Thank you for standing by, and welcome to J&J Snack Foods' Fiscal 2024 Q1 conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one, one. To remove yourself from the queue, you may press star one, one again. I would now like to hand the call over to Norberto Aja, Investor Relations. Please go ahead. Thank you, operator, and good morning, everyone. Thank you for joining J&J Snack Foods' Fiscal 2024 Q1 conference call. We will start 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 contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. As such, all statements made on this call that do not relate to matters of historical facts should be considered forward-looking statements, including statements regarding management's plans, strategies, goals, expectations and objectives, and our anticipated financial performance. These statements are neither promises nor guarantees and involve known and unknown risks, 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 forward-looking statements. Factors discussed in our annual report on Form 10-K for the year ended September 30, 2023, and there were other filings with the Securities and Exchange Commission, could cause actual results to differ materially from those indicated by the forward-looking statements made on this call today. Any such forward-looking statements represents management's estimates as of the date of this call, February 6, 2024. While we may elect to update forward-looking statements at some point in the future, we disclaim any obligation to do so, even if subsequent events cause expectations to change. In addition, we may also reference certain non-GAAP measures on the call today, including Adjusted EBITDA, operating income, or earnings per share, all of which are reconciled to the nearest GAAP measure in the company's earnings press release, which can be found in our investor relations section of our website. Joining me on the call today is Dan Fachner, our Chief Executive Officer, along with Ken Plunk, our Chief Financial Officer. Following management's prepared remarks, we will go ahead and open the call for a question-and-answer session. With that, I would now like to turn the call over to Mr. Dan Fachner, J&J Snack Foods' Chief Executive Officer. Please go ahead, Dan. Thank you, Norberto, and good morning, everyone. We appreciate you joining us this morning to discuss J&J Snack Foods' fiscal 2024 Q1 results. I am pleased with our ability to successfully manage through a challenging consumer environment, with many of our customers experiencing year-over-year declines in consumer traffic and consumption. Our customers adapted to consumer trends by reducing inventories ahead of the holiday season, especially in product categories like pies, cookies, and frozen novelties. I am proud of how the J&J team leveraged our iconic brands and incremental customer opportunities to maximize every sales opportunity in the Q1. This resulted in a sales decline of just under 1%, largely in line with the trends in the overall industry. While we experienced a 4.1% decline in sales across our Food Service segment, driven by softness in our bakery, we saw resilience in retail and continued strong growth in Frozen Beverages as sales grew 1.6% and 8.5%, respectively. Our ongoing focus on Gross Margin expansion resulted in 130 basis points improvement to 27.2%, driven by our strategy to grow higher-margin core products as well as continued gains in overall productivity. Importantly, the success of our strategic initiatives is becoming increasingly visible. Despite softer sales, we delivered a meaningful year-over-year improvement in the overall profitability of the business, including a 20.6% increase in Adjusted Operating Income and a 19.2% increase in Adjusted EBITDA. I'd like to take a few minutes talking about our sales performance in the quarter. We have never been more confident in our ability to grow, even as our industry faces a more challenging consumer environment. For J&J, it's about continuing to leverage innovation and cross-selling opportunities to expand placements of our core products and brands. Our business is gaining incremental opportunities and is well positioned as consumption trends improve. Here are a few insights into the performance of our core brands and products during the Q1. In our Retail segment, sales of our soft pretzel products increased 27.4% compared to the prior year. Bavarian Sticks, a new product launched late in fiscal 2023, is now the number two bestseller in the SUPERPRETZEL retail product portfolio. We also gained incremental items within our SUPERPRETZEL portfolio across major retailers, including Publix, Stop & Shop, and Woodman's, to name a few... Moving to soft pretzels in our Food Service segment. Sales declined 4%, primarily driven by soft traffic trends in key channels. However, the team did gain new business, including the launch of a SUPERPRETZEL filled jalapeño knot nationwide with a major theater customer, and incremental sales gains in pretzel bites and buns. Also, several national fast casual chains are making pretzels a permanent part of their menu. We continued to gain market share this quarter compared to last year. Let's talk about churros. We continue to see strong momentum across the Food Service segment and remain excited about the growth opportunities. The team successfully secured an opportunity with Subway to manufacture a foot-long churro for all U.S. locations. This rollout began in the Q1 and is already exceeding expectations. We also began rollout of churros with a major food distributor in September 2023, and they have recently doubled their original order, given the strong momentum. Finally, we are leveraging innovation with flavor extensions, such as the recent launch of our chocolate-filled churro that is driving new sales opportunities. Our ¡Hola! Churros brand is also performing at or above expectations in the retail segment. We expanded distribution at Wakefern, Schnucks, Giant Landover, and Grocer Supply, and are awaiting feedback from additional retailers. Sales for Dippin' Dots, which is part of the food service segment, were slightly positive for the quarter, led by an approximate 3.5% increase in sales of our top 30 customers. This was, however, offset by some softness in the franchisee part of the business. We continue to see growth opportunities for Dippin' Dots and are moving quickly to activate new business. Just this past quarter, we completed the rollout of Peter Piper Pizza, extended our agreement with Chuck E. Cheese through 2027, and received a commitment from a convenience store customer for another 200 placements. In addition, we continue to expand across the theater channel with ongoing rollouts at Cinemark, commitments to install vending at 56 locations for Marcus Theatres, and incremental tests at a third major theater chain. Moving to frozen beverages. This segment posted an 8.5% increase in sales, led by the continued strength of ICEE. Overall, theater volume increased for the quarter compared to the prior year, but was below expectations due to lower-performing movie releases and softer traffic. Sales in Mexico, the amusement channel, mass merchandise retailers, and restaurants increased for the quarter. The rollout of a new self-serve program for a major club customer is delivering strong results, with over 100 locations converted to date, with plans to continue rolling out locations in the Q2. We also had a positive impact from our Trolls marketing campaign at major retail outlets such as Target, as well as continued overall c- store channel strength. Looking ahead, we are excited about a major QSR opportunity entering a test phase in Q2. Also, we received a commitment from our partners at Dave & Buster's to roll out across 150 locations by late April. As previously mentioned, frozen novelties declined in the quarter as key customers reduced orders and inventory levels in this category. This impacted our year-over-year sales growth for most of our key brands, but we continue to grow faster than the market in many areas. In fact, our Luigi's Italian Ice brand gained market share compared to top competitors during the quarter, and our team secured incremental retail shelf placements at additional grocery retailers. Products like our ICEE branded novelty and Dogsters continue to perform well. I'm really excited about our Dogsters, as it delivered strong results, outpacing the growth of our largest competitors. Dogsters also recently gained incremental shelf placements, something we expect will continue as retailers reset later in 2024. We continue to see strong growth opportunities across our frozen, frozen novelty portfolio as we approach peak season for spring and summer seasons. Finally, I'd like to talk about our bakery business. For the quarter, bakery sales decreased 6.4%, driven entirely by the impact of reduced customer orders for pies and cookies during the holiday season. Many of our largest customers experienced lower traffic and moved to tighter management of inventory to manage through softer consumption trends. Looking ahead, we are focused on product innovation that drives more profitable sales while we continue rationalizing lower-performing SKUs. This strategy is helping us improve bakery gross margins while identifying new selling opportunities. On the growth front, we recently secured new cookie opportunities with several customers, introduced Cakeables and seasonal cookies across a handful of partners, and we are working on opportunities to launch pretzel croissants and SUPERPRETZEL Bavarian Buns into retail outlets across grocery, in-store bakery, and convenience.... From an operational perspective, as we have mentioned on prior calls, we continue to execute initiatives to enhance overall operations and to better support our growth opportunities. Starting with our supply chain strategy, we have now opened two of the three distribution centers, Terrell, Texas, and Woolwich, New Jersey. These 2 new DCs are exceeding expectations and will enable us to continue driving productivity improvements in our supply chain. We are scheduled to open the third DC in Glendale, Arizona, in the Q2. In fact, I think we're opening it this week. Shifting to operations, the addition of 6 new production lines gives us the capacity and flexibility to grow core products such as pretzels, churros, and frozen novelties across new customers and channel opportunities. These lines also create production efficiencies and higher output and metrics through better automation, which improves product margins and profitability. Our team is aligned and focused as we execute the 5 core strategies, grow and protect our brands, dominate core categories, cross-sell the portfolio, invest in our future, and embrace our culture. In closing, I want to thank our J&J employees for their unwavering commitment to establishing a winning culture and to their commitment to our partners and customers. The diverse nature of our business, along with the power of our brands and the channel diversity of our products, is something that we are confident will continue to serve us well in fiscal 2024 and beyond. Our company has never been more aligned in its vision and strategy, and we are excited about the opportunities ahead of us to deliver long-term value to our employees, partners, and shareholders. With that, I would now like to pass the call over to Ken to review our financial performance in more detail. Ken? Thank you, Dan, and good morning, everyone. As Dan just discussed, we are pleased with our team's ability to navigate a softer consumer environment in fiscal Q1. For the quarter, we did experience a slight sales decline compared to the prior year, but we're in line with overall industry trends. As Dan stated, we were executing our strategy, improving operational efficiency and profit margins, and expanding growth opportunities across channels and customers. This helped balance declines in consumer traffic and consumption that impacted many of our customers. Net sales for the quarter totaled $348.3 million, down 0.9% versus the prior year. Food Service, our largest segment, saw sales decrease 4.1% to $228.6 million, primarily reflecting reduced inventories of pies and cookies among certain customers during the holiday season, as well as a decline in Handheld sales due to a contractual cost true-up agreement. Bakery sales decreased 6.4%, and Handheld sales declined 6.5% in the quarter. Although volume sales for our core Food Service Handhelds did increase for the quarter, these declines were partially offset by our churros category, which grew 8.9% as we continue to drive growth of this high-margin business. Sales of soft pretzels and frozen novelties declined 4% and 3.3% in the quarter, respectively, driven by the previously discussed consumer pressures. This led to Q1 2024 Food Service segment operating income of $6 million, or a decrease of 5.8% versus the prior period. This reflects softer sales and a one-time cost associated with the opening of our New Jersey distribution center, which impacted distribution expenses. Moving to our Retail segment, Q1 2024 Retail sales increased 1.6% to $43.8 million, compared to Q1 of 2023. Handheld sales grew by 90.5%, while soft pretzel sales increased 27.4%, led by our continued expansion of SUPERPRETZEL products into retail. Frozen novelties and biscuit sales declined 28.4% and 11.1%, respectively, versus the prior year period. This resulted in Q1 2024 retail segment operating income of $0.5 million, or a decrease of 59.3% versus the prior year period, driven by product mix, lower gross margin, and a one-time cost associated with the opening of the New Jersey distribution center. As it relates to our third segment, frozen beverages, sales were $75.9 million and beat Q1 2023 sales by 8.5%. Beverage sales grew 8.5% or $3.3 million higher than Q1 2023, led by solid performance across key channels, including convenience, amusement parks, mass merchants, and restaurants. Machine service revenues increased 3.1% versus the prior year period, while equipment sales increased 26.8%, driven by strong growth from the convenience in QSR channels. Q1 2024 operating income in the Frozen Beverages segment also improved $3.2 million, a 75.7% increase compared to Q1 of 2023. Our focus on gross margin expansion through an improved mix of core products, more aligned pricing, and cost of goods efficiencies, is clearly benefiting our results. For the quarter, gross profit totaled $94.6 million, a 4.1% increase compared to Q1 of 2023. This led to a gross margin of 27.2%, favorably compared to 25.9% in Q1 of 2023. Despite the softer consumer environment in fiscal Q1 2024, we remain confident in our plans to improve profit margins and expect to achieve gross margin of 30% or better for the full year. Overall, we experienced slight inflation for the quarter. The cost of ingredients, including flour, oil, dairy, and eggs, have declined. However, this was offset by double-digit inflation in sugars, sweeteners, mixes, chocolate, and meats, which continue to impact products such as frozen novelties and baked goods. Looking at expenses, total operating expenses increased $3.4 million, or 4.1%, representing 24.4% of sales for the quarter, compared to 23.2% in Q1 of 2023. It is important to note that during the quarter, we incurred $2.2 million in one-time expenses, reflecting transition costs related to the October opening of our second distribution center in New Jersey. This was a planned cost of our distribution network strategy and is expected to drive meaningful cost savings once we complete this initiative. Our third distribution center will open in Glendale, Arizona, in the Q2 and will incur similar one-time transition costs. Distribution costs were 11.6% of sales in the quarter, compared to 12% in the prior year period, even with the previously mentioned one-time transition costs. The year-over-year improvement in distribution expense was largely driven by more favorable inflationary environment and the benefits of our initiatives to improve logistics management, and increased efficiency across our distribution network and supply chain. Marketing and selling expenses were 7.9% of sales versus 6.7% in the prior period, driven primarily by incremental promotional marketing support on core brands and new products. Administrative expenses were 5.2% of sales in Q1 2024, compared to 4.7% in Q1 of 2023, attributable to investments in incremental resources, as well as hosting our national sales meeting for the first time since the pandemic. This led to an operating income of $9.7 million, or a 3.8% increase compared to $9.3 million in Q1 of 2023. Adjusted operating income was $13.5 million or a 20.6% increase compared to Q1 2023. After the impact of income taxes of $2.6 million, compared to $2.3 million in Q1 of fiscal 2023, net earnings increased 9.8% to $7.3 million, resulting in reported earnings per share of $0.37, compared to $0.34 in the prior period, prior year period. Adjusted diluted earnings per share was $0.52 a share for the quarter, compared to $0.42 in the prior year period. Adjusted EBITDA increased 19.4% to $30.2 million from $25.3 million in the prior year period, and our effective tax rate was 26.6% in the Q1. Looking at our liquidity position, we continue to have a healthy balance sheet and overall strong liquidity position, with $50 million in cash and approximately $7 million in debt. Our ability to improve cash flow through working capital initiatives and stronger profitability is generating more cash to pay down debt, raise dividends, and continue investing in our business. Our focus will continue to be on maintaining a healthy balance sheet and prudent leverage position, which enables us to continue investing in the growth of our business and returning value to our shareholders. In addition, we have ample availability under our revolver, approximately $208 million in additional borrowing capacity. In summary, we are executing our strategy and remain confident in our plans to continue driving profitable growth and value to our shareholders. I would now like to turn the call over to the operator for questions and answers. Thank you. Thank you. As a reminder, to ask a question, you will need to press star one one on your telephone. To remove yourself from the question queue, you may press star one one again. Please stand by while we compile the Q&A roster. Thank you for standing by. Our first question comes from the line of Andrew Wolf of C.L. King. Your question, please, Andrew. Good morning. Thank you. I wanted to ask about this contractual cost true-up with the handheld product. I guess it was the Q2 in a row. So first, is that kind of a normal thing that happens quarterly, and because there's been such big swings and, you know, your cost, input costs, it, it's worth calling out? Or is just what's the nature of that? Like, how can we, on the outside, try to get a handle on how to model that and think about how that might occur going forward? And, uh- Yeah, good morning. Yes, thank you. Yeah, good morning. Good morning, Andrew. How are you doing? I'm good, and you? I'm doing great. It's a good question. It is a quarterly true-up. And you know, we saw that as prices were, or costs were going up, and we're seeing that as costs are coming down. We do it quarterly. ... Ken, do you wanna add anything to that? Yeah. It's a larger amount. The reason we call it out, Andrew, is because of the phenomenon of the last 2 years. You know, so the cost in many areas, you know, 2 years, 18 months ago, up 20%, then obviously go the opposite. And then as those commodities have had deflation, we've then trued up quarterly, and it's had, you know, the opposite effect, which is us passing and reducing that cost to that customer, and therefore, that has an impact on sales and on profits for that area. But we should lap the significance of that probably in the next quarter. We should be lapping that, Andrew, but that's why that number has been as big as it's been. Okay. And could you give us, like, the dollar amount so we can at least think about what earnings would be on a kind of a commodity neutral basis? I realize it's real money, but, you know, how- Yeah. It's, well, it's over $1 million, closer to $1 million- Okay. Closer to $1.5 million, Andrew. Got it. And then I wanted to ask as a follow-up on the situation with Costco and the churros, which at least according to the internet, you know, Costco is discontinuing the churros and replacing them with, with cookie, chocolate chip cookie. Just wanted to confirm, is that accurate, and does that kind of going to be a firm, you know, impact, you guys across Costco? And, you know, what the timing of that would look like? And, you know, when you look at your relationship with Subway, is it... You know, where do you end up net-net in a year's time, when those two events have matured, rolled out? Yeah, Andrew, this is Dan. That is a great question. Yes, the account has rotated, and they've done that in the past. They will offer different things periodically throughout time. They have a limited SKU within their locations, and so they do a rotation. That churro has rotated off the menu at this point. That happened towards the end of December, and we saw some of the impact there. In regards to our Subway contract, we're really excited about that. It's a really good size opportunity for us, and it outweighs what we would potentially be losing at Costco. The Subway outweighs it just by the sheer numbers of locations. There's, you know, 20-21 thousand Subways out there today. The product is being accepted really, really well. So we're excited about the growth in the churro business. Thank you. Our next question comes from the line of Todd Brooks of The Benchmark Company. Please go ahead, Todd. Hey, thanks. Good morning to you, to you both. Good morning, Todd. A couple questions as well. Just wanna ensure, if we look at the Q4 sales results, was there any operational friction in there that cost us anything on the revenue line, either around the new RDC coming up during the quarter, or maybe some of the new lines ramping to full productivity? Or did the shortfall on the revenue side really just reflect softer end market demand? Yeah, no, Todd, it really did just reflect the softer market. And really what we saw more than anything is inventories being tightened up across the board, not just with our customers, but with distributors as well. In fact, we have some data that would show really strong sales even during the month, when you look at IRI or Circana, but inventories certainly were narrowed down. And so you could somewhere make that assumption that somewhere down the line, those inventories will come back into play. It won't happen in a January period or a February period, but it might happen as we get closer to spring. But the operational side did not affect sales going out in any way. That's good to hear. And Dan, you brought up January, February. Obviously, the data points to really kind of tough consumer traffic through the month of January here, and obviously, what's going on in California is not helping right now. How do we think about what you're hearing through the channel for just the slowdown in consumer traffic, whether they're digesting holiday spend, whether it's the Omicron lapping from the prior year? There's a bunch of different crosscurrents here, but what are you seeing in your end customer channels in Food Service? Well, I think you, you know, I think you're reading probably the same data we're reading as well. It's hard to come off a quarter like we just come off and not be concerned or cautious about what the future looks like. We're still very confident in our long-term strategy and what we're doing, and we're seeing that play out really well. And I think by the time that we close up the year, we'll have another strong year. But we're certainly cautious, and I think the consumer is cautious out there today. You know, a couple things that I've read that are interesting, that I think makes a lot of sense to me. One, I do think we pulled back on inventory, and so I believe that inventory will come back around. The second is just the price increases that we had at such a rapid rate caused what they call kind of like a food reference price, that people are shopping out there, and they see a higher price, and they're waiting for that price to come back down. And until water kind of seeks its own level and you get used to that pricing, we may see a little bit of a softness there. Overall, I think it's short-lived. I don't know that for sure, but I think it's short-lived. I don't think that we can look at a January, February period of time and say, "Boy, that's what we're gonna predict for the year." I feel really confident in the new business that we're generating and the play that the team is executing, and I feel very confident about our long-term play, so. Yeah. That's great. Sorry, go ahead. Sorry. If I could just give a bit more context on sales, 'cause I went back and kind of looked back at it and, you know, we thought we were gonna have a stronger quarter than we did, not really expecting some of the consumer softness. But when you look at the last two years, we're laying growth on top of a little over 10% growth a year ago, Q1, and 32% growth two years ago, Q1. So, you know, the foundation of what we're building growth on is on top of some really significant numbers. And a lot of that, you know, played out in post-COVID and supply chain, and you kind of know the story there. But to be able to have two segments, have positive sales growth on top of that, in the environment that we saw in the quarter, you know, we're actually pretty happy about it, even as we continue to look at opportunities to, you know, continue to grow sales year-over-year. Great. Thanks. And one more, and I'll jump back in queue. Dan, as you're looking forward into 2024, you made the comment in the release, you see building sales momentum for the balance of the fiscal year here. If we just put aside the consumer, the consumer's going to do what the consumer does. If you look at kind of new customer wins, cross-sell success, new product launches, what sort of growth rate did those three, if you're looking at the forward kind of pipeline, deliver? And then we can all adjust for what we think the macro is on the back end, as you're thinking about fiscal 2024. Yeah, I don't know if we have a number to give you on that growth rate, Todd, but, you know, I'll just kind of remind you of some of the exciting things that the team is generating. Love the Subway opportunity, and it might even lend us some additional opportunities for us there that we're working on as we speak today. Like the way that the ¡Hola! and retail has kicked off. The Bavarian Sticks moving up into the number 2 position of what we sell, and we see that a little bit unlimited at this point. Like some of the things that the bakery's doing, you know, we've continued to narrow the bakery and rationalize some of the SKUs, but I like some of the things that they have going on right now with our Cakeables, which is a gourmet cookie, and our seasonal cookies and working on sticks and buns in that area. You know, we've talked about ICEE and now rolling out the Dave & Buster's. We got a QSR that we're gonna test this quarter, that I'm really, really excited about. The club store conversion to self-serve is working out great, and we're gonna escalate the way that we install that. Dippin' Dots growth in the theaters and convenience and just see a lot of the right things happening that can really impact our margins. And again, you know, talked about even on the operational side, the 3 DCs opening, the one in Glendale is actually opened yesterday. And so we're starting to see that take effect. The new lines doing well as we fill those up. Just really encouraged by what the future looks like. That's great. Thanks, Dan. Thank you. Please stand by for our next question. Our next question comes from the line of David Schachne of William Blair. Your question, please, David. Hey, this is David Schachne, stepping in for John Anderson. Could you talk about price and volume a little bit? If I recall from the last call, you mentioned you were looking at some areas to take pricing in, calendar 2024. Then, just wanted to understand also how you're looking at volumes for the balance of the year. Yeah. Well, I can tell you volume for the quarter, again, it can vary somewhat, a little bit, depending on the business and channel, but overall, volume was down 1%-2%, depending on what area of business you're in. Again, I think kind of speaks to some of the things that we talked about, David, with the consumer. So, you know, if you just kind of look at that number against where we landed at -0.9, you can kind of get some idea of the price benefit overall for the company. You know, as you look forward, you know, we did take a price increase in January in our ICEE business. We took a price increase in Dippin' Dots, Dan, I think- We did. January or December. Yes. As well. Then on the snack food side, you got a lot of—you know, you got some commodities with deflation, you got some with inflation, so we're kind of taking a surgical approach to that, David, and really looking case by case, where we think we've got a place to, you know, to increase price. But the market, you know, has an opinion on that as well, in terms of price point. So, that's kind of what's been done and what's planned. As we look forward, on volume, I would just kind of echo what Dan said: You know, we're coming out of a quarter that makes us a bit cautious. You know, we have data that we're looking at each and every week to get a sense of kind of where the consumer's at.... you know, when you get into spring, we're hoping that that kind of launches people getting out and will benefit our business. But, you know, if I was looking forward, you know, there might be some slight improvement in volume, but I think we're still cautious about what, what's out there in front of us. Sure. For that price increase on IC in January, should we think of that similar to... I think that price increases the past couple years, each January for that has been mid-single digits or so. Correct me if I'm wrong. Should we be thinking about it roughly the same again? Probably not quite as high as the last two years, given where we were with inflation, but somewhere in that, you know, mid-single digit, maybe a hair under that, probably, David, is the way to think about that. Great. And then, one other thing, if I can. I know historically, second half gross margins, those tend to be, I think, 200-300 basis points higher than the first half. Just with one quarter down here for the fiscal year, are you still kind of expecting that, you know, cadence for the second half of fiscal 2024? And then, regardless, can you just kind of outline some of the puts and takes there? I know you mentioned a little bit on the pricing question about commodities, but if you could just kind of outline that in general, that'd be great. Yeah. Yeah, we still feel really good about what we're doing as it relates to driving profit margins. We actually were very happy with the gross profit for this quarter, even with some of the challenges on the sales side, that we exceeded our internal budgets on that. You know, we saw our bakery gross margins improve over 100 basis points, strong margin performance, you know, in IC and in food service. So we like what we're doing. I think the initiatives we mentioned are working. What we're focused on is mixing out better. And then to your point, as we get into Q2, and particularly in 3 and 4, you know, those will mix in much heavier ICEE, much heavier Dippin' Dots, which are some of our highest margin businesses, and we expect that to generate, you know, those 30%+ gross margins that we did a year ago. And so we see no reason to back off of kind of what we've talked about, which is getting above 30% for the year. And we think what we've done in the Q1 is a good sign that we're moving in the right direction on that. Got it. Great. That's all for me. I'll pass it on. Thank you, David. Thank you. Our next question comes from the line of Connor Rattigan of Consumer Edge. Your question please, Connor. Hey, guys. Good morning. Good morning, Connor. Good morning, Connor. Yeah. So I just wanted to touch on the top line a little bit, specifically on the food service pressure. So I guess, first things first, I guess, was this more isolated to maybe a select channel or customer, or was it maybe a more broad-based pullback? And also, was there any deflationary pricing involved in there? There really was no deflationary price pricing involved in it at all. We talked about, you know, food service being affected and really being affected through our pies and cookies. And so, you know, if you looked at it surgically, that had a pretty sizable impact on where we were off and saw that in inventory reductions as early as, you know, early December, late November, started to see that. And that's real. Again, I mentioned this earlier, we looked at some IRI and Circana data and our volume looks good through that. And so you know that these inventories were pulled back and so we don't want to overcomplicate it. We think the, you know, the consumer is cautious, as we've said already, but we really do feel like a good portion of this is inventory related. Yeah, and just to magnify- And- Just to magnify, you know, you're trying to get into kind of particular product areas. The pie decline was the majority of the decline in bakery year-over-year, and then we mentioned cookies on top of that. But, you know, that's a product that once it gets on display, you know, in retailers, has a shorter shelf life. And so as they start to see, you know, retailers and grocery stores concerns about traffic coming in during the holidays, they back down their orders. And so that was a big number in terms of year-over-year comparison. Got it. So, I guess it sounds like more the inventory and deload that you saw there on the pies and whatnot, should be more of a one-time headwind and nothing to persist, you know, throughout the balance of the year. Is that fair? We believe that to be true, but certainly we're gonna come off a quarter and be cautious about that, right? And watch it really, really closely, and why we're looking at all the different data points that we can find. But yes, we do believe that. Remember, pies business is really a one time a year business, too. That doesn't stretch out for four quarters. Got it. Got it. And then, just one more for me that I'll squeeze in. So, pretty significant step up in marketing in the quarter. I mean, could you maybe, could you maybe touch on some of your initiatives there, and I guess maybe what we should expect for the balance of the year? And do you maybe see a need to spend some more or maybe do some more advertising, sort of in light of the slowing traffic and consumption? Yeah, we, I think we talked about this before, Connor. We love what we're doing in terms of marketing. You know, Lynwood Mallard and his marketing team have really done a great job of both with our new products and with brands that we had, of really investing and getting a lot out of those investments to drive growth. And we believe that is a key to us continuing to build these brands and grow. And so, you know, we continue to invest accordingly. Just remember, a lot of those, the spend of that, you know, has impacts and benefits to, you know, the rest of the year and even beyond that. So it's not always just contained in a quarter by quarter kind of thing. You know, it's also against one of our lowest sales bases. You know, when you look at Q1, Q2 will be much the same. We got that kind of spend on a lower sales base. So that should level its way out as we get through the year, and ultimately in the year, you know, probably in that low 7 to 7.1-7.2% sales range. Thanks for the call as always, guys. Appreciate it. I'll pass it on. Thanks, Connor. Thank you. Please stand by for our next question. Our next question comes from the line of Robert Dickerson of Jefferies. Your line is open, Robert. Great. Thanks so much. Hey, guys. I guess just to kind of circle back to the, like, the pies and the cookies situation, relative to kind of what I'm hearing, you know, around maybe new distribution potential at Subway and, kind of new distribution kind of potential overall. Like, maybe just provide some color as to kind of how you see the portfolio, performing or recently performing on maybe like a branded versus non-branded basis, right? Because I'm asking because I, you know, I hear SUPERPRETZEL's doing great, right? ICEE still doing pretty well. So it almost sounds like there's maybe a little bit more momentum on the branded side versus the non-branded side, and usually, that also provides some positive mix, margin mix, uplift over time. So just any updated thoughts there would be great. Thanks. Yeah, Rob, that's a really good question. You know, you know this, we've talked about it several times. I love branded products, right? I love the fact that we have an opportunity to get out there and advertise and market our branded products, and I think our team is doing that really, really well. Within our brands, like SUPERPRETZEL, we've been able to release some really good new products that are being really well accepted out in the industry. And so I think we're seeing some nice lifts from that, like the Bavarian Sticks. Almost feels like a natural that we should have done it maybe, you know, prior to this, but everything is about timing. And so I do like where our branded products are going, and think we have some real opportunities. I think ¡Hola! Churros in retail still have some great opportunities. We're seeing our Dogsters really grow at a nice pace. So our branded products are growing well, and we'll continue to push our brands as that's one of our core strategies in our organization. However, we do have some opportunities as well on the non-branded like the opportunity we have with Churros right now. That's our Churro, and it's doing extremely well. If we continue to be a good supplier, we think there's more opportunities other than just the Churro side of that business that we're gonna continue to look at. So I think we have some nice growth going that way, too. It's a balancing act, always, right? And so we're gonna push the brands because we love them, and there's an opportunity to get behind them and advertise them and do some of the right things, but we're also gonna seek out those opportunities that make really good sense for us as an organization around non-branded. All right. Great. Another quick one. I guess just, you know, very specifically in your retail supermarket business, just, you know, when I look at the op margin, it just kind of feels a little low. And, you know, clearly there could be some one-off, true-up dynamic maybe in that segment. I'm just trying to gauge, you know, like, if you're kind of doing well in that, in that business and decent amount of that business clearly is branded, you know, like, maybe, like, why is the operating margin kind of so low now? And then, you know, if we think forward, you know, longer term, for two, three years, what have you, you know, is that like a business that, you know, we, we do think can kind of get to that, I don't know, high single digit or a low double digit op margin? Just trying to gauge kind of, you know, where we are today and then kind of, you know, what could come later. Right. Yeah. Rob, thanks, and great question. Let me just provide a little bit more clarity on retail operating income. So included in that number is roughly $1.3 million of that one-time distribution expense. So if you're thinking about kind of adjusting that out as a one-timer, that starts to change that picture a little bit. Operating income would have grown, I think, roughly 8.5%- Right. If you factor that in. There was a bit of a mix impact on gross margin because of higher sales in handheld and lower in frozen novelties. Again, we've got data that says in many of those frozen novelty areas, like Luigi's, the consumer bought more at retail, but our customer ordered less. And we think that is somewhat tied into this inventory leveling that many are doing kinda after the supply chain challenges. And, you know, we mentioned that in a couple areas. So we think that'll work its way out. Yeah, we think we can get that retail business. I think if we ended Q3, Q4, it was moving up closer to that mid-single digit range. Certainly expect it to improve and get up into that range once we cycle some of these things. All right. Super. And then maybe, one last question, a bit more theoretical. You know, clearly, you know, you're stating today just, you know, being a little bit more cautious, right? Consumer seems to be a little bit more cautious. You're clearly not the only company saying that, right? We consistently hear the term value seeking, you know, thrown around a lot, over the past couple quarters. You know, you guys are kind of, you know, about to enter, so probably two, three months left, but you are, you know, about to enter kind of, you know, that seasonal uplift on the business. So when we think about, you know, kind of the, you know, the cautious thought process as we get through the year... And then we also just think about price points, right? Like, some could argue that, you know, having an icy drink is mandatory, right? It's a need state. Some others might argue it's more of a want state, maybe it's a little more discretionary. So I'm just curious, you know, where you sit today, if we're thinking about, like, you know, May, really June, right, opening of all amusement parks, like it's time, we're all out and about, it's time to go. Are there areas where, you know, in these varied channels where you can promote a little bit more? I don't know, like maybe put a little bit more signage or, you know, just try to kind of push the consumer basically into consumption? That's it. Thanks a lot. Yeah, Rob, absolutely, there are ways for us to do that. ICEE does that really well. In fact, the team led by Steve Avery, even as soon as last week, have been revisiting all those ways that we can energize sales as we get to the core months, right? And signage is a big part of that. Our flavor rotations becomes a big part of that. Getting out in front of the customer and talking about promotional items or BOGOs or something along that lines. And so the teams are already engaged in doing that. And we're proactive to make sure that as we get into that peak selling season that we're gonna be able to get everything that we can. I loved your thought about ICEE being a need rather than an impulse item. I hope we can spread that across the country. Yeah, I like it. All right. Thank you so much. All right. Thank you. Thanks, Rob. Thank you. I would now like to turn the conference back to President and CEO, Dan Fachner, for closing remarks. Sir? Great. Thank you. As we turn to 2024, we remain confident in our strategy to continue growing sales and profits. The J&J team is executing across all facets of the business, and we continue to secure incremental growth opportunities across the customers and channels that we serve. This positions us well for continued growth as the overall consumer environment improves. We look forward to updating you on our progress throughout fiscal 2024. In the interim, should you have any questions or wish to speak to us, please contact our investor relations firm, JCIR, at 212-835-8500. Thank you very much. Have a good afternoon. This concludes today's conference call. Thank you for participating. You may now disconnect.