Cal-Maine Foods Q3 FY2026 Earnings Call - Specialty and Prepared Foods Now Drive the Business as Commodity Prices Collapse

Operator: Good morning, everyone, and welcome to the Cal-Maine Foods third quarter fiscal 2026 earnings conference call. All participants are in 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. Please note this call is being recorded. I will now turn the call over to Sherman Miller, President and Chief Executive Officer of Cal-Maine Foods. Please go ahead.

Sherman Miller, President and Chief Executive Officer, Cal-Maine Foods: 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. Let me start by sincerely thanking our teams across the organization whose execution, focus, and commitment to excellence drive the operational and financial performance that underpins everything we do. Their hard work and dedication continue to set us apart, and these results are a direct reflection of their efforts. In February, we shared the sad news of the passing of longtime board member Jim Poole. Over more than two decades, Jim made a lasting impact on the company, and we extend our heartfelt condolences to his family and loved ones. Today, we announce the appointment of Dudley Wooley to the board to fill the vacancy left by Jim.

Dudley brings deep expertise in risk management and governance, along with a strong track record of leading growth-oriented organizations and driving operational performance. We look forward to the perspective he will add as we continue to strengthen our business, enhance earnings visibility, and focus on long-term value creation. Before Max walks you through our results in detail and provides additional color on our financial performance, I’d like to spend a few minutes discussing how we think about the long-term direction of the business and how the strategy we’re executing is designed to create durable value over time. When investors evaluate Cal-Maine, they often focus on the consistency of our execution. That reputation has been built over time, not in any single quarter. It reflects the accountability, operational excellence, and continuous improvement embedded across the organization.

At Cal-Maine, our objective is straightforward: to compound intrinsic value per share over time through thoughtful portfolio evolution, efficient operations, and prudent capital allocation. While short-term earnings will naturally fluctuate in a cyclical industry, our focus remains on strengthening the long-term earnings power and resilience of the business. In practical terms, that strategy centers on several priorities. First, we continue to expand our specialty egg mix. As specialty eggs represent a larger portion of our portfolio, they support structurally stronger margins, more stable demand characteristics, and improved returns on invested capital. Second, we’re continuing to evolve our pricing structures. Over time, we’re increasing the share of our business that operates under structured pricing arrangements, which we believe helps improve the stability and predictability of realized pricing across the cycle. Third, we’re expanding our prepared foods platform.

Prepared foods broadens our addressable market, leverages our vertically integrated shell egg inputs, and establishes a complementary long-term growth platform alongside our core shell egg business. At the same time, we continue to reinforce the operational strengths that have long defined the company. Investments in biosecurity, productivity, and vertical integration strengthen our cost leadership and support reliable operating performance across cycles. Together, we believe these actions will steadily improve the quality and durability of our normalized earnings power while strengthening the company’s long-term competitive position. Against that backdrop, let me highlight a few key developments from the third quarter and the first three quarters of our fiscal year that reflect how this strategy is translating into execution. Unless otherwise indicated, all comparisons are to the comparable period of fiscal 2025.

In the third quarter of fiscal 2026, specialty eggs drove a greater portion of shell egg sales, accounting for 50.5% of total shell egg sales compared to 24.4%. Prepared foods accounted for 9.5% of net sales compared to 0.8%. Specialty eggs and prepared foods combined accounted for 52.9% of net sales compared to 24%. In the first three quarters of fiscal 2026, specialty eggs drove a greater portion of shell egg sales, accounting for 42.7% of total shell egg sales compared to 29.2%. Prepared foods accounted for 9.3% of net sales compared to 1%. Specialty eggs and prepared foods combined accounted for 45.7% of net sales compared to 28.6%.

Importantly, the egg market in the third quarter of fiscal 2026 provided a real-time test of our strategy. Periods of price softness can create noise around near-term performance, but they also provide an opportunity to demonstrate that our results are not simply a function of spot market conditions. Instead, our performance reflects how effectively we manage mix, pricing structures, cost, and capital across the cycle. What we’re really seeing is a market that’s still being impacted by HPAI, but to a much lesser extent than last year. The disruption hasn’t gone away. It’s still a reality, but it’s not driving the same level of supply shock or panic-driven purchasing. Supply has improved, and retailers and food service operators aren’t rushing to build inventory, which has put downward pressure on wholesale prices, with retail adjusting more gradually. The key data points for December to February make that clear.

The average layer hen flock is up about 2.2% year-over-year, and depopulations are down 70.6% year-over-year. While HPAI is still present, the magnitude of disruption is meaningfully lower, and that’s what’s showing up in pricing. On the demand side, consumption remains stable to improving, with a few timing dynamics influencing near-term trends. In retail, volumes are up about 3% year to date. What’s important is that our market is broad-based. Growth is showing up across both value and premium segments. In food service, demand is beginning to recover, with increased traffic and egg servings increasing, particularly in quick service. More broadly, eggs continue to benefit from strong structural tailwinds. They align with high-protein and health-focused diets, fit well with convenience and portable meal formats, and remain a non-discretionary item once a consumer is in the channel.

Overall, demand is holding up well, and what we’re seeing in the market to date is much more about supply recovery and timing shifts than any fundamental change in consumption. You can see our strategic framework reflected in the acquisition of the shell egg products, and prepared foods assets of Creighton Brothers and Crystal Lake that we announced during the quarter. This transaction expands the geographic scale of our shell egg platform and adds nearby liquid egg capacity that supports our internal sourcing strategy for egg-based ingredients. We believe that over time, integrating shell egg production, egg products, and prepared foods more tightly within our value chain will help strengthen supply security, improve operational efficiency, and reinforce the economics of our prepared foods platform. With that, let me turn the call over to Max to drill down into our financial results and discuss our capital allocation framework. Max?

Max, Chief Financial Officer, Cal-Maine Foods: Thanks, Sherman, and good morning, everyone. As a reminder, we published our third quarter earnings release and the 10-Q this morning. Additionally, we published a brief earnings presentation on our website. These documents contain detailed information on our financial results. I’ll touch on the highlights for the third quarter of fiscal 2026. Unless otherwise indicated, all comparisons are to the comparable period of fiscal 2025. For the third quarter of fiscal 2026, net sales were $667 million compared to $1.4 billion, down 53%. Conventional egg sales were $283.2 million compared to $1 billion, down 72.1%, with 70.1% lower selling prices and 6.7% lower sales volumes.

Specialty egg sales were $289.1 million compared to $328.9 million, down 12.1%, with 16.9% lower selling prices and 5.8% higher sales volume. Our average breeder flocks grew 13%, total chicks hatch rose 41.7%, and the average number of layer hens expanded 2%. Prepared foods sales were $63.6 million compared to $11.8 million, up 441.2% year-over-year and compared to $71.7 million, down 11.2% quarter-over-quarter. Our majority-owned subsidiary, Crepini Foods, delivered strong momentum, with sales increasing by 283%, contributing positively to the overall prepared foods portfolio.

In prepared foods, Q3 represents a trough driven by the timing of previously announced planned network optimization and expansion activities. The near-term margin pressure is largely volume driven, reflecting temporary downtime and under absorption of fixed costs, along with some mixed headwinds as the network transitions and we increase the use of cost-type pricing arrangements that enhance stability. As capacity comes back online, we expect a progressive recovery beginning in Q4, with margins trending back towards baseline through fiscal 2027 and 2028 as scale and network efficiencies are realized. We expect prepared foods capacity to increase more than 30% over the next 18-24 months. Importantly, demand remains intact. This is a function of execution timing, not structural weakness, and these investments position prepared foods as a more durable, high-margin growth platform.

Overall, gross profit was $119.3 million compared to $716.1 million, down 83.3%, primarily driven by 56.5% lower shell egg selling prices, partially offset by decrease in the price and volume of outside egg purchases as our percentage produced to sold increased 3.1 percentage points to 91.5%. Operating income was $35.9 million compared to $635.7 million, down 94.3% with an operating income margin of 5.4%. Net income attributable to Cal-Maine was $50.5 million compared to $508.5 million, down 90.1%. Diluted earnings per share were $1.06 compared to $10.38, down 89.8%.

Cost of sales decreased 21.9%. Lower costs associated with egg purchases and egg products more than offset the increase in prepared food costs due to the acquisition of Echo Lake Foods, as well as the increase in our farm production and processing, packaging, and warehouse costs. SG&A expenses increased 4.2% due to the addition of Echo Lake Foods and increased professional and legal fees. This was partially offset by lower employee-related costs. Net cash flow from operations was $103.6 million compared to $571.6 million, down 81.9%. We ended the quarter with cash and temporary cash investments of $1.152 billion, down 17.3%. We remain virtually debt-free.

We repurchased 329,830 shares of common stock under our current share repurchase authorization during the quarter for a total of $24.3 million. The repurchase program permits us to purchase up to $500 million, of which $350.8 million remains available. For the third quarter of fiscal 2026, we will pay a cash dividend of approximately $0.36 per share to holders of our common stock pursuant to our variable dividend policy. The dividend is payable on May 14, 2026, to holders of record on April 29, 2026. The final amount paid will be based on the number of outstanding shares on the record date. From a financial perspective, our priorities remain centered on strengthening the durability and predictability of Cal-Maine Foods’ earnings profile while maintaining a structured and flexible capital structure.

Our capital allocation framework is designed to support long-term per share value creation while preserving the financial resilience necessary to navigate a cyclical industry. First, we will prioritize investment in high return organic growth opportunities. This includes investments that expand specialty egg capacity, improve productivity and operational efficiency, and support the continued development of our egg products and prepared food capabilities. To that end, our prepared foods expansion initiatives are progressing on schedule and in line with plans previously communicated. At Echo Lake Foods, the network optimization and capacity expansion project is underway and expected to add approximately 17 million pounds of annual scrambled egg production capacity throughout fiscal 2027. In addition, the previously announced 14.8 million high-speed pancake line continues to advance as planned and is expected to contribute an additional 12 million pounds over the course of fiscal 2027.

Separately, our joint venture, Crepini Foods, is investing $7 million through fiscal 2028 to expand production capacity by approximately 18 million pounds through the installation of new equipment and production lines. Collectively, these initiatives remain on track and are expected to increase Cal-Maine’s prepared food production capacity by more than 30% over the next 18-24 months as the projects are completed and ramp up as planned. Second, we pursue selective acquisitions that strengthen the company’s strategic positioning and meet stringent return thresholds. Our acquisition of certain assets of Creighton Brothers in Crystal Lake is a good example of this approach. The transaction expands the geographic scale of our shell egg platform while also adding nearby liquid egg capacity that we believe will strengthen our integrated value chain. Third, we return excess capital to shareholders through our variable dividend framework and, when appropriate, opportunistic share repurchases.

Underlying this entire framework is a commitment to maintaining balance sheet strength. A strong liquidity position provides the flexibility to invest across the cycle, respond to strategic opportunities, and navigate industry volatility. This systematic approach allows us to balance growth, resilience, and shareholder returns while preserving the long-term optionality that is critical in our industry. Over time, we believe the combination of portfolio evolution, disciplined capital allocation, and balance sheet strength will continue to enhance the company’s normalized earnings power per share and support durable value creation for shareholders. That concludes my review of the financial results. I will now turn the call back to Sherman.

Sherman Miller, President and Chief Executive Officer, Cal-Maine Foods: Thanks, Max. Looking ahead, we believe Cal-Maine’s well-positioned to benefit from durable shifts shaping the egg category. By building on the structural strength of our core shell egg platform while expanding across specialty eggs, egg products, and prepared foods, we believe we are strengthening the resilience and quality of our business over time. This progression is expected to help enhance the durability of our earnings profile and position Cal-Maine to deliver sustainable growth and long-term value creation. With that, I’ll turn the call back over to the operator to begin the Q&A portion of today’s call.

Operator: 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, LLC. Your line is open.

Heather Jones, Analyst, Heather Jones Research, LLC: Good morning. Thanks for the question. Congratulations on the quarter. I guess I want to start with specialty pricing. That was where much of the upside was relative to our estimate for the quarter. The California price had rallied nicely over the course of a few weeks, but it’s recently begun to pull back.

No, still not back to the Q3 lows. Just wondering if you would expect Q4 specialty price to be similar to Q3? Or is there some other dynamic that we need to consider there?

Sherman Miller, President and Chief Executive Officer, Cal-Maine Foods: Good morning, Heather. Thank you for the question. You know, specialty eggs are continuing to be extremely exciting for us, and as we move into Q4 and beyond, we see that as a huge part of our differentiation and us being able to diversify. The specialty prices we’ve mentioned before, there is a smaller piece of that category that is tied to the market. As that market moves up and down, there is some fluctuation. For the most part, those prices are a lot more stable. Max, you might wanna give a little bit more color on that.

Max, Chief Financial Officer, Cal-Maine Foods: Yes. As Sherman said, Heather, you know our specialty pricing doesn’t fluctuate that much. We call out, you know, the vast majority of our specialty pricing is either grain-based or a fixed price type arrangement of cost-plus. Again, stays pretty flat. There is a component of that as you call out that ties to the cage-free California market. You know, it varies from quarter to quarter, but roughly I’d say about 12% or in that range. You know, depending on how that price reacts, this quarter and coming quarters you know will largely drive a lot of that movement. You know, we expect that specialty price to stay pretty consistent.

Heather Jones, Analyst, Heather Jones Research, LLC: Okay. Thank you for that. On my follow-up, it’s just on the prepared foods business. I think I joined the call a few minutes late, but I think I caught y’all saying that you expect the margin for that business to trend back to baseline through 2027 into 2028. Just wanting to clarify that. Are you not expecting it to fully get back there until 2028? When you say baseline, there were some quarters where it was north of 20%, but I believe your baseline is 19%. Is it unlikely to get back to where it was a few quarters ago? Just like, updated thinking on how we should be thinking about baseline.

Max, Chief Financial Officer, Cal-Maine Foods: Yeah, I’ll take that one. You know, we think Q3 represents a, I’d call it a trough quarter. You know, what you’re seeing is anticipated impacts of some of the network expansion and capacity initiations that we’ve mentioned. In the quarter, we saw some lower volumes as we go and in margin pressure as we go through these reconfigurations. You know, when you have lower volumes, the first thing that happens to you is under absorption of fixed cost. You know, that was one of the major headwinds for the quarter. As we roll into Q4 2026 even, we expect to see some of that rebound begin to come back online.

It will be tempered a little bit, as sales mix tied to the end of the school year, partially will offset some of that margin recovery. That’s just a normal seasonal dynamic. It’s not an execution issue there. We’re currently, because of these reconfigurations, you know, having a slightly less desirable product mix, that’s impacting our margins as we reconfigure. But again, that will improve over time too. All these things are transitional and, you know, not reflecting of underlying demand, which we still believe to be strong. We continue to migrate from market-based pricing towards grain-based and longer-term pricing arrangements.

This moderates sometimes near-term pricing upside, but again, we’re looking at the long-term durability and stability of our business, and we think it enhances that. As we begin to see this recovery in Q4 2026, we’ll see higher capacity and better utilization of that capacity, and then that margin recovery will really start showing up towards the end of 2027 and as you said, into 2028. That’s when the volumes we’ve talked about through the additional investment that we’ve made or are making, I should say, in Echo Lake as well as Crepini will be fully online and returning. When you speak of the 19%-20% margin, you know, that was the margin we had called out at Echo Lake.

You know, Crepini’s coming along and the other elements of our prepared foods. We continue to work on as well. It’s, you know, we think we’re taking some, if you wanna call it, short-term pain now for better long-term positioning and gain in the future. We feel more positive as we go into 2027 and early 2028 that we’ll really see the fruits of that along with that 30% growth that we had talked about from these investments.

Sherman Miller, President and Chief Executive Officer, Cal-Maine Foods: Thank you, Max. Only thing I’ll add, Heather, is just getting the nuts and bolts in the right place for long-term performance and growth and having streamlined operations and really strategically placing the 4 Echo facilities in the right manner to have our flour products to the north 2 facilities, the egg-type products in the southern 2 facilities, which happen to be very close to Creighton Brothers, which can supply the eggs long-term. A lot of good progress there.

Heather Jones, Analyst, Heather Jones Research, LLC: Okay. Thank you so much.

Operator: One moment for our next question. Our next question comes from Pooran Sharma with Stephens Inc. It’s open.

Pooran Sharma, Analyst, Stephens Inc.: Thank you and congrats on the quarter here. Wanted to focus on pricing here maybe for the conventional eggs. It did come in a little bit higher than we were modeling. You have stated in the past that your new hybrid pricing model gives you a little bit better floor. I’m just looking at the price ratio between your conventional egg pricing and what we track with the USDA, and we just haven’t seen it this high since over a decade.

Was wondering if maybe you could help us and the investment community just understand how to think about your cost of production for your conventional eggs, just kind of based on some of the disclosures you have in your filings. Then maybe just marry that with what kind of, at a high level, rate of return do you all kinda generally expect from these type of assets?

Sherman Miller, President and Chief Executive Officer, Cal-Maine Foods: Well, good morning, and thank you for the question. I’ll start off and then pass it to Max. I think you pegged it very well. You are seeing reduced volatility. As we mentioned with hybrid pricing, there’s some trade-offs. On the top side, there’s an opportunity, but on the bottom side there is as well, and that’s what you’re seeing in this quarter. Market realization certainly benefits from this as well as we’ve mentioned before, having longer term arrangements. Any top side slippage is certainly balanced with downside uplift.

That of course, it depends heavily upon the type of customer and the real win here is us working with customers not to only benefit the type of eggs you’re talking about, but also specialty eggs and prepared foods that we also value very highly. On the cost side, there’s certainly a lot going on geopolitically around the world. Grain certainly is one of the things that’s come up in the news over the last few weeks, particularly tied to fertilizer. Our consultants have assured us that probably 90% of the inputs have already been locked, so fertilizer costs for this planting season shouldn’t cause too much disruption. Certainly, fuel transporting not only grains, but everything else is certainly in the news and is real.

The reassuring piece of that is that we’ve been here many, many times before, and we navigate that not only by using our scale, but also by using things like our warehousing and our inventory and managing through situations like this. Max, what would you add?

Max, Chief Financial Officer, Cal-Maine Foods: Well, I mean, Pooran, when you talked about hybrid pricing, you’re talking about primarily our conventional eggs. As you know, we only report one segment today, so we don’t really give complete margin information and returns on conventional versus specialty. You know, all that hybrid pricing does is exactly what you called out and what we’ve said before. What we hope to get from that is a more stable and resilient and continuous profit. You know, I mean, I’m not saying it will always be a profit, but certainly we’re taking some off the top for high returns from conventional and trading that for longer term, more stable earnings.

As we grow, you know, that’s a piece of the puzzle, and where we look for really, you know, good growth and even better returns would be from our specialty and our prepared foods business. We kind of look at the conventional business as our baseline. It’s important because of its size and scale, that it’s strong and it operates profitably and consistently. That’s what the hybrid pricing does. We continue to invest in the prepared foods and our specialty where we hope to get higher returns.

We don’t disclose, you know, individual, again, returns for conventional and specialty at this time, but, you know, we’ve said in the past that our return on invested capital is, you know, double digit, well above our cost of capital. We feel good about the returns as we sit today, not only from conventional, but the opportunities in specialty and prepared foods.

Pooran Sharma, Analyst, Stephens Inc.: Great. I appreciate the detail there, Sherman and Max. Maybe I just wanted to understand from a capital allocation front, you still have a pretty strong balance sheet and you know, when in our recent conversations you had called out liquids as maybe an area of focus. So as you’re looking kinda across the M&A landscape, does that remain an area that you wanna continue to build, or are you kinda just more looking at it opportunistically in terms of what’s out there in terms of conventional specialty or more prepared foods assets?

Sherman Miller, President and Chief Executive Officer, Cal-Maine Foods: I’ll start by just commenting on Creighton Brothers. As we pointed out, there’s liquid egg capacity there, and it’s very close to our prepared foods operations that ultimately eggs, egg products will be produced in the southern two plants. Our capital allocation hierarchy still remains intact to pursue selective accretive M&A where returns are compelling. We believe that we have more ways to grow than ever before, being conventional eggs, specialty eggs, prepared foods, the ingredients that you mentioned, and also brands tied to pre-prepared foods. The ingredient piece we wanna over time closely align our needs within Echo Lake. As we mentioned before, there’s some arrangements that we’re working through that we inherited.

We think that Creighton Brothers is certainly a very strategic move in making now that come to pass. Max?

Max, Chief Financial Officer, Cal-Maine Foods: Yeah. I guess I would just say, we in our materials that we published, we’ve got an investor deck. It’s got a few slides on there, and it recaps our capital allocation for the last 12 months, ending at the end of our third quarter. You know, I think there’s a lot of balance there, and it kind of shows that in a lot of ways, we’re putting our money where our mouth is. I mean, it represents about $1 billion in capital that was allocated. About 38% or $384 million of that went to dividends to our shareholders. About $299 million or 30%, you know, went to the acquisitions, you know, things like Echo Lake, Crystal Lake, Creighton Brothers that we just announced.

Remember, we’re in a time when acquisitions are sometimes considered a little tougher because of the very good markets that we’ve been in. Yet we’ve been able to deploy capital towards these acquisitions that we believe, you know, really advance our goals for long-term. On the CapEx side, we allocate about $117 million or 17% of that, and that includes about $35 million or so of maintenance CapEx. Then our stock repurchases or share repurchases, about 15% over $150 million. You know, again, I think that gives a good view of where we’re spending our money. As Sherman says, you know, what our focus is there is really long-term shareholder value.

We look at things opportunistically, and we wanna do the things that we think clearly enhance our earnings quality and portfolio growth and resiliency.

Pooran Sharma, Analyst, Stephens Inc.: Great. Thank you for the detail.

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

Leah Jordan, Analyst, Goldman Sachs: Thank you. Good morning. I wanted to ask about demand. You talked about it being resilient in the quarter, but just seeing if you could provide more color on the trends you’re seeing within your branded portfolio specifically. What are the growth opportunities you still see there, including any potential opportunity to gain more contracts or exclusivity over time?

Sherman Miller, President and Chief Executive Officer, Cal-Maine Foods: Good morning, Leah. Thank you for that question, and I’ll certainly get to the branded. Just on a higher level, retail egg volumes are up about 3% year to date, and that’s through late February. The really incredible thing about that is it’s broad across segments from conventional, cage-free, free-range, pasture-raised. Food services also showing early signs of recovery, with January making a clear inflection point up about 1% year-over-year, with dollars up about 4%. We’re seeing some good things from a high level. Eggs continue to be well positioned with the long-term consumer shift toward high-protein diets, supported by their strong nutritional profile. Affordability is a huge plus for us right now as a tailwind.

On our branded side, we do continue to grow that through many ways. One is establishing production to support it. As Max has mentioned, these cage-free projects that are coming online here now and in the next few months tee us up to be able to continue to grow that. We have seen growth of course in this quarter and are planning future growth as well.

Max, Chief Financial Officer, Cal-Maine Foods: Max, what would you add? Yeah, I think you pretty well covered it. I mean, I would say that our, you know, our specialty, not just branded, but specialty, it was up 6% for the quarter. That’s higher than the overall market for specialty. As Sherman says, it’s kind of broad-based across cage-free, free-range, pasture-raised. You know, importantly for us, from a volume perspective, it was a record specialty quarter, which and you know I think is something to take note of, particularly when you consider the fact that lower conventional prices sometimes tend to tamper down specialty growth because the consumer goes for the cheaper egg, yet we were still able to get some growth.

You know, I didn’t mention our NutriEnhanced or our branded relationship with EB, but that’s something we continue to work to grow and think there’s opportunity for some more regional growth there into the fourth quarter and beyond a bit. Then as Sherman says, those projects that we called out, the 1.1 million of cage-free that we were adding at, I think, five locations, all those are a couple were done. The rest, I’ll say one will finish up late in this quarter, this fourth quarter, and the other one will finish in the fourth quarter, or excuse me, in August of next year of this year, but after this fiscal year.

You know, we could still see growth in our specialty business ahead and think there’s great opportunity there.

Leah Jordan, Analyst, Goldman Sachs: Thank you. That’s very helpful detail. Just for a follow-up, wanted to switch over to feed. I know, Sherman, you touched on it a little bit in an earlier question, but just given the shift in grain markets in recent weeks, just seeing if you could provide more color on how you’re thinking about your feed costs over the coming quarters and as you start to plan into FY 2027, and any mitigation you have there should we see costs continue to rise?

Sherman Miller, President and Chief Executive Officer, Cal-Maine Foods: Yes. We continue to measure and mitigate risk, and that includes utilizing our grain warehousing basis locks or hedging strategies that are applicable. Certainly these grain-based agreements help offset the effect of grain price change. Yesterday, the planting intentions report came out and viewed by some as fairly neutral. If you look at what they were predicting planting last year at this time, it’s very close in reality of what actually got planted. Corn is down about 3.5 million acres, and beans are up about 3.5. We really focus on the carryout. 14% stocks-to-use is bearish, and certainly the geopolitical effect can change things in a hurry from the Middle East and a lot of fertilizer costs and fuel costs conversation happening.

At the end of the day, we’ve been through this many times, and we continue to utilize all of our tools to mitigate any risk that we have the best that we can, and we’ll continue to do that. Max, anything to add there?

Max, Chief Financial Officer, Cal-Maine Foods: I think you covered it, Sherman.

Leah Jordan, Analyst, Goldman Sachs: Great. Thank you.

Operator: One moment before our next question. Our next question comes from Benjamin Mayhew with BMO Capital Markets. Your line is open.

Benjamin Mayhew, Analyst, BMO Capital Markets: Hi. Good morning, guys. Thanks for the questions. My first is, if you could just help us better frame up the current supply environment, and particularly the specialty egg category. Competition seems to have picked up there quite a bit year-to-date with more promotional activity seen. What is your view on the sustainability of the supply growth rates we are seeing?

Sherman Miller, President and Chief Executive Officer, Cal-Maine Foods: Ben, good morning. Thank you for that question. As we mentioned a few minutes ago, specialty eggs, we continue to grow that, and the first step of it is having supply. As some of these projects come online, it certainly indicates that we’re gonna be prepared for that type of growth. The last few years have certainly been very light on promotions, just simply there was a shortage of eggs and promotions were not needed going forward. We promoted all except for the last few years, we’ll continue to fall back into that routine and see good results coming from it. Max, anything to add on that question?

Max, Chief Financial Officer, Cal-Maine Foods: I think that pretty much covers it.

Benjamin Mayhew, Analyst, BMO Capital Markets: Okay. Just thinking about your organic growth investments, just your thought process around that. How do you view the trade-offs or any trade-offs between investing in productivity enhancements up and down your value chain, versus adding more capacity at this point? Given, like, the current market environment, how are you know, thinking about deploying, you know, your capital there?

Sherman Miller, President and Chief Executive Officer, Cal-Maine Foods: You know, back to capital allocation. Capital is allocated to the opportunities that most clearly enhance our earnings quality, portfolio resilience and long-term shareholder value. As I mentioned, there’s more ways than ever for us to consider that, Ben. We kinda consider it in five buckets. Conventional eggs, we continue to grow. Creighton Brothers, that acquisition had additional conventional eggs that fit very nicely, especially in the liquid piece. Specialty eggs, those organic projects have been going on as well as we’ve had M&A through Creighton, also picked up about 500,000 cage-free hens there. Of course, also prepared foods. We have about $36 million worth of expansion projects going on there, as well as continue to look for M&A and opportunities.

Lastly, ingredients. Just a big opportunity for us to make sure that our production is aligned. We don’t just focus on specialty eggs, but we certainly know that we’ve got to have the supply needed to be able to grow those. I believe we’re sitting in the right position to do that.

Max, Chief Financial Officer, Cal-Maine Foods: You know, I think you covered it. You know, the only thing I’ll say about the productivity, I mean, just our culture with our, you know, roughly 50 operating locations, you know, we’re always ranking those one against the other, trying to learn what one is doing that’s really good or if there’s one that’s underperforming, how we can get that underperforming to duplicate the results of those at the top third of our business. It is a constant analysis of productivity and looking for ways to, you know, bring our whole enterprise up as we identify things, you know, across it.

I do think that scale and that opportunity to look at good data at 50 locations gives you, if you can really mine that and then take it to the other locations, a lot of opportunity for continuous improvement. That’s always part of our focus.

Benjamin Mayhew, Analyst, BMO Capital Markets: Great. Thank you, guys. Have a great rest of your day.

Sherman Miller, President and Chief Executive Officer, Cal-Maine Foods: Thank you.

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

Ben Klieve, Analyst, Benchmark: All right. Thank you for taking my questions, and congratulations on a nice quarter here. My first question is a follow-up to the conversation around the hybrid pricing model and the conventional leg. I’m wondering if you can elaborate a bit on the kinda behavior of your retail partners here as commodity egg prices have come down, you know, with intra-quarter sub-$1 at various points throughout the quarter. Have those retailers that maybe were you know moving to contract-based pricing over the past you know year or two, are they reconsidering that move here in the face of low commodity egg prices? Or has kind of the willingness for the you know move to you know from market-based to contract-based remained pretty consistent?

Sherman Miller, President and Chief Executive Officer, Cal-Maine Foods: Good morning, Ben. Thank you for that question. Boy, this quarter was certainly a test for whatever strategy a retailer had with a market range up to $2.69 all the way down to $0.85 within the same quarter, and that’s in the Southeast market. Definitely the strategies got tested. As we’ve mentioned, there’s protection for our customers on the upside, and then the downside, there’s protection for us. Depending on their go-to-market strategy, whether it’s a high-low or an everyday low price, different arrangements are favorable to one retailer versus the next. I would say overall, the strategies performed exactly like they were designed to. You’re seeing some of that benefit in our market realization in this quarter. Matt?

Matt: I think you covered it.

Ben Klieve, Analyst, Benchmark: All right. Very good. I appreciate that. My follow-up question is pivoting over to the prepared side. Can you educate us a bit on the state of this market, you know, doubling down after Echo Lake with another acquisition here a few weeks ago? I’m wondering, if you can educate us on kind of the size of this addressable market and the degree of fragmentation within it. I’m just kinda curious, if you guys are maybe looking to continue this acquisition pace or if you’ve reached a reasonable level of market share within this space.

Sherman Miller, President and Chief Executive Officer, Cal-Maine Foods: Ben, we certainly have not topped out here. Crystal Lake that came with Creighton Brothers is certainly in our announcement, but it was more or less a distribution of Echo Lake products. So I wouldn’t really say it’s doubling down at this point, but we do continue to grow that both organically and through M&A as opportunities present themselves, and we’ll be very strategic and make sure that we stay egg-centric while we do that in the breakfast channel, and won’t get too far outside of our core competencies. Matt?

Ben Klieve, Analyst, Benchmark: Got it.

Sherman Miller, President and Chief Executive Officer, Cal-Maine Foods: Yeah.

Ben Klieve, Analyst, Benchmark: Very good. All right. Well, I appreciate you guys taking my questions. Congratulations again on a nice quarter, and I’ll get back in queue.

Sherman Miller, President and Chief Executive Officer, Cal-Maine Foods: Thank you.

Operator: I’m not showing any further questions at this time. I’d like to turn the call back over to Sherman.

Sherman Miller, President and Chief Executive Officer, Cal-Maine Foods: Well, thanks everybody. It was an exciting quarter for us, and we’re very grateful for everybody’s attendance today and your continued interest in Cal-Maine Foods. Operator, we’re ready to conclude this call.

Operator: This concludes the question and answer session. A replay of today’s call will be available via webcast in approximately two hours after this call. The webcast will be available on demand for a year. It can be accessed by going to the company’s website investor relations section. In addition, a transcript of today’s call will also be posted on Cal-Maine’s website investor relations section. Thank you for joining us today. You may now disconnect.