Q2 2025 J&J Snack Foods Corp Earnings Call

Robert Dickerson, Andrew Wolf, Todd Brooks, Jon Andersen, Ken Plunk

Russ Willis, Will Ferrell.

Thank you for watching!

Speaker Change: Good day, and welcome to the J & J Snack Foods Fiscal 2025 Second Quarter Conference Call. As a reminder, this call may be recorded, but would now like to turn the call over to Norberto, uh-huh, investor relations. Please go ahead.

[inaudible]

Speaker Change: Thank you, operator. Good morning, everyone. Thank you for joining the J & J Snack Foods fiscal 2025 second quarter conference call.

Speaker Change: Before getting started, let me take a minute to read the safe harbor language. This call contains forward-looking statements within the meaning of the Private Security Fletigation Reform Act of 1995.

Speaker Change: All statements made on this call that do not relate to matters of historical facts should be considered for looking statements including statements regarding management's plans, strategies, goals, expectations, and objectives as well as our anticipated financial performance.

Speaker Change: These statements are neither promises or guarantees and involve known and unknown risks.

Speaker Change: Uncertainties, and other important factors that may cause results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the four-looking states.

Speaker Change: Factors and other items discussed in our annual report on Form 10K for the year end of September 28th, 2024.

Speaker Change: and their other filings with the Securities and Exchange Commission could cause actual results to defer materially from those indicated by the four local statements made on the call today.

Speaker Change: Any such fort-looking statements represent management estimates as of the date of the call today May 6, 2025.

Speaker Change: While we may elect to update forward-looking statements at some point in the future, we display any obligation to do so, even if subsequent events cause expectations to change.

Speaker Change: In addition, we may also reference certain non-GAAP measures on the call today, including adjusted if it does, adjusted operating income, or adjusted earnings per share, all of which are reconciled to the nearest gap measure on the company's earnings press release.

Speaker Change: which can be found in our Investor Relations section of our website.

Speaker Change: Joining me on the call today to stand fashioner, her chief executive officer, along with Shawn Munsell, her chief financial officer.

Speaker Change: Following management's 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 Mr. Fashner. Please go ahead Dan.

Dan Fachner: Thank you, Roberto. Good morning, everyone, and thank you for joining us today. Well, the corridor reflected some short-term pressures.

Dan Fachner: are differentiated portfolio and core brands will stand out as we build momentum for the second half of fiscal 2025. We're energized by the opportunities we see ahead from new customer relationships.

Innovations and Improving Operating Efficiency

Dan Fachner: Total net sales for our fiscal second quarter declined 1% to 356.1 million as compared to the prior year quarter, which was primarily attributed to lower sales in our frozen beverage and food service segments.

Partly offset by growth in our retail business

Dan Fachner: This led to a 320 basis points decline in gross margin to 26.9%. Adjusted EBITDA in the quarter was 26.2 million, and adjusted EPS was 35 cents per share.

Our second quarter performance was primarily impacted by three factors.

Dan Fachner: First, theater channel weakness, impacted beverage volumes in our frozen beverage segment and to a lesser extent our food service business.

Dan Fachner: The frozen beverage segment was also impacted by foreign exchange headlands [inaudible]

Dan Fachner: 2. Food service sales declined primarily due to the loss of a limited time offered churro volumes from a year ago. And third, we experienced continued input cost inflation, which was mostly related to chocolate in our bakery business.

Dan Fachner: Despite challenges in the quarter, we're confident that the foundation of our business is strong.

Dan Fachner: We expect earnings to improve in the second half driven by projected theater industry rebound, as well as actions were taken to capture additional price increases and to grow volume.

Dan Fachner: I'd also like to thank our terrific team members for their effort and dedication to the company and our customers during this challenging quarter.

Dan Fachner: Our teams across the country and globe are leading initiatives that will help drive our long-term success.

Dan Fachner: Before I discuss the outlook in more detail, I'll first address the second quarter by walking through our segment performance.

Dan Fachner: Frozen Beverage Sales declined by less than 1% with the decline primarily reflecting weakness in the theater channel due to underperforming movie releases, as well as unfavorable foreign exchange impacts from a weaker peso.

Dan Fachner: North America box office sales in our fiscal Q2 declined an estimated 10% as compared to the prior year [inaudible]

Dan Fachner: Beverage sales declined 7.1% with gallons down by a similar percentage.

Dan Fachner: The beverage sales decline was partly offset by higher maintenance and machine revenue, which rose 4.2% and 17% respectively.

Dan Fachner: The beverage volume loss compressed margins, given the relatively higher margin profile associated with beverage sales margins were also impacted by unfavorable foreign exchange effects from a weaker peso

Dan Fachner: Well, we were disappointed with the theater traffic in the second quarter. We have been pleased with the success of the Minecraft movie today, which is evident and sharply improved U.S. beverage volume in early Q3.

Dan Fachner: We're optimistic that a strong summer lineup that includes movie releases such as How To Train Your Dragon and Lilo and Stitch will provide tailwinds to the frozen beverage segment.

Dan Fachner: Industry forecasts suggest that the North American box office sailed in our fiscal third quarter could increase by 30% or more as compared to the prior year.

Moving on to our food and service business [inaudible]

Dan Fachner: Sales declined 1.7% with the largest impact coming from the loss of the limited time offer to our Turo volumes with a major QSR last year, which drove Turo sales down by 18.7%

This year, we successfully added neutral volumes.

Dan Fachner: and while these additions have not fully offset the strong performance of last year's LTO, we remain encouraged by the compelling opportunity with Turros.

Dan Fachner: I want to reiterate that we view LTOs as a valuable platform to engage our customers and create opportunities for long-term menu items.

Dan Fachner: Pretzel sales declined by 7.9%, with some of the declines driven by the Theatre Channel weakness, as well as general market softness in the pretzel category within food service.

Dan Fachner: Notably, our market share improved by 1.4 points and by 4.4 points within Bavarian pretzels as demand for that type pretzel continues to grow.

Dan Fachner: Bavarian Pretzels remained a standout performer within the category, making it a key area of focus and a significant opportunity to leverage our leadership position in Pretzels.

Dan Fachner: I'm excited about the innovation and marketing behind our pretzel business and we'll share more on that shortly

Dan Fachner: The segment was also pressured by continued chocolate cost inflation, namely in our bakery business.

Dan Fachner: Well, we did take incremental pricing in the quarter across our portfolio. It did not fully offset cost inflation.

Dan Fachner: We are continuing to implement price increases across the portfolio selectively during the third quarter We will continue to be surgical as we implement price increases to protect volume for the long-term

Dan Fachner: We expect to drive improvement across food service in the second half of fiscal 2025, as we grow volume, increase pricing selectively and bring innovation to the market.

Retail sales grew 1.8% in a quarter.

Dan Fachner: including a 14.7% growth in frozen novelties led by the dogsters' brand which added 2.7 points of share growth in the quarter on continued unit growth.

Dan Fachner: Additionally, the recent launch of Dip and Dot Sundays reached 1 million in sales during the quarter, while ACV climbed to 15%.

Dan Fachner: The outstanding off-season performance of this product positions us well for summer as we continue to expand distribution and receive positive feedback from consumers.

Regarding Hand Helps [inaudible]

Dan Fachner: Sales declines reflect temporary capacity constraints caused by a fire related outage at one of our facilities late last year.

Dan Fachner: We are working to mitigate the constraints with supplemental capacity elsewhere. We expect our business interruption insurance to provide some mitigation to these impacts as we work through the details with our ensure.

Dan Fachner: Overall, we are pleased with our retail business performance and continue to invest behind a brand recording link.

Dan Fachner: I'd like to share more about the recently announced enhancements to our flagship Superpressual Recipe and Packaging for Retail.

Dan Fachner: In response to consumer feedback, we made small but meaningful recipe updates to give our super pretzel a softer texture and a more robust Bavarian style flavor.

Dan Fachner: The new recipe positions the product well given that the varying style pretzels are some of the fastest growing products in the pretzel category.

We also refresh the retail packaging .

Introduced an Omni-Tanile Marketing Plan to support the launch

Dan Fachner: and will convert some of our top food service SKUs to the new recipe this summer, including the pretzels that consumers find at baseball games and amusement parks.

Dan Fachner: We're very excited about this update to the Super Pretzel brand and we know that consumers will be pleased with the new enhancements as well.

Dan Fachner: The quarter was challenged in part due to weakness in the theater channel. Additionally, the recent decline in consumer sentiment amidst macro uncertainty may be influencing consumer demand.

Although the consumer backdrop presents challenges.

Speaker Change: We believe our portfolio is relatively insulated during periods of economic uncertainty because our products are relatively affordable and tend to be viewed as treats by consumers.

Speaker Change: Recent data indicates that consumers rank cost of living and affordability among their top considerations when weighing purchase decisions.

Speaker Change: We also made progress on several market initiatives during the quarter. We have increased Diffendot's theater presence by over 30% since the end of fiscal 24th.

Speaker Change: We are thrilled to announce that we recently added Urban Air, the ultimate indoor adventure park and family destination as a new customer for dip and dots. Our first shipments will come in soon and we expect Urban Air to become the largest single customer for dip and dots. [inaudible]

Speaker Change: As mentioned, the rollout of Dip and Dot Sundays has been successful and reached 1 million in sales during the quarter with more growth coming as our distribution expands and we approach the peak selling season.

Speaker Change: We are testing a thorough innovation with a QSR customer as part of their value menu, which could lead to meaningful volume. In fact, this is a great example of a limited time offer fostering a potential permanent menu placement. This is a great example of a limited time offer, which could lead to meaningful volume placement.

Speaker Change: We continue to bring innovation to the market across the portfolio, including whole grain and super pretzel varieties and other new dip and dock products for retail.

as it relates to GLP One Drugs.

Speaker Change: Penitration appears to remain steady at around 8-9% [inaudible]

Speaker Change: It's unclear whether demand for our products has been affected by GLP1 related diet preferences.

Speaker Change: However, we are actively innovating art portfolio to offer more products that are compatible with GLP1 diets and more broadly, better for you diet trends.

Speaker Change: For instance, we have been developing a high protein pretzel with approximately 10 grams of protein to help meet the growing demand for protein enriched products [inaudible]

Speaker Change: We're also innovating some of our frozen novelties to add better for you attributes.

Speaker Change: Such as by enhancing them with electrolytes, antioxidants, and probiotics. These are just a few of the innovations that are underway as we adapt our portfolio to meet consumers however and wherever they choose to snack.

Speaker Change: In summary, while the quarter was more challenging than anticipated, we are optimistic that our results will improve as theatre traffic rebounds.

Price Realization Improves [inaudible]

Speaker Change: Our retail brands continue growing in the peak season for frozen novelies, and new business initiatives and innovations take hold and help drive results.

Shawn Munsell: With that, I would now like to turn the call over to Shawn to review the financial results in greater detail. Shawn?

Thank you, Dan, and good morning everyone.

Shawn Munsell: Our second quarter revenue declined 1% to 356.1 million. Frozen beverage sales decreased less than 1% food service sales decreased 1.7% and retail sales grew 1.8%.

Shawn Munsell: Cost a good soul increased 3.5% to 260.4 million, which generated a gross profit of 95.7 million compared to 108.2 million in the year ago period, while gross margin declined to 26.9% from 30.1%.

Shawn Munsell: The softness in our frozen beverage business primarily caused by lower beverage volumes, and for an exchange headwinds, contributed to approximately 60 basis points of gross margin compression, while the loss of turnover and price of volumes includes service together contributed to approximately 190 basis points of gross margin compression.

We continue to monitor the evolution of tariff policy.

Shawn Munsell: Changes in tariffs did not directly impact our input costs in the fiscal second quarter, but could impact future quarters.

Shawn Munsell: The tariffs currently in place could increase our input cost by 4 to 6 million on an annualized basis, if not mitigated by pricing, alternate sourcing or other strategies. We're actively seeking options to mitigate these impacts.

Shawn Munsell: Operating expenses totaled 89.7 million or 25.2% of sales as compared to 25.1% last year.

Shawn Munsell: Operating expenses decreased by less than a percent as compared to the prior year quarter, primarily due to one-time start-up costs at a regional distribution centers last year.

Shawn Munsell: Marketing expenses were 28.5 million or 8% of sales up from 7.7% last year.

Shawn Munsell: and increased 3.1% versus the prior year quarter. About half of the year-over-year increase was related to higher brand amortization expenses associated with a legacy churro brand that has been faced out for the Ola Churro brand.

Shawn Munsell: Distribution costs were 41.8 million, or 11.7% of sales, down from 12.3% in the prior year. Distribution costs overall, declining by 5.5%.

Shawn Munsell: The decline primarily reflects the impact of startup costs that are regional distribution centers last year. Adjusting for those impacts, distribution costs would have been approximately in line with last year as the percentage of sales.

Shawn Munsell: Distribution costs rose sequentially from the first quarter as we built inventory in advance of our peak season [inaudible]

Shawn Munsell: Administrative expenses were 19.8 million or 5.5% of sales, up from 5.1% in the prior year, mostly driven by higher compensation costs, as well as higher non-recurring legal expenses.

Shawn Munsell: Net earnings totaled $4.8 million compared to $13.3 million in the prior year quarter, and the earnings per diluted share fell to $25.00 for its $69.00.

Shawn Munsell: Adjusted earnings per diluted share, were 35 cents versus 84 cents in the prior year Adjusted EBITDA was 26.2 million versus 39.3 million in the prior year

Shawn Munsell: We continue to have a healthy balance sheet and liquidity position, with 48.5 million in cash and no long-term debt. We had approximately 213 million of borrowing capacity under our revolving credit agreement.

Shawn Munsell: We repurchase to approximately 39,000 shares for $5 million at an average price of about $128 per share.

Shawn Munsell: In closing, we are encouraged that we will deliver a stronger second half driven by improving theater attendance, the impact of pricing actions, and exciting innovation across our

Shawn Munsell: With a portfolio of great products and brands, J & J is well positioned to deliver value to both customers and shareholders in the quarters ahead. I would now like to turn the call over to the operator for Q&A. Operator?

Speaker Change: Thank you. At this time we will conduct the question and answer session. As a reminder to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again.

Please stand by while we come and pause the Q&A roster.

I'm sorry. I'm sorry. I'm sorry. I'm sorry. I'm sorry.

Speaker Change: Our first collection comes from the line of David Shakno, William Blair. Your line is now open.

David Sheckno: Good morning. You provided a helpful, gross margin bridge in the press release, but I think there were 70 to 80 bits not covered within that. Any color that could help us understand the balance of the decline there.

David Sheckno: Yeah, sure, good morning. Most of the remaining balance really just represents that chocolate cost inflation relative to the pricing offset. So that was about 60 basis points and that covers most of the gap.

David Sheckno: Got it and then just one follow up here I forgive me if I missed this in the prepared remarks, but you mentioned last quarter that you didn't expect to get gross margins back to the low 30s until the second half of the year. One to see if that's still the expectation or if you've had to recalibrate that a bit given the macro environment. All right.

David Sheckno: Now we still believe that's the expectation for us as we enter into the back half of the year.

David Sheckno: Got it. Great. Sounds good. I'll pass them on. Thank you.

Thank you.

Speaker Change: Our next question comes from the line of Todd Brooks of the Benchmark Company. Your line is no open.

Todd Brooks: Hey, thanks for taking my questions. Dan, just following up on the expectation to get Chris smarter back to the low 30s.

Todd Brooks: Does that assume just the pricing that you've been able to capture the data or does that assume success with forward pricing activities?

Todd Brooks: Well, it does assume some of the pricing that we have as it continues to build through the remainder of this year. And then also, don't forget, as we get into the back half of the year, you have the influence from our frozen beverage business and our different dots business.

Todd Brooks: and even as we said in the remarks, you know, early indications if the theater business comes back and as we look at early Q3 right now, those two pieces of business really start to drive that March and nicely as we give it a backup.

Todd Brooks: and where we're highlighting theater or such a driver. Can you update us on?

Todd Brooks: I think last we heard it was kind of 25% of frozen beverage and a slightly lower percentage in food service. Where are the percentages now as we start to look at the ebb and flows

Todd Brooks: Yeah, we're still in that same area, Todd. That hasn't changed a lot. It hasn't precise impact on our...

Todd Brooks: Frozen Beverage Business, it will begin to have a larger impact on our different dots business as well.

Todd Brooks: And then, of course, as this last quarter unfolded, we saw a dip on the food service pretzel side of our business. So all three of those have a piece of it, but specifically to the to the icy side, it's about 25% of their business.

Todd Brooks: Okay, great. One more quick one. Sorry, Shawn go ahead. Yeah, I was just going to say as it relates to getting back to 30% in the second half.

Todd Brooks: Dan touched on it, you know, remember as we get into the second half, you get a much higher proportion of our business coming from frozen beverage retail and you know, retail is, you know, it's

Todd Brooks: Mostly pros and novelties as well as the dip and dots business so in all of those are you know those are our higher market businesses. You know what I'm talking about?

Todd Brooks: and just use in, you know, 24 as a point of reference, you know, our frozen beverage business grew sequentially from Q2 to Q3 by about 40%. You're up about 30% in retail and much figure increase in the dip in Dr. Business.

Todd Brooks: Okay, great. And then two more quick ones, if I may, Shawn, on the distribution line.

with the volume we should.

Todd Brooks: Leverage that I would expect in the second half of the year, but that...

Todd Brooks: Ability to get down to that 10% or slightly below level is that?

Todd Brooks: Is that tracking based on what you're seeing and how the facilities are operating? It is, it is. I would expect that we see something closer to 10% near 10% in the third quarter, not terribly different from where we were last year.

Todd Brooks: Okay, perfect. And the final one, just if we're thinking about

Todd Brooks: Q-2 versus Q-3. How does Easter impact the business? Is Ernie Easter shift impact with...

Todd Brooks: Not just the holiday shifts, but later spring breaks and things like that, that either you can size from what it costs. The March quarter is just talked to as a driver for the upcoming quarter.

Todd Brooks: Yeah, you know, Todd probably more impacted by weather during this time of year than we are by Easter break itself.

Todd Brooks: Although there's, you know, plenty of vacations that get taken around Easter and so it starts to kick in for many of our amusement parks Probably as you think about May but more impacted even by Memorial Week and that it is by Easter. We just get into that time of year now where you really want to cheer on the weather as we get into the more summer months and kids are out of school.

Okay, fair enough. Thank you both.

Thank you.

Speaker Change: Our next question comes from the line of Andrew Wolf of Seal King, your line is now open.

Good morning. Good morning, Andrew.

Andrew Wolfe: So I wanted to hear a little more about your kind of top line views.

Andrew Wolfe: You know, clearly, theatre business is going to be a nice tailwind, at least in the, you know, is quarter for food servicing, but, you know, and

and Frozen Saverages.

as Todd got to, you know, let's...

Andrew Wolfe: You know, it's a big part of the business, but the majority of the business is, you know, rest of food service, amusement parks and so on and convenience stores.

So are you expecting that to be good enough?

Andrew Wolfe: from that 25% or so of the business that 30% increase in traffic to theaters to have the top line and turn up in those two segments are another way of saying it is what's going on with the end customers.

Andrew Wolfe: Right, you know, sort of organically how you view, you know, the summer season for your food service customers and I guess convenience stores if you have the view on that as well.

Andrew Wolfe: Right. Well, you know, as we've talked about, it's a tough quarter for sure with consumer confidence and sentiment struggling. Right. We know there's an impact from that on our business.

Andrew Wolfe: But what we really tried to highlight is that, you know, we view it as three real buckets that we're against in the corner that start to go away as we look into the third and fourth quarter. That theater business as we've talked about and

Andrew Wolfe: And, you know, there's also conversation about, you know, is that theatre industry dying but every time we see a good movie like we did with Minecraft we see that business just jump up and do really really good things for us. [inaudible]

Andrew Wolfe: And so if you look at the year of business as you get into the third quarter, especially the one that we're in right now

Andrew Wolfe: It looks to be really really strong and then levels off a little bit in June and then looks to be a nice fourth quarter for us as well.

Andrew Wolfe: We don't have that churro piece of business that headwind that we're off against. That was a great LTO and it spurred some other LTOs and may even spur a permanent menu item on a big USR chain that we're really excited about that will happen in 26.

Andrew Wolfe: and as we mitigate the input costs, especially around chocolate as we get into the back half of the year, we think all of those headwinds are kind of behind us, and then you're looking squarely at what does consumer confidence look like? [inaudible]

Andrew Wolfe: and that's a tough one to try to understand. We believe and we have great confidence in what we're doing.

Andrew Wolfe: and the new pieces of business that we're bringing on and the new innovation even as we talk about the

Andrew Wolfe: The pretzel innovation with new packaging and a new recipe were really encouraged by that. We think, I guess I would say we're optimistic about the back half of this year. It's going to be really strong. It might end up slightly below last year's.

Andrew Wolfe: Sales, but we still are hopeful that back after the year can do really good things for us.

Speaker Change: Alright, and I wanted to ask about kind of price realization.

Andrew Wolfe: as part of you know obviously it's getting better but I think you did say you want to be selective with price increases and

Andrew Wolfe: Um, I can understand, you know, this is not the time to be

Andrew Wolfe: You know, just throwing out, you know, I'm sure you're going to get audited on a lot of this stuff like your regular customers but...

Andrew Wolfe: Uh, where do you feel? I mean, do you feel you're going to get your price realization and

You know, the impacted categories of chocolates and eggs and-

Andrew Wolfe: You know, anything else that really has real inflation in it?

Andrew Wolfe: We do, we pay for catching up to that really nicely, other themes [inaudible] We do, we do,

Andrew Wolfe: The teams have done a nice job getting out there and getting the pricing in.

Andrew Wolfe: It may have come a little slower than we anticipated, but it also came with some directions from me that I don't want to lose volume or customers Well, well we're passing this needed price increase along [inaudible]

Andrew Wolfe: And that's going to continue to build even as we get into the third quarter. We felt confident that the team has gone out there and got that we've been careful not to turn the wheel too quickly as to lose some volume along the way. It's a delicate balance but we're feeling good about where we're going to be there. Shawn, you want to add a...

Shawn Munsell: Couple percentage points to that. Yeah, yeah, I'd say that, you know, just to help upon a tie, you know, work.

Shawn Munsell: We expect that we'll pick up, call it another 80 basis points, maybe a full percentage point here in the third quarter, but like Dan said, we're being surgical about it and we're not losing volume and that's part of what slows the pace in the first quarter.

I'm sorry in the second quarter [inaudible]

Shawn Munsell: Yeah, no, that's understandable and thanks for the quantification. I guess my last one is on the Dip and Dot Sundays. That's the only retail product. I don't understand that.

Shawn Munsell: It is the only retail product to date. We're working on another one that some of the teams are out there already talking to customers about that we're really excited about. So as we round it out in the 2026.

Shawn Munsell: We believe we'll have a couple of those different items out in the field.

Bye.

Speaker Change: You know, we're so happy with the success of the Sunday so far.

Shawn Munsell: And it's early, right? Even as we see April April sales really jumped out at us. So we're excited about that in over 8,000 locations and consumer sentiment has been really strong about that product and

Shawn Munsell: And if we can back it up with this next new innovation that we have, I think we'll continue to see great things from it.

Shawn Munsell: Got it. Well, that's it for me. Thank you. Thank you. Thanks

Speaker Change: Thank you. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced.

Speaker Change: Our next question comes from the line of Scott Marks of Jeffries, your line is now open.

Take the morning guys. Thanks so much for taking our questions.

Good morning, Scott.

Morning.

Speaker Change: First thing I want to ask about is just the pretzel category. So you mentioned, you know, pressure, pretzel category from the theater, traffic, but you also mentioned just other general category weakness. So it's just wondering if you can kind of speak to that and give us some insight into, you know, where exactly that stemming from and what the drivers are.

Speaker Change: Yeah, the category did show some weakness in the quarter, and it's something that we're trying to address even as we talked about some new packaging and formulation of our product that will begin in the retail side to be a little bit more like a Bavarian style pretzel, which we see some real growth in the category. [inaudible]

Speaker Change: What's interesting is our market share group, but the category is down, and so when you look inside the...

Speaker Change: The pretzel business, you see that the Biberian style pretzel growing, and so we're going to attack that really strong We're going to attack that really strong.

Speaker Change: Team's done a really nice job. We did some great market research across the country to to ensure that

Speaker Change: and consumers like the new product and like the new packaging and so you're seeing that out the stores right now we feel like that will bring some emphasis back to it. We're still bullish on the pretzel category but you know whatever you see a category down even if you're growing inside it draws attention and and I think there's also a chance that also within that that's where we're seeing some of that consumer confidence that might be an area that. [inaudible] We're still bullish on the pretzel category but we're still bullish on the pretzel category but we're still bullish on the pretzel category.

Speaker Change: Some of the places just aren't as busy and we're not getting the pool through on the pretzel category.

Speaker Change: And we did, we talked to one of our QSR customers where we did see some year over year weakness into Q and it was interesting that they did cite some of the traffic within their stores but

Speaker Change: Part of that they did, they did attribute to the weather that we had in the quarter so you know certainly not you know pinning it all on weather but it seems like at least for you know for some of our customers that was having it look like

Speaker Change: Got it. And then I know there's been a lot of discussion about this theater channel, but I don't think I heard as much about the convenience channel. So just wondering if you can kind of speak to trends throughout the quarter, maybe what you've seen as we've kind of progressed, you know, into April and here into May. [inaudible]

Speaker Change: You know, the convenience channel has been off for about 18 months or so now, maybe even longer than that. And it continues to be down, even as you talked to that industry. It's down. We're doing some good things within the channel. We're continuing to grow some of those equipment sales that you saw out of frozen beverage side is going into the convenience channel. So, you know, we're still pushing hard at it and seeing some growth. But the total channel [inaudible]

Has been off for us

Speaker Change: I think in a quarter it was down something like 7% from a gallons perspective in the frozen beverage business.

It's got it and then the last one from me.

Speaker Change: You know, as we think about maybe some of the regulatory changes around, you know, artificial ingredients from some of the health departments here in the US, just wondering if you can kind of help us understand maybe your exposure to that and maybe how you're working on reformulations to try to, you know. [inaudible]

Get around some of those some of those changes.

Speaker Change: Yeah, I'm really proud of the teams. They've been right on top of this and doing a really good job. The first really one that we're focused on is the dye number three red dye number three and that is now out of all of our products.

Speaker Change: And so we're watching it closely. We're continuing to read up on it. We've got a team focused on what we need to do to make sure we stay within regulation. And we feel like we'll be way ahead of that as as laws get passed in different states and things like that. [inaudible]

Speaker Change: Got it. Thanks so much. I'll pass it on. Thank you Scott.

Dan Fachner: Thank you. I am showing no further questions at this time. I would now like to turn it back to Dan for closing remarks.

Dan Fachner: Thank you very much. In closing, we are encouraged that we deliver a stronger second half driven by improving theater attendance, the impact of our pricing action, and exciting innovation across our portfolio.

Speaker Change: With a portfolio of great product and brand, J & J is well-positioned to deliver value to both customers and shareholders in the quarter, and we feel strong about that.

Speaker Change: We look forward to sharing our third court results and in the meantime, invite you to contact our investor relations team at JCIR at 212-835-8500 with any questions. Thank you and have a great day.

Speaker Change: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

[music]

Speaker Change: Andrew Wolf, Robert Dickerson, Robert Dickerson, Robert Dickerson

Speaker Change: Andrew Wolf, Robert Dickerson, Jon Andersen, Todd Brooks, Ken Plunk