know, on a go-forward basis as it relates to impact from those LTO reductions versus other, you know, potential wins and business opportunities.

You're precisely right. That's exactly what that is. So we did see favorability with some of our other customers that was able to offset some of that. So as we sort of work our way through this, you can expect to see us begin to lap those headwinds as we get to the back part of the year. If you look at it, we saw growth from a handful of our QSR customers, and we continue to see growth with the branded part of our portfolio, which is our own, you know, Marzetti-branded items that we sell through distributors. So, and if you look at the pipeline that we have of new items and the traffic performance of our existing customers, you know, we would expect to see those trends continue.

Understood. Thanks so much. We'll pass it on.

Thank you. Thank you.

If there are no further questions, we will now turn the call back to Mr. Szczesinski for his closing comments.

Well, thank you, everybody, for joining us today. We look forward to being back together with you in November as we share with you our results for the first quarter of this fiscal year. We look forward to seeing you guys on the road. Take care.

This concludes today's conference call. Thank you for participating. You may now disconnect.