J&J SNACK FOODS CORP Q2 FY2025 earnings call

• Total net sales declined 1% to $356.1M, gross margin declined 320 basis points to 26.9%, adjusted EBITDA $26.2M, adjusted EPS $0.35. - Impacted by theater channel weakness, Foodservice order loss, and input cost inflation. - Confident in business foundation, expects earnings improvement in second half due to theater industry rebound, price increases, and volume growth. - Retail business grew 1.8%, with frozen novelties and Dippin' Dots Sundaes performing well. - Announced enhancements to SUPERPRETZEL recipe and packaging, increased Dippin' Dots theater presence, added Urban Air as customer, testing churro innovation, and innovating for GLP-1 diet trends.

Total net sales for fiscal second quarter declined 1% to $356.1 million. Frozen Beverage sales declined less than 1%, impacted by theater channel weakness and foreign exchange headwinds; Foodservice sales decreased 1.7% due to loss of limited-time-offer churro volumes and input cost inflation; Retail sales grew 1.8%, with frozen novelties and Dippin' Dots Sundaes contributing. Frozen Beverage segment: sales down less than 1%, theater channel weakness and peso foreign exchange impact; Foodservice segment: sales down 1.7% due to LTO churro volume loss and chocolate cost inflation; Retail segment: sales up 1.8% with growth in frozen novelties and Dippin' Dots Sundaes.

• Expect earnings to improve in second half driven by theater industry rebound, price increases, and volume growth. - Still expect gross margin to get back to low 30s in second half. - Anticipate another 80 basis points or a full percentage point of price realization in third quarter.

• Consumer confidence and sentiment impact on business. - Tariff policy changes could impact input costs. - Uncertainty regarding demand for products due to GLP-1 related diet preferences.

Q: Asked about the 70-80 bps gap in gross margin not covered in the press release and if gross margin expectation to get back to low 30s is still on track.

A: Shawn said most remaining gap is chocolate cost inflation relative to pricing offset; Dan said still expect to get back to low 30s in second half.

Q: Followed up on theater business percentage impact and update on theater attendance impact.

A: Dan said theater business still has a pretty sized impact, about 25% of Frozen Beverage business and has impact on Dippin' Dots and Foodservice pretzel side.

Q: Asked about topline views, price realization, and convenience channel.

A: Dan said optimistic about back half with theater tailwind, price realization continuing to build, and convenience channel has been down but equipment sales in Frozen Beverage side growing.

Q: Inquired about pretzel category, convenience channel trend, and regulatory changes.

A: Dan spoke about pretzel category weakness and new product efforts; Shawn mentioned convenience channel weather impact; Dan talked about Red dye number three being out of all products and team working on regulatory compliance.