Good day, and thank you for standing by. Welcome to the John B. Sanfilippo & Son Incorporated First Quarter Fiscal 2022 Operating Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. I would now like to hand the conference over to your first speaker today, CFO, Frank Pellegrino. Please go ahead, sir.

Thank you, Charlotte. Good morning everyone, and welcome to our fiscal 2022 first quarter earnings conference call. Thank you for joining us today. On the call with me today is Jeffrey Sanfilippo, our CEO; Jasper Sanfilippo, our COO; and Mike Valentine, our Group President. Before we start, I would like to remind everyone that 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 these filings to learn more about these risks and uncertainties that are inherent in our business. Starting with the income statement. Net sales for the first quarter of fiscal 2022 increased 7.6% to $226.3 million, compared to net sales of $210.3 million for the first quarter of fiscal 2021. The increase in net sales was mainly attributable to a 14% increase in sales volume, which is defined as pounds sold to customers. Increased sales volume was partially offset by a 5.6% decrease in the weighted average selling price per pound, which was caused by a decline in commodity prices for all major tree nuts except cashews. Sales volume increased in the consumer distribution channel by 13%. Due to a 20.4% increase in private brand sales volume for trail and snack mixes. The increase in sales volume for these private brand products came from new distribution at existing customers. The increase in private brand sales volume was partially offset by sales volume decline in our branded products. Sales volume in the consumer distribution channel accounted for 75.1% of total sales volume in the first quarter. Sales volume increased in the commercial ingredients channel by 37.2%, due…

Thank you, Frank. Good morning everyone. A great start to the current first quarter of fiscal 2022. We reported record net income and diluted earnings per share for the fourth consecutive quarter. The record results were driven by strong double-digit volume growth in our consumer distribution channel, the continued recovery of our foodservice business in our commercial ingredients channel, and lower commodity acquisition costs for most major tree nuts. The strong sales volume growth in our consumer distribution channel was mainly attributable to the efforts of our entire team to maintain superior service and quality levels as we navigated through the numerous global supply chain challenges that existed during this quarter. The consumer channel accounted for approximately 79.4% of total sales dollars in the current first quarter. Our relentless commitment to providing best-in-class service, quality and value to our customers and consumers is a significant factor in our company's success. It takes a talented group of dedicated individuals across an entire organization to deliver consistent strong results, as we have done here at JBSS, especially during these unprecedented times with the pandemic and the impact it has had on economic and social behavior. I am proud of every person in our company, whose leadership and commitment to our customers and consumers is unwavering, especially our manufacturing, shipping and procurement teams. As we enter the harvest season, we anticipate higher acquisition costs for many of our raw nut and dried fruit input stock. Notably, in respect to cashews, almonds and walnuts, where we expect to see significant increases in acquisition costs as a return to average historical market prices. In addition, we are experiencing cost increases in freight and labor and we expect that trend to continue. We have begun implementing pricing actions across our entire business to help mitigate these…

Thanks Jeffrey. We will now open the call to questions. Charlotte, please queue up the first question.

Thank you. Your first question comes from the line of Chris McGinnis from Sidoti & Company. Your line is now open.

Hi, good morning. Thanks for taking my questions and nice quarter. I just wonder if maybe we could start off with just obviously a lot of talk around just the inflationary environment, but also some of the other kind of external factors that are -- that should pressure sounds like profitability in the near term. Can you just walk through some of the magnitude that you expect there? It's been a while since you've been in inflationary environment. And can you just walk us through how that could impact the model? Thanks.

Well, I'll start it off Chris. Thanks for the question. Obviously, we are in a challenging situation with inflationary pricing not just commodities this time, but it's labor, it's freight. And so we are having those difficult conversations with customers. We've actually started that a few weeks ago. Not easy, but at the same time, it's the right thing for the business and we need to make sure that we keep these customers in supply both being able to procure product for them package it and ship it. And so difficult conversations, but they're necessary. We are getting back to actually normalized levels with some commodities. So, it's not like we are increasing commodity costs way beyond where they've ever been. So, retail prices should still be very competitive with what consumers have paid for in the past.

Okay. And is there any issue around getting supply at this point?

So, Chris, this is Mike Valentine.

Hey Mike.

So, we see shortages periodically on various different things. For example in packaging. We're seeing lead-times that could be as much as three months where they used to be weeks. Occasionally, we'll see some materials that will get very tight, like for example, recently it's been living stock for our clear cans. We've talked about pallets before and then of course, anything imported can be a little bit dicey just due to the situation on West Coast ports.

And I would add Chris that because of our procurement expertise and our visibility at the supply chain, we anticipated some challenges we've watched how they've extended lead-times on deliveries and our procurement team has done an extraordinary job making sure that we have been kept in stock as best as possible.

I guess just turning on the demand side. On the -- within consumer just around that snack mix, can you just talk about what's happening? You've obviously done a great job around that kind of in that product line. Is this a new program and expansion with the existing customer? Because it sounds like it was a pretty robust pickup in the quarter.

Yes. So, you're referring to the Fisher Oven Roast Never Fried program?

Is that -- I thought it was a branded product or expansion with a customer around the snack nuts or the trail mix.

Yes. So, we've seen obviously snack and trail mixes. There's competitive pricing for mixes like that. So, we've seen consumers shift to snack mixes. But it's been a growing category for a long time. We've really expanded our manufacturing of some private brand items with key customers in that trail mix category and snack mix category. So, part of it is new products that we're supplying that we didn't in previous years. Part of it is growth in that segment within the category.

Hey Chris, this is Frank. A big factor in that is also and now we began to ship some new product to our private brand customers in Q2 of last year. So, the Q1-over-Q1 impact is much more significant in Q1--

Okay. The comp is plays into it. Okay. All right. That makes sense. And it sounds like Fisher recipe you have some holiday you're coming up on the holiday. Can you just talk about it. It sounds like you may approach it differently. Is that correct in terms of how you're looking at the holiday season for Fisher recipe?

Chris we've just -- our sales and marketing teams have done a great job building more relevant messaging for the holiday season. We've gained some new distribution. We focus on velocity; the holiday season is the most important time period for recipe nuts. And our team has just positioned us really well both from a consumer messaging, product placement, pricing we're very competitive in the market from a pricing perspective. And so we just anticipate a really strong holiday season this year.

Great. And anything you could share from – I know it's still early but just on the consumer side and some of the talent addition? What have they seen about the brands? What are they looking to introduce? Can you just talk a little bit? I know you can't share too much probably on the new product introductions, but whatever you could share would be helpful.

Yeah. We're hopeful at least for the new product. We've made some investments in new technology that we'll discuss probably in the back half of the fiscal year. The consumer insights team has been focusing on just really understanding Gen Z and millennial generation consumers. They don't typically put nuts on their shopping list a lot of times when they go to the store. So we've got to understand that dynamic. They're looking at category trends and the changing consumer behavior as a result of the pandemic. E-commerce is critical. And just the social messaging and how you engage consumers has changed dramatically. So those investments we're making consumer insights are helping us to understand the consumer where they're shopping, the type of messaging that impacts them. And we'll still have a much better level of intelligence to then look at our brands, position them better, message them better and engage consumers in the future.

Okay, great. And any update on the pea chips or some of the new product introductions and how they're contributing at this point?

Sure. So the chickpea chips and Orchard Valley Harvest we are -- we launched in e-commerce. We've got distribution on Amazon. We're -- it's really a test market at this point but our goal is to have a full launch in spring of 2022. So Q3 of 2022 we'll have a full launch of Fisher -- of Orchard Valley Harvest chickpea chips. It's a great product.

Great. Thanks. And then just looking on the commercial side is that -- the growth that we're seeing is -- as we reopen, the economies reopen, are you at -- are you -- do you think you're taking market share? Is there ability to go out and take market share as the economy starts to open back up? And how far below are you from where I guess pre-COVID levels are you at this point?

Yeah. So it's -- we're still trying to get back to 2019 levels. Obviously not all restaurants have full capacity, not all restaurants are open. There's been some impact on restaurant closures as a result of the pandemic, the past 19 months. So it will take time I believe for the entire foodservice channel to get back and very robust. What I will tell you is our foodservice team has worked so hard to build distribution. We've got better distribution today than we did in 2019 pre-pandemic. We have better products in the marketplace. And we have better relationships with some of the key foodservice players in the market. And so I'm very confident that our team is well-positioned to take advantage and optimize this return to going out to dinners and lunches and breakfast and the return of foodservice and also traveling as well.

Hey, Chris this is Frank again. And as far as your second part of that question at Q1, we're approximately 87% pre-COVID levels on volume in foodservice.

Great.

And we expect to get back to pre-COVID levels sometime during the year -- fiscal year.

Fiscal year throughout the remainder of this year, okay? Great. And then just last question M&A. It sounded like the last time we talked on the last quarter, you're maybe looking into some M&A but just didn't make sense. Can you maybe just update us on the M&A market? Thanks.

Sure Chris. It's a very competitive market out there. Now we are actively looking for potential targets. We have an M&A committee that's actively looking and analyzing any potential targets. So again it's hard to predict when those may materialize but we are looking pretty consistently.

Great. Well, thanks again for taking my questions. Good luck in Q2, and I’ll jump back in the queue.

Thanks Chris.

There are no further questions at this time. Presenters please continue.

Again thank you for your interest in JBSS. Now I'd like to remind everyone that we will be presenting at the Southwest IDEAS Conference in Dallas on November 18, 2021. This concludes the call for our first quarter of fiscal 2022 operating results.

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