Core Insights - The company reported a net sales decline of 5.2% year over year, primarily due to the bakery business, with approximately $18 million of the revenue decline attributed to this segment [1][7] - Management highlighted a 200 basis-point improvement in consolidated gross margin to 27.9%, driven by early savings from Project Apollo, plant consolidation, and a favorable product mix [2][7] - The company achieved sales of $343.8 million and adjusted EBITDA of $27 million, reflecting a 7% increase compared to the prior year [3][7] Financial Performance - The company reported adjusted earnings per diluted share of $0.33, while reported earnings per diluted share were $0.05 due to one-time charges [15] - Operating cash flow for the quarter was $36 million, with capital expenditures of $19 million [17] - The company ended the quarter with $67 million in cash and no long-term debt, alongside approximately $210 million in borrowing capacity [5][17] Project Apollo and Cost Management - Project Apollo delivered over $3 million in net savings in Q1, with a reiterated target of $20 million run-rate savings [6][8] - The quarter included $6.1 million in non-recurring closure costs, with an expectation of an additional $5 million in FY26 [6][8] - Management expects portfolio optimization to result in an approximate 3% decline in sales for fiscal 2026 [7] Segment Performance - The food service segment saw a net sales decline of $19.7 million, or 8.3%, largely due to the lower-margin bakery business [10] - Retail net sales increased by $1.2 million, or 2.6%, driven by improved handheld volume [11] - Frozen beverage net sales remained flat at $78.7 million, with modest increases in beverage sales [12] Innovation and Market Outlook - The company has a robust innovation pipeline, with planned shipments including new pretzel varieties and Dippin' Dots products [19] - Management acknowledged weaker box office performance impacting sales but expressed optimism for fiscal 2026 based on improved trends [19]

Financial Data and Key Metrics Changes - The company reported adjusted EBITDA of $27 million on sales of $343.8 million for Q1 2026, representing a 7% increase in adjusted EBITDA compared to the prior year [5] - Gross margin improved by 200 basis points to 27.9% year-over-year, driven by early savings from Project Apollo and improved product mix [5][12] - Net sales declined by 5.2% to $343.8 million, primarily due to a $18 million revenue decline in the bakery business [5][11] Business Line Data and Key Metrics Changes - Food service segment net sales decreased by $19.7 million, or 8.3%, to $219.2 million, with $18 million of the decline attributed to the lower-margin bakery business [11] - Handheld sales in the food service segment declined by approximately $5 million, while soft pretzel sales increased by $3.6 million, or about 6.9% [11] - Retail segment net sales increased by $1.2 million, or 2.6%, to $45.9 million, driven by a $1.8 million increase in handheld volume [11] Market Data and Key Metrics Changes - The company experienced a dip in dollar sales in mid-November due to a pause in SNAP benefits, with the largest impact seen in frozen novelties [6] - Dippin' Dots sales increased by approximately 4% in Q1, supported by retail growth and expansion into theaters and amusement centers [9] - The company noted improved theater trends in January, primarily due to the success of the Avatar movie, with a promising movie slate for the remainder of the fiscal year [10] Company Strategy and Development Direction - The company is focused on higher-margin opportunities and operational excellence as part of its transformation initiatives under Project Apollo [5][41] - A new $50 million share repurchase authorization was announced, reflecting confidence in the business and commitment to returning cash to shareholders [7] - The company aims to achieve a $20 million run-rate operating income once all Project Apollo initiatives are fully activated [7][29] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the early benefits of Project Apollo and the potential for low single-digit growth for the full year, despite a 3% headwind from SKU rationalization [25][26] - The company anticipates that commodity pricing will be more favorable this year compared to the previous year, which faced significant headwinds [32] - Management remains confident in the ability to deliver the full benefits of Project Apollo and drive long-term value creation [41] Other Important Information - The company generated approximately $36 million in operating cash flow and invested $19 million in capital expenditures during the quarter [17] - Operating expenses increased by $95.4 million, including $6.1 million in non-recurring plant closure costs [14] Q&A Session Summary Question: Sales and Project Apollo - Analyst inquired about the full-year sales expectations considering the SKU rationalization impact and the company's long-term growth objectives [19] - Management responded that they expect low single-digit growth for the year, despite the SKU rationalization headwind [25][26] Question: Cost Savings from Project Apollo - Analyst asked about the $20 million annual run rate for cost savings from Project Apollo and the timeline for achieving it [28] - Management indicated that they expect to reach the full run rate in Q2, with significant progress already made [29] Question: Commodity Environment and Gross Margin - Analyst requested an update on commodity costs and their impact on gross margin moving forward [31] - Management noted that commodity pricing is expected to be more favorable this year, contributing to gross margin improvements [32]