Q2 2025 Smithfield Foods Inc Earnings Call

Operator: Good day, everyone, and welcome to the Smithfield Foods second quarter 2025 results conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask your question, you may press star and then one on your telephone keypads. To withdraw your questions, you may press star and two. Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Julie MacMedan, Vice President of Investor Relations. Ma'am, please go ahead.

Good day, everyone. And welcome to the Smithfield Foods. Second quarter, 2025 results conference call.

All participants will be in a listen-only mode. Did you need assistance? Please say no conference specialist by pressing the star key followed by zero.

After today's presentation, there will be an opportunity to ask questions to ask a question. You may press star and then 1 on your telephone, keypads to withdraw your questions, you may press star and 2

There's also note today's event is being recorded.

At this time, I'd like to turn the floor over to Julie McMahon vice president of investor relations ma'am.

Julie MacMedan: Thank you, Operator, and good morning, everyone. Welcome to Smithfield's second quarter 2025 earnings call. Earlier this morning, we announced our results. A copy of the release, as well as today's presentation, are available on our IR website, investors.smithfieldfoods.com. Today's presentation contains projections and other forward-looking statements that are being provided pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all comments reflecting our expectations, assumptions, or beliefs about future events or performance that do not relate solely to historical periods. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, the factors identified in the release, in our annual report on Form 10-K, our quarterly reports on Form 10-Q, and our other filings with the Securities and Exchange Commission.

Please go ahead.

Thank you, operator, and good morning, everyone. Welcome to Smithfield's second quarter 2025 earnings call.

Earlier this morning, we announced our results, a copy of the release, as well, as today's presentation are available on our IR website investors.com.

Of the Private Securities Litigation Reform Act of 1995.

Or looking statements include all comments, reflecting our expectations assumptions or beliefs about future events or performance that do not relate solely to historical periods.

These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections.

These risks and uncertainties include but are not limited to the factors identified in the release.

In our annual report on form. 10K.

Our quarterly reports on Form 10-Q.

Julie MacMedan: The company undertakes no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events, or other factors. Please refer to our legal disclaimer on slide two of the presentation for more information. Today's presentation will also include certain non-GAAP measures, including but not limited to adjusted operating profit and margin, adjusted net income, adjusted earnings per share, and adjusted EBITDA. For reconciliation of these and other non-GAAP measures to the corresponding GAAP measures, please refer to our earnings press release and our slide presentation on our website. With me this morning are Shane Smith, President and CEO; Mark Hall, CFO; Steve France, President of Packaged Meats; and Donovan Owens, President of Fresh Pork. I will now turn the discussion over to Shane. Shane?

And our other filings with the Securities and Exchange Commission.

The company undertakes, no, obligation to update or revise publicly, any forward-looking statements.

Whether because of new information, future events or other factors.

Please refer to our legal. Disclaimer on slide 2 of the presentation for more information.

Today's presentation will also include certain non-gaap measures including but not limited to adjusted operating profit in margin, adjusted, net income, adjusted earnings, per share and adjusted. EBA

For reconciliation of these and other non-GAAP measures to the corresponding GAAP measures, please refer to our earnings press release and our slide presentation on our website.

With me this morning are Shane Smith, President and CEO, and Mark Hall, CFO.

Shane Smith: Thank you, Julie. Good morning, everyone. I am pleased to report that we delivered record second quarter adjusted operating profit of $298 million. That is up 20% from adjusted operating profit of $248 million in the second quarter of 2024. In addition, our adjusted operating profit margin of 7.9% improved from 7.3% in the second quarter of 2024. Our record second quarter results demonstrate the resilience of our business model as we successfully navigated a dynamic consumer spending and geopolitical environment. We grew sales and volume in our packaged meat segment, demonstrating the power of our iconic brand portfolio, which continued to deliver quality and value across all price points. Our Fresh Pork segment also increased sales and volume as it adeptly managed short-term disruptions in certain export markets, and our Hog Production segment continued to increase profitability.

Steve France, president of package meets and Donovan Owens. President of fresh pork. I will now turn the discussion over to Shane Shane

Thank you, Julie. Good morning, everyone.

I am pleased to report that we deliver record second quarter adjusted operating profit of 298 million, that's up 20% from adjusted. Operating profit of 248 million in the second quarter of 2024. In addition, our adjusted operating profit margin of 7.9% improved from 7.3% in the second quarter of 2024.

Our record second quarter results demonstrate the Brazilians of our business model. As we successfully navigated a dynamic consumer spending and geopolitical environment.

We grew sales and volume in our packaged meat segment, demonstrating the power of our iconic brand portfolio, which continues to deliver quality and value across all price points.

Shane Smith: With a solid first half performance combined with a more favorable full-year outlook for Hog Production, we have raised our full-year outlook. Looking at profit by segment, our Packaged Meat segment delivered an adjusted operating profit of $296 million, with an adjusted operating profit margin of 14.2% as we successfully navigated higher raw material input costs and a cautious consumer spending environment with our well-diversified portfolio of products and price points. We also continue to achieve operating efficiencies and cost savings. Our Fresh Pork segment reported an adjusted operating profit of $30 million, with an adjusted operating profit margin of 1.4%. This was up from $17 million and 0.9% in the second quarter of 2024. Our team demonstrated agility in executing our strategy to maximize product values through our multiple channels. We helped maximize profitability through our ability to flex production over the course of the quarter.

A fresh pork segment also increased sales and volume as it. Adeptly managed short-term disruptions in certain export markets and our hog production segment. Continue to increase profitability.

With a solid first half performance, combined, with a more favorable full year, outlook for hog production. We have raised our full year outlook

looking at profits by segment our package, meet segment delivered, adjusted operating profit of 296 million with an adjusted operating profit margin of 14.2%. As we successfully navigated higher raw material input cost, and a cautious consumer spending environment with our well, Diversified portfolio of products and price points.

We also continue to achieve operating efficiencies and cost savings.

Our fresh pork segment reported adjusted operating profit of $30 million, with an adjusted operating profit margin of 1.4%.

This was up from 17 million and 0.9% in the second quarter of 2024.

Our team demonstrated agility in executing our strategy to maximize product values through our multiple channels.

Shane Smith: We navigated the China tariff disruption, minimizing the impact by selling into alternative countries and channels and subsequently resuming shipments to China. The team also continued executing our operational strategies, resulting in improved cost and efficiency. Our Hog Production segment delivered an adjusted operating profit of $22 million versus a loss of $10 million in the second quarter of 2024. The increase was driven by improved market conditions and a more efficient cost structure on our retained farms. We achieved strong year-over-year profit improvement during the quarter, despite recognizing a loss of approximately $15 million related to mark-to-market derivative instruments. Our hog production segment is performing well this year. Given solid execution on our internal efficiency initiatives, combined with more favorable market conditions, we have raised our full-year hog production segment operating profit outlook by $50 million.

We help Max maximize profitability through our ability to flex production, over the course of the quarter.

We navigated the China tariff disruption minimizing the impact by selling into alternative countries and channels and subsequently resuming shipments to China.

The team also continued executing our operational strategies, resulting in improved cost and efficiency.

Our hog production segment. Delivered, adjusted operating profit of 22 million versus a loss of 10 million in the second quarter of 2024.

The increase was driven by improved market conditions and a more efficient cost structure on our retained Farms.

We achieved strong year-over-year profit improvement during the quarter.

Despite recognizing a loss of approximately 15 million dollars related to Mark to Market derivative instruments.

Our hog production segment is performing well this year.

Shane Smith: In summary, we delivered record second quarter adjusted operating profit through disciplined execution on our strategies and our relentless focus on continuous operating improvement. Our performance underscores the strength of our experienced executive team as we navigated a dynamic consumer spending and tariff environment. Our balance sheet and financial position are solid. We have ample financial flexibility to support our growth strategies and deliver value for our shareholders over the long term. Now turning to our outlook for fiscal 2025, I am pleased to report we have raised our outlook for adjusted operating profit, driven primarily by our increased outlook for our hog production segment. Mark Hall will share more details in a few minutes. Now I will turn to our key growth strategies.

Market conditions, we have raised our full year hog production, segment operating profit Outlook by million dollars.

In summary, we delivered record second quarter adjusted operating profit through disciplined execution, our strategies, and our relentless focus on continuous operating improvement.

Our performance underscores the strength of our experienced executive team as we navigated our dynamic consumer spending and tariff environment.

About balance sheet and financial position are solid.

We have ample financial flexibility to support our growth strategies and deliver value for our shareholders over the long term.

Now, turning to our outlook for fiscal 2025.

And please report, we've raised our outlook for adjusted operating profit, driven primarily by our increased outlook for our hog production segment. Mark will share more details in a few minutes.

Shane Smith: Our five strategic growth priorities are as follows: increase profits in our packaged meat segment through enhanced product mix, volume growth, and innovation; grow profits in our Fresh Pork segment by maximizing product value across channels; achieve a best-in-class cost structure in our hog production segment; optimize operations and deliver operating efficiencies in manufacturing, supply chain, distribution, procurement, and SG&A; and finally, evaluate synergistic M&A opportunities across North America. First, in Packaged Meats, which is our largest and most profitable segment, representing 55% of our consolidated sales with 98% of our packaged meat SKUs sold here in the U.S. While consumer budgets remain tight, our packaged meat segment is benefiting from several tailwinds. We are capitalizing on increased demand for protein. In addition, our products span the perimeter of the grocery store where consumers have shifted their spending patterns. Today's consumers are looking for value and convenience.

Now, I'll turn to our key growth strategies.

Our five strategic growth priorities are as follows: increased profits in our package meet segment, through enhanced product mix, volume growth, and innovation.

Broke profits in our fresh pork segment by maximizing product value across channels.

Achieve a best-in-class call structure in our heart production segment.

Optimize operations and deliver operating efficiencies and Manufacturing supply chain distribution, procurement and sgna.

And finally evaluate synergistic m&a opportunities across North America.

First in package meets which is our largest and most profitable segments representing 55% of our Consolidated sales with 98% of our package, meet SKU sold here in in the US.

While consumer budgets remain. Tight. Our package meets segment is benefiting from several Tailwind.

We are capitalizing on increased demand for protein. In addition, our products span the perimeter of the grocery store, where consumers have shifted their spending patterns.

Shane Smith: We are meeting these demands with our iconic and diversified brand portfolio that covers a wide range of price points and includes convenient packaging and portion sizes suited to people's busy lifestyles. We are focused on meeting consumers' needs profitably. Our three-prong strategy to grow Packaged Meats segment profit encompasses product mix improvement, volume growth, and innovation. First, product mix. We remain focused on increasing the mix of higher margin product categories such as quarter hams, packaged lunch meats, and dry sausage. We continue to see success converting large holiday hams to smaller, more convenient and profitable items. For example, we are delivering value and convenience with our Smithfield Anytime Favorites Quarter Hams. We set an affordable price for a fixed weight, a pound and a half ham, which has been well received by consumers.

Today's consumers are looking for value and convenience.

We are meeting these demands with our iconic and diversified brand portfolio that covers a wide range of price points and includes convenient packaging and portion sizes suited to people's busy lifestyles.

We are focused on meeting consumers' needs profitably.

Our 3-prong strategy to grow the packaged meat segment profit encompasses product mix improvement, volume growth, and innovation.

First product mix: We remain focused on increasing the mix of higher-margin product categories, such as quarter hands, packaged lunch meat, and dry sausage.

We continue to see success converting large holiday, hams to smaller more convenient and profitable items.

Shane Smith: We've grown unit share in this category to 30% for the first six months of 2025, up from 18% for the first six months of 2024, according to Circana. Even at this affordable price point, our quarter hams are more profitable than our large holiday hams. Another higher margin use of ham is packaged lunch meats. Based on Circana data for the six months into June 29, 2025, our Smithfield Prime Fresh packaged lunch meat posted the largest dollar share gain for the packaged lunch meat category of 1.1 percentage points. This is particularly impressive in today's cautious consumer spending environment, given that Prime Fresh is at the premium price point. We are also capitalizing on the popularity of pepperoni and salami to grow our higher margin dry sausage mix.

For example, we are delivering value and convenience with our Smithfield, anytime, favorites. Quarter hams, we've said an affordable price for a fixed weight pound and a half ham which has been well received by consumers.

We've grown unit, share in this category, to 30%, for the first 6 months of 2025 up from 18% for the first 6 months of 2024, according to sirana.

Even at this affordable price point, our quarter hams are more profitable than our large Holiday House.

Another higher margin. The use of ham is packaged lunch meat. Based on Sirana data for the six months ended June 29, 2025, our Smithfield Prime Fresh packaged lunch meat posted the largest dollar share gain for the packaged lunch meat category of 1.1 percentage points.

This is particularly impressive in today's cautious consumer spending environment. Given that Prime fresh is at the premium price point

Shane Smith: According to Circana, for the six months into June 29, 2025, Smithfield Foods is the number two branded dry salami and pepperoni vendor, and we are growing volume share. Second, volume. We continue to expect Packaged Meats volume to be up about 1% year over year, led by packaged lunch meat and other categories as we deliver quality protein at a good value to consumers. We are currently the number two branded provider of packaged meats by volume in the key categories in which we operate. Ten of these categories have a market size of more than $1 billion, and we strive to grow volume and market share in each of these categories. In today's economy, our ability to deliver value with a portfolio of quality branded products spanning multiple categories and price points is an important competitive advantage for Smithfield.

We're also capitalizing on the popularity of pepperoni and salami to grow. Our higher margin dry sausage mix.

According to sirana for the 6 months, ended June 29th 2025

Smithfield Foods is the number 2 branded dry salami and pepperoni vendor and we are growing volume share.

Second volume.

We continue to expect packaged Meats volume to be up about 1% year-over-year led by packaged lunch meat and other categories. As we deliver quality protein at a good value to Consumers.

We are currently the number 2 branded provider of packaged meats by volume in the key categories in which we operate.

10 of these categories have a market size of more than 1 billion dollars and we strive to grow volume and market share in each of these categories.

Shane Smith: We are able to attract and retain consumers even in a challenging spending environment. Packaged lunch meat is a great example, with our portfolio ranging from our private label brand at an entry price point all the way up to our premium brand, Smithfield Prime Fresh. Value seekers are also turning to private label, which is a key competitive advantage for Smithfield Foods. Retailers and food service operators are elevating their private label offerings, and they look to us as a trusted partner who consistently and reliably deliver high-quality products at scale. Our ability to deliver private label at scale strengthens our customer relationships. We pride ourselves on delivering outstanding service to our retail and food service customers. By taking a strategic multi-year planning approach, we help drive increased sales for us and our customers. Next, product innovation. We have a deep innovation pipeline.

Our ability to deliver value, with a portfolio of quality branded products spanning multiple categories and price points, is an important competitive advantage for Smithfield.

We were able to attract and retain consumers, even in a challenging spending environment.

Package launch meat is a great example with our portfolio. Ranging from our Gwaltney brand at an entry price point all the way up to our premium brand Smithfield Prime fresh.

Value seekers are also turning to private labels, which is a key competitive advantage for Smithfield retailers and food service. Operators are elevating their private label offerings and look to us as a trusted partner who consistently and reliably delivers high-quality products at scale.

Our ability to deliver private label at scale, strengthens our customer relationships, we pride ourselves on delivering outstanding service to our retail and Food Service customers.

By taking a strategic multi-year planning approach, we help drive increased sales for us and our customers.

Next product innovation.

Shane Smith: New concepts are continuously developed based on consumer research and in conjunction with our retail and food service customers. These new products target consumers through line extensions of our trusted brands, new flavors, and more convenient packaging and sizing options. A good example of an innovative product that aligns with evolving consumer preferences for convenient meal solutions is our precooked half rack of ribs offered at an attractive price point and size. According to Circana, this product grew share volume by 1.4 percentage points for the six months ended June 29, 2025. Our food service business posted strong sales growth in Q2 and in the first half, and innovation is at the forefront of helping our food service partners keep their menus fresh. During the first half of 2025, we executed over 30 limited-time offers within our strategic national chain partners in the U.S.

We have a deep Innovation pipeline.

New concepts are continuously developed based on consumer research and in conjunction with our retail and food service customers.

These new products target consumers through line extensions of our trusted brands, new flavors, and more convenient packaging and sizing options.

A good example of an Innovative product that aligns with evolving consumer preferences for convenient meal, Solutions is our precooked. Half rack of ribs offered at an attractive price, point, and size.

According to sirana. This product, grew share volume by 1.4 percentage points for the 6 months, ended June 29th 2025.

Our food service business posted strong sales growth in the second quarter. In the first half, innovation is at the forefront of helping our food service partners keep their menus fresh.

Shane Smith: In January, we launched Smithfield Select into the food service ready-to-eat bacon category. This premium fit cup product delivers superior flavor to our restaurant partners while helping them save labor, cost, and time in their kitchens, and we are seeing that reflected in strong volume growth. We have some exciting new product innovations scheduled for later this year that I look forward to sharing with you on future calls. Now let's talk about our second core growth strategy, increasing our Fresh Pork segment profitability. We are focused on growing Fresh Pork adjusted operating profit in 2025 by maximizing the net realizable value of each hog and driving best-in-class operating efficiency. I am very proud of our Fresh Pork team who delivered higher Q2 sales and adjusted operating profit in the face of tighter gross market spreads and a dynamic tariff environment.

During the first half of 2025, we executed over 30 limited time offers within our strategic national chain, Partners in the US. In January, we launched Smithfield, select into the Food Service, ready to eat bacon category. This premium

Pick.

Up product, deliver Superior flavor to our restaurant Partners, while helping them, save, labor cost and time in their kitchens, and we are seeing that reflected in strong volume growth.

We have some exciting new product innovations scheduled for later this year that I look forward to sharing with you on future calls.

Now, let's talk about our second core growth strategy. Increasing our fresh Fork segment profitability.

We are focused on growing fresh pork operating profit in 2025 by maximizing the net realizable value of each hog and driving best-in-class operating efficiency.

Shane Smith: This is a testament to our relentless focus on optimizing product values, achieving operational efficiencies, and containing cost. We continue to closely monitor the tariff and geopolitical environment, which remains fluid. While we are not immune to the impacts of tariff, we have built flexibility into our system and established multiple outlets for our Fresh Pork products, as demonstrated in Q2. We believe our 2025 operating profit outlook range for Fresh Pork addresses tariff risk. We have a seasoned team skilled at leveraging multiple channels to maximize profitability, underscoring one of the main competitive advantages for our leadership position as the number one pork processor in the industry. Now to our strategy to optimize our Hog Production segment. Our Hog Production segment reported a $22 million adjusted operating profit in Q2, compared to a loss of $10 million in Q2 of last year.

I'm very proud of our fresh 14 who delivered higher second quarter sales and adjusted operating profit in the face of tiger, gross Market, spreads, and that, and a dynamic tariff environment.

This is a testament to our Relentless, focus on optimizing product values achieving operating efficiencies and containing costs.

We continue to closely monitor the Tariff and geopolitical environments which remains fluid.

While we are not immune to the impacts of tariff.

We have built flexibility into our system and established multiple outlets for our fresh for products as demonstrated in the second quarter.

We believe our 2025 operating profit Outlook. Range for fresh Fork. Addresses tariff risk.

We have a seasoned team skilled at leveraging, multiple channels to to maximize profitability, underscoring 1 of the main competitive advantages for our leadership position as the number 1 Port processor in the industry.

Now, to our strategy to optimize our hog production segment.

Shane Smith: We continue to benefit from both improved industry market conditions, as well as our focus on operating a best-in-class cost structure on our retained farms. Our initiatives in genetic transformation, herd health improvements, and procurement and nutrition savings are yielding results. Based on the strong first half performance for Hog Production, combined with a more favorable market outlook for the second half, we are raising our anticipated full-year adjusted operating profit range by $50 million. We remain focused on actively resizing our business to reduce the number of hogs we produce ourselves. We are on track to achieve our medium-term goal of internally producing approximately 30% of the needs of our Fresh Pork segment. We expect to produce approximately 11.5 million hogs in 2025, which is roughly 40% of the needs of our Fresh Pork segment.

Our hog production segment reported a 22 million dollar adjusted operating profit in the second quarter compared to a loss of 10 million in the second quarter of last year.

We continue to benefit from both improved industry market conditions as well as our focus on operating a best-in-class call structure on our retained farms.

Our initiatives in genetic transformation, her health, improvements and procurement and nutrition. Savings are yielding results.

50 million.

We remain focused on actively resizing our business to reduce the number of hogs. We produce ourselves

We are on track to achieve our medium-term goal of internally producing approximately 30% of the needs of our fresh pork segment.

Shane Smith: This is down from 14.6 million in 2024 and from a high point of 17.6 million in 2019. Next, our strategy to optimize operations and deliver operational efficiencies in manufacturing, supply chain, distribution, procurement, and SG&A. We continue to reap the benefits of our investments in automation, as well as our multi-year efforts to drive operational efficiencies by eliminating waste and maximizing throughput. Automation has enabled us to redeploy labor to higher value activities, as well as to reduce our overall labor count, helping to offset inflationary pressures. We also continue to refine and optimize our transportation and logistics activities. Across the entire company, we are driving a culture of continuous improvement. Each year, we look for new ways to improve operating efficiency and to reduce our costs. We expect efficiency savings to again contribute to enhanced profitability in 2025.

We expect to produce approximately 11.5 million hogs in 2025, which is roughly 40% of the needs of our fresh pork segment. This is down from 14.6 million in 2024 and from a high point of 17.6 million in 2019.

Next, our strategy is to optimize operations and deliver operating efficiencies in manufacturing, supply chain, distribution, procurement, and SG&A.

We continue to reap the benefits of our investments in automation, as well as our multi-year efforts to drive operational efficiencies by eliminating waste and maximizing throughput.

Automation has enabled us to redeploy labor, to higher value activities, as well as to reduce our overall labor of counts helping to offset inflationary pressures.

We also continue to refine and optimize our transportation and Logistics activities.

Across the entire company, we are driving a culture of continuous improvement. Each year, we look for new ways to improve operating efficiency and reduce our costs.

Shane Smith: Finally, we continue to evaluate opportunistic M&A in North America to support our growth strategies. We will remain disciplined in evaluating complementary and synergistic opportunities. In summary, we delivered record Q2 adjusted operating profit and a strong first half performance. We are well positioned to achieve our increased outlook for 2025 and to continue to support our growth and market leadership over the long term. With that, I will turn it over to Mark to review our financials in more detail.

We expect efficiency savings to again contribute to enhanced profitability in 2025.

Finally, we continue to evaluate opportunistic. M&a in North America to support our growth strategies.

We will remain disciplined in evaluating complimentary and synergistic opportunities.

In summary, we delivered records, second quarter, adjuster operating profit and a strong first half performance.

We are well, positioned to achieve our increased outlook for 2025, and to continue to support our growth and Market leadership over the long term.

With that, I will turn it over to Mark to review our financials in more detail.

Mark Hall: Thanks, Shane, and good morning to everyone joining the call. In the second quarter, we delivered $298 million in adjusted operating profit, an increase of 20.1% versus the prior year, marking a record second quarter and reflecting the resilience of our business model. We achieved higher adjusted operating profit dollars across each of our three segments. We ended the second quarter with a strong balance sheet, and we have the financial flexibility to invest in growth and return value to our shareholders. Turning to the details of our second quarter results, starting with the consolidated results and then a review of our performance by segment. Consolidated sales in the second quarter were $3.8 billion, representing an 11% or $374 million increase compared to the prior year. This was driven by sales growth across all segments.

Thanks, Shane, and good morning, everyone. Joining the call.

In the second quarter, we delivered 298 million in adjusted operating profit and increase of 20.1% versus the prior year marketing. Your record second quarter and reflecting the resilience of our business model, we achieved higher adjusted operating profit dollars across each of our 3 segments.

We ended the second quarter with a strong balance sheet and we have the financial flexibility to invest in growth and determine value to our shareholders.

Turning to the details of our second quarter results, starting with the Consolidated results and then a review of our performance by segment.

Mark Hall: We delivered record second quarter adjusted operating profit of $298 million and an adjusted operating profit margin of 7.9% compared to an adjusted operating profit of $248 million or 7.3% in the second quarter of 2024. The second quarter of 2025 adjusted net income from continuing operations was also a record at $217 million, compared to $192 million in the second quarter of 2024. Adjusted EPS was $0.55 per share, compared to $0.51 per share during the second quarter of 2024. Now on to our second quarter of segment results. Packaged Meats segment delivered second quarter adjusted operating profit of $296 million and a healthy adjusted operating profit margin of 14.2%, despite higher raw material costs and a greater mix of lower margin ham sales due to the Easter sales initiative. Second quarter Packaged Meats sales of $2.1 billion increased by 6.9% compared to the second quarter of 2024.

Consolidated sales in the second quarter were 3.8 billion dollars representing an 11% or 374 million increase compared to the prior year. This was driven by sales growth of cross Hall segments,

We delivered records for the second quarter, with an adjusted operating profit of $298 million and an adjusted operating profit margin of 7.9%, compared to an adjusted operating profit of $248 million, or 7.3%, in the second quarter of 2024.

The second quarter 2025 adjusted net income from continuing operations was also a record at $217 million, compared to $192 million in the second quarter of 2024.

Adjusted EPS was 55 cents per share compared to 51 cents per share during the second quarter of 2024.

Now, on to our second quarter of segment results.

Packaged meat segment delivered second quarter adjusted operating profit of 296 million and a healthy adjusted operating profit margin of 14.2%, despite higher raw material costs, and a greater mix of lower margin, ham sales, due to the Easter sales, mix shift.

Mark Hall: This was driven primarily by a 4.5% increase in our sales volume, which reflected the later Easter holiday this year. The strength of our Packaged Meats portfolio is evidenced by the fact that we grew sales volume in the second quarter by more than 1% when excluding the holiday ham sales. Second quarter sales also benefited from a 2.3% increase in average selling price. The higher average selling price was driven by higher market prices for the pork value chain, with key raw materials such as bellies up 24% and shrimp up 10% to 14% year over year. Additionally, the higher average selling price was influenced by our continued favorable product mix ship to higher margin items such as lunch meat and dry sausage. Next, in Fresh Pork. For the second quarter of 2025, we delivered adjusted operating profit of $30 million and an adjusted operating profit margin of 1.4%.

Second quarter package meat sales of $2.1 billion increased by 6.9% compared to the second quarter of 2024. This was driven primarily by a 4.5% increase in our sales volume, which reflected the later Easter holiday this year.

The strength of our package Community Support portfolio is evidenced by the fact that we grew sales volume in the second quarter. By more than 1%, when excluding the holiday ham sales.

Second quarter sales also benefited from a 2.3% increase in average selling price.

The higher average selling price was driven by higher market prices for the pork value chain with key raw materials such as bellies of 24% and trim up 10 to 14% year-over-year.

Higher margin items, such as lunch meat and dry sausage.

Mark Hall: This was up from $17 million and 0.9% in the second quarter of 2024. In the second quarter of 2025, the industry market spread was compressed versus last year, and we faced short-term tariff disruption. The team successfully grew adjusted operating profit versus last year by executing our best sales strategy, by flexing production over the course of the quarter, and by delivering cost savings. Fresh Pork segment sales of $2.1 billion increased 5% year over year, primarily driven by a 3.3% increase in average selling price and a 1.7% increase in volume. Turning now to Hog Production, we are pleased to report adjusted operating profit of $22 million in the second quarter of 2025 versus a loss of $10 million in the second quarter of 2024. The substantial increase was driven by improved commodity markets, as well as actions we have taken to optimize our operations.

Next in fresh pork for the second quarter of 2025, we delivered an adjusted operating profit of $30 million and an adjusted operating profit margin of 1.4%. This was up from $17 million and 0.9% in the second quarter of 2024.

In the second quarter of 2025, the industry market spread was compressed versus last year, and we faced short-term terror disruption. The team successfully grew adjusted operating profit versus last year by executing our best sales strategy, flexing production over the course of the quarter, and delivering cost savings.

Press support, segment sales of 2.1 billion increased 5% year-over-year, primarily driven by a 3.3% increase in average selling price and a 1.7% increase in volume.

Mark Hall: The second quarter of 2025 Hog Production segment sales of $840 million increased by 8.4% year over year. This was despite a 24% or approximately 850,000 head reduction in the number of hogs produced. The second quarter sales increase was primarily due to increased external grain and feed sales of $116 million, as well as approximately $103 million for the sale of commercial hog inventories and other goods and services to our new joint venture partners. Our average market hog sales price was flat year over year, inclusive of the effects of hedging, while the CME Lean Hog Index was up 4%. As Shane Smith mentioned, during the quarter, our profitability was reduced by approximately $15 million related to mark-to-market derivative instruments. While this unfavorably impacted second quarter results, we have raised our full-year Hog Production segment operating profit outlook by $50 million.

Turning down the hog production. We're pleased to report adjusted operating profit of 22 million to the second quarter of 2025 versus a loss of 10 million. In the second quarter of 2024. The substantial increase was driven by improved commodity markets, as well as actions, we've taken to optimize our operations.

Second quarter 2025, Pond. Production segment sales of $840 million increased by 8.4% year-over-year. This was despite a 24% or approximately 850,000 head reduction in the number of hogs produced.

The second quarter sales increased with primarily due to increased external Grain and Feed sales of 116 million as well as approximately 103 million for the sale of commercial, hog, inventories and other goods and services to our new joint venture Partners. Our average Market, hog sales price was flat year-over-year. Inclusive of the effects of hedging. While the CME lean hog index was up 4%.

Mark Hall: Adjusted operating profit for our other segment, which includes our Mexico and bioscience operations, was $7 million in the second quarter, which flattened from the second quarter of last year. Corporate expenses came in $60 million below the prior year, reflecting our disciplined cost management strategies. Next, let us review our strong balance sheet and financial position. At the end of the second quarter, our net debt to adjusted EBITDA ratio was 0.7 times, well below our policy of less than two times. Our liquidity at quarter end was $3.2 billion, including $928 million in cash and cash equivalents. This is well above our policy threshold of $1 billion of liquidity. Capital expenditures for the first six months were $158 million, compared to $173 million in the first half of 2024.

The Shane mentioned during the quarter. Our profitability was reduced by approximately 15 million dollars related to Mark to Market derivative instruments. While this unfavorably impacted second quarter results, we've raised our full year hog production, segment operating profit Outlook by 50 million dollars.

Adjusted operating profit for our other segments which includes our Mexico and bioscience operations of 7 million dollars. In the second quarter of with flat to the second quarter of last year.

Corporate expenses came in 6% of the prior year, reflecting our disciplined cost management strategies.

Next, let's review our strong balance sheet and financial position.

At the end of the second quarter, our net debt to adjusted EBITDA ratio was 0.7 times, well below our policy of less than 2 times liquidity. At quarter-end, liquidity was $3.2 billion, including $928 million in cash and cash equivalents. This is well above our policy threshold of $1 billion of liquidity.

Mark Hall: More than 50% of our capital investments this year are to fund projects that will drive both top and bottom line growth. This consists primarily of various plant automation and improvement projects as we continue to lower our manufacturing cost structure and better utilize labor. Reinforcing our commitment to return value to shareholders, on April 22nd and May 29th of this year, we have paid quarterly dividends of $0.25 per share. On July 31st, we announced the quarterly dividend of $0.25 per share to be paid on August 28th, and we expect to pay $1 per share in annual dividends this year, subject to the board's discretion. Now to our outlook for fiscal 2025, which we raised this morning given strong first half performance, as well as our forward outlook. We continue to navigate a dynamic consumer spending and tariff environment.

Capital expenditures for the first 6 months were 158 million compared to 173 million in the first half of 2024, more than 50% of our Capital Investments. This year, are the fund projects that will drive both top and bottom line growth.

This consists primarily of various plant automation and improvement projects as we continue to lower our manufacturing cost structure and better utilize labor.

Reinforcing our commitment to return value to shareholders, on April 22nd and May 29th of this year, we paid quarterly dividends of $0.25 per share.

On July 31st, we announced a quarterly dividend of 25 cents per share to be hit, paid on August the 28th and we expect to pay a dollar per share in annual dividends this year subject to the board's discretion.

now, to our outlook for fiscal 2025, which we raised this morning given strong first half performance as well as our forward Outlook,

Mark Hall: We still expect to continue to increase profitability by executing our core strategies that Shane Smith reviewed. First, we anticipate that total company sales will increase in the low to mid-single-digit percent range compared to fiscal 2024. Please note that for comparability purposes, our sales outlook excludes the impact of our Hog Production segment sales to the newly formed joint venture partners. Our outlook for segment adjusted operating profit is as follows. For our Packaged Meats segment, we still anticipate adjusted operating profit in the range of $1.05 billion to $1.15 billion. For Fresh Pork, we still anticipate adjusted operating profit of between $150 million to $250 million. As Shane Smith mentioned, we continue to execute our best sales strategy in response to recent tariff actions, and we believe our 2025 range for Fresh Pork addresses the risk that China or other export market tariffs could again be prohibited.

While we continue to navigate the dynamic consumer spending and tariff environment, we still expect to continue to increase profitability by executing our core strategies that Shane reviewed.

First, we anticipate that total company sales will increase in the low to mid single digit percentage compared to fiscal 2024. And please note that for comparability purposes. Our sales Outlook excludes the impact of our hog production. Segment sales to the newly formed joint venture partners.

Outlook for Segment. Adjusted operating profit is as follows for a package meet segment. We still anticipate adjusted operating profit in the range of 1.05 billion to 1.15 billion.

Mark Hall: For Hog Production, we have raised our anticipated adjusted operating profit range by $50 million to between break even to a profit of $100 million. As a result, we now anticipate total company adjusted operating profit in the range of $1.15 billion to $1.35 billion, fully reflecting the $50 million increase in Hog Production. Our total company operating profit outlook reflects continued efforts to more than offset inflation through cost savings and efficiency initiatives. In summary, today we raised our outlook for 2025 based on solid first half results, an improved outlook for hog production, and our continued expectation that we can generate operating profit growth even as we navigate a dynamic consumer spending and tariff environment. Now I will ask the operator to open up the call for Q&A. Operator?

For fresh pork, we still anticipate adjusted operating profit of between $150 million and $250 million. If Shane mentioned, we continue to execute our best sales strategy in response to recent tariff actions, and we believe our 2025 range for fresh pork addresses the risk that China or other export market tariffs could again be prohibited.

Between break-even and a profit of $100 million. As a result, we now anticipate total company adjusted operating profit in the range of $1.15 billion to $1.35 billion, fully reflecting a $50 million increase in hog production.

Total company operating profit outlook reflects continued efforts to more than offset inflation through cost savings and efficiency initiatives.

In summary today, we raised our outlook for 2025 based on solid first-half results and improved outlook for hog production, as well as our continued expectation that we can generate operating profit growth. Even as we navigated dynamic consumer spending and tariff environments.

Now, I'll ask the operator to open up the call for Q&A.

Operator.

Operator: Ladies and gentlemen, at this time we will begin the question and answer session. To ask a question, you may press star and then one using a system. To withdraw your questions, you may press star and two. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality. Once again, that is star and then one to join the question queue. Our first question today comes from Ben Theurer from Barclays. Please go ahead with your question.

Ladies and gentlemen, at this time, we'll begin the question and answer session to ask a question. You may press star and then 1 using a

So withdrawal of your questions, you may press star and 2. If you are using a speaker-phone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality.

Once again, that is star and then 1 to join the question queue.

Steve France: Yeah, good morning. Hey, Mark, thanks for taking my question. Congrats on a very strong second quarter. Two quick ones. The first one really was in Packaged Meats, and thanks for sharing a lot of details already in the presentation, but I wanted to understand a little bit better what you have been seeing in terms of consumer shifts maybe within your brands on the portfolio and how much potentially has shifted into private label. Any additional commentary that you can make in terms of trends within your portfolio, that would be great. My second question really is, as you look at your Hog Production, obviously being very strong, clearly that does have a negative impact into your Fresh Pork business to a small degree. I just wanted to understand what you are seeing in terms of profits in between one and the other.

Our first question today comes from Ben, a toy buyer from Barkley's. Please go ahead with your question.

Uh yeah, good morning. Uh, Shane Mark thanks. Uh, thanks for taking my question. Congrats on a, on a very strong, uh, second quarter, um, 2, quick ones. Um, so first 1 really was in within packaged meat and thanks for sharing a lot of details already in the presentation, but wanted to understand a little bit better. What you've been seeing in terms of like consumer shifts, maybe within your brands on the portfolio on how much potentially has has shifted into private label. Uh, so any any commentary additional that you can make in terms of like Trends within your portfolio? Uh, that would be great. And then my, my second question really is. Um, as you look at your um,

Steve France: How do you feel about the current visibility of the hog price, let us put it this way, and how it impacts on one side Hog Production, but then on the other side Fresh Pork? Thanks.

The the hog production obviously being very strong clearly that does have a negative impact into, uh, your your fresh for business to a small degree. So just wanted to understand what you're seeing for um, in terms of like profits in between 1 and the other how how do you feel about the the current um, visibility of the hot price. That's what it is saying and how it impacts on 1 side, hog production. But then on the other side, fresh pork, thanks.

Shane Smith: Thanks Ben. For your first question, maybe I will kick it over to Steve to talk about what we have seen from a consumer standpoint.

Steve France: I appreciate the question, and obviously we spent a lot of time looking at all the different topics that I guess are involved in the question that you just asked. As far as a retail perspective, at a high level from the retail side of the business, really for food and beverage spending, we still see it's pretty soft, and that's really due to ongoing economic challenges. We see that consumers are hesitant. Weather has certainly been unpredictable, and inflation is still putting pressure on consumers' wallets. While confidence has picked up a bit in June after a slow start to the year, it's still not where it was last year, and consumer demand really remains resilient but cautious, I would say, in 2025, shaped by inflation fatigue, shifting value perceptions, and evolving household behavior. With that said, we're very pleased with where we ended up in Q2.

Hey, thanks Ben for your first question. Maybe I'll kick it over to Steve to talk about what we've seen from uh from a consumer standpoint. Sure.

So, I appreciate the, uh, question. And obviously, we spend a lot of time, uh, looking at, uh, you know, all the different topics that, you know, I guess, uh, are involved in the question that you just asked, but as far as, uh, a retail perspective. So at a high level from a, for the retail side of the business, uh, really for food and beverage spending its we still see, it's pretty soft and that's uh,

Steve France: If you look at some of the numbers that were just reported from a sales perspective, we're up almost 7% on sales, and volume was up 4.5%. Specifically to our brand, if you look at Circana data for Q2, our volume share was actually up 60 basis points, which outperformed our key competitors. I would say that these are very impressive results when you consider that we have not increased promoted volume. Our first half sales are up 4%, which really speaks to the loyalty of our brands and our strategy to diversify across price points. The other comment or question that you had was really on private label. I would say that from an industry perspective, and we do see it happening to some of our business on the branded side, we do see the industry seeing an increase in private label shared growth.

Uh, really to ongoing economic challenges. So we see that consumers are hesitant uh weathers. Uh weather has certainly been unpredictable and inflation is still putting pressure on consumers wallets. So while confidence is picked up a bit in June, after a slow start to the year, it's still not where it was last year and consumer demand, uh, really remains resilient with caution. So I would say in 2025, shaped by inflation fatigue, uh, shifting value perceptions and evolving household Behavior. So with that said, uh, we're very pleased with where we ended up in Q2. So if you look at uh, some of the numbers that uh we're just reported from a sales perspective. We're up almost uh 7% on sales and volume was up 4.5% and specifically to our brand. So if you look at Circa data for Q2 uh our volume share was actually up 60 basis points, which outperformed our

Key competitors. I would say that these are very impressive results when you consider that we have not increased promoted volume. So, our first-half sales are up 4%, which really speaks to the loyalty of our brands and our strategy to diversify across price points. Then, the other comment or question that you had was really on private label.

Steve France: It's really in certain categories as retailers invest in their own brands. With that said, I would say that our private label business really provides us a key competitive advantage since many of our retail partners are upscaling their private label offerings. Historically, private label producers really focused on commodity value-tier products, and the shift of retailers and food service distributors looking to offer high-quality, innovative food safe products has really provided us the platform to excel in this space and really be a leader in profit margins, which you can see that we delivered in Q2, coming in at the 14.2%.

Distributors looking to offer high-quality Innovative food. Safe products as really provided us the platform to excel in the space and really be a leader in profit margins which can see uh, that we delivered in Q2 coming in at the 14.2%.

Mark Hall: Very clear. Thanks, Steve.

Very clear. Thanks Steve.

Shane Smith: Ben, to your second question on Hog Production, we do have visibility into the back half of the year. While we did have a mark-to-market component in the second quarter, we are comfortable raising our guidance. We look at the pricing that we see out in the futures markets, and of course, we temper that with things. You look at the USDA report, they are expecting about a nine-tenths of a percent or 0.9% increase in overall full-year pork production. We also look at the last four weeks' slaughter levels or harvest levels across the industry compared to the same time last year, and we are actually down 3% on a per head basis, and we know that weights are lighter.

Shane Smith: We believe that is one thing that is going to help support pork prices as we go into the back half of this year and into the first quarter of next year. As a protein, pork is from a price point really well positioned against both beef and chicken. If you compare retail prices four years ago to four years ago, for example, beef is up, I think, about 24%, chicken is up about 22%, and pork is up about 7%. I think the dynamics in the industry are really setting up for a strong second half and a carryover into 2026 as the meat prices and the meat demand continue to support the hog prices that we see.

And then been to your second question on on hog production, you know, we do have visibility into the back half of the year. And while we did have a, a mark to Market component in the second quarter, uh, we are comfortable raising our guidance. Uh, you know, we look at the pricing that we see out in the future markets and you know, of course, we temper that with things, you know, you look at the USDA report, they're expecting about a 9/10 of a percent or or 0.9% increase, um, in in overall full year, Port production. But we also look at the last 4 weeks, slaughtered levels or harvest levels across the industry, uh, compared to the same time last year and we're actually down, 3% on the per head basis and and we know that weights are lighter and so we believe, you know, that's 1 thing that's going to help support Port prices as we go into the back half of this year and into the first quarter of next year. Uh as of protein you have pork is from Price Point really well positioned against both beef and chicken. Um you know, if you compare

Shane Smith: You couple that with the changes that we have made in our Hog Production operations from the genetic improvements that we are now really beginning to see the impacts of our health initiatives. While health has been a big topic in the industry this year and a big concern in the industry, from the public data that is available, we see our incidence rates are better than the industry. The nutritional things that we have done to improve our feed cost. I am really bullish on our Hog Production operations. Again, I think those things combined is what gives us the confidence to raise the full-year outlook in Hog Production for 2025.

Retail prices, you know, 4 years ago, for to 4 years ago. For example. Uh, beef is up, I think about 24%, uh, chickens up about 22% and forks up about 7% and so I think the, the Dynamics in the industry are really setting up for a strong second half and a carryover into 2026 uh, as as the meat prices and the meat demand uh, continue to support the hog prices that we see. Uh, and then you couple that with the changes that we've made in our heart production operations from the genetic improvements that we're, we're now really beginning to see the impacts of our health initiatives. Um, while Health has been a big Topic in the, in the industry this year and a big concern in the industry, uh, from the public data, that's available. We see our, our incidents rates are better than the industry. Uh, and then the, the nutritional, uh, things that we've done to improve our feed cost. And so, I'm really bullish on, on our hot production operations. And again,

Mark Hall: Perfect. Thank you very much. Our next question comes from Peter Galbo from Bank of America. Please go ahead with your question.

I think those things combined is what gives us the confidence to to raise the 4 year outlook in high production. Uh for 2025.

Perfect, thank you very much.

Our next question comes from Peter Galvo from...

Steve France: Hey, good morning, Shane and Mark. Thanks for the question. Maybe to start, Shane, you know, there has been a lot of discussion, I think, around the raw material, you know, input increases in Packaged Meats. I know you saw a bit of that in Q2, and it seems like it has continued pretty strongly here in Q3. Despite that, you know, you kept the outlook on Packaged Meats on profitability the same. So maybe you can just talk a little bit more about, you know, against the backdrop of increasing raw materials, why you feel confident in that kind of back half profitability guide on Packaged Meats remaining unchanged.

Bank of America, please go ahead with your question.

Hey, good morning Shane and Mark. Thanks for the questions. Um

maybe to start shein.

Shane Smith: Yeah, maybe I will start off, and Steve, you can jump in here as well. One of the things our Packaged Meats business has really done well, and not just this year, but over the past few years, is really becoming efficient in our cost structures. Peter, we have talked about on previous calls, the things we have done to simplify that business through SKU reductions, through investments in automation and technology to improve the overall cost structure. There is no doubt that this year we have really been faced with high raw material costs. As Mark mentioned, bellies are up in excess of 20% and shrimp anywhere from 10% to 14%. One of the things we have is with our private label business, which is about 40% of our retail business.

Um, you know, there's been a lot of discussion, I think around the, the raw material, you know, input increases in, in packaged meats. And and I know you saw a bit of that and, and in Q2 and it seems like it's it's continued pretty strongly here in Q3. Um, but despite that, you know, you kept that the outlook on packaged Meats on profitability, the same. So, so, maybe you can just talk a little bit more about, you know, against the backdrop of increasing raw materials, why you feel confident in that kind of back half. Um, profitability guide on packaging, me remaining unchanged.

Yeah, maybe I'll start off and see if you can jump in here as well. Yeah, 1 of the things, our package meets business is really done well and not just this year, but over the past few years has really become an efficient uh in our core structures. And so, you know, Peter we've talked about on previous calls, you know, the things we've done to simplify that business through SKU reductions through investments in Automation and Technology uh to improve the overall cost structure. Now, there is no doubt that this year we have uh really been faced with higher raw material costs. As Mark mentioned, billies are up in excess of 20% in trim, anywhere from 10 to 14%. Uh, but 1 of the things we have

Shane Smith: We have some formula-based pricing mechanisms in there to allow us to ebb and flow with the underlying commodity. We feel good with our guidance for the year and where we see this back half going, especially as we continue to change our product mix from traditional lower margin products into many of the higher margin categories that Steve and Mark talked about. We are really confident looking forward and where we think the Packaged Meats business will continue to go. Steve, do you want to add anything there?

Steve France: Sure. I appreciate the question, Peter. You are right. If you think about the first half of this year, from an input raw materials standpoint, our costs were up about $200 million. I would say what we do that is probably a little bit different, when you think about the input costs going up that much, we are certainly not immune to the impact that this has on our overall business. We do believe that we are better positioned than most companies, really due to the extensive product portfolio that we talk about, including both branded and also the private label product. That enables us to really meet those consumer needs at all price points up and down the value chain.

Steve France: If you think about our Packaged Meats and what you have been seeing over the last several quarters, our Packaged Meats business has consistently outperformed key competitors in terms of profitability and margins. Our business has demonstrated consistent, strong financial health with annual margins surpassing the industry. That said, we believe we can mitigate some of the other factors typically considered uncontrollable by continuing to stay focused on our current strategies. One is our strong brand portfolio, and it really provides us the ability to market our products to customers and consumers across multiple categories and also the price points. This really helps us to attract and retain consumers as they move up and down that value spectrum. That enables us to meet those shifting consumer preferences and to really capture that wallet share.

Are certainly not immune to the impact that this has on our overall business, but we do believe that we are better positioned than most companies. I really do to the extensive product portfolio that we talked about, uh, including both branded and also the private label products and what that enables us to do is really meet those consumer needs at all price points up and down the value chain. And if you think about our packaged meats and what you've been seeing over the last several quarters is that our package meets business has consistently outperformed key competitors in terms of profitability and margins and our business has demonstrated consistent, strong Financial Health with annual margins surpassing, the industry and that said we believe we can mitigate some of the other factors typically considered uncontrollable by continuing to stay focused on our current strategies. So 1 is our strong brand portfolio and it really provides us the ability to Market our products to customers and consumers across multiple categories and also the price points.

Steve France: I would say the big thing is if they do decide to switch into private label, we are well positioned to maintain that consumer in a private label product that there is a good chance that was produced by us. As we continue to see a shift in retail to more upscale private label, as I mentioned before, it really benefits the structure that we have from our capabilities at the plants and also the ability to, I guess, the redundancy that we have from a production standpoint. Even though we are faced with these higher raw material costs, we believe that we are well positioned to again continue to mitigate them as best as possible by sticking to our current strategy, which shows that we are certainly successful in the first half of this year.

And this really helps us to attract and retain consumers. As they move up and down that value Spectrum, uh, and that enables us to meet, uh, those shifting consumer preferences and to really capture that wallet share share. And I would say the big thing is if they do decide uh, to switch into private label, we are well positioned to maintain that consumer in a private label product uh that there's good chance that was produced by us. Uh so as we continue to see a shift in retail to more uh uh more upscale

Operator: Great. Thank you for that. Just as a follow-up, Mark, on the hog production side, I think if I did the math right based on the 10Q, you are hedged for about, I think, half of your hog production needs in the back half of the year. So maybe there was a bit of an expectation that you would have taken up the hog production profitability a bit more, but potentially the mark-to-markets and hedging are keeping that a bit conservative in the back half. Can you just touch on the dynamic in the quarter around the mark-to-market, how that hedging is impacting the second half, and again, whether that is the right way to think about potential conservatism into the back half in 2026 on hog production?

Label. As I mentioned before uh it really benefits, the structure that we have from our capabilities at the plants and also the uh the ability to uh I guess the redundancy that we have from a production standpoint. So even though we're faced with these higher raw material costs, we believe that we are well positioned to uh again continue to mitigate them as best as possible by sticking to our current strategy. Uh which shows that you know, we're certainly successful in uh the first half of this year.

Mark Hall: Yeah, sure, Peter. So during the second quarter, our average market hog selling price was flat year over year, and that is inclusive of the impacts of hedging. You compare that to the CME Lean Hog Index, which is up about 4% over the same time period. As you alluded to, we have a number of instruments that we utilize to mitigate risk, and not all of those qualify for hedge accounting. As a result, our second quarter results were impacted by $15 million with the mark-to-market adjustment that really related to positions that will materialize in the second half of the year. Under mark-to-market accounting rules, we are pulling those forward. They are not deferred in OCI like hedge accounting. Overall, the business is performing well, and that is really what has helped us to raise the outlook for the full year by that $50 million.

Great, thank. Thank you for that. Um, and just as a follow-up mark on, on the hog production side. I, I think if I did the math, right, based on the based on the 10, um, you're you're hedged for about, I think half of your hog production needs in the back half of the year. And so maybe there was a bit of an expectation that you would have, taken up the hog production profitability a bit more, but, but potentially that the mark to markets and and hedging our keeping that a bit conservative in the back half. So can you just touch on like the dynamic and the quarter around the mark to Market? How that hedging is impacting the second half and and again whether that that is the right way to think about potential conservatism into the back half and in 26, on our production,

Operator: Great. Thanks very much. Comes from Megan Clapp from Morgan Stanley. Please go ahead with your question.

Yeah, sure Peter. So during the second quarter, our average, um, Market hog selling price was flat here over here, and that is an inclusive of the impacts of hedging. So you compare that to the CME lean hog index, which is up about 4% over the same time, period. So, as you alluded to we have, we have a number of instruments that we utilize to mitigate risk and not all of those qualify for hedge accounting. So, as a result, our second quarter results were impacted by 15 million dollars, uh, with the mark to Market adjustment, that really related to, um, positions that will materialize in the second half of the year. So, under Mark tomarket accounting rules, we are pulling those forward, so they're not deferred in oci like like hedge accounting. So, you know, overall the business is performing well and and that's really what has raised the helped us to raise the outlook for the full year by that fifty million dollars.

Great. Thanks very much.

Analyst (Multiple: Megan Clapp, Leah Jordan, Heather Jones): Hi, good morning. Thanks so much. I wanted to just pick up with the answer there, Mark. Looking at the futures curve, it would seem to indicate that maybe you are tracking towards the higher end of that hog production guide, especially because those mark-to-market positions are going to materialize in the back half of the year. So it seems like more of a timing impact. Shane, I think you used the word "tempered" in a response earlier. So maybe we would just love to get your thoughts on why the range is still quite wide. So, you know, how you are thinking about looking relative to the futures curve and whether the high end is, you know, kind of more likely at this point. Thank you.

Comes from Megan clap from Morgan Stanley, please. Go ahead with your question.

Hi, good morning. Thanks so much. I wanted to just pick up with the answer there, Mark. So,

Mark Hall: Yeah, I think that's a fair way to look at it, Megan, right now with where the futures curve is right now. The range is still the $100 million that we quoted at the beginning of the year, but we did raise that by $50. But I'd say it leans towards the higher end.

Looking at the Futures curve. It, it does, it would seem to indicate that maybe you are tracking towards the higher end of that, hog production guide, um, especially because those those Mark to Market, uh, positions are going to materialize in the back half of the year. So seems like more of a timing impact. Um, you know, Shane, I think you used the word tempered in a response earlier so maybe it would just love to get your thoughts on, you know, the why the range is still quite wide. So you know how how you're thinking about um, looking relative to the future's curve. And and whether the high end is, you know, kind of more likely at this point. Thank you.

Yeah, I think that's a, that's a fair way to look at it Megan right now with, uh, with where the Futures curve is right now. Um, you know the the range is is still the 100 million that that we had quoted at the beginning of the year, but we did raise that by 50, but I'd say it it leans towards the higher end.

Analyst (Multiple: Megan Clapp, Leah Jordan, Heather Jones): Okay, great. That is clear and helpful. Then maybe just a follow-up as well on Packaged Meats. Shane Smith, I think in your prepared remarks, you said you expect volumes to be up 1% for the year. The first half came in flattish. I think if I am doing my math correctly, I think you talked about still some consumer spending uncertainty. So maybe you could just talk about what is underpinning what seems to be an acceleration in volume performance in the second half of the year in Packaged Meats. Thanks.

Prepared remarks. You said you accept volumes to be up 1% for the year? The first half came in flattish. I think if I'm doing my math correctly, you know, I think you talked about still some consumer, uh, spending uncertainties. So maybe you could just talk about what's underpinning, what, what seems to be an acceleration and and volume performance in the second half of the year and packaged me? Thanks.

Shane Smith: Steve, do you want to talk too?

Steve France: Sure. Yeah, so obviously, we have, when you think about Q2 and where we ended up on a volume perspective, volume was up that 4.5%. I believe the 1% you are talking about is Mark Hall's reference. If you exclude the impact of seasonal hams, that volume would have been up that 1%. When we look at really the remainder of the year, we are confident in, if you think about what I just kind of walked through with the strategy of Packaged Meats and sticking to that strategy, really leveraging our brands and also the pricing strategy, the mix optimization, innovation plays a big key of that. We have new innovative items that will be rolling out this back half of the year. Some have just gotten into the marketplace.

Thank you want to talk to you, sir.

Steve France: When you take all those things into account, that certainly helps us from a volume perspective that we are referencing and talking about for the remainder of the year. The other big piece is on the food service side of the business. We have seen very good success, not only in the first half, but also in Q2 when we come to food service. If you look at some of the information that was reported, our food service sales were up 9.5% in Q2. We look to continue that momentum that we have seen on the food service side of the business. We do believe, if you think about the food service industry as a whole, we believe we are outperforming the industry within our categories.

Yeah, so, uh, obviously, you know, we have, uh, when you think about Q2 and where we ended up on a volume perspective, so volume was up that 4.5%. I believe the 1% you're talking about is Mark's reference. If you exclude the impact of seasonal hands, that volume would have been up that 1%. So when we look at, uh, really the remainder of the year, we're confident in, you know, if you think about what I just kind of walked through, with the strategy of package needs, and sticking to that strategy, uh, really leveraging our brands and also the pricing strategy, uh, the mix optimization, uh, innovation plays a big key event. So, we have, uh, new innovative items that will be rolling out this back half of the year; some have just gotten into the marketplace. Uh, so when you take all those things into account, that certainly helps us from a volume perspective that, uh, that we're referencing and talking about for the remaining of the year. Uh, the other big piece is on the food service side of the business. So we have seen, uh, uh, very.

Steve France: When you think about food service, our growth is really being fueled by product innovation, and our focus is on convenience and also on-trend flavors. A core pillar of our food service innovation really provides easy-to-use, precooked solutions for food service operators. The benefit that they have is obviously the high labor costs, and the products that we can provide help mitigate some of those labor costs by providing them precooked proteins. It also provides them the ability to provide a consistent product to their consumers. A great example of that is this year we rolled out a ready-to-eat roasted bacon, and the sales that we have seen, not only in Q2, but also year to date, have far exceeded our original expectations. By the end of the year, it will probably triple the original projections we had for that category.

Of success. Uh, not only in the first half but also, in Q2 when it looked, when we come to food service. So if you look at, uh, some of the information that was reported our food service sales were up 9 and a half percent, uh, in Q2 and we looked to continue the kind of that momentum that we've seen on The Food Service side of business. So we do believe. So if you think about food service industry as a whole, we believe we are outperforming, uh, the industry within our categories. And when you think about food service, our growth is really being fueled by product Innovation, and our focus is on convenience, and also on Trend flavors. So a core pillar of our food service Innovation. We only provides easy to use pre-cooked solutions for Food, Service, operators, uh, and the benefit that they have is obviously the high labor costs, and the products that we can provide helps mitigate some of those labor costs, by providing them pre-cooked proteins, and it also provides them the ability to provide a consistent.

Steve France: We are very excited about not only where we are today, but also where we are heading on the retail side of the business and also on the food service side of the business to grow that volume.

Product to their consumers. Uh and a great example of that is this year we rolled out a ready to eat. Roasted bacon. And the sales that we have seen not only in Q2 but also the year of date had far exceeded that our original expectations. So by the end of the year they'll probably triple uh the original projections, we have for that category. So we're very excited about uh not only where we are today but also where we're heading on the retail side of the business and also on the Food Service,

Analyst (Multiple: Megan Clapp, Leah Jordan, Heather Jones): Got it. Thanks, Steve.

The business to grow that volume.

Got it, thanks.

Operator: Our next question comes from Leah Jordan from Goldman Sachs. Please go ahead with your question.

Our next question comes from Lee Jordan from Goldman Sachs. Please go ahead with your question.

Analyst (Multiple: Megan Clapp, Leah Jordan, Heather Jones): Thank you. Good morning. First, seeing if you could comp what you are seeing across the competitive environment for Packaged Meats. How has your promotional activity tracked versus planned, or has anything changed with how consumers are responding over the past few months, given you highlighted cautious consumer spending? Thank you.

Steve France: Sure. I appreciate the question. First, I would start out by saying, I think that we have probably a best-in-class Packaged Meats team. I am really thrilled and proud of the way the team has worked together to really maximize the ROI that we have when it comes to trade spending. When I think about trade spending and what we are seeing, not only the way we are handling trade spending, especially in light of escalated raw material markets, but also what we are seeing from the marketplace. My viewpoint is, really taking volume or growing volume based on price is definitely not a winning strategy. We are focused on improving our quality merchandising and really going for quality versus unprofitable quantity, which is different than what we are seeing from others in the industry.

Thank you. Good morning. Um, first thing, if you could call what you're seeing across the competitive environment for packaged meat, you know, how has your promotional activity tracked versus plan or has anything changed with how consumers are responding over the past few months giving you highlighted um cautious consumer spending, thank you.

Sure, I know, I appreciate the question. So first, I'd start out by saying, you know, I think that we have probably a best-in-class package from each team, and I'm really thrilled and proud of the way the team has worked together to really maximize the ROI that we have when it comes to trade spending. So, when I think about...

Trade spending. And what we're seeing, not only the way we're handling trade spending, especially in light of escalated, raw material markets but also what we're seeing from the marketplace.

Steve France: We are really optimizing the effectiveness of our spend by increasing the promoted volume sold as feature and display. When you think about feature and display, we have actually increased our feature and display activity by 200 basis points when you look at our performance in Q2 this year versus last year. When we think about feature and display, it is a great way to really bring lapse fires back to categories, and it also keeps our brands top of mind. The execution that we have had with our promotional strategy and what we are seeing in the marketplace, that is one of the things that is driving really our industry-leading profit margin that we just delivered of that 14.2%.

So you know, my viewpoint is that really taking volume or growing volume based on price is definitely not a winning strategy. So we are focused on improving our quality merchandising and really going for quality versus unprofitable quantity, which is different from what we're seeing from others in the industry. We are really optimizing the effectiveness of our spend by in.

Promotional strategy and what we're seeing in the marketplace, uh, that's one of the things that's driving really our industry-leading profit margin, uh, that we just delivered of 14.2%.

Analyst (Multiple: Megan Clapp, Leah Jordan, Heather Jones): Thank you. That's very helpful. I just wanted to follow up around the value-added shift. That's been a big initiative for you guys. It sounded like you had constructive comments around lunch meat and dry sausage today. Could you comment on how the magnitude of that shift toward value-added has evolved throughout this year, just given the dynamic consumer backdrop and perhaps how you're thinking it could change in the back half? Given what you're seeing on the demand side for those products, how are you thinking about potential incremental needs for more capacity over the next few years as well? Thank you.

Thank you, that's very helpful. Um I just wanted to follow up around the value, added shift. I mean that's been a big Initiative for you guys. It sounded like you had constructive comments around uh, lunch meat and dry sausage today. Um, just could you comment on how the magnitude of that shift toward value, added has evolved throughout this year, just giving the dynamic consumer backdrop and and perhaps how you're thinking it could change in the back half and then just given what you're seeing on the demand side for those products. Just, um, how are you thinking about potential incremental needs for for more capacity over the next few years as well? Thank you.

Steve France: Yeah, so it's a great question. I would say that's one of the key things to the success that we've been seeing so far this year. It's been a major initiative over the last couple of years to really shift our focus from commodity-based items, as Shane Smith had walked through that example, when you think about seasonal hams and the number of units that we can sell when you look at seasonal hams, and then taking that seasonal ham and converting that into a value-added convenient ham, you know, pre-sliced or quarter hams that's easier to use, more of a year-round item for that consumer. Obviously, we sell a tremendous number of units compared to, you know, one or two seasonal hams throughout the year. We've seen really a great amount of consumer acceptance as we've made that change.

Yeah, so it's a great question and I would say that's uh, 1 of the key things to, uh, really the success that we've been seeing so far this year. So it's been a major initiative over the last couple of years to really shift, our Focus from commodity based items and Shane had kind of walked through that example, when you think about seasonal hands and the number of units that we can sell, when you look at seasonal hands and then taking that seasonal, ham and converting that into a value added, uh, convenient ham, you know, pre-sales or quarter. Damn, that easier to use more of a year, round item. For that consumer. Obviously, you can sell a tremendous number of huge,

Units compared to, you know, 1 or 2 seasonal amps throughout the year. And we've seen that, uh,

Steve France: So those ham items that we've converted to are actually a net weight item now versus random weight. We've actually seen, so you think about the potential volume impact of making that change because it is a smaller size item, but we've actually been able to grow that volume substantially because of the consumer acceptance and the ease for that retailer to actually market those items. So it's been a big win within that category. You asked the question on capacity. That is one thing that we look at. As we look at our capital spend for Packaged Meats, a big piece of that is really on the investments we're going to make from a capacity standpoint to really focus on these value-added categories, such as the conversion of commodity items into value-added items.

Really a great amount of consumer acceptance, uh, as we've made that change. So those those ham items. Uh, that we've converted to, uh, are actually a net weight item Now versus random way and we've actually seen. So you think about the potential volume impact of making that change because it is a smaller sized item. But we've actually been able to grow that volume substantially because of the consumer acceptance and the ease for that retailer to actually Market those items. So it's been a big win within that category. So, you know it

Steve France: That is a big focus that we continue to see kind of that winning strategy take effect in our overall results.

Shane Smith: Yeah, the only thing I would add, Lee, and to add on to Steve's point, you and Mark talked about it in his comments, that is, you know, 50% of our CapEx is looked at top and bottom line growth. Packaged meats capacity in key categories, higher margin categories, is absolutely where we're looking to invest our money. The other thing I would say is that our relationships with our customers have really changed over the last few years, where now we're talking to them about not just quantity and or volume and price, we're talking about what's next. That gives us insight into where they see the market going, where we see the market going, and gives us the ability to make sure we're using our capital dollars where we need to.

You you asked the question on uh, you know capacity so that is 1 thing that we look at and as we look at our Capital, spend for package. We it's a big piece of that is really on, uh, you know, the Investments we're going to make from a capacity standpoint to really focus on these value added categories uh such as the conversion of commodity items into value added items. And that is a big Focus that we can continue to see uh kind of that winning strategy. Take effect in our overall results.

Yeah, the only thing I would add lid and to add on to Steve's point you and Mark talked about it in in this comments. So that is, you know, 50% of our capex has looked at top and bottom line growth and, uh, package meets capacity and key categories. Higher margin categories is absolutely, uh, where we're looking to invest our our money. Uh, the, uh, the other thing I would say is that our relationships with our customers.

Customers have really changed over the last few years where now we're talking to them about. Not just

Shane Smith: That's how we're kind of thinking about this from a capacity standpoint, is staying ahead of demand so we're not reacting to a need too late.

Quantity and, or, or volume and price. We're talking about what's next and, so that gives us insight into where they see the market going, where we see the market going and gives us the, uh, the ability, uh, to make sure we're using our Capital dollars where we need to. Um, so, you know, that's how we're kind of thinking about this, from a capacity, standpoint is staying ahead of demand. So we're not reacting to a need, uh, to wait.

Analyst (Multiple: Megan Clapp, Leah Jordan, Heather Jones): Thank you.

Thank you.

Operator: Once again, if you would like to ask a question, please press star then one. To withdraw your question, you may press star and two. Our next question comes from Heather Jones from Heather Jones Research. Please go ahead with your question.

Once again, if you would like to ask a question, please press star and then 1 to withdraw your questions. You may press star and 2.

Our next question comes from Heather Jones from Heather Jones Research. Please go ahead with your question.

Analyst (Multiple: Megan Clapp, Leah Jordan, Heather Jones): Thank you for the question. I wanted to start with Packaged Meats. I was wondering if you could give us a sense of how you are expecting the cadence of the second half to play out, given the cost inflation you mentioned in bellies and all that has picked up, accelerated in late June into July. How we should think about the second half playing out there.

Question.

Um, I want to start with packaged meats and was wondering if you could give us a sense of how you're expecting the cadence of the second half to play out. Um,

Given the cost inflation, you mentioned in bellies and all that is, um,

picked up accelerated, and you know, late June into July, and just how we... So how we should think about the second half playing out there.

Steve France: Yeah, so similar to what I have talked about, I think we had the right strategies in place to, you know, minimize the overall, I guess as best we can, the impact to the higher raw material markets that we are faced with. But as you can see through the first half of the year, this strategy has been working. At this point, our, I would say our outlook for 2025 really reflects our best view of the business as we see it today. So it was really guided Packaged Meats to the profit margin of that market reference of $1,000,005 up to $1,000,105. We believe that that really represents a healthy level of profitability in the face of a cautious consumer and the current spending environment that we are faced with, not only on the retail side of the business, but also the food service side of the business.

Shane Smith: Yeah, the only thing I would add there, Heather, is, and Steve touched on this a little earlier. Consumers are looking to add protein to their diets, and we believe that pork, when you look at it relative to beef and chicken, is a great value. We know consumers are looking for value, and that plays into where we believe we are better positioned than most of the companies due to our product portfolio. Steve mentioned having offerings at all of the value chain, plus into the private label categories. I really believe that we are better positioned to meet consumers wherever they are along the value chain.

Uh, we believe that this really represents a healthy level of profitability in the face of a cautious consumer and the current spending environment that we're faced with, not only on the retail side of the business but also the food service side of the business.

Mark Hall: Yeah, the only thing I would add, and I noticed that seasonally, the third quarter is typically a little softer than the fourth quarter because of the two holidays in the fourth quarter.

The only thing I would add their Heather is and Steve touched on this a little earlier. Uh you know, consumers are looking at protein to their diets and and we believe that for when you look at it relative to to beef and chicken, uh, is a great value and we know uh consumers are looking for value and and that plays into where, we believe we're better positioned than most of the companies do to our product portfolio. You know, Steve mentioned having, uh, offerings that all of the value chain, uh, plus into the private label categories. And so, I, I really believe that we're better positioned to meet consumers wherever they are along the value chain.

Analyst (Multiple: Megan Clapp, Leah Jordan, Heather Jones): My concern was, you all had mentioned you had the price pass-through mechanisms, and I just did not know, given what bellies have done, if there was a delay that would make the softer seasonality even more pronounced this year for Q3 versus Q4. But it sounds like that is not the case. Moving on to Hog Production, and I hate to belabor the point, but looking at you all's guide, it applies close to $15 ahead for the back half and getting back some of the mark-to-market hit in the first half. You know, you all have your productivity initiatives that are giving you an additional tailwind to market tailwinds. I was just wondering, is there potential for further upside to that?

Yeah, the only thing I would add, however, is that seasonally, the third quarter is typically a little softer than the fourth quarter because of the two days in the fourth quarter.

Yeah, my concern was that you all had mentioned you had the price-passing mechanisms, and I just didn't know, given what bellies have done, if there was a delay that would make...

The softer seasonality even more pronounced this year for Q3 versus Q4, but it, it sounds like that's not the case. Um, moving on to talk production and I, I hate to belabor the point but looking at y'all's, um, guide it applies close to $15 ahead for the back half, and getting back some of the mark-to-market head. Hit in the first half.

and, you know,

y'all have your

Productivity initiatives that are giving you an additional tailwind to market, um, market tailwinds. And so, just wondering, um.

Analyst (Multiple: Megan Clapp, Leah Jordan, Heather Jones): Are you baking in some conservatism because of the portion you do not have hedged just to be conservative on that front, or just help us to think about that? Because it is a very strong year, but it does seem like a conservative outlook given what we see in the industry. Any help you could provide on that front would be awesome. Thank you.

Is there potential for further upside to that? Are you baking in some conservatism? Because the portion you don't have hedged, just to be conservative on that front, or just help us think about that? Because it's a very strong year.

Shane Smith: Yeah, Heather, I would say, as Mark mentioned earlier, we do anticipate, based on what we see today, being at the higher end of the range. I would say there probably is some conservatism baked in as we continue to get clearer visibility, particularly into Q4. I think as we come back a little later in the year, we will have a much, we will be able to offer you some additional details. But I would say, as Mark said, we are looking toward the higher end of that range.

But it does seem like a conservative Outlook given what we see in the uh see in the industry. So just any any help you can provide on that front would be awesome. Thank you.

Yeah, Heather. I would say, as Mark mentioned earlier, we do anticipate, based on what we see today, being at the higher end of the range. I would say there probably is some conservatism baked in as we continue to get clear visibility, particularly into Q4. I think, as we come back a little later in the year, we'll have a much clearer picture.

Uh, we'll be able to offer you some additional details, but I would say, uh, as Mark said, uh, we're looking toward the higher end of that range.

Analyst (Multiple: Megan Clapp, Leah Jordan, Heather Jones): Okay, thank you so much.

Okay, thank you so much.

Operator: We do have an additional question from Manav Gupta from UBS. Please go ahead with your question.

Manav Gupta: My first quick question is, obviously, when we look at slide seven, you are number one and number two in most categories. I just wanted to understand if you are also looking to increase your market share in uncooked breakfast sausage and uncooked dinner sausage, or those are not the focus areas at this point in time.

And we do have an additional question from Manav Gupta from UBS. Please, go ahead with your question.

I'm a first quick. The question is obviously, when we look at slide 7, you are number one and number two in invoice categories. I just wanted to understand if you're also looking to increase your market share in, quote, breakfast sausage and uncooked dinner sausage. Or are those not the focus areas at this point in time?

Steve France: I would say the quick answer is yes, they are. It is certainly a focus that we have. Part of it is looking at the categories, and also, obviously, different categories have different profitabilities. We try and stay focused on the higher profitability categories, and the categories you are referencing are slightly lower. Even though it is still a focus for the company, there are better opportunities for us to spend time on at this point.

Well, so I would say the quick answer is yes, they are certainly focused uh that we have and you know part of it is looking at the categories and also uh obviously different categories have different profitability. Uh so we try and stay focused on the higher profitable, uh, profitability categories, and the categories you're referencing are slightly lower. So even though it's still a focus for the company, uh, there's uh, better opportunities for us to spend time on at this point.

Manav Gupta: Thank you. My quick follow-up here is, obviously, your first half and second half look alike, but between the third and the fourth quarter, should there be any kind of seasonality, or should we kind of think of both those quarters to be contributing similar amounts to earnings, or would you think one would be relatively stronger than the other one? Thank you.

Thank you. And my quick followup here is obviously your first half and second half look alike, but between the third and the fourth quarter, uh, it should, there be any kind of, you know, seasonality or should be kind of think of both those quarters to be contributing similar amounts to earnings or or would you think 1 would be relatively stronger than the other 1? Thank you.

Steve France: As Mark Hall had just referenced, the big difference between Q3 and Q4 is Q4, Smithfield Foods ships a lot more seasonal hams. There is always going to be more volume shift in Q4. Q3 is typically slightly lower from a profitability standpoint. It is lower just because of the items that are being sold during that timeframe versus the seasonal items that will be sold in Q4.

What kind of is uh Market just referenced you, a big difference between Q3 and Q4 is Q4. We ship a lot more seasonal hands. So, you know, there's always going to be more volume shift in Q4 Q3 is typically a slightly lower from a profitability standpoint, uh, and it's lower, uh, just because of the items that are being sold during that time frame versus, uh, you know, the seasonal items, uh, that will be sold in Q4, uh,

Manav Gupta: Thank you so much.

Thank you so much.

Operator: Ladies and gentlemen, with that, we will conclude today's question and answer session. I would like to turn the floor back over to the President and CEO, Shane Smith, before closing remarks.

Shane Smith: Okay, thanks to everyone who joined our call today. We are pleased with our first half performance and believe we are well positioned to deliver long-term growth and increase value for our shareholders, even in a challenging environment. We look forward to updating you on our progress following our third quarter results. Thank you.

I would like to turn the floor back over to the President and CEO, Shane Smith, for closing remarks.

Hey, thanks to everyone who joined our call today. We are pleased with our first-half performance and believe we're well positioned to deliver long-term growth and increase value for our shareholders, even in a challenging environment. We look forward to updating you on our progress following our third quarter results. Thank you.

Operator: With that, ladies and gentlemen, we will conclude today's conference call and presentation. We thank you for joining. You may now disconnect your lines.

And with that, ladies and gentlemen, we will conclude today's conference call and presentation. We thank you for joining; you may now disconnect your lines.