Q1 2026 Cal-Maine Foods Inc Earnings Call

Sherman Miller: Good morning, everyone, and welcome to the Cal-Maine Foods' first quarter fiscal 2026 earnings conference call. All participants are in a listen-only mode. After today's prepared remarks, there will be a question and answer session. At that time, I will provide instructions for those wishing to ask a question. Please note this call is being recorded. I will now turn the call over to Sherman Miller, President and Chief Executive Officer of Cal-Maine Foods. Please go ahead.

Speaker #2: Good morning, everyone, and welcome to the Cal-Maine Foods first-quarter fiscal 2026 earnings conference call. All participants are in a listen-only mode. After today's prepared remarks, there will be a question-and-answer session.

Speaker #2: At that time, I will provide instructions for those wishing to ask a question. Please note, this call is being recorded. I will now turn the call over to Sherman Miller, President and Chief Executive Officer of Cal-Maine Foods.

Speaker #2: Please go ahead.

Max Bowman: Good morning, and thank you for joining us today. We appreciate your interest in Cal-Maine Foods and the opportunity to share our results and outlook. This is an important milestone for us as it marks our first-ever earnings call. It's an important part of our commitment to a more robust investor relations strategy aimed at increasing visibility into the institutional investment community and providing stakeholders with increased transparency into our business. Before we begin, I want to remind everyone that today's remarks may include forward-looking statements. These are based on management's current expectations and are subject to risk and uncertainties described in our SEC filings. I want to start the call today with an expression of humbleness and gratitude. I'm humbled each morning in realizing the dedication and strength of our Cal-Maine family.

Speaker #3: Good morning, and thank you for joining us today. We appreciate your interest in Cal-Maine Foods and the opportunity to share our results and outlook.

Speaker #3: This is an important milestone for us as it marks our first-ever earnings call. It's an important part of our commitment to a more robust investor relations strategy aimed at increasing visibility into the institutional investment community and providing stakeholders with increased transparency into our business.

Speaker #3: Before we begin, I want to remind everyone that today's remarks may include forward-looking statements. These are based on management's current expectations and are subject to risks and uncertainties described in our SEC filings.

Speaker #3: I want to start the call today with an expression of humbleness and gratitude. I'm humbled each morning and realize the dedication and strength of our Cal-Maine family.

Max Bowman: I'm truly grateful to have the opportunity to represent each and every one of them on this call today. I'd like to recognize a few folks who have been a huge part of building the Cal-Maine foundation, which is the platform that we operate from today. Cal-Maine has always been about people, our over 4,000 employees, our customers, our communities, and our shareholders. Every day, our team demonstrates the discipline, accountability, and frugalness that have defined this company from the very beginning. We stand on the shoulders of our founder, Fred Adams, and leaders like Dolph Baker, who remains an important guy, his Board Chair. Also, there is a long list that have mentored both me and our management team as a whole.

Speaker #3: I'm truly grateful to have the opportunity to represent each and every one of them on this call today. I'd like to recognize a few folks that have been a huge part of building the Cal-Maine Foundation.

Speaker #3: Which is the platform that we operate from today? Cal-Maine has always been about people. Our over 4,000 employees, our customers, our communities, and our shareholders.

Speaker #3: Every day, our team demonstrates the discipline, accountability, and frugality that have defined this company from the very beginning. We stand on the shoulders of our founder, Fred Adams, and leaders like Dolph Baker, who remains an important guide as our board chair.

Speaker #3: Also, there is a long list that I mentored both me and our management team as a whole. I'd like to name just a few.

Max Bowman: I'd like to name just a few: Steve Storm, Bob Scott, Jack Sell, David Jenkins, Mark Ashby, all previous Vice Presidents of Operations; Bobby Raines and Tim Dawson, previous CFOs; Jeff Hardin and Kim Paramore, both previous Vice Presidents of Sales; Ken Looper, former President; Joe White, former Vice President of Feed Mills; Charlie Collins and Mike Cassaberry, both former Controllers. There are many more to thank, but for the sake of time, I just want to say a very simple and humble thank you to all of our employees, both past and present. Each has contributed to building a strong foundation that is in place today. The cornerstones of that foundation are simple. We have broad scale, which provides us significant benefits.

Speaker #3: Steve Storm, Bob Scott, Jack Self, and David Jenkins, all previous Vice Presidents of Operations; Bobby Raines and Tim Dawson, previous CFOs; and Jeff Hardin and Kim Paramore, both previous Vice Presidents of Sales.

Speaker #3: Ken Looper, former President; Joe White, former Vice President of Feed Mills; Charlie Collins and Mike Cassaberry, both former Controllers. There are many more people to thank, but for the sake of time, I just want to say a very simple and humble thank you to all of our employees, both past and present.

Speaker #3: Each has contributed to building a strong foundation that is in place today. The cornerstones of that foundation are simple. We have broad scale, which provides us significant benefits.

Max Bowman: Our vertically integrated model allows us to manage every step of production, which keeps costs low, enables supply reliability, safeguards quality and food safety, and gives us the flexibility to optimize output. This is also a significant competitive advantage. Our culture, what we refer to as the Cal-Maine way, is one focused on operational excellence. We define operational excellence as an unwavering focus on the fundamentals. That means investing in modernization, embedding biosecurity, and applying the Cal-Maine way of accountability across our operations. With respect to biosecurity, we've invested more than $80 million in equipment, procedures, and training to safeguard flock health and mitigate the risk of highly pathogenic avian influenza since 2015. Unfortunately, high-path AI remains a reality for the industry. Financially, we're operating from a position of strength with a great balance sheet and enough cash to opportunistically pursue acquisitions in furtherance of our strategy.

Speaker #3: Our vertically integrated model allows us to manage every step of production, which keeps costs low, enables supply reliability, safeguards quality in food safety, and gives us the flexibility to optimize output.

Speaker #3: This is also a significant competitive advantage. Our culture, what we refer to as the Cal-Maine way, is one focused on operational excellence. We define operational excellence as an unwavering focus on the fundamentals.

Speaker #3: That means investing in modernization, embedding biosecurity, and applying the Cal-Maine way of accountability across our operations. With respect to biosecurity, we've invested more than $80 million in equipment, procedures, and training to safeguard flock health and mitigate the risk of highly pathogenic avian influenza since 2015.

Speaker #3: Unfortunately, high-path AI remains a reality for the industry. Financially, we're operating from a position of strength with a great balance sheet and enough cash to opportunistically pursue acquisitions in furtherance of our strategy.

Max Bowman: Finally, as I mentioned, we have a fantastic team with significant depth and experience. Speaking of our team, I'd like to welcome Melanie Bolden and Kira Lombardo to Cal-Maine. Melanie, who joins our board of directors, has deep expertise in the food and beverage industry and nearly three decades of global business management, brand building, and experience at companies like Coca-Cola, Kraft, and most recently, Tyson. Kira was recently appointed as the company's first-ever Chief Strategy Officer. Like Melanie, Kira has significant experience working with consumer-facing companies. She will work with our senior leadership team to further accelerate and shape enterprise priorities, building on Cal-Maine Foods' leadership role in a rapidly changing marketplace.

Speaker #3: Finally, as I mentioned, we have a fantastic team with significant depth and experience. Speaking of our team, I'd like to welcome Melanie Boldin and Kira Lombardo to Cal-Maine.

Speaker #3: Melanie, who joins our board of directors, has deep expertise in the food and beverage industry and nearly three decades of global business management. Brand building and experience at companies like Coca-Cola, Kraft, and most recently Tyson.

Speaker #3: Kira was recently appointed as the company's first-ever Chief Strategy Officer. Like Melanie, Kira has significant experience working with consumer-facing companies. She will work with our senior leadership team to further accelerate and shape enterprise priorities.

Speaker #3: Building on Cal-Maine Foods' leadership role and our rapidly changing marketplace, our foundation and strong business momentum allowed us to deliver the strongest first quarter in our history. This also reflects the benefits of diversification.

Max Bowman: Our foundation and strong business momentum allowed us to deliver the strongest first quarter in our history and also reflects the benefits of diversification, the strength of our operations, and the progress we've made in positioning Cal-Maine for the future. Specifically, our results were driven by strong growth in specialty eggs and the expansion of our prepared foods platform, supported by solid performance in conventional eggs. Together, specialty eggs and prepared foods accounted for nearly 40% of net sales, underscoring their central role in Cal-Maine's strategy and long-term financial performance. These results show Cal-Maine advancing as a diversified, consumer-driven food company. Our conventional egg business continues to provide stability and scale, while specialty eggs and prepared foods are increasingly shaping the future of our portfolio. Specialty eggs and prepared foods are positioned as growth engines, shifting our mix toward higher value categories.

Speaker #3: The strength of our operations and the progress we've made in positioning Cal-Maine for the future. Specifically, our results were driven by strong growth in specialty eggs and the expansion of our prepared foods platform.

Speaker #3: Supported by solid performance in conventional eggs, together with specialty eggs and prepared foods accounted for nearly 40% of net sales, underscoring their central role in Cal-Maine's strategy and long-term financial performance.

Speaker #3: These results show Cal-Maine advancing as a diversified consumer-driven food company. Our conventional egg business continues to provide stability and scale, while specialty eggs and prepared foods are increasingly shaping the future of our portfolio.

Speaker #3: Specialty eggs and prepared foods are positioned as growth engines. Shifting our mix toward higher-value categories, and across it all, our vertical integration and financial strength ensure that we can execute with discipline and resilience.

Max Bowman: Across it all, our vertical integration and financial strength ensure that we can execute with discipline and resilience. With that, let me turn the call over to our Chief Financial Officer, Max Bowman, to drill down into our results for the quarter and discuss our capital allocation framework. Max?

Speaker #3: With that, let me turn the call over to our Chief Financial Officer, Max Bowman, to drill down into our results for the quarter and discuss our capital allocation framework.

Speaker #3: Max,

[Company Representative]: Thanks, Sherman, and good morning, everyone. Thanks for tuning into our first live earnings call. This is a new format to us and is part of an increased focus on our part to deliver increased transparency to all of our stakeholders. As a reminder, we published our earnings release and 10-Q this morning. Additionally, we have published a brief earnings presentation on our website. These documents contain detailed information on our financial results. I'll touch on the highlights for the first quarter of fiscal 2026. Net sales were $922.6 million, up 17.4% from $785.9 million last year. The increase was driven by an increase in shell egg sales and from contributions from our recent acquisitions in the prepared food space. Shell egg sales were $789.4 million, up 6.5%, driven by a 3.9% increase in net average selling price for shell eggs and a 7.5% increase in specialty egg sales volume.

Speaker #4: Thanks, Sherman. And good morning, everyone. Thanks for tuning into our first live earnings call. This is a new format for us and is part of an increased focus on our part to deliver increased transparency to all of our stakeholders.

Speaker #4: As a reminder, we've published our earnings release in our 10-Q this morning. Additionally, we have published a brief earnings presentation on our website. These documents contain detailed information on our financial results.

Speaker #4: I'll touch on the highlights for the first quarter of fiscal 2026. Net sales were $922.6 million, up 17.4% from $785.9 million last year. The increase was driven by an increase in shell egg sales and contributions from our recent acquisitions in the prepared food space.

Speaker #4: Shell egg sales were $789.4 million, up 6.5%, driven by a 3.9% increase in the net average selling price for shell eggs and a 7.5% increase in specialty egg sales volume.

[Company Representative]: Shell eggs represented 85.6% of total net sales. That's down 880 basis points from last year, as our portfolio mix diversified into prepared foods. Specialty eggs generated $283.5 million in sales, up 10%, with double-digit growth in cage-free and pasture-raised. Specialty eggs account for more than 30% of net sales. Conventional egg sales generated $505.9 million in sales, up 4%. Prepared foods delivered $83.9 million in sales, an increase of over 800%, with Echo Lake Foods contributing sales of $70.5 million. Prepared foods represented more than 9% of our net sales this quarter. This shift in mix demonstrates how specialty eggs and prepared foods are shaping our portfolio towards higher margin categories. Gross profit was $311.3 million, or 33.7% of net sales, up from $247.2 million, or 31.5% of net sales last year.

Speaker #4: Shell eggs represented 85.6% of total net sales, down 880 basis points from last year, as our portfolio mix diversified into prepared foods. Specialty eggs generated $283.5 million in sales, up 10%, with double-digit growth in cage-free and pasture-raised.

Speaker #4: Specialty eggs account for more than 30% of net sales. Conventional egg sales generated $505.9 million in sales, up 4%. Prepared foods delivered $83.9 million in sales, an increase of over 800%, with Echo Lake Foods contributing sales of $70.5 million.

Speaker #4: Prepared foods represented more than 9% of our net sales this quarter. This shift in mix demonstrates how specialty eggs and prepared foods are shaping our portfolio towards higher-margin categories.

Speaker #4: Gross profit was $311.3 million, or 33.7% of net sales, up from $247.2 million, or 31.5% of net sales last year. This nearly 26% improvement in gross profit was driven primarily by higher shell egg selling prices, growth in our specialty egg sales volume, lower feed costs, and contributions from prepared foods.

[Company Representative]: This nearly 26% improvement in gross profit was driven primarily by higher shell egg selling prices, growth in our specialty egg sales volume, lower feed costs, and contributions from prepared foods. Operating income was $249.2 million, or 27% of net sales, compared with $187 million, or 23.8% a year ago, a 320 basis point improvement. Net income was $199.3 million, or $4.12 per diluted share, up from $150 million, or $3.06 per diluted share last year. These improvements were driven by higher average selling prices for shell eggs and the incremental contributions from prepared foods. Turning to cost and expenses, our feed costs were actually a source of support this quarter. On a per-dozen basis, feed costs decreased about 4% year over year, driven primarily by lower soybean meal prices. That reduction translated into roughly $6 million in savings in cost of sales.

Speaker #4: Operating income was $249.2 million, or 27% of net sales, compared with $187 million, or 23.8%, a year ago. This represents a 320 basis point improvement. Net income was $199.3 million, or $4.12 per diluted share, up from $150 million, or $3.06 per diluted share last year.

Speaker #4: These improvements were driven by higher average selling prices for shell eggs and the incremental contributions from prepared foods. Turning to costs and expenses, our feed costs were actually a source of support this quarter.

Speaker #4: On a per dozen basis, feed costs decreased about 4% year over year, driven primarily by lower soybean and mill prices. That reduction translated into roughly $6,000,000 in savings in the cost of sales.

[Company Representative]: SG&A expenses increased modestly, up about 12% from the prior year. This was largely tied to higher sales volumes and the integration of Echo Lake Foods, which drove higher delivery expense and other overhead. Marketing was essentially unchanged. Importantly, these added SG&A costs are directly supporting growth in both shell eggs and prepared foods. In fact, SG&A as a percentage of sales decreased slightly from the prior year. On the production side, capacity expansion and rebuild post-HPAI is also supporting our growth. Breeder flocks increased 46%, chicks hatched were up 77%, and the average number of layer hens rose 10%. We sold 2.5% more dozens year over year, with specialty dozens increasing 7.5%. Our growth is not only driven by pricing but also by real volume expansion supported by long-term investments in our capacity. We continue to see tangible benefits from our modernization initiatives and inline facilities.

Speaker #4: SG&A expenses increased modestly, up about 12% from the prior year. This was largely tied to higher sales volumes and the integration of Echo Lake Foods, which drove higher delivery expenses and other overhead.

Speaker #4: Marking was essentially unchanged; and, importantly, these added SG&A costs are directly supporting growth in both shell eggs and prepared foods. In fact, SG&A as a percentage of sales decreased slightly from the prior year.

Speaker #4: On the production side, capacity expansion and rebuild post-HPAI is also supporting our growth. Breeder flocks increased 46%, chicks hatched were up 77%, and the average number of layer hens rose 10%.

Speaker #4: We sold 2.5% more dozens year over year, with specialty dozens increasing 7.5%. Our growth is not only driven by pricing but also by real volume expansion, supported by long-term investments in our capacity.

Speaker #4: We continue to see tangible benefits from our modernization initiatives and in-line facilities. These investments enhance yields, improve our productivity, and reinforce our low-cost positioning.

[Company Representative]: These investments enhance yields, improve our productivity, and reinforce our low-cost positioning. The Cal-Maine way, embedding best practices and process innovation, remains central to our ability to operate efficiently. Operating cash flow was very strong at $278.6 million, more than double last year's level of $117.5 million. We ended the quarter with $252 million in cash and equivalents and $1 billion in investments, and we remain virtually debt-free. Our capital allocation approach is centered on maximizing total shareholder return, and we view it through five lenses. First, our dividends. Consistent with our standing dividend policy, we will pay a dividend of $1.37 per share, payable November 13th to shareholders of record on October 29th. Second, share repurchases. We plan to take an opportunistic approach to share repurchases, guided by our broader commitment to disciplined capital deployment.

Speaker #4: The Cal-Maine way of embedding best practices and process innovation remains central to our ability to operate efficiently. Operating cash flow was very strong at $278.6 million, more than double last year's level of $117.5 million.

Speaker #4: We ended the quarter with $252 million in cash and equivalents and $1 billion in investments. We remain virtually debt-free. Our capital allocation approach is centered on maximizing total shareholder return, and we view it through five lenses.

Speaker #4: First, our dividends. Consistent with our standing dividend policy, we will pay a dividend of $1.37 per share, payable November 13th to shareholders of record on October 29th.

Speaker #4: Second, share repurchases. We plan to take an opportunistic approach to share repurchases, guided by our broader commitment to disciplined capital deployment. Depending on circumstances, we may use different methods to execute buybacks, such as open market purchases, accelerated programs, or pre-arranged trading plans.

[Company Representative]: Depending on circumstances, we may use different methods to execute buybacks, such as open market purchases, accelerated programs, or prearranged trading plans. Third, earnings per share growth. This is supported by disciplined reinvestment in our business, particularly in modernization, margin expansion initiatives, and efficiency programs. Four, M&A. We are focused on related areas, geographic expansion, and opportunities that meet strict financial return thresholds while strengthening our supply position. Prepared foods is a great example of this, where the best investment is in ourselves and the fast-growing subcategories we are building. Finally, multiple expansion. Over time, as we shift our mix and deliver higher quality, more predictable earnings, we believe Cal-Maine Foods will be positioned for a valuation that reflects that improvement. In short, our strong cash generation allows us to fund growth, support our dividend, be opportunistic on repurchases, and pursue disciplined M&A.

Speaker #4: Third, earnings per share growth. This is supported by disciplined reinvestment in our business, particularly in modernization, margin expansion initiatives, and efficiency programs. Fourth, M&A.

Speaker #4: We are focused on related areas, geographic expansion, and opportunities that meet strict financial return thresholds while strengthening our supply position. Prepared foods is a great example of this.

Speaker #4: We're the best investments in ourselves and the fast-growing subcategories we are building. And finally, multiple expansion. Over time, as we shift our mix and deliver higher quality, more predictable earnings, we believe Cal-Maine Foods will be positioned for evaluation that reflects that improvement.

Speaker #4: In short, our strong cash generation allows us to fund growth, support our dividend, be opportunistic on repurchases, and pursue disciplined M&A. In turn, these actions create even more cash flow for future deployment.

[Company Representative]: In turn, these actions create even more cash flow for future deployment. That concludes my review of the financial results. I will now turn it back to Sherman for additional commentary on where we're going strategically.

Speaker #4: That concludes my review of the financial results. I'll now turn the call back to Sherman for additional commentary on where we're going strategically.

Max Bowman: Thanks, Max. Let me close by reinforcing a few themes. Cal-Maine Foods is the largest egg producer in the U.S., with significant scale and vertical integration that delivers efficiency, lower costs, and supply reliability. Scale alone is not enough. Consumers are demanding more choice, more convenience, and more protein-rich foods. Our mission is to meet that demand with a diversified portfolio that ranges from conventional eggs to specialty eggs and increasingly into prepared foods. Specialty eggs and prepared foods are not promises for tomorrow. They're delivering today. Over time, we expect them to continue to improve the quality of our earnings and lead to margin expansion. We're executing a strategy to create a stronger, more predictable Cal-Maine Foods. That strategy, of course, has a strong M&A component embedded in it, supported by a robust pipeline of disciplined and creative opportunities.

Speaker #3: Thanks, Max. Let me close by reinforcing a few things. Cal-Maine is the largest egg producer in the United States, with significant scale and vertical integration that delivers efficiency, lower cost, and supply reliability.

Speaker #3: But scale alone is not enough. Consumers are demanding more choice, more convenience, and more protein-rich foods. Our mission is to meet that demand with a diversified portfolio that ranges from conventional eggs to specialty eggs and increasingly into prepared foods.

Speaker #3: Specialty eggs and prepared foods are not promises for tomorrow; they are delivering today. Over time, we expect them to continue to improve the quality of our earnings and lead to margin expansion.

Speaker #3: We're executing a strategy to create a stronger, more predictable Cal-Maine. That strategy, of course, has a strong M&A component embedded in it, supported by our robust pipeline of discipline and creative opportunities.

Max Bowman: Echo Lake Foods is a great example of how we're executing. Since the acquisition in June, utilization has ramped quickly, and we are on track to exceed every financial and operational expectation we set forth at the time of the acquisition. We've already approved a new $14.8 million investment in a high-speed pancake production line at our Burlington, Wisconsin facility, which will expand capacity, add automation, and improve packaging to capture accelerating customer demand. Projects like this will increase efficiency and scale, and they demonstrate our approach to disciplined investments in extensions and subcategories with attractive returns supported by strong consumer demand. We're becoming a house of brands from Egg-Land's Best, Land O'Lakes, Farmhouse Eggs, 4Grain, Sunups, MeadowCreek Foods to Crepini, reaching consumers across national, regional, and private label programs.

Speaker #3: Echo Lake is a great example of how we're executing. Since the acquisition in June, utilization has ramped quickly, and we are on track to exceed every financial and operational expectation we set forth at the time of the acquisition.

Speaker #3: We've already approved a new $14.8 million investment in a high-speed pancake production line at our Burlington, Wisconsin facility. This expansion will increase capacity, add automation, and improve packaging to capture accelerating customer demand.

Speaker #3: Projects like this will increase efficiency and scale, and they demonstrate our approach to disciplined investments and extensions and subcategories with attractive returns supported by strong consumer demand.

Speaker #3: We're becoming a house of brands. From Eglin's Pass, Land O' Lakes, Farmhouse Eggs, Four Grains, Sun Up, Sunny Meadow, Meadow Creek Foods, and Sticker Peanie, we are reaching consumers across national, regional, and private label programs.

Max Bowman: We account for roughly half of all Egg-Land's Best sales, which remains the number one brand of specialty eggs in the U.S. Our scale, vertical integration, and financial discipline provide a strong foundation, while specialty eggs and prepared foods are proven growth engines delivering higher quality, more consistent earnings. Together, these strengths make Cal-Maine Foods a compelling combination of both value and growth in today's food sector. At the same time, our mission is clear. We provide one of the most nutrient-dense, affordable sources of protein available. That matters today more than ever. Eggs are purchased by 97% of U.S. households and remain one of the lowest cost sources of high-quality protein. Consumers are eating more protein overall, with high-protein diets ranking as the most common eating pattern for the third consecutive year. Eggs fit squarely into that trend because they are fresh, versatile, and cost-effective.

Speaker #3: We account for roughly half of all Eglin's Pass sales, which remains the number one brand of specialty eggs in the United States. Our scale, vertical integration, and financial discipline provide a strong foundation, while specialty eggs and prepared foods are proven growth engines delivering higher quality, more consistent earnings.

Speaker #3: Together, these strengths make Cal-Maine a compelling combination of both value and growth in today's food sector. At the same time, our mission is clear.

Speaker #3: We provide one of the most nutrient-dense, affordable sources of protein available. That matters today more than ever. Eggs are purchased by 97% of U.S. households.

Speaker #3: Households continue to view eggs as one of the lowest-cost sources of high-quality protein. Consumers are eating more protein overall, with high-protein diets ranking as the most common eating pattern for the third consecutive year.

Speaker #3: Eggs fit squarely into that trend because they are fresh, versatile, and cost-effective. Specialty formats and ready-to-eat products extend that value proposition, giving people more ways to include eggs in their diets.

Max Bowman: Specialty formats and ready-to-eat products extend that value proposition, giving people more ways to include eggs in their diets. This is not just about chasing trends, it's about meeting fundamental needs for nutrition, affordability, and value in the American diet. Looking forward, our strategy is clear. We will, number one, expand specialty and prepared foods, number two, leverage vertical integration and operational excellence to remain a low-cost, reliable supplier, and number three, pursue disciplined M&A to drive mix-up lift, expand geographically, and create long-term stockholder value. Cal-Maine Foods combines scale, vertical integration, and financial strength with proven growth from specialty and prepared foods. Conventional eggs provide a strong foundation, while consumer demand for protein and the relative affordability of eggs create powerful tailwinds. Our disciplined capital allocation and operational excellence reinforce this advantage.

Speaker #3: This is not just about chasing trends; it's about meeting fundamental needs for nutrition, affordability, and value in the American diet. Looking forward, our strategy is clear.

Speaker #3: We will, number one, expand specialty and prepared foods; number two, leverage vertical integration and operational excellence to remain a low-cost, reliable supplier; and number three, pursue disciplined M&A to drive mix-up, lift, expand geographically, and create long-term stockholder value.

Speaker #3: Cal-Maine combines scale, vertical integration, and financial strength with proven growth from specialty and prepared foods. Conventional eggs provide a strong foundation, while consumer demand for protein and the relative affordability of eggs create powerful tailwinds.

Speaker #3: Our disciplined capital allocation and operational excellence reinforce this advantage. We're confident that the initiatives we're executing today will translate into durable growth, stronger margins, and higher returns for our shareholders.

Max Bowman: We're confident that the initiatives we're executing today will translate into durable growth, stronger margins, and higher returns for our shareholders. I want to close by thanking the entire Cal-Maine Foods team for their dedication, our customers for their trust, and our stockholders for their continued support. With that, I'll turn the call back over to the operator to begin the Q&A portion of today's call.

Speaker #3: I want to close by thanking the entire Cal-Maine team for their dedication, our customers for their trust, and our stockholders for their continued support.

Speaker #3: With that, I'll turn the call back over to the operator to begin the Q&A portion of today's call.

Sherman Miller: Thank you so much. As a reminder, to ask a question, simply press star 11 on your telephone to get in the queue and wait for your name to be announced. To remove yourself from the queue, press star 11 again. We ask that each participant limit themselves to one question and one follow-up. Once your questions have been answered, please re-enter the queue if you would like to ask additional questions. One moment for our first question. It comes from the line of Heather Jones with Heather Jones Research. Please proceed.

Speaker #2: Thank you so much. And as a reminder, to ask questions, simply press *11 on your telephone to get in the queue and wait for your name to be announced.

Speaker #2: To remove yourself from the queue, press star 11 again. We ask that each participant limit themselves to one question and one follow-up. Once your questions have been answered, please re-enter the queue if you would like to ask additional questions.

Speaker #2: One moment for our first question. It comes from the line of Heather Jones with Heather Jones Research. Please proceed.

[Analyst 1]: Good morning. I wanted to start with saying I appreciate y'all starting these calls. They're very helpful. I guess my first question is just on pricing. Just wondering if you, this quarter, your price capture relative to industry benchmarks was materially lower than it has been in the past. I was just wondering if you could share some quantitative or qualitative color as to the shift that's gone on in your mix as far as cost plus versus market-based, just so that we can try to be more accurate in our projections going forward.

Speaker #5: Good morning. I want to start by saying I appreciate y'all starting these calls. They're very helpful. I guess my first question is just on pricing. I'm just wondering if this quarter your price capture relative to industry benchmarks was materially lower than it has been in the past.

Speaker #5: And so I was just wondering if you could share some quantitative or qualitative color as to the shift that's gone on in your mix as far as cost-plus versus market-based, just so that we can try to be more accurate in our projections going forward.

Max Bowman: Hey, Heather. Good morning. This is Sherman, and thank you for that question. I'll start, and I'll call on Max to finish up here. I want to start this conversation just talking about how important our customers are and us keeping their trust and their support. That's always thinking about the long term. Each and every customer has their own go-to-market strategy, and there's certainly a multitude of different pricing structures out there. I think what you're indicating, Heather, is some topside slippage. What we would encourage you to think about is just balance that with the downside, the mid-cycle uplift that comes with that, and over time, market realization actually improving for the long term, the reduction of volatility, and certainly the longer-term arrangements that come with that. We think there's a lot of appeal in this shift.

Speaker #3: Hey, Heather, good morning. This is Sherman, and thank you for that question. I'll start, then I'll call on Max to finish up here. But I want to start this conversation by talking about how important our customers are and our need to keep their trust and support.

Speaker #3: And that's always thinking about the long term. Each and every customer has their own go-to-market strategy, and there's certainly a multitude of different pricing structures out there.

Speaker #3: But I think what you're indicating, Heather, is some top-side slippage. What we would encourage you to think about is just balancing that with the downside and the mid-cycle uplift that comes with that.

Speaker #3: And over time, market realization is actually improving for the long term. The reduction of volatility and certainly the longer-term arrangements that come with that.

Speaker #3: So we think there's there's a lot of appeal in this shift. And certainly, it's it's not a not complete because we if you look in our our queue, we do indicate that the majority of our conventional eggs are still priced off of a market framework.

Max Bowman: It's not complete because if you look in our queue, we do indicate that the majority of our conventional eggs are still priced off of a market framework. There's still a lot of eye history in our pricing agreements, but certainly, certain customers have different thought patterns on their go-to-market strategy. Once again, upside opportunity is balanced with downside protection here. Always, we strive for true partnerships to be the type of partner that they can rely upon, not only for supply but for meeting their other needs. Max, I'll pass it to you if you have any other comments to add there.

Speaker #3: So there's still a lot of our history and our pricing agreements, but certainly certain customers have different thought patterns on their go-to-market strategy.

Speaker #3: And once again, upside opportunity is balanced with downside protection here. We always strive for true partnerships to be the type of partner that they can rely upon not only for supply but for meeting their other needs.

Speaker #3: So, Max, I'll pass it to you if you have any other comments to add.

[Company Representative]: Sherman, I think you've covered it. It's just all about customer alignment and positioning ourselves as best we can for the long term through the cycle.

Speaker #6: Sherman, I think you covered it. It's just all about customer alignment and positioning ourselves as best we can for the long term through the cycle.

[Analyst 1]: Okay. Thank you. My follow-up is on Echo Lake. Those results were stronger than expected across the board, just the sales and the margins. Should we be expecting significant sequential revenue growth for that business? Was there anything related to cost, timing, etc., that affected margins, or is this a good gross margin to use going forward?

Speaker #5: Okay, thank you. And then my follow-up is on Echo Lake. Those results were stronger than expected across the board, just the sales and the margins. So, should we be expecting significant sequential revenue growth for that business?

Speaker #5: And secondly, was there anything related to cost timing, etc., that affected margins, or is this a good gross margin to use going forward?

Max Bowman: Heather, another great question. It's hard to express the amount of excitement that we have when you say not only Echo Lake but prepared foods and just the growth opportunity that we have, the focus on higher value, higher quality, more consistent, and then margin expansion over time. It opens lots of doors for us for additional organic growth and M&A. We do feel good. The color that we added in our queue is that we feel very strongly that they're meeting and exceeding all of the initial goals that we set for them. Echo Lake is strong. We spend a lot of time in due diligence, not only looking at the business but looking at the team. The team is what I really like to brag about, just an extremely solid team that has a mind for growth, a mind for perfection, and achieving goals. I'm very excited there.

Speaker #3: Heather, another great question, and it's hard to express the amount of excitement that we have when you say not only Echo Lake, but prepared foods, and just the growth opportunity that we have to focus on higher value, higher quality, more consistent, and then margin expansion over time.

Speaker #3: It it opens lots of doors for us for additional organic growth and M&A and we we do feel good the color that we added in our queue is is that we we feel very strongly that they're meeting and exceeding all of the initial goals that we set for them.

Speaker #3: And Echo Lake is strong. We spent a lot of time in due diligence, not only looking at the business but also looking at the team. The team is what I really like to brag about.

Speaker #3: Just an extremely solid team that has a mind for growth, a mind for perfection, and achieving goals. So very excited there. Max, I'll see if you have any comments to add.

Max Bowman: Max, I'll see if you have any comments there.

[Company Representative]: Yeah, Heather, I think it's in line or exceeding, as Sherman said, some of the benchmarks that we threw out, you know, in the initial investor presentation for Echo Lake. As Sherman said, no buyer's remorse. We're feeling great about Echo Lake and feeling good about where it's positioned for the future. We did call out the synergies early on, and we had said $15 million. I think we're on track to achieve those and potentially more. We're already working on reinvestment at Echo Lake with an announced additional investment there.

Speaker #6: Yeah, Heather, I think it's in line or exceeding, as Sherman said, some of the benchmarks that we threw out, you know, in the initial investor presentation for Echo Lake.

Speaker #6: And, as Sherman said, no buyer's remorse. We're feeling great about Echo Lake and feeling good about where it's positioned for the future.

Speaker #6: We are you know we did call out the synergies early on and and you know we had said 15 million. I think we're on track to to to achieve those and potentially more.

Speaker #6: And you know we're already working on reinvestment at Echo Lake, with an announced additional investment there.

Max Bowman: Yeah, and that's significant, Max. It's almost a 10% growth in their annual volume. You can see how much we're believing in it, Heather.

Speaker #3: Yeah, and that's significant, Max. It's almost a 10% growth in their annual volume. So you can see how much we're believing in it, Heather.

[Analyst 1]: Okay, thank you.

Speaker #5: Okay, thank you.

Sherman Miller: One moment for our next question, please. It comes from the line of Puron Sharma with Siemens. Please proceed.

Speaker #2: One moment for our next question, please. It comes from the line of Pooran Sharma, with Stevens. Please proceed.

[Analyst 2]: Good morning, and thanks for the question. I just wanted to say congrats on the quarter and on getting your first earnings call here. Maybe for the first question, I wanted to understand a little bit about the supply situation. It looks like we've had a pretty good sequential buildback in the layer flock over the last couple of months. I know in our past conversations, we've talked about how long it'll take to get back to about 325 million hens. I think the industry projections called for about 305 to 315 million by year-end. We have been hearing some expansion amongst smaller contract farmers may not be fully captured in the latest USDA figures of about 300 million hens. I just wanted to get your thoughts on how to think about supplies over the next few quarters from here.

Speaker #6: Good morning and thanks for the question. I just wanted to say congrats on the on the on the quarter and and on getting your your first earnings call.

Speaker #6: Here, maybe for the first question, I wanted to understand a little bit about the supply situation. It looks like we've had a pretty good sequential build back in the layer flock over the last couple of months.

Speaker #6: I know in our past conversations, we've talked about you know how long it'll take to get back to about 325 million hens. And I think the you know industry projections called for about 305 to 315 by year end.

Speaker #6: But we have been hearing some expansion among smaller contract farmers, which may not be fully captured in the latest USDA figures of about 300 million hens.

Speaker #6: So, I just wanted to get your thoughts on how to think about supplies over the next few quarters from here.

Max Bowman: Brian, good morning, and thank you for that question. You know the USDA hens numbers that came out September 1 indicated 101.4 million or 301.4 million. That certainly is a number well lower than the five-year, but I think we would challenge you to think a little bit broader than that. There's a general rule of thumb that it takes one chicken for each person in the U.S. The U.S. population hovering somewhere around 340 million indicates that we're well short of the potential that the market could use. There's certainly lots of things on the demand side. Unfortunately, there are some early indicators that the highly pathogenic avian influenza certainly is not gone. This is a lot bigger than a U.S. problem. It's a global problem. The global indicators indicate the same thing, that there's lots of challenges sitting at the doorstep with highly pathogenic avian influenza.

Speaker #3: Ran, good morning, and thank you for that question. The USDA hen numbers that came out on September 1st indicated 101.4 million, or 301.4 million.

Speaker #3: And that certainly is a number well lower than the five-year, but I think we would challenge you to think a little bit broader in that.

Speaker #3: There's a general rule of thumb that it takes one chicken for each person in the U.S. The U.S. population is hovering somewhere around 340 million.

Speaker #3: Indicates that we're well short of the potential that the market could use. And there's certainly lots of things on the demand side, but unfortunately, there are some early indicators that the high-path avian influenza certainly is not gone.

Speaker #3: And this is a lot bigger than the U.S. problem. It's a global problem. The global indicators indicate the same thing: that there are lots of challenges sitting at the doorstep with high-path avian influenza.

Speaker #3: And unfortunately, about 3.1 million hens have been taken away from that 301.4 million. Already, numerous turkey flocks have also been depopulated. And the migration is certainly turning the volume up as we speak.

Max Bowman: Unfortunately, about 3.1 million hens have been taken away from that 301.4 million already, and numerous turkey flocks also depopulated. The migration is certainly turning the volume up as we speak. There are lots of things that are concerning about the migration and about how this fall could play out. We have no exact indicators of what that would be, but certainly, just looking and listening to the experts, there's lots of concerns around future highly pathogenic avian influenza. You pair the supply with demand. There's always seasonality that comes into play. The last few years have been a roller coaster. Normal seasonality has been disrupted by loss of birds during those times, which has kind of muddied the waters. Supply stabilization is just one of the important pieces to think about. Whenever marketing programs work most effectively, it's when they can count on supply.

Speaker #3: And so, there are lots of things that are concerning about the migration and about how this fall could play out. We have no exact indicators of what that would be, but certainly, just looking and listening to the experts, there are lots of concerns around future high-path avian influenza.

Speaker #3: And you pair the supply with demand, and certainly there's always seasonality that comes into play. The last few years have been a roller coaster.

Speaker #3: Normal seasonality has been disrupted by the loss of birds during those times, which kind of muddies the waters. But supply stabilization is just one of the important pieces to think about whenever marketing programs work most effectively.

Speaker #3: It's when they can count on supply. And the tailwinds that are sitting there for the demand side are extremely favorable, and we're excited about them.

Max Bowman: The tailwinds that are sitting there for the demand side are extremely favorable, and we're excited about them. FDA now lets us put the word healthy on an egg carton. The American Heart Association recommended eggs as a part of a heart-healthy diet. The American Academy of Pediatrics, they're recommending eggs from conception to two years of age because of choline. These GLP-1 drugs are certainly a catalyst. People looking for clean, unprocessed foods, and eggs just become a spotlight as 97% of households buy eggs. Of course, the United Nations is pushing eggs still. At the end of the day, eggs fit very well into the healthy trends, the convenient trends, and they're still affordable on a program of protein serving. Some of the other spotlights against foods containing sodium, sugar, and saturated fat were either low or zero. We think there's tremendous tailwinds to pair with this supply.

Speaker #3: FDA, now lets us put the word healthy on an egg carton. American Heart Association recommending eggs as a part of a heart-healthy diet. American Academy of Pediatrics they're recommending eggs from conception to two years of age because of choline.

Speaker #3: These GLP-1 drugs are certainly a catalyst. People are looking for clean, unprocessed foods, and eggs just become a spotlight as 97% of households buy eggs.

Speaker #3: And of course, the United Nations is still pushing eggs. At the end of the day, eggs fit very well into the healthy trends, the convenient trends, and they're still affordable as a source of protein.

Speaker #3: And they also some of the other spotlights against foods containing sodium, sugar, and saturated fat. We're either low or zero. So we think there's tremendous tailwinds to pair with this supply.

Max Bowman: Unfortunately, over the last three years, it's been one step forward, two steps back. We're all hoping for a much better fall than what the early indicators show. Max?

Speaker #3: And we unfortunately, over the last three years, have been one step forward, two steps back. We're all hoping for a much better fall than what the early indicators showed.

Speaker #3: Max?

[Company Representative]: I think you covered it, Sherman.

Speaker #6: I think you covered it, Sherman.

[Analyst 2]: Great. Appreciate the color there. I just wanted to maybe hone in on HPAI. We had the $3.1 million case in Wisconsin. I think in the northern states, you've been hearing about some turkey flocks that had been impacted by the virus. It seems a little bit earlier than expected, early in the migration period, as you called it. Do you think the industry is better prepared this year than last? I know you talked about your own biosecurity measures, your own investments into your biosecurity. Just from an industry kind of perspective, do you think they're better prepared this time around than last time? Do you think we could see the potential for a similar magnitude, just given where the industry is at?

Speaker #4: Great. I appreciate the color there. I just wanted to maybe hone in on HPAI. You know we have the 3.1 million cases in Wisconsin, and I think in the northern states, you've been hearing about some turkey flocks that have been impacted.

Speaker #4: By the virus, it seems a little bit earlier than expected, early in the in the migration period as you as you called it. You know do you think the the the the industry is better prepared this year than last?

Speaker #4: I know you you talked about your own biosecurity measures, your own investments into your biosecurity. But just from an industry kind of perspective, do you think they're better prepared this time around than than last last time?

Speaker #4: And do you think we could see the potential for a similar magnitude, just given where the industry's at?

Max Bowman: I can't predict the magnitude, but what I do feel confident in is a lot of work has gone into biosecurity and preventing the lateral spread. The big question mark still comes from these point-source introductions. That ties back to not only migrating birds but also the pair of domestic species that are around farms and just a huge need for concrete epidemiology to know how this virus is not only getting onto farms but getting into chicken houses. There's work certainly being done on that. The silver bullet of, "Here's the problem. Here's how to solve it," is still out there. We've got to find it. Certainly, biosecurity is top of mind. We have invested over $80 million. It's something that we've been very serious about since 2015 and beyond that even.

Speaker #3: I can't predict the magnitude, but what I do feel confident in is that a lot of work went into biosecurity and preventing the lateral spread.

Speaker #3: The big question mark still comes from these point source introductions, and that ties back to not only migrating birds but also the parodomic species that are around farms.

Speaker #3: And just a huge need for concrete epidemiologies and know how this virus is not only getting onto farms but getting into chicken houses.

Speaker #3: And there's certainly work being done on that, but the silver bullet of "here's the problem, here's how to solve it" is still out there.

Speaker #3: We've got to find it. And certainly, biosecurity is top of mind. We have invested over $80 million; it's something that we've been very serious about since 2015 and beyond that even.

Max Bowman: Unfortunately, I can't give you a prediction of how it's going to play out, but the early indicators are that the birds are certainly carrying it as they migrate. It's certainly a virulent strain that's still well capable of infecting chickens and turkeys.

Speaker #3: So, unfortunately, I can't give you a prediction of how it's going to play out, but the early indicators are that the birds are certainly carrying it as they migrate.

Speaker #3: And it's certainly a violent strain that's still well capable of infecting chickens and turkeys.

[Company Representative]: I think.

Max Bowman: Thank you.

Speaker #6: I think we can't, you know. Sherman said we can't speak for the industry and wouldn't pretend to. But I think it's evident that everyone in the industry is taking it very seriously.

[Company Representative]: Brian, we can't, you know, Sherman said, we can't speak for the industry and would pretend to. I think it's evident that everyone in the industry is taking it very seriously. We just continue to focus on what we can control. We know and trust in our scale and diversity of our operations that give us advantages. We know, at the same time, we've got to execute and remain diligent every day. You're only as good as your worst day when it comes down to it. Consistency is very important in our operations. I think all of our locations are, you know, they talk about it literally daily and are focused on it. That's what we're going to depend on going forward.

Speaker #6: You know we just continue to focus on what we can control. And we know and trust in the scale and diversity of our operations that give us advantages.

Speaker #6: But we know that, at the same time, we've got to execute and remain diligent every day. You're only as good as your worst day when it comes down to it.

Speaker #6: So consistency is very important in our operations, and I think all of our locations, you know, they talk about it literally daily and are focused on it.

Speaker #6: And that's what we're going to depend on going forward.

Max Bowman: Great. Appreciate the call.

Speaker #4: Great. Appreciate the color.

Sherman Miller: Thank you. Our next question is from Leah Jordan with Goldman Sachs. Please proceed.

Speaker #2: Thank you. Our next question is from Leah Jordan with Goldman Sachs. Please proceed.

[Analyst 1]: Thank you. Good morning, Sherman and Max. Thanks for hosting this call. Really appreciate all the detail. I wanted to ask about specialty eggs. You called out double-digit growth in cage-free and pasture-raised. Any more detail on the trends you're seeing in specialty? How are you thinking about capacity growth for that segment going forward? Ultimately, where would you like to land in terms of mix between conventional and specialty longer term?

Speaker #5: Thank you. Good morning, Sherman and Max. Thanks for hosting this call; I really appreciate all the detail. I wanted to ask about specialty eggs. You called out double-digit growth in cage-free and pasture-raised.

Speaker #5: Does any more detail on the trends you're seeing in specialty? And how are you thinking about capacity growth for that segment going forward? And ultimately, you know, where would you like to land in terms of mix between conventional and specialty longer term?

Max Bowman: Good morning, Leah. Thank you. Great question. As she pointed out, pasture-raised double-digit growth year over year in dollars and volumes. Leah, one thing that we continue to focus on is the word choice. We want to produce what the customer, the consumer wants to purchase. We focus on a very broad range so that we make sure that we service all customers. We also love to talk about the strength of Egg-Land's Best, the number one branded specialty eggs that we produce, over 50% of the dozens per Egg-Land's Best, huge, huge tailwinds for us. The way we think about it is that we want to move at our customer's long-term pace. We don't make short-term decisions. We've been in this business a long time, and we think very forward on how different categories play out. That circles us right back to choice.

Speaker #3: Good morning, Leah. Thank you. Great question. As you pointed out, pasture-raised has experienced double-digit growth year over year in dollars and volumes. One thing that we continue to focus on is the word "choice."

Speaker #3: We want to produce what the customer, the consumer, wants to purchase. We focus on a very broad range so that we make sure that we service all customers.

Speaker #3: We also love to talk about the strength of Eglin's Pass, the number one branded specialty eggs that we produce over 50% of the dozens for Eglin's Pass.

Speaker #3: Huge, huge tailwinds for us. But the way we think about it is that we want to move at our customers' long-term pace. We don't make short-term decisions.

Speaker #3: We've been in this business a long time, and we think very forward on how different categories play out. And that circles us right back to choice.

Max Bowman: We invest broadly, and we make sure that we're positioned for the long term. We certainly see growth that's happening both in branded and private label and pasture-raised and certainly cage-free as well. We really focus hard on our long-term enterprise value to increase that over time. We will continue to invest in cage-free. We will continue to invest in pasture-raised as well as the other items. The customer will be our guide on the pace and scale that we do that at.

Speaker #3: So we invest broadly, and we make sure that we're positioned for the long term. But we certainly see growth that's happening both in branded and private label, as well as pasture-raised and certainly cage-free.

[Company Representative]: Thanks. Yeah, I mean, Leah, long term, we focus on capacity growth in specialty particularly. That's typically around, you know, double digits, 10% or so. We continue to keep focusing there. Over time, it's hard to predict exactly that mix. Obviously, acquisitions could play into that. We've purchased some nice acquisitions in the last three years that had some significant conventional production. Those numbers go up. Over time, we believe and think that the specialty will continue to grow as a percentage of the overall mix.

[Analyst 1]: That's very helpful. Thank you. Maybe just sticking with the theme of shifting the mix of your business, I wanted to go back to the Echo Lake discussion. What have been the initial learnings or key surprises over the past few months? On the longer-term growth, any more color there? I guess, how many more opportunities like the recently announced line extension for protein pancakes are there?

Max Bowman: We do believe there are more, which would definitely fall under the organic growth. The other exciting part of this, we've added a lot of scale to our company through M&A. This opens the door to a new channel of M&A, and we think there will be some opportunities there. No surprises with Echo. We knew that there was a tremendous team coming with Echo, and they've absolutely delivered in every area. A lot of key initiatives out of the gate, working on leadership and labor, reliable manufacturing, operational excellence, sales planning, gross margin management, net margin management, market expertise, just everything about the business that we should be touching, the team is driving forward on and extremely exciting.

Max Bowman: We're excited about showing the growth that we did this quarter, but we certainly believe that there's opportunities, as we mentioned earlier, about the approval of $14.8 million for a new pancake line. That's almost a 10% increase in our volume right out of the gate. Good things to come there.

[Company Representative]: Thanks. Sherman, again, I think you've covered it well. We'll remind everyone, Leah, we're less than a full quarter into this. I mean, June 2nd was the closing date. I know we've got some exciting meetings planned to really drill down with the Echo Lake team on longer-term plans. What I think we've been very excited about, as Sherman said before, is just learning more about the capability of that team, the very disciplined approach and logical approach that they're taking, strategic approaches to both maintaining the business they have and structuring the business and positioning it for more growth in the future. More to come. As we said from the outset, Echo Lake's been everything that we projected and maybe a little more. You can go back to those initial investor decks and kind of see what was there.

[Company Representative]: You can get a good idea of the margins from what we showed this first quarter. We're really excited about the future for Echo and our whole prepared foods. Not to leave out, MeadowCreek is sort of beginning to achieve, I think, a good base to go from. They're getting their volumes up, and Crepini's got some exciting developments as well. We'll be continuing to try to grow and invest in ourselves in that important area of our business.

Jonah. Again, I think I think you covered it. Well, we're you know, I I will remind everyone Leo. We're we're we're less than a full quarter into this. I mean uh you know 3 June 2nd was the closing date. I know we've got some exciting meetings planned to really drill down with Echo Lake team on longer term plans and and uh you know what, I think we've been very excited about is Sherman said before, is just learning more about the capability of that team. The very disciplined approach, uh, and logical approach that they're taking strategic approaches to, to both maintaining the business, they have and, and structuring the business for, in positioning for more growth, uh, in the future. So more to come. But, but as we said from the outset, uh, Echo Lake's, been everything that we projected and maybe a little more, you can go back to those, invest those initial investor decks and kind of see what was there. And you can get a good idea of the margins and uh from what we showed this first quarter. So we're really excited.

Excited about the future for Echo and our old prepared foods, you know, not to leave out, you know, Meta Creek as a sort of beginning to achieve. Uh, you know, I think a good base to go from, they're getting their volumes up and for pennies, got some exciting developments as well. So we'll be continually trying to grow and invest in ourselves in that important area of our business.

[Analyst 1]: That's great. Thank you. Lots for us to look forward to.

That's great. Thank you. Lots for us to look forward to.

Sherman Miller: Thank you. Our next question comes from the line of Ben Mayhew with BMO Capital Markets. Please proceed.

[Analyst 3]: Hey, good morning, and thank you for the questions. I guess just on your comments on share repurchases, you know, you only did the $50 million so far this year. You still have

Thank you. Our next question comes from the line of Ben Mayhew with BMO Capital Markets. Please proceed.

Hey, good morning, and thank you for the questions. Um, I guess just on your comments on share repurchases. Um,

Operator: Quite a bit left on the authorization, and you mentioned a couple of options in your prepared remarks. I just wanted to dig into that a little bit more. Do you think share repurchases are going to become a bigger piece of your allocation strategy? Is your goal to defend shares against commodity swings as you grow your value-added business? How are you thinking about utilizing that?

Sherry purchases are going to become a bigger piece of your allocation strategy.

And is your goal to defend shares against commodity swings as you grow your value-added business? Or how are you thinking about utilizing that?

Sherman Miller: I'll start and pass it to Max pretty quick. Being very excited to have share repurchases in our capital allocation strategy, it's certainly a solid tool. We know that, I think the investor community is as well. We've not given any formal guidance on what the buyback criteria will be. I will assure you that we have our eyes wide open, and we've described it as opportunistic. We're waking up every morning, keeping our eyes wide open and being ready. Max, any other color you want to add?

I'll start and pass it to Max pretty quick, but being we're excited to have share repurchases in our capital allocation strategy, it's certainly a solid tool. We know that, uh,

I think the investor community is as well, and we've not given any formal guidance on what the buyback criteria will be. But I will assure you that we have our eyes wide open, and we've described it as opportunistic.

Max Bowman: Yeah. Ben, you're well aware of the authorization that we have out there. As you said, we spent $50 million against that authorization. The keyword we're talking is opportunistic, primarily through, we're thinking at this point, open market type purchases. When we feel the time is right, as Sherman says, we're watching things very closely. A lot happening in our industry, and people are trying to figure out where we're going. We've already talked about a lot of the factors this morning that will affect the future from the supply side, what happens with HPAI. We've got a lot to factor in there. Believe me, it's at the height of our thought process. I can't leave this point without talking about, I mean, that is an important part of the capital allocation, is having that share repurchase there. It's a tool that we historically have not had.

And certainly, uh, we're waking up every morning and keeping keeping our eyes wide open and being ready Max. Any other color you want to add? Yeah we've been here. You're you're well aware of the authorization that we have out there and as you said, we spent 50 million against that off uh

That authorization, um, you know, the key word we're talking about is opportunistic, primarily through. We're thinking at this point, uh, open market type purchases. Uh, when we feel the time is right, as Sherman says, we're watching things very closely, you know, uh, a lot is happening in our industry and, you know, people are trying to figure out.

Max Bowman: We'll continue to use it. We're always going to lean into some of the other triggers that we like to talk about, which are acquisitions and organic growth and those things that are very important in our capital allocation strategy.

You know, kind of where we're going. You know, we've already talked about a lot of the factors this morning that will affect the future from a supply side. You know, what happens with a hpai and and so we you know we've got a lot to factor in there but uh believe me it's at the height of our thought process. Uh you know you know I I I can't leave this point without talking about. I mean that is an important part of our Capital allocation is having that share repurchase. Their it's a a tool that we historically have not had uh, we'll continue to use it. But you know, we're always going to lean into some of the other triggers that that we like to talk about which are, you know, Acquisitions and and organic growth. And those things that are very important in our Capital allocation strategy.

Operator: Great. Thank you for that. I'll just ask one more. When you think about the relative price of competing proteins, right, record beef prices, chicken prices that are high relative to historical averages, pork prices that are high, how do you feel about where eggs kind of sit in that relative competitive basis or landscape? Headed into this holiday season, could we see more consumer trade down into eggs? How are you looking at the demand environment over the next one to two years? Do you think eggs will outperform from a consumer value perspective? That'll be my last question. Thank you, guys.

Great, thank you for that, and then I'll just ask one more.

Um, when you think about the relative price of competing proteins, right? So, record beef prices, chicken prices that are high relative to historical averages, and pork prices that are high.

How do you, how do you feel about where eggs kind of sit in that relative competitive basis, or, or landscape and headed into this holiday season? Could we see more consumer trade down into eggs? How are you, how are you looking at the demand environment over the next 1?

1 to 2 years. Um, do you think eggs will outperform from a, you know, a consumer value perspective? And, and that'll be my last question. Thank you, guys.

Sherman Miller: Yeah. Ben, great question. Certainly, eggs are competing exceptionally well, being the lowest on a per serving of protein basis, except for milk. We feel really good about it because a lot of focus is being put on ultra-processed. Of course, eggs are not. You get to crack an egg. Certainly, the products that are created in prepared foods, they're clean, healthy. These things are awesome. The expansion of different formats, as well as day farts, you know, eggs are good each and every part of the day. That's one of my favorite things to do at night is to cook an egg. I think that carries over well into what you described. There's lots of things going on with other proteins, but the focus is being put on health and ultra-clean, as well as the sodium, sugar, and saturated fat.

Yeah, so being great question and uh, certainly eggs are competing, the exceptionally well-being, the the lowest on a per serving of protein basis except for milk and we we feel really good about it because uh a lot of focus is being put on Ultra processed and of course eggs are not you get to crack an egg and certainly the the products that are are created and prepared foods, they're clean, uh healthy, these things are awesome. The the expansion of different formats

As well as day parts. You know, eggs are good each and every part of the day, and that's one of my favorite things to do at night is to cook an egg.

So I think that carries over well into, uh, what you described. There are lots of things going on with other proteins, but, uh, the focus is being put on health and, uh, on ultra clean as well as.

Sherman Miller: It just keeps elevating eggs as a better choice for consumers.

Max Bowman: Yeah, that's a great comment, Sherman. You know, it's just all part of those tailwinds that we like to talk about. This is, in my judgment, one of the most important ones. I mean, we've got a lot of people to feed in this country and around the world. Choice is a big part of that, as Sherman has said already many times today. We're really excited about expansion into some of these additional formats. Prepared Foods just gives us another platform to move into, to really give more convenience and more access and making it easier for consumers in general to consume eggs. We're excited about that future.

The sodium, sugar, and saturated fat content just keeps elevating eggs as a better choice for consumers.

Consumers in general tend to consume eggs, and we’re excited about that future.

[Company Representative]: One moment for our next question, please. It comes from the line of Heather Jones from Heather Jones Research.

For our next question, please.

Any questions for Heather Jones from Heather Jones Research?

[Analyst 1]: Thanks for the follow-up. I just wanted to, I have two follow-ups, actually. I just wanted to ask about the current market. It's honestly surprised me how much pricing has dropped given, you know, the numbers you mentioned, Sherman, as far as the layers on the ground. I mean, clearly, there's been a rebuild from the spring lows. I was just wondering if you think that's either a demand disruption or do you think maybe the USDA has undercounted the numbers that are on the ground? I've got a follow-up to that.

Um, thanks for the follow-up.

I just wanted to have 2 follow-ups, actually. I just wanted to ask about the current market. It's honestly...

The prize may be. How much pricing has dropped getting?

You know, the numbers you mentioned, Sherman, as far as the layers on the ground, I mean clearly there's been a rebuild from the spring lows.

But, um, so I guess I was just wondering if you think that's either a demand destruction, or do you think maybe the USDA has undercounted the numbers that are on the ground? And then I've got a follow-up to that.

Sherman Miller: Heather, I would tie it more back to seasonality. I think there's certainly so many disruptions that have happened over the last couple of years. It's kind of easy to forget about normal eating patterns and seasonality. I think another huge piece of it is just tied back to the supply stabilization factor, that to plan business, to plan features, to showcase eggs that are so important with being a $65 difference in a basket in the grocery store, if eggs are in the baskets or not in the baskets, I don't see the demand destruction. Certainly, supply stabilization is key because if you're going to market eggs and move eggs, you've got to have number one eggs on the shelf. There's been some very strained times over the last few years where there's just simply not been enough eggs.

Heather. I I would tie it more back to seasonality. I think there's uh, certainly so many disruptions that's happened over the last couple years, is kind of easy to forget about, uh, normal eating patterns and and seasonality, but I think another huge piece of it is just tied back back to the supply stabilization factor that to plan business to plan that features to to Showcase eggs.

Sherman Miller: The price points they're sitting at today should be very attractive for the end consumer, especially paired with all these tailwinds that we've talked about. I see good things happening. Back in 2015, there was certainly some demand destruction on the liquid side where some reformulations happened. That was very difficult to get eggs put back in some formulas. The liquid side has remained extremely strong. That should have prevented any demand destruction on that side.

Max Bowman: I think obviously the imports of eggs played into that liquid side staying strong because all those eggs that were brought into the country were further processed and put into that channel. While that's not our, you know, it hasn't been historically our main focus, it certainly helped with the overall balance and supply of eggs. We don't see a lot of demand destruction at this point. In fact, I think we would say just the opposite. We think there's the tailwinds that we keep talking about. As we move out of October or into late October, early November, and we move towards the normal seasonal periods that really show demand. Remember, we're in our first quarter, which we typically think of as hitting our four quarters, our weakest quarters. We think we've got a good year ahead given the current supply levels.

That are so important, uh, with being a $65 difference in a basket in the grocery store. If eggs are in the baskets, or not in the baskets, um, I I don't see the demand destruction, but certainly supply stabilization is key. Because if you're going to, uh, market eggs and move eggs, you've got to have number 1 eggs on the shelf. And there's been some very strange times over the last few years where there's just simply not been enough eggs. And, uh, the price points they're sitting at today should be very attractive for the end consumer, especially paired with all these tailwinds that we've talked about. So I see good things happening. Back in 2015, there was certainly some demand destruction on the liquid side, where some reformulations happened, and that was very difficult to get eggs put back in some formulas, but the liquid side has remained extremely strong. So that should have prevented any demand destruction on that side.

And I, you know, the point there Sherman. I think obviously, the the Imports, the bags played into that that liquid side staying strong because all those eggs that were brought into the country were were for the processed and put into that channel. So while that's not our, you know, our hasn't been historically our main focus. It it certainly helped with the overall, uh, balance and supply of eggs. So, you know, we don't we don't see a lot of demand destruction at this point. In fact, I think we would say just the opposite, we think they're

[Analyst 1]: Okay. My follow-up is going back to your comment, Sherman, about leveraging your vertical integration to remain the low-cost producer. I suspect you're not going to quantify this specifically, but just more a qualitative idea. Thinking about the Echo Lake, your other prepared foods, your further processed eggs, is it part of your strategy to divert more and more of Cal-Maine's owned production into those products and leave less to have to sell on the open market? How should we be thinking about that and the cadence of it over the next two or three years?

The Tailwinds that we keep talking about and as we move as we move out of October, or into late October, early November and we move towards the normal seasonal periods that that really, you know, show demand and remember, we're in our first quarter, which we typically think of, is it in our fourth quarters, our weakest quarters. Uh, um, so, you know, we think we, we think we've got, you know, a good year ahead given the current, uh, Supply levels.

Okay, and then my, uh, follow-up is going back to your comments, Sherman, about leveraging your vertical integration to remain the low-cost producer.

And I suspect you're not going to quantify this specifically, but just more of a qualitative idea. Thinking about, um,

The Echo Lake, your other prepared foods... Um, your further processed eggs. Is it part of your strategy to divert more and more of cowman's?

Sherman Miller: Great question. Vertical integration is important to us to be able to have control over each step of the process, to create efficiencies in each step of the process, and to ultimately ensure supply for our customers. It's very important to us. We've even thought of it as a skyscraper approach, each step along the way, adding another floor to that skyscraper. Every floor creates efficiencies. It creates value for the end consumer that we all benefit from. Leveraging low cost, we have a great capacity to learn with the broadness and diversity of our locations. That learning can be shared among our locations, and we all benefit in a hurry from it. As far as the Echo Lake Foods piece, we certainly have some agreements in place at the time of acquisition that we absolutely honor for sourcing eggs.

Production should be owned. Production into those products and leave less to have to sell on the open market. How should we be thinking about that and the cadence of it over the next 2 or 3 years?

Sherman Miller: The thing that we really think we bring to the table is stabilizing their supply during some of these crazy periods over the last few years where supply was there and then wasn't there. We do have the breaking capacity to supply these, and for sure, we want to ensure that they have the eggs that they need to continue to grow that business. We'll continue to develop our long-term plan, but ensuring they have supply is one of the key factors there.

[Analyst 1]: Wonderful. Thank you so much.

To learn, uh, with the broadness of our and diversity of our locations. And, and that learning can be shared among our locations. And we, we all benefit in a hurry from it and far as the Echo Echo Lake piece. Uh, we certainly have, uh, some agreements in place. At the time of acquisition, that we absolutely honor, uh, for sourcing eggs. And, uh, the thing that we really think we bring to the table is stabilizing their supply, uh, during some of these crazy, uh, periods of the last few years where Supply was there. And then once wasn't wasn't there. We do have the breaking capacity to, uh, to supply these. And, uh, for sure we want to ensure that they have the eggs that they need to continue to grow that business. So, we'll, uh, we'll continue to develop our long-term plan, but uh, ensuring they have supplies 1 of the, the key factors there.

[Company Representative]: Thank you. As a reminder, if you do have a question, press star 11 to get in the queue. This will conclude the Q&A session. I will pass it back to Sherman Miller for final remarks.

Wonderful, thank you so much.

Thank you. And as a reminder, if you do have a question, press *1 1 to get in the queue.

Sherman Miller: Once again, thank everybody for the time. We look forward to this day to have our first call, and we look forward to having greater visibility going forward. Thank you for all the thoughtful questions today, your continued interest in Cal-Maine Foods, and operator, we're ready to conclude the call.

All right, this will conclude the Q&A session. I will pass it back to Sherman Miller for final remarks.

[Company Representative]: Thank you so much. This concludes today's conference call. A replay of today's call will be available beginning at 12:00 P.M. Eastern Time on October 1, 2025, for one year and can be accessed on the events and presentations page in the Investor Relations section of Cal-Maine Foods' website. A transcript of today's call will also be posted in the Investor Relations section. Thank you all for participating. You may now disconnect.

Once again, thank uh, everybody for the time. We've looked forward to this day to have our first call and we look forward to, uh, to having greater visibility going forward. And, uh, thanks for all the thoughtful questions, the day, your continued interest in calming foods and operator. We're ready to conclude the call.

Thank you so much. This concludes today's conference call. A replay of today's call will be available beginning at 12:00 p.m. Eastern Time on October 1, 2025, for one year and can be accessed on the Events and Presentations page in the Investor Relations section of Cal-Maine Foods' website. A transcript of today's call will also be posted in the Investor Relations section. Thank you all for participating. You may now disconnect.