Alton Stump

Alton Stump questioned the significance of the $21 million in share buybacks during the quarter, comparing it to historical activity, and asked about the company's future appetite for buybacks post-acquisition. He also sought high-level color on Bachan’s distribution upside potential.

Answer

CFO Tom Pigott stated that the share buybacks were opportunistic due to the stock's trading performance but indicated a return to a traditional approach post-Bachan's acquisition, while reaffirming commitment to dividend growth. CEO Dave Ciesinski outlined a three-stage growth plan for Bachan’s: refining existing distribution, driving new items, and extending into broader adjacencies, including potential international expansion in Canada. He emphasized the brand's remarkable velocities and high Net Promoter Score.

Alton Stump from Loop Capital asked about Marzetti's $21 million in share buybacks, the largest in over a decade, and the company's future appetite for buybacks given the recent acquisition. He also sought high-level color on the distribution upside potential for the newly acquired Bachan’s brand.

Answer

CFO Tom Pigott explained that the buybacks were opportunistic due to the stock trading off. He stated that with the balance sheet now leveraged for the Bachan’s acquisition, the company would likely return to its traditional approach on buybacks, though the dividend policy is expected to continue growing. CEO Dave Ciesinski outlined a three-stage growth plan for Bachan’s: refining existing distribution, driving new items, and extending into broader adjacencies and international markets (e.g., Canada). He highlighted the brand's remarkable velocities and high Net Promoter Score.

The analyst asked for modeling guidance on the temporary supply agreement revenue and for the company's perspective on how the current consumer environment will separately impact its retail and foodservice segments.

Answer

The company confirmed the temporary supply agreement revenue will be consistent for the first three quarters of FY26 but advised analysts to exclude it from models for a cleaner organic projection. They are cautiously optimistic about the consumer, expecting sequential improvement in foodservice and growth in retail driven by a strong new product pipeline. The overall FY26 outlook is for low-single-digit revenue growth, mid-single-digit operating income growth, and gross margin expansion of around 50 basis points.

Asked if the QSR industry's shift towards driving volume with new products could be a tailwind, and questioned the importance of long-term success stories like the Olive Garden license in attracting new partners.

Answer

The company confirmed that QSR clients are increasingly focused on new 'hero items' to drive traffic, which has increased inbound calls for development, particularly for sauces. The long-term, continued growth of the Olive Garden license is considered a very important factor in attracting new partners, as it serves as a case study proving that licensing can be a sustainable, non-cannibalistic, and growing revenue stream.

Alton Stump inquired about the potential EBITDA impact from increasing the cookie manufacturing facility's utilization, the current consumer environment and the need for value-focused promotions, and the reasons for the delay in the Twin Hospitality equity raise.

Answer

Chairman of the Board Andrew Wiederhorn explained that the goal is to increase the facility's EBITDA from approximately $15 million to $25 million annually, which could value the asset at over $300 million for future debt reduction. He characterized the consumer as apprehensive and event-driven, noting FAT Brands' value strategy focuses on providing a great experience to justify the price. Regarding the equity raise, Wiederhorn attributed the delay to volatile market conditions, stating there is no hard deadline and that the company will wait for the market to stabilize.

Alton Stump asked about the opportunity to improve breakfast and lunch dayparts, similar to the recent success at dinner, and also inquired about the company's remaining pricing power given its strong value proposition.

Answer

CEO Julie Masino confirmed they remain focused on all dayparts, noting traffic improved across breakfast, lunch, and dinner in Q2 versus Q1, and highlighted new pancake innovations to bolster breakfast. Regarding pricing, she stated that while they believe there is room, they are cautious and focused on delivering value through multiple avenues like specials, loyalty, and a significant average check advantage over competitors.

Alton Stump asked if the challenging macroeconomic environment has dampened franchisee appetite for developing new Jack in the Box locations.

Answer

CEO Darin Harris stated that franchisee interest remains robust, evidenced by a record number of development agreements and new franchisees joining the system. He pointed to a strong development pipeline with 18 units under construction and 54 in permitting, and highlighted the strong AUVs of new restaurants in markets like Salt Lake City and Louisville as proof of the concept's appeal.