NASDAQ:JJSF J&J Snack Foods Q4 2024 Earnings Report $128.52 -1.15 (-0.89%) Closing price 04/25/2025 04:00 PM EasternExtended Trading$126.12 -2.40 (-1.87%) As of 04/25/2025 07:18 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast J&J Snack Foods EPS ResultsActual EPS$1.60Consensus EPS $1.85Beat/MissMissed by -$0.25One Year Ago EPS$1.73J&J Snack Foods Revenue ResultsActual Revenue$426.76 millionExpected Revenue$428.33 millionBeat/MissMissed by -$1.57 millionYoY Revenue Growth-3.90%J&J Snack Foods Announcement DetailsQuarterQ4 2024Date11/13/2024TimeBefore Market OpensConference Call DateThursday, November 14, 2024Conference Call Time10:00AM ETUpcoming EarningsJ&J Snack Foods' Q2 2025 earnings is scheduled for Tuesday, May 6, 2025, with a conference call scheduled at 10:00 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Q2 2025 Earnings ReportConference Call ResourcesConference Call AudioConference Call TranscriptPress Release (8-K)Annual Report (10-K)Earnings HistoryCompany ProfilePowered by J&J Snack Foods Q4 2024 Earnings Call TranscriptProvided by QuartrNovember 14, 2024 ShareLink copied to clipboard.There are 9 speakers on the call. Operator00:00:00Good day, and welcome to the J and J Snack Foods Fiscal 20 24 4th Quarter Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Instructions will be given at that time. As a reminder, this call may be recorded. Operator00:00:18I would now like to turn the call over to Norberto AHA, Investor Relations. Please go ahead. Speaker 100:00:24Thank you, operator, and good morning, everyone. Thank you for joining the J and J Snag Foods' fiscal 2024 4th quarter conference call. Before getting started, let me take a minute to read the Safe Harbor language. This call contains forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements made on this call that do not relate to matters of historical facts should be considered forward looking statements, including statements regarding management's plans, strategies, goals, expectations and objectives as well as our anticipated financial performance. Speaker 100:01:03These statements are neither promises or guarantees and involve known and unknown risks, uncertainties and other important factors that may cause results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward looking statements. Risk factors and other items discussed in our annual report on Form 10 ks for the year ended September 30, 2023, and our other filings with the Securities and Exchange Commission could cause actual results to differ materially from those indicated by forward looking statements made on the call today. Any such forward looking statements represents management's estimates as of the date of the call today, November 14, 2024. While we may elect to update forward looking statements at some point in the future, we disclaim any obligation to do so even if subsequent events cause expectations to change. In addition, we may also reference certain non GAAP measures on the call today, including adjusted normalized sales, EBITDA, adjusted operating income or adjusted earnings per share, all of which are reconciled to the nearest GAAP measure in the company's earnings press release, which can be found in our Investor Relations section of our website. Speaker 100:02:23Joining me on the call today is Dan Fashner, Chief Executive Officer along with Ken Plunk, our Chief Financial Officer. Following management's prepared remarks, we will open the call for a question and answer session. With that, I would now like to turn the call over to Mr. Fashner. Please go ahead, Dan. Speaker 200:02:41Thank you, Alberto. Good morning, everyone, and thank you for joining us today. J and J Snack Foods achieved another year of top and bottom line growth in fiscal 2024. We not only achieved record annual sales and gross profit, but also set new highs for adjusted EBITDA. And we achieved our financial goals of improving gross margin rates, delivering improved supply chain metrics and growing profits faster than sales. Speaker 200:03:14Adjusted EBITDA increased 10.2% in fiscal 2024. More importantly, these results were achieved during a dynamic consumer and economic environment that impacted traffic and spending in key channels including amusement, convenience, theaters, restaurant and retail. Despite pressures on consumer spending, we continue to grow sales on a year over year basis, led by incremental placements of core products, brands, product innovation and new customer wins. I'm so proud of our employees, who continue to execute a well aligned long term strategy that positions J and J for continued profitable growth. As we discussed our performance, it is important to remember that we had one less week of selling days in fiscal 2024 compared to fiscal 2023. Speaker 200:04:16This impacted 4th quarter sales by an estimated 33,000,000 dollars We will refer to it as normalized sales in our discussions today to better explain what we feel is a more accurate apples to apples comparison. For the year, we grew sales 1% on a reported basis and 2.8% comparing results on a normalized basis. I'm especially proud of our double digit growth in adjusted EBITDA led by an 80 basis points improvement in gross margins to 30.9 percent along with a 110 basis points improvement in adjusted EBITDA margins for the full year. Looking at our 4th quarter results, reported sales decreased 3.9%. However, on a normalized basis, sales increased 3.9%. Speaker 200:05:13Softer consumer trends, along with fewer selling days, impacted sales of our higher margin products during the quarter, including soft pretzels, churros, frozen beverages, frozen novelties and dip and dal. This resulted in a less favorable gross margin mix and created production inefficiencies as we adjusted inventory levels across our plants and distribution centers. As a result, our gross margin decreased 110 basis points for the quarter to 31.8 percent compared to a record Q4 of fiscal 2023, while operating income and adjusted EBITDA decreased 4.5% and 4%, respectively. Despite these challenges in the 4th quarter, we managed operating expenses well, improving by 110 basis points and achieving net earnings as a percentage of sales of 6.9%, consistent with the previous year. Ken will review financial performance for the Q4 fiscal year in more detail in just a few minutes. Speaker 200:06:29I'd like to emphasize the importance of our strategy and how it aligns with our results over the last year. Our J and J team remains relentlessly focused on executing our strategy of growing core brands and creating cross selling opportunities to drive incremental sales. Each quarter, we expanded new products and incremental placement even as consumer softness challenged sales in many of our key channels. This is a critical element of our strategy as it layers on growth during short term periods of declining traffic and attendance. As consumer trends improve, we are well positioned across our segments to continue driving growth and profitability. Speaker 200:07:18Let's review our 3 segments with a focus on the year's results and why we are confident in our ability to continue driving growth. In Foodservice, reported sales grew 0.3% for the fiscal year and 2.4% on a normalized basis. This included growth of frozen novelties, churros, handhelds and bakery on both a reported and normalized basis. We did experience consumer softness in key channels in the Q4, but consider these challenges to be short term in nature and do not expect that they will continue into fiscal 2025. Let me start with our frozen novelty business. Speaker 200:08:05Frozen novelty sales grew on both the reported and normalized basis for the year despite channel performance in amusement and convenience, which are key sales venues for Dip and Dots. Dip and Dots sales grew low single digits on a normalized basis for the year as new theater locations were offset by declines in traffic and attendance in our core convenience and amusement channels. This was more pronounced in our 4th quarter after delivering stronger sales in the prior Q3. As it relates to Dippin' Dots, we remain optimistic with our growth opportunities, driven by added placements in theaters and indoor amusement, together with expectations that business will improve in our core channels. Dip and Dots is currently in just under 900 theaters as of the end of fiscal 2024, and we expect to add another 120 locations in the Q1 and 180 locations in our fiscal 2nd quarter. Speaker 200:09:13We will then have Dip and Dots available in the 4 largest theater chains AMC, Cinemark, Regal and Marcus. And early feedback from some of our theater partners is that Dip and Dots is exceeding the sales of other Frozen Novelties. We are rolling out Dip and Dots in all Dave and Busters and main event locations. We expect this rollout to be completed within our fiscal Q1 across roughly 2 20 locations. We have significant opportunities in the Dip and Dots business and we'll continue to expand placement and leverage innovation to add new flavors and packaging to drive growth. Speaker 200:09:57Taking a look at churros, we continue to be confident in our long term performance and growth opportunities. Sales growth for the full year was led by the addition of a major QSR customer launched earlier in the year. This business provides other opportunities for growth with this customer. Looking forward, we're excited about a new opportunity to launch churro fries with a leading national hamburger chain. This product was successfully introduced in a recent LTO, and it exceeded expectations. Speaker 200:10:35We are working with the customer on next steps and new opportunities. We're also working on LTOs with 2 additional major QSR customers. There's a lot going on with our churro business that provides us with added confidence in our ability to continue to grow this business. Moving to bakery. We had a strong year in the bakery business, led by expanded growth of cookies with both current and new customers. Speaker 200:11:04Our bakery team has a well thought out plan to continue driving growth in 2025 that includes expanded production capacity, new products and incremental contract manufacturing opportunities. Shifting to soft pretzels. Sales declined for the year, driven by softness in the convenience, theaters, restaurant and amusement channels. This was pronounced throughout the entire market. However, we continue to grow our market share within the industry. Speaker 200:11:40We remain well positioned for growth as consumer trends improve in these key channels. Recently, we gained incremental placements of Bavarian Pretzel Bites across all sectors of the food service industry. We will continue to drive incremental opportunities through new innovations like Braulhaus pretzels and Bavarian pretzel sticks and bites, along with the expectations for improving channel performance of our core soft pretzel business. Moving to our retail segment. We grew reported sales 2.7% and normalized sales 4.4% for the fiscal year. Speaker 200:12:23This growth was driven primarily by continued expansion of our Super Pretzel Bavarian Sticks and Mini Pretzel Dogs as a major customer continues to expand placements across their portfolio. We have talked about this business before as being a great example of where cross selling and leveraging our great brands across customer channels creates incremental opportunities. We have invested marketing dollars and trade funds to drive this growth and we'll continue building this brand across retail in 2025. Soft pretzel ACV grew over 3 points, driven by expansion of Super Pretzel Mini Pretzel Dogs and Bavarian Sticks. Our soft pretzel products are well positioned in the retail sector, despite recent short term softness in the 4th quarter. Speaker 200:13:20Looking forward, we expect distribution expansion across our Super Pretzel and Auntie Anne's brands and will enter the premium pretzel segment as we launch our BrowHouse brand into retail. Let's talk about frozen novelty sales in retail. For both the year and the quarter, sales declined on both the reported and normalized basis. This decline was primarily driven by softer sales in Luigi's in an overall declining Italianized category. Our marketing and sales teams are focused on improving Luigi's performance in 2025 through improved marketing programs, enhanced consumer and product positioning and incremental customer opportunities. Speaker 200:14:13Our Dogsters brand continues to perform well, growing almost 20% in the quarter and adding over 4 points of ACV expansion. We continue to see opportunities to build this brand, leveraging the growing demand for pet products. We remain confident in this category and are really excited about bringing a new Dippin' Dots retail product to the market in fiscal 2025. Also, we continue to grow our handheld business in retail. Sales for the year grew over 58% on both a reported and normalized basis. Speaker 200:14:54This is a strong business for us, led by growth and incremental placements with a major mass merchant. Finally, let's discuss our frozen beverage segment. Sales increased 1.9% on a reported basis and 3% on a normalized basis for the year. The IT team grew this business despite volume declines in our theater and convenience channels throughout most of the year. On a reported basis, frozen beverage sales increased 2.4% for the year, even lapping an extra week in fiscal 2023. Speaker 200:15:35Theatres, a significant part of the IC business, was down 5% compared to the prior year, as the actors strike impacted the volume and quality of movie releases. We did, however, see improvements in the theater channel in Q4, especially in July September, as stronger releases hit the market. In talking with our largest theater customers, the industry expects significant improvement starting in our Q1 with a slate of franchise films and titles such as Wicked, Gladiator 2 and Sonic the Hedgehog 3. We see solid trends in the movie theater channel throughout fiscal 2025 with an improving movie slate and continuing strong concession consumption. Repair and maintenance and equipment sales increased on both the reported and normalized basis for the year. Speaker 200:16:33We continue to grow both of these categories led by expanded placements of IC machines and incremental service business across our customer portfolio. We are excited about the prospects for IC. And as the theater business comes back, we are confident IC sales will as well. In short, our strategies to leverage innovation and cross selling opportunities to expand placements of our core products and brands continue to deliver positive results. I'd like to take a moment to emphasize the impact of our operational investments over the past few years. Speaker 200:17:16Enhancements to our manufacturing and distribution capabilities are leading to notable improvements in key efficiency metrics. Our supply chain initiatives anchored by the 3 new RDCs are working as planned, adding new capacity and creating efficiencies and how we move products to our customers. We now operate out of the 9 cold storage facilities, simplifying logistics management across our network. Today, 90% of our sales orders are shipped from the new distribution network versus under 30% a year ago, with the average length of haul decreasing by over 30% and on time performance improving to over 80% versus 63% a year ago. Line haul cost per pound decreased 14% compared to the same quarter last year in our snack food business. Speaker 200:18:17Shifting to operations. The combination of new lines and increased capacity in collaboration with new distribution centers has streamlined operations, leading to reduction in waste and overtime. This optimization has allowed us to enhance our service to customers more effectively than ever before. Notably, fill rates have improved to 98.7%. I also wanted to mention that we are far along on our CFO search and we'll be in a position to confirm a new hire shortly. Speaker 200:18:54As you know, our current CFO, Ken Plunk will be retiring at the end of this calendar year. In summary, we are pleased with the progress we are making to optimize sales across all customer channels and improve our operational efficiencies. Our diverse portfolio of products and brands and our continued focus on innovation provides considerable growth opportunities across our customer base. Additionally, our strong balance sheet and liquidity, along with our experienced leadership team, reinforce our confidence in generating long term value for our employees, partners and shareholders. I'm incredibly proud of our senior team and employees who consistently carry out their jobs with dedication and skill. Speaker 200:19:48Their commitment to our goals has led to strong results that reflect their hard work and collaboration. It's truly inspiring to see how each team member contributes to our success, driving innovation and operational excellence. Together, we are building a strong foundation for future growth and success. As we enter fiscal 2025, we are optimistic about the growth potential of our core products and the success of our new product launches and client partnerships. We expect performance trends to improve in our core channels like convenience, theaters, amusements and restaurants as consumer confidence and spending improves in fiscal 2025. Speaker 200:20:36With a stronger film lineup ahead, we believe there will be significant growth opportunities for Dippin' Dots and ICEE. And we anticipate improved sales across our other products as well. With that, I would now like to pass the call over to Ken to review our financial performance in more detail. Ken? Speaker 300:20:58Thank you, Dan, and good morning, everyone. I am pleased with our ability to deliver yet another record full year performance, even as many of our core customer channels faced a softer consumer environment. As Dan just stated, we are executing a strategy that is working and confident our team is running the right place. I would like to take a few minutes to walk you through our Q4 and fiscal year results. Before reviewing our results, it is important to note that J and J's fiscal 2023 Q4 and full year included an additional week with reported results comparing 14 weeks in the Q4 of fiscal 2023 to 13 weeks in the Q4 of fiscal 2024. Speaker 300:21:43Likewise, reported results include 53 weeks for the full year 2023 results compared to 52 weeks for fiscal 2024. For purposes of comparability, we'll refer to normalized sales more accurately explain performance trends. Looking at our fiscal Q4 results, net sales decreased 3.9% as reported and increased 3.9% on a normalized basis. The loss of 1 week of sales had an even more pronounced impact on the quarter compared to the prior year due to losing selling days in the 1st week of our July fiscal month. These are peak seasonal sales days for our core business. Speaker 300:22:25We estimate this impact to be approximately $33,000,000 when comparing 4th quarter results for fiscal 2024 to 2023. Reported net sales for the quarter totaled $426,800,000 For the fiscal year, we grew sales 1% on a reported basis and added $15,900,000 in incremental sales despite having 1 less week. Net sales grew an estimated 2.8% comparing results on a normalized basis. I'll spend a few minutes reviewing 4th quarter results for each of our segments. Foodservice, our largest segment saw reported sales decrease 3 percent to $262,200,000 during the Q4 compared to the prior year period. Speaker 300:23:14Churro and salt pretzel sales declined 9 point 5% and 9.4% respectfully, while frozen novelty sales declined 4.3%. This was partially offset by a 3.5% increase in bakery sales to just shy of $100,000,000 and an 8.4% increase in handheld sales. The sales decline across most categories was attributed to the 1 less week this quarter and softer consumer spending in key channels like convenience, amusement and restaurants. Sales on a normalized basis increased an estimated 4.6%. Sales of new products and added placement with new customers totaled approximately $8,000,000 driven primarily by the addition of churros to the menu of 2 major QSR customers. Speaker 300:24:04This led to 4th quarter operating income in the foodservice sector of $15,300,000 a decrease of 12.7% versus the prior year period, reflecting lower overall foodservice sales, a less favorable sales mix and production and supply chain efficiencies as we manage through the softer consumer demand. Moving to retail, Q4 'twenty four reported net sales totaled $55,900,000 or a decrease of 13.7%, Speaker 200:24:36driven by Speaker 300:24:3919.3% and 16.8% declines in soft pretzels and frozen novelties respectively. This was partially offset by relatively flat biscuit sales and a 14.9% increase in handheld sales as we expanded product placement with a major mass merchant. Normalized sales decreased an estimated 5.7% as consumers tightened spending in key grocery and mass merchant retailers. We continue to see pressure on discretionary spending from long term food inflation impacts, higher interest rates, rising credit card balances and overall economic concerns. This led to an operating income of $3,300,000 or a decrease of $400,000 versus the prior year period reflecting the drop in sales. Speaker 300:25:33As it relates to our 3rd segment, frozen beverages reported sales were $108,700,000 a 0.1% decrease compared to a record Q4 2023. Overall segment sales increased an estimated 7.7% on a normalized basis. Beverage sales were flat at $71,300,000 but did increase on a normalized comparison led by improvements in theater sales, especially in July September as the volume and quality of releases started to recover from last year's active strike. Overall, gallons sold increased an estimated 7% when adjusted for the extra week. As Dan mentioned, we expect volumes to experience a significant improvement in calendar year 2025 given the stronger schedule of film releases. Speaker 300:26:27Repair and maintenance revenues declined 1.3% versus the prior year period, reflecting the impact of 1 last week while machine sales were up 1.7% in the quarter. This led to a Q4 2024 operating income increase of 3.4 percent to $21,300,000 for the quarter compared to Q4, 2023 operating income of 20,600,000 dollars This was driven by improved product mix and effective management of operating expenses. Before moving on, I would like to point out that on a full year basis, all three segments experienced growth including 0.3% increase in foodservice, 2.7% in retail and a 1.9% increase in food beverage sales. Adjusting for the additional week in fiscal 2023, we estimate that normalized sales increased 2.4%, 4.4% and 3% respectively for the Foodservice, Retail and Frozen Beverages segments. Our investments and initiatives over the last 2 years to enhance profit margins and drive efficiency across our business are proving to be successful. Speaker 300:27:40For the year, we continue to deliver on our goal of improving gross profit. In fiscal 2024, gross profit increased 3.5% to $486,100,000 leading to a gross margin rate improvement of 80 basis points to 30.9%. Due to the previously mentioned impacts, our 4th quarter gross profit did decline 7% to $135,500,000 leading to a gross margin rate of 31.8 percent compared to 32.8% in Q4 2023. We remain confident in our ability to deliver strong and consistent profit growth and expect to further improve our gross margin rate in 2025. And as it relates to inflation across our portfolio of raw materials, we experienced net mid single digit inflation with the increase primarily driven by higher cost of cocoa, chocolate and to a lesser extent increases in the cost of sugar, eggs and meats. Speaker 300:28:43These increases were somewhat offset by the deflationary trends seen in flour, cheese and dairy and mixes. Pricing adjustments to contractual cost true ups help minimize the majority of the impact, but continued inflation in chocolates and sugar is driving consideration of further price increases in cost of goods initiatives to manage gross margins. Our procurement team continues to effectively manage supplying cost and we are well positioned to respond to any impacts. Looking at expenses, total operating expenses decreased $8,400,000 or 8%, representing 22.4% of sales for the quarter compared to 23.4% of sales in the prior year period. Distribution costs were 10.8% of sales in the quarter, flat compared to the prior year period as the investments we made to increase efficiency across our distribution network and supply chain continue to drive expense savings. Speaker 300:29:47Marketing and selling expenses for the quarter were 7.3% of sales versus 7% in the prior year period as we continue to invest in our product innovation, brand promotions and new selling opportunities. Administrative expenses were 4.3% of sales in Q4 'twenty four compared to 5% in 2023. This led to an operating income of $39,800,000 for the quarter or a 4 point 5% decrease compared to $41,700,000 in Q4 of 2023. Adjusted operating income was $42,000,000 in the 4th quarter or an 8.3% decrease compared to Q4 2023. We estimate the additional week negatively impacted operating profit for the quarter by approximately $4,000,000 On a full year basis, operating income increased 7.3% to $117,500,000 while adjusted operating income grew 8.5 percent to $130,400,000 After the impact of income taxes of $10,900,000 compared to $11,300,000 in the comparable prior year, net earnings for the 4th quarter decreased 2.6 percent to $29,600,000 resulting in earnings per diluted share of 1 $0.52 dollars compared to $1.57 in the prior year period. Speaker 300:31:19Adjusted earnings per diluted share were $1.60 for the quarter compared to $1.73 in the prior year period. And on a full year basis, net earnings increased 9.7% leading to diluted earnings per share of $4.45 versus $4.08 in fiscal 2023. This resulted in full year fiscal 2024 adjusted earnings per diluted share of $4.93 versus $4.50 in fiscal 2023. Adjusted EBITDA for the 4th quarter decreased 4% to $59,700,000 from $62,200,000 in the prior year period and our effective tax rate was 26.8% in the quarter. On a full year basis, adjusted EBITDA increased 10.2% to a record 200 $100,000 Looking at our liquidity position, we continue to maintain a healthy balance sheet and overall strong liquidity position with $73,400,000 in cash and no debt. Speaker 300:32:28Our ability to improve cash flow through working capital initiatives and stronger profitability is generating more cash to pay down debt, pay dividends and continue investing in our business. Our focus will continue to be on maintaining a healthy balance sheet and prudent leverage position, which enables us to continue investing in the growth of our business and returning value to our shareholders. In addition, we have ample availability under our revolver of over $210,000,000 in additional borrowing capacity. To summarize, we continue to see momentum in our business supported by the breadth of our portfolio on brands, the strength of our balance sheet and the improvements we continue to make across our operations. Before I turn the call over to the operator, I wanted to thank Dan, our Board of Directors and every member of the J and J team for their unwavering support during my time as CFO. Speaker 300:33:22J and J is truly an exceptional company and I very much enjoyed my time here. As Dan mentioned, we are close to announcing my replacement and I look forward to helping ensure a smooth and seamless transition. I would now like to turn the call over to the operator for questions and answers. Operator00:33:42Thank you. Our first question comes from Conor Radigan with Consumer Edge. Your line is open. Speaker 400:34:00Good morning, guys. Thanks for the question. Speaker 200:34:02Good morning, Gunnar. Good morning. Speaker 400:34:05Good morning. So Dan, you called out challenge traffic and software consumption across your channels via QSRs, retail, c store. And so I understand traffic is broadly under pressure, but I guess could you maybe kind of comment maybe where you're seeing the greatest pressure and kind of help us understand the magnitude of that traffic pressure? And also, you also kind of noted that you don't really expect this to continue into 2025. I mean, I guess just kind of given the backdrop across the sector, what really gives you the confidence this pressure won't persist into 2025? Speaker 200:34:39Yes. Great question, Conor. A couple of the areas that we saw declines in really all year long, both the theater and the convenience sector, are ones that I believe, especially the theater, have a chance to really bounce back strong for this coming year. And that's part of what gives me a confidence that there's a period of time that we've gone through that maybe has a reason to be hopeful for the future, right? There's some great new movie releases coming out even as we close the end of this year. Speaker 200:35:13And then if you look at their lineup into 2025 and really even into 2026, it gives you the great hope that those sales will return pretty rapidly. A couple of the other areas that we talk about, the restaurants and the QSRs being down throughout this period of time, we know that the consumer has been stretched and spending has been down. And you heard me talk throughout the year, even I think you specifically asked me what some of my concerns were throughout 2025 or 2024. And I said as we get closer into the election period, I was worried about how the consumer might react during that time. There's a lot of publicity going out there and people feel one way or the other and there's just an uneasiness as you go through it. Speaker 200:36:04I felt it myself. And regardless of who wins and what party wins, once you come through that, there's the American people who are just so resilient that I believe will have a stronger feel for our economy as we go forward. I think we're starting to even feel some of that today, right? And so I'm hopeful as we move into 2025 that we'll see a lot of those pressures subside. It doesn't happen overnight, but it does happen over a period of time. Speaker 200:36:33And as we get through our Q1 and into the rest of the year, we feel pretty hopeful with all the things that we have going on, both in operational efficiencies and some of the great new pieces of business and the pipeline that I see from each business unit that we can see a really nice 2025. Speaker 400:36:56All right, great. That was really helpful. And then just one more too. So on the margin component, so you called out about some margin pressure given the 14 week compare with I believe it was a $4,000,000 operating income headwind. And so correct me if I'm wrong, but it seems like the entirety of that $4,000,000 operating income headwind should consist of gross margin pressure. Speaker 400:37:21Could you guys maybe elaborate a little bit on that on the mix headwind you called out and just maybe why that was so significant? Or was there maybe some incremental inflation or promotional pressure that popped up in the quarter? Speaker 300:37:32Yes. Connor, this is Ken. Thanks for your question. Yes, it's kind of a combination of a lot of things. 1, the loss of that key week, and again, we wanted to call out that that was the 1st week of the July fiscal month that we lost. Speaker 300:37:49That is a period of time where our core products pretzels, churros, ICs, Dippin' Dots really sell in high volume and those are some of our strongest margin products. So because it was that weak that drove especially pronounced impact on margin and on the operating income impact that we estimated of $4,000,000 The other thing as we looked into the quarter Connor, and you see the degree of sales decline in some of those core areas combined with increases in areas like bakery, handhelds and a few others. The combination of some of those lower margin areas growing and the higher margins declining, we estimate probably had around 80 basis point impact on margin rate in the quarter just from that change in mix. And those core items I'm speaking of remember they are predominantly sold in amusement, in restaurants, in theaters, in those channels that we spoke about that are soft. And you can read on many of those customers that we serve that recently come out in all of those industries and channels talking about softer traffic particularly in Q4. Operator00:39:15Thank you. Our next question comes from Andrew Wolf with CL King. Your line is open. Speaker 500:39:23Thanks. Good morning and Ken, congratulations on everything and have a great post J and J retirement and whatever else you do. Speaker 200:39:33Thank you, Andrew. Speaker 100:39:35Most welcome. Speaker 500:39:37I want to kind of follow-up on the last question. So just from the outside, it looks to me like in terms of deleveraging and kind of missing your earnings targets, clearly the foodservice part seems to be where the problems were and you just spelled out a big mix change. Can you unpack the rest of that because the press release referenced and you guys, I think a little more than you have been talking about, inefficiencies in production and even supply chain. So I know when there's unexpected demand shifts either way, but particularly down, your labor rates are going to go the wrong way and so on. But was there anything unusual or is it mainly just that plus the lack of absorption of the overhead? Speaker 300:40:27You summed it up well, actually, Andrew. It's a combination of all those things. So distribution expenses, rough numbers here, but around 20% of those expenses are fixed, particularly as we've gotten into these 3 RDCs that are driving all the efficiencies that we talked about. The cost of those on a fixed basis is more. And so when sales are down, then that's going to that's not going to leverage as well. Speaker 300:40:56That was part of the impact. It's why I'm actually quite proud that we came in flat with a year ago given the sales difference. And on a dollar basis, we came in, I want to say $2,000,000 or $3,000,000 less than a year ago in distribution expenses. So we still manage it well. And Dan spoke to a lot of those metrics. Speaker 300:41:17But when we have the sales come down in those core areas and start to deleverage fixed expenses, it creates that margin challenge that was really a byproduct. And it was both in distribution and then it was also in plant absorption, because we had built up inventory, we started to see consumption declines. We ended up having to pull back on production, kind of manage and position that. And because of that, there was less absorption and that contributed to this mix challenge that I mentioned in the 100 basis points lower margin than a year ago. Speaker 500:41:58Okay. And just kind of related to that, is there anything it demands planning that AI or machine learning, any way to like get that so you can actually predict these previously unpredictable shifts in demand better? Or is it just as you've been able to be and that's Speaker 600:42:17never changed? Speaker 200:42:18It's a great question. I hope it will change, right? It is a great question. And whenever you go through a quarter, we've asked those questions as well. And Ken and I have sat down with the teams to really understand exactly how we go about demand planning and how that circulates within our organization. Speaker 200:42:41We always think there's opportunities for improvement. We think the team is doing really, really well. But I'm asking those same questions. And our goal was absolutely to be better at that in the future like a lot of areas that we've improved on or had transformation in. I think that's one of those areas that we can continue to look at and become better at. Speaker 300:43:02Yes. And I would add, Andrew, the quarter started out well. We had a good July. And really, it was in August September. And Dan and I attribute that a lot to the things that he summarized a few minutes ago in that the combination of probably uncertainty around the election with some trends already negative in many of these channels as discretionary spending was tightening up. Speaker 300:43:32And then the other thing we did mention in the script, we don't have a measure of it, it would be hard for us to measure is the timing of the 2 hurricanes that came through Florida and Southeast. Florida is obviously a big, big state in terms of outdoor amusement, that sort of thing. But that played a role, I suspect, in some of the declines that we weren't necessarily anticipating coming out of July and then all of a sudden start to play out in August September. Speaker 500:44:04Yes. There was one of the big foodservice distributors trying to quantify it. It was pretty big impact for them at least. Speaker 200:44:13Right. Speaker 500:44:16Lastly, I don't want to I'll see it. I just wanted to ask a specific thing because you covered a lot of your innovation. But did you mention or could you update us if you didn't mention it or if you did just repeat it? Are you still doing a frozen beverage test at a QSR in QSR chain? Speaker 200:44:33We are. We are. It's continuing to grow. I did not mention it, but it's continuing to grow, and we've now rolled out an additional market down in Florida with it. And so we remain hopeful that this is something that we can bring in during the 2025 year. Speaker 500:44:51Okay, great. All right. Thank you. Speaker 200:44:54Thank you, Andrew. Thank you, Andrew. Operator00:44:57Thank you. And our next question comes from Todd Brooks with The Benchmark Company. Your line is open. Speaker 700:45:09Hey, thank you. Good morning, gentlemen and Ken. Try not to play too much golf, okay? Speaker 300:45:16Thank you, John. Speaker 700:45:19First question I have for you and it gets to just the timing of this call and looking forward to fiscal 2025. You've had a nice track record here of gross margin improvement. We've talked about more of a medium term target of getting to the mid-30s with gross margin and you pointed to in the call, expecting improvement fiscal 'twenty five over 'twenty four. Distribution, you talked about kind of a 10% goal, maybe levering a little bit beyond that as time goes on. Just can we talk about margin framework looking forward into 2025 knowing that you're hopeful on the consumer bouncing back, but within the controllable elements of the business, maybe try to level set expectations from our standpoint for margin improvement that you're expecting to unlock in the upcoming year? Speaker 300:46:15Yes, absolutely. And great question. There's a reason why we spent a lot of time in Dan's comments about really talking about the strategies and the financial strategies of improving gross margin. And we did it last year, we did it this year. That's very important to us, growing profits faster than sales. Speaker 300:46:35Our plan for next year is to continue to do the same, Todd. We would expect gross margin to improve. I think it's safe to say we expect it to be over 31%, which would show improvement over the 30.8% for the year this year. I think Dan mentioned this in our call last quarter. The next mile gets harder, right? Speaker 300:46:58There's a lot more work we got to do to continue figuring out our way to 32 and beyond, but that is the goal and we think we will get there. I don't think we'll get there next year. I would probably be thinking in the kind of low 31% range kind of area for 25%. But the focus is there. The initiatives are there. Speaker 300:47:21We went through in our planning recently and there are very specific initiatives whether it's procurement, whether it's operational efficiency, whether it's distribution, how do we get that number starting to hit its way towards that below 10% range. All of those things are very specific initiatives and continue to be the focus. Speaker 200:47:43Yes. Todd, I'll just echo on that. We're as bullish as ever before. We're going to continue to drive that as much as we possibly can. And just like Ken said, I say it all the time, the last mile is the hardest, but we're going to continue to work hard in that last mile. Speaker 200:47:59And the teams continue to be focused around it. And so I think we can continue to move it. I think Ken gave you a number that's probably fairly accurate for next year and then we'll continue to get it better the year after as well. Speaker 700:48:11And just a follow-up on that, if I can. The distribution with all 3 of the RDCs now set up and really running 90% of the product like you said through there. Is that 10% goal deliverable in fiscal 2025 to meet or beat that number? Speaker 300:48:31Probably not for the year, Todd. You'll see us getting in that range I think in Q3 and Q4 when the sales are up there, enable us to get there. Given the seasonality of many products and the level of fixed cost in that, we won't hit that mark in Q1 or even in Q2. So that will average out probably something closer in the mid teens somewhere I would probably say, Todd. Speaker 700:49:03Okay, perfect. Thanks. And then Speaker 300:49:05Let me be clear mid teens. Sorry, the mid-ten percent range is what I was trying to say. Speaker 700:49:13Got you. And then final question from me, product newness, not as much focused on that on the call because we had to explain just kind of the lapse with the 53rd week here. But I know you just did announce the upcoming Dippin' Nuts launch in grocery at retail with Kroger. You talked about expanded placement all for theater channels, Dave and Buster's, which was incremental news. Dan, you talked about the ability to double this business relative to that $80,000,000 run rate when you bought it. Speaker 700:49:50Are you more bullish on the outlook now as you're seeing this expansion through additional channels with the core product, but also opening up the retail channel here early in calendar 2025? Speaker 200:50:01Thank you. We're really excited about that retail thing. We believe Dippin' Dots in retail can be really, really big for us. And early indications from talking to our customer, not the consumer, but talking to our customer, they're equally as excited. And so we feel really good about that. Speaker 200:50:22And we think we have a potential product to back it up with out coming out of Dippin' Dots as well. And so I love the momentum that our teams are working on and how they see being able to expand that. I still am bullish that we can double those sales. Now they may show up in our P and L, some in retail and some under foodservice because of the way we report it, but I still believe that we can do that, and I love that acquisition. And if we were calling out some of the new items coming out, that would be top of the list. Speaker 200:50:55I really like what we're doing with that. I also like I mentioned our BrowHouse in the retail. I think that's going to do really, really well for us. The team has kind of positioned this good, better, best kind of profile around our J and J's Snack Foods pretzel and our Auntie Anne's pretzel and this Browhouse pretzel. And I think we're entering into a really nice market there as well. Speaker 200:51:19And then continued expansion with Docksters. Today, we have a new flavor that we introduced last year and we're looking at how to introduce that in single serve to enter into the pet industry as well. Just see some really good things across all of our business units with great opportunities. Even mentioned in the call, just to call this out to the an opportunity that we have with contract manufacturing because it's something that we don't always talk about. We have a really nice opportunity there. Speaker 200:51:51So a lot of really good tailwinds going into the year. Speaker 500:51:56Okay, great. Thank you both. Speaker 300:51:58Thank you, Tyler. Operator00:52:01Thank you. Our next question comes from John Anderson with William Blair. Your line is open. Speaker 600:52:09Hey, good morning, Dan and Ken. Thanks for the question. Speaker 200:52:12Good morning, John. Speaker 600:52:15Maybe just to kind of try and close the loop a little bit on one of the questions from the last participant. You addressed kind of how you're thinking about gross margin in 2025 and the distribution ratio. I wanted to hit a different line, a marketing line. There were a couple of years in 2020 2021 when the marketing ratio came down. Speaker 400:52:43I think Speaker 600:52:44that's quite understandable given what was happening at that time. It's crept up a little bit in 2023 2024, ended the year this year at about 7.4% of sales, but still below where it was several years ago, closer to 8.5% to 9%. Dan, you mentioned some investments there, promo, marketing Speaker 500:53:09behind Speaker 600:53:09the retail part of the business. How do you see that line evolving over the next year or 2 as you expand particularly some of the new products, dip and dots, etcetera into retail? Thanks. Speaker 200:53:23Yes. Good question, John. I'm really proud of that marketing team of ours led by Linwood Mallard and some really, really good people within there being cost conscious at all the times. And so I would first answer the question as I see that marketing line being basically flat to that 7.4% range somewhere in there during this next year. The teams are evaluating how they spend that all the time and maybe diverting it into some more digital and more focused marketing in different ways. Speaker 200:54:00And I like how we have that lined up for next year. But I would see it in that same flattish range to that 7.4%. Speaker 600:54:09Great. That's helpful. Okay. So I wanted to shift to the top line for a minute. You did talk quite a bit about some of the pressure on the consumer or softer traffic of late and I guess some of that throughout the year in certain channels. Speaker 600:54:27But when I step back and I think about, hey, on a normalized basis, you grew sales about 3% this year. And even in this quarter, normalized, you grew sales at 4% or nearly 4%, which is pretty good. And so I'm trying to kind of taking that kind of view and then some of the commentary around your thinking that cross selling efforts are taking hold, the consumer is likely to come back stronger, the theater channel is improving. What should we be kind of be thinking about for fiscal 2025 in terms of normalized growth at this point? How would you kind of at least give us some guardrails to work with as we think about modeling the top line going forward? Speaker 200:55:17Yes. Hey, thanks for calling some of those things out. That's exactly what I was trying to get across on the call too. We're really proud of the year that we've had, right, especially if you back out some of the muddiness of an extra week in last year compared to this year. I love what the teams are doing to grow that. Speaker 200:55:35It kind of falls in line with some of the things that I've you've heard me say before and I really believe this. The J and J Company has this broad diverse portfolio, which allows us to be what I'd call kind of recession resilient, not recession proof. It doesn't mean that we don't in down periods of time, we don't get affected. So but we have such a broad portfolio that if we have some recession proof to that or downtime proof. Our goals continue to be that mid single digit growth year in and year out, right? Speaker 200:56:11And as I look into probably 2025, I would see it in that low mid single digits growth, somewhere in that range, probably is how we're looking at it going forward. We think we have some really nice opportunities and we believe that the industry and channels will improve. And those combinations, I think, should get us somewhere in that mid to low single digits. Speaker 600:56:37And I think that there was at least a comment in the prepared remarks around some inflation, maybe it was cocoa, sugar, perhaps prompting you to look at some additional price. I think you usually take price late in the year to effective in the new calendar year. Is that part is pricing part of the algorithm in 2025 or not at this point? Speaker 200:57:02It is and we will be taking pricing on what I call the 3 business units, IC Snack Foods and Dippin' Dots, into January timeframe. IC has that cadence that they always are on and they'll do that January 1 and Dippin' Dots is kind of now on that cadence as well. And then somewhere mid January, we'll have an increase in the snack food side as well. Speaker 600:57:27That's helpful. Last one for me. Your CapEx was down 30% or so this year. I think that's because there was some larger investments, obviously, you're making in operational efficiencies. Infrastructure, I think, in 2023 that didn't have to repeat in 2024. Speaker 600:57:47But how should we think about capital expenditure in 2025, maintenance and growth? Yes, that would be helpful. Thanks. Speaker 300:57:58Yes, John, this is Ken. You summarized that well. 2022, 2023 were big investment years as we talked about the 6 lines and the 3 RDCs, etcetera. And now I think we're back to a bit more normal state. I mean we'll continue to invest in our business. Speaker 300:58:17There's still I want to say 2 or 3, 4 lines that we may add or improve next year on some other capital. But I think the way to think about it in 20 25 and going forward is, it's going to be kind of a run rate of around 4.5% to 5% of sales. So that would put you kind of in a range of $75,000,000 to $85,000,000 probably in the near future, somewhere in there. Speaker 600:58:46Great. Thanks so much. And Ken, good luck going forward. Speaker 200:58:49Thank you, John. Thanks, John. Operator00:58:54Thank you. Our next question comes from Rob Dickerson with Jefferies. Your line is open. Speaker 800:59:04Great. Sorry. Speaker 300:59:06Yes, I guess just Speaker 800:59:08two questions for me. First question is just, excuse me, just kind of going back to like the channel dynamics, the consumer discretionary spend, all that fun stuff so far. You clearly have a kind of better view of what's been occurring in the convenience store channel where you do have some exposure. And clearly the channel has been under a bit of pressure. Recently, if I walk into a number of convenience stores, I actually see some promotions in C stores, which we normally don't see. Speaker 800:59:51And I've been talking to a few people who say, oh, yes, I mean really have expectations and hope that that C store channel kind of comes back as we get through next year. So like while I understand your comments on the movie theater channel with new film releases, like kind of whatever you have, like how you think about like what could actually entice kind of the average person who would normally have gone to a C store to kind of go back to that C store? Because I do think that is kind of like a decent kind of benchmark as to where maybe some of the discretionary spend moves and kind of how consumers overall kind of think about shopping that channel or those more discretionary channels and your products? And I kind of preface it all with like I realize there's an election and things are choppy and consumer, but just kind of taking a guess, like what could get people back there? That's just kind of a very broad first question. Speaker 201:00:57Yes. That convenience channel is interesting because I've watched it really closely too. It infects a lot of pieces of our business on the snack food side, on the IC side and on the Dip and Dot side. All three of those are impacted by what happens there. And so I think you brought up some promotional activity and we're looking at that really strong. Speaker 201:01:20We're looking at marketing efforts that pull consumers in as they're out in the car and entices them to products that we have inside the store, which are highly impulse items often there. And I don't know if there's a silver bullet that pulls that industry back in overnight, but I think a greater consumer confidence will allow some additional spending for people to get out of their car and out of the gas pump area and into the convenience store to buy one of our core products. And so sometimes, and you've heard me say this before and we've really been doing it in the theaters as well with Dippin' Dots, sometimes the best way or best time to invest in a particular channel that you have a lot of faith in that will come back is when it's a little soft, right? And so we're working really hard at that and continuing to grow in several of our areas in that channel. We were just out at the National Association of Convenience Store Show and had some good opportunities come out of that. Speaker 201:02:25We're going to continue to grow in it and are confident that it will come back. Does it come back in Q1 or Q2? I'm not sure, but we're going to do that and then we're going to drive some promotional and marketing activity to try to pull the consumer inside, as they are too. They're smart operators and they're working hard at it as well. Speaker 801:02:46Yes. I mean, I'm just kind of thinking like you're introducing Churro into Subway, right? And drive to the Subway, there's like signage everywhere. And little Johnny in the car is like, hey, mommy, can I we stopped by Subway, we're going to Churro like why not put up different signage or say, oh, it's special icy day for $3 for a large size? Like I'm assuming there are ideas out there that kind of pull them in a little bit versus just like, hey, hopefully consumer gets better. Speaker 801:03:17You know what I mean? Speaker 201:03:18I agree, Rob. That's exactly what I'm saying. We call it curb in marketing, where when you're driving up to that convenience store, you start to recognize some of those products that are out there right now. I see over the years has done that curve in marketing really well, and we're going to leverage some of those learnings into our other pieces of business. Speaker 801:03:39Fair enough. Fair enough. Okay, cool. And then just kind of quickly, there have been a lot of great kind of supply chain network optimization moves over the past couple of years along with the CapEx that you spent to do it. I mean, I realize it's a little softer now and lapping the extra week. Speaker 801:04:02But kind of like and then also the comments around gross margin expansion, right, some next year, right? It's not a ton, but getting kind of far in the mileage of that gross margin. But like there was still kind of like a longer term expectation, right, that you can get that operating profit margin up over time because of the initiatives, because and then obviously some consumer tailwinds would help too. So like if we're thinking 3 years forward, is there anything that's like necessarily changed or no? Like well, the environment's changed a little bit, but environment comes back and we're back on track and we'll be able to leverage some of our SG and A distribution costs and what have you. Speaker 801:04:55So again, kind of a broad question, but just curious. Speaker 201:04:59Yes. No, Rob, nothing has really changed in our initiatives to continue to drive those to the levels that we've talked about. Other than what I've said before and for a period of time in my life, I ran a bunch of half marathons and if you ever ran a half or a full, when you hear me say that last mile is the hardest, it really is the hardest. It seems like it takes you the whole marathon to get to that last mile, right? And so those are the things that we're up against. Speaker 201:05:26We will continue to grow margins 30 plus with the goal of someday hoping to be in the mid-30s with that. We'll continue to drive that through the things that we do each and every day. And the same thing with supply chain, met with that team and I love the work that they've done, Met with that team just a couple of weeks ago to talk about, okay, so now how do we take the next really big step. And the team has some great plans in it. And I'm sure that they will execute on it. Speaker 201:05:56But those plans as we get to this stage are harder, right? When you get to the last mile, it's just harder. Our goals haven't changed. My initiatives haven't changed. I believe that we'll get there. Speaker 201:06:08It just gets tougher as you get deeper into it. Speaker 301:06:11Yes. Rob, just to add some emphasis to what Dan said, because I mean, we talk about this every day, every meeting, every quarter. These are real parts of the strategy. But the proof is that in what we've done. So we improved EBITDA margin, adjusted EBITDA margin year over year by 110 basis points. Speaker 301:06:33I mean that was driven by the 80 basis points improvement in gross profit and then the other part primarily probably distribution expenses. Even in the Q4, if you take out the impact of the extra week, we would have came in around 15% EBITDA as a way to sell. So we're hitting the mark there. It's going to be harder to get the next 100 and the next 100, but I think as long as those are core strategies and how we do things and how we drive performance, the business is going to continue to move those numbers up. Operator01:07:12Thank you. There are no further questions at this time. I'd like to turn the call back over to Dan Fassner for any closing remarks. Speaker 201:07:18Thank you very much. In closing, we are successfully executing our strategy in an ever evolving operating environment and we are confident in our ability to deliver our objectives in 2025 and over the long term. I also want to take this opportunity to thank Ken for being such a great partner and leader in his valuable work in transforming the business over these past 4 years. Everyone at J&J wishes him and his family the very best in this new chapter of his life. We look forward to updating you on our fiscal 2025 Q1 results. Speaker 201:07:55In the interim, should you have any questions or wish to speak to us, please contact our Investor Relations firm JCIR at 212-835-8500. Thank you and have a great day. Operator01:08:12Thank you for your participation. This does conclude the program. You may now disconnect.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallJ&J Snack Foods Q4 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsPress Release(8-K)Annual report(10-K) J&J Snack Foods Earnings HeadlinesAnalysts Offer Insights on Consumer Goods Companies: J & J Snack Foods (JJSF) and Philip Morris (PM)April 24 at 5:13 PM | markets.businessinsider.comJ&J Snack Foods Refreshes SUPERPRETZEL® with a Bolder Taste and Softer TextureApril 24 at 9:00 AM | prnewswire.comTrump purposefully forcing markets to crash…Whether you agree with the plan or not doesn’t matter. It’s happening. The only question is – are you ready for it?April 26, 2025 | Porter & Company (Ad)J & J SNACK FOODS SCHEDULES FISCAL 2025 SECOND QUARTER EARNINGS CONFERENCE CALL AND WEBCASTApril 15, 2025 | globenewswire.comJ&J Snack Foods: Despite Some Promising Signs, I'm Staying Away For NowApril 15, 2025 | seekingalpha.com3 Reasons to Avoid JJSF and 1 Stock to Buy InsteadApril 7, 2025 | msn.comSee More J&J Snack Foods Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like J&J Snack Foods? Sign up for Earnings360's daily newsletter to receive timely earnings updates on J&J Snack Foods and other key companies, straight to your email. Email Address About J&J Snack FoodsJ&J Snack Foods (NASDAQ:JJSF) engages in the manufacturing of nutritional snack foods and distribution of frozen beverages to the food service and retail supermarket industries. It operates through the following segments: Food Service, Retail Supermarkets, and Frozen Beverages. The Food Service segment includes soft pretzels, frozen novelties, churros, handheld products, and baked goods. The Retail Supermarkets segment offers soft pretzel products including Superpretzel, frozen juice treats and desserts, including Luigi's real Italian ice, Minute Maid juice bars and soft frozen lemonade, Whole Fruit frozen fruit bars and sorbet, Philly Swirl cups and sticks, ICEE Squeeze-Up Tubes and dough enrobed handheld products including Patio burritos. The Frozen Beverages segment provides frozen beverages to the food service industry primarily under the names ICEE, SLUSH PUPPIE, and PARROT ICE in the United States, Mexico, and Canada, as well as repair and maintenance services. The company was founded by Gerald B. 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There are 9 speakers on the call. Operator00:00:00Good day, and welcome to the J and J Snack Foods Fiscal 20 24 4th Quarter Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Instructions will be given at that time. As a reminder, this call may be recorded. Operator00:00:18I would now like to turn the call over to Norberto AHA, Investor Relations. Please go ahead. Speaker 100:00:24Thank you, operator, and good morning, everyone. Thank you for joining the J and J Snag Foods' fiscal 2024 4th quarter conference call. Before getting started, let me take a minute to read the Safe Harbor language. This call contains forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements made on this call that do not relate to matters of historical facts should be considered forward looking statements, including statements regarding management's plans, strategies, goals, expectations and objectives as well as our anticipated financial performance. Speaker 100:01:03These statements are neither promises or guarantees and involve known and unknown risks, uncertainties and other important factors that may cause results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward looking statements. Risk factors and other items discussed in our annual report on Form 10 ks for the year ended September 30, 2023, and our other filings with the Securities and Exchange Commission could cause actual results to differ materially from those indicated by forward looking statements made on the call today. Any such forward looking statements represents management's estimates as of the date of the call today, November 14, 2024. While we may elect to update forward looking statements at some point in the future, we disclaim any obligation to do so even if subsequent events cause expectations to change. In addition, we may also reference certain non GAAP measures on the call today, including adjusted normalized sales, EBITDA, adjusted operating income or adjusted earnings per share, all of which are reconciled to the nearest GAAP measure in the company's earnings press release, which can be found in our Investor Relations section of our website. Speaker 100:02:23Joining me on the call today is Dan Fashner, Chief Executive Officer along with Ken Plunk, our Chief Financial Officer. Following management's prepared remarks, we will open the call for a question and answer session. With that, I would now like to turn the call over to Mr. Fashner. Please go ahead, Dan. Speaker 200:02:41Thank you, Alberto. Good morning, everyone, and thank you for joining us today. J and J Snack Foods achieved another year of top and bottom line growth in fiscal 2024. We not only achieved record annual sales and gross profit, but also set new highs for adjusted EBITDA. And we achieved our financial goals of improving gross margin rates, delivering improved supply chain metrics and growing profits faster than sales. Speaker 200:03:14Adjusted EBITDA increased 10.2% in fiscal 2024. More importantly, these results were achieved during a dynamic consumer and economic environment that impacted traffic and spending in key channels including amusement, convenience, theaters, restaurant and retail. Despite pressures on consumer spending, we continue to grow sales on a year over year basis, led by incremental placements of core products, brands, product innovation and new customer wins. I'm so proud of our employees, who continue to execute a well aligned long term strategy that positions J and J for continued profitable growth. As we discussed our performance, it is important to remember that we had one less week of selling days in fiscal 2024 compared to fiscal 2023. Speaker 200:04:16This impacted 4th quarter sales by an estimated 33,000,000 dollars We will refer to it as normalized sales in our discussions today to better explain what we feel is a more accurate apples to apples comparison. For the year, we grew sales 1% on a reported basis and 2.8% comparing results on a normalized basis. I'm especially proud of our double digit growth in adjusted EBITDA led by an 80 basis points improvement in gross margins to 30.9 percent along with a 110 basis points improvement in adjusted EBITDA margins for the full year. Looking at our 4th quarter results, reported sales decreased 3.9%. However, on a normalized basis, sales increased 3.9%. Speaker 200:05:13Softer consumer trends, along with fewer selling days, impacted sales of our higher margin products during the quarter, including soft pretzels, churros, frozen beverages, frozen novelties and dip and dal. This resulted in a less favorable gross margin mix and created production inefficiencies as we adjusted inventory levels across our plants and distribution centers. As a result, our gross margin decreased 110 basis points for the quarter to 31.8 percent compared to a record Q4 of fiscal 2023, while operating income and adjusted EBITDA decreased 4.5% and 4%, respectively. Despite these challenges in the 4th quarter, we managed operating expenses well, improving by 110 basis points and achieving net earnings as a percentage of sales of 6.9%, consistent with the previous year. Ken will review financial performance for the Q4 fiscal year in more detail in just a few minutes. Speaker 200:06:29I'd like to emphasize the importance of our strategy and how it aligns with our results over the last year. Our J and J team remains relentlessly focused on executing our strategy of growing core brands and creating cross selling opportunities to drive incremental sales. Each quarter, we expanded new products and incremental placement even as consumer softness challenged sales in many of our key channels. This is a critical element of our strategy as it layers on growth during short term periods of declining traffic and attendance. As consumer trends improve, we are well positioned across our segments to continue driving growth and profitability. Speaker 200:07:18Let's review our 3 segments with a focus on the year's results and why we are confident in our ability to continue driving growth. In Foodservice, reported sales grew 0.3% for the fiscal year and 2.4% on a normalized basis. This included growth of frozen novelties, churros, handhelds and bakery on both a reported and normalized basis. We did experience consumer softness in key channels in the Q4, but consider these challenges to be short term in nature and do not expect that they will continue into fiscal 2025. Let me start with our frozen novelty business. Speaker 200:08:05Frozen novelty sales grew on both the reported and normalized basis for the year despite channel performance in amusement and convenience, which are key sales venues for Dip and Dots. Dip and Dots sales grew low single digits on a normalized basis for the year as new theater locations were offset by declines in traffic and attendance in our core convenience and amusement channels. This was more pronounced in our 4th quarter after delivering stronger sales in the prior Q3. As it relates to Dippin' Dots, we remain optimistic with our growth opportunities, driven by added placements in theaters and indoor amusement, together with expectations that business will improve in our core channels. Dip and Dots is currently in just under 900 theaters as of the end of fiscal 2024, and we expect to add another 120 locations in the Q1 and 180 locations in our fiscal 2nd quarter. Speaker 200:09:13We will then have Dip and Dots available in the 4 largest theater chains AMC, Cinemark, Regal and Marcus. And early feedback from some of our theater partners is that Dip and Dots is exceeding the sales of other Frozen Novelties. We are rolling out Dip and Dots in all Dave and Busters and main event locations. We expect this rollout to be completed within our fiscal Q1 across roughly 2 20 locations. We have significant opportunities in the Dip and Dots business and we'll continue to expand placement and leverage innovation to add new flavors and packaging to drive growth. Speaker 200:09:57Taking a look at churros, we continue to be confident in our long term performance and growth opportunities. Sales growth for the full year was led by the addition of a major QSR customer launched earlier in the year. This business provides other opportunities for growth with this customer. Looking forward, we're excited about a new opportunity to launch churro fries with a leading national hamburger chain. This product was successfully introduced in a recent LTO, and it exceeded expectations. Speaker 200:10:35We are working with the customer on next steps and new opportunities. We're also working on LTOs with 2 additional major QSR customers. There's a lot going on with our churro business that provides us with added confidence in our ability to continue to grow this business. Moving to bakery. We had a strong year in the bakery business, led by expanded growth of cookies with both current and new customers. Speaker 200:11:04Our bakery team has a well thought out plan to continue driving growth in 2025 that includes expanded production capacity, new products and incremental contract manufacturing opportunities. Shifting to soft pretzels. Sales declined for the year, driven by softness in the convenience, theaters, restaurant and amusement channels. This was pronounced throughout the entire market. However, we continue to grow our market share within the industry. Speaker 200:11:40We remain well positioned for growth as consumer trends improve in these key channels. Recently, we gained incremental placements of Bavarian Pretzel Bites across all sectors of the food service industry. We will continue to drive incremental opportunities through new innovations like Braulhaus pretzels and Bavarian pretzel sticks and bites, along with the expectations for improving channel performance of our core soft pretzel business. Moving to our retail segment. We grew reported sales 2.7% and normalized sales 4.4% for the fiscal year. Speaker 200:12:23This growth was driven primarily by continued expansion of our Super Pretzel Bavarian Sticks and Mini Pretzel Dogs as a major customer continues to expand placements across their portfolio. We have talked about this business before as being a great example of where cross selling and leveraging our great brands across customer channels creates incremental opportunities. We have invested marketing dollars and trade funds to drive this growth and we'll continue building this brand across retail in 2025. Soft pretzel ACV grew over 3 points, driven by expansion of Super Pretzel Mini Pretzel Dogs and Bavarian Sticks. Our soft pretzel products are well positioned in the retail sector, despite recent short term softness in the 4th quarter. Speaker 200:13:20Looking forward, we expect distribution expansion across our Super Pretzel and Auntie Anne's brands and will enter the premium pretzel segment as we launch our BrowHouse brand into retail. Let's talk about frozen novelty sales in retail. For both the year and the quarter, sales declined on both the reported and normalized basis. This decline was primarily driven by softer sales in Luigi's in an overall declining Italianized category. Our marketing and sales teams are focused on improving Luigi's performance in 2025 through improved marketing programs, enhanced consumer and product positioning and incremental customer opportunities. Speaker 200:14:13Our Dogsters brand continues to perform well, growing almost 20% in the quarter and adding over 4 points of ACV expansion. We continue to see opportunities to build this brand, leveraging the growing demand for pet products. We remain confident in this category and are really excited about bringing a new Dippin' Dots retail product to the market in fiscal 2025. Also, we continue to grow our handheld business in retail. Sales for the year grew over 58% on both a reported and normalized basis. Speaker 200:14:54This is a strong business for us, led by growth and incremental placements with a major mass merchant. Finally, let's discuss our frozen beverage segment. Sales increased 1.9% on a reported basis and 3% on a normalized basis for the year. The IT team grew this business despite volume declines in our theater and convenience channels throughout most of the year. On a reported basis, frozen beverage sales increased 2.4% for the year, even lapping an extra week in fiscal 2023. Speaker 200:15:35Theatres, a significant part of the IC business, was down 5% compared to the prior year, as the actors strike impacted the volume and quality of movie releases. We did, however, see improvements in the theater channel in Q4, especially in July September, as stronger releases hit the market. In talking with our largest theater customers, the industry expects significant improvement starting in our Q1 with a slate of franchise films and titles such as Wicked, Gladiator 2 and Sonic the Hedgehog 3. We see solid trends in the movie theater channel throughout fiscal 2025 with an improving movie slate and continuing strong concession consumption. Repair and maintenance and equipment sales increased on both the reported and normalized basis for the year. Speaker 200:16:33We continue to grow both of these categories led by expanded placements of IC machines and incremental service business across our customer portfolio. We are excited about the prospects for IC. And as the theater business comes back, we are confident IC sales will as well. In short, our strategies to leverage innovation and cross selling opportunities to expand placements of our core products and brands continue to deliver positive results. I'd like to take a moment to emphasize the impact of our operational investments over the past few years. Speaker 200:17:16Enhancements to our manufacturing and distribution capabilities are leading to notable improvements in key efficiency metrics. Our supply chain initiatives anchored by the 3 new RDCs are working as planned, adding new capacity and creating efficiencies and how we move products to our customers. We now operate out of the 9 cold storage facilities, simplifying logistics management across our network. Today, 90% of our sales orders are shipped from the new distribution network versus under 30% a year ago, with the average length of haul decreasing by over 30% and on time performance improving to over 80% versus 63% a year ago. Line haul cost per pound decreased 14% compared to the same quarter last year in our snack food business. Speaker 200:18:17Shifting to operations. The combination of new lines and increased capacity in collaboration with new distribution centers has streamlined operations, leading to reduction in waste and overtime. This optimization has allowed us to enhance our service to customers more effectively than ever before. Notably, fill rates have improved to 98.7%. I also wanted to mention that we are far along on our CFO search and we'll be in a position to confirm a new hire shortly. Speaker 200:18:54As you know, our current CFO, Ken Plunk will be retiring at the end of this calendar year. In summary, we are pleased with the progress we are making to optimize sales across all customer channels and improve our operational efficiencies. Our diverse portfolio of products and brands and our continued focus on innovation provides considerable growth opportunities across our customer base. Additionally, our strong balance sheet and liquidity, along with our experienced leadership team, reinforce our confidence in generating long term value for our employees, partners and shareholders. I'm incredibly proud of our senior team and employees who consistently carry out their jobs with dedication and skill. Speaker 200:19:48Their commitment to our goals has led to strong results that reflect their hard work and collaboration. It's truly inspiring to see how each team member contributes to our success, driving innovation and operational excellence. Together, we are building a strong foundation for future growth and success. As we enter fiscal 2025, we are optimistic about the growth potential of our core products and the success of our new product launches and client partnerships. We expect performance trends to improve in our core channels like convenience, theaters, amusements and restaurants as consumer confidence and spending improves in fiscal 2025. Speaker 200:20:36With a stronger film lineup ahead, we believe there will be significant growth opportunities for Dippin' Dots and ICEE. And we anticipate improved sales across our other products as well. With that, I would now like to pass the call over to Ken to review our financial performance in more detail. Ken? Speaker 300:20:58Thank you, Dan, and good morning, everyone. I am pleased with our ability to deliver yet another record full year performance, even as many of our core customer channels faced a softer consumer environment. As Dan just stated, we are executing a strategy that is working and confident our team is running the right place. I would like to take a few minutes to walk you through our Q4 and fiscal year results. Before reviewing our results, it is important to note that J and J's fiscal 2023 Q4 and full year included an additional week with reported results comparing 14 weeks in the Q4 of fiscal 2023 to 13 weeks in the Q4 of fiscal 2024. Speaker 300:21:43Likewise, reported results include 53 weeks for the full year 2023 results compared to 52 weeks for fiscal 2024. For purposes of comparability, we'll refer to normalized sales more accurately explain performance trends. Looking at our fiscal Q4 results, net sales decreased 3.9% as reported and increased 3.9% on a normalized basis. The loss of 1 week of sales had an even more pronounced impact on the quarter compared to the prior year due to losing selling days in the 1st week of our July fiscal month. These are peak seasonal sales days for our core business. Speaker 300:22:25We estimate this impact to be approximately $33,000,000 when comparing 4th quarter results for fiscal 2024 to 2023. Reported net sales for the quarter totaled $426,800,000 For the fiscal year, we grew sales 1% on a reported basis and added $15,900,000 in incremental sales despite having 1 less week. Net sales grew an estimated 2.8% comparing results on a normalized basis. I'll spend a few minutes reviewing 4th quarter results for each of our segments. Foodservice, our largest segment saw reported sales decrease 3 percent to $262,200,000 during the Q4 compared to the prior year period. Speaker 300:23:14Churro and salt pretzel sales declined 9 point 5% and 9.4% respectfully, while frozen novelty sales declined 4.3%. This was partially offset by a 3.5% increase in bakery sales to just shy of $100,000,000 and an 8.4% increase in handheld sales. The sales decline across most categories was attributed to the 1 less week this quarter and softer consumer spending in key channels like convenience, amusement and restaurants. Sales on a normalized basis increased an estimated 4.6%. Sales of new products and added placement with new customers totaled approximately $8,000,000 driven primarily by the addition of churros to the menu of 2 major QSR customers. Speaker 300:24:04This led to 4th quarter operating income in the foodservice sector of $15,300,000 a decrease of 12.7% versus the prior year period, reflecting lower overall foodservice sales, a less favorable sales mix and production and supply chain efficiencies as we manage through the softer consumer demand. Moving to retail, Q4 'twenty four reported net sales totaled $55,900,000 or a decrease of 13.7%, Speaker 200:24:36driven by Speaker 300:24:3919.3% and 16.8% declines in soft pretzels and frozen novelties respectively. This was partially offset by relatively flat biscuit sales and a 14.9% increase in handheld sales as we expanded product placement with a major mass merchant. Normalized sales decreased an estimated 5.7% as consumers tightened spending in key grocery and mass merchant retailers. We continue to see pressure on discretionary spending from long term food inflation impacts, higher interest rates, rising credit card balances and overall economic concerns. This led to an operating income of $3,300,000 or a decrease of $400,000 versus the prior year period reflecting the drop in sales. Speaker 300:25:33As it relates to our 3rd segment, frozen beverages reported sales were $108,700,000 a 0.1% decrease compared to a record Q4 2023. Overall segment sales increased an estimated 7.7% on a normalized basis. Beverage sales were flat at $71,300,000 but did increase on a normalized comparison led by improvements in theater sales, especially in July September as the volume and quality of releases started to recover from last year's active strike. Overall, gallons sold increased an estimated 7% when adjusted for the extra week. As Dan mentioned, we expect volumes to experience a significant improvement in calendar year 2025 given the stronger schedule of film releases. Speaker 300:26:27Repair and maintenance revenues declined 1.3% versus the prior year period, reflecting the impact of 1 last week while machine sales were up 1.7% in the quarter. This led to a Q4 2024 operating income increase of 3.4 percent to $21,300,000 for the quarter compared to Q4, 2023 operating income of 20,600,000 dollars This was driven by improved product mix and effective management of operating expenses. Before moving on, I would like to point out that on a full year basis, all three segments experienced growth including 0.3% increase in foodservice, 2.7% in retail and a 1.9% increase in food beverage sales. Adjusting for the additional week in fiscal 2023, we estimate that normalized sales increased 2.4%, 4.4% and 3% respectively for the Foodservice, Retail and Frozen Beverages segments. Our investments and initiatives over the last 2 years to enhance profit margins and drive efficiency across our business are proving to be successful. Speaker 300:27:40For the year, we continue to deliver on our goal of improving gross profit. In fiscal 2024, gross profit increased 3.5% to $486,100,000 leading to a gross margin rate improvement of 80 basis points to 30.9%. Due to the previously mentioned impacts, our 4th quarter gross profit did decline 7% to $135,500,000 leading to a gross margin rate of 31.8 percent compared to 32.8% in Q4 2023. We remain confident in our ability to deliver strong and consistent profit growth and expect to further improve our gross margin rate in 2025. And as it relates to inflation across our portfolio of raw materials, we experienced net mid single digit inflation with the increase primarily driven by higher cost of cocoa, chocolate and to a lesser extent increases in the cost of sugar, eggs and meats. Speaker 300:28:43These increases were somewhat offset by the deflationary trends seen in flour, cheese and dairy and mixes. Pricing adjustments to contractual cost true ups help minimize the majority of the impact, but continued inflation in chocolates and sugar is driving consideration of further price increases in cost of goods initiatives to manage gross margins. Our procurement team continues to effectively manage supplying cost and we are well positioned to respond to any impacts. Looking at expenses, total operating expenses decreased $8,400,000 or 8%, representing 22.4% of sales for the quarter compared to 23.4% of sales in the prior year period. Distribution costs were 10.8% of sales in the quarter, flat compared to the prior year period as the investments we made to increase efficiency across our distribution network and supply chain continue to drive expense savings. Speaker 300:29:47Marketing and selling expenses for the quarter were 7.3% of sales versus 7% in the prior year period as we continue to invest in our product innovation, brand promotions and new selling opportunities. Administrative expenses were 4.3% of sales in Q4 'twenty four compared to 5% in 2023. This led to an operating income of $39,800,000 for the quarter or a 4 point 5% decrease compared to $41,700,000 in Q4 of 2023. Adjusted operating income was $42,000,000 in the 4th quarter or an 8.3% decrease compared to Q4 2023. We estimate the additional week negatively impacted operating profit for the quarter by approximately $4,000,000 On a full year basis, operating income increased 7.3% to $117,500,000 while adjusted operating income grew 8.5 percent to $130,400,000 After the impact of income taxes of $10,900,000 compared to $11,300,000 in the comparable prior year, net earnings for the 4th quarter decreased 2.6 percent to $29,600,000 resulting in earnings per diluted share of 1 $0.52 dollars compared to $1.57 in the prior year period. Speaker 300:31:19Adjusted earnings per diluted share were $1.60 for the quarter compared to $1.73 in the prior year period. And on a full year basis, net earnings increased 9.7% leading to diluted earnings per share of $4.45 versus $4.08 in fiscal 2023. This resulted in full year fiscal 2024 adjusted earnings per diluted share of $4.93 versus $4.50 in fiscal 2023. Adjusted EBITDA for the 4th quarter decreased 4% to $59,700,000 from $62,200,000 in the prior year period and our effective tax rate was 26.8% in the quarter. On a full year basis, adjusted EBITDA increased 10.2% to a record 200 $100,000 Looking at our liquidity position, we continue to maintain a healthy balance sheet and overall strong liquidity position with $73,400,000 in cash and no debt. Speaker 300:32:28Our ability to improve cash flow through working capital initiatives and stronger profitability is generating more cash to pay down debt, pay dividends and continue investing in our business. Our focus will continue to be on maintaining a healthy balance sheet and prudent leverage position, which enables us to continue investing in the growth of our business and returning value to our shareholders. In addition, we have ample availability under our revolver of over $210,000,000 in additional borrowing capacity. To summarize, we continue to see momentum in our business supported by the breadth of our portfolio on brands, the strength of our balance sheet and the improvements we continue to make across our operations. Before I turn the call over to the operator, I wanted to thank Dan, our Board of Directors and every member of the J and J team for their unwavering support during my time as CFO. Speaker 300:33:22J and J is truly an exceptional company and I very much enjoyed my time here. As Dan mentioned, we are close to announcing my replacement and I look forward to helping ensure a smooth and seamless transition. I would now like to turn the call over to the operator for questions and answers. Operator00:33:42Thank you. Our first question comes from Conor Radigan with Consumer Edge. Your line is open. Speaker 400:34:00Good morning, guys. Thanks for the question. Speaker 200:34:02Good morning, Gunnar. Good morning. Speaker 400:34:05Good morning. So Dan, you called out challenge traffic and software consumption across your channels via QSRs, retail, c store. And so I understand traffic is broadly under pressure, but I guess could you maybe kind of comment maybe where you're seeing the greatest pressure and kind of help us understand the magnitude of that traffic pressure? And also, you also kind of noted that you don't really expect this to continue into 2025. I mean, I guess just kind of given the backdrop across the sector, what really gives you the confidence this pressure won't persist into 2025? Speaker 200:34:39Yes. Great question, Conor. A couple of the areas that we saw declines in really all year long, both the theater and the convenience sector, are ones that I believe, especially the theater, have a chance to really bounce back strong for this coming year. And that's part of what gives me a confidence that there's a period of time that we've gone through that maybe has a reason to be hopeful for the future, right? There's some great new movie releases coming out even as we close the end of this year. Speaker 200:35:13And then if you look at their lineup into 2025 and really even into 2026, it gives you the great hope that those sales will return pretty rapidly. A couple of the other areas that we talk about, the restaurants and the QSRs being down throughout this period of time, we know that the consumer has been stretched and spending has been down. And you heard me talk throughout the year, even I think you specifically asked me what some of my concerns were throughout 2025 or 2024. And I said as we get closer into the election period, I was worried about how the consumer might react during that time. There's a lot of publicity going out there and people feel one way or the other and there's just an uneasiness as you go through it. Speaker 200:36:04I felt it myself. And regardless of who wins and what party wins, once you come through that, there's the American people who are just so resilient that I believe will have a stronger feel for our economy as we go forward. I think we're starting to even feel some of that today, right? And so I'm hopeful as we move into 2025 that we'll see a lot of those pressures subside. It doesn't happen overnight, but it does happen over a period of time. Speaker 200:36:33And as we get through our Q1 and into the rest of the year, we feel pretty hopeful with all the things that we have going on, both in operational efficiencies and some of the great new pieces of business and the pipeline that I see from each business unit that we can see a really nice 2025. Speaker 400:36:56All right, great. That was really helpful. And then just one more too. So on the margin component, so you called out about some margin pressure given the 14 week compare with I believe it was a $4,000,000 operating income headwind. And so correct me if I'm wrong, but it seems like the entirety of that $4,000,000 operating income headwind should consist of gross margin pressure. Speaker 400:37:21Could you guys maybe elaborate a little bit on that on the mix headwind you called out and just maybe why that was so significant? Or was there maybe some incremental inflation or promotional pressure that popped up in the quarter? Speaker 300:37:32Yes. Connor, this is Ken. Thanks for your question. Yes, it's kind of a combination of a lot of things. 1, the loss of that key week, and again, we wanted to call out that that was the 1st week of the July fiscal month that we lost. Speaker 300:37:49That is a period of time where our core products pretzels, churros, ICs, Dippin' Dots really sell in high volume and those are some of our strongest margin products. So because it was that weak that drove especially pronounced impact on margin and on the operating income impact that we estimated of $4,000,000 The other thing as we looked into the quarter Connor, and you see the degree of sales decline in some of those core areas combined with increases in areas like bakery, handhelds and a few others. The combination of some of those lower margin areas growing and the higher margins declining, we estimate probably had around 80 basis point impact on margin rate in the quarter just from that change in mix. And those core items I'm speaking of remember they are predominantly sold in amusement, in restaurants, in theaters, in those channels that we spoke about that are soft. And you can read on many of those customers that we serve that recently come out in all of those industries and channels talking about softer traffic particularly in Q4. Operator00:39:15Thank you. Our next question comes from Andrew Wolf with CL King. Your line is open. Speaker 500:39:23Thanks. Good morning and Ken, congratulations on everything and have a great post J and J retirement and whatever else you do. Speaker 200:39:33Thank you, Andrew. Speaker 100:39:35Most welcome. Speaker 500:39:37I want to kind of follow-up on the last question. So just from the outside, it looks to me like in terms of deleveraging and kind of missing your earnings targets, clearly the foodservice part seems to be where the problems were and you just spelled out a big mix change. Can you unpack the rest of that because the press release referenced and you guys, I think a little more than you have been talking about, inefficiencies in production and even supply chain. So I know when there's unexpected demand shifts either way, but particularly down, your labor rates are going to go the wrong way and so on. But was there anything unusual or is it mainly just that plus the lack of absorption of the overhead? Speaker 300:40:27You summed it up well, actually, Andrew. It's a combination of all those things. So distribution expenses, rough numbers here, but around 20% of those expenses are fixed, particularly as we've gotten into these 3 RDCs that are driving all the efficiencies that we talked about. The cost of those on a fixed basis is more. And so when sales are down, then that's going to that's not going to leverage as well. Speaker 300:40:56That was part of the impact. It's why I'm actually quite proud that we came in flat with a year ago given the sales difference. And on a dollar basis, we came in, I want to say $2,000,000 or $3,000,000 less than a year ago in distribution expenses. So we still manage it well. And Dan spoke to a lot of those metrics. Speaker 300:41:17But when we have the sales come down in those core areas and start to deleverage fixed expenses, it creates that margin challenge that was really a byproduct. And it was both in distribution and then it was also in plant absorption, because we had built up inventory, we started to see consumption declines. We ended up having to pull back on production, kind of manage and position that. And because of that, there was less absorption and that contributed to this mix challenge that I mentioned in the 100 basis points lower margin than a year ago. Speaker 500:41:58Okay. And just kind of related to that, is there anything it demands planning that AI or machine learning, any way to like get that so you can actually predict these previously unpredictable shifts in demand better? Or is it just as you've been able to be and that's Speaker 600:42:17never changed? Speaker 200:42:18It's a great question. I hope it will change, right? It is a great question. And whenever you go through a quarter, we've asked those questions as well. And Ken and I have sat down with the teams to really understand exactly how we go about demand planning and how that circulates within our organization. Speaker 200:42:41We always think there's opportunities for improvement. We think the team is doing really, really well. But I'm asking those same questions. And our goal was absolutely to be better at that in the future like a lot of areas that we've improved on or had transformation in. I think that's one of those areas that we can continue to look at and become better at. Speaker 300:43:02Yes. And I would add, Andrew, the quarter started out well. We had a good July. And really, it was in August September. And Dan and I attribute that a lot to the things that he summarized a few minutes ago in that the combination of probably uncertainty around the election with some trends already negative in many of these channels as discretionary spending was tightening up. Speaker 300:43:32And then the other thing we did mention in the script, we don't have a measure of it, it would be hard for us to measure is the timing of the 2 hurricanes that came through Florida and Southeast. Florida is obviously a big, big state in terms of outdoor amusement, that sort of thing. But that played a role, I suspect, in some of the declines that we weren't necessarily anticipating coming out of July and then all of a sudden start to play out in August September. Speaker 500:44:04Yes. There was one of the big foodservice distributors trying to quantify it. It was pretty big impact for them at least. Speaker 200:44:13Right. Speaker 500:44:16Lastly, I don't want to I'll see it. I just wanted to ask a specific thing because you covered a lot of your innovation. But did you mention or could you update us if you didn't mention it or if you did just repeat it? Are you still doing a frozen beverage test at a QSR in QSR chain? Speaker 200:44:33We are. We are. It's continuing to grow. I did not mention it, but it's continuing to grow, and we've now rolled out an additional market down in Florida with it. And so we remain hopeful that this is something that we can bring in during the 2025 year. Speaker 500:44:51Okay, great. All right. Thank you. Speaker 200:44:54Thank you, Andrew. Thank you, Andrew. Operator00:44:57Thank you. And our next question comes from Todd Brooks with The Benchmark Company. Your line is open. Speaker 700:45:09Hey, thank you. Good morning, gentlemen and Ken. Try not to play too much golf, okay? Speaker 300:45:16Thank you, John. Speaker 700:45:19First question I have for you and it gets to just the timing of this call and looking forward to fiscal 2025. You've had a nice track record here of gross margin improvement. We've talked about more of a medium term target of getting to the mid-30s with gross margin and you pointed to in the call, expecting improvement fiscal 'twenty five over 'twenty four. Distribution, you talked about kind of a 10% goal, maybe levering a little bit beyond that as time goes on. Just can we talk about margin framework looking forward into 2025 knowing that you're hopeful on the consumer bouncing back, but within the controllable elements of the business, maybe try to level set expectations from our standpoint for margin improvement that you're expecting to unlock in the upcoming year? Speaker 300:46:15Yes, absolutely. And great question. There's a reason why we spent a lot of time in Dan's comments about really talking about the strategies and the financial strategies of improving gross margin. And we did it last year, we did it this year. That's very important to us, growing profits faster than sales. Speaker 300:46:35Our plan for next year is to continue to do the same, Todd. We would expect gross margin to improve. I think it's safe to say we expect it to be over 31%, which would show improvement over the 30.8% for the year this year. I think Dan mentioned this in our call last quarter. The next mile gets harder, right? Speaker 300:46:58There's a lot more work we got to do to continue figuring out our way to 32 and beyond, but that is the goal and we think we will get there. I don't think we'll get there next year. I would probably be thinking in the kind of low 31% range kind of area for 25%. But the focus is there. The initiatives are there. Speaker 300:47:21We went through in our planning recently and there are very specific initiatives whether it's procurement, whether it's operational efficiency, whether it's distribution, how do we get that number starting to hit its way towards that below 10% range. All of those things are very specific initiatives and continue to be the focus. Speaker 200:47:43Yes. Todd, I'll just echo on that. We're as bullish as ever before. We're going to continue to drive that as much as we possibly can. And just like Ken said, I say it all the time, the last mile is the hardest, but we're going to continue to work hard in that last mile. Speaker 200:47:59And the teams continue to be focused around it. And so I think we can continue to move it. I think Ken gave you a number that's probably fairly accurate for next year and then we'll continue to get it better the year after as well. Speaker 700:48:11And just a follow-up on that, if I can. The distribution with all 3 of the RDCs now set up and really running 90% of the product like you said through there. Is that 10% goal deliverable in fiscal 2025 to meet or beat that number? Speaker 300:48:31Probably not for the year, Todd. You'll see us getting in that range I think in Q3 and Q4 when the sales are up there, enable us to get there. Given the seasonality of many products and the level of fixed cost in that, we won't hit that mark in Q1 or even in Q2. So that will average out probably something closer in the mid teens somewhere I would probably say, Todd. Speaker 700:49:03Okay, perfect. Thanks. And then Speaker 300:49:05Let me be clear mid teens. Sorry, the mid-ten percent range is what I was trying to say. Speaker 700:49:13Got you. And then final question from me, product newness, not as much focused on that on the call because we had to explain just kind of the lapse with the 53rd week here. But I know you just did announce the upcoming Dippin' Nuts launch in grocery at retail with Kroger. You talked about expanded placement all for theater channels, Dave and Buster's, which was incremental news. Dan, you talked about the ability to double this business relative to that $80,000,000 run rate when you bought it. Speaker 700:49:50Are you more bullish on the outlook now as you're seeing this expansion through additional channels with the core product, but also opening up the retail channel here early in calendar 2025? Speaker 200:50:01Thank you. We're really excited about that retail thing. We believe Dippin' Dots in retail can be really, really big for us. And early indications from talking to our customer, not the consumer, but talking to our customer, they're equally as excited. And so we feel really good about that. Speaker 200:50:22And we think we have a potential product to back it up with out coming out of Dippin' Dots as well. And so I love the momentum that our teams are working on and how they see being able to expand that. I still am bullish that we can double those sales. Now they may show up in our P and L, some in retail and some under foodservice because of the way we report it, but I still believe that we can do that, and I love that acquisition. And if we were calling out some of the new items coming out, that would be top of the list. Speaker 200:50:55I really like what we're doing with that. I also like I mentioned our BrowHouse in the retail. I think that's going to do really, really well for us. The team has kind of positioned this good, better, best kind of profile around our J and J's Snack Foods pretzel and our Auntie Anne's pretzel and this Browhouse pretzel. And I think we're entering into a really nice market there as well. Speaker 200:51:19And then continued expansion with Docksters. Today, we have a new flavor that we introduced last year and we're looking at how to introduce that in single serve to enter into the pet industry as well. Just see some really good things across all of our business units with great opportunities. Even mentioned in the call, just to call this out to the an opportunity that we have with contract manufacturing because it's something that we don't always talk about. We have a really nice opportunity there. Speaker 200:51:51So a lot of really good tailwinds going into the year. Speaker 500:51:56Okay, great. Thank you both. Speaker 300:51:58Thank you, Tyler. Operator00:52:01Thank you. Our next question comes from John Anderson with William Blair. Your line is open. Speaker 600:52:09Hey, good morning, Dan and Ken. Thanks for the question. Speaker 200:52:12Good morning, John. Speaker 600:52:15Maybe just to kind of try and close the loop a little bit on one of the questions from the last participant. You addressed kind of how you're thinking about gross margin in 2025 and the distribution ratio. I wanted to hit a different line, a marketing line. There were a couple of years in 2020 2021 when the marketing ratio came down. Speaker 400:52:43I think Speaker 600:52:44that's quite understandable given what was happening at that time. It's crept up a little bit in 2023 2024, ended the year this year at about 7.4% of sales, but still below where it was several years ago, closer to 8.5% to 9%. Dan, you mentioned some investments there, promo, marketing Speaker 500:53:09behind Speaker 600:53:09the retail part of the business. How do you see that line evolving over the next year or 2 as you expand particularly some of the new products, dip and dots, etcetera into retail? Thanks. Speaker 200:53:23Yes. Good question, John. I'm really proud of that marketing team of ours led by Linwood Mallard and some really, really good people within there being cost conscious at all the times. And so I would first answer the question as I see that marketing line being basically flat to that 7.4% range somewhere in there during this next year. The teams are evaluating how they spend that all the time and maybe diverting it into some more digital and more focused marketing in different ways. Speaker 200:54:00And I like how we have that lined up for next year. But I would see it in that same flattish range to that 7.4%. Speaker 600:54:09Great. That's helpful. Okay. So I wanted to shift to the top line for a minute. You did talk quite a bit about some of the pressure on the consumer or softer traffic of late and I guess some of that throughout the year in certain channels. Speaker 600:54:27But when I step back and I think about, hey, on a normalized basis, you grew sales about 3% this year. And even in this quarter, normalized, you grew sales at 4% or nearly 4%, which is pretty good. And so I'm trying to kind of taking that kind of view and then some of the commentary around your thinking that cross selling efforts are taking hold, the consumer is likely to come back stronger, the theater channel is improving. What should we be kind of be thinking about for fiscal 2025 in terms of normalized growth at this point? How would you kind of at least give us some guardrails to work with as we think about modeling the top line going forward? Speaker 200:55:17Yes. Hey, thanks for calling some of those things out. That's exactly what I was trying to get across on the call too. We're really proud of the year that we've had, right, especially if you back out some of the muddiness of an extra week in last year compared to this year. I love what the teams are doing to grow that. Speaker 200:55:35It kind of falls in line with some of the things that I've you've heard me say before and I really believe this. The J and J Company has this broad diverse portfolio, which allows us to be what I'd call kind of recession resilient, not recession proof. It doesn't mean that we don't in down periods of time, we don't get affected. So but we have such a broad portfolio that if we have some recession proof to that or downtime proof. Our goals continue to be that mid single digit growth year in and year out, right? Speaker 200:56:11And as I look into probably 2025, I would see it in that low mid single digits growth, somewhere in that range, probably is how we're looking at it going forward. We think we have some really nice opportunities and we believe that the industry and channels will improve. And those combinations, I think, should get us somewhere in that mid to low single digits. Speaker 600:56:37And I think that there was at least a comment in the prepared remarks around some inflation, maybe it was cocoa, sugar, perhaps prompting you to look at some additional price. I think you usually take price late in the year to effective in the new calendar year. Is that part is pricing part of the algorithm in 2025 or not at this point? Speaker 200:57:02It is and we will be taking pricing on what I call the 3 business units, IC Snack Foods and Dippin' Dots, into January timeframe. IC has that cadence that they always are on and they'll do that January 1 and Dippin' Dots is kind of now on that cadence as well. And then somewhere mid January, we'll have an increase in the snack food side as well. Speaker 600:57:27That's helpful. Last one for me. Your CapEx was down 30% or so this year. I think that's because there was some larger investments, obviously, you're making in operational efficiencies. Infrastructure, I think, in 2023 that didn't have to repeat in 2024. Speaker 600:57:47But how should we think about capital expenditure in 2025, maintenance and growth? Yes, that would be helpful. Thanks. Speaker 300:57:58Yes, John, this is Ken. You summarized that well. 2022, 2023 were big investment years as we talked about the 6 lines and the 3 RDCs, etcetera. And now I think we're back to a bit more normal state. I mean we'll continue to invest in our business. Speaker 300:58:17There's still I want to say 2 or 3, 4 lines that we may add or improve next year on some other capital. But I think the way to think about it in 20 25 and going forward is, it's going to be kind of a run rate of around 4.5% to 5% of sales. So that would put you kind of in a range of $75,000,000 to $85,000,000 probably in the near future, somewhere in there. Speaker 600:58:46Great. Thanks so much. And Ken, good luck going forward. Speaker 200:58:49Thank you, John. Thanks, John. Operator00:58:54Thank you. Our next question comes from Rob Dickerson with Jefferies. Your line is open. Speaker 800:59:04Great. Sorry. Speaker 300:59:06Yes, I guess just Speaker 800:59:08two questions for me. First question is just, excuse me, just kind of going back to like the channel dynamics, the consumer discretionary spend, all that fun stuff so far. You clearly have a kind of better view of what's been occurring in the convenience store channel where you do have some exposure. And clearly the channel has been under a bit of pressure. Recently, if I walk into a number of convenience stores, I actually see some promotions in C stores, which we normally don't see. Speaker 800:59:51And I've been talking to a few people who say, oh, yes, I mean really have expectations and hope that that C store channel kind of comes back as we get through next year. So like while I understand your comments on the movie theater channel with new film releases, like kind of whatever you have, like how you think about like what could actually entice kind of the average person who would normally have gone to a C store to kind of go back to that C store? Because I do think that is kind of like a decent kind of benchmark as to where maybe some of the discretionary spend moves and kind of how consumers overall kind of think about shopping that channel or those more discretionary channels and your products? And I kind of preface it all with like I realize there's an election and things are choppy and consumer, but just kind of taking a guess, like what could get people back there? That's just kind of a very broad first question. Speaker 201:00:57Yes. That convenience channel is interesting because I've watched it really closely too. It infects a lot of pieces of our business on the snack food side, on the IC side and on the Dip and Dot side. All three of those are impacted by what happens there. And so I think you brought up some promotional activity and we're looking at that really strong. Speaker 201:01:20We're looking at marketing efforts that pull consumers in as they're out in the car and entices them to products that we have inside the store, which are highly impulse items often there. And I don't know if there's a silver bullet that pulls that industry back in overnight, but I think a greater consumer confidence will allow some additional spending for people to get out of their car and out of the gas pump area and into the convenience store to buy one of our core products. And so sometimes, and you've heard me say this before and we've really been doing it in the theaters as well with Dippin' Dots, sometimes the best way or best time to invest in a particular channel that you have a lot of faith in that will come back is when it's a little soft, right? And so we're working really hard at that and continuing to grow in several of our areas in that channel. We were just out at the National Association of Convenience Store Show and had some good opportunities come out of that. Speaker 201:02:25We're going to continue to grow in it and are confident that it will come back. Does it come back in Q1 or Q2? I'm not sure, but we're going to do that and then we're going to drive some promotional and marketing activity to try to pull the consumer inside, as they are too. They're smart operators and they're working hard at it as well. Speaker 801:02:46Yes. I mean, I'm just kind of thinking like you're introducing Churro into Subway, right? And drive to the Subway, there's like signage everywhere. And little Johnny in the car is like, hey, mommy, can I we stopped by Subway, we're going to Churro like why not put up different signage or say, oh, it's special icy day for $3 for a large size? Like I'm assuming there are ideas out there that kind of pull them in a little bit versus just like, hey, hopefully consumer gets better. Speaker 801:03:17You know what I mean? Speaker 201:03:18I agree, Rob. That's exactly what I'm saying. We call it curb in marketing, where when you're driving up to that convenience store, you start to recognize some of those products that are out there right now. I see over the years has done that curve in marketing really well, and we're going to leverage some of those learnings into our other pieces of business. Speaker 801:03:39Fair enough. Fair enough. Okay, cool. And then just kind of quickly, there have been a lot of great kind of supply chain network optimization moves over the past couple of years along with the CapEx that you spent to do it. I mean, I realize it's a little softer now and lapping the extra week. Speaker 801:04:02But kind of like and then also the comments around gross margin expansion, right, some next year, right? It's not a ton, but getting kind of far in the mileage of that gross margin. But like there was still kind of like a longer term expectation, right, that you can get that operating profit margin up over time because of the initiatives, because and then obviously some consumer tailwinds would help too. So like if we're thinking 3 years forward, is there anything that's like necessarily changed or no? Like well, the environment's changed a little bit, but environment comes back and we're back on track and we'll be able to leverage some of our SG and A distribution costs and what have you. Speaker 801:04:55So again, kind of a broad question, but just curious. Speaker 201:04:59Yes. No, Rob, nothing has really changed in our initiatives to continue to drive those to the levels that we've talked about. Other than what I've said before and for a period of time in my life, I ran a bunch of half marathons and if you ever ran a half or a full, when you hear me say that last mile is the hardest, it really is the hardest. It seems like it takes you the whole marathon to get to that last mile, right? And so those are the things that we're up against. Speaker 201:05:26We will continue to grow margins 30 plus with the goal of someday hoping to be in the mid-30s with that. We'll continue to drive that through the things that we do each and every day. And the same thing with supply chain, met with that team and I love the work that they've done, Met with that team just a couple of weeks ago to talk about, okay, so now how do we take the next really big step. And the team has some great plans in it. And I'm sure that they will execute on it. Speaker 201:05:56But those plans as we get to this stage are harder, right? When you get to the last mile, it's just harder. Our goals haven't changed. My initiatives haven't changed. I believe that we'll get there. Speaker 201:06:08It just gets tougher as you get deeper into it. Speaker 301:06:11Yes. Rob, just to add some emphasis to what Dan said, because I mean, we talk about this every day, every meeting, every quarter. These are real parts of the strategy. But the proof is that in what we've done. So we improved EBITDA margin, adjusted EBITDA margin year over year by 110 basis points. Speaker 301:06:33I mean that was driven by the 80 basis points improvement in gross profit and then the other part primarily probably distribution expenses. Even in the Q4, if you take out the impact of the extra week, we would have came in around 15% EBITDA as a way to sell. So we're hitting the mark there. It's going to be harder to get the next 100 and the next 100, but I think as long as those are core strategies and how we do things and how we drive performance, the business is going to continue to move those numbers up. Operator01:07:12Thank you. There are no further questions at this time. I'd like to turn the call back over to Dan Fassner for any closing remarks. Speaker 201:07:18Thank you very much. In closing, we are successfully executing our strategy in an ever evolving operating environment and we are confident in our ability to deliver our objectives in 2025 and over the long term. I also want to take this opportunity to thank Ken for being such a great partner and leader in his valuable work in transforming the business over these past 4 years. Everyone at J&J wishes him and his family the very best in this new chapter of his life. We look forward to updating you on our fiscal 2025 Q1 results. Speaker 201:07:55In the interim, should you have any questions or wish to speak to us, please contact our Investor Relations firm JCIR at 212-835-8500. Thank you and have a great day. Operator01:08:12Thank you for your participation. This does conclude the program. You may now disconnect.Read morePowered by