Q1 2022 J & J Snack Foods Corp Earnings Call
Okay.
Okay.
[music].
Yeah.
Welcome to the J&J snack foods first quarter earnings call. My name is and Matt and I'll be your operator for today's call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session during the Q&A session.
If you have a question. Please press Star then one on your Touchtone phone. Please note that this conference is being recorded I will now turn the call over to Nolberto Ah Ha. Mr. <unk> you may begin.
Thank you operator, and good morning, everyone. Thanks for joining the J&J snack foods fiscal 2022 first quarter conference call. We will get started in just a minute with management's comments and your questions, but before doing so let me take a minute to read the safe Harbor language.
This call will contain 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 fact should be considered forward looking statements, including statements regarding management's plans strategies goals and objectives.
Dissipated financial performance industry wide supply constraints and the expected impact of COVID-19, our business. These statements are neither promises nor guarantees, but involve known and unknown risks uncertainties and other factors that may cause our actual results performance or achievements to be materially different from any.
<unk> future results performance or achievements expressed or implied by the forward looking statements.
Factors discussed in our annual report on Form 10-K for the year ended September 25, 2021, and other filings with the Securities and Exchange Commission could cause actual results to differ materially from that indicated by the forward looking statements made on this call.
Any such forward looking statements represent managements estimates as of the date of this call February one 2022, while we may elect to update such forward looking statements at some point in the future. We disclaim any obligation to do so in the subsequent events cause our views to change. In addition, we may also reference certain non-GAAP metrics.
<unk> adjusted EBITDA, which is reconciled to the nearest GAAP metric in the company's earnings release.
Found in the Investor Relations section of our website at J&J snack Dot com.
With us on the call today are Dan <unk>, our Chief Executive Officer, Ken <unk>, Chief Financial Officer, Steve <unk>, Chief Operations Officer.
And Linwood Malik Chief Marketing Officer joined remotely are Marshall <unk>, Our general Counsel and James Campbell corporate controller.
Following management 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 Dan factors J&J snack Foods Chief Executive Officer. Please go ahead Dan.
Thank you Norberto and good morning, everyone. We appreciate you joining us to discuss our first quarter results, which reflect the continued strength across our businesses driven by a healthy growth in all three of our segments.
Before doing so I'd like to take this opportunity to thank the entire J&J snack foods team as always none of our achievements would be possible without the hard work of our world class team of employees.
The dedication of this group ensures that we deliver for all of our stakeholders and I am truly grateful for their efforts and commitments.
Taking a look at the results for the first quarter of fiscal 2022.
We are pleased with our strong start to the year and the continuation of many of the positive trends we saw in the prior quarter net sales increased by 32% year over year to 318, and $5 million and by 17% when compared to our fiscal.
Q1 2019.
These topline results represent the highest fiscal first quarter revenue in the company 50 year history.
Our improving sales performance was.
It was led by our <unk>.
54% jump in the frozen beverage segment.
Followed by a 32% increase in foodservice and.
And 9% growth in our retail segment.
This led to earnings of $11 1 million or <unk> 58 per share compared to $1 8 million or <unk> <unk> per share in the first quarter of fiscal 2021.
Walking through each of these three segments, let me begin with our largest group foodservice.
This segment represents over 60% of our total sales, we have strong customer relationships with snack and food businesses, leading retailers warehouse clubs and convenient stores.
Our portfolio also includes malls and shopping centers as well as many of the most popular <unk> and casual dining chain restaurants, and many of the largest stadiums and sports arenas.
This segment also sells into leisure and theme parks across the country and of course, just about every movie theater there is the.
The foodservice segment is a great example of what we mean, when we say J&J snack foods is everywhere.
Our foodservice sales grew 32% compared to the same quarter last year and 18% above Q1, 2019 and continues to reflect the healthy demand for our soft pretzels.
Rosen, Novelese churros and handheld products across the consumer touch points.
Soft pretzel sales increased 54% and frozen novelties increased 34%.
<unk> sales and bakery products increased 69% and 21% respectively.
In addition, we are seeing growth of 5% and the handhelds as this category continues to be a greater contributor.
Moving to our retail segment revenue grew by 9% year over year and by 36% versus fiscal Q1 2019.
Growth was driven by a 17% rise in soft pretzel sales helped by our increasingly popular film Pretzel bites.
Frozen novelties are also continuing to perform well posting a 16% year over year increase.
We continue to gain placements and new selling opportunities at major grocery retailers through products like luigi's favored ice whole fruit bars dog sitters in IC branded novelties.
The retail segment continues to reflect sustained consumer at home consumption, given the increase in remote work and evolving consumer preferences.
We believe these trends will continue to benefit our retail business going forward.
Let's move on to the frozen beverage segment are.
Our business is now starting to produce results consistent with pre COVID-19 sales as the theater industry continues to improve and consumers enjoyed travel and outdoor activities.
Our sales for the quarter exceeded the same period last year by 54% and were 6% above our very strong Q1 2019.
These results were led by strong performances in amusement convenience and restaurants as traffic returns to these outlets and as we gain new <unk> and convenience customers.
And the amusement channel we continue to continue to see strong growth in the indoor focused venues as that business segment continues to expand.
I'm also really excited to see theater sales improved steadily throughout the quarter, including a December where sales were just slightly above or below pre COVID-19 2019 levels.
The segment growth was once again led by our IC beverage lineup, which grew 113% versus the prior year and 8% above fiscal Q1 2019.
Service revenue increased 16% the strongest first quarter in our service history led by an acceleration in our preventative maintenance calls equip.
Equipment sales increased 21% driven mainly from our large <unk> and convenience customers.
With all three of our major business lines posting strong sales growth. We remain optimistic that these positive consumer trends will continue as we move further away from the impact of the pandemic and the recent challenges the variance have brought to all of us at.
As was the case last quarter, our industry continues to experience unprecedented inflationary pressures and higher than expected cost increases across many facets of the business.
From raw materials and ingredients to transportation packaging and labor. These.
These costs escalated in the back half of the quarter with the onset of the Omicron Varian, resulting in first quarter of fiscal 2022 gross margins of 25% Fe.
Favorably compared to 21% the prior year, but below the 28% gross margin generated in the comparable 2019 period.
Like many of our competitors and customers.
We are seeing double digit levels of inflation across a number of areas ingredient costs increased over 10% on average compared with the same period last year.
Distribution expenses were 10, 5% of sales in the quarter compared to nine 5% the same period last year.
Our organization continues to focus on specific actions to offset these short term challenges and we have identified a number of opportunities to reduce expenses across the business, including procurement R&D production and distribution.
In addition, we have four new production lines scheduled to be activated in fiscal 2022 that will leverage automation to improve efficiencies.
Finally, we are also implementing additional price increases for our products across nearly all of the categories.
<unk>, we expect these initiatives to improve our gross profit margin progressively over the second quarter of fiscal 2022, and really into the back half of the fiscal year.
And while we are being proactive and taken the necessary steps to best navigate the current inflationary environment.
The work, we are doing to build and evolve. Our brands also continues we have over 10 iconic brands that are leaders in their respective segments and in some cases. These brands EBIT define this segment.
So there are a number of significant opportunities to leverage these brands and grow organically.
Within foodservice, we are very bullish on Churros and expect to launch a new branded <unk> product to target major foodservice customers in fiscal 2022.
We are also expanding our powerful super pretzel, and Bavarian pretzel brands with individually wrapped solve the Brussels and filled pretzels.
In retail segment, we are leaning on our super brands, including Super Pretzel, Luigi's and dog sitters to both create and grow market share through new products flavor extensions and improved packaging.
Finally in our frozen beverage segment, we remain focused on expanding our ICEE brand and have recently introduced IC products into <unk> and fast casual dining.
As previously reported we have seen great success on this front in places like crystals restaurants, and Golden Corral.
We have a good pipeline with customers testing the IC products and I am pleased to report that our customers are already seeing mark upticks and beverage consumption.
As it relates to inorganic growth.
We continue to be very vigilant on the front and remain disciplined in our criteria and approach.
We will not do acquisitions that are not accretive to our business overpay for assets or buy something outside of our area of expertise, we have a long and successful track record on the acquisition front.
And we intend for that to be continue to be the case.
In closing.
An important aspect of our business that has shown through more than ever before during the past 18 to 24 months has been the resilience and power of our products and brands.
The changes brought on by the pandemic have created tailwind for many of our brands as people have sought to create moments of enjoyment comfort and even companionship. During these unprecedented times.
Challenges create opportunities for strong brands to get even stronger and that is what I firmly believe is happening here on.
On the back of various initiatives I mentioned earlier and the strong demand environment, we continue to experience.
We are in a much stronger competitive position today.
We are well positioned to continue to drive long term growth and shareholder value for the company.
I would now like to turn the call over to Ken Plunk CFO to review our financial performance Ken.
Thank you Dan and good morning, everyone. Our fiscal 2022 first quarter results reflect.
The continued success of our operating strategies and the power of our unique brands as well good evening trends and the macroeconomic environment and across the majority of the customer segments, we serve like.
Like Dan mentioned, they also reflect some of the challenges and headwinds.
We continue to experience as it relates to our supply chain and cost of goods.
Revenues for the first quarter of fiscal 2022 increased by a healthy 32% to $318 $5 million versus the prior year period.
And compares favorably versus the first quarter of fiscal 2019.
With an increase of 17% of sales.
Breaking revenue down foodservice revenue grew 32% to $211 7 million.
Or 67% of our total sales.
It was led by a 69% growth in <unk>.
Bakery, and soft pretzels enjoyed 21% and 54% growth respectively versus Q1 of fiscal 2021.
And frozen novelties grew 34% for the quarter and handhelds grew in mid single digits.
Retail increased over 9% to $42 7 million or 13% of total sales.
As soft pretzels frozen novelties.
And biscuit sales increased 17%, 16% and <unk>.
8% respectively.
Handhelds in our retail segment declined 54% drill.
Driven by proactive discontinuation of margin dilutive products.
I would like to point out that retail was lapping a 33% sales growth in last year's first quarter as consumers stay at home.
Regarding our third segment frozen beverages revenues increased 54%.
<unk> hundred $64 1 million or 20% of total sales.
Versus Q1 of fiscal 2021.
Reflecting healthy sales growth across all sub to sub segments.
Including 113% increase in beverage sales.
16% and 21% increase in maintenance and machine sales respectively.
This led to a gross profit of $79 4 million or an increase over 58%.
Compared to the previous year period, and a gross margin rate of 24, 9% an improvement of over 400 basis points above Q1 of fiscal 2021.
As Dan pointed out our industry continues to face historic inflationary challenges.
And this has certainly impacted our cost and margin expectations for the quarter as Dan discussed we are confident in our plans to manage these headwinds as we move forward.
Moving down the income statement total operating expenses increased from $49 5 million to $64 5 million and were 23% of sales for the quarter.
This compares favorably to the same quarter in fiscal 2021.
Even while distribution costs continue to escalate.
Distribution expenses were 10, 5% of sales compared to nine 5%.
Sales in fiscal 2021.
Marketing expenses and administrative expenses were well managed for the quarter and below prior year.
Overall operating income improved from 6 million to $14 8 million for the quarter compared to the prior year.
With income taxes of $4 million.
Compared to <unk> 2 million in Q1 of fiscal 2021.
Net earnings increased by over 524% to $11 1 million.
Resulting in diluted earnings per share of <unk>.
58, a share compared to nine in the prior period.
And on an adjusted EBITDA basis, we saw an improvement of 77%.
To $27 5 million in Q1 of fiscal 2022.
First is Q1 of fiscal 2021.
Taking a look at our balance sheet and liquidity position. We are pleased that even on the back of these challenging last few quarters that we continue to have a healthy balance sheet and overall liquidity was $283 million in cash and marketable securities and zero debt.
Company is well positioned for continued investment and growth.
In closing our first quarter results reflect the diversification and strength of our brands.
Alex.
Financially we are confident in our short term plans to manage through the current environment.
And excited about our long term strategies to grow sales and profits, we have an incredible portfolio of brands and products and improving team committed to continue the growth legacy of the company.
I would now like to open the call to questions operator.
Thank you we will now begin the question and answer session. If you have a question. Please press Star then one on your Touchtone phone.
This can be removed from the queue. Please press the pound sign or the hash key there will be a delay before the first question and that is announced.
You are using a speakerphone you may need to pick up the handset first before pressing the numbers.
Once again, if you have a question please press <unk>.
Higher than one on your Touchtone phone.
Let's see and we have some people in the killer variety.
This call is from Rob Dickerson, please excuse if I Miss pronouncing your name. Please go ahead. Please.
Great. Thanks, so much.
Good morning.
Good morning.
Hey, Dan how are you.
Great.
I guess first question I have is just on the foodservice side.
No no.
The results are impressive.
Okay.
First quarter, you've actually posted on on the revenue side.
I'm just curious if you could provide any more color kind of what what do you think in your opinion is driving that I mean is that right.
Kind of black and white, new distribution picked up a new customer or do you think it's just kind of more consumer behavior, driven just with respect to traffic in these certain channels be it convenience what have you.
You know, what I think theres, a little bit of all of that cement mentioned, Rob. We are excited about what foodservice is doing and the growth that is having.
I do think theres, a little bit of pent up demand thats going on out there, but I also think that our products are a product that people are now starting to search out and you know what's exciting to me probably more than anything as I'm seeing some great growth on our core products, it's not just new things that we're introducing but it's.
Really some of our core products like the pretzels in the Churros that are really having some strong improvement over the quarter and thats encouraging as we get deeper into the year. So I really am encouraged by what we're seeing in <unk> and <unk>.
We anticipate for.
US to be able to continue to have growth in that category or segment.
Alright got it and then I guess just quickly historically your second quarter on the revenue line at least.
It seems to be fairly similar relative to Q1 given seasonality.
Q1 is very strong.
Realize you don't guide for the year, but it doesn't seem as if there would be anything kind of one off in Q1 that wouldn't necessarily.
Hopefully repeat in Q2, right, which kind of stages you for kind of a solid year given back half you would assume would be stronger given.
Some part traffic et cetera.
Well, we absolutely think that we think that.
Q2, as a chance of mirroring what you saw in Q1, right and then getting some really strong help as we as we enter Q2 and into Q3 and four with some of the initiatives that we're doing regarding regarding the costing side of things in supply chain.
So we're encouraged we're really encouraged by the year.
Yes, Rob I would just add one.
Even with strong.
Q1 revenues, which were quite proud of.
I think it's good for us all to remember that <unk> and the impact of that on <unk>.
Travel and on getting out, particularly in December probably impacted our.
Sales from being even bigger in the quarter and as we hopefully get beyond that.
We're very optimistic that the trends from Q1, and then maybe even as.
As we get pass omicron.
That that environment improves even further for us.
Got it Okay Super and then.
Just on the cost side, obviously costs are up but they are for everyone.
It sounds like things hopefully improve through Q2, given some of your initiatives and pricing.
To kind of a quick two part question.
I'm curious, though.
As you think.
Forward for the year, if we assume there's perfect visibility on the cost side drive there's not a lot of volatility probably know what some of the pricing as some of the initiatives.
Maybe my assumption is you're probably.
Exit the year.
Maybe it's still a little challenging to kind of get back to those pre COVID-19 gross margin levels.
So any color on that would be great and then the other kind of follow up question is just you know.
Maybe this is for you Curt and it might be a bit difficult to answer but just curious.
You're talking about reducing margin dilutive.
<unk>.
You have four new lines coming on where should we be more efficient.
Should get some operating leverage with better top line. So if we kind of were to normalize the cost environment right do you think the larger strategy.
Forget through Covid.
Function here is that gross margins should in theory be.
Kind of nicely above pre COVID-19 .
You cant quantify but just kind of.
How are you feeling about the end of the year exit rates and then two just kind of broadly speaking, how we're thinking about kind of.
Gross margin in a normalized run rate.
Alright, let me start and then I'll, let Ken add to that as well.
But youre right.
Have some hefty goals out there for us as a company and have been working really really hard on the business and some initiatives that we think will take hold as we get into the later half of the <unk>.
Second quarter, and then stronger in the third and even stronger in the board and then some long term ones as we've talked about with <unk>.
With some of the distribution.
The frozen plants that we're looking at across the country.
Do believe that we can get back to those pre COVID-19 gross margin levels. We are.
We are convinced that we can get there there are challenges in front of us and some headwinds that were facing like we just faced in this quarter in and some that we may not see yet.
If it was normalized absolutely believe that we can get ourselves back to the margins that you had seen before and then of course my goal would be to be better than that Ken you want to touch on that some yes, Rob I would say similar to what we said coming out of Q4.
Heading into Q1.
We've got to get through this period, where we executed the price increases we have done that on the IP side.
I think I could probably say if not the largest one of the largest price increases that we.
Pass through as the industry has done that work has been done and was done in January .
And we have very specific plans over the next three months to execute.
That on the foodservice side, we had a number of customers that had 60 90 day notice clauses and that sort of thing, but the plans are there.
So I think what I mentioned going into Q1 is we really feel like back end of Q2, and particularly into Q3 and Q4.
The pricing actions the cost actions.
We will start to bear fruit now I expect those.
Into the back half of the year.
Let's get back to those margins that youre used to seeing.
Q3, and Q4 periods and the other thing I would add I mean, the team has been working exceptionally hard.
And I, probably said here and I think Dan, let's say the same thing.
We're confident in kind of the rigor behind our plans whether that's.
Cost reduction initiatives, that's the new lines, we're implementing that's the pricing action. There are very specific plans and timing around those many of which are happening now and many of which will happen over the next few months.
So yes.
I think again continue to look at very late Q2 back half back to kind of what we would expect assuming nothing else crazy around.
Distribution expense inflation in raw materials continues.
Alright Super Thank you so much pass it on thank you Rob.
Alright.
Our next question is from Todd Brooks. Your line is now open.
Hey, good morning, everybody.
How are you all doing.
We're doing great how about you im doing well thanks.
Couple of quick gross margin questions to follow up on robs line of questioning.
If we go back and look at Q1 can you maybe talk about how much pressure you were seeing in gross margin pre omicron and then that last month.
Month of the quarter how much.
Inflationary cost pressures accelerated to hit the gross margin.
Well again, we'll tag team. This some but certainly saw pressures throughout the quarter, but it's definitely peaked as you got into the later half of the quarter.
Omicron, one of the things that did affect labor and with the sales that we're experiencing are not wanted to not be able to ship everything that we can there.
Labor increases that happened towards the end of the quarter with.
With people, calling out sick and having that bring in temp labor and overtime hours and things like that and working really hard to make sure that we're continuing to produce the products that we want to produce and get them out to our customers.
So it certainly peak throughout the throughout the quarter distribution was a big piece of that.
And distribution.
Was.
<unk>.
A rising cost all across the quarter I don't know that at peak throughout it I think it was just a rising cost all across the quarter and continued to get worse. So Ken you want to talk about that some yes I'll just.
Kind of start where Dan ended on distribution.
Again.
Some of the quick as fast as the escalation of costs that I've seen.
My career.
Just to give you an idea one of our biggest line items is outbound freight.
And from Q4 into Q1.
That continued to increase just under 20%. So as you look at that level of cost increase just within three or four months.
As we got in December it was a huge revenue month for us.
And our first commitment as it relates to the business.
<unk>.
Both.
In the quarter and long term is to continue to invest in getting our sales growth bag and get market share.
So there are things that we did to ensure from a product availability standpoint.
Did that drive those sales that was part of the reason why we had such a great quarter.
There are specific plans in place around distribution.
We've mentioned before we brought in a <unk>.
Third party expert around logistics management and they are just now starting to get engaged and have already taken.
Sponsor ability for one of our biggest.
Warehouse and pick up locations.
That will continue very quickly in Q2.
But.
Yes.
Distribution and the escalation of those costs certainly had an impact and then the same thing on raw materials.
And yes December as it relates to cost of goods and margin and results was our toughest month and I think it was because of the combination of the.
The things I mentioned and as that escalate over the quarter as well as the labor situation that Dan mentioned.
That's helpful. Thanks.
I follow up with.
Obviously rolling out of a strong month in December and into the beginning of the year.
Just what's kind of the current experience as far as omicron staffing levels to.
Volumes drop enough that you're not having to chase the same magnitude.
Labor, So maybe not the same pressure as we're working our way through this variant.
It's getting better Todd.
And as you said January isn't December however, we're still seeing nice increases year over year.
And believe that we will continue to do that but the labor issues that we experienced towards the end of December are in the mid December through the end of the year.
As challenging as they are today, however, I think it could be challenging all year long to some extent.
Okay great.
Can we.
Can we kind of talk about pricing and maybe break it into.
I know it's across segments. So it's hard to just give a blanket statement on pricing, but maybe talk about.
Where we stood on blended pricing in Q4, what you tried to put in effect over Q1, and then magnitude of what you are trying to put in over the next 60 to 90 day period in the foodservice business.
And we've always tried to be sensitive when it comes to pricing to our customers and consumers right and so.
Probably our first go around with an increase that would have taken effect, we might've been a little bit more conservative than we should have been.
And so we have gone back in and looked at that really really hard we've taken pricing.
With the IC side that became effective January and probably some of our largest pricing that we've ever taken.
We've gone back and done that on the foodservice side.
You've heard me talk about our new senior Vice President of sales on the foodservice or in the J&J side of our business beyond wiser and he's on the call today, but you've heard me talk about him and he's really led.
The team on on pricing right out of the chute in.
So we feel really good about where we're at with that that will take effect.
End of this quarter some happens in this quarter, but really end of this quarter and then really.
Mainly in the third quarter.
So and again I think at a larger rate than then we have taken in the past.
So Ken if we if we use kind of a rops constructive cost stable from here how much gross margin should you recapture from the pricing increases if they are fully implemented.
Well it was scale.
Way through time.
But I'm going to go.
And I'll leave it at this I mean.
The level of increase is.
Double that we took last year, so youre looking at probably.
On average, 6% plus depending on.
Customer composition of product flower for example is.
One.
Big commodity for us and it's.
One of the ones that continues to inflate double digits.
Yes, it does vary by.
Customer et cetera.
We'll enjoy some of that benefit in Q2, but I would call it marginal.
Sure.
But somewhat improvement over Q1, but the bulk of that will play out entirely in Q3 and Q4.
And that in combination with the.
<unk> cost.
The reduction initiatives that we just mentioned is going to enable us to get back.
More of that 30% gross margin range assuming.
The double digit inflationary environment doesn't continue which at least right now we're not expecting that.
Okay, Great and then if I can ask one more and I'll jump back in queue.
Obviously, a great revenue performance and relatively flat sequentially, which we don't typically see.
December quarter versus September quarter.
Maybe if we can parse the strength between Danny pointed maybe brand discovery versus new.
Introductions and then secondly, if we can talk just about the recovery in the theater business.
<unk>, the course of the quarter and what kind of the forward outlook for that business given the release schedule.
Well really proud of all three segments all three of them had good increase in sales across the board.
And I think I mentioned this to you already most of that increase is coming from our core products and thats really encouraging to see we're seeing in our pretzels increase we're seeing churros increase we're seeing our frozen novelties in the retail side increased and we're seeing an increased distribution and and all of those channels.
Frozen beverage side.
It was great to see the theater business come back and it really came charge and back in December our board of times. That's that's really based on the movies that are being released and the timing of those movies.
And we had a great win released in December and we saw that immediate jump across the whole channel. So really encouraging to say in the midst of omicron continuing to grow in December when the theaters released a good movie that people were out there to see it and so encouraged by that.
And that's what I would tell you about the theater business going forward for the rest of this year as we have the right movies released we will see a nice return to that business again.
And.
Pretty similar to what I've said in the past I think by the end of the year, we could be in that 85% range of what it was in 2019.
Our business, particularly might be greater than that because of their reduction in their ask skus in their places we sell more per location than we used to sell in 2019. So so we may we may be at a higher level than that.
But encouraged I would just say this I am encouraged by the theater business that when there is a good movie release people are willing to go see it in the midst of the pandemic even.
Okay, great. Thanks, I'll pass it along.
That's a big deal.
In my in my view again, we mentioned December was just a hair under FY.
Slide 19, so to me that's even more encouraging.
Probably three or four months ago, because when you see the product there you see the right kind of movies in the theaters.
The consumers are coming back and that's really encouraging as we look to more of those kinds of movies coming out top gun baton in the Batman I think theres a lot of product built up an inventory so that's encouraging.
That's great. Thanks, I'll jump back in queue.
Thanks Todd.
Okay.
And our next question comes from Ryan Bell go ahead. Please.
Good morning, Brian .
Morning.
I just had a question sort of about the impacts with elevated COVID-19 cases at the end of calendar 'twenty, one and sort of the beginning of this year.
Im just trying to understand if you had any sort of quantification about what that impacts might've been.
On the businesses and then seeing potentially released from that as we're getting.
<unk> over the <unk>.
Ken I don't know if you can identify.
Percentage or a number there, but what I would tell you Ryan is the biggest impact we had of the Covid cases was on the labor side of our business.
We continued to have strong sales all the way through the quarter and all the way through December so it wasn't as affected.
The customer consumer level, but where we really saw the impact is in the labor shortages and what we needed to do to cover for those labor shortages both on the.
Snack food side of the business, the J&J side and on the IC side with our many service technicians out in the field.
Some of them suffering from the variant and having to cover that with over time or or additional labor.
Okay. Thanks, that's helpful. And then I think when you were talking about some of the pricing has been taken so far this year I may have misheard this but.
It was that it's about or at least 6%. So far this year and does that not include some of the foodservice pricing.
No.
Let me try to clear that up a little bit one one point that Dan made was the price increases we took.
Last year in hindsight, we probably should have been more aggressive.
Those are probably on average.
3% to 4% call it.
The price increases that we've taken at ICR already.
And the ones that we are in the process of taking on the foodservice.
Retail J&J side of things we.
We will be call it double that.
Again.
Specifics are different based on.
Customer and product and that sort of thing, but kind of just think and averages.
What's the magnitude of.
Not what everybody in the industries, having to look at as.
As costs have gone up double digits and so that's why we keep emphasizing.
As they get through that.
In this quarter.
Along with the other things that we're doing we feel really good about.
One we have the sales where you want it and growing it and we've got great programs New innovation.
And as we get the margins back up but we feel that we feel really confident about the back half of the year.
Thanks.
And then structurally the retail supermarket business.
Is it a lot better place than it was in calendar 2019.
Much of the base increase do you think will hold going forward and where do you see maybe opportunities to hold that base or expand a little bit more.
We're encouraged by retail we feel like we've got some really good things going on in that group. We've got some great products. Some some good introduction to even some newer products.
We feel like we can we can hold on to where we're at today and potentially grow that we have some some good new distribution happening.
With one of the largest mass merchandisers out there with our frozen novelty group and the dog serves specifically.
But we're really excited about what's happening in retail and don't expect that dip its nose anytime soon.
And then just the last one for me in terms of capital allocation, obviously your balance sheet balance sheet is incredibly strong.
Is there anything youre thinking about in terms of strategies for deploying some of that capital and then I don't know if you've talked about this before but is there potentially a leverage.
Range that you'd be thinking about.
Essential acquisitions contract.
Well.
We are fortunate to have a really strong balance sheet and we've worked really hard to have that type of thing and we want to continue to be vigilant in the way that we look at it we've looked at all aspects of what to do with that cash, but probably are our biggest interest is some type of acquisition out there and.
We've been really active on that front, Ken and I over the last three months or so and feel like we're storing up some some pretty good opportunities and hope that that would be the area that we would be able to use that cash.
Ken you want to touch.
The other thing Ryan Youre seeing you'll see it even on the financials this quarter.
We're investing even more.
In our plants.
We mentioned four new lines coming in those lines are all focused on.
Core product areas, whether it's frozen novelties churros pretzels.
And those will improve efficiencies and innovation there is three other lines coming in in.
Q1, Q2 next year.
And then so that pipeline.
Things that we need to do to get better and get more and more automated and we're investing in so we're using money for that.
Dan mentioned.
We're very aggressive in looking at the acquisition opportunities.
And I think that's just a matter of time.
Yeah or maintaining cash for that.
In terms of leverage.
The specific number out but we have.
We have clear support from the board that depending on.
The opportunity if we need to leverage the balance sheet a bit.
We can go do that.
Great. Thanks, so much.
That's it for me.
Thank you Ryan.
Yes.
Give me a minute here I have the name on this line.
Okay.
Okay and this call is from Robert Costello go ahead. Please.
Hello, Good morning, Robert.
I have a question the number of years ago, Gerry outlined where he put the best growth opportunities percentage was in foodservice.
And with your expansion of your product lines that you mentioned on Capex.
That continuing could you be a little more specific on what you think where are you reinvesting the money for the future growth is coming from what areas of the company.
Yes, Robert when we're talking about foodservice as I mentioned earlier, we're seeing great growth in our core products core products, meaning the pretzels churros and the frozen novelties.
And as we're looking at lines of expansion right now, we're looking at the opportunity of being able to expand our production on that core.
Still believe to this day, if that was Jerry's answer in the past with pretzels, and Churros and frozen novelties and Thats, how we answered it before.
I would tell you I still believe today that thats, our biggest opportunity for growth right now.
Right.
The Capex budget is there any change that you're anticipating with the inflation versus the beginning of the year versus now and your cost and weight.
Going to cost you to expand the product line or is it pretty much the same as you anticipated.
Well theres some slight inflation in that most of the ones that we've approved.
We locked in on the pricing.
That.
For those lines.
I'm sure there'll be some if things don't change I'm sure there'll be some inflation that will go along with the lines is that as we start to put them in.
The other thing Rob I'm sorry.
The other thing Robert to keep in mind is.
Yes, and we've mentioned this before.
We have a capital committee and so each of these investments go through rigorous reviews strategic fit operational and then financial modeling and within each of those.
We don't make these decisions unless we believe very strongly that theyre going to drive accretive returns.
So that level of rigor is behind a lot of these decisions as well as investing.
Putting aligned in the right places.
Which are really focus.
Primarily on our core products.
Alright, two quick questions on the Churros you mentioned.
New product lines could you be more specific is it a new product category or how are you. How are you anticipating doing this.
We're seeing great growth today in the <unk> business.
And that's one of the areas that we're going to continue.
Look at potential new lines to be able to keep up with that and maybe even some regional production I'll call. It so that we're not shipping things across the country that we're making them in the spots where we're selling them.
But we're seeing some great growth when it comes to <unk> and good demand.
Out there with customers.
Last question your cash with interest rates slightly rising over the year what are you.
What is the cash invested specifically.
Okay.
Well most of it is in very liquid.
Cash money markets.
There is still some bonds that are older that most of those are maturing.
Like most every other company given where rates were over the last year to 18 months, we've been waiting to see what the market does and so now the rates come back up we are evaluating.
That option of investment along with using that money for cat.
Capital using that money for dividends using that money for acquisitions.
Right, but you don't have it in bond funds right now is that the case or you haven't just been cash and individual bonds.
The majority of it is in cash in very short term liquid.
Theres only.
Probably I don't know $20 million to $30 million.
Corporate bonds that we've had for a number of years that.
Most of those I think are maturing probably in the next 12 months.
Alright, thank you.
Thank you Robert.
Okay, and we have Todd Brooks again did you have another question.
I sure did.
Okay go ahead.
Thank you.
Just wanted to follow up and see if we're to the point, where some of these efficiency opportunities.
Our clear enough.
Ken can you start to manifest the total savings from efficiency efforts.
The company is targeting or are there any bigger projects in here, where you could maybe size the targeted savings. So that we can look at these cost cost offsets against.
It could be some persistent inflationary pressures.
Yes, Todd.
Just to reiterate what I said, a little bit ago. The one thing that gives me more confidence than I've ever had in these calls as these plans are very specific.
Our operations supply chain leaders have done a great job of it.
Really putting very concrete things together and they're laid out by months that are laid out by quarter.
So there is a lot of relevance to that.
We've mentioned before in the areas of distribution.
On an annualized basis tied once we move.
Our logistics management of this third party.
Leverage their capability technology.
There is a conservative $4 million.
Benefit there and that's an annualized number.
As you look at like procurement.
Got it.
A number of initiatives in place there that once those start to bear fruit.
We think there is.
Low single single digit million dollar opportunities over the next few quarters.
There's some work we had to go do to tie it together, but.
Those just give you some high level numbers, but the plans are specific.
In terms of ownership in terms of <unk>.
<unk> in terms of timing.
And we're just really getting that.
That going in terms of.
Launching those in initiating those Todd I'll, just add to that where.
We're focused on distribution, we're focused on procurement R&D production, even though even regional production as I talked about earlier.
And pricing and really encouraged by what we think that is out there and those efficiencies side. So as the year progresses, we felt really comfortable with that.
That's great and then just a final one from me since.
We have lynnwood available on the call I'd love to get.
Your thoughts on the brands being a more recent arrival to J&J and thoughts on looking at this portfolio and the ability to really extend these brands to start to drive.
More of a new product or a product extension engine too.
Help.
Enhance the revenue growth rate over time.
Todd that's a great question Len Wood sitting right here next to me and anxious to be a part of this so let me let I'll turn it over to you, Yes, Hi, Todd. Thank you for getting me involved I appreciate it.
We have a lot of confidence in these brands in our core brands and the ability to stretch these brands.
Into some new spaces, starting with IC and its ability to extend further into foodservice.
Stretch and innovate and novel PS.
Novelties continues to be a promising.
Overall category.
A lot of confidence in Super Pretzel.
And just the inherent strength of that brand across channels.
Service.
As well as retail and we see the innovation.
Opportunity in retail to continue to be a positive space for us and our and our pretzel bites followed up by pretzel not.
Later in the year, then when you get into further into <unk>.
Now, let the brands, we have brands like whole fruit.
Which has just tons of upside fantastic brand big.
Big distribution upside.
Dan mentioned, the officers and with the officers, we're seeing green shoots as we speak with.
Brand new distribution with some of our largest customers honestly I think the upside on Doug the officers and the looming pet industry space is just enormous.
The last one I'll call out is luigi's, where we have leadership in the Italian ice category. There is a lot left to do with Louise and it's not just about expansion.
Growing into new spaces like a natural place for low wages as July .
So we have a lot of confidence that's just a few top line thoughts I'll leave it there and anything you could just touch on gelato a little bit more if you want that we haven't mentioned that yet as a good time to introduce that yes. It's a fantastic product I can tell you is just a natural fit.
Real genuine Italian.
July auto, it's consistent with that brand positioning and we're launching will be launching three flavors as early as next month.
In March.
So we're very excited about that.
I'm very hungry listening to it so I can't wait to get my hands.
Okay.
Okay. Thanks.
Yes.
Thank you. Thank you all for the time appreciate it.
Thank you Todd really appreciate the questions.
Okay and at this time there are no more questions in the queue.
Great well. Thank you everyone for joining us on the call today. We appreciate your interest and continued support and look forward to updating you on our progress during our second quarter call. Thank you very much and look forward to speaking with you soon have a great afternoon.
Thank you.
Ladies and gentlemen. This concludes today's conference. Thank you for participating you may now disconnect.
Okay.