J & J Snack Foods(US:JJSF)2026-02-03 16:02Financial 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]