Earnings Call: Q3 2026

May 4, 2026

Good morning. My name is Deedee, I will be your conference call facilitator today. At this time, I would like to welcome everyone to The Marzetti Company's fiscal year 2026 third quarter conference call. Conducting today's call will be Dave Ciesinski, President and CEO, and Tom Pigott, CFO. All lines have been placed on mute to prevent any background noise. After the speakers have completed their prepared remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star 11 on your telephone keypad. If you would like to withdraw your question, please press star 11 again. Thank you. To begin the conference call, here is Dale Ganobsik, Vice President of Corporate Finance and Investor Relations for The Marzetti Company. Good morning, everyone. Thank you for joining us today for The Marzetti Company's fiscal year 2026 third quarter conference call. Our discussion this morning may include forward-looking statements which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are subject to a number of risks and uncertainties that could cause actual results to differ materially, and the company undertakes no obligation to update these statements based upon subsequent events. A detailed discussion of these risks and uncertainties is contained in the company's filings with the SEC. Also note that the audio replay of this call will be archived and available on our website, investors.marzetticompany.com later today. For today's call, Dave Ciesinski, our President and CEO, will begin with an update on our Bachan's acquisition that was successfully completed on Friday, May 1, along with a business update and highlights for the quarter. Tom Pigott, our CFO, will then provide an overview of the financial results. Dave will then share some comments regarding our current strategy and outlook. At the conclusion of our prepared remarks, we'll be happy to respond to any of your questions. Once again, we appreciate your participation this morning. I'll now turn the call over to The Marzetti Company's President and CEO, Dave Ciesinski. Dave? Thanks, Dale, and good morning, everyone. It's a pleasure to be here with you today as we review our third quarter results for fiscal year 2026. I would like to start today's call by providing you with some insights specific to our acquisition of Bachan's, the fast-growing Japanese-American barbecue sauce brand known for its delicious, authentic, clean label products. I'm happy to share that in advance of last week's closing of the transaction, we have been collaborating closely with the Bachan's team on our future plans for the business. Everything we've learned has made us even more convinced about what a great addition this is to our family of brands. Since our announcement, the Bachan's business has continued on a path of strong growth, with Circana data for the quarter ending March 31st showing strong sales growth of over 25% and TDPs up over 50%. This growth has resulted in share gains for Bachan's in the barbecue sauce category, positioning them as the second leading retail brand. Consumers love both the brand and the products, as evidenced by its broad usage across a wide variety of proteins, food types, and meal occasions. We believe this brand has tremendous potential and is the perfect fit for our sauce portfolio. Our thoughtful plans for the Bachan's integration are fully on track. They will remain based in California with their very strong team retained to lead the business. We are also delighted that Bachan's founder, Justin Gill, has agreed to continue working with us on product development and marketing strategy. At the same time, we are developing plans to provide this team with the opportunity to draw from Marzetti's resources, including our go-to-market capabilities, culinary expertise, procurement capabilities, and supply chain expertise to support both their continued growth and cost synergies. Over time, we anticipate additional opportunities for Bachan's to more fully leverage Marzetti's supply chain network. We believe our light touch integration approach will allow Bachan's to continue its strong growth trajectory, and we look forward to a bright future with the Bachan's team. This acquisition strategically expands our portfolio of leading sauces, dressings, and dip brands that now represent two-thirds of our consolidated net sales. It also specifically strengthens our portfolio of sauces, which alone account for nearly 40% of our consolidated net sales. In the era of MAHA and GLP-1s, we believe consumers will continue to seek flavor enhancements for their meals. We believe our deep culinary expertise and focus scale in these categories positions us well to support the continued growth of Bachan's, as well as our other brands. Moving on to The Marzetti Company's results for our fiscal third quarter, which ended March 31st, consolidated net sales declined 1% to $453 million. Excluding non-core sales attributed to the temporary supply agreement or TSA, adjusted net sales decreased 0.9% to $452 million. Despite the lower sales, we were pleased to report record third quarter gross profit of $107.2 million. An increase of 1.2%, driven by our cost savings programs. In our retail segment, net sales declined 3.2%, while volume measured in pounds shipped declined 5.6%. Our category leading frozen bread brands were a bright spot as sales of our New York Bakery frozen garlic bread products continued to grow and increase market share. While sales of our Sister Schubert's dinner rolls benefited from the pull forward of demand due to the earlier Easter holiday. These sales gains were more than offset by the impacts of category softness and reduced sales into the club channel. We have initiatives in place with our club channel partners to pursue future growth for both our Chick-fil-A sauces and Olive Garden dressings. Circana scanner data for the quarter ending March 31st showed sales of our core brands and licensed items up 0.2%. In the frozen garlic bread category, our category leading New York Bakery brand grew sales 4.4%, adding 260 basis points of market share for a category leading share of 46.7%. In the frozen dinner roll category, our own Sister Schubert's brand and our licensed Texas Roadhouse brand combined to grow 10.1% for a category leading market share of 61%. In the shelf stable sauces and condiments category, sales of our licensed Chick-fil-A sauces grew 4.4%, resulting in a 5 basis points growth of share. In the crouton category, our branded croutons added 40 basis points of market share for a category leading 28.5%. In the food service segment, excluding the non-core TSA sales, adjusted net sales grew 1.8%, while volume measured in pounds shipped improved 0.1%. In addition to the benefit of inflationary pricing, the increase in food service segment net sales reflects increased demand from several of our core national chain restaurant customers. We were pleased to report record third quarter gross profit of $107 million with reported gross margin of 50 basis points. Our focus on supply chain productivity, value engineering and revenue management all remain core elements to further improve our margins and financial performance. I'll now turn the call over to Tom Pigott, our CFO, for his commentary on our third quarter results. Tom? Thanks, Dave. Overall, the company delivered improved gross profit performance despite a modest decline in revenue. In addition, investments were made to support future growth. Third quarter consolidated net sales decreased by 1% to $453.4 million. The revenue performance was primarily driven by a decline in core volume and product mix of 120 basis points. This decline was partially offset by net pricing, which was accretive by approximately 30 basis points. Despite the decline in revenue, consolidated gross profit increased by $1.3 million or 1.2% versus the prior year quarter to $107.2 million, and reported gross margin expanded by 50 basis points. The gross profit growth was driven by our productivity program, where we benefited from cost savings across a number of areas including procurement, manufacturing, value engineering and distribution. This quarter marked the 11th straight quarter of gross margin improvement versus the prior year. This accomplishment is a reflection of the many cost savings initiatives, network restructuring programs, revenue growth management projects, and the ongoing pricing net of commodities management program that the company has successfully implemented. Selling, general and administrative expenses grew $5.4 million or 9.5%. The increase was primarily driven by a net increase in acquisition related costs, higher IT expenses and personnel related costs as we invested to support continued growth. Consolidated reported operating income decreased $3.3 million. The gross profit growth was offset by the higher investments made in SG&A. Our tax rate for the quarter was 23.3% versus 20.7% in the prior year quarter. We estimate our tax rate for the fourth quarter of fiscal 2026 to be 23%. Third quarter diluted earnings per share decreased $0.14 or 9.4% to $1.35, driven by the reduced operating income and higher tax rate. Turning to the balance sheet and cash flow, the company had strong cash flow generation during the quarter, and year-to-date operating cash flow is up over $55 million versus the prior year. Year-to-date payments for property additions totaled $54.6 million. For the full year of fiscal 2026, we are forecasting total capital expenditures of $80 million. We will continue to invest in both cost savings projects and other manufacturing improvements, as well as the Atlanta facility we acquired to support future growth. In addition to investing in the business, we also returned funds to shareholders. Our quarterly cash dividend of $1 per share paid on March 31st represented a 5% increase from the prior year's amount. Our enduring streak of annual dividend increases stands at 63 years. As we've completed 3 quarters of the year, we are pleased to report growth across a number of metrics in a difficult operating environment. Reported and adjusted net sales increased 2.2% and 0.9% respectively. Reported and adjusted gross margin reflected increases of 40 and 80 basis points respectively. Reported operating income was flat, while adjusted operating income increased 1%. In addition, operating cash flow grew by 32%. We finished the quarter with a debt-free balance sheet and over $218 million in cash. As was previously announced, we closed on the $400 million acquisition of Bachan's on May 1st. The transaction was funded by a $200 million term loan and cash on the balance sheet. The interest rate on the debt is currently less than 5%. The company's strong cash generating capabilities and low debt levels put us in a position to continue to invest for growth and return funds to our shareholders. To wrap up my commentary, our results demonstrate strong execution across a number of areas, and we continue to invest to support the future growth of our business and return funds to our shareholders. I'll now turn it back over to Dave for his closing remarks. Thank you. Thanks, Tom. Going forward, The Marzetti Company will continue to leverage the combined strength of our team, our operating strategy, and our balance sheet in support of the three simple pillars of our growth plan. 1. Accelerate core business growth. 2. Simplify our supply chain to reduce our costs and grow our margins. 3. Expand our core with focused M&A and strategic licensing. As we look ahead to The Marzetti Company's fiscal fourth quarter, in addition to the incremental sales attributed to the Bachan's acquisition, we expect retail sales will benefit from new product introductions, including Marzetti Protein Ranch dressing and veggie dips, a new Olive Garden Zesty Italian Dressing flavor, and the addition of a larger size bottle for the popular Chick-fil-A Avocado Lime Ranch Dressing. In the food service segment, we anticipate continued growth from select customers in our mix of national chain restaurant accounts. Specific to the contribution of the Bachan's business, as part of The Marzetti Company for two-thirds of our fiscal fourth quarter, we would guide to a net sales run rate moderately above the $87 million that the business reported in calendar year 2025, with an operating margin similar to Marzetti's current level. Like many of you, we continue to monitor external factors, including U.S. economic performance and consumer behavior that may impact the demand for our products. With respect to input costs, in the aggregate, we anticipate that inflation will continue to tick up during the months ahead, and we will continue to carefully monitor the macroeconomic impact of the tariff war. We believe our commodity risk management program will serve us well in these volatile times. Specific to soybean oil prices, we believe we have sufficient coverage in place to mitigate the near-term impact of the price run-up and moreover, to implement relevant pricing. In closing, I would like to thank the entire Marzetti Company team for all their hard work this past quarter and their ongoing commitment to grow our business. I would also like to reiterate to Justin Gill and the entire Bachan's team how excited we are about the opportunities for future growth and shared success. This concludes our prepared remarks for today, and we'd be happy to answer any questions you may have. Operator? Thank you. At this time, I would like to remind everyone in order to ask a question, please press star 11 on your telephone keypad. One moment. Our first question comes from Jim Salera of Stephens. Your line is open. Hi, guys. Morning. Thanks for taking our question. Morning, Jim. Morning, Jim. Dave, you almost read my mind in your prepared comments there. I wanted to start on soybean oil. It's very convenient- Oh that was the last thing that you mentioned. Can you just give us a sense for how the duration of the coverage in place right now? I know there's a lot of moving pieces, but certainly it's an important input, and I know we get questions. Yeah ... from investors about as you're doing kind of demand forecasting and procurement planning for 2027. Yeah How the recent run-up impacts, you know, the mix and kind of the margin outlook. Any thoughts there would be very helpful. Jim, I'd be happy to share that with you. We have, I would call it intermediate-term coverage that takes us through essentially the end of the summer on board and basis, which should be more than enough time for us to be able to get into the marketplace and implement pricing. Our retail team is in the throes of putting those plans together right now. In the case of private label, we've already begun to see the market start to move within the last few weeks. We feel like we're in a much better position as it pertains to that than we were in 2022, the last time we saw a spike. On the food service business, as you recall, it's a mark-to-market process where we have some of our customers on national accounts that have taken positions, some that were a little closer nearby, but independent, the pricing differential is passed through. You know, I think for you and others that track us, the watch is our coverage on retail, and we feel like we're in a strong position relative to where we were in 2022. Great. I was hoping you can help us size up how you're thinking about the protein launch. I know the protein craze, all these protein-forward new products have been very hot with consumers. If I recall correctly, I think your produce dressing business is around $150 million, inclusive of Chick-fil-A on a retail sales basis. Given that I would imagine this would maybe pull some people that aren't historical consumers in that category into the category, can you just help us? Yeah. think about how we should think about that business scaling? Yeah. Be happy to. This was a fast launch in the marketplace now. It's continuing to build distribution, we attacked it in two different places. One was as pertains to produce dressing. You're right, the overall category is about $525 million, of which we have about $150 million, $140 million or so size of our business. We've launched a Ranch protein SKU that's in the marketplace that we're watching carefully. We also launched it in cups, in a 75 millimeter dip cup. We launched the product in dips as well. What we're seeing so far is that the product actually in the portable cup seems to be performing the best. We're excited about both of those. To help you size dips for you, let me look here. The size category is about $200 million. If you remember, we have about a 75% or stronger share there. We have 2 different places where we see that there's an opportunity, and it really depends. I think for this launch, you know, we're gonna be, I would say, an agile innovator, in particular, looking at making sure that we nail the right size format. Our supposition is this is something that's gonna be perfect for, you know, kids and adults that are on the go, so that the dip cup, in particular, seems like it's particularly interesting to us. Great. I appreciate the thoughts. I'll hop back in the queue. Of course. Thank you. Our next question comes from Alton Stump of Loop Capital. Great. Thanks, guys. Good morning. Thanks for taking my questions. Just wanted to ask first off, you know, obviously, you know, of course, you mentioned the sell-through data, which was, you know, once again, very strong for both your frozen dinner rolls and for Chick-fil-A. You know, yet obviously, you know, overall segment sales were down. What do you think were sort of the, you know, couple of, you know, you know, kind of key areas of, you know, weakness that you saw when, you know, as you kind of look at your, you know, just over 5% volume decline in the quarter for the retail segment? Yeah. Yep. Really, Alton, I'd point to 3 things. One is January and February weather resulted in the Northeast being particularly hard hit. The second is category softness in both produce dressings as well as pourable dressings, where the category is down about 5 points. The 3rd is that we're lapping the pipeline build of both Chick-fil-A into the club channel and Texas Roadhouse rolls. Really those 3 things combining together are what really drove that decline on the volume front. You know, as you swing around and you say, you know, what of this came as maybe a surprise to us or below our expectation? Well, you know, weather, you just necessarily can't plan for when we were talking to you in January. I would say, as it pertains to the launch of our Roadhouse rolls, the velocities in Walmart continue to be particularly strong. It's taken us a little bit longer to build the quality of distribution that we want in retail. As a consequence, those velocities are lagging a little bit. I think as you put all those together, I'd ladder back to some January, February weather, category softness in produce and in refrigerated dressings at about five points, which is significant, and then lapping that pipeline build. The executional component that we're really continuing to focus on is continuing to drive improved velocities on Roadhouse, not in the aggregate, don't look at the share data that's out there, but in retail in particular. Got it. Great. Thank you, Dave. Very helpful. I guess just another question I wanted to ask is just with your comments, I think you used the word moderately higher, you know, as far as modeling Bachan's sales, you know, now that obviously that has closed for the last 2 months of the current quarter. You mentioned that, you know, sell-through data was up over 25% during the 1st quarter. Is this just you guys, you know, look, we just closed, want to be a little conservative here, or is there any reason why we should think that there should be any, you know, kind of slowdown as, you know, it pertains to the current growth profile of that brand? You know, of that business, I should say. Yeah. You know what I would point to, Alton, is let's kinda look at it strategically. First of all, an amazing product, authentic founder story, great ingredients, and really connecting with consumers, has been growing in strong double digits, both the velocity as well as distribution. We expect that to continue. Now, as we sort of work our way through the next handful of quarters, they have some new item launches that they have that are in the queue and some other activities. I can't tell you it's necessarily gonna be linear at the exact same rate, but we continue to be extremely bullish on the growth of the brand. As a proof point, I think what I would look to is two important pieces of data. In the recent Circana period, they actually became the number 2 barbecue sauce, right behind Ken's. Or not Ken's, excuse me, but behind Ken's and Sweet Baby Ray's, but in front of Kraft and Kinder's in that period. The second thing that I would point to is the velocities on those items. They continue to be extremely high, satisfying both retailers and, of course, us. The last item that I would point to, and this is sort of a longer-term piece, when we look at something like a net promoter score, the brand actually connects and scores more strongly than almost any other sauce brand that's out there. All of these make us confident that this is a great platform with room to continue to grow. You know, as you're aware, we closed on the transaction on Friday. I'm jumping on a plane tomorrow morning first thing and flying out there along with the leader of our retail team, where we're gonna spend a couple of days with them celebrating the close. We've been working with them and the leadership team to put together their AOP for our fiscal year that will be forthcoming. I can tell you that they couldn't be more excited about the opportunity to work with our culinary and product development team. We're very bullish about it. Great brand, you know, maybe later in the call I'll talk about why I think that this transaction, in particular, marks an important evolution in our company strategy. Yeah, Alton, I would say we're probably a little conservative in what we put out there and, you know, we'll see as we progress deeper into it. Got it. Great. Thanks for all that color. I appreciate it, Dave and Tom. I'll hop back in the queue. Our pleasure. Thank you. Thank you. Our next question comes from Todd Brooks of The Benchmark Company. Your line is open. Hey, thanks. Good morning, and congrats on getting the Bausch+ Lomb deal across the finish line. Good to hear. Two questions. Thanks, Todd. Morning, Todd. Morning. Talked about some friction in the club channel. Can you walk through details behind that? Is that related to maybe the new SKU introductions on the Olive Garden side around zesty? Can you just walk us through maybe some of that friction you saw and how you worked that out and restore the momentum in the club channel? Yeah. Good eye, but that's not the cause. That new item that's coming out there is really the response. Within club, two different points of noise. One is we're lapping the launch of Chick-fil-A sauce last year, so we had a big pipeline build in the period. When we went out with that item, we launched it in a two-pack, so two 20-ounce Chick-fil-A sauce. What we found is that the sell-through was strong, however, our buyers didn't come back, and when we did the math, what we realized is that we were selling consumers about what becomes a year's worth of supply of Chick-fil-A sauce. In conversations with the buyers at Chick-fil-A, what we've elected to do is to come back with a 3-pack, so it's gonna be 2 smaller originals and 1 Polynesian Sauce, and that's shipping into the marketplace now. The other thing that happened in, and this isn't related, is that as you recall, you've followed us for a while, we've been in club with our Olive Garden dressing for quite a long time with the exact same variance. We had a couple of different regions on Costco, not on Sam's, that elected to move us from full-time distribution to more of a rotation sort of distribution. In response to that, we've gone back and retooled the offering to offer a multi-pack as well, where it's the original plus the Zesty that we're bringing to the marketplace there. We are working with our club partners to, you know, work on, innovating and ensuring that that offering is relevant. It doesn't have to do with the zesty. The zesty is part of the response. Okay. Great. Thanks, Dave. Can we talk through just within the concept of frozen bread, how we should be thinking about Easter shift impacts with the 2-week earlier Easter that we had this year versus prior, so that we can really fine-tune the modeling? Yeah ... that segment of the business as we're looking at the upcoming quarter. Sure. While Tom and Dale are gonna give you specific information on Sister, I think what I would point to is maybe just a quick set of words on what's going on with New York Texas Toast, which really continues to be our evergreen legacy brand growth story. Where it was up several points in the period, behind both the strength of our gluten-free item, which I think in sales, value now is pushing 20 million, and also our value size of sticks, which continues to grow in the high single-digit, if not double-digit range. That brand just continues to grow almost independent of the economic circumstances. That category is down about 1.5 points, we're continuing to deliver not only just market share gains, but actual sales gains through this. Increasingly what you're seeing is the category seems to be, you know, closing in on more and more of a two-brand set, where it's our brand and private label and select retailers. That's Toast, Tom. Yeah. On the retail segment, we benefited only about 30 basis points really driven by Sisters, in terms of the revenue impact, maybe slightly less than what we had anticipated when we talked to you at the prior quarter. On Roadhouse, just to kind of finish out the frozen side, you talked about good performance really actually very strong performance of Walmart, getting the retail distribution the way that you wanted to get it so you can really accelerate that role. I think at one point you thought that was an extendable category as well with different flavor way type of SKUs. Yeah. Do we need to get the retail distribution in place before we start to see SKU extension? How do we stage those two? Thanks. Sure. Maybe I'll give you a little bit of backdrop. When we originally launched the item into Walmart, it was in a 10-count displayable case. The velocities were so fast we were having a hard time keeping it on the shelf. You know, at the re-request of our partner, we shifted it to a 20-count case. The case was not a display-ready case. That worked fine for Walmart, where they had already built the awareness and trial, and repeat was strong and continued to grow. As we then pivoted into driving retail distribution, having a case that wasn't display ready resulted in, let's just say, a suboptimal, you know, merchandising on the shelf. The team has been working for, let's say, the last three or four months on strengthening the display of that item, and we feel like we're starting to make some progress there. Really, as we look, you know, through the remainder of this fiscal year and into next fiscal year in the retail segment, what you can expect to see is more effort on getting display strengthened and getting it where we want it on shelf. You know, as it pertains to extending the platform into new flavors, those plans are already in place, and we should have some news here shortly to share with you. We're well down the path on that. We continue to believe that it's not only viable, but we have great confidence in it. Great. Thank you all. Great. Our pleasure. Thanks. Thank you. Thank you. Sure. Our next question comes from Scott Marks of Jefferies. Your line is open. Hey, good morning, guys. Thanks for taking our questions. Morning. Morning. First thing I wanted to ask about, don't think we've really touched as much on the food service side of things. Happy to. ... you can help us understand some of the puts and takes there, maybe how the businesses are doing, you know, within Chick-fil-A operator, as well as some of the other bigger customers you have, and help us understand how we should be thinking about that going forward. Yeah. No, I'm glad that you ask. Food service actually had a pretty solid quarter when you look at it, where volume and sales were both up in the period. Let's maybe pull it apart. If you look at the whole industry, the industry is essentially where it was three months ago. It's flat. You pull that apart and we look at national accounts, what I would point to, Scott, is it sort of bifurcates into the concepts that are emerging as the continuous winners and those that I think are struggling. You know, within our portfolio, we have a handful of those performers that continue to do pretty well. One of those is Chick-fil-A. They're doing it on their base business, but they're also doing it behind several of their LTOs, which we've been fortunate enough to support. Taco Bell has also continued, even in this economic environment, to emerge as a winner. We have a handful of others that I would say we're continuing to win with. You know, what we're seeing then on the other side of the ledger, though, is for those concepts that can't lead with price or they have a product offering that isn't necessarily connecting with consumers, you know, they're struggling. All in on our national accounts component, which is 75% of our food service business, we were able to grow it, really led by Chick-fil-A and our winners, offset partially by some of the others. On our branded piece of the business, that business was flattish. Would have been up were it not for the fact that we exited a very low margin breadstick business, which is pulling it back slightly. You know, net-net, you know, for our food service business in a competitive environment, I think we continue to do well. Part of it is we sell sauces, and it continues to be the area where our partners look to differentiate their menu. The other part of it is because we're fortunate enough to have partners with the big, strong concepts that seem to be performing best in this environment. Appreciate the color on that. Thanks very much. Second question from me would be, you made some comments about higher investments in personnel and IT. I know you've also been working through testing some different advertising concepts within the retail business. Just wondering if you can give us an update on some of those initiatives and some of the extra costs that you've called out and how we should be thinking about, you know, where those investments are going and the kind of growth you're looking for because of them. Scott, great question. On the IT side, after we put in SAP, there are a number of legacy systems that, quite frankly, needed to be replaced and were not being supported by vendors anymore. There was opportunity to put in systems that would give us more sophistication. A couple examples would be on the food service side, the trade system we put in really helps us on the branded business to improve the trade optimization. That's been a key contributor to the improved P&L performance we've seen in retail on a year to date basis. That's been very positive. There's some other legacy systems that we've had to replace that are not as value added, but necessarily to kind of sustain the business and the growth. What I can tell you is that from an IT standpoint, a lot of that spending is now behind us. As we plan the future years, we're not putting as much emphasis on that aspect of it. Going forward, I think you'll see, and in Q4 you'll see, even with Bachan's, just a modest increase in SG&A in line with inflation. As we plan for the next fiscal year, I think we're in the same mode in terms for SG&A spend. Now, as we see good marketing spends to support growth in Bachan's and other brands, we will continue to invest, but that's kind of our overall profile going forward. Appreciate the color there. Just one quick just technical question. I think you called out earlier the Bachan's op margins the same as The Marzetti Company. Is that referring specifically to the retail segment, or is that total Marzetti? That's total operating margin. Okay. Again, I think we're being a little conservative at the onset and as we get into it. Certainly what we know to be true is that they're an investment, invest to grow brand. There's a higher level of marketing spend there as they expand into markets and build awareness, as Dave shared. It's a fantastic brand. It's number 2 in barbecue sauce, but the awareness is relatively low. Their operating margins are slightly below our existing retail, and part of that is the amount of investment going into the brand to sustain its growth and to build it out. At the gross margin level with Bachan's, it's nicely margin accretive to the business. As we get into next quarter's call, we'll have completed the planning process with the team, and we'll have certainly more to share. But as Dave shared, everything we can see in terms of their performance gives us comfort in terms of our business model for what we can achieve with that acquisition. Okay. Appreciate the clarification. Thanks very much. I'll pass it on. Thank you. As a reminder, if you have a question, please press star one one. If there are no further questions, we will now turn the call back to Mr. Ciesinski for his closing comments. Thank you, operator. Before we end the call, I just wanted to make a couple of short comments about strategically, you know, the disposition of the company and where we're heading. I believe that the acquisition of Bachan's is an opportune time to kinda take a step back and take an inventory of where we've been and where we are and where we look to go. Really, over the last 10 years, if you've looked at the evolution of our company, you know, we started as a company really focused on driving our legacy brands. Really, we focused in that mode, then we started to add to that with our restaurant brand licenses. I would argue that over the course of the last seven years, we've built out our retail business, you know, essentially by leaning into the growth of those licensed restaurant brands. As we sit today, it's about $550 million or so of Circana sales. It's about $350 million, more than that, of net sales. It's been really an important driver of our growth story. At the same time, we've leveraged our strong balance sheet as a means by which to go back and make key investments in our infrastructure, both our plant infrastructure by retiring old lines and putting in place high-speed, more efficient lines, and then putting in place scalable IT infrastructure. What Bachan's really marks for us is not only just the acquisition of a phenomenal brand and the opportunity to work with tremendously talented people, but the first of what we believe will be more acquisitions in an area that we're calling authentic flavors. If 10 years ago, the growth of our company, Marzetti or then Lancaster Colony, was driven by legacy brands, Marzetti, Sister Schubert's, and New York Bakery, the more recent period has been driven by that plus restaurant brands. As we look to go forward, what we're excited about is the opportunity to add a whole new growth leg to our overall story, which is authentic flavors. If you look at what our aspirations are going forward, it's to continue to innovate and market and grow against our legacy brands and our restaurant license brands, but also to use our end-to-end focused scale from culinary to product development through the supply chain to help highly relevant brands like Bachan's achieve their full potential in the marketplace. What we would love to be able to do as we learn more about Bachan's and we get the integration successfully underway, is to start to think about where are those opportunities to continue to leverage our balance sheet and find other authentic flavors where those brands and those teams can come and take their business to the next level. You know, as we look at the next 10 years going forward, it really gives us a platform for a much more balanced pathway to grow in retail and in food service. Before we wind down the call, I just wanted to share that with those of you that are listening, so. With that, operator, and everybody else, thank you for your time today. We look forward to being with you in August. Have a great rest of the day. Thank you. This concludes today's conference call. Thank you for participating, and you may now disconnect.