Q1 2027 Cal Maine Foods Inc Earnings Call

September 30, 2026

Speaker #2: Good morning, everyone, and welcome to the Cal-Maine Foods Inc. Q4 fiscal year 2027 earnings conference call and webcast. Joining us today are Sherman Miller, President and CEO; Max Bowman, Vice President and CFO; Kiara Lombardo, Chief Strategy Officer; and John Zeller, CFO Prepared Foods.

Operator: Good morning, everyone, and welcome to the Cal-Maine Foods Inc. First Quarter Fiscal Year 2027 Earnings Conference Call and Webcast. Joining us today are Sherman Miller, President and CEO, Max Bowman, VP and CFO, Keira Lombardo, Chief Strategy Officer, and John Zoeller, CFO Prepared Foods. 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. Sherman, please go ahead.

Speaker #2: All participants are on a listen-only mode. After today's prepared remarks, there'll be a question-and-answer session. At that time, I'll provide instructions for those wishing to ask a question.

Speaker #2: Please note this call is being recorded. I will now turn the call over to Sherman. Please go ahead.

Speaker #3: Good morning. Thank you for joining us today. 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.

Sherman Miller: Good morning. Thank you for joining us today. 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. I would like to begin with a question we believe is most important as we look at Cal-Maine from this point in the cycle. How does the earnings power of the company evolve from here? There are really two timing questions underneath that. The first is when the conventional shell egg market begins to rebalance. The second is when the investments we are making in prepared foods translate into greater earnings contribution. Starting with conventional eggs, the market remains oversupplied, which continues to put downward pressure on wholesale prices. The key question is the timing of rebalancing. There are some early indicators worth watching.

Speaker #3: I'd like to begin with a question we believe is most important as we look at Cal-Maine from this point in the cycle. How does the earnings power of the company evolve from here?

Speaker #3: There are really two timing questions underneath that. The first is when the conventional shell egg market begins to rebalance. The second is when the investments we are making in prepared foods translate into greater earnings contribution.

Speaker #3: Starting with conventional eggs, the market remains oversupplied, which continues to put downward pressure on wholesale prices. The key question is the timing of rebalancing.

Speaker #3: There are some early indicators worth watching. According to the American Egg Board's September supply commentary, based on assessments collected through June, AEB estimates the U.S.

Sherman Miller: According to the American Egg Board September Supply Commentary based on assessments collected through June, AEB estimates the US layer flock at approximately 336 million to 343 million birds, roughly 4 million below its previous estimate. AEB also reports that August hatch numbers are down approximately 12% year-over-year, and that cancellations are becoming more common. From a production standpoint, AEB estimates an average of approximately 19.9 million cases per month over the last three months, a slight reduction from its prior report. These indicators do not establish that the market will turn, but they provide important context on the potential direction of supply. HPAI could also affect the timing of when supply rebalances with demand. As shown on slide 9 of our earnings presentation, activity has historically increased with fall wild bird migration, although timing and severity vary by year.

Sherman Miller: According to the American Egg Board September Supply Commentary based on assessments collected through June, AEB estimates the US layer flock at approximately 336 million to 343 million birds, roughly 4 million below its previous estimate. AEB also reports that August hatch numbers are down approximately 12% year-over-year, and that cancellations are becoming more common. From a production standpoint, AEB estimates an average of approximately 19.9 million cases per month over the last three months, a slight reduction from its prior report. These indicators do not establish that the market will turn, but they provide important context on the potential direction of supply. HPAI could also affect the timing of when supply rebalances with demand. As shown on slide nine of our earnings presentation, activity has historically increased with fall wild bird migration, although timing and severity vary by year.

Speaker #3: layer flock at approximately 336 million to 343 million birds. Roughly 4 million below its previous estimate. AEB also reports that August hatch numbers are down approximately 12% year over year.

Speaker #3: And cancellations are becoming more common. From a production standpoint, AEB estimates an average of approximately 19.9 million cases per month over the last three months—a slight reduction from its prior report.

Speaker #3: These indicators do not establish that the market will turn, but they provide important context on the potential direction of supply. High-path AI could also affect the timing of when supply rebalances with demand.

Speaker #3: As shown on slide 9 of our earnings presentation, activity has historically increased with fall wild bird migration, although time and in severity vary by year.

Speaker #3: We're approaching the period when the historical curve has typically turned upward. While a meaningful layer outbreak could tighten supply and support egg prices, because relatively small changes in supply can have an outsized market impact, the healthier and more sustainable outcome is for normal industry economics to work.

Sherman Miller: We're approaching the period when the historical curve has typically turned upward. While a meaningful layer outbreak could tighten supply and support egg prices, because relatively small changes in supply can have an outsized market impact, the healthier, more sustainable outcome is for normal industry economics to work. Our focus remains on rigorous biosecurity to protect our flocks and reduce exposure. Importantly, we do not see structural weakness in egg demand. The data remains constructive across retail, food service, and exports. According to NielsenIQ, calendar year to date through August, measured retail egg volume increased approximately 4%. More recently, in the 4 weeks ended 29 August 2026, national retail dozens remained slightly positive year over year, even as average price per dozen declined approximately 27%. Affordability and greater promotional activity should provide additional support to consumption as we move into the seasonally stronger fall baking and holiday periods.

Speaker #3: Our focus remains on rigorous biosecurity to protect our flocks and reduce exposure. Importantly, we do not see structural weakness in egg demand. The data remains constructive across retail, food service, and exports.

Speaker #3: According to Nielsen IQ, calendar year-to-date through August, measured retail egg volume increased approximately 4%. More recently, in the four weeks ended August 29, 2026, national retail dozens remained slightly positive year over year, even as average price per dozen declined approximately 27%.

Speaker #3: Portability and greater promotional activity should provide additional support to consumption as we move into the seasonally stronger fall, bacon, and holiday periods. The demand trends within specialty shell eggs are particularly constructive.

Sherman Miller: The demand trends within specialty shell eggs are particularly constructive. NielsenIQ data show that calendar year to date, combined US cage-free, organic, free-range, and pasture-raised dozens sold at retail increased approximately 6%, outpacing the approximately 4% growth of the overall egg category. We're also seeing healthy demand beyond retail. According to the American Egg Board, citing Circana data, QSR egg servings increased approximately 2.4% year to date through July, representing approximately 69 million incremental egg servings. American Egg Board data show that US egg export volume increased approximately 29% year to date, with July representing the highest monthly export volume since May 2023. More fundamentally, eggs remain exceptionally well-positioned against durable consumer trends around protein, nutrition, convenience, simple ingredients, and value. Taken together, this gives us confidence in the long-term demand foundation, even as supply and demand work back toward balance.

Speaker #3: Nielsen IQ data show that calendar year-to-date combined U.S. cage-free organic free range and pasture-raised dozens sold at retail increased approximately 6%. Outpacing the approximately 4% growth of the overall egg category.

Speaker #3: We're also seeing healthy demand beyond retail. According to the American Egg Board, citing cercana data, QSR egg servings increased approximately 2.4% year-to-date through July.

Speaker #3: Representing approximately 69 million incremental egg servings. An American Egg Board data show that U.S. egg export volume increased approximately 29% year-to-date, with July representing the highest monthly export volume since May 2023.

Speaker #3: More fundamentally, eggs remain exceptionally well-positioned against durable consumer trends around protein, nutrition, convenience, simple ingredients, and value. Taken together, this gives us confidence in the long-term demand foundation, even as supply and demand work back toward balance.

Speaker #3: That brings us to the more important point for Cal-Maine. The current cycle needs to be viewed in the context of how much the company has already changed.

Sherman Miller: That brings us to the more important point for Cal-Maine. The current cycle needs to be viewed in the context of how much the company's already changed. The transformation is not prospective. It's already visible in our mix. What comes next is scaling the earnings contribution. During the first quarter, specialty shell eggs and prepared foods represented approximately 54% of net sales, including approximately 12% for prepared foods. Conventional shell eggs remain foundational to Cal-Maine. Our scale, vertically integrated operating model, customer relationships, and national distribution capabilities are significant competitive advantages, and the business has demonstrated substantial cash-generating capacity through the cycle in the past. Specialty shell eggs broaden that foundation. Our ability to serve consumers across conventional, cage-free, nutritionally enhanced, organic, brown, pasture-raised, and free-range eggs is an important competitive advantage.

Speaker #3: The transformation is not prospective. It's already visible in our mix. What comes next is scaling the earnings contribution. During the first quarter, specialty shell eggs and prepared foods represented approximately 54% of net sales, including approximately 12% for prepared foods.

Speaker #3: Conventional shell eggs remain foundational to Cal-Maine. Our scale, vertically integrated operating model, customer relationships, and national distribution capabilities are significant competitive advantages. The business has demonstrated substantial cash-generating capacity through cycles in the past.

Speaker #3: Specialty shell eggs broaden that foundation. Our ability to serve consumers across conventional, cage-free, nutritionally enhanced, organic, brown, pasture-raised, and free-range eggs is an important competitive advantage.

Speaker #3: It allows us to participate across price points and consumer preferences. Rather than relying on any single segment of the category. Specialty shell eggs and our cost-plus and hybrid pricing structures also create a more diversified economic profile.

Sherman Miller: It allows us to participate across price points and consumer preferences rather than relying on any single segment of the category. Specialty shell eggs and our cost-plus and hybrid pricing structures also create a more diversified economic profile. They do not eliminate commodity exposure, but we believe they reduce the extent to which daily conventional wholesale egg prices alone impact Cal-Maine's earnings potential. Prepared foods takes that diversification further and brings us to the second major timing question: when will the investments we're making translate into greater earnings contribution? This is a multi-year capacity and commercialization build. Investment, commissioning, and startup costs necessarily precede full utilization and earnings contribution. The question is not simply when capacity comes online, it's how quickly we convert that capacity into customer demand, utilization, fixed cost absorption, and profitable growth.

Speaker #3: They do not eliminate commodity exposure, but we believe they reduce the extent to which daily conventional wholesale egg prices alone impact CAL-MAINE's earnings potential.

Speaker #3: Prepared foods takes that diversification further and brings us to the second major timing question: When will the investments we're making translate into greater earnings contribution?

Speaker #3: This is a multi-year capacity and commercialization build. Investment, commissioning, and startup costs necessarily precede full utilization and earnings contribution. The question is not simply when capacity comes online.

Speaker #3: It's how quickly we convert that capacity into customer demand, utilization, fixed cost absorption, and profitable growth. We expect prepared foods production capacity to increase by more than 60% by the first half of fiscal 2028, compared to the end of fiscal 2026.

Sherman Miller: We expect prepared foods production capacity to increase by more than 60% by the H1 of fiscal 2028 compared to the end of fiscal 2026. Our high-speed pancake line is expected to add approximately 12 million pounds of annual production capacity through early fiscal 2027. Our network optimization expansion project is expected to add approximately 17 million pounds of annual scrambled egg production capacity through fiscal 2027. In Crepini, our investment is expected to add approximately 18 million pounds of additional production capacity progressively through fiscal 2028. Those projects are complemented by the additional $54 million of prepared foods capacity investments we announced last quarter. The Echo Lake, Crepini, Creighton Brothers, and Van's acquisitions have broadened our capabilities, customer base, and routes to market. The next phase is increasingly about scaling those platforms and converting the increased production capacity we are building into profitable growth.

Speaker #3: A high-speed pancake line is expected to add approximately 12 million pounds of annual production capacity through early fiscal 2027. Our network optimization and expansion project is expected to add approximately 17 million pounds of annual scrambled egg production capacity through fiscal 2027.

Speaker #3: An egg crepini, our investment is expected to add approximately 18 million pounds of additional production capacity progressively through fiscal 2028. Those projects are complemented by the additional 54 million dollars of prepared foods capacity investments we announced last quarter.

Speaker #3: The Echo Lake crepini Creighton Brothers and Van's acquisitions have broadened our capabilities. Customer base and routes to market. The next phase is increasingly about scaling those platforms, and converting the increased production capacity we're building into profitable growth.

Sherman Miller: Importantly, the addressable opportunity extends well beyond breakfast. The measured prepared breakfast category alone represents approximately $8.4 billion in annual US retail sales. Our broader opportunity is egg-based prepared foods across multiple meal occasions and day parts, including breakfast, on-the-go, snacking, after school, and convenient meals. Our strategy is to leverage our capabilities in eggs and protein across a larger set of products, customers, channels, and consumer occasions. Capacity comes first, commercialization and customer demand follow, earnings contribution builds as volume scales, utilization increases, fixed costs are absorbed, and operations mature. That progression is important to understanding both where our earnings are today and the earnings power we are building. With that, I will turn the call over to Max to review our Q1 financial results.

Speaker #3: Importantly, the addressable opportunity extends well beyond breakfast. The measured prepared breakfast category alone represents approximately 8.4 billion dollars in annual U.S. retail sales. But our broader opportunity is egg-based prepared foods across multiple meal occasions and day parts.

Speaker #3: Including breakfast, on-the-go snacking, after-school, and convenient meals. Our strategy is to leverage our capabilities in eggs and protein across a larger set of products, customers, channels, and consumer occasions.

Speaker #3: Capacity comes first. Commercialization and customer demand follow. Earnings contribution bills as volume scales. Utilization increases. Fixed costs are absorbed. And operations mature. That progression is important to understanding both where our earnings are today and the earnings spiral we're building.

Speaker #3: With that, I'll turn the call over to Max to review our first quarter financial results.

Speaker #2: Thanks, Sherman. And good morning, everyone. Earlier this morning, we issued our quarterly earnings release and filed our Form 10-Q for the first quarter of fiscal 2027.

Max P. Bowman: Thanks, Sherman, and good morning, everyone. Earlier this morning, we issued our quarterly earnings release and filed our Form 10-Q for the Q1 of fiscal 2027. We also posted a supplemental Q1 earnings presentation to our website that provides additional details on our performance. For the Q1, consolidated net sales were $539.6 million, down 41.5% compared with the prior year period. Gross profit was $403,000, compared with $311.3 million in the prior year period. Operating loss was $82.2 million, compared to operating income of $249.2 million in the prior year period, and operating margin was -15.2%. Net loss attributable to Cal-Maine was $58.6 million, compared to net income attributable to Cal-Maine of $199.3 million in the prior year period, resulting in diluted loss per share of $1.26, compared to diluted earnings per share of $4.12. Turning to our segment results.

Max Bowman: Thanks, Sherman, and good morning, everyone. Earlier this morning, we issued our quarterly earnings release and filed our Form 10-Q for the Q1 of fiscal 2027. We also posted a supplemental Q1 earnings presentation to our website that provides additional details on our performance. For the Q1, consolidated net sales were $539.6 million, down 41.5% compared with the prior year period. Gross profit was $403,000, compared with $311.3 million in the prior year period. Operating loss was $82.2 million, compared to operating income of $249.2 million in the prior year period, and operating margin was -15.2%. Net loss attributable to Cal-Maine was $58.6 million, compared to net income attributable to Cal-Maine of $199.3 million in the prior year period, resulting in diluted loss per share of $1.26, compared to diluted earnings per share of $4.12. Turning to our segment results.

Speaker #2: We also posted a supplemental first quarter earnings presentation to our website that provides additional details on our performance. For the first quarter, consolidated net sales were $539.6 million, down 41.5% compared with the prior year period.

Speaker #2: Gross profit was $403.0 million, compared with $311.3 million in the prior year period. Operating loss was $82.2 million, compared to operating income of $249.2 million in the prior year period.

Speaker #2: And operating margin was negative 15.2%. Net loss attributable to Cal-Maine was $58.6 million, compared to net income attributable to Cal-Maine of $199.3 million in the prior year period.

Speaker #2: Resulting in diluted loss per share of $1.26, compared to diluted earnings per share of $4.12. Turning to our segment results, for conventional and specialty shell eggs combined, our percent produced to sold was 98.2%.

Max P. Bowman: For conventional and specialty shell eggs combined, our Percent Produced To Sold % was 98.2%. Conventional shell eggs generated net sales of $201.7 million, down 59.5% compared with the prior year period. Segment operating loss was $71 million with an operating margin of -35.2%. Price realization for external customers, which we define as our average conventional shell egg selling price relative to the daily average Urner Barry Southeast market price was 99% in FY27 Q1 compared with 101% in FY26 Q4. The primary driver of the change was market timing. Much of our conventional business is priced back of the market and our selling prices move with a lag. In Q4, the Urner Barry market declined rapidly, which benefited realization as our selling prices lagged the market down.

Max Bowman: For conventional and specialty shell eggs combined, our Percent Produced To Sold % was 98.2%. Conventional shell eggs generated net sales of $201.7 million, down 59.5% compared with the prior year period. Segment operating loss was $71 million with an operating margin of -35.2%. Price realization for external customers, which we define as our average conventional shell egg selling price relative to the daily average Urner Barry Southeast market price was 99% in FY27 Q1 compared with 101% in FY26 Q4. The primary driver of the change was market timing. Much of our conventional business is priced back of the market and our selling prices move with a lag. In Q4, the Urner Barry market declined rapidly, which benefited realization as our selling prices lagged the market down.

Speaker #2: Conventional shell eggs generated net sales of $201.7 million, down 59.5% compared with the prior year period. Segment operating loss was $71 million, with an operating margin of negative 35.2%.

Speaker #2: Price realization for external customers, which we define as our average conventional shell egg selling price relative to the daily average Urner Barry Southeast market price, was 99% in FY27 quarter 1, compared with 101% in FY26 quarter 4.

Speaker #2: The primary driver of the change was market timing. Much of our conventional business is priced back of the market, and our selling prices move with a lag.

Speaker #2: In Q4, the earn-a-berry market declined rapidly, which benefited realization as our selling prices lagged the market down. Towards the end of Q1, the market rose rapidly and late August creating the opposite effect as our selling prices lagged the market.

Max P. Bowman: Towards the end of Q1, the market rose rapidly in late August creating the opposite effect as our selling prices lagged the market. Our pricing approach has not changed. The direction and timing of the market did. Customer pricing arrangements, including cost-plus and hybrid structures, remain intact and realization remains historically strong. Sales mix and egg donations during the quarter also contributed to the slight sequential decline in price realization. Despite the slight sequential decline, price realization remained above historical levels achieved before the pricing structure changes, demonstrating that our strategy continues to work as intended. Specialty Shell egg generated net sales of $236.9 million, down 14% compared with the prior year period. Segment operating income was $14.9 million with an operating margin of 6.3%. The year-over-year decline reflects an unusually strong prior year period when we strategically stepped in to supply customers during industry-wide shortages.

Max Bowman: Towards the end of Q1, the market rose rapidly in late August creating the opposite effect as our selling prices lagged the market. Our pricing approach has not changed. The direction and timing of the market did. Customer pricing arrangements, including cost-plus and hybrid structures, remain intact and realization remains historically strong. Sales mix and egg donations during the quarter also contributed to the slight sequential decline in price realization. Despite the slight sequential decline, price realization remained above historical levels achieved before the pricing structure changes, demonstrating that our strategy continues to work as intended. Specialty Shell egg generated net sales of $236.9 million, down 14% compared with the prior year period. Segment operating income was $14.9 million with an operating margin of 6.3%. The year-over-year decline reflects an unusually strong prior year period when we strategically stepped in to supply customers during industry-wide shortages.

Speaker #2: Our pricing approach has not changed. The direction and timing of the market did. Customer pricing arrangements, including cost-plus and hybrid structures, remain intact, and realization remains historically strong.

Speaker #2: Sales mix and egg donations during the quarter also contributed to the slight sequential decline in price realization. Despite the slight sequential decline, price realization remained above historical levels achieved before the pricing structure changes, demonstrating that our strategy continues to work as intended.

Speaker #2: Specialty shell eggs generated net sales of $236.9 million, down 14% compared with the prior year period. Segment operating income was $14.9 million, with an operating margin of 6.3%.

Speaker #2: The year-over-year decline reflects an unusually strong prior year period when we strategically stepped in to supply customers during industry-wide shortages. That decision reinforced our position as a reliable supplier of choice, and kept our brand's own shelf and supply was constrained.

Max P. Bowman: That decision reinforced our position as a reliable supplier of choice and kept our brands on shelf when supply was constrained. As the comparison normalizes, we expect growth to more closely align with the broader market. Prepared Foods generated net sales of $63 million, down 13% compared with the prior year period. Segment operating income was $7.8 million with an operating margin of 12.4%. SG&A expense for the quarter was $81.7 million compared with $69.5 million in the prior year period. Interest income net of expenses was $8 million compared with $12.9 million in the prior year period. Our effective tax rate for the quarter was 24.2% compared with 24.4% in the prior year period.

Max Bowman: That decision reinforced our position as a reliable supplier of choice and kept our brands on shelf when supply was constrained. As the comparison normalizes, we expect growth to more closely align with the broader market. Prepared Foods generated net sales of $63 million, down 13% compared with the prior year period. Segment operating income was $7.8 million with an operating margin of 12.4%. SG&A expense for the quarter was $81.7 million compared with $69.5 million in the prior year period. Interest income net of expenses was $8 million compared with $12.9 million in the prior year period. Our effective tax rate for the quarter was 24.2% compared with 24.4% in the prior year period.

Speaker #2: As a comparison normalizes, we expect growth to more closely align with the broader market. Prepared foods generated net sales of $63 million, down 13% compared with the prior year period.

Speaker #2: Segment operating income was $7.8 million, with an operating margin of 12.4%. SG&A expense for the quarter was $81.7 million, compared with $69.5 million in the prior year period.

Speaker #2: Interest income netted expenses was $8 million, compared with $12.9 million in the prior year period. Our effective tax rate for the quarter was 24.2%, compared with 24.4% in the prior year period.

Speaker #2: Turning to cash flow and the balance sheet, net cash used in operating activities during the quarter was $101.4 million, compared to net cash provided by operating activities of $278.6 million in the prior year period.

Max P. Bowman: Turning to cash flow and the balance sheet, net cash used in operating activities during the quarter was $101.4 million compared to net cash provided by operating activities of $278.6 million in the prior year period. Capital expenditures were $26.6 million and we acquired additional Eggland's Best franchise territory in the Northeast US for $25 million during the quarter. We ended the quarter with cash and temporary cash investments of $767.6 million and remain virtually debt-free. During the quarter, we repurchased 66,601 shares of our common stock under our share repurchase program for approximately $5 million. Under our current $500 million repurchase authorization, approximately $315.7 million remained available at quarter end. Subsequent to the end of the first quarter, Cal-Maine Foods repurchased 204,888 shares on the repurchase program for $14.9 million.

Max Bowman: Turning to cash flow and the balance sheet, net cash used in operating activities during the quarter was $101.4 million compared to net cash provided by operating activities of $278.6 million in the prior year period. Capital expenditures were $26.6 million and we acquired additional Eggland's Best franchise territory in the Northeast US for $25 million during the quarter. We ended the quarter with cash and temporary cash investments of $767.6 million and remain virtually debt-free. During the quarter, we repurchased 66,601 shares of our common stock under our share repurchase program for approximately $5 million. Under our current $500 million repurchase authorization, approximately $315.7 million remained available at quarter end. Subsequent to the end of the first quarter, Cal-Maine Foods repurchased 204,888 shares on the repurchase program for $14.9 million.

Speaker #2: Capital expenditures were $26.6 million, and we acquired additional EB franchise territory in the Northeast US for $25 million, during the quarter. We ended the quarter with cash and temporary cash investments of $767.6 million, and remained virtually debt-free.

Speaker #2: During the quarter, we repurchased 66,601 shares of our common stock under our share repurchase program for approximately $5 million. Under our current $500 million repurchase authorization, approximately $315.7 million remained available at quarter end.

Speaker #2: Subsequent to the end of the first quarter, CAL-MAINE Foods repurchased 204,888 shares under repurchase program for $14.9 million. Pursuant to our variable dividend policy, we will not pay a cash dividend until we are profitable on a cumulative basis.

Max P. Bowman: Pursuant to our variable dividend policy, we will not pay a cash dividend until we are profitable on a cumulative basis. The cumulative loss to be recovered at the end of the first quarter is $94.5 million. With that, I'll turn the call back to Sherman for closing remarks before we begin the Q&A session.

Max Bowman: Pursuant to our variable dividend policy, we will not pay a cash dividend until we are profitable on a cumulative basis. The cumulative loss to be recovered at the end of the first quarter is $94.5 million. With that, I'll turn the call back to Sherman for closing remarks before we begin the Q&A session.

Speaker #2: The cumulative loss to be recovered at the end of the first quarter is $94.5 million. With that, I'll turn the call back to Sherman for closing remarks before we begin the Q&A session.

Speaker #3: Thanks, Max. As we look ahead, I want to come back to those two timing questions because they are central to understanding both our near-term results and the longer-term opportunity.

Sherman Miller: Thanks, Max. As we look ahead, I want to come back to those two timing questions because they are central to understanding both our near-term results and the longer-term opportunity. The first is the shell egg cycle. As outlined in slide 8, near-term results will continue to reflect low conventional wholesale egg prices, higher input costs in the current supply imbalance. Market timing also affects how changes in conventional pricing flow through our results. Much of our conventional business is priced back of the market, meaning changes in the daily average Urner Barry market price flow through our realized selling prices with a lag. When the market falls rapidly, our realized prices can temporarily remain above the current market. When the market rises rapidly, our realized prices can temporarily lag the market. Our pricing approach has not changed. The direction and timing of the market have.

Speaker #3: The first is the shell egg cycle. As outlined in slide 8, near-term results will continue to reflect low conventional wholesale egg prices, higher input costs, and the current supply imbalance.

Speaker #3: Market timing also affects how changes in conventional pricing flow through our results. Much of our conventional business is priced back of the market, meaning changes in the daily average Earn-a-Berry market price flow through our realized selling prices with a lag.

Speaker #3: When the market falls rapidly, our realized prices can temporarily remain above the current market. When the market rises rapidly, our realized prices can temporarily lag the market.

Speaker #3: Our pricing approach is not changed to the direction and timing of the market have. We are not attempting to call the precise bottom in the conventional egg cycle.

Sherman Miller: We're not attempting to call the precise bottom in the conventional egg cycle. What we do see are early supply indicators worth watching against a demand backdrop that remains healthy. Retail volume is growing, specialty shell egg sales are outpacing the broader category, QSR egg servings are up, and exports have strengthened significantly. AEB reported earlier this month that US egg exports increased 25% during the first half of 2026, consistent with the strengthening export trend reflected in the more recent data. The issue today is that supply remains greater than even that healthy demand can absorb. That distinction is important. The second timing question is different because it is much more directly connected to our own execution. In prepared foods, we have considerably greater visibility in the investments we're making, the capacity being added, and the commercial opportunities we're pursuing.

Speaker #3: What we do see are early supply indicators worth watching, against a demand backdrop that remains healthy. Retail volume is growing, specialty shell egg sales are outpacing the broader category, QSR egg servings are up, and exports have strengthened significantly.

Speaker #3: AEB reported earlier this month that US egg exports increased 25% during the first half of 2026, consistent with the strengthening export trend reflected in the more recent data.

Speaker #3: The issue today is that supply remains greater than even that healthy demand can absorb. That distinction is important. The second timing question is different because it is much more directly connected to our own execution.

Speaker #3: In prepared foods, we have considerably greater visibility in the investments we are making. The capacity being added and the commercial opportunities we're pursuing. Our focus now is increasingly on commercialization, customer demand, utilization, and converting that additional capacity into profitable growth.

Sherman Miller: Our focus now is increasingly on commercialization, customer demand, utilization, and converting that additional capacity into profitable growth. That means current earnings reflect two things happening simultaneously. A difficult point in the conventional egg cycle and investment ahead of the full earnings contribution from prepared foods. Neither viewed in isolation fully describe the longer-term earnings power we're building. That is why the strength of our balance sheet is particularly important at this point in the cycle. We ended the quarter with cash and temporary cash investments of approximately $768 million and remain virtually debt-free. That financial strength allows us to continue investing organically, execute our prepared foods capacity roadmap, and pursue strategically aligned M&A without depending on near-term recovery in conventional egg prices. Rather than retrenching when commodity economics are weak, we have the financial capacity to invest through the cycle.

Speaker #3: That means current earnings reflect two things happening simultaneously: a difficult point in the conventional egg cycle, and an investment ahead of the full earnings contribution from prepared foods.

Speaker #3: Neither viewed in isolation, fully described the longer-term earnings power we're building. That is why the strength of our balance sheet is particularly important at this point in the cycle.

Speaker #3: We ended the quarter with cash and temporary cash investments of approximately $768 million and remained virtually debt-free. That financial strength allows us to continue investing organically execute our prepared foods capacity roadmap, and pursue strategically aligned M&A without depending on near-term recovery in conventional egg prices.

Speaker #3: Rather than retrenching when commodity economics are weak, we have the financial capacity to invest through the cycle. That gives us the opportunity to emerge from this part of the cycle with greater capacity, a broader portfolio, and a more diversified earnings model.

Sherman Miller: That gives us the opportunity to emerge from this part of the cycle with greater capacity, a broader portfolio, and more diversified earnings model. There's also an important point about how Cal-Maine's earnings power should be evaluated at this stage in the cycle. When conventional egg economics were exceptionally strong and our earnings were near the high end of the cycle, our results were normalized. Peak commodity earnings were not assumed to represent the permanent earnings level of the business. We believe the same through-cycle framework is relevant today. Conventional egg economics are now at the other end of the cycle. At the same time, we're investing ahead of growth in prepared foods, and a majority of the capacity we're building has not yet reached its full utilization or earnings potential.

Speaker #3: There is also an important point about how CAL-MAINE's earnings power should be evaluated at this stage in the cycle. When conventional egg economics were exceptionally strong and our earnings were near the high end of the cycle, our results were normalized.

Speaker #3: Peak commodity earnings were not assumed to represent the permanent earnings level of the business. We believe the same through cycle framework is relevant today.

Speaker #3: Conventional egg economics are now at the other end of the cycle. At the same time, we're investing ahead of growth in prepared foods and a majority of the capacity we're building has not yet reached its full utilization or earnings potential.

Speaker #3: Just as peak cycle earnings were not viewed as normalized earnings power, we do not believe trough cycle earnings should be viewed that way either.

Sherman Miller: Just as peak cycle earnings were not viewed as normalized earnings power, we do not believe trough cycle earnings should be viewed that way either, particularly while we are simultaneously investing to expand the future earnings capacity of the business. The more relevant question is what Cal-Maine's through cycle earnings profile can become as these two dynamics evolve. On one side, we have a foundational shell egg business positioned to participate as supply and demand normalize. On the other, we are building specialty and prepared foods businesses designed to contribute a greater share of earnings through the cycle. Our balance sheet allows us to invest through the period between those two. Current results therefore reflect both commodity pressure and investment ahead of growth.

Speaker #3: Particularly, while we are simultaneously investing to expand the future earnings capacity of the business. The more relevant question is what CAL-MAINE's through cycle earnings profile can become as these two dynamics evolve.

Speaker #3: On one side, we have a foundational shell egg business positioned to participate as supply and demand normalize. On the other, we are building specialty and prepared foods businesses designed to contribute a greater share of earnings through the cycle.

Speaker #3: And our balance sheet allows us to invest through the period between those two. Current results, therefore, reflect both commodity pressure and investment ahead of growth.

Speaker #3: They do not yet fully reflect the potential earnings contribution from the capacity and portfolio we're building. Together with the earnings benefit that would accompany normalization in the shell egg market.

Sherman Miller: They do not yet fully reflect the potential earnings contribution from the capacity and portfolio we are building, together with the earnings benefit that would accompany normalization in the shell egg market. Ultimately, there are two clocks. The first is normalization in the shell egg cycle. We cannot precisely predict when that occurs. The second is earnings contribution from the investment we are making in specialty shell eggs and prepared foods. We have considerably greater visibility and control over that progression. Our strategy is designed so that over time, the second increasingly matters more than the first. We cannot control HPAI, industry flock size, or daily commodity egg prices. We can control how we allocate capital, execute our prepared foods expansion, commercialize the capacity we are building, drive utilization, grow specialty shell eggs, serve our customers, and pursue strategically aligned opportunities.

Speaker #3: Ultimately, there are two clocks. The first is normalization in the shell egg cycle, which cannot precisely predict when that occurs. The second is earnings contribution from the investment we're making in specialty shell eggs and prepared foods.

Speaker #3: We've considerably greater visibility and control over that progression. Our strategy is designed so that over time, the second increasingly matters more than the first.

Speaker #3: We cannot control how Path AI industry flock size or daily commodity egg prices. We can control how we allocate capital, execute our prepared foods expansion, commercialize the capacity we're building, drive utilization, grow specialty shell eggs, serve our customers, and pursue strategically aligned opportunities.

Speaker #3: And our balance sheet gives us the ability to do those things through the cycle. That is the opportunity at this point in the cycle.

Sherman Miller: Our balance sheet gives us the ability to do those things through the cycle. That is the opportunity at this point in the cycle. We have a foundational shell egg business positioned to participate when market conditions normalize, significant specialty and prepared foods growth underway, and the financial capacity to continue investing through the trough rather than managing around it. Our objective is not to eliminate the egg cycle. It is to build a Cal-Maine whose earnings becomes progressively more diversified and durable through that cycle. With that operator, we are ready to take questions.

Speaker #3: We have a foundational shell egg business positioned to participate when market conditions normalize, significant specialty and prepared foods growth underway, and the financial capacity to continue investing through the trough rather than managing around it.

Speaker #3: Our objective is not to eliminate the egg cycle. It is to build a CAL-MAINE whose earnings becomes progressively more diversified and durable through that cycle.

Speaker #3: With that operator, we're ready to take questions.

Speaker #1: Thank you. We will now begin the question and answer session. To ask a question, you will need to press star 11 on your telephone.

Operator: Thank you. We will now begin the question and answer session. To ask a question, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. We ask that each participant limit themselves to one question and one follow-up. Once your question has been answered, please reenter the queue if you would like to ask additional questions. We will pause for a moment while we compile our Q&A roster. Our first question comes from Heather Jones with Heather Jones Research. Your line is open.

Speaker #1: You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. We ask that each participant listen themselves limit themselves to one question and one follow-up.

Speaker #1: Once your question has been answered, please re-enter the queue. If you would like to ask additional questions, we'll pause for a moment while we compile our Q&A roster.

Speaker #1: Our first question comes from Heather Jones with Heather Jones Research. Your line is open.

Speaker #2: Good morning, and thank you for the additional detail y'all brought to this quarter. I wanted to ask first about corporate expense. It was corporate expense and other; they were the biggest drivers of the disparity with our estimate.

Heather Jones: Good morning, and thank you for the additional detail you all provided this quarter. I wanted to ask first on corporate expense. Corporate expense and other, they were the biggest drivers of the disparity with our estimate. I think corporate was like $8 million or $9 million higher than last year. I want to say in the Q, you talked about insurance and professional fees. How should we be thinking about that line item for the rest of 2027?

Speaker #2: And I think corporate was like eight or nine million higher than last year. And I want to say in the queue, you talked about insurance and professional fees.

Speaker #2: So, how should we be thinking about that line item for the rest of '27?

Speaker #3: Good morning, Heather. Thank you for that question. I'm actually going to lead off from that.

Sherman Miller: Good morning, Heather. Thank you for that question. Max, you want to lead off with that?

Speaker #4: Yeah. Thanks, Heather. Yeah, if you're talking about our unallocated corporate G&A, it was up about eight and a half million. Over the previous period, you mentioned we had a couple of things.

Max P. Bowman: Yeah. Thanks, Heather. Yeah. If you are talking about our unallocated corporate G&A, it was up about $8.5 million over the previous period. You mentioned we had a couple of things. We had some insurance expenses in the previous period that were a credit that lowered the cost. Then we did have the higher costs that you mentioned in legal and professional fees that brought it up. It was also a little bit of an offset from the contingent consideration fee for the Fassio acquisition, which will settle out in this next quarter. In terms of a run rate, I think the number that you are looking at there, given the give and take in it for the quarter, as our business begins to grow and scale, is about where I expect us to be.

Max Bowman: Yeah. Thanks, Heather. Yeah. If you are talking about our unallocated corporate G&A, it was up about $8.5 million over the previous period. You mentioned we had a couple of things. We had some insurance expenses in the previous period that were a credit that lowered the cost. Then we did have the higher costs that you mentioned in legal and professional fees that brought it up. It was also a little bit of an offset from the contingent consideration fee for the Fassio acquisition, which will settle out in this next quarter. In terms of a run rate, I think the number that you are looking at there, given the give and take in it for the quarter, as our business begins to grow and scale, is about where I expect us to be.

Speaker #4: We had some insurance expenses in the previous period that were a credit, which lowered the cost. And then, as you mentioned, we did have the higher cost in legal and professional fees.

Speaker #4: That brought it up. It was also a little bit of an offset from the contingent consideration fee for the FOSSEO acquisition, which was settled out in this next quarter.

Speaker #4: And in terms of a run rate, I mean, I think the number that you're looking at there—given the give and take in it for the quarter—is our business begins to grow in scale.

Speaker #4: It's about where I expect us to be. The other things were additions; we had Craton that came on, and CleanEgg that also came on in the year.

Max P. Bowman: The other things were additions of, we had Creighton that came on and Clenegg that also came on in the year. Our operations were growing and more expense. Volume was down, but delivery expense was up quite a bit across all of our segments, over 16%. That would be one thing that might go the other way, depending on when things settle down in the Middle East, and we see hopefully a normalization of prices.

Max Bowman: The other things were additions of, we had Creighton that came on and Clenegg that also came on in the year. Our operations were growing and more expense. Volume was down, but delivery expense was up quite a bit across all of our segments, over 16%. That would be one thing that might go the other way, depending on when things settle down in the Middle East, and we see hopefully a normalization of prices.

Speaker #4: So our operations were growing and more expensive. Volume was down, but delivery expense was up quite a bit across all of our segments—over 16%.

Speaker #4: So that would be one thing that might go the other way depending on when things settle down in the Middle East, and we see, hopefully, a normalization of prices.

Speaker #2: Okay. Thank you for that. And then as a follow-up on conventional pricing, y'all had that slide that shows the market-based pieces. Trending close to 90 cents quarter to date.

Heather Jones: Okay. Thank you for that. Then as a follow-up on conventional pricing, y'all had that slide that shows the market-based piece is trending close to $0.90 quarter to date. Going to the cost plus feed piece, feed costs have gone up pretty dramatically over the last few months, so wondering if you could help us think about that lag. Should we start to see that in Q2, or is that cost plus piece going to show up more in Q3?

Speaker #2: Going to the cost-plus feed piece, feed costs have gone up pretty dramatically over the last few months. So, I was wondering if you could help us think about that lag.

Speaker #2: Should we start to see that in Q2, or is that cost-plus piece going to show up more in Q3?

Sherman Miller: Heather, great question, and feed cost for us during the quarter was up 4.3% versus Q1 of 2026. The Egg Industry Center, using USDA data, they projected it could be up as high as 8%, with corn carrying about 16% heavier weight. So it is definitely a factor, and as we continue to watch grain, we use all the tools that we traditionally have: basis locks, farm storage important to fill up at harvest, hedging, but it is a very small piece for us. You mentioned the Grain Based Agreements Act as a natural hedge. Overall, the crop harvest is kind of on track, but there is a lot of weather happening in the Midwest right now that could put some pressure and delay that. We are hearing rumblings that soybeans are tight. Six states either have slowed or idle crushers waiting on beans.

Speaker #3: Heather, great question. Feed cost for us during the quarter was up 4.3% versus Q1 of 2026. The Egg Industry Center, using USDA data, projected it could be up as high as 8%, with corn carrying about 16% heavier weight.

Speaker #3: So it's definitely a factor. And as we continue to watch grain, we use all the tools that we traditionally have: basis locks, farm storage — important to fill up at harvest.

Speaker #3: Hedging, but it's a very small piece for us. And then you mentioned the grain-based agreements act as a natural hedge. Overall, the crop harvest is kind of on track, but there's a lot of weather happening in the Midwest right now that could put some pressure and delay that.

Speaker #3: We are here in rumblings that soybeans are tight, six states either have slowed or out of pressures, waiting on beans. So we'll continue to watch that and then corn, the stocks to use there.

Sherman Miller: We will continue to watch that, then corn, the stocks-to-use there, somewhere between 9.5% and 10.5%, depending USDA versus consultant opinions on that. So there is definitely some tightness going on there. We will continue to evaluate, and of course, the Iran war, the Russia-Ukraine war, all causing global disruption, then China, waiting to see exactly how their commitments play out. So we do expect that feed will continue to be up, but we continue to manage with our hard work that happens in the chicken houses every day to make sure that we are getting the best of feed costs.

Speaker #3: Somewhere between nine and a half and 10 and a half percent depending USDA versus consultant opinions on that. So there is definitely some tightness going on there.

Speaker #3: We'll continue to evaluate in, of course, the RM war, the Russia-Ukraine war, all causing global disruption and then China waiting to see exactly how their commitments play out.

Speaker #3: So we do expect that feed will continue to be up, but we continue to manage with our hard work that happens in the chicken houses every day to make sure that we're getting the best of feed cost.

Speaker #4: Chairman, if I could add one thing to that. Heather, your question about how that kind of unfolds through the year. You probably remember from prior years our strategy generally is to fill our bins and facilities where we have extra storage at harvest.

Max P. Bowman: Sherman, if I could add one thing to that. Heather, your question about how that kind of unfolds through the year is, you probably remember from prior years, our strategy generally is to fill our bins in facilities where we have extra storage at harvest. So, we have been doing that this year, and that cost will kind of follow through. It takes somewhere, depending on the facility, probably as little as a month to consume that to as much as almost six months. So it will have some impact as we go through the balance of the year.

Max Bowman: Sherman, if I could add one thing to that. Heather, your question about how that kind of unfolds through the year is, you probably remember from prior years, our strategy generally is to fill our bins in facilities where we have extra storage at harvest. So, we have been doing that this year, and that cost will kind of follow through. It takes somewhere, depending on the facility, probably as little as a month to consume that to as much as almost six months. So it will have some impact as we go through the balance of the year.

Speaker #4: So we've been doing that this year and that cost will kind of follow through. It takes somewhere depending on the facility probably as little as a month to consume that to as much as almost six months.

Speaker #4: So it will have some impact as we go through the balance of the year.

Speaker #2: My apologies. I think I wasn't clear in how I asked it. I'm more interested in what is the lag for when that higher feed cost is going to show up in your cost plus pricing?

Heather Jones: My apologies. I think I wasn't clear in how I asked it. I'm more interested in what is the lag for when that higher feed cost is going to show up in your cost-plus pricing. Is it a quarter? Is it two quarters? Because the market-based piece is clearly lower sequentially, but I would think the cost-plus piece would be higher sequentially given what's happened with feed cost. If you could just give us a sense of the timing lag for how that pricing piece flows through.

Speaker #2: Is it a quarter? Is it two quarters? Because the market-based piece is clearly lower sequentially, but I would think the cost plus piece would be higher sequentially given what's happened to feed cost.

Speaker #2: But if you could just give us a sense of the timing lag for how that pricing piece flows through.

Speaker #3: Some of it has already shown up, Heather, and will continue to do so. But generally, within two weeks to a month, most updates happen.

Sherman Miller: Some of it has already showed up, Heather, and will continue to do so, but generally within two weeks to a month, most updates happen. There are a few that stretch out to a quarter-type look back. But at harvest, we try to have empty bins so that we can capture that new crop grain that Max is talking about. So the effect is happening now.

Speaker #3: There are a few that stretch out to a quarter. Tight look back, but at harvest, we try to have empty bins so that we can capture that new crop grain that Max is talking about.

Speaker #3: So the effect is happening now.

Speaker #2: Right. Okay. Thank you.

Heather Jones: Right. Okay. Thank you.

Speaker #1: One moment for our next question. Our next question comes from Leah Jordan with Goldman Sachs. Your line is open.

Operator: One moment for our next question. Our next question comes from Leah Jordan with Goldman Sachs. Your line is open.

Speaker #5: Good morning. Thank you for taking our question. You talked about strong specialty volume growth across the industry, but your volumes in that segment declined during the quarter.

Leah Jordan: Good morning. Thank you for taking our question. You talked about strong specialty volume growth across the industry, but your volumes in that segment declined during the quarter. I was seeing if you could talk about your market share trends across the category. What has really been impacting that? How did it trend throughout the quarter? Maybe just when do you expect to get back to volume growth within specialty?

Speaker #5: So, seeing if you could talk about your market share trends across the category—what's really been impacting that? How did it trend throughout the quarter?

Speaker #5: And maybe just when do you expect to get back to volume growth within specialty?

Speaker #3: Hey, good morning. Great question. It all starts with a really tough comp compared to last year. We outperformed the overall market last year and did the best job we possibly could, making sure our customers had eggs on their shelves of all types.

Sherman Miller: Hey, good morning. Great question. It all starts with a really tough comp compared to last year. We outperformed the overall market last year and did the best job we possibly could, making sure our customers had eggs on the shelf of all types. We expect as time goes on, we will trend more with what the market is doing. It is just a really tough comp. Speaking of eggs themselves, eggs continue to be a tremendous value in the shopping cart, between $60 and $90 a basket difference if eggs are in there or not. We do believe that there are extremely positive trends behind eggs overall. Strong household penetration still at 97%. Eggs are extremely hard to replace and carry a huge advantage on a cost per serving basis.

Speaker #3: And we expect, as time goes on, we'll trend more with what the market is doing. But it's just a really tough comp. And just speaking of eggs themselves, eggs continue to be a tremendous value in the shopping cart—between $60 and $90 a basket difference if eggs are in there or not.

Speaker #3: So we do believe that there's extremely positive trends behind eggs overall, strong household penetration still at 97%. Eggs are extremely hard to replace. And carry a huge advantage on a cost per serving basis.

Sherman Miller: We do expect for that to look a lot more like the overall trends, but really tough quarter to call.

Speaker #3: So we do expect for that to look a lot more like the overall trends, but really tough quarter to comp.

Sherman Miller: We do expect for that to look a lot more like the overall trends, but really tough quarter to call.

Speaker #5: Understood. Thanks. Maybe just a follow-up sticking with specialty. On the profitability, I think historically this has always been viewed as relatively more resilient, but we still sequential decline again.

Leah Jordan: Understood. Thanks. Maybe just a follow-up, sticking with specialty, on the profitability. I think historically this has always been viewed as relatively more resilient, but we still have a sequential decline. Again, I think volume is likely pressured, but also calling out feed costs, which I know you talked about in Heather's question. Just trying to get more color on this segment, specifically around how you think about mid-cycle earnings. What is the range and variability we should keep in mind? Then specifically on the feed costs that have come up this Q1 that you called out, maybe more specifically, the timing recovery for this segment, how we should think about that. Thank you.

Speaker #5: I think volumes are likely pressured, but also calling out feed costs, which I know you talked about in Heather's question. But just trying to get more color on this segment, specifically around how you think about mid-cycle earnings, what's the range and variability we should keep in mind?

Speaker #5: And then, specifically on the feed costs that have come up this first quarter that you called out—maybe, more specifically, the timing of recovery for this segment—how should we think about that?

Speaker #5: Thank you.

Speaker #3: Yeah, great question again. The piece of our specialty that's tied to the market—that is, low double-digit type percentage—is seeing the influence here, but compared to last quarter, very, very stable pricing.

Sherman Miller: Yeah, great question again. The piece of our specialty that is tied to the market that is low double-digit type percentage is seeing the influence here. But compared to last quarter, very stable pricing. The California market still sits at $0.97 a day. So it is that piece of it that continues to put pressure on it. Longer term, those type prices are just not sustainable, so there will have to be adjustments. We cannot predict the timing of that, but there definitely will be. Max, what would you add?

Speaker #3: And the California market still sits at 97 cents a day. So it's that piece of it that continues to put pressure on it. Longer term, those type prices are just not sustainable.

Speaker #3: So there will have to be adjustments we can't predict the timing of that, but there definitely will be Max. What would you add?

Speaker #4: I mean, I think that's kind of it. Sherman, specialty pricing is always influenced and we've never ran away from that. It's always influenced by conventional pricing.

Max P. Bowman: I think that is kind of it, as Sherman. Specialty pricing is always influenced and we have never ran away from that. It is always influenced by conventional pricing. As Sherman was mentioning those comps, not only the volumes that we shipped last year in specialty, a lot of that was because specialty had that lower price point or near price point to conventional. As that recovers, you are going to see some pressure on specialty volumes and that goes across industry-wide, I believe. So that is the only other thing I would add there.

Max Bowman: I think that is kind of it, as Sherman. Specialty pricing is always influenced and we have never ran away from that. It is always influenced by conventional pricing. As Sherman was mentioning those comps, not only the volumes that we shipped last year in specialty, a lot of that was because specialty had that lower price point or near price point to conventional. As that recovers, you are going to see some pressure on specialty volumes and that goes across industry-wide, I believe. So that is the only other thing I would add there.

Speaker #4: And as Sherman was mentioning those comps, not only the volumes that we ship, last year in specialty, a lot of that was because specialty had that lower price point or near price point to conventional.

Speaker #4: And as that recovers, you're going to see some pressure on specialty volumes, and that goes across industry-wide, I believe. So that's the only other thing I would add there.

Speaker #5: Okay, thank you. I'll pass it on.

Leah Jordan: Okay, thank you. I will pass it on.

Speaker #1: One moment for our next question. Our next question comes from Parin Sharma with Stevens. Your line is open.

Operator: One moment for our next question. Our next question comes from Pooran Sharma with Stephens. Your line is open.

Speaker #6: Good morning, and thanks for the question here. I wanted to get your sense of—I know you're saying it's hard to kind of predict the supply-demand rebalancing, but you noted there are early supply indicators. I think USDA data doesn't show that the bullets that feed the breeder flock have been in decline.

Pooran Sharma: Good morning, and thanks for the question here. Wanted to get your sense of, I know you're saying it's hard to kind of predict the supply-demand rebalancing, but you noted there are early supply indicators. I think USDA data doesn't show that the pullets that feed the breeder flock have been in decline over the past few months. Wanted to get a sense of what would give you more confidence in terms of data that rationalization is taking place. Do you think that the increase in feed cost accelerates this dynamic?

Speaker #6: Over the past few months, I wanted to get a sense of what would give you more confidence in terms of data that rationalization is taking place. And just secondly, do you think that the increase in feed costs accelerates this dynamic?

Speaker #3: Good morning, Parin. And thank you for that question. The American Egg Board is calling the flock between 336 million to 343 million for June.

Sherman Miller: Good morning, Pooran, and thank you for that question. The American Egg Board's calling the flock between 336 million to 343 million for June, and that's down 4 million versus May. Also mentioning a USDA number that hatches down 12% in August, which is significant. That is telling us something. Also, I think this week, the inventory that came out on Monday is down 128,000 cases, or about 7% less than last year. I think that is also telling us something. Then also that chart that we have in our deck that shows the price movement within the quarter, that bell curve was the exports mostly to South Korea. If you look at the overall magnitude of that export, if the US had got all of the 750 loads they were looking for, it's relatively small and had a substantial impact.

Speaker #3: And that's down 4 million versus May. Also, I want to mention the USDA number: hatches are down 12% in August, which is significant. So that is telling us something.

Speaker #3: And also, I think this week the inventory that came out on Monday is down 128,000 cases, or about 7% less than last year. I think that is also telling us something.

Speaker #3: And then also that chart that we have in our deck that shows the price movement within the quarter—that bell curve was the exports mostly to South Korea. And if you look at the overall magnitude of that export, if the US had got all of the 750 loads they were looking for, it's relatively small and had a substantial impact.

Speaker #3: So it could be indicating more tightness than what the Ernabury market today is showing us.

Sherman Miller: It could be indicating more tightness than what the Urner Barry market today is showing us.

Speaker #4: Yeah. I mean, to answer the last part of your question, Parin, or attempt to what impact would feed costs have on the market? I mean, again, we can only speak for CAL-MAINE and we can observe history, but historically speaking, when you see margin compression like we're seeing now sort of from both ends, we got a lower price point on sales price and we've got higher input costs, particularly with feed and delivery and some of the things that we've already called out.

Max P. Bowman: Yeah. To answer the last part of your question, Pooran, or attempt to, what impact would feed costs have on the market? Again, we can only speak for Cal-Maine and we can observe history. Historically speaking, when you see margin compression like we're seeing now sort of from both ends, we got a lower price point on sales price and we've got higher input costs, particularly with feed and delivery and some of the things that we've already called out. Historically that does As Sherman said earlier about the specialty pricing, the price is not sustainable. The product is still in demand, so we would expect that there would be adjustment in that going forward. It's just really difficult to put a timeline on when that happens.

Max Bowman: Yeah. To answer the last part of your question, Pooran, or attempt to, what impact would feed costs have on the market? Again, we can only speak for Cal-Maine and we can observe history. Historically speaking, when you see margin compression like we're seeing now sort of from both ends, we got a lower price point on sales price and we've got higher input costs, particularly with feed and delivery and some of the things that we've already called out. Historically that does As Sherman said earlier about the specialty pricing, the price is not sustainable. The product is still in demand, so we would expect that there would be adjustment in that going forward. It's just really difficult to put a timeline on when that happens.

Speaker #4: And historically, that does as Sherman said earlier about the specialty pricing, the price is not sustainable. The product is still in demand. So we would expect that there would be adjustment in that going forward.

Speaker #4: But it's just really difficult to put a timeline on when that happens. But I think all of it does work together to people have to understand their cost and feed costs are certainly an important part of that.

Max P. Bowman: But I think all of it does work together. People have to understand their cost, and feed cost is certainly an important part of that.

Max Bowman: But I think all of it does work together. People have to understand their cost, and feed cost is certainly an important part of that.

Speaker #3: And then one follow-up, Parin, is just about high-path AI. Impossible to predict timing or magnitude of impact, but if you look at the indicators, just the EPI curve that we have on slide nine that shows the seasonal pattern in the fall generally comes under pressure that time of the year.

Sherman Miller: Then one follow-up for Dan is just about HPAI. Impossible to predict timing or magnitude of impact, but if you look at the indicators, just the epi curve that we have on slide 9 that shows the seasonal pattern. The fall generally comes under pressure that time of the year. Then other early indicators are just the number of states that have some type of poultry, mostly turkeys. That number is 7 now, with Indiana being added this week in commercial ducks and also up north in Canada, Manitoba, and Alberta. Both are indicating that there is poultry affected. To our knowledge, there is not any layers in that. But it is just showing the overall presence of the virus that the wild birds are carrying.

Speaker #3: And then, other early indicators are just the number of states that have some type of poultry, mostly turkeys. That number is seven now, with Indiana being added this week in commercial ducks, and also up north in Canada—Manitoba and Alberta both are indicating that there is poultry affected. To our knowledge, there's not any layers in that, but it's just showing the overall presence of the virus that the wild birds are carrying.

Speaker #1: Thank you. One moment for our next question. Our next question comes from Benjamin Mayhew with BMO Capital Markets. Your line is open.

Operator: Thank you. One moment for our next question. Our next question comes from Benjamin Bienvenu with BMO Capital Markets. Your line is open.

Speaker #7: Hi. Good morning. Thanks for the questions. I'd like to start—so your 10-K notes your breeder and layer flock actually grew about low single digits from the end of May to the end of August.

Benjamin Bienvenu: Hi. Good morning. Thanks for the questions. I would like to start on, your 10-K notes, your breeder and layer flock actually grew about low single digit from the end of May to the end of August. This would imply the industry is cutting back, but that Cal-Maine is not, at least on a net basis. So my questions are: are you comfortable with your current in-house supply of breeders and layer flock at this point in the cycle and given your financial strength? Understanding there could be more nuance here, but how are you thinking about this dynamic, especially in the face of mounting industry losses?

Benjamin Mayhew: Hi. Good morning. Thanks for the questions. I would like to start on, your 10-K notes, your breeder and layer flock actually grew about low single digit from the end of May to the end of August. This would imply the industry is cutting back, but that Cal-Maine is not, at least on a net basis. So my questions are: are you comfortable with your current in-house supply of breeders and layer flock at this point in the cycle and given your financial strength? Understanding there could be more nuance here, but how are you thinking about this dynamic, especially in the face of mounting industry losses?

Speaker #7: So this would imply the industry is cutting back, but that CAL-MAINE is not, at least on a net basis. So my questions are: are you comfortable with your current in-house supply of breeders and layer flock at this point in the cycle, and given your financial strength—I understand there could be more nuance here?

Speaker #7: But how are you thinking about this dynamic, especially in the face of mounting industry losses?

Speaker #3: Well, good morning, Ben. And great question. And as you know, our flock planning happens two years out at all times. So we're planning well in advance.

Sherman Miller: Well, good morning, Ben, and great question. As you know, our flock planning happens 2 years out at all times, so we are planning well in advance and our goal is to supply 100% of our customer needs. So that is how our flocks play out. No question, over the last few years, it has been very difficult to stay in normal flock rotations. But thankfully, we have had an opportunity to catch up on some of those. So we continue to plan the absolute best we possibly can to make sure 100% of our customer orders are filled. Cannot speak to the industry. Max, anything to add there?

Speaker #3: And our goal is to supply 100% of our customer needs. So that's how our flocks play out. And no question over the last few years has been very difficult to stay in normal flock rotations.

Speaker #3: But thankfully, we've had an opportunity to catch up on some of those, so we continue to plan the absolute best we possibly can to make sure 100% of our customer orders are filled.

Speaker #3: I cannot speak for the industry. Max, anything to add there?

Speaker #4: No, I think you covered the chart.

Max P. Bowman: No. I think you are good.

Max Bowman: No. I think you are good.

Speaker #7: Got it. And I wanted to ask a question on prepared foods. So first quarter, pleasantly surprised with the profitability there. Obviously, understand that you have a lot of investments in motion that are impacting volumes.

Benjamin Bienvenu: Got it. Then I wanted to ask a question on Prepared Foods. So Q1, pleasantly surprised with the profitability there. Obviously understand that you have a lot of investments in motion that are impacting volumes. But I guess my question is on an annual basis for this year, is there a chance you could actually grow profits year-over-year in the Prepared Foods business? How are you thinking about the H2 of the year, particularly? Are you expecting a strong acceleration in Prepared Foods profitability? Could the margin profile quickly approach mid-teens from an operating margin perspective? I will leave it there. Thanks.

Benjamin Mayhew: Got it. Then I wanted to ask a question on Prepared Foods. So Q1, pleasantly surprised with the profitability there. Obviously understand that you have a lot of investments in motion that are impacting volumes. But I guess my question is on an annual basis for this year, is there a chance you could actually grow profits year-over-year in the Prepared Foods business? How are you thinking about the H2 of the year, particularly? Are you expecting a strong acceleration in Prepared Foods profitability? Could the margin profile quickly approach mid-teens from an operating margin perspective? I will leave it there. Thanks.

Speaker #7: But I guess my question is on an annual basis for this year, is there a chance you could actually grow profits year over year in the prepared foods business?

Speaker #7: And how are you thinking about the second half of the year particularly? Are you expecting a strong acceleration in prepared foods profitability? And could the margin profile quickly approach mid-teens from an operating margin perspective?

Speaker #7: And I'll leave it there. Thanks.

Speaker #3: John, you thank you.

Sherman Miller: John, you take that?

John Zoeller: Yeah. Good morning, Ben. Thanks for the question. As Sherman mentioned in his remarks, the first wave of this capital expansion that we have previously announced is being put in right now, the pancake line that he mentioned, as well as the scrambled egg line, and then the gradual over the course of this year and next year, the incremental capacity for our Crepini pancake brand. From a top line, we will start to see that in the H2 of this year. As that comes online and we commercialize it, obviously that lags our operating costs to commission and to get the lines installed and up and running. From an earnings perspective, not providing any guidance on where to think about in terms of margins for the full year.

Speaker #6: Good morning, Ben. Thanks for the question. So as Sherman mentioned in his remarks, the first wave of this capital expansion that we've previously announced is being put in right now, the pancake line that he mentioned as well as the scrambled egg line.

Speaker #6: And then the gradual, kind of over the course of this year and next year, the incremental capacity for a Capini Pancake brand. From a top line, you'll start to see that in the second half of this year as that comes online and we commercialize it.

Speaker #6: Obviously, that lags our operating costs to commission and to get the lines installed and up and running. So, from an earnings perspective, not providing any guidance on where to think about, in terms of margins for the full year. But as we get this in and start commercializing it and kind of reach full capacity, that will provide some uplift to, certainly, our margin profile as we absorb a fixed cost base.

John Zoeller: But as we get this in and start commercializing it and reach full capacity, that will provide some uplift to certainly our margin profile as we absorb a fixed cost base. I think that is what you can expect for the rest of this year.

Speaker #6: So I think that's kind of what you can expect for the rest of this year.

Speaker #7: Thank you.

Benjamin Bienvenu: Thank you.

Benjamin Mayhew: Thank you.

Speaker #1: One moment for our next question. Our next question comes from Ben Cleave with Stonex. Your line is open.

Operator: One moment for our next question. Our next question comes from Ben Klieve with StoneX. Your line is open.

Speaker #5: All right. Thanks for taking my questions. Most of mine have already been addressed, but I did have one question on your kind of M&A strategy here going forward in the context of the egg market now having both the supply dynamics that have been noted for some time, but also the input cost dynamics that have come up, especially over the past several months.

Ben Klieve: All right. Thanks for taking my questions. Most of mine have already been addressed, but I did have one question on your M&A strategy here going forward in the context of the egg market now having both the supply dynamics that have been noted for some time, but also the input cost dynamics that have come up, especially over the past several months. Does this environment change how you look at M&A from the perspective of being able to potentially acquire to expand your vertical integration capabilities or potentially expand production or branding of shell eggs, either on the conventional or specialty side at a particularly attractive valuation, given that a lot of operators in the space are financially stressed these days? Or has your M&A philosophy not really changed at all here over the past several quarters?

Speaker #5: Does this environment change how you look at M&A from the perspective of being able to potentially acquire to expand your vertical integration capabilities or potentially expand production or branding of shell eggs either on the conventional or specialty side at a particularly attractive valuation given that a lot of operators in the space are financially stressed these days or is your M&A philosophy not really changed at all here over the past several quarters?

Speaker #3: Good morning, Ben. Thank you for that question. And first, out of the gate, always be confident that our goal is to remain egg-centric when talking about M&A, bolt-on, tuck-in type.

Sherman Miller: Good morning, Ben. Thank you for that question. First out of the gate, always be confident that our goal is to remain egg-centric. When talking about M&A, bolt-on, tuck-in type M&A is what we look for. As you mentioned a few of them, we have more ways to grow than ever before from conventional eggs, specialty eggs, prepared foods, ingredients, and brands. We have more opportunity than ever. So we continue to evaluate opportunities, relying heavily upon our model to tell us if it's the right opportunity or not, but also considering the organic opportunities like the ones that John mentioned a few minutes ago is also a tremendous way of growing.

Speaker #3: M&A is what we look for, but as you mentioned a few of them, but we have more ways to grow than ever before from conventional eggs, specialty eggs, prepared foods, ingredients, and brands.

Speaker #3: We have more opportunity than ever. So we continue to evaluate opportunities relying heavily upon our model to tell us if it's the right opportunity or not.

Speaker #3: But also considering the organic opportunities like the ones that John mentioned a few minutes ago is also a tremendous way of growing.

Speaker #2: Yeah, Ben, what I would add to that is that we have meaningful opportunity for both organic investment and M&A, and that pacing is very strategically important.

Keira Lombardo: Yeah, Ben, what I would add to that is that we have meaningful opportunity through both organic investment and M&A, and that pacing is very strategically important. We're building the foundation of a prepared foods platform that we expect to support growth for many years to come, and that foundation needs to be very well fortified, and that's commercially, operationally, and organizationally as well. We've added capabilities, as you know, through Echo Lake and Crepini and Creighton and Van's Foods. At the same time, we're investing organically in significant new capacity as both Sherman and John outlined. So the priority now is really to integrate those capabilities, to commercialize the capacity, and to build the customer pipeline and prove that the platform can execute consistently. That does not mean that we stop looking at M&A.

Speaker #2: We're building the foundation of a prepared foods platform that we expect to support growth for many years to come. And that foundation needs to be very well fortified.

Speaker #2: And that commercially, operationally, and organizationally as well. And we've added capabilities, as you know, through Echo Lake, Carpini, Creighton, and Vans. At the same time, we're investing organically in significant new capacity, as both Sherman and John outlined.

Speaker #2: So the priority now is really to integrate those capabilities to commercialize the capacity and to build the customer pipeline and prove that the platform can execute consistently.

Speaker #2: That does not mean that we stop looking at M&A, right? It means that we evaluate every opportunity against what the organization can absorb and execute really well.

Keira Lombardo: It means that we evaluate every opportunity against what the organization can absorb and execute really well. We need to digest and build at a pace that supports long-term success, not maximize the number of transactions or the speed of expansion in the near term. If M&A can accelerate the strategy without compromising execution, we have the capacity to act. But organic growth, integration, and commercialization are equally important parts of creating value.

Speaker #2: We need to digest and build at a pace that supports long-term success, not maximize the number of transactions or the speed of expansion in the near term.

Speaker #2: So if M&A can accelerate the strategy without compromising execution, we have the capacity to act. But organic growth integration and commercialization are equally important parts of creating value.

Speaker #5: Got it. Got it. Very helpful. Thanks, Karen. Thanks, Sherman. Thanks for taking my questions. Best of luck going into the seasonal strong period here. I'll get back in the queue.

Ben Klieve: Got it. Very helpful. Thanks, Karen. Thanks, Sherman. Thanks for taking my questions. Best of luck here going into the seasonally strong period here. I will get back in queue.

Speaker #1: One moment for one moment for our next question. Our next question comes from Heather Jones with Heather Jones Research. Your line is open. Heather, your line is open.

Operator: One moment for-

Ben Klieve: Thank you.

Operator: One moment for our next question. Our next question comes from Heather Jones with Heather Jones Research. Your line is open. Heather, your line is open. You can ask your question.

Speaker #1: You can ask your question.

Speaker #4: Hi, sorry about that. I was on mute. Thank you for taking this follow-up. Two follow-ups. I know you're not giving guidance on prepared foods, but just wondering, more qualitatively, as you roll out this additional capacity, I would assume the upfront expense piece is going to increase.

Heather Jones: Hi. Sorry about that. I was on mute. Thank you for taking the follow-ups. Two follow-ups. I know you're not giving guidance on Prepared Foods, but just wondering, just more qualitatively, as you roll out this additional capacity, I would assume the upfront expense piece is going to increase. Should we expect Prepared Foods EBIT to decline sequentially? Or how should we think about that?

Speaker #4: So, should we expect prepared foods EBIT to decline sequentially, or how should we think about that?

Speaker #6: Yeah, Heather, thanks for the follow-up. This is John. Looking at Q2, we're going to have some upfront costs for the capacity that we're bringing online this quarter.

John Zoeller: Yeah, Heather. Thanks for the follow-up. This is John. Look, in Q2, we're going to have some upfront costs for the capacity that we're bringing online this quarter. We saw that in the first quarter from the initial capacity we brought online late in the first quarter, and you can expect to see that in Q2. That should kind of moderate a little bit in the back half of this year while getting the top-line growth from commercializing those pounds that we bring online. I think that's kind of the sequence you can think about.

Speaker #6: And so we saw that in the first quarter from the initial capacity that we brought online late in the first quarter. And you can expect to see that in Q2.

Speaker #6: And that should kind of moderate a little bit in the back half of this year, while getting the top-line growth from commercializing those pounds that we bring online.

Speaker #6: So, I think that's kind of the sequence you can think about.

Speaker #4: Okay, thank you for that. And then, Sherman, going back to comments you made in the prepared remarks about the valuation of your stocks. So, it's setting new lows on a price-to-book basis.

Heather Jones: Okay. Thank you for that. Sherman, going back to comments you made in the prepared remarks about the valuation of your stock. It's setting new lows on a price-to-book basis, going back at least 20 years. When you think about the valuation on a price per hen, et cetera, basis, it seems to be setting new lows there, too. Given the cash the company's sitting on, I know you have to fund losses and you're having to fund these Prepared Foods investments, but is there any reason to think that you would not get more aggressive? I know you all bought the 200 and some thousand shares post-quarter end, but is there any reason to think you won't get even more aggressive than that given just to stop setting new lows? Thank you.

Speaker #4: Going back at least 20 years. And then, when you think about the valuation on a price per hen, etc., basis, it seems to be setting new lows there, too.

Speaker #4: So given the cash the company is sitting on, I know you have to fund losses and you're having to fund these prepared foods investments.

Speaker #4: But is there any reason to think that you would not get more aggressive? And I know y’all bought the 200-and-some-thousand shares post-quarter end.

Speaker #4: But is there any reason to think you won't get even more aggressive than that given just the stock setting new lows? Thank you.

Speaker #3: Heather, great question. The share repurchases are a great addition to our capital allocation that we added a little over a year ago. And as we noted, the subsequent events that you mentioned show that we see big value at these levels of stock.

Sherman Miller: Heather, great question. The share repurchases are a great addition to our capital allocation that we added a little over a year ago. As we noticed the subsequent events that you mentioned, it shows that we see big value at these levels of stock. The overhang right now is the things that we've mentioned today. But the assurance is that we've been here before, and it's why we manage the company the way that we do from our balance sheet forward. The current situation is just not mid-cycle, normal, or sustainable. You pointed out the right metrics. The stock value is very low compared to historical, and we see a lot of value there.

Speaker #3: And the overhang right now is the things that we've mentioned today. But the assurance is that we've been here before. And it's why we manage the company the way that we do from our balance sheet forward.

Speaker #3: And the current situation is just not mid-cycle normal or sustainable. So, you pointed out the right metrics. The stock value is very low compared to historical.

Speaker #3: And we see a lot of value there.

Speaker #4: Okay. Thank you so much.

Heather Jones: Okay. Thank you so much.

Speaker #1: And I'm not showing any further questions. I'd like to turn the call back over to Sherman for any further remarks.

Operator: I am not showing any further questions. I would like to turn the call back over to Sherman for any further remarks.

Speaker #3: All right. Well, thank you for the thoughtful questions today and for your continued interest in Cal-Maine Foods. Operator, we're ready to conclude the call.

Sherman Miller: All right. Well, thank you for the thoughtful questions today and for your continued interest in Cal-Maine Foods. Operator, we are ready to conclude the call.

Speaker #1: This concludes today's question and answer session. A replay of today's call will be available via webcast approximately two hours after the conclusion of the call.

Operator: This concludes today's question and answer session. A replay of today's call will be available via webcast approximately two hours after the conclusion of the call and will remain available on demand for a year. The webcast can be accessed in the Investor Relations section of the Cal-Maine Foods website. A transcript of today's call will also be posted on the Investor Relations section of the company's website. Thank you for joining us today. You may now disconnect.

Speaker #1: And we'll remain available on demand for a year. The webcast can be accessed in the Investor Relations section of the CAL-MAINE Foods website. A transcript of today's call will also be posted in the Investor Relations section of the company's website.