J&J Snack Foods’ Fiscal 2023 Fourth Quarter Revenue Increases 10.8% to a Quarterly Record of $443.9M

MOUNT LAUREL, N.J., Nov. 15, 2023 (GLOBE NEWSWIRE) -- J&J Snack Foods Corp. (NASDAQ: JJSF) (the “Company”) today reported financial results for the fourth quarter and full year ended September 30, 2023.

^{This press release contains non-GAAP financial measures. Please refer to the Non-GAAP Financial Measures section below for reconciliations to the most comparable GAAP measures.}

Dan Fachner, J&J Snack Foods President and CEO, commented, “J&J Snack Foods ended fiscal 2023 on a strong note, including record sales and profitability for both the fourth quarter and full year. We achieved these results through the dedicated efforts of our J&J employees across the business, as well as the positive impact of various operational and strategic initiatives we have undertaken over the past two years. Fiscal fourth quarter net sales increased to a record $443.9 million, driven by Food Services sales growth of 5.3%, Retail segment sales growth of 21.2% and Frozen Beverages sales growth of 20.6%. In addition, our work to improve profit margins continues to gain momentum led by a 32.8% gross margin in the quarter and lower distribution expenses. Operating income and adjusted EBITDA increased 93.0% and 55.2%, respectively, for the fourth quarter and 77.2% and 46.3%, respectively for fiscal 2023.

“Diving deeper into our sales performance, we are seeing marked success across our core brands, as pretzels, churros and frozen novelties continue to post healthy growth on the back of our initiatives to onboard new customers, bring new products to market and improve the effectiveness of our brand marketing. I am particularly pleased with Dippin’ Dots performance in its first full year as a part of J&J’s portfolio. Dippin’ Dots achieved its highest sales and profitability in its history, growing over 13% and 80% for the fiscal year, respectively, on the back of our success in driving synergies, penetrating new sales channels, and leveraging new products. Our Retail segment delivered a strong fourth quarter, growing 21.2% driven by new placement of SuperPretzel Bavarian sticks, pretzel dogs and pretzel bites, along with our launch of Hola! Churros into retail. Our Frozen Novelty business also continues to grow led by Luigi’s, Dogsters and Icee sticks. In addition, our Frozen Beverage segment delivered record fourth quarter and full year sales and profitability, as sales grew 20.6% in the quarter and 16.6% for the year. This was led by double digit growth of beverage gallons for both the quarter and year as our major sales channels including theaters, convenience, amusement, mass merchandisers and restaurants, continued to show healthy demand.

“In addition, we continue to successfully execute our operational initiatives focused on continuous improvement, production expansion and supply chain efficiencies across the business. We now have two regional distribution centers in operation, with a third scheduled to open in early calendar 2024. In addition, we have completed the implementation of six new production lines creating additional production capacity in core product categories such as pretzels, churros, and frozen novelties. Together, these initiatives are improving how we operate, creating cost efficiencies and positioning us for continued growth in both sales and profitability.”

“As we look ahead to fiscal 2024, our momentum remains strong, and we are aligned on a strategy that positions us well for continued success. Our focus on cross-selling is creating new product opportunities and channels, providing us the ability to further leverage our product innovation capabilities and the strength of our brands. We believe this momentum, together with improved operational efficiencies positions J&J well to deliver added value for our employees, partners, and shareholders.”

Fourth Quarter Highlights
Net sales increased 10.8% to $443.9 million in Q4 of fiscal 2023, compared to Q4 of fiscal 2022, marking the largest fourth quarter sales performance in the Company’s history.   Q4 2023 includes an extra week compared to prior years quarter and contributed an estimated 6.8% to sales growth and approximately $2 million in operating profit.  

Key highlights include:

• Achieved sales growth across all three business segments.
  • Food Service sales exceeded Q4 ’22 by 5.3%.
  • Retail segment sales exceeded Q4 ’22 by 21.2%.
  • Frozen Beverage segment sales exceeded Q4 ’22 sales by 20.6%.
• Organic sales growth was mainly driven by growth across our core brands and products, including pretzels, churros, frozen novelties and frozen beverages.
• Sales included approximately $35.2 million in revenue from Dippin’ Dots, which we report as a part of Frozen Novelties in the Food Service segment. Dippin’ Dots sales exceeded Q4 ’22 sales by 11.7%.

Gross profit as a percentage of sales was 32.8% in Q4 ’23, comparing favorably to 28.9% in Q4 ’22, reflecting increased volume, improved product mix, aligned pricing, as well as the stabilization of inflationary pressures on the back of historic highs last year. Overall, we experienced deflation for the quarter led by flour, oils, dairy, eggs, and meats. We continue to experience double digit inflation in sugar/sweeteners.

Total operating expenses of $104.0 million represented 23.4% of sales for the quarter, favorably comparing to 23.5% in Q4 ’22.

• Distribution costs represented 10.8% of sales in the quarter, versus 12.4% in the prior year period, largely driven by an improved inflationary environment and benefits of our strategic initiatives to improve logistics management and increase efficiency across our distribution network and supply chain.
• Marketing and selling expenses represented 7.0% of sales, versus 6.4% in the prior year period, reflecting added promotional and marketing support on our core brands and new products launches.
• Administrative expenses were 5.0% of sales in Q4 ’23, compared to 4.3% in Q4 ’22, with the year-over-year increase largely attributable to higher performance-based bonus payments compared to prior year and investments in capability.

Adjusted operating income was $45.8 million in the fourth quarter of fiscal 2023, compared to $25.8 million in the prior year period, with the increase driven by higher net sales, 390 bps improvement in gross margin rate and lower operating expenses as a percentage of sales. This led to net earnings in Q4 ’23 of $30.4 million, compared to $17.3 million in Q4 ’22. Our effective tax rate was 27.0% in Q4 ’23.        

Fiscal 2023 Highlights
Net sales increased 12.9% to $1.56 billion for full year fiscal 2023, versus full year fiscal 2022, reflecting strong performance across all three business segments for the full year. The fiscal 2023 year includes an extra week compared to the prior year and contributed an estimated 2.0% to sales growth and approximately $2 million in operating profit.

Key highlights include:

• Food Service sales grew 12.5% in fiscal 2023, compared to the prior year, led by frozen novelties, which benefited from the Dippin’ Dots acquisition, as well as double-digit growth in pretzels and churros. Bakery sales were relatively flat for the year.
• Retail sales continued their strong performance growing 8.8%, and was driven by growth in frozen novelties and handhelds, slightly higher sales in biscuits offset by a small decline in pretzels sales.
• Frozen Beverages segment sales grew 16.6%, driven by a 22.1% increase in beverage sales and a 12.9% increase in equipment sales led by strong momentum in theaters, along with continued growth in amusement parks, convenience, restaurants, and retail venues.

Gross profit as a percentage of sales improved to 30.1% for fiscal 2023, favorably comparing to 26.8% for the prior year, with the increase largely attributable to the benefit of increased top-line demand, favorable product mix, more aligned pricing and cost, and targeted margin efficiencies.

Total operating expenses increased to 23.1% of sales, compared to 22.3% for fiscal 2022 reflecting the addition of a higher expense Dippin’ Dots business for a full year compared to just a one quarter impact in fiscal 2022. Excluding this impact, operating expenses as a percentage of sales decreased 40 bps compared to the prior year.

• Distribution cost were 11.1% of sales for the year, versus 11.6% in the prior year period, reflecting the progress we continue to make towards establishing a more efficient and effective operational structure.
• Marketing and selling expenses were 7.1% of sales, compared to 6.6% last year, driven by more marketing dollars aligned with new product launches and promoting our core brands.
• Administrative expenses were 4.8% of sales this year, compared to 4.0% last year, reflecting higher performance-based bonus payments compared to the prior year-period, the addition of Dippin’ Dots and investments in capability.

Fiscal 2023 operating income increased to $109.5 million, versus $61.8 million for fiscal 2022, largely as the result of the continued top-line growth, 330 bps improvement in gross margin rate, and 50 bps leverage for distribution expenses.

Fiscal 2023 net earnings increased to $78.9 million, compared to $47.2 million in fiscal 2022. Our effective tax rate was 26.6% in fiscal 2023, compared to 23.5% in the prior year.

Food Services Segment Fourth Quarter Highlights

• Q4 ’23 food service sales exceeded Q4 ’22 by $13.5 million to $270.3 million, or an increase of 5.3%, including approximately $35.2 million in sales from the recent acquisition of Dippin’ Dots.
• Outdoor venues, including stadiums and amusement parks, as well as schools and restaurants and strategic accounts continued to experience strong sales across all our product lines, including a 14.6% increase in pretzels, 9.7% increase in frozen novelties, an 8.1% increase in churros, and a 2.2% increase in bakery. Handhelds decreased 21.8% driven primarily by a contractual cost true-up agreement. Volume sales for core food service handhelds increased for the quarter.
• Q4 ’23 operating income increased 175.8% to $17.5 million reflecting the top-line growth as well as the improvement in margins and added leverage across our costs.

Retail Segment Fourth Quarter Highlights

• Q4 ’23 retail sales increased 21.2% to $64.8 million, compared to Q4 ’22.
• Handheld sales grew by 205.5%, while biscuit sales increased 32.0% and frozen novelty sales increased 16.7%, compared to Q4 ’22. Soft pretzels sales grew by 6.7% versus the prior year period led by the expanded placement of SuperPretzel Bavarian sticks, bites, and mini dogs with several retail customers.
• New product innovation contributed approximately $3.5 million in the quarter driven by new pretzel and frozen novelties products at major grocery retailers and growth of handhelds with a major customer.
• Operating income increased 237.0% to $3.6 million, versus the prior year period driven by top-line growth as well as the improvement in margins and added leverage across our costs.

Frozen Beverages Segment Fourth Quarter Highlights      

• Frozen beverage segment sales were $108.7 million and beat Q4 ’22 sales by 20.6%.
• Beverage sales grew 24.8%, or $14.2 million higher than in Q4 ’22 led by double digit volume growth and healthy consumer trends across key channels including convenience, amusement parks, mass merchants, restaurants and theaters.
• Machine Service revenues increased 6.0%, versus the prior year period reflecting strong maintenance call volumes, while equipment sales increased 33.2% driven by strong growth from new clients and convenience customers.
• Q4 ’23 operating income improved to record $20.6 million, compared to a Q4 ’22 operating income of $14.2 million, as strong sales drove leverage across the business.

Conference Call
J&J Snack Foods Corp. will host a conference call to discuss results and business outlook on November 16, 2023, at 10:00 a.m. Eastern Time. Conference call participants should register by clicking on this Registration Link to receive the dial-in number and a personal PIN, which are required to access the conference call. A live audio webcast of the conference call will also be available on the Investors homepage at www.jjsnack.com.

About J & J Snack Foods Corp.
J & J Snack Foods Corp. (NASDAQ: JJSF) is a leader and innovator in the snack food industry, providing innovative, niche, and affordable branded snack foods and beverages to foodservice and retail supermarket outlets. Manufactured and distributed nationwide, our principal products include SUPERPRETZEL, the #1 soft pretzel brand in the world, as well as internationally known ICEE and SLUSH PUPPIE frozen beverages, DIPPIN’ DOTS ice cream, LUIGI’S Real Italian Ice, MINUTE MAID* frozen ices, WHOLE FRUIT sorbet and frozen fruit bars, SOUR PATCH KIDS** Flavored Ice Pops, HOLA! CHURROS, and THE FUNNEL CAKE FACTORY funnel cakes and several bakery brands within DADDY RAY’S, COUNTRY HOME BAKERS and HILL & VALLEY. For more information, please visit http://www.jjsnack.com.

*MINUTE MAID is a registered trademark of The Coca-Cola Company.
**SOUR PATCH KIDS is a registered trademark of Mondelēz International group, used under license.

Cautionary Statement Regarding Forward-Looking Information
This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements regarding the Company’s expected future financial position, results of operations, revenue growth and profit levels, cash flows, business strategy, budgets, projected costs, capital expenditures, products, competitive positions, growth opportunities, plans and objectives of management for future operations, as well as statements that include words such as “anticipate,” “if,” “believe,” “plan,” “goals,” “estimate,” “expect,” “intend,” “may,” “could,” “should,” “will,” and other similar expressions are forward-looking statements. This includes, without limitation, our statements, and expectations regarding any current or future recovery in our industry and the future impact of our operational efficiency projects. Such forward-looking statements are inherently uncertain, and readers must recognize that actual results may differ materially from the expectations of management. We do not undertake a duty to update such forward-looking statements. Factors that may cause actual results to differ materially from those in the forward-looking statements include consumer spending, price competition, acceptance of new products, the pricing and availability of raw materials, transportation costs, changes in the competitive marketplace the uncertainty and ultimate economic impact of the COVID-19 pandemic or similar health outbreaks, and other risks identified in our annual report on Form 10-K, and our other filings with the Securities and Exchange Commission. Many of these factors are outside of the Company’s control.

Non-GAAP Financial Measures
Adjusted EBITDA consists of net earnings adjusted to exclude: income taxes (benefit); investment income; interest expense; depreciation and amortization; share-based compensation expense; COVID-19 related expenses (recoveries); net (gain) loss on sale or disposal of assets; impairment charges, restructuring costs, merger and acquisition costs, acquisition related inventory adjustments, strategic business transformation costs, and integration costs.

Adjusted Operating Income consists of operating income adjusted to exclude: COVID-19 related expenses (recoveries); impairment charges, restructuring costs, merger and acquisition costs, acquisition related amortization expenses and inventory adjustments, strategic business transformation costs, and integration costs.

Adjusted Earnings per Diluted Share consists of net earnings adjusted to exclude: COVID-19 related expenses (recoveries); impairment charges, restructuring costs, merger and acquisition costs, acquisition related amortization expenses and inventory adjustments, strategic business transformation costs, and integration costs. For purposes of comparability, the income tax effect of pre-tax adjustments is determined using statutory tax rates.

This press release contains certain non-GAAP financial measures; Adjusted EBITDA, Adjusted Operating Income, and Adjusted Earnings per Diluted Share. A "non-GAAP financial measure" is a numerical measure of a company's financial performance that excludes or includes amounts so as to be different than the most directly comparable measure calculated and presented in accordance with U.S. generally accepted accounting principles ("GAAP") in the statements of income, balance sheets, or statements of cash flow of the company. Pursuant to applicable reporting requirements, the company has provided reconciliations below of non-GAAP financial measures to the most directly comparable GAAP measure.

The non-GAAP financial measures presented within the Company's earnings release are not indicators of our financial performance under GAAP and should not be considered as an alternative to the applicable GAAP measure. These non-GAAP measures have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP. In addition, in evaluating these non-GAAP measures, you should be aware that in the future we may incur income, expenses, gains and losses, similar to the adjustments in this press release. Our presentation of these non-GAAP measures should not be construed as an inference that our future results will be unaffected by unusual or infrequent items. We compensate for these limitations by providing equal prominence to our GAAP results and using non-GAAP measures only as supplemental presentations.

The non-GAAP measures presented are utilized by management to evaluate the Company's business performance and profitability by excluding certain items that may not be indicative of our recurring core business operating results. The Company believes that these measures provide additional clarity for investors by excluding specific income, expenses, gains, and losses, in an effort to show comparable business operating results for the periods presented. Similarly, Management believes these adjusted measures are useful performance measures because certain items included in the calculations may either mask or exaggerate trends in the Company’s ongoing operating performance. See the reconciliation of Non-GAAP Financial Measures below.

Investor Contact:
Joseph Jaffoni, Norberto Aja or Jennifer Neuman
JCIR
(212) 835-8500
jjsf@jcir.com