J&J Snack Foods Corp: Form 10-Q for the period ended Jun 28, 2025

Statements made in this Form 10-Q that are not historical or current facts are “forward-looking statements” made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements discuss goals, intentions and expectations as to future trends, plans, events, results of operations or financial condition, or state other information relating to us, based on our current beliefs as well as assumptions made by us and information currently available to us. Forward-looking statements generally will be accompanied by words such as "anticipate," "if," "may," "believe," "plan,", "goals," "estimate," "expect," "project," "continue," "forecast," "intend," "may," "could," "should," "will," and other similar expressions. Statements addressing our future operating performance and statements addressing events and developments that we expect or anticipate will occur are also considered forward-looking statements. This includes, without limitation, our statements and expectations regarding any current or future recovery in our industry (or the industries of our customers), the success of new product innovations, the impact of tariffs and other government regulations, and the future impact of our supply chain efficiency projects, including facility optimization projects and investments in additional production capacity and logistics and warehousing operations. Such forward-looking statements are inherently uncertain, and readers must recognize that actual results may differ materially from the expectations of management. We intend that such forward-looking statements be subject to the safe harbor provisions of the Securities Act and the Exchange Act.

We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak as of the date made. Any forward-looking statements represent our best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties, and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. We disclaim any obligation to revise, update, add or to otherwise correct, any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.

Objective

This Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide readers of our financial statements with a narrative form from the perspective of our management regarding our financial condition and results of operations, liquidity and certain other factors that may affect our future results. The following discussion should be read in conjunction with the consolidated financial statements and accompanying notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q and within the Company’s Annual Report on Form 10-K filed for the fiscal year ended September 28, 2024.

Business Overview

The Company manufactures and sells snack foods and distributes frozen beverages, which it markets nationally to the foodservice and retail supermarket industries. The Company’s principal snack food products are soft pretzels, frozen novelties, churros and bakery products. We believe we are the largest manufacturer of soft pretzels in the United States. Other snack food products include donuts, churros, cookies, funnel cake and handheld products. The Company’s principal frozen beverage products are the ICEE brand frozen carbonated beverage and the SLUSH PUPPIE brand frozen non-carbonated beverage. The Company’s Food Service and Frozen Beverage sales are made principally to foodservice customers including snack bar and food stand locations in leading chain, department, discount, warehouse club and convenience stores; malls and shopping centers; fast food and casual dining restaurants; stadiums and sports arenas; leisure and theme parks; movie theaters; independent retailers; and schools, colleges and other institutions. The Company’s Retail Supermarket customers are primarily supermarket chains.

Business Trends and Strategy

Our results are impacted by macroeconomic and demographic trends and changes in consumer behavior. The U.S. economy has experienced economic volatility and uncertainty in recent years, which has had, and we expect might continue to have, an impact on consumer behavior. Consumer spending may continue to be impacted by levels of discretionary income and the impact of that on the consumer’s decisions making around their purchases.

Our industry continues to face specific challenges arising from consumer and economic uncertainty due to inflation and rapid changes in global trade policies including the announced tariff increases and potential additional tariff increases. We expect that consumer trends will continue to evolve, and economic pressures on consumers, including the challenges of high inflation and the impact of increased tariffs, may have an impact on our volumes. In addition, inflation and fluctuating raw material costs may continue to impact the costs of our products.

To help combat these potential headwinds, we strategically look to improve our operational efficiencies and margins, as well as expand our growth opportunities across our various channels and customers. Some recent examples of implementing these strategies include:

• Our recently completed strategic supply chain transformation in which we opened three regional distribution centers which is projected to drive significant cost reductions around warehousing and distribution costs.
• The recent addition of six new production lines which has significantly expanded our capacity and allowed us to meet growth opportunities across our core products such as pretzels, churros and frozen novelties.
• Implementation of a new ERP system in fiscal 2022 which has helped to create efficiencies and streamline processes.
• Increased successful cross-selling activities and leveraging our brands across customer channels, including our recent expansion of the breadth and depth of our Dippin’ Dots brand across the theater channel, as well as penetrating that brand into the retail market.
• An update to our SuperPretzel recipe and packaging.
• Our fiscal year 2023 rollout of our new Hola! Churros brand.
• Our fiscal year 2022 acquisition of Dippin’ Dots, and our fiscal year 2024 acquisition of Thinsters.

RESULTS OF OPERATIONS – Three and nine months ended June 28, 2025

The following discussion provides a review of results for the three and nine months ended June 28, 2025 as compared with the three and nine months ended June 29, 2024.

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22

Net Sales

Net sales increased by $14.3 million, or 3.3%, to $454.3 million for the three months ended June 28, 2025, with the increase led by sales growth in our foodservice and frozen beverages segments, offset somewhat by a decrease in our retail supermarket segment. Net sales increased by $25.0 million, or 2.2%, to $1,173.0 million for the nine months ended June 28, 2025 with the increase led by sales growth in our foodservice and frozen beverages segments across the period, offset slightly by a decrease in our retail supermarket segment, which was attributable to the decline noted in the third fiscal quarter.

Gross Profit

Gross Profit increased by $2.3 million, or 1.5%, to $150.0 million for the three months ended June 28, 2025. As a percentage of sales, gross profit decreased from 33.6% to 33.0%. The increase in gross profit primarily related to the benefit of the increased net sales, while the slight decrease as a percentage of sales was primarily attributable to the higher proportion of lower margin machine sales in our frozen beverages business, as well as some foreign exchange related headwinds encountered by the frozen beverages business.

Gross Profit decreased by $10.9 million, or 3.1%, to $339.6 million for the nine months ended June 28, 2025. As a percentage of sales, gross profit decreased from 30.5% to 29.0%. This decrease primarily reflected the impact noted through the second fiscal quarter of the negative margin impacts from comparatively rising raw material costs and other inflationary pressures that outweighed recent pricing actions. Additionally, mix changes within our bakery business in the first fiscal quarter, the loss of some limited time offer churro volumes from prior year, and the impact of mix and foreign exchange related headwinds in the frozen beverages segment, all negatively impacted current period gross profit when compared to prior year.

Operating Expenses

Operating Expenses decreased $8.2 million, or 8.4%, to $89.4 million for the three months ended June 28, 2025. As a percentage of sales, operating expenses decreased from 22.2% to 19.7%. The main driver of the decrease was the non-recurring net benefit of the $10.6 million gain on insurance proceeds received for damage to property, plant and equipment related to the fire at our Holly Ridge plant, offset slightly by the $1.5 million intangible asset impairment charge. As a percentage of sales, distribution expenses decreased from 10.2% to 9.8%, with the decrease driven by the benefits of our strategic initiatives to improve logistics management and increase efficiency across our distribution network and supply chain, as well as lower fuel expenses. As a percentage of sales, marketing expenses increased slightly from 7.4% to 7.5%, with the increase primarily attributable to higher summer promotional marketing spend in the period. As a percentage of sales, general and administrative expenses decreased slightly from 4.5% to 4.4%, with the decrease primarily attributable to the leveraging benefit of a higher sales base, as well as strong expense control discipline.

Operating Expenses decreased $6.1 million, or 2.2%, to $266.8 million for the nine months ended June 28, 2025. As a percentage of sales, operating expenses decreased from 23.8% to 22.7%. The main driver of the decrease was the net benefit of the $10.6 million gain on insurance proceeds received for damage to property, plant and equipment at our Holly Ridge plant, offset slightly by the $1.5 million intangible asset impairment charge. As a percentage of sales, distribution expenses decreased from 11.3% to 10.8%, with the decrease driven by the benefits of our strategic initiatives to improve logistics management and increase efficiency across our distribution network and supply chain, combined with the impact of $2.3 million of non-recurring expenses in the prior year for start-up costs related to our regional distribution center supply chain transformation. As a percentage of sales, marketing expenses increased slightly from 7.6% to 7.8%, with the increase primarily attributable to higher summer promotional marketing spend, as well as higher tradename amortization expenses associated with a legacy churro brand that is being phased out for the Hola! Churro brand. As a percentage of sales, general and administrative expenses increased slightly from 4.9% to 5.0%, with the increase attributable to higher compensation costs as well as higher non-recurring legal expenses, primarily offset by the leveraging benefit of a higher sales base and strong expense control discipline.

Other Income and Expense

Investment income decreased by $0.2 million to $0.6 million for the three months ended June 28, 2025, and increased by $0.1 million to $2.3 million for the nine months ended June 28, 2025.

Interest expense decreased by $0.1 million to $0.4 million and by $0.8 million to $0.7 million for the three months and nine months, ended June 28, 2025, respectively, due to the decrease in the Company’s average outstanding borrowings on the Amended Credit Agreement for the three- and nine- month periods ended June 28, 2025, as compared to the prior year periods.

Income Tax Expense

Income tax expense increased by $2.5 million, or 17.6%, to $16.5 million for the three months ended June 28, 2025. The effective tax rate was 27.2% as compared with 27.9% in the prior year period.

Income tax expense decreased by $1.3 million, or 5.9%, to $20.3 million for the nine months ended June 28, 2025. The effective tax rate was 27.2% as compared with 27.4% in the prior year period.

Net Earnings

Net earnings increased by $7.9 million, or 21.9%, for the three months ended June 28, 2025, due to the aforementioned items.

Net earnings decreased by $2.7 million, or 4.7%, for the nine months ended June 28, 2025, due to the aforementioned items.

There are many factors which can impact our net earnings from year to year and in the long run, among which are the supply and cost of raw materials and labor, insurance costs, factors impacting sales, the continuing consolidation of our customers, our ability to manage our manufacturing, marketing and distribution activities, our ability to make and integrate acquisitions and changes in tax laws and interest rates.

Business Segment Discussion

We operate in three segments: Food Service, Retail Supermarket, and Frozen Beverages. The following table is a summary of sales and operating income, which is how we measure segment profit.

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Food Service Segment Results

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Sales to food service customers increased $12.7 million, or 4.8%, to $277.2 million for the three months ended June 28, 2025 with the increase largely attributable to the benefit of price increases, as well as volume increases in certain product categories, most notably soft pretzels. Those increases were offset somewhat by volume declines seen in other product categories, most notably in the churro category, which was primarily driven by the lapping of the benefit of limited time offer churro volumes in the prior year.

Soft pretzels sales to food service increased 12.8% to $67.1 million, with the increase largely driven by strong volume increases across many of our pretzel products and brands, most notably our Bavarian pretzels, with a secondary benefit of price increases. Frozen novelties sales increased 2.1% to $52.8 million, led by an approximate 3% increase in Dippin’ Dots sales. Churro sales decreased 13.2% to $26.3, million with the decrease largely driven by the lapping of the benefit of limited time offer churro volumes with a major QSR customer in the prior year period which did not recur in the current quarter. Sales of bakery products increased by 8.7% to $101.7 million, with the growth primarily attributable to pricing increases related to the contractual pricing true-up of costing on certain raw material ingredients, somewhat offset by volume losses throughout the portfolio. Sales of handhelds remained relatively flat, decreasing by 0.1% to $21.3 million, with the decrease attributable to a slight volume decrease across our food service handhelds, mostly offset by pricing increases related to the contractual pricing true-up of costing on certain raw material ingredients.

Sales of new products in the first twelve months since their introduction were minimal in the three months ended June 28, 2025. Sales in the quarter benefited from the impact of the mid single digit percentage price increases, with those price increases primarily related to the contractual pricing true-up of costing on certain raw material ingredients, as well as some targeted, non-contractual price increases taken in an attempt to offset the rising costs on certain raw material ingredients. The revenue increase attributable to price increases was slightly offset by net declining volumes, with the volume declines seen in our churros, and bakery portfolios offset by volume increases in our soft pretzel portfolio.

Operating income in our Food Service segment increased $11.3 million in the quarter to $31.5 million, with the increase primarily attributable to the non-recurring net benefit of the $10.6 million gain on insurance proceeds received for damage to property, plant and equipment related to the fire at our Holly Ridge plant, offset slightly by the $1.5 million intangible asset impairment charge. Excluding these non-recurring charges, the remaining increase in operating income in our Food Service segment was primarily driven by the strong performance of our pretzel business, as well notable margin improvement on our churro portfolio. These increases more than offset the headwinds related to the volume declines in our bakery business and the impact of the lapping of the limited time offer churro promotion with a major QSR customer in our prior year quarter, that did not recur in the current quarter.

Sales to food service customers increased $19.1 million, or 2.6%, to $742.1 million for the nine months ended June 28, 2025. Soft pretzels sales to food service customers increased 3.5% to $169.7 million with the increase largely related to the previously referenced strong volume increases noted in the fiscal third quarter. Frozen novelties sales increased 4.3% to $104.8 million with the increase driven by an approximate 5% increase in Dippin’ Dots sales. Churro sales decreased 13.9% to $76.8 million with the decrease largely driven by the lapping of the benefit of limited time offer churro volumes with a major QSR customer in the prior year period which did not recur in the current year period, somewhat offset by new business growth. Sales of bakery increased 5.9% to $304.5 million, with the increase largely attributable to the contractual pricing true-up of costing on certain raw material ingredients, as well as some targeted, non-contractual price increases taken in an attempt to offset the rising costs on certain raw material ingredients offset somewhat by volume declines, most notably in our fiscal first quarter related to our pie portfolio and the loss of some seasonal business with a declining margin profile that we bid on, but did not retain. Sales of handhelds increased 7.2% to $67.3 million with the increase attributable to a combination of strong volume increases across our core food service handhelds as well as pricing increases related to the contractual pricing true-up of costing on certain raw material ingredients.

Sales of new products in the first twelve months since their introduction were approximately $3.5 million for the nine months ended June 28, 2025, driven primarily by the addition of churros to the menu of a major fast food customer. Sales in the nine-month period benefited from the impact of the mid single digit percentage price increases, with those price increases primarily related to the contractual pricing true-up of costing on certain raw material ingredients, as well as some targeted, non-contractual price increases taken in an attempt to offset the rising costs on certain raw material ingredients. The revenue increase attributable to price increases was somewhat offset by declining volumes, most noticeably in our churro portfolio due to the lapping of the benefit of limited time offer churro volumes with a major QSR customer in the prior year period which did not recur in the current year period, as well as in our bakery portfolio, due to the volume declines in our pie business in the first fiscal quarter related to loss of some seasonal business with a declining profit margin profile that we bid on, but did not retain.

Operating income in our Food Service segment increased $0.2 million in the nine months ended June 28, 2025, to $34.4 million. Operating income in our Food Service segment was materially affected by the non-recurring net benefit of the $10.6 million gain on insurance proceeds received for damage to property, plant and equipment related to the fire at our Holly Ridge plant, offset slightly by the $1.5 million intangible asset impairment charge. Excluding the net $9.1 million benefit of these non-recurring charges, operating income in our Food Service segment decreased $8.9 million, to $25.3 million, which primarily reflected the impact noted through the second fiscal quarter of the gross margin pressures due to the rising raw material costs and other inflationary pressures, outweighing the benefits from price increases, as well as an unfavorable product mix. The unfavorable product mix reflected the fiscal first quarter loss of some seasonal business within bakery with a declining margin profile that we bid on, but did not retain, as well as lower churro volumes as we lapped the benefit from a limited time offer with a quick serve restaurant in the prior year.

Retail Supermarket Segment Results

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Sales of products to retail customers decreased $4.9 million, or 7.1%, to $63.9 million for the three months ended June 28, 2025, with the decrease primarily attributable to declining frozen novelties volumes. Soft pretzel sales increased 3.3% to $11.5 million. Frozen novelties sales decreased 8.5% to $42.3 million, with volume declines seen across many of our brands due to lower promotional activity in the quarter, as well as the lapping of a very strong prior year fiscal third quarter. Biscuit sales decreased 8.2% to $4.4 million, and Handheld sales decreased 21.2% to $6.0 million with the decrease in Handheld sales primarily attributable to the impact of the fire at our Holly Ridge location, and delays that were experienced in the production of our retail handhelds during the quarter. Sales of new products in retail supermarkets were approximately $2.8 million in the quarter, driven primarily by the launch of Dippin’ Dots sundaes. Sales in the quarter benefited from the impact of the low single digit percentage price increases, with the benefit more than offset by volume declines, most notably within the frozen novelties product category.

Operating income in our Retail Supermarkets segment decreased $2.1 million in the quarter to $5.8 million, primarily driven by the impact of lower volumes and lower sales in the segment.

Sales of products to retail customers decreased $2.9 million, or 1.8%, to $162.4 million for the nine months ended June 28, 2025. Soft pretzel sales decreased 3.1% to $44.6 million with the decrease largely due to soft consumer trends seen within the product category earlier in the fiscal year. Frozen novelties sales increased 3.4% to $85.6 million, with the increase largely attributable to growth in our second fiscal quarter, most notably within our Dogsters and Luigi’s brands, offset somewhat by the volume declines noted in our third fiscal quarter. Biscuit sales decreased 4.3% to $17.3 million, and Handheld sales decreased 19.9% to $16.2 million with the decrease in Handheld sales primarily attributable to the impact of the fire at our Holly Ridge location, and delays that were experienced in the production of our retail handhelds during the period. Sales of new products in retail supermarkets were approximately $3.4 million in the nine months ended June 28, 2025, driven primarily by the launch of Dippin’ Dots sundaes. Sales in the nine-month period were impacted minimally by price increases, with the revenue decline attributable to volume decreases in the third fiscal quarter somewhat offset by volume increases that had been noted through our second fiscal quarter.

Operating income in our Retail Supermarkets segment decreased $4.5 million in the nine months ended June 28, 2025 to $8.9 million, primarily driven by the declining frozen novelties volumes noted in our third fiscal quarter, as well as gross margin performance noted through our second fiscal quarter.

Frozen Beverages Segment Results

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26

Frozen beverage and related product sales increased $6.5 million, or 6.1%, in the three months ended June 28, 2025. Beverage-related sales decreased 1.5% to $71.0 million, with the decrease primarily reflecting weakness in a number of our channels, as well as the unfavorable foreign exchange impacts from a weaker Mexican Peso, somewhat offset by the comparative strength noted within the theater channel. Gallon sales decreased approximately 1% for the three months ended June 28, 2025. Service revenue increased 2.7% to $24.4 million and machine revenue (primarily sales of frozen beverage machines) increased 73.4% to $16.9 million with the growth driven by a major convenience customer updating its equipment across its store network.

Operating income in our Frozen Beverage segment increased $1.3 million in the quarter to $23.3 million, as the increase in machine revenues, as well as focused expense management, more than offset the somewhat weak beverage sales and the unfavorable foreign exchange related headwinds.

Frozen beverage and related product sales increased $8.9 million, or 3.4% in the nine months ended June 28, 2025. Beverage-related sales decreased 1.0% to $157.2 million. Gallon sales increased approximately 1% for the nine months ended June 28, 2025, with that slight increase in gallon sales offset by a slightly less favorable sales mix and some foreign exchange related headwinds. Service revenue increased 1.0% to $72.2 million. Machine revenue (primarily sales of frozen beverage machines) increased 36.2% to $36.6 million, primarily driven by strong growth from theater and convenience customers.

Operating income in our Frozen Beverage segment decreased $0.6 million in the nine months ended June 28, 2025 to $29.5 million, primarily due to the impact of unfavorable mix, and the unfavorable foreign exchange related headwinds, somewhat offset by focused expense management.

Liquidity and Capital Resources

Although there are many factors that could impact our operating cash flow, most notably net earnings, we believe that our future operating cash flow, along with our borrowing capacity, our current cash and cash equivalent balances and our investment securities is sufficient to satisfy our cash requirements over the next twelve months and beyond, as well as to fund future growth and expansion.

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• Gain on insurance proceeds received related to insurance recoveries related to the Holly Ridge fire and totaled approximately $11.4 million.
• The net cash outflow of $4.3 million in cash flows associated with changes in assets and liabilities, net of effects from purchase of companies, in the nine months ended June 28, 2025, was primarily driven by largely offsetting impacts across working capital categories, including a $21.6 million increase in inventories, a $16.5 million increase in accounts receivable, and a $33.8 million increase in cash flow from other operating assets and liabilities, net. In the prior year, the net cash inflow of $12.1 million was primarily driven by $30.3 million increase in cash flow from other operating assets and liabilities, net, offset somewhat by an increase in accounts receivable of $10.9 million and an increase in inventories of $7.3 million.

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• The prior year payment for purchases of companies, net of cash acquired related to the Thinsters acquisition.
• Purchases of property, plant and equipment include spending for production growth, in addition to acquiring new equipment, infrastructure replacements, and upgrades to maintain competitive standing and position us for future opportunities.
• Proceeds from insurance for fixed assets related to insurance recoveries related to the Holly Ridge fire.

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• During the nine months ended June 28, 2025, the Company repurchased 39,061 shares of common stock of the Company at an average price of $128.00 per share on the open market, pursuant to the share repurchase program.
• Proceeds from issuance of stock decreased in the nine months ended June 28, 2025 as the quantity of stock options being exercised continues to decline as the Company began to issue service share units and performance units as forms of stock-based compensation in recent years.
• Borrowings under credit facility and repayment of borrowings under credit facility relate to the Company’s cash draws and repayments made to primarily fund working capital needs.
• The increase in payment of cash dividends from prior year period was due to the raising of our quarterly dividend during fiscal 2025.

Liquidity

As of June 28, 2025, we had $77.4 million of cash and cash equivalents and no long-term debt outstanding.

In December 2021, the Company entered into an amended and restated loan agreement (the “Credit Agreement”) with our existing banks which provided for up to a $50 million revolving credit facility repayable in December 2026.

On June 21, 2022, the Company entered into an amendment to the Credit Agreement, the “Amended Credit Agreement” which provided for an incremental increase of $175 million in available borrowings. The Amended Credit Agreement also includes an option to increase the size of the revolving credit facility by up to an amount not to exceed in the aggregate the greater of $225 million or, $50 million plus the Consolidated EBITDA of the Borrowers, subject to the satisfaction of certain terms and conditions.

Interest accrues, at the Company’s election at (i) the BSBY Rate (as defined in the Credit Agreement), plus an applicable margin, based upon the Consolidated Net Leverage Ratio, as defined in the Credit Agreement, or (ii) the Alternate Base Rate (a rate based on the higher of (a) the prime rate announced from time-to-time by the Administrative Agent, (b) the Federal Reserve System’s federal funds rate, plus 0.50% or (c) the Daily BSBY Rate, plus an applicable margin). The Alternate Base Rate is defined in the Credit Agreement.

The Credit Agreement requires the Company to comply with various affirmative and negative covenants, including without limitation (i) covenants to maintain a minimum specified interest coverage ratio and maximum specified net leverage ratio, and (ii) subject to certain exceptions, covenants that prevent or restrict the Company’s ability to pay dividends, engage in certain mergers or acquisitions, make certain investments or loans, incur future indebtedness, alter its capital structure or line of business, prepay subordinated indebtedness, engage in certain transactions with affiliates, or amend its organizational documents. As of June 28, 2025, the Company is in compliance with all financial covenants of the Credit Agreement.

As of June 28, 2025, there was no outstanding balance under the Amended Credit Agreement. As of June 28, 2025, the amount available under the Amended Credit Agreement was $212.7 million, after giving effect to the $12.3 million of letters of credit outstanding.

Critical Accounting Policies, Judgments and Estimates

There have been no material changes to our critical accounting policies, judgments and estimates from the information provided in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies, Judgments and Estimates, in our Annual Report on Form 10-K for the year ended September 28, 2024, as filed with the SEC on November 26, 2024.

There has been no material change in the Company’s assessment of its sensitivity to market risk since its presentation set forth, in item 7a. “Quantitative and Qualitative Disclosures About Market Risk,” in our Annual Report on Form 10-K for the year ended September 28, 2024, as filed with the SEC on November 26, 2024.

Evaluation of Disclosure Controls and Procedures

Our management, under the supervision and with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of June 28, 2025. The term “disclosure controls and procedures,” means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosures. Based on such evaluation, our principal executive officer and principal financial officer have concluded that as of June 28, 2025 our disclosure controls and procedures were not effective because of the material weakness in internal control over financial reporting described below.

Notwithstanding the ineffective disclosure controls and procedures as a result of the identified material weakness described below, management has concluded that the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q present fairly, in all material respects, the Company’s financial position, results of operations and cash flows in accordance with generally accepted accounting principles in the United States of America.

Material Weaknesses in Internal Control Over Financial Reporting

As previously disclosed, management identified a material weakness related to ineffective information technology general controls (“ITGCs”), including certain controls over logical access and change management. As a result, certain business process controls that are dependent on the ineffective ITGCs or rely on the data produced from systems impacted by the ineffective ITGCs, were also deemed ineffective.

Management’s Remediation Plan and Status

Our management is committed to maintaining a strong internal control environment. In response to the identified material weakness above, management has already taken steps to substantially remediate this material weakness and will continue to take further steps until such remediation is complete. Remediation efforts include ensuring that change management and user access controls are performed timely. Our remediation plan also includes: (i) enhancing processes around reviewing privileged access to key financial systems, (ii) strengthening change management procedures, (iii) expanding the management and governance over ITGCs, (iv) enhancing existing access management procedures and ownership.

As management continues to evaluate and work to improve our disclosure controls and procedures and internal control over financial reporting, we may take additional measures to address these control deficiencies or modify certain remediation measures described above. We anticipate that the foregoing efforts, when implemented and tested for a sufficient period of time, will remediate the material weakness described above.

Changes in Internal Control Over Financial Reporting

Other than continuing to make progress on the ongoing remediation efforts described above, there were no changes in the Company’s internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended June 28, 2025 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

For information on risk factors, please refer to “Risk Factors” in Part I, Item 1A of the Company’s Form 10-K for the fiscal year ended September 28, 2024. The risks identified in that report have not changed in any material respect.