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01/11 16:23
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presents mixed signals: declining sales and profits, increased operating expenses, and cautious consumer sentiment weigh negatively. However, optimism for 2026, expected savings from plant closures, and a focus on share repurchases provide positive aspects. The Q&A reveals management's cautious optimism, but lack of specific guidance and immediate M&A actions limits strong positive sentiment. With a market cap of $3.17 billion, the stock is likely to experience a neutral reaction, fluctuating between -2% to 2% over the next two weeks.
Adjusted EBITDA (Q4) $57.4 million, down from $59.7 million last year, a decrease of 3.9%. The decline was attributed to lower sales, particularly in the frozen beverage business, and a challenging summer backdrop.
Net Sales (Q4) $410.2 million, down 3.9% year-over-year. Over half of the sales decline was associated with the frozen beverage business due to lapping strong volumes from the Inside Out 2 movie last year.
Adjusted EBITDA (Full Year) $180.9 million, down from $200.1 million last year. The decline was due to lower volumes and operational challenges.
Net Sales (Full Year) $1.58 billion, up 0.5% year-over-year. Growth was driven by price increases, which offset lower volumes.
Pretzel Sales (2025) Increased by 2.7% year-over-year, with an 8% increase in the second half of the year. Growth was driven by innovation and modernization efforts, including recipe enhancements and fresh packaging.
Frozen Beverage Segment Sales (Q4) Declined 8.3% year-over-year due to lower beverage volume, particularly in theaters, as the company lapped the success of the Inside Out 2 movie last year.
Foodservice Segment Net Sales (Q4) Declined 1.1% to $259.3 million. Soft pretzel sales increased 3.6%, but overall volume softness offset price increases.
Retail Segment Net Sales (Q4) Declined 8.1% year-over-year, primarily due to lower frozen novelty volumes, partly offset by higher pretzel volume.
Gross Profit (Q4) $130.2 million, down from $135.5 million last year. Gross margin was 31.7%, slightly down from 31.8% last year. Decline was due to lower mix of beverage revenue and tariff costs, partially offset by insurance proceeds and early plant consolidation savings.
Operating Expenses (Q4) Increased 24% to $118.8 million, including $24.8 million of nonrecurring charges related to Project Apollo plant closures.
Adjusted Operating Income (Q4) $37.7 million, down from $42 million last year. Decline was due to higher operating expenses and lower gross profit.
Adjusted Earnings Per Diluted Share (Q4) $1.58, slightly down from $1.60 last year. The decline was due to lower operating income, partially offset by a significantly lower effective tax rate.
Effective Tax Rate (Q4) 4.8%, down from 26.8% last year. The significant decrease was due to a change in estimate on the blended state tax rate and its impact on deferred tax liabilities.
Distribution Expenses (Q4) Declined 8.3% year-over-year due to lower volume and efficiency gains, including better truck utilization and fewer internal transfers.
Marketing Expenses (Q4) $32.6 million, up 4.8% year-over-year, driven by increased spending on new sponsorships and promotional activities.
SUPERPRETZEL product modernization: Modernized with a recipe enhancement and fresh packaging, leading to a 2.7% pretzel sales increase in 2025.
Dippin' Dots Sundaes: Launched at retail, adding approximately $5 million to the top line.
New protein pretzel: Available in retail as a 4-pack of large pretzels with 10 grams of protein or mini pretzels with 7 grams of protein per serving.
SUPERPRETZEL pizza sticks and queso sticks: Smaller pretzel bites with tasty fillings to be launched.
LUIGI'S mini pops: Frozen novelty featuring hydration and immunity support.
Dogsters mini ice cream sandwich: Extension of the popular pet treat brand.
Dippin' Dots retail launch: Original form to be launched for retail, along with two new flavors for the Sundae lineup.
Theater presence for Dippin' Dots: Rollout substantially completed, now in almost 1,600 theaters.
Churros for QSR: Shipping to a major QSR as part of a limited-time offer program, with potential for permanent volume.
ICE machines rollout: Completed for a large convenience store operator in the Southwest.
Frozen beverage test: Nearly complete with a major West Coast QSR operator, showing encouraging results.
Project Apollo: Business transformation program expected to deliver at least $20 million of annualized operating income in 2026.
Plant closures: Three facilities closed, with production consolidated or discontinued, leading to $15 million in annualized savings by Q2 2026.
Distribution system optimization: Expected to generate $3 million in annualized savings.
Administrative initiatives: Part of Project Apollo, with most savings realized by Q3 2026.
Share repurchase activity: Intended to accelerate significantly in fiscal 2026, with $3 million repurchased in the quarter.
Tech infrastructure modernization: Developing a roadmap to streamline corporate processes and improve data analytics.
Sales Decline in Frozen Beverage Business: Over half of the sales decline in Q4 was associated with the frozen beverage business, attributed to lapping strong volumes from the Inside Out 2 movie last year.
Frozen Novelties Sales Decline: Frozen novelties experienced declines, which the company is addressing through marketing, trade spend, and innovation.
Plant Closures: The company announced the closure of three facilities as part of Project Apollo, which could lead to potential disruptions in production and customer orders during the transition.
Temporary Capacity Constraints: Handheld sales were impacted by temporary capacity constraints due to a fire at the North Carolina facility last year.
Theater Sales Decline: Theater sales in the frozen beverage segment declined due to lower box office sales, which were down approximately 11% in Q4.
Nonrecurring Costs from Project Apollo: The company incurred $24.8 million in nonrecurring charges related to Project Apollo plant closures, with additional costs of $3 million to $5 million expected in fiscal 2026.
Tariff Costs: Tariff costs added approximately 35 basis points to the cost of goods, negatively impacting gross margin.
Higher Operating Expenses: Operating expenses increased by 24% in Q4, driven by nonrecurring charges, higher marketing expenses, and increased compensation costs.
Project Apollo: A business transformation program aimed at generating sustainable efficiencies and cost savings across the enterprise. Expected to deliver at least $20 million of annualized operating income in 2026. Initial focus includes consolidation of manufacturing network, closure of three facilities, and optimization of frozen beverage distribution and service network. Annualized savings from plant closures expected to be approximately $15 million, with additional $3 million savings from distribution system initiatives. Most savings to be realized by Q3 2026.
Innovation Initiatives: Several product launches planned for fiscal 2026, including protein pretzels, SUPERPRETZEL pizza and queso sticks, LUIGI'S mini pops, Dogsters mini ice cream sandwiches, and Dippin' Dots retail products. Most products will be available starting fiscal Q2 2026.
Commercial Activities: Shipping churros to a major QSR as part of a limited-time offer program in fiscal Q1 2026, with potential for permanent volume. Completing rollout of ICE machines for a convenience store operator in the Southwest. Encouraging results from frozen beverage test with a major West Coast QSR operator.
Theater Industry Outlook: North America box office sales projected to increase by 9% in fiscal 2026, supported by a strong lineup of movies. Encouraging trends in theater industry recovery post-COVID.
Financial Position and Share Repurchase: Strong financial position with $106 million in cash and no debt. Plans to accelerate share repurchase activity in fiscal 2026 due to compelling value in shares.
Operational Efficiency: Efficiency gains in distribution expected to continue, driven by fewer internal transfers and better truck utilization. Additional savings anticipated from Project Apollo initiatives.
Frozen Beverage Segment: Encouraging results from frozen beverage tests with QSR operators. Anticipates normalization of volumes and continued rebound in theater industry sales.
Marketing and Trade Spend: Increased marketing and trade spend to support frozen novelty business and other product lines. Focus on shopper marketing and promotional activities to drive growth.
Dividends: The company continues to take a balanced approach to capital allocation, which includes returning capital to shareholders through dividends.
Share Repurchase: The company repurchased $3 million worth of shares in the quarter and intends to significantly accelerate the pace of share repurchases during the current quarter, citing compelling value in its shares.
The earnings call presents mixed signals: declining sales and profits, increased operating expenses, and cautious consumer sentiment weigh negatively. However, optimism for 2026, expected savings from plant closures, and a focus on share repurchases provide positive aspects. The Q&A reveals management's cautious optimism, but lack of specific guidance and immediate M&A actions limits strong positive sentiment. With a market cap of $3.17 billion, the stock is likely to experience a neutral reaction, fluctuating between -2% to 2% over the next two weeks.
The earnings call reveals mixed signals. While net sales and adjusted EBITDA reached record highs, challenges like foreign exchange headwinds and input cost inflation persist. The cautious consumer backdrop, capacity constraints from a plant fire, and declining retail sales further complicate the outlook. Although promising developments in product expansion and cost savings exist, the overall sentiment remains balanced, reflecting both positive and negative elements. Given the company's mid-sized market cap, the stock price is expected to remain relatively stable, resulting in a neutral prediction for the next two weeks.
The earnings call shows mixed signals: record net sales and adjusted EBITDA are positive, but margin pressure and capacity constraints due to a fire are concerns. The Q&A indicates management is addressing these issues, and new programs could boost future growth. However, the lack of specific guidance and cautious outlook on promotional activities tempers optimism. Given the company's market cap, the overall sentiment is neutral, expecting minor stock fluctuations.
The earnings call reveals several concerns: declining net sales, lower gross margins, and reduced earnings. Additionally, input cost inflation, foreign exchange headwinds, and competitive pressures are impacting performance. Despite some positive elements like stock repurchase and cash position, the overall sentiment is negative due to underperformance in key segments, especially Frozen Beverage, and weak consumer sentiment. The Q&A session highlighted management's confidence in future gross margin recovery but also underscored ongoing challenges. Given the market cap, a negative stock price reaction of -2% to -8% is expected over the next two weeks.
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