John B. San Filippo's Q4 results reveal record $1.11 billion sales, but EPS growth falls short amid cost pressures and strategic shifts.

OPERATOR - (00:01:25)

Good day ladies and gentlemen and thank you for standing by. Welcome to the John B Sanfilippo & Son Fourth quarter and full year 2025 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. To ask the question during the session you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised to withdraw your question, please press star 11. Again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jeffrey Sanfilippo, CEO. Please go ahead.

Jeffrey Sanfilippo - Chief Executive Officer - (00:02:06)

Thanks. Latonya, Good morning everyone and welcome to our fiscal 2025 fourth 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. 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. Before we begin today's call, I want to take a moment to honor the life and legacy of Matt Valentine, former president from 1995 to 2006 and member of the JVSS Board of Directors who passed away this week. Matt played a pivotal role in shaping the success of our company, working closely alongside our former CEO Jasper Sanfilippo Sr. During some of the company's most formative years. He was more than a leader, he was a mentor, a trusted advisor and a steady presence for so many of us. My brother Jasper and I were fortunate to learn from him and his impact continues to resonate throughout our organization. We are deeply grateful for Matt's contributions. Our thoughts and prayers are with the Valentine and Carol families Turning to our results, I'm proud of how our team navigated a challenging and constantly evolving operating environment through fiscal 2025. We responded swiftly and decisively to address short term financial impacts while remaining focused on executing our long range plan in spite of a challenging macroeconomic and consumer environment. Although our financial performance fell short of our expectations, we gained positive momentum as the year progressed, highlighted by year over year diluted eps growth of 49.6% and 33.7% in the third and fourth quarters respectively, and enhanced spending discipline and increased efficiencies in our operations. We also increased our net sales to a record $1.11 billion, surpassing the billion dollar mark for two years in a row. We continue to make significant investments in our manufacturing capabilities and infrastructure, laying the foundation for future profitable growth. In addition, we recently increased our annual dividend by 5.9% to $0.90 per share and declared a special dividend of $0.60 per share. Both dividends will be paid on September 11, 2025. This marks the 14th consecutive year of returning capital through dividends to our shareholders. I want to sincerely thank all our employees for their dedication, resilience and hard work this year. Their commitment drives our success and positions us for a strong future Navigating a Dynamic Market Landscape across recent CPG earnings calls, three key themes have consistently emerged, each reflecting the evolving challenges and opportunities facing our industry. We recognize the importance of addressing these shifts head on. Now we'll share how our teams are actively managing change, responding to uncertainty, and positioning the company for continued growth and resilience in today's complex marketplace. First, navigating tariffs and rising costs in an increasingly volatile global landscape. Tariff related cost pressures continue to challenge manufacturers across the industry. At jvss, we proactively monitor trade developments, material costs, customer pricing, and demand fluctuations through close collaboration among our procurement, demand, planning, finance, marketing, and sales teams. While the environment remains complex, we built a resilient framework to assess and manage our supply chain, helping us mitigate risk and maintain a continuity. Our teams are responding with agility, leveraging sourcing flexibility, driving cost savings initiatives, and implementing selective price adjustments where appropriate. We remain transparent with our customers, providing regular updates and offering tailored solutions such as reformulations, alternative ingredients, and optimized pack sizes to help manage costs without compromising value. Second, adapting to shifts in consumer behavior in today's environment, consumers remain highly value conscious, making thoughtful decisions about their purchases. At jbss, we stay closely attuned to these evolving behaviors through continuous monitoring of consumption trends across the nuts, trail, mix and snack bar categories. As inflationary pressure persists, our consumers insights play a critical role in shaping our innovation pipeline, ensuring that new offerings resonate with shoppers seeking both quality and value. Additionally, our advanced price elasticity models help us optimize price pack architecture and promotional strategies, allowing us to deliver compelling value while maintaining profitability. This is an important environment for private label programs, and we are optimistic about expanding product portfolios with several of our transformational customers to meet shifting consumer needs. Third, driving growth through innovation and portfolio expansion as evidenced by current market valuations, growth remains a top priority across the consumer packaged goods sector. At our company, we're embracing this imperative with strategic investments designed to unlock new opportunities. Earlier this year we announced a significant investment and expansion in our manufacturing capabilities, an initiative that will enable us to broaden our product portfolio and better serve evolving consumer preferences. We're energized by the potential these innovations hold and remain committed to transforming our business for long term sustainable growth. We will share further details in the coming quarters as we wrap up for production. Looking ahead to fiscal 26, we are focused on accelerating our volume growth by expanding on the success of our private label bar portfolio, rebuilding our nut and trail business through price packed architecture and innovation, and expanding our manufacturing capabilities. We are confident we can continue to deliver strong operating results and create long term value for our shareholders through the execution of our long range plan. We are nuts about creating real food that brings joy, nourishes people and protects the planet and JVSS is executing on this mission. I'll now turn the call over to Frank to discuss our financial performance.

Frank Pellegrino - Chief Financial Officer - (00:09:22)

Thank you Jeffrey Starting with the income statement, net sales for the fourth quarter of fiscal 2025 decreased slightly by 0.2% 269.1 million compared net sales of 269.6 million for the fourth quarter of fiscal 2024. The slight decline in net sales was due to a 5.9% decrease in sales volume or pounds sold to customers, which was largely offset by a 6% increase in the weighted average sales price per pound. The increase in the weighted average selling price primarily resulted from higher commodity acquisition costs for peanuts and all major tree nuts except for pecans. Sales volume declined for all major product types with the exception of peanuts, walnuts and pecans. Sales volume decreased 11.5% in consumer distribution channel primarily due to a 10.7% decrease in private brand sales volume. The private brand volume decrease was due to a 16.7% reduction bar volume mainly due to reduced sales to a mass merchandising retailer following an increase in bar sales from national brand recall in the fourth quarter of fiscal 2024. Our strategic decision to reduce sales to a grocery retailer and lost distribution at another grocery retailer contributed to decline in bars volume. These decreases were partially offset by new bars distribution at new customers. Additionally, sales volume for other products types decreased 8.5% mainly due to the discontinuation of peanut butter along with softer demand for snack and trail mix, mixed nuts and almonds all at the same mass merchandising retailer driven by higher retail prices however, these decreases were partially mitigated by increased sales of walnuts and pecans at the same retailer. Sales volume decreased 19.7% for our branded products, primarily driven by a 42.9% reduction in orchard value harvest sales mainly due to lost distribution to a major customer in the non food sector. Sales volume increased 8.7% in the commercial ingredients distribution channel, mainly driven by increased snack bar volume to existing customers which was first supplemented by an increase in peanut volume. Sales volume increased 18.7% in the contract manufacturing distribution channel primarily due to increased granola volume processed in our Lakeville facility and snack nut sales to a new customer and increased peanut sales volume to a major customer also contributed to the overall increase. Gross profit decreased by 1.2 million and or 2.4% to 48.8 million compared to the fourth quarter of last year driven by higher commodity acquisition costs for nearly all tree nuts and peanuts. However, the impact was significantly offset by increased production volume, lower manufacturing spending and improved manufacturing efficiencies. Fourth quarter gross profit margin as a percentage of net sales decreased to 18.1% compared to 18.5% for the fourth quarter fiscal 2024 due to the reasons previously mentioned. Total operating expenses for the fourth quarter decreased 6.7 million compared to prior year quarter mainly due to lower incentive compensation expenses along with reduced freight expense, lower third party warehouse expenses and lower marketing insight spending. These decreases were partially offset by increase in rent associated with our new facility in Humphrey, Illinois. Total operating expenses for the fourth quarter of 2025 decreased to 10.6% of net sales from 13.1% for last year's fourth quarter due to the reasons previously mentioned. Interest expense was 1.2 million for the fourth quarter of fiscal 2025 in part to 500,000 for the fourth quarter of fiscal 2024 due to higher average debt levels. Net income for the fourth quarter of fiscal 2025 was 13.5 million or $1.15 per diluted share compared to 10 million or $0.86 per diluted share for the fourth quarter of fiscal 2024. Now taking a look at inventory. The total value of inventories on hand at the end of the current fourth quarter increased 58 million or 29.5% compared to the total value of inventories on hand at the end of the prior year's comparable quarter. The increase was due to higher commodity acquisition costs across all major tree nuts as well as higher on hand quantities of finished goods in preparation for anticipated seasonal demand. The weighted average cost per pound of raw nut and dried fruit increased 30.4% year over year, mainly due to higher commodity acquisition costs for almost all major treatments. Moving on to year to date results fiscal 2025 net sales increased 3.8% to 1.11 billion compared to fiscal 2024 net sales of 1.07 billion. Excluding the 2025 first quarter impact, the Lakeville acquisition net sales remained relatively unchanged. Sales volume increased 3.4% primarily due to the Lakeville acquisition. Excluding the impact of the Lakeville acquisition, sales volume decreased 1.7% reflecting a 4% decrease in the consumer channel which was partially offset by 15.4% increase in the contract manufacturing channel. Gross profit margin decreased from 20.1% to 18.4% of net sales. The decrease is mainly attributable to increased commodity acquisition costs for substantially all major nuts except pecans, as well as competitive pricing pressures and strategic pricing decisions which were offset by factors cited previously and improved profitability on bars due to manufacturing efficiencies. Total operating expenses for fiscal 2025 decreased by 10.2 million 118.8 million compared to fiscal 2024. The decrease in total operating expenses was mainly driven by lower incentive compensation, advertising and consumer insight expenses. These decreases were partially offset by a one time bargain purchase gain from the Lakeville acquisition which did not repeat in the current fiscal year, as well as increases in wage and rent expenses attributable to our Humphrey warehouse. Interest expense was 3.6 million for fiscal 2025 and 2.5 million for fiscal 2024. Net income for fiscal 2025 was 58.9 million or $5.03 per diluted share with our net income of 60.2 million or $5.15 per D share for fiscal 2024. Please refer to our 10K for additional details regarding our financial performance for fiscal 2025. Now I will turn the call over back to Jeffrey to provide additional comments.

Jeffrey Sanfilippo - Chief Executive Officer - (00:16:56)

Thanks Frank for the financial updates. Now let's shift to consumption activity and category updates. I'll share the 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 for the period ending June 15, 2025. When I refer to Q4, I'm referring to 13 weeks of the quarter ending June 15, 2025 references to changes in volume or versus the corresponding period one year ago. For pricing commentary, we are using scan data from Circana, which includes food, drug, mass, Walmart, military and other outlets, and we are referring to average price per pound. We are 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 aisle as defined by Circana. Volume and dollars were up 1% and 3% respectively. This is consistent with the performance we saw in Q3. In Q4, the snack, nut and trail mix category was down 1% in pounds which is consistent with Q3 performance. Dollars in Q4 were up 4% versus 2% in Q3. As prices continued to rise. Prices rose 5% for snack nuts with increases primarily in cashews, mixed nuts and pistachios. Prices also rose 4% for trail mixes. Fisher Snack Nut and Trail Mix performed worse in the category with pond shipments down 17%. This was due primarily to declines at a major specialty retailer. As Frank mentioned, due to inventory changes and not repeating a promotion. Our Southern style nut brand pound shipment increased by 1% and driven primarily by growth in Mass and E commerce. Orchard Valley Harvest brand, which primarily plays in trail mix was down 43% in pound shipments driven by discontinuation at a national specialty retailer. Despite strong performance in club, Mass and E Commerce. Commodity increases including cocoa and some tree nuts are resulting in higher prices for Orchard Valley Harvest. We continue to focus on innovation and cost savings opportunities to mitigate this commodity pressure. Our private label consumer snack and trail shipments performed weaker than the category with pound shipments down 8% versus last year due to softness in mass as prices rise due to commodity pressures. We're actively working on cost mitigation solutions with our retail partners. Now let me turn to the recipe nut category in Q4. Recipe nut category was down 1% in pounds and up 18% in dollars as prices for both walnuts and pecans continued to increase. This is an improvement in both volume and dollar performance versus Q3. Our fish and recipe pound shipments were down 7% in Q4 with volume softness tied to increased cost of our commodities and delayed shipments in E Commerce. Now let's switch to the bar category. In Q4, the bars category continued to rebound as a major player continued to re enter the market. After a major recall in winter of 2023, the category grew 7% in pounds and 8% in dollars. Private label was down 4% in pounds and 2% in dollars as the previously mentioned national brand retook some of the share it lost to private label this past year. Our private label bar shipments were down 17% versus a year ago as we lapped significant growth from the national brand recall. In closing, as we enter fiscal 26 we have strong momentum and optimism as we continue to execute our strategic plan. We are actively pursuing additional opportunities to grow sales volume across all three of our distribution channels and we're encouraged by early signs of success. At the same time, we remain focused on disciplined cost management and driving further operational efficiencies. That said, we recognize that significant external uncertainties remain, including tariffs, inflation, unpredictable commodity costs, and a broader macroeconomic challenge. These factors will require us to stay agile and responsive as the year progresses. We're committed to taking the necessary actions to deliver long term sustainable growth, enhance our margins and continue to create value for our customers, consumers and shareholders. As I said earlier, while the company did not hit some of our financial performance goals in fiscal 25, I am proud of what we did accomplish to transform our company. These achievements are a testament to the fortitude of our business model, the commitment of our people, and the mutual trust and depth of our customer and supplier partnerships. We are executing our growth strategies, implementing continuous improvement projects throughout the company to optimize our cost structure and we continue to invest in our brands, our capabilities and our people to better service our customers and consumers and create value for our shareholders. We appreciate your participation in the call and thank you for your interest in our company. Latonya I will now open the call to questions.

OPERATOR - (00:22:36)

Thank you. As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced.. To withdraw your question, please press star 11 again. As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced.. To withdraw your question, please press star 11 again. And I would now like to hand the call back to Jeffrey for closing remarks.

Jeffrey Sanfilippo - Chief Executive Officer - (00:23:12)

We thank you for your participation in the call. We will be at next week's investor conference in Chicago. We hope you will join us. Thank you.

OPERATOR - (00:23:24)

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