Good day, ladies and gentlemen, and thank you for standing by. Welcome to the John B. Sanfilippo & Son Incorporated Second Quarter Fiscal Year 2025 Operating Results Conference Call. [Operator Instructions] 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 volume 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 our retailer's private brand recipe program to enhance the baking category. Our sales and marketing teams 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…

Thank you, Jeffrey. Starting with the income statement. Net sales for the second quarter of fiscal 2025 increased 3.4% to $301.1 million, compared to net sales of $291.2 million in 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 2.9% in the consumer distribution channel, primarily due to a 4% increase in private brand sales volumes. 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, the sales volume of Southern 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…

Thanks, Frank, for the financial updates. While we continue to navigate a challenging operating environment, I am proud of the efforts and results from each of our business segments to grow our volume and develop long-term business partnerships. I am confident that we have the right strategy, agility and team to continue to deliver strong results. Now, let's turn to category updates. I'll share some category and brand results with you for the quarter. All the market information I'll be referring to is Circana panel data, and for today, it is the period ending December 29, 2024. When I refer to Q2, I'm referring to 13 weeks of the quarter ending December 29, 2024. References to changes in volume are versus the corresponding period one year ago. For pricing commentary, we are using scanned data from Circana, which includes food, drug, mass, Walmart, military and other outlets. We are referring to average price per pound. We're using the nut, trail mix and bar syndicated views of the category as defined by Circana. In the latest quarter, we continue to see modest growth in the broader snack outlook, as defined by Circana. Volume and dollars were up 1.5% and 3.4%, respectively. This is consistent with the performance we saw in Q1 as pricing and inflation continued to stabilize. In Q2, the snack and trail mix category performed similar to the broader snack aisle, up 1% in pounds and 2% in dollars. It's also consistent with the performance we saw in Q1. We saw prices fall 1% in snack nuts with slightly lower retail prices across all major nut types except for almonds. Trail mix's prices were flat. Fisher snack and trail mix performed on par with the category with pound shipments up 2%. This was driven primarily by growth at a…

Thank you. [Operator Instructions] And our first question will come from the line of Nick Otton of CWB. Your line is open.

Hi, guys. I just wanted to start on the pricing environment and what's going on there. You're talking about it's becoming really competitive and seem to need to maintain share there. So, just some further detail would be great.

Sure. So, obviously, we've talked about increased commodity costs, especially in almonds, chocolate, cashews in the last couple of quarters, and now we're seeing increased cost in walnuts. And we have typically a six-month pricing review with our retail partners, so it takes time to get those price increases initiated before actually raw material cost flows through our system. So that's put margin pressure on the company. But in addition to that, because of the volume declines in some areas such as almonds, for example, we're seeing competitive price pressure from some of the brands not raising pricing in order to kind of maintain and try to rebuild some of that volume growth. So that puts even more pressure on some of our private brand retailers, because they expect a gap between the brand leader and their private brand. So, it's a combination of things that have impacted pricing. As I mentioned, we have taken pricing now on all our brands and our private brand customers. So, most of that goes into effect in January and February of this quarter. So, a lot of it is being initiated as we speak.

And then, will that take you back to like a gross margin per pound closer to over [$0.60 from the current $0.50] (ph) the last couple of quarters?

Hey, Nick, this is Frank. That's our long-term goal, and we have a process in place that gets back up to those historical averages. And that will occur over the next several quarters.

Okay. And then just on the brands, I guess they have been losing share. Like, is it sustainable on their level? I understand you guys are one of the lowest cost of the industry, but can the branded keep up with not increasing price with the commodity environment?

Yeah. It's tough to say. Obviously, brands, they have a mind of their own, and I expect them to continue to invest in the category to either build their brand equity, market share or just move some of the inventories of raw materials that they have in their system. And so, it's hard to say when they would take price adjustments. I can't imagine it's going to be too far out there, but it's hard to say. And also add that the focus we have on -- I'm sorry. Yeah, and the other focus, obviously, pricing is a big lever that we have, but also reducing our operating costs, our supply efficiencies is critical to making sure that we streamline our efforts. So, we expect a lot of -- some of that margin enhancement to come from just cost reduction initiatives internally.

And then, starting up the new lines, like you said, by the end of the fiscal year, will there be any costs associated with that that could create additional margin pressure in the next two quarters to come?

Yeah, this is Jasper. Most of the costs that we'll incur with the installation of these new lines will be capitalized. So, I wouldn't imagine -- other than some moving equipment around and things of that nature, I wouldn't imagine that it would have any impact on margin.

And then just some more comments around Lakeville, like how this quarter was and everything? Obviously, great quarter, 28% growth there. Just after last quarter's back-to-school issues and everything?

Yeah. Lakeville, we had a bunch of one-off expenses in Lakeville, as we're moving inventory out of a third-party warehouse up there into our Huntley facility. We're still carrying a bit of a lease payment on that. That has expired at the end of Q2. We also had to temporarily install some equipment we bought in summer into that Lakeville facility to help build inventories for this year's back-to-school. So, there was quite a bit of noise up there. I think from an overall operating impact, we are really running that business for service and to build inventory so we make sure that we hit the back-to-school numbers. So, we are incurring quite a bit of overtime in that facility. But we do anticipate, with the installation of the line that we put up there temporarily, coupled with running more production in Elgin, that we'll see that facility become even more profitable than it is.

And then, any disclosure on just like what the dollar value -- you talked about the volume growth and everything. Like, how -- what was Lakeville's dollar value in the quarter?

I think it's in the 10-Q, Nick, but I think it's around $40 million, was the Lakeville-related sales for the quarter.

All right. And then I just -- final one just on tariffs, because in the -- you talked about in your annual report just how you get some of your pecan business from Mexico. So, just any thoughts on how it's going to affect the industry, how it affects you if the tariffs do come in?

Well, we're almost at the tail-end of buying this crop. So, I don't think even if the tariffs do occur shortly, we would be still buying a lot of products from Mexico.

We are working with our procurement teams really across all the supply chain to make sure that we are aware and ready if tariffs do go into place either in Mexico or Canada or [indiscernible], just make sure we have the right supply chain in place to overcome any issues that might occur. So, it is on our radar for sure.

All right. Thanks, guys. That's it for questions for me.

Thanks, Nick.

Thank you.

Thank you. [Operator Instructions] And at this time, there are no more questions in the queue. I'd like to turn the call back over to Jeffrey for closing remarks. Please go ahead.

Thank you, Lisa. Again, I want to thank all of you on the call for your interest in JBSS. This concludes the call for our second quarter fiscal 2025 operating results. And have a great day.

Thank you all for joining today's conference call. You may now disconnect.