Good day and thank you for standing by. Welcome to the John B. Sanfilippo & Son, Inc. First 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. And I would now like to hand the conference over to your speaker today, the CEO, Jeffrey Sanfilippo. Sir, please go ahead.

Thank you, Chris. Good morning, everyone, and welcome to our 2024 first quarter earnings conference call. Thank you for joining us. On the call with me today is Frank Pellegrino, our CFO; and Jasper Sanfilippo, our COO. We may make some forward-looking statements today. 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 12.7% increase in diluted earnings per share for our fiscal 2024 first quarter, as the execution of our plan to control costs and invest in growth initiatives was accompanied by a challenging nut category and softness in consumer confidence, which resulted in a decrease in our sales volume. We made a significant investment – marketing investment to relaunch the Orchard Valley Harvest brand in the first quarter, which resulted in a 3.2% year-over-year sales volume increase for our reimagined Orchard Valley Harvest product line. Although, we are in a difficult brand environment in the snack category, our marketing and sales teams are working hard to gain new distribution and differentiate our brand through innovative products and customer programs and creative social media campaigns. We will continue to strategically invest in growth opportunities as we monitor changes in consumer purchasing preferences. With the inflationary environment, we are seeing signs of consumers shifting to more value-focused retailers such as mass merchandising retailers, club stores and dollar stores, not all of which we currently distribute or sell to, but our teams are working hard to expand our retail distribution especially in the…

Thanks, Jeffrey. As a reminder, we completed our Snack Bar acquisition at the beginning of the second quarter. Therefore, first quarter results were not materially impacted by the acquisition. Starting with the income statement. Net sales for the first quarter of fiscal 2024 decreased 7.3%, $234.1 million compared to net sales of $252.6 million for the first quarter of fiscal 2023. The decrease in net sales was mainly due to a 7.3% decrease in sales volume, which is defined as pounds sold to customers. Sales volume decreased 5.8% in the consumer distribution channel due to a 5% decrease in sales volume for private brand sales, driven primarily by fewer promotional programs and lower seasonal sales volume for snack and trail mixes as well as a decrease in peanut sales volume at two current mass merchandising retailers. A 17% sales volume decrease for our branded products which includes Fisher recipe nuts, Fisher snack nuts, Orchard Valley Harvest and Southern Style Nuts also contributed to the overall decrease in sales volume in the consumer distribution channel. Decline in branded sales volume was mainly attributable to a 30.9% decrease in sales volume for Fisher snack nuts due to increased competitive pricing pressures, discontinuance of a product line at a mass merchandising retailer and the timing of holiday sales orders for a customer in the non-food sector. Sales volume for Fisher recipe decreased 10.8% due to a one-time order at an existing grocery customer in the same quarter of our prior fiscal year that did not reoccur in the current quarter and timing of holiday sales orders for another grocery customer. Sales volume for Southern Style Nuts decreased 36.6%, mainly from reduced distribution and promotional programs at a club store customer. Sales volume decreased 5.5% in the commercial ingredients channel due to a 50.3%…

Great. Thanks, Frank, for the financial updates. As Frank mentioned, we completed the acquisition of the snack bar business from TreeHouse Foods. This transaction significantly accelerates our product diversification strategy and we now have the capabilities to offer our private label retail partners a broader portfolio of snack bars. This new business complements our own internally developed nutrition bar program which had sales exceeding $1.5 million in the first quarter. I am so proud of the JBSS department leaders who are managing the integration of the TreeHouse bar business. They are working extremely hard and doing an extraordinary job. They have developed strong plans and a clear path to optimize the operation and create efficiencies to make this business accretive by the back half of fiscal 2025. I had a chance to spend time with the Lakeville [ph] team joining our company. We are fortunate to have a strong group of dedicated people in the Minnesota facility, and we look forward to profitably growing the snack bar business together. Now I'll turn to category updates for the quarter. As always, market information I'll be referring to is Circana reported data, and today is for the period ending September 24, 2023. When I refer to Q1, I'm referring to 13 weeks of the quarter ending September 24, 2023. 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, maps, Walmart, military and other outlets. Unless otherwise specified and when we discuss pricing, we are referring to average price per pound. Breakouts of the recipe, snack and produce nut segments are based on our custom definitions developed in conjunction with Circana. The term velocity refers to the sales per point of distribution. In…

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

Hi, guys. I just had a starting off question on the acquisition. So I was wondering once it's fully integrated and I say perhaps in 2026, will it have the same kind of margin profile as the overall business?

Thanks, Nick, for your question. We're still in the early process of integrating the business. But at this point, I would expect the operating margin to be consistent with our overall margin albeit our gross margin may be different.

And then on this potential, like how much more revenue you think you can generate off this business from deepening the relationship with your largest suppliers, like Walmart and Target going forward?

I think we could grow this business by 20% to 30% over the next three or five years.

And then following up, just one on the club channel, I was just wondering how big of a channel that is for you? And you've talked about growing more in there, so just what the opportunity looks like there?

Sure, Nick. So it's really not a big channel for us today. It is a competitive channel. We have some distribution with Orchard Valley Harvest and a couple of divisions in there, in the channel, and then we have some of the Southern Style Nuts program at one of the major retailer, but it's a huge opportunity. As we see consumers shifting to the club channel as a result of market situations of the economy, I just – it's such an important channel that we need to participate and should be participating in. So we are really working hard to develop the right products, right value proposition for that channel to be successful, but it's a small piece of our business today, but we're focused on trying to build it.

And then Hormel Foods had their Investor Day and one that stood out is they said for the Planters marketing they've changed it, and they've seen a 4x increase in the ROI for their marketing. So I was wondering, has there been any effect towards your business with potential shift changes or market share loss?

Sure. So Hormel has been extremely competitive with the Planters brand, actually for the – almost the entire past year, increased their marketing spend, they've been very creative. They've done a great job making brand awareness and their marketing programs are strong. So we have seen some impact, both on our branded product line, but also in the private label space. At some point, you're seeing retail prices for Planters cheaper than the private label offering for a like item. So some consumers shift to their brand as a result of that competitive pricing points.

Is that pricing sustainable for Planters or is this like a TreeHouse situation with the produce nut business?

Good question. Just to be tactful, I'm surprised they're as competitive and investing so much this far along in the program. It's very deep discounting.

And then last one I had was just around – just all that buzz around Ozempic and other weight loss drugs. I'm wondering what you guys have thought about this and just how the relationship with the nut industry and just Ozempic and weight loss drugs do you think will evolve over time?

Yes. We haven't seen an impact yet, and that's – it's time will tell. I think it's going to be a while before we see any specific impact on the nut category. It's just too early to see what kind of impact it may have at this point. Have you seen impact on other categories? Yes?

Not so much. The one I've only seen for nuts is every nutritionist is really actually pounding the table for it because just protein to calorie consumption is so high. So I was just wondering if there's maybe even a positive for you guys.

Well, hopefully, that's the case. We'll see.

All right, thanks for taking my question.

Thanks Nick.

Thank you. [Operator Instructions] I’m not seeing any further questions in the queue. I would now like to turn the conference back to Jeffrey Sanfilippo for closing remarks.

Great. Thanks, Chris. Again, I want to thank everyone for your interest in JBSS. This concludes the call for our first quarter of fiscal 2024 operating results. Have a great day.

This does conclude today's conference call. Thank you all for participating. You may now disconnect, and have a pleasant day.