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Date

Monday, May 4, 2026 at 10 a.m. ET

Call participants

  • President and Chief Executive Officer — David A. Ciesinski
  • Chief Financial Officer — Thomas K. Pigott

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Takeaways

  • Bachan's acquisition -- Closed on May 1 for $400 million, funded by a $200 million term loan at an interest rate below 5% and cash on hand; Bachan’s founder remains involved, and the brand's operating margin is cited as comparable to total company level.
  • Bachan's performance -- Circana data reports sales growth above 25% and total distribution points (TDPs) up over 50% in the fiscal quarter ending March 31, indicating significant share gains within the barbecue sauce segment.
  • Revenue -- Consolidated net sales declined 1% to $453 million; adjusted net sales excluding the non-core temporary supply agreement (TSA) decreased 0.9% to $452 million.
  • Gross profit and margin -- Gross profit rose 1.2% to $107.2 million, with gross margin expanding by 50 basis points, marking the eleventh consecutive fiscal quarter of year-over-year margin improvement.
  • Retail segment -- Net sales declined 3.2%, with volume down 5.6%; despite overall decline, New York Bakery frozen garlic bread sales grew 4.4% (market share +260 basis points to 46.7%), and Sister Schubert's plus Texas Roadhouse dinner rolls rose a combined 10.1% (market share 61%).
  • Croutons and sauces -- Branded croutons gained 40 basis points of market share to reach 28.5%; licensed Chick-fil-A sauces grew 4.4% in sales, increasing share by 5 basis points.
  • Foodservice segment -- Net sales, excluding TSA, grew 1.8%, with shipped volume up 0.8%, attributed to inflationary pricing and increased demand from national chain restaurant customers.
  • SG&A expenses -- Rose $5.4 million or 9.5%, mainly due to acquisition-related costs, higher IT spending, and personnel investments.
  • Operating income -- Reported operating income decreased by $3.3 million, attributed to higher SG&A outlays offsetting gross profit gains.
  • Dividend -- Quarterly cash dividend increased 5% to $1 per share, paid March 31; this marks 63 consecutive years of annual dividend growth.
  • Cash flow and balance sheet -- Year-to-date operating cash flow is up over $55 million; ended the period debt-free with over $218 million in cash prior to the Bachan's acquisition funding.
  • Capital expenditures -- Year-to-date property additions reached $54.6 million; company forecasts full-year capital expenditures of $80 million, including investments in the Atlanta facility.
  • Tax rate -- Effective tax rate was 23.3% (versus 20.7% prior year); full-year estimate set at 23%.
  • Diluted EPS -- Decreased $0.14 or 9.4% to $1.35, reflecting reduced operating income and higher tax rate.
  • Forward guidance -- For the post-acquisition period, management guides to a net sales run-rate moderately above Bachan’s $87 million 2025 figure, with operating margin comparable to current company average.
  • Input cost management -- Management described their soybean oil coverage as "intermediate-term" extending through summer, with pricing plans in place to mitigate impact from recent cost run-ups.

Summary

Marzetti (MZTI 6.56%) closed its $400 million acquisition of Bachan’s, integrating a high-growth sauce brand reporting over 25% quarterly sales growth and a substantial rise in market share. The company registered fiscal third-quarter net sales of $453 million (down 1%) for the period ending March 31, 2026, while achieving record quarterly gross profit of $107.2 million (up 1.2%) and maintaining an eleventh straight fiscal quarter of gross margin expansion. Retail segment volumes fell due to weather-related issues, category softness, and lapping past pipeline builds, offset by share and sales gains in core frozen bread and licensed sauce brands. Despite increased SG&A expenditure primarily tied to acquisition and IT investment, the balance sheet remains robust, supporting increased shareholder returns and future M&A activity across the "authentic flavors" platform.

  • Ongoing productivity and value engineering programs contributed notably to margin gains, with management emphasizing continued cost initiatives and supply chain simplification as central to strategy.
  • Large national accounts—especially Chick-fil-A and Taco Bell—drove Foodservice gains, while momentum in club channels lagged following last year's pipeline builds; strategic product adjustments are being deployed to restore growth.
  • Planned Retail innovation includes new protein-forward dressings and flavor extensions, with initial traction best in portable dipping cup formats within the $200 million dips category, where the company holds a dominant market share.
  • Capital deployment priorities include further infrastructure investments, integration of Bachan's, and evaluation of additional acquisitions targeting authentic flavor segments to diversify and expand top-line growth drivers.

Industry glossary

  • TDPs (Total Distribution Points): A distribution metric representing the weighted presence of a product across all scanned retail outlets, used to gauge product availability and shelf space penetration.
  • TSA (Temporary Supply Agreement): A non-core sales arrangement for a fixed term, referenced in adjusting reported segment performance to reflect ongoing core business trends.
  • Circana: A third-party retail sales data provider (formerly IRI-NPD) widely cited for point-of-sale scanner-based industry performance metrics.
  • LTOs (Limited Time Offers): Promotional or product offerings available only for a limited duration, often influencing Foodservice channel volume fluctuations.

Full Conference Call Transcript

For today's call, David A. 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. Thomas K. Pigott, our CFO, will then provide an overview of the financial results. David A. Ciesinski will then share some comments regarding our current strategy and outlook. At the conclusion of our prepared remarks, we will be happy to respond to any of your questions. Once again, we appreciate your participation this morning. I will now turn the call over to The Marzetti Company's President and CEO, David A. Ciesinski. David?

David A. Ciesinski: Thanks, Dale, and good morning, everyone. It is 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 am 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 have 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 31 showing 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 one of the leading retail brands. 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 The Marzetti Company'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 The Marzetti Company'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 M&A and GLP-1s, we believe consumers will continue to seek flavor enhancements for their meals. We believe our deep culinary expertise and focused 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 31, consolidated net sales declined 1% to $453 million. Excluding non-core sales attributed to the temporary supply agreement (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 increased 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 31 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 point increase in share. In the crouton category, our branded croutons added 40 basis points of market share for a category-leading 28.5%. In the Foodservice segment, excluding the non-core TSA impact, net sales increased 1.8%, while volume, measured in pounds shipped, improved 0.8%.

In addition to the benefit of inflationary pricing, the increase in Foodservice 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 expanding by 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 will now turn the call over to Thomas K. Pigott, our CFO, for his commentary on our third quarter results. Tom?

Thomas K. Pigott: 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 eleventh 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 effective tax rate in the quarter was 23.3% versus 20.7% in the prior-year quarter. We estimate our tax rate for 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 31, represented a 5% increase from the prior year's amount. Our enduring streak of annual dividend increases stands at 63 years. As we have completed three 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 1. 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 will now turn it back over to Dave for his closing remarks. Thank you.

David A. Ciesinski: 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 for our growth plan: one, accelerate core business growth; two, simplify our supply chain to reduce our cost and grow our margins; and three, 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 Foodservice 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 The Marzetti Company'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 Iran 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 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. We will now open the call for questions. Operator?

Operator: Thank you. At this time, I would like to remind everyone to press 11 to ask a question. One moment please. Our first question comes from James Ronald Salera of Stephens. Your line is open.

James Ronald Salera: Hi, guys. Good morning. Thanks for taking our question. Dave, you almost read my mind in your prepared comments there. I wanted to start on soybean oil, so it is very convenient that is the last thing that you mentioned. Can you give us a sense for the duration of the coverage in place right now? I know there are a lot of moving pieces, but it is an important input that we get questions from investors about. As you are doing demand forecasting and procurement planning for 2027, how does the recent run-up impact the mix and the margin outlook?

David A. Ciesinski: Jim, I would be happy to share that with you. We have what I would call 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, and in the case of private label, we have already begun to see the market start to move within the last few weeks. We feel like we are in a much better position as it pertains to that than we were in 2022, the last time we saw a spike.

On the Foodservice business, as you recall, it is a mark-to-market process where we have some of our national account customers that have taken positions, some that are a little closer nearby, but independent of that, the pricing differential is passed through. For you and others that track us, the key watch is our coverage on Retail, and we feel like we are in a strong position relative to where we were in 2022.

James Ronald Salera: Great. I was hoping you could help us size up how you are thinking about the protein launch. The 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 are not historical consumers in that category into the category. How should we think about that business scaling?

David A. Ciesinski: We would be happy to. This was a fast launch. It is in the marketplace now and continuing to build distribution, and we attacked it in two places. One was produce dressing. You are right, the overall category is about $525 million, of which we have about a $140–$150 million business. We launched a ranch protein SKU that is in the marketplace that we are watching carefully. Then we also launched it in cups, a 75-millimeter dip cup, and we launched the product in dips as well. What we are seeing so far is that the product in the portable cup seems to be performing the best. To help you size it, the dips category is about $200 million.

If you remember, we have about a 75% or stronger share there. We see opportunity in both places, and for this launch we will be an agile innovator, making sure we nail the right size format. Our supposition is this is perfect for kids and adults on the go, so the dip cup in particular seems interesting to us.

James Ronald Salera: Great. I appreciate the thoughts. I will hop back in the queue.

David A. Ciesinski: Of course. Thank you.

Operator: Our next question comes from Alton Kemp Stump of Loop Capital. Your line is open.

Alton Kemp Stump: Great. Thanks, guys. Good morning. Thanks for taking my questions. First, sell-through data was once again very strong for both your frozen dinner rolls and for Chick-fil-A, yet overall Retail segment sales were down. What were the key areas of weakness as you look at your just over 5% volume decline in the quarter in Retail?

David A. Ciesinski: I will point to three 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 five points. The third is that we are lapping the pipeline build of both Chick-fil-A into the club channel and Texas Roadhouse rolls. Those three things combined drove the volume decline. In terms of surprises versus our expectations, weather is difficult to plan for. Regarding the launch of our Roadhouse rolls, velocities in Walmart continue to be particularly strong.

It has taken us a little bit longer to build the quality of distribution that we want in Retail, so those velocities are lagging a little bit outside of Walmart. But overall, I would ladder back to January/February weather, roughly five-point category softness in produce and refrigerated dressings, and lapping that prior pipeline build. The executional component we are focused on is continuing to drive improved velocities on Roadhouse in Retail in particular.

Alton Kemp Stump: Got it. Thank you, Dave. And on Bachan's, you used the phrase “moderately above” for modeling sales, now that it has closed for the last two months of the current quarter. But Circana data was over 25% during the first quarter. Are you being conservative, or is there any reason to think there should be any slowdown in the current growth profile?

David A. Ciesinski: I would look at it strategically. It is an amazing product with an authentic founder story, great ingredients, and strong consumer connection. It has been growing in strong double digits in both velocity and distribution, and we expect that to continue. As we work through the next handful of quarters, they have new item launches and other activities in the queue, so it may not be perfectly linear, but we are extremely bullish on the growth of the brand. As a proof point, in the recent Circana period, Bachan's became a top brand in barbecue sauce, behind the leaders and ahead of others like Kraft and Kinder’s in that period.

Velocities continue to be extremely high, satisfying both retailers and us. Longer term, on Net Promoter Score, the brand connects and scores more strongly than almost any other brand out there. We closed the transaction on Friday; I am flying out tomorrow with the leader of our Retail team to spend a couple of days with them celebrating the close. We have been working with their leadership to put together their AOP for our fiscal year that will be forthcoming, and they could not be more excited about the opportunity to work with our culinary and product development teams. We are very bullish.

And yes, we are probably a little conservative in what we put out there, and we will see as we progress.

Alton Kemp Stump: Got it. Great. Thanks for all the color. I appreciate it, Dave and Tom. I will hop back in the queue.

David A. Ciesinski: Our pleasure.

Operator: Thank you. Our next question comes from Todd Morrison Brooks of Benchmark. Your line is open.

Todd Morrison Brooks: Hey, thanks. Good morning, and congrats on getting the Bachan's deal across the finish line. Two questions. First, you called out some friction in the club channel. Can you walk through details behind that? Is that related to the new SKU introductions on the Olive Garden side around Zesty? How do you work that out and restore momentum in the club channel?

David A. Ciesinski: Good eye, but that is not the cause. The new item is really the response. Within club, there were two points of noise. One, we are lapping a launch of Chick-fil-A sauce last year, so we had a big pipeline build in the period. We went out with a two-pack of 20-ounce Chick-fil-A sauce. Sell-through was strong; however, buyers did not come back as quickly. When we did the math, we realized we were selling consumers about a year’s worth of supply of Chick-fil-A sauce. In conversations with the buyers at club, what we have elected to do is come back with a three-pack: two smaller originals and one Polynesian sauce, and that is shipping into the marketplace now.

The other thing that happened is that, as you recall, we have been in club with our Olive Garden dressing for quite a long time with the exact same offering. A couple of Costco regions, not Sam’s, elected to move us from full-time distribution to more of a rotation. In response, we have retooled the offering to a multipack with the Original plus the Zesty, which we are bringing to the marketplace. We are working with our club partners to innovate and ensure that the offering is relevant. The Zesty is part of the response.

Todd Morrison Brooks: Great. Thanks, Dave. And then within frozen bread, how should we think about Easter shift impacts with the two-week earlier Easter this year versus prior as we fine-tune modeling for the upcoming quarter?

David A. Ciesinski: While Tom and Dale can give you specific information on Sister Schubert’s, I will offer a quick update on New York Texas Toast, which continues to be our evergreen legacy brand growth story. It was up several points in the period, behind both the strength of our gluten-free item, which in sales value is now pushing $20 million, and our value size of sticks, which continues to grow in the high single-digit, if not double-digit, range. That brand continues to grow almost independent of economic circumstances. The category is down about 1.5%, but we are delivering not only share gains, but actual sales gains.

Increasingly, the category seems to be closing in on more of a two-brand set: our brand and private label at select retailers.

Thomas K. Pigott: On the Retail segment, we benefited only about 30 basis points from the earlier Easter, really driven by Sister Schubert’s in terms of the revenue impact, maybe slightly less than what we had anticipated when we talked to you at the prior quarter.

Todd Morrison Brooks: And on Texas Roadhouse rolls, you mentioned strong performance at Walmart. You needed Retail distribution the way you want it to really accelerate that roll. At one point, you thought that was an extendable category with different flavor SKUs. Do we need to get the Retail distribution in place before we start to see extensions, or how do we stage those?

David A. Ciesinski: When we originally launched the item into Walmart, it was in a 10-count displayable case, and the velocities were so fast we were having a hard time keeping it on the shelf. At the request of our partner, we shifted to a 20-count case. That case was not display-ready. That worked fine for Walmart, where awareness and repeat were already strong, but as we pivoted into Retail, having a case that was not display-ready resulted in suboptimal merchandising on the shelf. The team has been working for the last three to four months on strengthening the display of that item, and we feel like we are starting to make progress.

For the remainder of this fiscal year and into next, you can expect more effort on strengthening display and getting it where we want it on shelf. As it pertains to extending the platform into new flavors, those plans are already in place, and we should have some news shortly. We continue to believe it is not only viable, but we have great confidence in it.

Todd Morrison Brooks: Great. Thank you all.

David A. Ciesinski: Our pleasure. Thanks.

Operator: Thank you. Our next question comes from Scott Michael Marks of Jefferies. Your line is open.

Scott Michael Marks: Hey, good morning, guys. Thanks for taking our questions. First, I wanted to ask about the Foodservice side. Can you help us understand some of the puts and takes there, how the businesses are doing within the Chick-fil-A operator as well as some of the other bigger customers, and how we should think about that going forward?

David A. Ciesinski: Foodservice had a solid quarter where volume and sales were both up. If you look at the whole industry, it is essentially flat versus three months ago. Pulling that apart, in national accounts it bifurcates into concepts that are emerging as continuous winners and those that are struggling. Within our portfolio, we have a handful of performers that continue to do well. One of those is Chick-fil-A, doing well on their base business and behind several of their LTOs, which we have been fortunate enough to support. Taco Bell has also continued to emerge as a winner even in this economic environment. We have a handful of others that we are continuing to win with.

On the other side, concepts that cannot lead with price or have an offering that is not connecting with consumers are struggling. Net-net, for our national accounts, which are 75% of our Foodservice business, we were able to grow, really led by Chick-fil-A and other winners, offset partially by some others. On our branded piece of the business, that was flattish and would have been up more were it not for our exit of a very low-margin breadstick business. Overall, in a competitive environment, we continue to do well.

Part of it is we sell sauces, which continue to be where our partners look to differentiate their menus, and part is we are fortunate to have partners with big, strong concepts performing best in this environment.

Scott Michael Marks: Appreciate the color. Second, you made comments about higher personnel and IT. You have also been testing different advertising concepts within Retail. Can you give us an update on those initiatives and the extra costs you called out, where those investments are going, and the kind of growth you are looking for because of them?

Thomas K. Pigott: On the IT side, after we put in SAP, a number of legacy systems needed to be replaced and were no longer supported by vendors. There was also opportunity to add systems for more sophistication. For example, on the Foodservice side, the trade system we put in helps on the branded business to improve trade optimization, and that has been a key contributor to improved P&L performance in Retail on a year-to-date basis. Then there are other legacy systems we have had to replace that are not as value-added, but necessary to sustain the business and growth. From an IT standpoint, a lot of that spending is now behind us.

As we plan future years, we are not putting as much emphasis on that. Going forward, in Q4 you will see, even with Bachan's, just a modest increase in SG&A in line with inflation. As we plan for the next fiscal year, we are in the same mode in terms of SG&A spend. Where we see good marketing spend opportunities to support growth in Bachan's and other brands, we will continue to invest, but that is our overall profile.

Scott Michael Marks: Appreciate the color. One quick technical question: you called out earlier that Bachan's operating margin is the same as The Marzetti Company. Is that referring specifically to the Retail segment, or total company?

Thomas K. Pigott: That is total operating margin. Again, we are being a little conservative at the onset. As we get into it, we know they are an invest-to-grow brand, so there is a higher level of marketing spend as they expand into markets and build awareness. It is a fantastic brand and a top brand in barbecue sauce, but awareness is relatively low. Their operating margins are slightly below our existing Retail due to the level of investment to sustain growth and build it out. At the gross margin level, Bachan's is nicely margin-accretive to the business. As we get into next quarter's call, we will have completed the planning process with the team and will have more to share.

Everything we see in terms of their performance gives us comfort in our business model for what we can achieve with that acquisition.

Scott Michael Marks: Okay. Appreciate the clarification. Thanks very much. I will pass it on.

Operator: Thank you. As a reminder, if you have a question, please press 11. If there are no further questions, we will now turn the call back to Mr. Ciesinski for his closing comments.

David A. Ciesinski: Thank you, operator. Before we end the call, I want to make a couple of short comments about the strategic disposition of the company and where we are heading. I believe that the acquisition of Bachan's is an opportune time to take a step back and take an inventory of where we have been, where we are, and where we look to go. Over the last ten years, if you have looked at the evolution of our company, we started as a company focused on driving our legacy brands and then added to that with our restaurant brand licenses.

Over the last seven years, we have built out our Retail business by leaning into the growth of those licensed restaurant brands. As we sit today, it is about $550 million or so of Circana sales and about $350 million more than that of net sales, and it has been an important driver of our growth story. At the same time, we have leveraged our strong balance sheet to make key investments in our infrastructure, retiring old lines and putting in high-speed, more efficient lines, and putting in place scalable IT infrastructure.

What Bachan's marks for us is not only 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 are calling authentic flavors. Ten years ago, growth was driven by legacy brands—Marzetti, Sister Schubert’s, and New York. The more recent period has been driven by that plus restaurant brands. As we go forward, we are excited to add a whole new growth leg to our story: authentic flavors.

Our aspirations are to continue to innovate, market, and grow against our legacy brands and our restaurant licensed brands, and 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. As we learn more about Bachan's and get successfully underway, we will look for other opportunities to leverage our balance sheet and find other authentic flavors where those brands and teams can come and take their business to the next level. Over the next ten years, this gives us a platform for a more balanced pathway to grow in Retail and in Foodservice. Thank you for your time today.

We look forward to being with you in August. Operator, have a great rest of the day.

Operator: Thank you. This concludes today's conference call. Thank you for participating, and you may now disconnect.