Welcome to the J&J Snack Foods Fiscal Q3 2022 Earnings Conference Call. My name is Cheryl, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. During the question-and-answer session, if you have a question, please press zero one on your touchtone phone. As a reminder, this conference is being recorded. I will now turn the call over to Norberto Aja, investor relations for J&J Snack Foods. Sir, you may begin.
Thank you, operator, and good morning, everyone. Thank you for joining the J&J Snack Foods Fiscal 2022 Q3 Conference Call. We'll get started in just a minute with management's comments and your questions. Before doing so, let me take a minute to read the safe harbor language. This call will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements made on this call that do not relate to matters of historical fact should be considered forward-looking statements, including statements regarding management's plans, strategies, goals and objectives, and anticipated financial performance, industry-wide supply constraints, and the expected impact of COVID-19 on our business.
These statements are neither promises nor guarantees, but involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Facts as discussed in our annual report on Form 10-K for the year ended 25 September 2021, and 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. Any such forward-looking statements represents management's estimates as of the date of this call, 3 August 2022. While we may elect to update such forward-looking statements at some point in the future, we disclaim any obligation to do so, even if subsequent events cause our views to change.
In addition, we may also reference certain non-GAAP metrics, including adjusted EBITDA, operating income, and earnings per share, which is reconciled to the nearest GAAP metric in the company's earnings release, which can be found in the Investor Relations section of our website at jjsnack.com. With us on the call today are Dan Fachner, our Chief Executive Officer, Ken Plunk, our Chief Financial Officer, and joining us remotely, we have Lynwood Mallard, our Chief Marketing Officer, Bob Cranmer, our Senior Vice President of Operations, Steve Every, our Senior Vice President and Chief Operating Officer of ICEE, Bjoern Leyser, Senior Vice President of Sales, James Hamill, VP of Corporate Controller, and Michael Pollner, our SVP and General Counsel. Following management's prepared remarks, we will open the call for a question-and-answer session.
With that, I would now like to turn our call over to 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 our Q3 results. We are pleased with our overall performance, which extends the top-line growth we have seen across our business this fiscal year and further reflects the ongoing recovery of our customers. It is evident from our results that we've addressed the headwinds we encountered during our new ERP system launch in February, which temporarily impacted the fiscal Q2 performance of our food service and retail segments. I want to give a special thanks and recognition to the enormous effort of our team members who worked tirelessly to quickly resolve this issue. Thank you for that.
Taking a look at the Q3, revenue of $380.2 million was an all-time quarterly record, representing a 17.2% growth versus the prior year period and an over 35% increase versus our Q2 revenue. When compared to Q3 of 2019, revenue was up over 16%. On a year-to-date basis, revenue for the first nine months of fiscal 2022 totaled $980.2 million or 19.3% increase versus the first nine months of fiscal 2021. These top-line results were led by market growth across all three business segments and across just about every product line. Sales were consistently strong across each month of the quarter. Starting with food service, we saw continued growth in this segment across the board, including soft pretzels, frozen novelties, churros, handhelds, and bakery.
Our business continues to leverage strong core products and innovation to capture new customer opportunities in channels like convenience, QSR, and amusement. Our retail segment also enjoyed strong growth, posting $61 million in sales and growing 13% compared to the same quarter last year, and over 46% compared to the same period in fiscal 2019. As was the case with food service, sales were strong across all categories, including handhelds, frozen novelties, biscuits, and soft pretzels. Frozen novelties is a great story this year as we add SKUs and gain additional placement in leading retailers led by the LUIGI'S, Dogsters, and ICEE. Our frozen beverages segment also saw strong growth, with sales increasing 23.5% versus Q3 2021, led by beverages growing 37% and equipment up 17%.
Volume in restaurants and amusements were up double digits versus the prior year. Theaters, while still down compared to pre-COVID performance, is improving as consumers go back to the movies to see top box office releases such as Top Gun, Minions, and Jurassic World. We continue to see strong growth opportunities in QSR, fast casual, and convenience for both beverages and service. We are winning new customers, bringing new products to market, continuing to find ways to leverage our brands, refining our go-to-market strategy, and working to satisfy our customers each and every day. Our Q3 top-line results only reinforce our confidence in our strategies and the potential we see for added growth. Our business is strong.
We have made significant progress improving gross margins to 28.7% this quarter, but we continue to experience inflationary pressures across many areas of our business, from sourcing key ingredients such as flour, eggs, dairy, oils, chocolates, and meats, to packaging and distribution costs. Cost of these key raw ingredients increased almost 10% versus the prior quarter, continuing to put pressure on our manufacturing. We've responded by implementing our second price increase early in the quarter and have already communicated a third high single-digit increase that will take effect late in the Q4 . These actions, combined with our focus on improved margin mix and cost initiatives, led to higher gross margins this quarter and are expected to drive further margin improvements as we close the year.
We also continue to face historic cost pressures in our supply chain, where we saw both sequential and year-over-year increases driven by higher truck driver wages and rising carrier storage and fuel costs. In order to offset these pressures, we have a number of cost reduction initiatives underway in R&D, procurement, plant operations, and distribution that we expect to offset some of these cost pressures over the next few months and into the next year. Our team is focused on reducing costs across the business as we transform how we operate and improve efficiencies across the business.
As it relates to customer wins, we continue to cultivate a healthy pipeline of new business, including a new recently launched churro LTO at Sonic, ICEE expansion with new customers such as Moe's and Peter Piper Pizza, a new pretzel stick with QuikTrip in the convenience channel, and an introduction of a fantastic new pretzel dog at McAlister's Deli. Additionally, as we move to the back-to-school time of year, we're optimistic about recapturing business in the K-12 channel in core snack categories that softened a bit during COVID. On our service side of the business, we are targeting new opportunities, leveraging our ICEE service network, and continuing to see strong demand and growth opportunities with existing customers, including America's leading coffee retailers, convenience stores, and movie theaters.
Regarding product launches and innovation, we are leveraging the ICEE brand in sugar cookies in both in-store bakery and in individually wrapped single-serve packaging. We remain highly focused on our SUPERPRETZEL brand as we expand winning products at retail while introducing new filled pretzel bites and filled pretzel knots in fiscal Q1 of 2023. Our Dogsters brand continues to see strong, profitable growth as we expand the brand with key retailers. Our marketing team is focused on strengthening the brand's positioning and will launch an entirely new campaign in 2023, celebrating the special relationship that dog lovers have with their dogs and reminding them not to forget their best friend when shopping the novelty aisle. We're anticipating continued strong growth driven by further expansion at retail and this new fully integrated marketing campaign.
We will also launch our new brand, ¡Hola! Churros, starting in fiscal Q4 after debuting the new brand at the National Restaurant Association in May. We're excited to roll out the new brand with a full suite of marketing and sales tools. Churros is a significant opportunity for us, having grown 38% in just the past four years across American menus. According to Datassential, growth will continue in every segment within food service, including a projected 8.5% within casual dining restaurants, 4.5% in fast casual, and nearly 4% in QSR. J&J is already the largest domestic producer of churros, and creating a new branded product provides us with a unique and valuable opportunity to grow share.
Trending at 78% awareness in the U.S., we offer strong margins, are easy to prepare for operators such as quick-serve restaurants, movie theaters, and adventure parks. Regarding the operating and consumer backdrop, from our vantage point, all indications point to consumers seeing value in our products while spending more time outdoors, including at leisure and entertainment venues. As our results indicate, consumers are visiting restaurants, amusement parks, live venues, theaters, and convenience stores, travel venues, and public spaces in great numbers. For example, theme park attendance remains resilient despite recent macro volatility, as domestic and international consumers are vacationing more with their families. Major live event organizers are reporting attendance above pre-pandemic levels, as well as higher spending on food and beverage.
In theaters, a significant revenue segment for us, we are seeing levels approaching 75% of pre-pandemic attendance levels while seeing marked upticks in per capita spending as moviegoers indulge in their favorite snacks. As it relates to M&A, we could not be more excited to have completed the $223 million acquisition of Dippin' Dots. We believe the combination of the two companies will be a game changer, given the almost seamless alignment of Dippin' Dots with our frozen novelty and our frozen beverage businesses. We have already begun to leverage our relationships in key food service and entertainment channels, identifying opportunities to expand distribution of the Dippin' Dots brand. Operationally, we've already started working with Dippin' Dots' team on integrating the two companies, and I'm pleased to report that everything is working just as planned.
As we move further along the integration process, we are confident in our ability to gain meaningful revenue and cost synergies and create value for our shareholders. In closing, we remain extremely optimistic about our future, given the resilience of our products and brands, the strength across our core products, the success of our new product offerings, our ability to expand our customer footprint, and a terrific addition to the J&J family with the acquisition of Dippin' Dots. I would now like to turn the call over to Ken Plunk, CFO, to review our financial performance. Ken?
Thank you, Dan, and good morning, everyone. Taking a look at the results for the Q3 of fiscal 2022, we are pleased with the continued strength and resiliency of the business, surpassing pre-COVID levels for the fourth consecutive quarter. Net sales of $380.2 million grew by 17.2% versus the prior year and by over 35% sequentially. When compared to the Q3 of 2019, revenue was up 16%. A growth trend is further reflected on our year-to-date performance, with revenue for the first nine months of fiscal 2022 totaling $980.2 million, or a 19.3% increase versus the first nine months of fiscal 2021.
Starting with food service, which continues to be our largest segment, representing 60% of total sales, revenue of $227.8 million grew by 16% versus Q3 2021 and by almost 18% compared to Q3 of fiscal 2019. The strong performance in food services was driven by a 35.7% increase in handheld sales, a 27.5% increase in churro sales, and a 23.2% increase in frozen novelty sales. We also saw great momentum in our bakery and soft pretzels, with year-over-year growth of 11.4% and 9.9% respectively.
The retail segment also posted a strong quarter, with $61 million in sales compared to $53.9 million the prior year period and growing by over 46% compared to the same period in fiscal 2019. Handheld sales led the way with a 33.4% growth compared to Q3 of 2021, followed by biscuits and soft pretzels, with sales growth of 33% and 4.5% respectively. Frozen beverages sales were $91.4 million and grew 23.5% versus Q3 2021, led by beverage sales growth of 36.7% and machine sales growth of 17.4%. Machine service revenues were flat versus Q3 2021.
Gross profit for the quarter was $109.1 million, an increase of over 13.4% compared to the previous year period, and a gross margin of 28.7%. A slight drop compared to 29.7% in Q3 of fiscal 2021. However, a marked improvement on a sequential basis. Despite the ongoing inflationary challenges, we are confident in our plans to resolve and manage the headwind. As we move forward, we expect gross margins to continue to improve. Moving down the income statement. Total operating expenses increased from $58 million to $87.8 million, representing 23.1% of sales for the quarter, compared to 17.9% in Q3 of 2021.
These results largely reflect the inflationary pressures across all of our expense line items, in particular in distribution expenses, which was 12.7% of sales, compared to 8.4% of sales in fiscal 2021. Distribution expenses were driven by rising carrier, driver wage, storage, and fuel costs, and supply chains remain constrained. Also impacting operating expenses was approximately $3.1 million in one-time transaction closing fees related to the Dippin' Dots acquisition, which were captured in administrative expenses. This led to an operating income decline of 44.3% to $21.3 million for the quarter compared to prior year. Excluding the one-time charges, adjusting operating income was $24.3 million. Adjusted earnings per share for diluted share was $0.93 a share, and adjusted EBITDA was $38.4 million.
After considering income taxes of $5.6 million compared to $9.7 million in Q3 of fiscal 2021, our net earnings decreased to $15.6 million for the quarter, resulting in reported diluted earnings per share of $0.81 compared to $1.51 in the prior year period. Our effective tax rate was 26.6% for the Q3. On an adjusted EBITDA basis, we saw a decline to $38.4 million from $52.2 million in the prior year period on the back of the decrease in earnings. Year-to-date adjusted EBITDA totaled $84 million compared to $89.5 million for the first nine months of fiscal 2021. Taking a look at our liquidity position.
Even with the recent Dippin' Dots acquisition, we continue to have a healthy balance sheet, an overall strong liquidity position with $91.4 million in cash and marketable securities and approximately $125 million in debt. In addition, we have ample availability under our revolver with $91.2 million of additional borrowing capacity. Very confident in our financial position and our ability to adequately invest and support our business while continuing to return value to our shareholders via quarterly dividends. In closing, our Q3 results reflect the ongoing resiliency and health of our business as sales continue to grow and gross margins continue to improve. We have a disciplined focus on executing our strategic initiatives, reduce costs, improve margins, and continue to build on our sales momentum. I would now like to open the call to questions. Operator?
Thank you. We will now begin the question-and-answer session. If you would like to ask a question, you could do so by pressing zero one on your touchtone phone. Again, to ask a question, please press zero one on your touchtone phone. Our first question comes from Andrew Wolf. Your line is now open.
Thank you and good morning.
Good morning, Andrew.
On the sales. Good morning, yeah. Could you tell us how much of your sales was volume versus price?
Yeah, you know, we increased both volume and pricing during the quarter. As far as percentages, a little over 60%, somewhere in that, you know, 60%-70% probably range is pricing, the rest is volume.
Yeah, Andrew, I would just add to that every segment sales were up in both volume as well as price, obviously, as we took price increases.
Okay, great. Could you give us a flavor for how July is trending given, you know, what's going on with the economy and some parts of food service at least, you know, softening?
We continue to see strong sales, as we did for the Q3, as we enter into the Q4 . We're encouraged by what we're seeing so far.
Great to hear. Just a last follow-up kind of related to pricing, kind of two-part. The second price increase, I think you said was during the quarter. As we look at modeling the Q4 , is there a little more pricing from the, you know, the pricing action you instituted in the fiscal Q3 to come into the Q4 ? That's part one. Part two is the high single digit pricing, you know, you're gonna institute late in the Q4 , which, you know, I assume, mainly a fiscal 2023 event for modeling purposes.
You know, given a little deflation, you know, we anticipated in some of the ingredients costs and so on, how do you think about, you know, recovery and price realization and your gross margin, you know, as we look into 2023? Obviously, I'm not asking you to guide us specifically, but just, you think there's a normalization coming there, you know, if the ingredient cost side of things cooperates?
Yeah. All great questions, Andrew. I'm gonna let Ken address some of those first.
Yeah, Andrew, I would answer it this way. Again, remember with the price increase, there's like most everyone else out there, you're playing catch up. Even from Q2 to Q3, you know, our cost of our key raw materials went up another $10 million. That price increase that we took in April certainly helped, but costs continued to go up in the quarter. Even as you mentioned, certain commodities, projections of certain commodities are starting to come down a little bit, food being one of those, fuel a little bit. I mean, our experts still kind of call out it's a wait and see, but they're like some of that is stabilizing. It's gonna come down, but then it takes a bit of time for that to all flow through.
You know, the price increase we took in April is helping us try to catch up, but we need to take the other one, and we've already had. You know, communications with customers and feel like we're, you know, completely ready to start executing that, you know, over the next few weeks. That will probably take effect kinda late August and into September. Yeah, to your point, it'll benefit 2023.
Okay. It sounds like are you cautiously optimistic on gross margins or is it more of a too soon to call kind of view as you start to, you know, as you look at your budgeting process and so on?
Yeah. No, Andrew, I think we're absolutely cautiously optimistic. We like the position that we're in. We like where we landed even ending this Q3. As you put it, we're very cautiously optimistic as we move into the next quarter and beyond.
I think the other thing that makes us optimistic. We're doing a better job, Andrew, as we drive sales, driving it in higher margin areas. Our mix is getting better. Then we've got a number of cost of goods initiatives, reducing waste in plants, and we're starting to see the benefits of some of that. All of that combined with inflation that seems to be slowing down and maybe dipping a little bit, with the price increases we've taken, I agree with Dan. I think we're cautiously optimistic as we look forward.
Thanks. Just one follow-up on your last comment, Ken. Is on the positive mix shift, is that just what, you know, sort of related to food service recovering and those margins being higher, overall or are you doing some kind of SKU rationalization of lower margin SKUs as well that, you know, will last beyond, you know, recovery in food service?
Yeah, Andrew, great question. We've done a little bit of both of that. We've done some SKU rationalization. We have a focus on our core products, which we're being able to drive growth in, that are higher margin. We feel good about the direction that our company is heading and the great work that our sales team is doing out there, addressing those kinds of issues and feel like that will, you know, pay benefits as we move into 2023.
Great. Thank you very much.
Thank you.
Thank you.
Thank you. Our next question comes from Rob Dickerson. Your line is now open.
Great. Thanks so much. Hey, guys. Quick question, I guess, to ask you a little more succinctly. It's just I think, Ken, you had said previously that sort of given, you know, the pricing that was coming through and where the costs were coming out of Q2, that, you know, you were hopeful at that point, that you could, you know, get back to that pre-COVID margin by Q2 of 2023. It doesn't seem like that's necessarily off the table given the flow through of the third round of pricing. Just wanna kind of make sure that's still the case. If not, it just sounds like maybe that gets pushed forward a little bit. Any color on that would be helpful. That's the first question.
Yeah. I feel better sitting here today than I did coming out of Q2, that's for sure. You know, with the market we're in and the hints still on whether going into recession or not, you know, I'm still kind of probably saying Q2, but I probably would answer it this way, Rob. I feel a little bit more optimistic about getting there, maybe getting there a little earlier than I did two months ago.
Okay, super. Just on the distribution side, I mean, obviously, you know, it's a material step up in the quarter, for all the obvious reasons. You know, as you even think through into Q4 and then 2023, you know, what's hopeful too on that line item is that maybe that's peaked, at least as a percent of revenue, and hopefully that starts to kinda trail off, through Q4. Is there just some stickiness in the cost, you know, on the supply side, just, outside of freight and fuel costs?
Well, we're certainly hoping that it's peaked at this point, Rob. You know, we have a lot of initiatives. We have extra eyes on it. We're looking at it really, really closely. You know, it's affected by fuel storage and outbound carriers. We're watching it really closely. We hope that it's peaked and it's down as it relates to a percent of sales.
Okay, super. Just last question from me. On the segment operating margin delta, right? Between, let's say food service and retail, I guess, you know, relative to frozen beverages. Frozen beverages came in, I think it may be the highest we've seen historically, so very strong, right? Demand is coming back. You're back in line with pre-pandemic revenues. You know, while at the same time you're getting pricing and the margin's doing very well. While at the same time food service is still struggling a little bit, as is retail. I'm just curious, is there some lag effect on the pricing side or, you know, relative to frozen beverages or is there maybe not as much operating leverage in that part of the business?
I'm just trying to get a better understanding as to kind of, you know, why those segments seem to be kind of dragging a little bit relative to where you are in frozen.
That's it.
Again, on frozen, the price increases are taken annually every January. We had the benefit of that pricing action in January, you know, ahead of kind of what we were doing on the food service and retail side, where we took, you know, a small one late last year, and then the other one didn't go into effect, most of it, until April. You have a little bit of that going on. Rob, you also have the cost of the acquisition of 3.1 is shared between those retail and food service numbers. Then the bulk of the distribution expenses and challenges there are in our retail and food service business. It's a different business model. You got 16 plants, 30-something pickup locations.
You can imagine managing that from a distribution standpoint is much different than on the frozen beverages side. Those are some distinct differences between the profit you see in frozen and what you're seeing go down to the bottom line in food service and retail.
Okay. Cool. That's us. Thank you.
Thank you. Our next question comes from Connor Rattigan. Your line is now open.
Good morning.
Good morning, Connor.
Thanks for the question. I was just wondering if you could comment on your thoughts on just the health of the consumer going forward. You know, it sounds like your business isn't really seeing much of an impact, but we're hearing a lot about pressure on lower income consumers specifically. With a large portion of the business revolving around experiences like, you know, theme parks and stadiums and such, do you expect any real volume elasticity or maybe consumers being priced out of those experiences going forward?
We're gonna have the discipline to watch it really closely. At this point, we have not seen that happen. Historically as a company, we've done pretty well during times like these in the past. We have great products that are kind of a snack and a treat and a reward that people will still buy during recessionary periods. Again, to date, we're not seeing that drop in sales, but we're gonna watch it really closely and react if we see something like that.
Okay, great. Thanks. That was helpful. Also just as far as the top line goes, could you just sort of maybe just, like, share some color on sort of how that trended over the quarter? Was there maybe still somewhat of a hangover early in the quarter from that ERP system implementation?
You know, there had to be a little bit of that. It's hard to identify, but there had to be a little bit early in the quarter that we were able to benefit from what we did not get into the system in the Q2 . Really, we saw strong sales in each month of the quarter. We feel like there's a great demand. We like some of the new products that we've released. I like the action that our sales team is taking out there and getting our core products to the customers and feel really strong about our sales going into the future.
Okay, great. Great. Also just a little bit on the pricing side too. I know you guys quantified that about 60%-70% of growth from pricing. I know you typically don't really quantify mix, but any chance you can sort of guide us as to maybe how substantial of an impact that mix shift was?
Sure. Can you say that one more time, Connor? Sorry.
Yeah, sure thing. I know you guys quantified about 60%-70% of growth from pricing. Any chance you can sort of guide us to about sort of how substantial the mix shift impact was just on the overall top line growth?
When you say mix, you're saying between price and volume, is that what you mean?
Yeah, that's correct.
Well, it varies by segment. I think the way I would answer that, without really getting into specific details on it, is for every segment of our business, so you'll get frozen, food service, retail. All of them grew volume and also grew in price, obviously.
Mm-hmm.
As Dan just pointed out, we studied elasticity very closely as we and other competitors have raised prices, you know, and we start to see the pressure on consumers. You gotta watch kind of that decision very closely with what happens with volumes. We've balanced that very well and continue to see us growing both on the volume side as well as price side.
Okay. All right, thanks. Thank you so much. That's it for me.
Thank you.
Thank you. Our next question comes from Trevor Sahr. Your line is now open.
Good morning, Trevor.
Hey, guys. This is Trevor on for Jon Anderson here. Just one for me today. I wanted to ask just on kind of fill rates and ability to meet demand in the quarter, kind of where you guys were from that front, maybe if you ran into any challenges, specific channels or segments or if you left anything on the table throughout the quarter. Thanks.
Well, our operational team did a fantastic job pulling as much capacity through the plants as we possibly can. You know this because we've said it before, we have seven new lines underway that will come into effect. A couple of them came to effect this year in the frozen novelty group. We have some coming into effect with both the pretzel and the churros at the end of this year and into next year that will give us greater capacity. Certainly with sales like this, that $380.2 million being a record quarter of all time, it certainly stretched our abilities, but our team did a great job at getting the products to the customer.
Great. Thanks.
Thank you.
Thank you. Our next question comes from Todd Brooks. Your line is now open.
Hey, good morning everybody. How you guys doing?
Great.
A few questions for you if I may. One, you're starting to get a little bit of the way into kind of digging into the Dippin' Dots opportunity here. I think at the time of closure, you had talked about it looking to be $0.30-$0.40 accretive pre-synergies. Dan, you kind of hinted at strong interest from existing J&J customers to expand Dippin' Dots distribution there. I guess, what are the early reads about the synergy opportunity with the Dippin' Dots brand now under the J&J umbrella?
We think there's some significant synergies to be had. I think I've said this to you, Todd, I'll just repeat it again. You know, we bought this right in the middle of what I'll call harvest season. We really haven't wanted to disrupt what Dippin' Dots does today and has done so well, and to make sure that we get the product to the customers in the appropriate fashion. Our people are working hand in hand with the group there today at kind of identifying those synergies and we'll start to see those probably late in the year, early 2023, late 2022. As you talked about with the expansion, we're having a lot of really good conversations with our customers out there.
This is one of the things that we saw as such a big opportunity with Dippin' Dots. They do business in many of the same places we do, or at least in many of the same channels. This allows us to have a pretty open conversation with our customers right away. We have, as you know, some great relationships out there. We're getting a lot of really good feedback and think that we are gonna be able to grow those sales pretty rapidly in the next few years.
That's great to hear. Following up on another opportunity that seems to be growing pretty rapidly, can you talk through how big the Dogsters business has gotten to be for you? Talk through maybe what distribution doors look like this year versus last year, future wins that could be there, and then any plans in conjunction with the new marketing campaign next year to maybe broaden out the product line as well?
You know, that brand, as you know, the pet industry has grown tremendously too during COVID. A lot of people bought pets and so we feel like we're in the right place at the right time with the right brand. We just did some brand understanding around that with a group who got together to really identify what the brand means and how we go to market with it. Putting together some terrific plans for 2023. I've got a chance to look under the hood. Lynwood Mallard and team are doing great with it. As far as sales in period 12, I think it was, we did around $5 million, something like that, somewhere in that range. We see just a wide open space for us. We're continuing to gain opportunities with retailers.
We feel as we're starting to look at the packaging, starting to look at the brand, understand it better, that there's just a lot of room for growth there. Love that brand, love what we're doing. The sales team likes it. Just feel like we have a lot of room for growth.
How substantial is the door growth on the distribution side currently versus a year ago? Have you opened up some of the bigger, maybe pet concepts or more mass concepts, and you're adding meaningful doors for Dogsters?
Well, I think if you're asking how many more SKUs, I think there's retail outlets where we've added two to three SKUs, depending on the retailer. Todd?
Yeah, Ken, I was more asking the number of doors that you're distributing in versus this time last year. How much has that expanded?
I don't know if we have that handy, Todd. I'm not sure I can give you that answer today.
Okay. Fair enough. Back on frozen beverage, obviously a very strong quarter. Last call, Dan, you talked about some interest coming out of the NRA show. Anything you can share about restaurant concepts that have come into the testing pipeline during the quarter or maybe the magnitude of those opportunities if they're coming to fruition?
Yeah, I think I've said this before. I really like the pipeline that we have going on with ICEE right now. We have, I mentioned by name, we have Moe's starting to roll out. That was one in test. You know, I've said this to you before, with the ICEE product, it's a long test period. There's a long incubation period because it's a big commitment with a big machine to people. But we have Moe's now starting to roll out. We have Peter Piper Pizza rolling out and two or three other QSR type opportunities that are in test that I can't mention yet, but I like the momentum that we have in them and see some really good growth for ICEE as we move into 2023.
Okay, great. Thank you.
I'll also say that not just in the beverage side of it, but also have some really good momentum going on the service side as well.
Okay, great. Thanks, Dan.
Thank you, Todd.
Thank you. Our next question comes from Jonathan M. Bentley. Your line is now open.
Hi, good morning. On the Dippin' Dots acquisition, did you guys also acquire their cryogenics business, their cryogenics licensing business?
We did not acquire that portion of it. When I looked at it first, I think I talked about having a
You know, an opportunity to meet with the owners and sit down at dinner and kind of get a firsthand view of this purchase. That was one of the areas that I just didn't think fit within our kind of wheelhouse, I guess, is what I would say. They also had a couple issues with that side of the business, and it just didn't feel like it was the right thing for us, and that we could take it and grow it and mature it the way that we can on the Dippin' Dots side.
Okay, great. Thanks for the information.
Thank you.
Thank you. We have a follow-up question from Andrew Wolf. Your line is now open.
Hi. Given the magnitude of, you know, the inflation and the distribution costs, could you just unpack that a little bit? What, you know, which were the biggest drivers? You mentioned you know, number of items. How much of that is, you know, I wouldn't say control, but how much of this is third party where, you know, let's say shipping, you know, trucking business is tight, they're just raising prices because the, you know, the supply is tight, versus, you know, where you have some control, it's your drivers', fuel coming down could help you and so on. I have a follow-up to that in regards to some of the initiatives you've mentioned in your release.
Yeah, Andrew, it kind of breaks out this way, probably I'd say 75% was from costs that we pay outbound carriers. You know, to move the product, obviously, we depend on third parties for that. That is 75% of the cost increase. Storage went up more than 100% year-over-year. We got a number of situations where 3PL that store our product gave us price increases. That was probably another, you know, 15%-20%. Then fuel costs, just our own direct fuel costs went up over 100%. You know, obviously, you know, fuel costs go up over 100% year-over-year. Those are the three biggest buckets driving the increase year-over-year.
Okay. Do you have an outlook on the outbound carrier rates? Do you think they're gonna come down with the economy coming down? Are the rates coming down at all yet? Or what's going on?
I can tell you that we are seeing, I'll use the word stabilization, and we're hearing some experts talk about, you know, certain rates coming down as kind of supply and demand for carriers has kind of equaled out a little bit from what it was a few months ago. It seems to be more promising, but gosh, given everything that's gone through in the last year on costs, I believe it when I see it. I think it's promising. I mean, we're hearing things moving in a better direction, but, you know, we need to see that realized in the P&L.
Okay. Thank you.
Thank you, Andrew.
We have no further questions in queue. At this time, I'll turn the call back to Dan Fachner for closing comments.
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Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.