Core Viewpoint - Nathan's Famous, Inc. has experienced a decline in stock performance following its earnings announcement, with shares down 9.9% since the release of quarterly results, contrasting with a 0.8% gain in the S&P 500 Index during the same period [1] Financial Performance - In the second quarter of fiscal 2026, Nathan's Famous reported an 11.1% increase in revenues to $45.7 million, up from $41.1 million a year earlier, primarily driven by the Branded Product Program [2] - However, income from operations fell 22.1% to $7.5 million from $9.6 million, and net income decreased 13.8% to $5.2 million from $6 million, with diluted earnings per share dropping 14.3% to $1.26 from $1.47 [2] Segment Performance - The Branded Product Program saw revenues rise 18.4% to $29 million from $24.5 million, while product licensing revenue decreased 2.8% to $9.2 million from $9.5 million, and restaurant operations revenue increased 4.9% to $6.8 million from $6.5 million [3] - The Branded Product Program's operating loss was $1.1 million, compared to an operating income of $0.7 million a year earlier, due to a 26.9% increase in the cost of sales [4] Cost Pressures and Profitability - The cost of sales in the Branded Product Program rose significantly, driven by a 20% increase in the average cost per pound of hot dogs, leading to margin compression despite revenue growth [4] - Company-owned restaurants showed better profitability, with sales increasing 5.2% to $5.6 million, and operating income improving 11.9% to $1.9 million [5] Year-to-Date Performance - Year-to-date, the Branded Product Program revenue increased 14.7% to $58.1 million, with hot dog volume up 3% and average selling prices 10% higher, although the average cost per pound of hot dogs was about 16% higher [7] - Franchise-related revenues increased, with franchise restaurant sales rising 5.5% to $38.3 million [8] Management Insights - Management noted ongoing commodity inflation, particularly in beef markets, as a significant factor affecting margins, alongside broader economic factors like inflation and labor cost increases [9] - The importance of licensing partnerships and franchise expansion for long-term growth was emphasized, with the flagship Coney Island locations being key traffic drivers [10] Overall Results and Guidance - The stronger top-line performance was attributed to the Branded Product Program, but significant inflationary pressures on costs led to operating margin compression [11] - Nathan's Famous did not provide formal financial guidance for future periods, maintaining a cautious stance amid ongoing cost pressures and market uncertainties [12] Other Developments - The board declared quarterly dividends of $0.50 per share and a special cash dividend of $2.50 per share, payable in December 2025 [13]