Q3 2025 Lamb Weston Holdings Inc Earnings Call

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Dan: Dan, welcome to the Lamb Weston third quarter FY 2025.

Speaker Change: Good day and welcome to the Lamb Weston third quarter FY 'twenty 25 earnings call. Today's conference is being recorded at this time I'd like to turn the conference over to MS. Debbie Hancock, Vice President of Investor Relations. Please go ahead ma'am.

Debbie Hancock: Today's conference is being recorded at this time I'd like to turn the conference over Debbie Hancock, Vice President of Investments. Thank you, Anna. Good morning, and thank you for joining us for Lamb Weston's third quarter 2025 earnings call. I am Debbie Hancock, Lamb Weston's Vice President of Investor Relations. Earlier today, we issued our press release and posted slides that we will use for our discussion today. You can find both on our website, lambweston.com. Please note that during our remarks, we will make forward-looking statements about the company's expected performance that are based on our current expectations.

Speaker Change: Thank you Ana good morning, and thank you for joining us for Lamb Weston third quarter 2025 earnings call I am Debbie Hancock Lamb Weston as Vice President of Investor Relations earlier today, we issued our press release and posted slides that we will use for our discussion today you can find both on our website Lamb Weston.

Speaker Change: <unk> Dot com.

Speaker Change: Please note that during our remarks, we will make forward looking statements about the company's expected performance that are based on our current expectations actual results may differ materially due to the risks and uncertainties.

Debbie Hancock: Actual results may differ materially due to the risks and uncertainties.

Debbie Hancock: Please refer to the cautionary statements and risk factors contained in our SEC filings for more details on our forward-looking statements. Some of today's remarks include non-GAAP financial measures. These non-GAAP financial measures should not be considered a replacement for and should be read together with our GAAP results.

Speaker Change: Please refer to the cautionary statements and risk factors contained in our SEC filings for more details on our forward looking statements.

Speaker Change: Some of today's remarks include non-GAAP financial measures. These non-GAAP financial measures should not be considered a replacement for and should be read together with our GAAP results you can find the GAAP to non-GAAP reconciliations in our earnings release and the appendix to our presentation. Joining me today are Mike Smith, our president.

Debbie Hancock: You can find the GAAP to non-GAAP reconciliations in our earnings release and the appendix to our presentation.

Debbie Hancock: Joining me today are Mike Smith, our President and CEO, and Bernadette Madarieta, our Chief Financial Officer. Let me now turn the call over to Mike.

Mike Smith: C E O and Bernadette <unk>, our Chief Financial Officer, Let me now turn the call over to Mike.

Mike Smith: Thank you, Debbie, and congratulations on your new role.

Mike Smith: Debbie and congratulations on your new role and good morning, everyone. Thank you for joining us today I am honored to be the CEO of Lamb Weston.

Mike Smith: Good morning, everyone. Thank you for joining us today. I am honored to be the CEO of Lamb Weston, a company with a long and proud track record of excellence in our industry. Throughout our history, Lamb Weston has been a leader in innovation, product quality, customer relationships, and operations. These are long-term strengths we will build upon to drive growth and shareholder value. I know this industry and this business. I recognize our recent challenges and understand our future risks and opportunities.

Mike Smith: With a long and proud track record of excellence in our industry.

Mike Smith: What our history Lam, Washington has been a leader in innovation product quality customer relationships and operations.

Mike Smith: These are long term strengths, we will build upon to drive growth and shareholder value.

Mike Smith: I know this industry in this business I recognize our recent challenges and understand our future risks and opportunities.

Mike Smith: To meet evolving industry dynamics, Lamb Weston needs to change. This is where my focus has been since I took over as CEO three months ago, and where it Everything is on the table, and we are moving with urgency. We are amplifying our efforts with customers, and I have been personally meeting and hearing directly from them. We have engaged Alex Partners, a global advisory firm specializing in business optimization, to accelerate an end-to-end value creation plan. Not only are we focused on unlocking value, both in the near-term and long-term, but also on defining the right go-forward strategy.

Speaker Change: To meet evolving industry dynamics Lamb Weston needs to change. This is where my focus has been since I took over as CEO three months ago, and where it remains everything is on the table and we're moving with urgency.

Speaker Change: We are amplifying our efforts with customers and I have been personally meeting and hearing directly from them.

Speaker Change: We have engaged Alex partners, a global advisory firm specializing in business optimization to accelerate and then value creation plan.

Speaker Change: Not only are we focused on unlocking value bolt in the near term and long term, but also on defining the right go forward strategy and the Lamb Weston team is talented and experienced they are engaged and ready to embrace change.

Mike Smith: And the Lamb Weston team is talented and experienced. They are engaged and ready to embrace change. This notably includes our new head of the global supply chain, who has already identified significant opportunities to win with our customers, reduce complexity and cost, as well as improve performance. We have over 30 projects underway this fiscal year and will deliver quick wins as part of a savings pipeline across multiple years. For example, in the logistics space, we are right-sizing the use of different transportation modes and optimizing rail car loading. We also see the need for better balancing of our finished goods cold storage capacity and are executing a plan to exit surplus warehouse space.

Speaker Change: This notably includes our new head of global supply chain, who has already identified significant opportunities to win with our customers reduce complexity and cost as well as improved performance.

Speaker Change: We have over 30 projects underway this fiscal year and will deliver quick wins as part of our savings pipeline across multiple years. For example in the logistics space. We are right sizing the use of different transportation modes, and optimizing railcar loading. We also see the need for better balancing of our finished goods cold storage capacity and our exit.

Speaker Change: Our plan to exit surplus warehouse space.

Mike Smith: We are combining these projects with the value creation work as part of our enterprise-wide value creation program. These efforts will be on top of our previously announced restructuring plan, where we remain on track to deliver at least $55 million of pre-tax savings in fiscal 2025 and $85 million of pre-tax savings in fiscal 2026.

Speaker Change: We are combining these projects with our value creation work as part of our enterprise wide value creation program.

Speaker Change: These efforts will be on top of our previously announced restructuring plan, where we're at.

Speaker Change: On track to deliver at least $55 million of pretax savings in fiscal 2025, and 85 million of pretax savings in fiscal 2026.

Mike Smith: Today, I'll update you on our progress to date, how we are controlling what we can control in a challenging market, and what's ahead. On slide six, you'll see our third quarter performance reflects the hard work of the Lamb Weston team to regain business, grow volume, and lower expenses while operating in a challenging macroeconomic environment. Specifically in the third quarter, we grew volume 9%, rebuilding after the transition to a new ERP in the prior year. increased net sales 4% and grew adjusted EBITDA 6%. Despite this, all indications are that the consumer remains stretched, concerned about the economy, and looking for value.

Speaker Change: Today I'll update you on our progress to date, how we are controlling what we can control in a challenging market and what's ahead.

Speaker Change: On slide six you'll see our third quarter performance reflects the hard work of the Lamb Weston team to regain business grow volume and lower expenses, while operating in a challenging macroeconomic environment.

Speaker Change: Specifically in the third quarter, we grew volume, 9% rebuilding after the transition to a new ERP in the prior year.

Speaker Change: The increased net sales, 4% and grew adjusted EBITDA at 6%.

Speaker Change: Despite this all indications are that the consumer remains stretched concerned about the economy and looking for value. We saw this in the second quarter and the consumer uncertainty has only increased since then.

Mike Smith: We saw this in the second quarter, and the consumer uncertainty has only increased since then. Turning to slide seven, as we finished our contracting late last year, visibility into our sales improved. We continue to reshape contracts, balancing when they come due, improving our ability to price with changes in the market, and providing customers continuity with Lamb Weston. Our improved engagement is also enabling us to expand and retain our existing customers while also pursuing and winning new business. We are seeing success across channels. And away from home, we recently partnered with a large growing QSR that previously had been cutting their own fries, converting them to a frozen product.

Speaker Change: Turning to slide seven.

Speaker Change: As we finished our contracting late last year visibility into our sales improved we continue to reshape contracts balancing when they come due improving our ability to price with changes in the market and providing customers continuity with Lamb Weston.

Our improved engagement is also enabling us to expand and retain our existing customers, while also pursuing and winning new business.

Speaker Change: We're seeing success across channels and away from home. We recently partnered with a large growing <unk> that previously been cutting their own fries converting them to a frozen product there'll be completing a national rollout of our product during the remainder of calendar 2025 and into early calendar 2026.

Mike Smith: They'll be completing a national rollout of our product during the remainder of calendar 2025 and into early calendar 2026. In the in-home consumption space, we recently launched new private label products across the grocery and club channels that are off to a great start.

Speaker Change: And the in home consumption space, We recently launched new private label products across the grocery and club channels that are off to a great start we are working to build upon wins like these as we continue to identify new and growing customers to drive long term sustainable growth in our business.

Mike Smith: We are working to build upon wins like these as we continue to identify new and growing customers to drive long-term, sustainable growth in our business. Now turning to slide eight, along with improved customer relations, we are winning business because of our ability to innovate and meet our customers' evolving needs. In North America, we launched new battered and seasoned products, as well as fridge-friendly fries and tots that can be held refrigerated up to seven days, expanding our addressable market by allowing us to sell to customers that may not have freezers. In our North America retail channel, we've expanded our licensed brand portfolio to include onion rings and cheesy potato bites.

Speaker Change: Now turning to slide eight.

Speaker Change: Along with improved customer relations, we are winning business because of our ability to innovate and meet our customers' evolving needs in North America, we launched new battered in season products as well as fridge friendly fries and tasks that can be held refrigerated up to seven days, expanding our addressable market by allowing us to sell to customers that may.

Speaker Change: Not have freezers.

Speaker Change: North America retail channel, we've expanded our licensed brand portfolio to include onion rings, and cheesy potato bites and internationally, we launched a re imagined classic Fry the three sided frenzy fries and are receiving very positive feedback and demand signals.

Mike Smith: And internationally, we launched a reimagined classic fry, the three-sided frenzy fries, and are receiving very positive feedback and demand signals.

Mike Smith: While we do not anticipate a near-term improvement in demand environment, we are controlling what we can control. We are focusing on gaining share, driving growth with existing customers, winning new customers, and operating with excellence.

We do not anticipate a near term improvement in demand environment. We're controlling what we can control we are focusing on gaining share driving growth with existing customers, winning new customers and operating with excellence.

Mike Smith: Now shifting to slide 9, into the upcoming potato crop. In North America, contract negotiations for the 2025 crop are nearly complete. Overall, we expect a mid-single-digit percent decline in price in the aggregate and have largely secured the targeted number of acres across our primary growing regions. We contracted fewer acres given softer demand and higher inventory on hand. Planting is on schedule for the early potato varieties, and we expect planting for the main harvest to be completed by the end of April. In Europe, prices governed under fixed price contracts are currently in negotiations and expected to be flat on average for the 2025 potato crop.

Speaker Change: Now shifting to slide nine into the upcoming potato crop in North America contract negotiations for the 2025 crop are nearly complete overall, we expect a mid single digit percent decline in price in the aggregate and have largely occurred the targeted number of acres across our primary growing regions.

Speaker Change: We contracted fewer acres, given softer demand and higher inventory on hand.

Planting is on schedule for the early potato varieties and we expect planning for the main harvest to be completed by the end of April.

Europe prices governed under fixed price contracts are currently in negotiations and expect it to be flat on average for the 2025 potato crop.

Mike Smith: Contract planning across the European growing regions will continue through the end of April.

Speaker Change: Contract planning across the European growing regions will continue through the end of April.

Mike Smith: And we'll provide our typical update on the outlook for potato crops in North America and Europe when we issue our fourth quarter earnings in July.

Speaker Change: We will provide our typical update on the outlook for potato crops in North America, and Europe, when we issue our fourth quarter earnings in July.

Mike Smith: Finally, an update on capacity. As we discussed previously, we took steps to rationalize capacity earlier this fiscal year, closing our Connell, Washington plant and curtailing additional lines across our network. These actions improved our capacity utilization. We are prepared to address changes in demand that require reducing or increasing production through line curtailments and restarts. But in the near term, we expect the demand patterns will impact factory absorption. Since last quarter, we have seen additional capacity announcements primarily outside the U.S. The industry has historically been rational in respect to supply and demand and has made the necessary adjustments over the long term to stay in balance.

Speaker Change: Finally, an update on capacity as we discussed previously we took steps to rationalize capacity earlier this fiscal year closing, our Cano, Washington plant and curtailing additional lines across our network. These actions improved our capacity utilization.

Speaker Change: We are prepared to address changes in demand that require reducing or increasing production through line curtailments and restarts, but in the near term we expect the demand patterns will impact factory absorption.

Speaker Change: Since last quarter, we have seen additional capacity announcements primarily outside the U S. B.

Speaker Change: The industry has historically been rational in respect to supply and demand and has made the necessary adjustments over the long term the stay in balance.

Mike Smith: And while we cannot know if or when these plants will come online, and we believe some have been delayed, we will continue to focus on driving productivity while working to exceed our customers' expectations. We are committed to ensuring we have the right capacity in the right geographies to meet our customers' needs, while optimizing flexibility in our manufacturing footprint.

Speaker Change: And while we cannot know if or when these plants will come online and we believe some had been delayed we will continue to focus on driving productivity, while working to exceed our customers' expectations. We're committed to ensuring we have the right capacity in the right geographies to meet our customers' needs, while optimizing flexibility in our manufacturing.

Speaker Change: <unk> footprint.

Mike Smith: As we execute our strategy, our board and management team continue to regularly engage with shareholders, and we appreciate constructive input that furthers our goal of creating sustainable long-term value and attractive returns for our investors. This includes several discussions among members of our board, JANA, and Continental Grain.

Speaker Change: As we execute our strategy our board and management team continue to regularly engage with shareholders and we appreciate constructive input that furthers our goal of creating sustainable long term value and attractive returns for our investors. This includes several discussions among members of our board Jana and Continental grain I'll now turn the call over to Bernadette.

Bernadette Madarieta: I'll now turn the call over to Bernadette. Thank you, Mike, and good morning, everyone. As a result of the actions we took in early fiscal 2025 to drive operational and cost efficiencies, we closed the quarter with sequentially improved volume trends and profitability in line with our expectations. We were able to accomplish this even while the consumer remained pressured, which is reflected in the restaurant traffic data that I'll speak to in a moment. Despite uncertainty in the consumer and macro environment, as well as softer restaurant traffic, we remain on track to meet our full year fiscal 2025 outlook.

Bernadette: Thank you, Mike and good morning, everyone.

Bernadette: As a result of the actions we took in early fiscal 2025 to drive operational and cost efficiencies, we closed the quarter with sequentially improved volume trends and profitability in line with our expectations.

Bernadette: We were able to accomplish this even while the consumer remained pressured which is reflected in the restaurant traffic data that I'll speak to in a moment.

Bernadette: Despite uncertainty in the consumer and macro environment as well as softer restaurant traffic, we remain on track to meet our full year fiscal 2025 outlook.

Bernadette Madarieta: Starting on slide 10. Net sales increased 4% compared with the prior year period. Volume increased 9 percent, primarily driven by fully replacing the combined regional, small, and retail customer volume lost in the prior year as we transitioned to a new ERP system, as well as incremental volume from recent customer contract wins across each of our channels and geographic regions, net of volume loss. These benefits were partially offset by soft global restaurant traffic trends. While French fry attachment rates remain high at almost two points higher than pre-pandemic levels, the net volume increase in the quarter did slightly lag our expectations given soft restaurant traffic in both North America and international markets.

Bernadette: Starting on slide 10.

Bernadette: Net sales increased 4% compared with the prior year period.

Bernadette: <unk> increased 9%, primarily driven by fully replacing the combined regional small and retail customer volume lost in the prior year as we transition to a new ERP system as well as incremental volume from recent customer contract wins across each of our channel and geographic region net of volume losses.

Bernadette: These benefits were partially offset by soft global restaurant traffic trends.

Bernadette: Well French Fry attachment rates remain high at almost two points higher than pre pandemic levels. The net volume increase in the quarter did slightly lag our expectations given soft restaurant traffic in both North America and international markets.

Bernadette Madarieta: Price mix declined 5% compared to the prior year quarter due to planned investments in price to compete in the increasingly competitive environment in both the North America and international segments. Looking at our segments, North America net sales grew 4% compared with the prior year. Volume improved 8% and included fully replacing volume lost in the prior year as we transitioned to a new ERP system, as well as recent customer contract wins across each of our channels, net of other volume losses, primarily in quick service restaurants. These volume gains were partially offset by soft restaurant traffic trends.

Bernadette: Price mix declined 5% compared to the prior year quarter due to planned investments in price to compete in the increasingly competitive environment in both the North America and international segments.

Looking at our segments North America, net sales grew 4% compared with the prior year.

Bernadette: Volume improved 8% and included fully replacing volume lost in the prior year as we transition to a new ERP system as well as recent customer contract wins across each of our channels net of other volume losses, primarily in quick service restaurants.

Bernadette: These volume gains were partially offset by soft restaurant traffic trends.

Bernadette Madarieta: In the US, according to industry experts, QSR traffic worsened during our fiscal third quarter, declining 2% compared with the prior year quarter. Traffic at QSR Chain, specializing in hamburgers, were down about twice as much in the quarter, with February traffic down 6%. As a reminder, about 85% of our North American sales are from Food Away From Home channels, and the majority of that volume is sold through QSRs. Price mix in our North America segment declined 4% due to planned investments in price and trade, which was only partially offset by favorable channel and product. The favorable mix was attributable to fully replacing the combined volume of higher-margin regional, small, and retail customers.

Bernadette: In the U S. According to industry experts <unk> traffic worsened during our fiscal third quarter declining 2% compared with the prior year quarter.

Bernadette: Traffic at <unk> chain specializing in hamburgers, we're down about twice as much in the quarter with February traffic down 6%.

Bernadette: As a reminder, about 85% of our North American sales are from food away from home channel and the majority of that volume is sold through <unk>.

Bernadette: Price mix in our North America segment declined 4% due to planned investments in price and trade, which was only partially offset by favorable channel and product mix.

Bernadette: Favorable mix was attributable to fully replacing the combined volume of higher margin regional small and retail customers.

Bernadette Madarieta: For our international segment, sales grew 5% versus the prior year quarter. Despite soft restaurant traffic in many of our key international markets, volume increased 12 percent, driven primarily by recent customer contract wins and, to a lesser extent, lapping unfilled orders in the prior year. Outside the U.S., according to industry experts, third quarter QSR restaurant traffic declined in most tracked markets, including the U.K., our largest market in Europe, as well as France, Germany, and Italy. Price mix was down 7%, reflecting pricing actions in key international markets in response to on-going competitive environment, along with unfavorable changes in foreign currency rates.

Bernadette: For our international segment sales grew 5% versus the prior year quarter.

Bernadette: Despite soft restaurant traffic in many of our key international markets volume increased 12% driven primarily by recent customer contract wins and to a lesser extent lapping unfilled orders in the prior year.

Bernadette: Outside the U S. According to industry experts third quarter <unk> restaurant traffic declined in most markets, including the U K, our largest market in Europe, as well as France, Germany and Italy.

Bernadette: Price mix was down 7%, reflecting pricing actions in key international markets in response to ongoing competitive environment, along with unfavorable changes in foreign currency rates.

Bernadette Madarieta: On a constant currency basis, price mix decreased about 4%.

Bernadette: On a constant currency basis price mix decreased about 4%.

Bernadette Madarieta: Moving on from sales, on slide 11 you can see that adjusted EBITDA increased $20 million versus the prior year quarter to $364 million. The increase was primarily attributable to first, higher sales volumes and lower manufacturing costs per pound, which included lapping the impact of the ERP transition and a $25 million pre-tax charge for the write-off of excess raw potatoes in the prior year. Second, recent customer and contract wins, net of other volume loss. And third, lower adjusted SG&A, which decreased $7 million, primarily related to lapping higher expenses associated with the ERP transition in the prior year quarter, and the continued execution of our expense reduction initiatives, including those associated with the restructuring plan announced this past October.

Bernadette: Moving on from sales on Slide 11, you can see that adjusted EBITDA increased $20 million versus the prior year quarter to $364 million.

Bernadette: The increase was primarily attributable to first higher sales volumes and lower manufacturing cost per pound, which included lapping the impact of the ERP transition and a $25 million pre tax charge for the write off of that that's raw potatoes in the prior year.

Bernadette: Second recent customer and contract wins net of other volume losses, and third lower adjusted SG&A, which decreased $7 million.

Bernadette: Primarily related to lapping higher expenses associated with the ERP transition in the prior year quarter and the continued execution of our expense reduction initiatives, including those associated with the restructuring plan announced this past October.

Bernadette Madarieta: These were partially offset by the timing of compensation and benefit accrual. These adjusted EBITDA improvements were partially offset by lower adjusted gross profit, which declined $7 million due to unfavorable price mix in response to a more competitive environment. Higher overall transportation and warehousing costs, resulting from higher inventory levels. And finally, while not impacting EBITDA, $16 million of incremental depreciation expense that's largely related to our capacity expansion in Idaho that was completed last fiscal year and our Netherlands expansion that was completed late in the second quarter of this fiscal year. As expected, adjusted gross profit increased sequentially from the second to the third quarter, which reflected the seasonal cost benefit of transporting and processing potatoes direct from the field, as well as the benefit from the lower raw potato prices negotiated in North America versus the prior year.

Bernadette: These were partially offset by the timing of compensation and benefit accruals.

Bernadette: These adjusted EBITDA improvements were partially offset by lower adjusted gross profit, which declined $7 million.

Bernadette: Due to unfavorable price mix in response to a more competitive environment.

Bernadette: Higher overall transportation and warehousing costs, resulting from higher inventory levels.

Bernadette: And finally, while not impacting EBITDA $16 million of incremental depreciation expense, that's largely related to our capacity expansion in Idaho that was completed last fiscal year and our Netherlands expansion that was completed late in the second quarter of this fiscal year.

Bernadette: As expected adjusted gross profit increased sequentially from the second to the third quarter, which reflected the seasonal cost benefit of transporting and processing potatoes direct from the field as well as the benefit from the lower raw potato prices negotiated in North America versus the prior year.

Bernadette: Sure.

Bernadette Madarieta: For our North America segment specifically, Adjusted EBITDA increased $15 million versus the prior year quarter to $301 million. The increase was driven by a combination of higher sales and lower manufacturing costs attributable to lapping the effect of last year's ERP transition, new customer contract wins, and lower raw potato prices. These increases were partially offset by softer restaurant traffic and price investments made in a competitive environment.

Bernadette: For our North America segment, specifically, adjusted EBITDA increased $15 million versus the prior year quarter to $301 million.

Bernadette: The increase was driven by a combination of higher sales and lower manufacturing costs attributable to lapping the effects of last year's ERP transition new.

Bernadette: New customer contract wins, and lower raw potato prices.

Bernadette: These increases were partially offset by softer restaurant traffic and price investments made in a competitive environment.

Bernadette Madarieta: For our international segment, Adjusted EBITDA declined $8.5 million to $93 million. Unfavorable price mix in an increasingly competitive environment in each region was only partially offset by increased sales volume and lower manufacturing cost per pound.

Bernadette: For our international segment, adjusted EBITDA declined $8 5 million to 93 million.

Bernadette: Favorable price mix and an increasingly competitive environment in each region was only partially offset by increased sales volume and lower manufacturing cost per pound.

Bernadette Madarieta: Moving to our liquidity position and cash flows on slide 12. We ended the third quarter with approximately $1.1 billion of liquidity, comprised of approximately $1.05 billion available under our revolving credit facility and $68 million of cash and cash equivalents. Our net debt was $4.2 billion, which keeps our leverage ratio at 3.4 times on a trailing 12-month basis. In the first three quarters of the year, we generated $485 million of cash from operations, which is up about $4 million versus the prior year due to favorable changes in working capital. These changes were mostly attributable to a greater build of inventory in the third quarter of the prior year related to the ERP transition.

Bernadette: Moving to our liquidity position and cash flows on slide 12.

Bernadette: We ended the third quarter with approximately $1 $1 billion of liquidity comprised of approximately 1.5 billion available under our revolving credit facility and $68 million of cash and cash equivalents.

Bernadette: Our net debt was $4 2 billion.

Bernadette: Which keeps our leverage ratio at three four times on a trailing 12 month basis.

Bernadette: In the first three quarters of the year, we generated $485 million of cash from operations, which is up about $4 million versus the prior year due to favorable changes in working capital.

Bernadette: These changes were mostly attributable to a greater build of inventory in the third quarter of the prior year related to the ERP transition.

Bernadette Madarieta: For the remainder of the year, we plan to continue reducing working capital, primarily through continued line curtailments and operational downtime. The cash provided by favorable working capital trends was mostly offset by lower income after adjustments for non-cash operating activities.

Bernadette: For the remainder of the year, we plan to continue reducing working capital primarily through continued line curtailments and operational downtime.

Bernadette: The cash provided by favorable working capital trends was mostly offset by lower income after adjustments for noncash operating activities.

Bernadette Madarieta: Turning to slide 13. Capital expenditures through the end of the third quarter, net of proceeds from blue chip swap transactions in Argentina were $563 million, down $251 million as we get closer to completing our expansion project. Our full year fiscal 2025 target remains at $750 million, a decrease of $250 million from last year. Depending on the timing of invoicing, our cash investments for the Argentina expansion may result in 2025 spending below $750 million and push into fiscal 2026. Aside from the timing related to cash paid for Argentina expansion-related expenditures, we estimate a $200 million reduction in fiscal 2026 capital expenditures, or $550 million in total, of which $400 million will be used for modernization and maintenance and $150 million for environmental investments, primarily for wastewater treatment.

Bernadette: Turning to slide 13.

Bernadette: Capital expenditures through the end of the third quarter net of proceeds from Blue chip swap transactions in Argentina were $563 million down $251 million as we get closer to completing our expansion projects are.

Bernadette: Our full year fiscal 2025 target remains at $750 million.

Bernadette: A decrease of $250 million from last year.

Bernadette: Depending on the timing of invoicing, our cash investments for the Argentina expansion May result, in 2025 spending below $750 million and push into fiscal 2026.

Bernadette: Aside from the timing related to cash paid for Argentina expansion related expenditures, we estimate a 200 million dollar reduction in fiscal 2026 capital expenditures or $550 million in total.

Bernadette: <unk> $400 million will be used for modernization and maintenance and a 150 million for environmental investments primarily for wastewater treatment.

Bernadette Madarieta: Next, capital return to shareholders on slide 14. We remain committed to returning cash to shareholders. We returned $151 million to shareholders in the quarter. After expanding our share repurchase authorization last quarter, we repurchased $100 million of shares, leaving us with $458 million available under the plan. We will continue to repurchase shares opportunistically. And given the current share price, we may temporarily move slightly above 3.5 times net debt to adjusted EBITDA. We also returned approximately $51 million in cash dividends.

Bernadette: Next capital returned to shareholders on slide 14.

Bernadette: We remain committed to returning cash to shareholders, we returned $151 million to shareholders in the quarter.

Bernadette: After expanding our share repurchase authorization last quarter, we repurchased $100 million of shares, leaving us with $458 million available under the plan.

Bernadette: We will continue to repurchase shares opportunistically and given the current share price. We may temporarily moved slightly above three five times net debt to adjusted EBITDA.

Bernadette: We also returned approximately $51 million in cash dividend.

Bernadette Madarieta: Before turning to our outlook, I want to address Tara. Given the timing of yesterday's announcement and the uncertainty, we have not included any impact from tariffs in our financial outlook. As it relates to our business, we are a global business, which allows us to supply most of our customers with local, regional supplies. As it relates to U.S. imports of frozen French fries, a new universal baseline tariff of 10% plus an additional country-specific tariff for select trading partners will be assessed. This tariff relates to all U.S. imports except U.S. MCA-compliant imports, which includes French fries imported from Canada.

Bernadette: Before turning to our outlook I want to address tariffs given.

Bernadette: Given the timing of yesterday's announcements and the uncertainty we have not included any impact from tariffs and our financial outlook.

Bernadette: As it relates to our business, we are a global business, which allows us to supply most of our customers with local regional supply.

Bernadette: As it relates to U S imports of frozen French fries, a new universal baseline tariff of 10% plus an additional country specific tariff for select trading partners will be assessed.

Bernadette: This tariff relates to all U S imports, except U S. M C. A compliant imports which include French fries imported from Canada.

Bernadette Madarieta: As such, the products we manufacture at our one plant in Canada and import to the U.S. are exempt from the new tariff. We source approximately 5% of our inputs from Canada, primarily edible oils and natural gas, which are also USMCA compliant, and therefore exempt from the tariff. We're evaluating other expenditures to assess the impact of yesterday's announcements, but do not currently expect them to have a significant impact on our fiscal 2025 financial results.

Bernadette: As such the products, we manufacture at our one plant in Canada and import to the U S are exempt from the new tariffs.

Bernadette: We sourced approximately 5% of our inputs from Canada, primarily edible oils and natural gas, which are also U S. MCA compliant and therefore exempt from the tariffs.

Bernadette: We're evaluating other expenditures to assess the impact of yesterdays announcements, but do not currently expect them to have a significant impact on our fiscal 2025 financial results.

Bernadette Madarieta: And finally, as it relates to U.S. exports, our manufacturing operations export in the mid to high teens as a percent of total volume and net sales, which could be subject to future retaliatory tariffs if imposed. As you can see on slide 15, we continue to expect revenue in the range of $6.35 billion to $6.45 billion, which at the midpoint implies growth of about 1% in the fourth quarter compared with the prior year period. We expect a mid to high single-digit increase in volume in our international segment, primarily reflecting the benefit of incremental volume from recent customer contract wins across each of our geographic regions, net of recent volume losses.

Bernadette: And finally as it relates to U S exports are manufacturing operations export in the mid to high teens as a percent of total volume and net sales, which could be subject to future retaliatory tariffs imposed.

Bernadette: As you can see on slide 15, we continue to expect revenue in the range of $6 three 5 billion to $6 four 5 billion, which at the midpoint implies growth of about 1% in the fourth quarter compared with the prior year period.

Bernadette: We expect a mid to high single digit increase in volume in our international segment.

Bernadette: Primarily reflecting the benefit of incremental volume from recent customer contract wins across each of our geographic regions net of recent volume losses.

Bernadette Madarieta: We expect North America volume to slightly decline. While regional, small, and retail volume is expected to increase compared with the prior year fourth quarter, lost QSR customer volume and softer restaurant traffic is expected to offset these volume increases. We expect overall price mix will be down low to mid-single digits. In North America, we're forecasting price mix will decline low to mid-single digits as pricing actions and softening restaurant traffic negatively impact product and channel mix. In international, we're forecasting price mix to be approximately flat on a constant currency basis as it continues being impacted by pricing actions in response to competitive dynamics in our key international markets.

Bernadette: We expect North America volume to slightly decline.

Bernadette: While regional small and retail volume is expected to increase compared with the prior year fourth quarter last <unk> customer volume and softer restaurant traffic is expected to offset these volume increases.

Bernadette: We expect overall price mix will be down low to mid single digits.

Bernadette: In North America, we're forecasting price mix will decline low to mid single digits as pricing actions and softening restaurant traffic negatively impact product and channel mix.

Bernadette: In international we're forecasting price mix to be approximately flat on a constant currency basis as it continues being impacted by pricing actions in response to the competitive dynamics in our key international markets.

Bernadette Madarieta: Our price investments in both segments are consistent with our prior expectations and will carry over into the next fiscal year.

Bernadette: Our price investments in both segments are consistent with our prior expectations and will carry over into the next fiscal year.

Bernadette Madarieta: Moving to earnings. Despite continued softening restaurant traffic trends, the work we're doing across the organization to meaningfully reduce costs and improve efficiencies keeps us on track to achieving our full year guidance. For fiscal 2025, we continue to expect adjusted EBITDA in the range of $1.17 billion to $1.21 billion. Overall, we expect the benefit from incremental volume in our international segment will be largely offset by planned investments in price and higher costs per pound. Similar to the prior year, we expect a sequential decrease in adjusted gross margin. Using the midpoint of the guidance range, adjusted gross margins are expected to decline about 700 basis points.

Bernadette: Moving to earnings.

Bernadette: Despite continued softening restaurant traffic trends.

Bernadette: We're doing across the organization to meaningfully reduce costs and improve efficiencies keeps us on track to achieving our full year guidance for.

Bernadette: For fiscal 2025, we continue to expect adjusted EBITDA in the range of 1.1 dollars 7 billion to $1 two $1 billion.

Bernadette: Overall, we expect the benefit from incremental volume in our international segment will be largely offset by planned investments in price and higher cost per pound.

Bernadette: Similar to the prior year, we expect a sequential decrease in adjusted gross margin.

Bernadette: Using the midpoint of the guidance range adjusted gross margins are expected to decline about 700 basis points, which is consistent with the decline between the third and fourth quarters in the prior year.

Bernadette Madarieta: which is consistent with the decline between the third and fourth quarters in the prior year. The expected decline reflects an approximate 260 basis point decrease related to seasonal trends in our business, particularly the third quarter benefit from seasonally lower costs as we transport and process direct from the field, and about a 330 basis point decrease related to higher factory burden absorption. Specifically, fixed costs assigned to our curtailed lines are temporarily being absorbed by lower production levels, which is leading to higher costs per pound. As we've previously discussed, in response to softer restaurant traffic and to reduce our inventory levels, we've temporarily curtailed production.

Bernadette: The expected decline reflects an approximate 260 basis point decrease related to seasonal trends in our business, particularly the third quarter benefit from seasonally lower costs as we transport and process direct from the field.

Bernadette: And about a 330 basis point decrease related to higher factory burden absorption.

Bernadette: Specifically fixed costs assigned to our curtailed lines are temporarily being absorbed by lower production levels, which is leading to higher cost per pound.

Bernadette: As we've previously discussed in response to softer restaurant traffic and to reduce our inventory levels with temporarily curtailed production.

Bernadette Madarieta: We expect these costs will more than offset the manufacturing efficiencies we expect to realize from the restructuring actions we've taken.

Bernadette: We expect these costs will more than offset the manufacturing efficiencies, we expect to realize from the restructuring actions we've taken.

Bernadette Madarieta: Moving to SG&A, we now expect adjusted SG&A in the range of $665 million to $675 million, down from the previous range of $680 million to $690 million. This implies a $20 to $30 million sequential increase in adjusted SG&A from the third to the fourth quarter, which is expected to be primarily due to the timing of compensation and benefit expenses, expenses for outside advisor services for business optimization, and higher royalty expenses. Finally, we are targeting a full-year effective tax rate of approximately 28 percent, excluding the impact of comparability items, which translates to a mid- to high-teen fourth-quarter tax rate.

Bernadette: Moving to SG&A, we now expect adjusted SG&A in the range of 665 million to $675 million down from the previous range of $680 million to $690 million.

Bernadette: This implies a $20 million to $30 million sequential increase in adjusted SG&A from the third to the fourth quarter, which is expected to be primarily due to the timing of compensation and benefit expenses expenses for outside advisory services for business optimization and higher royalty expenses.

Bernadette: Finally, we are targeting a full year effective tax rate of approximately 28%, excluding the impact of comparability items, which translates to a mid to high teen fourth quarter tax rate.

Bernadette Madarieta: As Mike noted, our previously announced restructuring plan is well underway, and we remain on track to deliver at least $55 million of pre-tax savings in fiscal 2025, with two-thirds of that from reduced selling, general and administrative expenses, and one-third from cost of goods sold.

Bernadette: As Mike noted, our previously announced restructuring plan is well underway and we remain on track to deliver at least $55 million of pre tax savings in fiscal 2025 with two thirds of that from reduced selling general and administrative expenses and one third from cost of goods sold let.

Mike Smith: Let me now turn the call over to Mike for some closing comments. Thank you, Bernadette. In closing, we are laser-focused on our customers, delivering quality products, and optimizing our cost structure and operations to improve profitability. We are working with speed to complete the work we've begun on our value creation plan, and we are committed to providing more details as well as long-term financial targets once this work is further along. Lastly, I want to thank the global Lamb Weston team. I have pushed them hard in a short period of time and found them ready to tackle our mission with urgency.

Mike Smith: Let me now turn the call over to Mike for some closing comments.

Mike Smith: Thank you Bernadette in closing we are laser focused on our customers delivering quality products and optimizing our cost structure and operations to improve profitability. We are working with speed to complete the work we have begun on our value creation plan and we are committed to providing more details as well as long term financial targets. Once this work is further along.

Mike Smith: Lastly, I want to thank the global Lamb Weston team I pushed them hard in a short period of time and down them ready to tackle our mission with urgency I am confident that we have the right team to guide the company through this period of change and deliver enhanced shareholder value.

Mike Smith: I am confident that we have the right team to guide the company through this period of change and deliver enhanced shareholder value.

Operator: I'll now turn the time over for questions. You would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a Please make sure your mute function is turned off to allow your signal to return. Again, that is star one if you would like to ask.

Mike Smith: Now I'll turn the time over for questions.

Speaker Change: And if you would like to ask a question. Please signal by pressing star one on your telephone keypad. If you are using a speaker phone. Please make sure. Your mute function is turned off your lawyers signal to reach our equipment.

Mike Smith: Again that is star one if you would like to ask a question.

Andrew Lazar: We will now take our first question from Andrew Lazar with... Great. Thanks so much. Good morning, everybody. Morning, Andrew. Mike, in thinking about some of your comments and the outlook around crop. North America. I guess as you roll that all up, how do you think this sort of impacts, you know, key sort of QSR contract negotiations? as you approach it sort of this. I'm just trying to get a sense of how you approach that, given all of these. Yeah, I appreciate the question. I appreciate the question, Andrew. You know, I think it's important to remember we haven't really started those customer contract negotiations yet.

We'll now take our first question from Andrew Lazar with Barclays.

Andrew Lazar: Great. Thanks, so much good morning, everybody.

Andrew Lazar: Good morning, Andrew Andrew.

Andrew Lazar: Sure.

Speaker Change: I guess, Mike thinking about some of your comments in the outlook around crop prices.

Mike Smith: In North America, we expect it to be sort of down mid single digit or so thinking about sort of the ongoing weak restaurant traffic trends and some of the additional inventory industry capacity, that's coming on stream I guess as you roll that all up how do you think this sort of impacts key sort of kuzara contract negotiations as you approach it.

Speaker Change: This summer.

Speaker Change: I'm just trying to get a sense of how you approach that given given all these dynamics. Thanks. So much I. Appreciate the question I appreciate the question Andrew.

Speaker Change: I think it is important to remember we haven't really started those customer contract negotiations yet those will start in the summer and move through the fall and wall potatoes are expected to be down. It's also just a portion of our cost of goods. There's other inflationary impacts that are hitting the business and are offsetting some of that favorability. So we'll have to see how those effects.

Mike Smith: Those will start in the summer and move through the fall. And while, you know, potatoes are expected to be down, it's also just a portion of our cost of goods. There's other inflationary impacts that are hitting the business and are offsetting some of that favorability. So we'll have to see how those effects transpire. The other thing that's unknown right now is any sort of effects from tariffs or reciprocal tariffs or retaliatory tariffs around the globe. And we'll have to take that into consideration as we're having those discussions and those contract negotiations with customers throughout this next customer contracting cycle.

Speaker Change: Transpire the other thing that's unknown right now or is any sort of effects from tariffs are reciprocal tariffs.

Speaker Change: Detroit tariffs around the globe and we'll have to take that into consideration as we're having those discussions.

Speaker Change: Discussions in those contract negotiations with customers throughout the region.

Speaker Change: This next customer contracting cycle, Yeah, that's right, Mike and if I could just add Andrew I think it's important to think through to about a third of our cost of goods sold as raw potatoes, then there's another 20% to 25% that's a combination of edible oils packaging and miscellaneous ingredients, where we're seeing some inflation.

Bernadette Madarieta: Yeah, that's right, Mike. And if I could just add, Andrew, I think it's important to think through too. About a third of our cost of goods sold is raw potatoes. Then there's another 20 to 25% that's a combination of edible oils, packaging, and miscellaneous ingredients where we're seeing some inflation. And then another 40 to 45% of our cost of goods sold, fixed overhead conversion, fuel power, water, also where we're seeing some increases. That's helpful. Thank you for that.

Speaker Change: And then another 40% to 45% of our cost of goods sold fixed overhead conversion fueled power water also where we're seeing some increases.

Speaker Change: That's helpful. Thank you for that and then just a quick one on the Alix partners agreement I'm just curious on.

Mike Smith: And then just a quick one on the Alex Partners. I'm just curious on... Obviously, you're just starting, getting going with that, but where would, how would you... Contexts of where the bigger buckets of potential opportunity are. Is it mostly really on the cost side and productivity? Is it more on sort of, let's call it utilization, capital, sort of your capital allocation sort of approach? I'm just trying to guess where you see potentially the bigger buckets versus maybe those that are not as compelling. Yeah, no, I appreciate that. You know, it's really all of the above.

Speaker Change: Obviously, youre, just starting getting getting going with that.

Speaker Change: How would you.

Speaker Change: Put in context, where the bigger buckets of potential opportunity or is it mostly really on the cost side.

Speaker Change: And then productivity is it more on sort of let's call. It a utilization capital sort of capital allocation sort of approach I guess of where where do you see that potentially the bigger buckets versus maybe those that are that are not as you know.

Speaker Change: Thank you.

Speaker Change: Yeah, no I appreciate that.

Mike Smith: Just a reminder, the process we're taking is really two complementary work streams. The first is a value creation plan. And when you think about value creation plan, that's not only costs, which is a large focus of where we're spending our time, but it is value across the entire P&L. It's top line, ensuring how we drive more growth from a net sales standpoint. It's obviously the middle of the P&L with the costs and focusing on the things that you talked about, primarily around manufacturing, our throughputs, as well as our transportation, logistics, procurement, and down to SG&A.

Speaker Change: It's really all the above just a reminder, this is a.

Speaker Change: The process, we're taking is.

Speaker Change: Really two complementary work streams. The first is a value creation plan and when you think about value creation plan and that's not only cost which is a large focus of where we're spending our time, but it is value across the entire P&L, it's topline ensuring how we drive more growth from a net sales standpoint.

Speaker Change: Obviously, the middle of the P&L with the costs in and focusing on the things that you talked about are primarily around manufacturing and our throughput as well as our transportation logistics procurement and down to SG&A.

Mike Smith: The other area that it's focused on is around working capital and we're spending a lot of time in that area. Now, that's the one side of it, Andrew, with the value creation. The other side is the long-term growth strategy. And we're really taking a data-driven approach and focusing on where to play and how we're gonna win for the future.

Speaker Change: The other area that is focused on is around working capital and we're spending a lot of time in that area now that's the one side of it Andrew with the value creation. The other side is the long term growth strategy and we're really taking a data driven approach and focusing on.

Speaker Change: Where to play and how we're going to win for the future and we will bring that all together in a full plan that we'll share once we've gone through the process.

Mike Smith: And we'll bring that all together in a full plan that we'll share once we've gone through the process. Thanks, Andrew.

Speaker Change: Thank you.

Andrew Lazar: Thanks, Andrew.

Thomas Palmer: And I'll take our next question from Thomas Palmer with. Good morning and thanks for your question. I wanted to maybe just first just ask on the 4Q gross margin. I think you called out 330 basis points from higher fixed cost absorption. Why is that more of a headwind, I guess, when we think about 4Q versus last quarter? And then I think you also said gross margin down around 700 basis points in 4Q. But unless I missed something, the two items you called out added up to roughly 600 basis points. So just kind of what else the incremental is there.

Speaker Change: We will now take our next question from Thomas Palmer with Citi.

Thomas Palmer: Good morning, and thank you for your question.

Speaker Change: Sure.

Speaker Change: I wanted to maybe just first just ask on the <unk> gross margin I think you'd called out 330 basis points from higher fixed cost absorption.

Speaker Change: Why is that more of a headwind I guess when you think about <unk> versus last quarter and then I think you also said gross margin down around 700 basis points in <unk>, but unless I missed something the two items you called out added up to roughly 600 basis points. So just kind of what else the incremental is there.

Bernadette Madarieta: Thank you. Sure.

Speaker Change: Yes.

Bernadette Madarieta: No, thanks for the question, Tom. You know, I think it's important to remember how our inventory turns and that the cost of the inventory that sold in the third quarter was mostly produced in the second quarter, which only had two months of our curtailed production lines. You know, we were also running through the remainder of our crop that we had negotiated in the prior year. So we were running harder during that time period. And then now, as we move forward to the fourth quarter, those are going to be the costs that, you know, relate to the three months where we've had some curtailed production lines, we've got lower production, and therefore we're going to have more cost per pound as a result of that fixed factory burden.

Speaker Change: Sure no. Thanks for the question Tom you know.

Speaker Change: I think it's important to remember how our inventory turns and that the cost of the inventory that's sold in the third quarter was mostly produced in the second quarter, which only had two months of our curtailed production lines.

Speaker Change: We were also running through the remainder of our crop.

Speaker Change: From that we had negotiated in the prior year. So we were running harder during that time period, and then now as we move forward to the fourth quarter those are going to be the costs that relate to the three months, where we've had some curtailed production lines, we've got lower production and therefore, we're going to have more.

Speaker Change: Cost per pound as a result of that fixed factory burden. So so that's really what is driving in terms of the seasonality of those trends and then yes, I did point to the 330 basis points and the 260 you know that's the majority of it certainly theres another 100 basis.

Bernadette Madarieta: So that's really what is driving in terms of the seasonality of those trends. And then, yes, I did point to the 330 basis points and the 260. You know, that's the majority of it. Certainly, there's another 100 basis points where you're going to see increases in other input costs and other things, but, you know, those were a number of miscellaneous things, nothing of material importance that we felt like we needed to call out at this point. But certainly, as we work through our inventories and we're able to restart as necessary, that then is going to help us with that absorption of fixed factory burden.

Speaker Change: <unk>, where you're going to see increases in other input costs and.

Speaker Change: And and and other things, but you know those were a number of miscellaneous things nothing of material importance that we felt like.

Speaker Change: We needed to call out at this time.

Speaker Change: But certainly as we work through our inventories and we're able to restart at as necessary.

Speaker Change: Ben is going to help us with that absorption of fixed factory burden, but you know right now we're balancing our overall footprint and we needed to do that as we were pulling the crop out of harvest and finishing off last year's raw potatoes.

Bernadette Madarieta: But right now, we're balancing our overall footprint. And we needed to do that as we were pulling the crop out of harvest and finishing off last year's raw potatoes. That's why you're seeing that trend. Okay. No, thanks. Thanks for all that. That's really helpful.

Speaker Change: That's why you're seeing that trend okay.

Yeah. Thanks, Thanks for all that that's really helpful and maybe ill just follow up with kind of on that inventory piece I think when you initially introduced it a couple of quarters ago, which sounded like it was more isolated to fiscal 'twenty five I guess, just any update on kind.

Mike Smith: And maybe I'll just follow up with kind of on that inventory piece. I think when you initially kind of introduced it a couple quarters ago, it sounded like it was more isolated to fiscal 25. I guess just any update on kind of working through the excess inventory and when we might start to see more of a positive inflection from that side. Thank you. Yeah, the teams are really focused on it right now, Tom. You know, as part of the value creation work that we're doing, we're putting extra emphasis around it, but it is top priority.

Speaker Change: Working through the excess inventory and when we might start to see more of a positive inflection from that side. Thank you.

Speaker Change: The teams are really focused on it right now Tom.

Speaker Change: You know as part of the value creation work that we're doing we're putting extra emphasis around it but it is top priority.

Mike Smith: And, you know, there's some products and SKUs that were long on inventory, and our selling organization is working on burning those down the right way. And our supply and planning team are also ensuring that we're not making products that we don't need to make. And that goes back to what Bernadette was talking about. We're taking some downtime in the plants, and we've curtailed some of those lines so that we can work down that inventory as quickly as possible. But we are taking a very data-driven approach to it, and with the work in our value creation plan, we want to push that even further.

Speaker Change: There are some products and skus that we're long on inventory in our selling organization is working on bringing those down the right way and our supply and our planning team are also ensuring that we're not making products that we don't need to make and that goes back.

Speaker Change: So what Brian was talking about we're taking some downtime in the plants and we've curtailed some of those lines. So that we can work down that inventory.

Speaker Change: As possible, but we are taking a very data driven.

Speaker Change: Approach to it and with the work on our value creation plan, we want to push that even further.

Mike Smith: The only other thing I would add Mike is that we are on track in terms of the stated target that we spoke about previously to getting our inventory down to about 65 days.

Mike Smith: At year end is still not where we want to be we need to continue to to work that down and we have plans to continue to do that which is only being emphasized with the work that we are have underway in our end to end value creation plan that Mike spoke about.

Ken Goldman: Right. Thank you.

Mike Smith: Alright, thank you.

Mike Smith: And I'll take our next question from Ken Goldman with J.P. Hi, thank you. You gave some helpful reasons why the bottom line might be under a little bit more pressure ahead. I won't regurgitate them here, but if you look at the bottom end of your EPS guidance or implied guidance for 4Q, it does imply a little bit of a steep deceleration, really a drop-off in that two-year rate, right? So just kind of normalizing for last year. And I'm just wondering, you know, is there any... Observatism built into your implies 4Q number on the bottomline that we should be aware of anymore any more than usual I guess Yeah, no, I would say, Ken, that there isn't any more conservatism that has been built in.

Speaker Change: We will now take our next question from Ken Goldman with Jpmorgan.

Speaker Change: Hi, Thank you.

Speaker Change: You gave some reasons helpful reasons, why the bottom line.

Speaker Change: Might be a little bit more pressure ahead, just I won't regurgitate them here, but if you look at the bottom end of your EPS guidance.

Speaker Change: The implied guidance for <unk>, it does imply a little bit of a steep deceleration really a drop off in that two year rate right. So just kind of normalizing for last year and I'm. Just wondering is there any.

Speaker Change: Conservatism built into your implied for Q number on the bottom line that we should be aware of any more than usual I guess is the way to ask it.

Speaker Change: Yeah, No I would say Ken that there isn't any more conservatism that has been built in we've seen soft restaurant traffic as I mentioned, the last month of the quarter USR hamburgers were down 6% as it relates to our cost of goods sold we are going to be seeing an increase there, particularly relate.

Mike Smith: We've seen soft restaurant traffic, as I mentioned, the last month of the quarter, QSR hamburgers were down 6%. As it relates to our cost of goods sold, we are going to be seeing an increase there, particularly related to those curtailed lines that I spoke about. So, you know, I would I would say this is a fair representation of the range that we expect to be in.

Speaker Change: To those curtailed lines that I spoke about so you know I would I would say this is a fair representation of the range that we expect to be in.

Ken Goldman: Okay, thank you. And then, just as we think about Alex Partners, you did talk about the value creation plan and how it's a little broader than maybe, you know, it might appear at first glance. You know, I guess my question is this, you know, Alex They're known not only for helping and identifying with top line and cost saves, but also with, you know, really kind of broader strategic activities. And I guess my question is, as you think about your work with them, Are really, you know, kind of all options for value creation on the table, or should we really think of this more as focused on fundamental top and bottom line efficiency, if that makes sense?

Speaker Change: Okay. Thank you and then just as we think about Alex partners. You did talk about the value creation plan and how it's a little broader than maybe it might appear at first glance I guess my question is this you know Alex.

Speaker Change: There are no not only for helping in identifying with topline and cost saves, but also with really kind of a broader strategic activities and I guess my question is as you think about your work with them.

Speaker Change: Are are really kind of all options for value creation on the table or should we really think of this more is focused on fundamental top and bottom line efficiency if that makes sense.

Mike Smith: Yeah, the way to answer that, Ken, is everything's on the table. We're definitely evaluating everything in terms of the markets we play in and how we're going to win and where we're going to win in the future. But the primary focus of the group is to really focus on that value creation piece. All levers of the P&L, like I talked about before, not only the top line growth, but also in the middle of the P&L and all the way through it in terms of finding the value and pushing us as an organization, using data a little bit harder, taking that unbiased approach.

Speaker Change: Yeah, you know.

Speaker Change: The way to answer that Ken is everything's on the table, we're definitely evaluating.

Speaker Change: Everything in terms of the markets we play in.

Speaker Change: And and how we're going to win and where we're going to win in the future, but the primary focus of the group is to really focus on that value creation piece, all levers of the P&L like I talked about before not only the top line growth, but also in the middle of the P&L and all the way through it in terms of <unk>.

Speaker Change: Finding the value and pushing us as an organization.

Speaker Change: Using data a little bit harder taken our unbiased approach and that's where the time and focus is and it's really about improving the fundamentals of our business and getting the business back on track too.

Mike Smith: And that's where the time and focus is. And it's really about improving the fundamentals of our business and getting the business back on track to execute with excellence and make sure we're delivering for our customers and also our holders.

Speaker Change: Execute with excellence and make sure we're delivering for our customers and also our shareholders.

Speaker Change: And did you have anything further.

Operator: This is a question and answer session. Yes, ma'am.

Speaker Change: Next question later.

Yasmeen Daswani: We'll move to Yasmeen Daswani with Bank. Morning, guys. Thank you for the question. I just wanted to dig a little bit on slide nine in your slides on just the crop. There was news out a few weeks ago on acreage reductions in the Columbia Basin, I believe, down mid-teens or so. How much of that do you attribute to the Cornell closure versus how you see the market shaping up in the next 12 to 18 months in terms of acreage? Yeah. So for us, we did lower the amount of acres that we had going into this contracting season.

Speaker Change: Yes, ma'am, we'll move to Yasmine <unk> with bank of America.

Yasmine: Good morning, guys. Thank you for the question.

Speaker Change: I just wanted to dig a little bit on slide nine in your slides on just the crop.

Speaker Change: There was news out a few weeks ago on acreage reductions in the Columbia Basin, I believe down mid teens or so how.

Speaker Change: How much of that do you attribute to the Cornell closure versus how you see the market shaping up in the next 12 to 18 months in terms of demand.

Speaker Change: Yeah. So so for US we did lower the amount of acres that we had going into this contracting season.

Mike Smith: Part of it is the softness of demand that we're seeing in the marketplace, the things that Bernadette talked about in terms of QSR traffic. But the other area is that we have a lot of high finished goods inventories, and so we want to make sure that we're working those down the right way. And over the last couple of years, we've had carryover of raw into the new fiscal years, and we've been running through that raw. And so we're in a position this year where we didn't need as much.

Speaker Change: Part of it is the softness of the demand that we're seeing.

Speaker Change: In the marketplace, the things that <unk> talked about in terms of <unk> traffic.

Speaker Change: But the other areas that we have a lot of high finished goods inventories and so we want to make sure that we're working those down the right way and you know over the last couple of years, we've had carryover of raw into the new fiscal years, and we've been running through that that ROI and so we're in a position this year, where we didn't need as much.

Mike Smith: got it helpful, thank you. And then, you know, you mentioned the mid-single-digit decline in price in your slides. How much of that do you expect to fall to the bottom line versus reinvestment? Yeah, I think it's a great question. I mean, we're, we haven't gone through any of the customer contracting for this coming year. As I mentioned earlier, with Andrew's question, you know, while raw's down, there's other inflationary impacts and inputs that are going to affect the business. And so we'll just continue to watch that. And as we get into those negotiations, we'll update this group as we do in years past.

Speaker Change: Got it helpful. Thank you.

Speaker Change: And then <unk>.

Speaker Change: And in the mid single digit decline in price in your slides how much of that do you expect to fall to the bottom line versus reinvestment.

Speaker Change: Yes.

Speaker Change: It's a great question I mean, we're we haven't gone through any of the customer contracting for this coming year as I mentioned earlier with Andrew's question.

Speaker Change: While raws down there's other inflationary impacts and inputs that are going to affect the business and so we'll just continue to watch that and as we get in those negotiations.

Speaker Change: We will update.

Speaker Change: This group as we do in years past.

Mike Smith: Okay, great. Thanks, guys.

Speaker Change: Okay, great. Thanks, guys.

Robert Moskow: Thank you.

Thank you next caller.

Mike Smith: Your next question will come from Robert Moskow. Hi, thanks. I wanted to ask about the Connell plant and what your plans are for the future. I think there was an article in a local paper speculating that you might sell it rather than shut it down. And my concern would be if another operator comes in and keeps the capacity up. might hurt your capacity utilization outcome. And then similarly, a couple of your biggest competitors here in the U.S. had plans this year to start up new facilities. or at least new production lines that were pretty significant.

Speaker Change: Your next question will come from Robert Moskow with TD Cowen.

Robert Moskow: Hi, Thanks.

Robert Moskow: I wanted to ask about the carnal plant and what your plans are for the future I think there was an article in a local paper speculating that you might sell it rather than shut it down and my concern would be if another operator comes in and keeps the capacity.

It might hurt your capacity utilization outlook.

Robert Moskow: And then similarly.

Robert Moskow: One of your biggest competitors here in the U S had plans this year to start up new facilities.

Robert Moskow: Or at least new production lines that were pretty significant is it your expectation that those are on track or not.

Mike Smith: Is it your expectation that those are on track or? Yeah, let me answer the first part, Rob. You know, as we discussed, we're doing this comprehensive review of our business, and so everything's on the table. And as part of that, we undertook really an exploratory process to understand the possibilities of potentially selling that Connell Washington building, obviously just the building itself, none of the technology or anything that was inside of it. We've gone through our process. We've determined that, you know, a sale of that facility is not in the best interest of our business at this time.

Rob: Yes, let me answer the first part Rob.

Rob: As we discussed we're doing this comprehensive review of our business and so everything's on the table and as part of that we undertook a really an exploratory process to understand the possibilities of potentially selling that corner of Washington.

Rob: Building, obviously, just the building itself none of the technology or anything that was inside of it we've gone through our process, we just determined that.

Rob: Our sale of that facility is not in the best interest of our business at this time, so we will.

Mike Smith: So, you know, we'll continue to complete our strategic review of other options that are out there.

Continue to complete our strategic review of of other options that are out there, but that one is off the table for right now.

Mike Smith: But, yeah, that one's off the table for right now. You know, in terms of new facilities from other manufacturers, you know, here or even around the globe, you know, we believe that there's some out there that have been delayed. We believe that some processors are taking extended downtime. We've heard that others have reduced acres similar to what we have as well. But I can't speak to any of the details around, you know, what our competitors or other manufacturers are planning to do with their capacity moving forward.

Speaker Change: Terms of new facilities.

Speaker Change: From other manufacturers, you know here or even around the globe.

Speaker Change: We've.

We believe that there is some out there that have been delayed we believe that some processors are taking extended downtime.

Speaker Change: We've heard that others have reduced.

Speaker Change: Akers similar to what we have as well, but I can't speak to any of the details around what our competitors or other manufacturers are planning to do with their capacity.

Speaker Change: Moving forward.

Robert Moskow: Helpful. Thank you, Mike.

Speaker Change: Helpful. Thank you Mike.

Speaker Change: Yes.

Max Gumport: We'll take our next question from Max Gumport with... Hey, thanks for the question.

Speaker Change: We'll take our next question from Max Gulfport with BNP Paribas.

Speaker Change: Hey, Thanks for the question, hoping to get a bit more commentary on that the weakness in <unk> traffic that you're seeing particularly what you think is dry.

Mike Smith: Hoping to get a bit more commentary on the weakness in QSR traffic that you're seeing, particularly what you think is driving the sequential weakening in trends, in particular for QSR hamburgers, and then how that informs your demand forecast for FY26. Thanks very much. Yeah. So, you know, as Bernadette said, QSR traffic is down. Berger QSR was down 4%. And, you know, it really comes back to the uncertainty with the consumer. There's obviously a lot going on from a macroeconomic perspective. We're taking all those demand signals into account as we think about, as I just mentioned, the raw that we're sourcing, as well as the amount of downtime we're potentially taking in our facilities with curtailments, but also have the flexibility should things turn around to bring those lines and facilities back on so that we can keep up with any changes in demand.

Speaker Change: Driving the sequential weakening in trends in particular for USR hamburgers and how that informs here.

Speaker Change: Your demand forecast for FY 'twenty six thank you very much.

Speaker Change: Yeah. So.

Speaker Change: That said <unk> of our traffic is down a burger <unk> was down four 4%.

Speaker Change: And you know it really comes back to the the uncertainty with the consumer there is obviously a lot going on from a macroeconomic perspective.

Speaker Change: We're taking all of those demand signals into account as we think about as I just mentioned the raw that we're sourcing as well as the amount of downtime where potentially taking our facilities with curtailments.

Speaker Change: But also have the flexibility should things turn around to bring those lines and facilities back on so that we can keep up with any changes in demand anything you'd add Brenda I think I think that covers it Mike.

Mike Smith: Anything you'd add, Bernadette? Nope. I think that covers it, Mike. Great, thanks very much.

Speaker Change: Great. Thanks, very much I'll leave it there.

Alexia Howard: I'll leave it there.

Alexia Howard: I'll take our next questions from Alexia Howard.

Speaker Change: Thanks, Ron I'll take our next question is from Alexia Howard with Bernstein.

Mike Smith: Good morning, everyone. Good morning. So, you've obviously got a pretty fast start on this broad-based turnaround plan. Can you talk about what's been most surprising as you've embarked on this process in terms of the biggest opportunities to improve performance and create value? Anything that's been surprising to the negative side as well? Thank you, and I'll pass it on. Yeah, you know, as I think about the work that's been underway, I mean, we are in the early innings. But I will tell you, it's a lot of the things that you'd expect around throughputs in our facilities, potato utilization, our logistics, procurement side of things, just across the board.

Alexia Howard: Good morning, everyone.

Speaker Change: Good morning Alexia.

Speaker Change: So you've obviously got a pretty small docs on this.

Speaker Change: Our broad based turnaround plan can you talk about what's been most surprising as you've embarked on this process.

Speaker Change: The biggest opportunities to improve performance and create value.

Speaker Change: The thing that's been surprising to the negative side as well, thank you and I'll pass it on.

Speaker Change: Yeah, you know as I think about the work that's been underway I mean, we are in the early innings, but I will tell you. It's a lot of the things that you would expect around.

Speaker Change: Throughput in our facilities.

Speaker Change: Potato utilization, our logistics procurement side of things just across the board the thing that I really appreciate it alexia that that.

Mike Smith: The thing that I really appreciate, Alexia, that our advisors have been helping with on is really taking an unbiased, data-driven approach to this work and putting everything on the table. And that way, we can evaluate all the options, and they're pushing us. And I appreciate that and the work they're doing.

Speaker Change: Our advisors have been helping with on is really taking an unbiased data driven approach.

Two to this work and putting everything on the table and that way that we can we can evaluate all the options and they're pushing us and I appreciate that and the work they're doing I. Appreciate the leadership team here at Lamb Weston for embracing it and.

Mike Smith: I appreciate the leadership team here at Lamb Weston for embracing it and acting with urgency to make sure we get things turned around.

Speaker Change: And acting with urgency to make sure we get things turned around.

Mike Smith: Great, and as a quick follow-up, in terms of diagnosing... continuing and deteriorating weakness in the burger chains, particularly in the U.S. Do you have a good handle on what's driving that at this point? Is it the low-income consumer getting worse? Is it a higher-income consumer maybe slowing traffic in the burger chains? Or is it possibly a GLP-1 drug impact? I'm just wondering, you know, what blocks you're turning over to try and figure it out. Yeah, I don't think we have a good read on the why to answer the first part of your question. I will tell you that the French fry attachment rate, so the percent of, or sorry, the percent of orders that have fries as part of that order has remained strong and is still up a couple points from pre-pandemic levels.

Speaker Change: Great and as a quick follow up.

Speaker Change: In terms of diagnosing continue.

Speaker Change: Continuing and deteriorating weakness and the bogo changes, particularly in the U S.

Speaker Change: Do you have a good handle on what's driving that at this point is it is at the low income consumer getting worse is it a higher income consumer maybe slowing traffic and me in the Burger chain or is it is it possibly G. L. P. One drug impact I'm just wondering.

Speaker Change: Walks you are handing over to try and figure it out.

Speaker Change: Yes, I don't think we have a good read on the wide to answer the first part of your question I will tell you that the French Fry attachment rate so the percent of.

Speaker Change: Or sorry, the percent of orders that have fries as part of that order has remained strong and is still up a couple of points from pre pandemic levels. So a.

Alexia Howard: So folks are still out there purchasing French fries when they are going to QSR. Thank you.

Speaker Change: Folks are still out there purchasing French fries, when they are going to <unk>.

Speaker Change: Great. Thank you I'll pass it on.

Alexia Howard: I'll pass it on.

Matt Smith: We'll now take our next questions from Matt Smith with... Hi, good morning. Thank you for taking the call. North America volume was stronger than I think many were expecting, and at the same time you called out a slight volume decline into the fourth quarter. You walked through some of those factors that benefited the North America volume in the third quarter, but can you help bridge the plus eight to kind of down sequentially maybe by the factors that most benefited the third quarter that were more unique? Yeah, I'll take that, Matt. As it relates to the factors that we expect to affect the fourth quarter, it's primarily the fact that we've seen and expect to see the continued increase in our small regional and retail volumes as we have lapped the ERP transition in the prior year.

Matt Smith: We will now take our next question is from Matt Smith with Stifel.

Matt Smith: Hi, Good morning, Thanks for taking the question on North America volume was stronger than I think many were expecting and.

Matt Smith: And at the same time, you called out a slight volume decline into the fourth quarter you walked through some of those factors that benefited the North America volume in the third for the third quarter, but can you can you bridge the plus eight to kind of down sequentially, maybe by that the factors that most benefited the third quarter that were more unique.

Matt Smith: Yeah, I'll take that Matt as it relates to the factors that affected that we expect the effect of fourth quarter. It's primarily the fact that we've seen and expect to see the continued increase in our.

Matt Smith: Small regional and retail volumes as we have lapped the ERP transition in the prior year, we saw that in the third quarter as well, but that was more pronounced because the third quarters is the quarter that was impacted them and then what we're seeing in the fourth quarter. Then is those increases are being offset.

Bernadette Madarieta: We saw that in the third quarter as well, but that was more pronounced because the third quarter is the quarter that was impacted. And then what we're seeing in the fourth quarter then is those increases are being offset by some of the lost customers that we've spoken about previously. But what I can tell you is we do have a pipeline, and Mike mentioned some of those in those QSR volume wins that will be starting and being increased as next year progresses.

Mike Smith: By some of the lost customers that we've spoken about previously, but what I can tell you is we do have a pipeline and Mike mentioned some of those in terms of those USR volume wins that will be starting in being increased as next year progresses, and we'll give more of an update on that when we give our guidance in next.

Mike Smith: And we'll give more of an update on that when we give our guidance in next quarter call. Yeah, Matt, the thing I'd add is we're putting a full court press on the customer and ensuring that Lamb Weston gets back to a stronger customer-first mentality. And as I mentioned in the prepared remarks, I've been spending time out with these customers, our large customers, and listening directly from them. And they value the innovation and the product quality and the consistency that Lamb Weston has had in the past. They want to have better continuity of supply and assured supply.

Mike Smith: Order call Yeah, Matt the thing I'd add is we're putting a full court press on the customer and ensuring that Lamb Weston gets back to.

Speaker Change: A stronger customer first mentality and as I mentioned in the prepared remarks, I've been spending time out with these customers, our large customers and listening directly from them and.

Speaker Change: The value of the innovation in the product quality and the consistency that Lamb Weston has had in the past they want to have a better continuity of supply.

Mike Smith: And that's where we're putting a focus. And I'm happy to share that we have improved our fill rates and have some momentum behind us.

Speaker Change: And assured supply and that's where we're putting our focus and I'm happy to share that we have improved our fill rates and <unk>.

Speaker Change: Now some momentum behind us.

Matt Smith: Thank you for that. And as a follow-up, it sounds like you've done – you're in process on doing a lot of work with Alex Partners and looking at your expense structure and revenue opportunities. Based on what you've seen to date, can you comment on how you view the 19 to 20 percent EBITDA margin that I think was discussed last quarter as an achievable level, perhaps in the medium term?

Thank you for that and then as a follow up it sounds like you've you've done you're in process on doing a lot of work with Alix partners and looking at your expense structure and revenue opportunities based on what you've seen to date can you comment on how you view the the 19% to 20% EBITDA margin.

Speaker Change: I think it was discussed last quarter as a as an achievable level, perhaps in the medium term. Thank you.

Mike Smith: Thank you, and I'll leave it there. Yeah, you know, Matt, we're not going to discuss that today. We have a lot of initiatives in play right now. And and, you know, I understand that the need or the question will come back as as we get to this process, as we get to our annual operating plan, and we'll share that.

Speaker Change: I'll leave it there.

Speaker Change: Yeah, you know, Matt we're not going to discuss that today, we have a lot of initiatives.

Speaker Change: In play right now and and you know I understand the need or the question.

Speaker Change: We'll come back as we get through this process as we get through our annual operating plan and we will share that we typically share our guidance on on the next fiscal year in Q4, and we'll continue to do that in the future.

Mike Smith: We typically share our guidance on on the next fiscal year in Q4, and we'll continue to do that in the future.

Speaker Change: Okay.

Mark: We'll now take our next question from Mark. with Wells Fargo. Hey, good morning. Thank you for the question. I appreciate the update on the capacity outlook.

Speaker Change: We will now take our next question from Marc <unk> with Wells Fargo Securities.

Speaker Change: Hey, good morning, and thank you for the question I appreciate the update on the capacity up.

Speaker Change: Capacity outlook.

Mike Smith: Any change on your level of comfort around pricing to remain rational in North America and maybe any kind of stabilization in international price mix? International is pretty weak. Was that in line with your own expectations, maybe EPS and FX? And how are you thinking about that progressing? Yeah, you know, you know, as I mentioned in the prepared remarks, we are, since last quarter, we have heard of some additional announcements. Most of those have been internationally, primarily in some of the developing markets. You know, there's been rumors of delays and extended downtimes in areas. So, but, you know, as Bernadette said, with the softness and demand of some of the macroeconomic impacts, we believe price will be pressured over the course of the next, over the near term.

Speaker Change: The change on your level of comfort around pricing to remain rational in North America, and maybe any signs of stabilization in international.

Speaker Change: Price mix International was pretty week was that in line with your own expectations may be absent FX.

Speaker Change: How are you thinking about that progressing from here. Thanks.

Speaker Change: Yes.

Speaker Change: You know as I mentioned in the prepared remarks, we are since last quarter, we have heard of some additional announcements most of those have been internationally.

Speaker Change: Morally and some of the developing markets.

Speaker Change: You know there has been rumors of delays and extended town downtime scenarios, so, but you know as Bernadette said.

Speaker Change: With the softness in demand and some of them.

Speaker Change: So you can all make impacts we believe price will be pressured over the course of the next Oh.

Speaker Change: The near term.

Carla Cosella: We will now take our next question from Carla Cosella. Hi, two quick follow-ups. One on CapEx. It's nice to see you can increase your cash flow as you finish off some of these projects. I'm wondering, what's your maintenance level of CapEx beyond that, and do you think you've got more opportunities to change that? Yeah, as it relates to capital spending, I think we've previously discussed that maintenance is about 3% of sales, add another 2% of sales for modernization. And then aside from that, if you know, it's environmental expenditures, but but those are the three main components as it relates to our our capital expenditure plan.

Speaker Change: We will now take our next question from Carla Casella with Jpmorgan.

Speaker Change: Okay.

Carla Casella: Hi, two quick follow ups one on Capex.

Carla Casella: Nice to see you can increase your cash flow base as you finish up some of these projects I'm wondering what's your maintenance level of Capex beyond that and you think you've got more opportunity.

Carla Casella: To change that.

Carla Casella: Yeah as it relates to capital spending I think we've previously discussed that maintenance is about 3% of sales add another 2% of sales for modernization and then aside from that it's you know it's environmental expenditures, but those are the three main components as it relates to our.

Carla Casella: Our capital expenditure plans.

Mike Smith: Okay, great.

Speaker Change: Okay, Great and then your new business wins is there a change in how the <unk> are operating are you seeing more.

Mike Smith: And in your new business, WINS, is there a change in how the QSRs are operating? Are you seeing more—it sounds like some were just open to outsourcing, but is there, as that happens, are you seeing any different competitive threats as you bid on the project, the way you and your competitors go after it, or how the QSRs look to bid out those projects, or the contracts? Yeah, you know, one thing that we've been working on is, and I believe we mentioned this for a pair of remarks, is adjusting our contract schedule. You know, in the normalized environment, typically we'd have about a third of our large chain customers come due for negotiations every year, and we've cycled back to that.

Speaker Change: It sounds like some more open to outsourcing, but is there as that happens are you seeing any different competitive threats as you did on the projects. The way you and your competitors go after it or how the <unk> look to put out those projects.

Speaker Change: For contracts.

Speaker Change: Yeah, you know one thing that we've been working on is is and I believe we mentioned in his prepared remarks is adjusting our our contracts schedule you know a norm in a normalized environment typically we'd have about a third of our large chain customers come due for a negotiations every year and we've we've <unk>.

Mike Smith: So we'll have about a third of those that will come due this coming contract cycle. And, you know, customers are starting to look towards, you know, driving traffic to their restaurants, given the environment, and they're open to some new ideas and new innovation, as we spoke to already.

Speaker Change: Back to that.

Speaker Change: So we will have about a third of those that will come due this coming contract cycle.

Speaker Change: And customers are starting to look towards.

Speaker Change: Driving traffic to their restaurants, given the environment and they are open to some some new ideas and new innovation as we spoke to already.

Mike Smith: Okay, great.

Operator: Thank you.

Speaker Change: Okay, great. Thank you.

Debbie Hancock: If there are no further telephone questions, I'd like to turn the conference back over to Debbie for any additional questions. Thank you, Anna. And thank you, everyone, for joining us today. The replay of the call will be available on our website later this afternoon. And just hope everyone has a good rest of your day.

Speaker Change: And it appears there are no further telephone questions. So I'd like to turn the conference back over to Debbie for any additional or closing comments.

Speaker Change: Thank you Anna and thank you everyone for joining us today, the replay of the call will be available on our website. Later this afternoon and just hope everyone has a good rest of your day. Thank you.

Operator: Thank you.

Operator: That does conclude today's conference. We thank you all for your participation.

Speaker Change: And that does conclude today's conference. We thank you all for your participation you may now disconnect.

Operator: You may now disconnect.

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Yeah.