Good day, and thank you for standing by. Welcome to the John B. Sanfilippo & Son Second Quarter Fiscal 2024 Operating Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Jeffrey Sanfilippo, CEO. Please go ahead.

Thank you, Victor. Good morning, everyone, and welcome to our 2024 second quarter earnings conference call. Thank you for 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 they 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. Starting with overall corporate performance, we delivered a record second quarter net sales of $291 million. This beats the previous Q2 sales record of $279 million in fiscal 2016. In addition, we delivered a very strong 13.1% increase in diluted earnings per share, which includes the dilutive impact of the Lakeville acquisition. This was a significant quarter for our company, as it represents the first quarter of financial results that includes our recent Lakeville acquisition. The Lakeville business increased our quarterly sales volume by 11.6 million pounds or 14.4% over the second quarter of fiscal '23, and increased quarterly net sales by approximately $28.7 million or 10.5% over the second quarter of fiscal '23. We also sold approximately $1.9 million of our own internally-developed nutrition bars, which compliments the snack bars produced in Lakeville. Furthermore, at the beginning of December, we completed key integration steps for the Lakeville acquisition and have begun optimizing the facility's operations. We're in a great position to grow our business in the Lakeville plant and we've our first major customers visiting the manufacturing facility in the coming months. This time last year, I mentioned that JBSS was excited to enter the $8 billion snack bar category…

Thank you, Jeffrey. Starting with the income statement, net sales for second quarter of fiscal 2024 increased 6.2% to $291.2 million compared to net sales of $274.3 million for the second quarter of fiscal 2023. Net sales for second quarter of fiscal 2024 include approximately $28.7 million of net sales from the Lakeville acquisition. Excluding the Lakeville acquisition, net sales decreased $11.8 million or 4.3%. The decrease in net sales was due to a 1.7% decrease in the weighted average sales price per pound, combined with a 2.6% decrease in sales volume, which is defined as pounds sold to customers. Sales volume for peanuts and all major tree nuts declined in the current second quarter. The decrease in the weighted average selling price primarily resulted from lower commodity acquisition costs for most major tree nuts, which was partially offset by higher commodity acquisition costs for peanuts. Sales volume increased 15.3% in the consumer distribution channel, primarily due to the Lakeville acquisition, whose sales volume is almost exclusively private brand bars. Excluding the impact of the Lakeville acquisition, sales volume decreased 2.8% in the consumer distribution channel, primarily due to 10.5% decrease in sales volume for our branded products, which includes Fisher recipe nuts, Fisher snack nuts, Orchard Valley Harvest and Southern Style Nuts. The sales volume decrease for our branded products was mainly attributable to a 12.6% decrease in sales volume for Fisher recipe nuts due to soft consumer demand across mass merchandising and grocery retailers and less merchandising activity at several grocery retailers. Sales volume for Southern Style Nuts decreased 36.7% due to reduced distribution and promotional programs at a club store customer. The above branded decreases were partially offset by a 15.5% increase in sales volume for Orchard Valley Harvest, which is mainly due to increased distribution at…

Thanks, Frank, for the financial updates. We continue to navigate a challenging operating environment, characterized by elevated retail sale selling prices and cautious consumers. I'll take some time now to give you category and brand results for the first -- for the second quarter. As always, the market information I'll be referring to is Circana-reported data, and for today it is for the period ending December 31, 2023. When I refer to Q2, I'm referring to 13 weeks in the quarter ending December 31, '23. References to changes in volume or price are versus the corresponding period one year ago. We look at the category on Circana's total U.S. definition, which includes food, drug, mass, Walmart, military, and other outlets. Unless otherwise specified and when we discuss pricing, we are referring to average price per pound. Breakouts of recipe, snack, and produce are based on our custom definitions developed in conjunction with Circana, and the term velocity refers to the sales per point of distribution. In the latest quarter, we saw -- continued to see a shift in consumer behavior, not just in the nut and trail categories, but in the broader snack aisle as defined by Circana. We're seeing volume declines no longer offset by prices across the entire snack aisle as consumers tighten their budgets in response to stubbornly high food prices. COVID-era SNAP and student loan benefits ending and future economic uncertainty is impacting consumer behavior. The snack aisle declined 3.6% in volume and was relatively flat in dollars in Q2. This is down from a 2.3% volume decline and a 3% dollar growth rate in Q1. The total nut and trail mix category was down 4.4% in dollars and down 4.8% in pound volume in Q2. This is a decline versus what we saw last quarter.…

Thank you. And at this time, we will conduct a question-and-answer session. [Operator Instructions] Our first question will come from the line of Nick Otton from CWB Wealth. Your line is open.

Hi. Just in the quarter, it looks like the core business of the nuts did about $0.38 a pound in operating profit. And I was wondering, is that sustainable.

Thanks. Yeah, I have to look at that number, Nick. I'm not sure. How did you come up with that number?

Just removing like everything without Lakeville, just the core nut business.

That seems a little bit low, so we just got to go back to our records. I don't think it's that low.

I mean on operating, not like a gross profit, it's $0.78 or $0.79, I just meant like EBITDA or EBIT, sorry.

Yeah, I think with that clarification, yeah, that does make sense. As you know, we are switching commodity acquisition cycle. So again, all our prices reset in Q3 and Q4. So, if you go back to historical operating income per pound, we should be maintaining consistent operating income per pound based on historical averages, which is in that high $0.20s, low $0.30 per pound.

And then, for the industry, it sounds like it was just shrinking in general, so has Planters pulled back on their promotional activity?

They reallocated promotions from their peanut platform, now they're focusing more on their cashew platform, so they've just shifted some of their investment spending, but they're still very aggressive to build share in the category.

Yeah, that was basically my two main questions. I have a couple more, but I have to run.

Okay. Thank you.

Thank you.

Thank you. One moment for your next question. Our next question will come from the line of Lance James from RBC Global Asset Management. Your line is open.

Thanks. Congratulations on the quarter. Just wondering what your takeaways early on. Any positive or negative surprises from the Lakeville acquisition, anything you've been surprised about in either direction so far early on?

So, the team has done a great job in looking at the operation, looking at the personnel there, and optimizing what we believe is the right structure going forward to drive cost out of that operation. I think we were pleasantly surprised on the opportunities to increase the margin profile in that facility. And so, the team is working extremely hard on turning that around fast. I think the other opportunity is the quality that that facility produces. We've had a lot of customer discussions and sent samples from that facility, and a lot of positive feedback from our retail partners. So, we're very optimistic about building the volume growth in that facility pretty quickly.

Great. The other question I would have is, you've done extensive studies on your customer base and demand for nuts and snacks, et cetera, over different demographic groups. Would you say that recent data there is in-line with or consistent with the studies that you have done, or are there any short-term surprises in either a positive or negative direction?

Sure. So, obviously, we continue to do studies on consumers. We look at product portfolios. We look at price points. We're looking at consumer behavior. We're a little bit surprised on some of the declines we're seeing in the snack and trail mix category, typically during a recession or tight economics. We see consumers shift from expensive mixed nuts, cashews, pecans, down to peanuts and cheaper trail mixes. It's one of the first times we've seen consumers actually leave the category completely. And it's not just nut and trail mix, we're seeing them leave the snack category overall, which is a little bit surprising. At the same time, we see inflation and the retail prices are at five-year highs at least for nuts and trail mix. So, we understand different price point architecture is so important, and that's what we're focused on right now is to get some retail prices that make sense for consumers and bring them back into the category.

Terrific. Again, congratulations on the solid quarter, and that's it for my questions.

Great. Thank you.

Thank you.

Thank you. [Operator Instructions] And I'm not showing any further questions. I'll turn the call back over to Jeffrey for any closing remarks.

Thank you, Victor. We appreciate your interest in JBSS. We appreciate the questions, and look forward to our third quarter results. This concludes the call for our second quarter of fiscal '24. Thank you very much, and have a great day.

Thank you. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.