MAMA - NASDAQ

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to MamaMancini's Second Quarter 2023 Earnings Conference Call. During today's presentation all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. This conference is being recorded today, September 14, 2022, and the earnings press release accompanying this conference call was issued after the market close today. On our call today is MamaMancini’s Chairman, Carl Wolf; CEO, Adam Michaels, COO, Matt Brown; and CFO, Larry Morgenstein. Before we get started, I’ll read a disclaimer about forward-looking statements. This conference call may contain in addition to historical information, forward-looking statements within the meaning of federal securities laws regarding MamaMancini’s. Forward-looking statements include, but are not limited to, statements that express the company’s intentions, beliefs, expectations, strategies, predictions or any other statements relating to its future earnings, activities, events or conditions. These statements are based on current expectations, estimates and projections about the company’s business based in part on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may and are likely to differ materially from what is expressed or forecasted in the forward-looking statements, due to numerous factors discussed from time to time in this report and in other documents, which the company files with the U.S. Securities and Exchange Commission. In addition, such statements could be affected by risks and uncertainties related to factors beyond the company’s control. Matters that may cause actual results to differ materially from those in the forward-looking statements include, among other factors, the loss of key management personnel, availability of capital and any major litigation regarding the company. And finally, this conference call contains time-sensitive information that reflects management’s best analysis only as of the date and time of this conference call. The company does not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events, information or circumstances that arise after the date of this conference call. At this time, I’d like to turn the call over to Chairman, Carl Wolf. Carl, the floor is yours.

Thank you, operator, and thank you, everyone, for joining us today. I'd like to welcome you to our second quarter 2023 financial results conference call. Earlier this summer, we issued a press release announcing that as of September 6, I will be passing the torch as CEO of MamaMancini's to Adam Michaels, retaining my role as Chairman. In a similar vein, earlier this week we announced the appointment of experienced financial executive Anthony Gruber as CFO effective September 19th. This is a decision the Board and I have been discussing for some time. We both felt that the timing of this decision could not be better as MamaMancini is rapidly evolving for what was a single brand, OTC listed regional firm into a NASDAQ listed national platform company spanning an increasing number of award-winning brands. It has truly been a privilege to spend the last twelve years leading the MamaMancini family to where it stands today. I am incredibly proud of all that we have accomplished during the past decade at this incredible company and I look forward to providing continued guidance for my role as Chairman of the Board of Directors. As we pass the CEO torch to Adam, I am fully confident that I am handing it to an experienced leader who can truly take MamaMancini to the next level. With that, I am pleased to introduce MamaMancini’s CEO, Adam Michaels. Adam, please go ahead.

Thank you, Carl. It is an honor to be here with you all today and I could not be more excited with the opportunity facing MamaMancini’s. For those of you who have not had the opportunity to meet, I’d like to take a moment to introduce myself. Earlier this month, I was privileged to take the position of CEO at a critical inflection point in the maturity of MamaMancini’s. By way of background, I have spent the last 15 years in the food & beverage industry, a space I am incredibly passionate about. Most recently, I had the great fortune of working and learning at Mondelez International, the makers and bakers of beloved brands such as Oreo, Ritz, Tate’s Bake Shop and Sour Patch Kids. Over the past nine years at Mondelez, I was lucky enough to work across categories and functions, most recently helping to identify, acquire and shepherd our newest and most innovative businesses. I am excited to take this experience and directly apply it to the equally exciting and innovative deli category into MamaMancini’s. As Carl alluded to earlier, we are building the foundations for a national deli solutions company. This will accelerate and expand our existing portfolio of brands while strategically leveraging incremental consumer-driven innovation and accretive mirroring acquisitions to fill out gaps in our portfolio. Our vision is to become a one stop shop for prepared foods for grocery, mass, club and convenience stores. This approach fits well with the significant pandemic-related lifestyle changes that consumers faced over the last three years with many focusing more than ever on quick, clean and fresh meals, made with better ingredients at a price more affordable than eating out. On the other side of the counter, retailers today continue to face significant supply chain and labor challenges and are seeking labor-efficient, reliable solutions for their hot bar, deli and Grab-n-Go offerings. Realizing that I only took this seat seven short days ago, I have had the fortune to spend the past few months speaking with my fellow Board members understanding both the parallels and differences of the deli prepared foods category and iterating on an enhanced vision for our business. Even in this short amount of time, supported by Dan Mancini’s and his grandmother Anna and MamaMancini’s recipes and earlier conversations with retailers, we can truly envision MamaMancini’s as a one stop shop for our deli prepared food solutions. This will require a step change in our corporate structure in many ways. To start, we will continue to build out our leadership bench and bring new capabilities to enhance the culture at MamaMancini’s. My first hire, Anthony Gruber is an excellent example bringing strong foundational finance rigor, along with the entrepreneurial spirit critical to succeed. We are already starting to putting new financial and operational controls in place to help our teams and provide agility for sales and operation staff and we must drive even greater cost synergies throughout our business processes where these savings will be the rocket fuel for our future growth. I realize that this is no small feat and it certainly won’t be done overnight, but I am confident that we truly have a differentiated advantage and are well positioned to achieve this vision in partnership with our retailers and service of our consumers. Now, turning to the quarter, Q2 was highlighted by our strategic acquisition of a 24% minority interest in Chef Inspirational Food or CIF for $1.2 million. They are a leading prepared foods sales agent, with our subsidiary T&L Creative Salads, being their largest partner providing us a higher degree of control and potential to bring the effective margin profile for T&L’s products in line with that of MamaMancini’s. As a reminder, we retain the option to acquire the remainder of CIF at a set price offering significant optionality and upside potential from CIF acting as our in-house sales agent as we grow both organically and inorganically. During the quarter, we saw record revenues for MamaMancini’s, both organic and inorganic supported by healthy growth from our recent acquisitions bringing us about in line with Carl’s previously announced goal of $100 million annualized sales runrate by year end. While I started at MamaMancini’s one short week ago, I have already been sharing with the Board, my 30, 60, and 90 day plan, as well as my focus areas, all in service to growth. Our three Cs, cost, controls and culture, will provide a structure and framework needed to be laser focused on the most critical improvement opportunities. Our cost focus will provide the rocket fuel for growth. Our financial and operational controls focus will make us fit for growth and our culture focus will provide us the design for growth. Over the next few months, you’ll be hearing more from me and Anthony on these three Cs. To address the specific headwinds we faced this quarter, we have already been aggressive in seeking out new ways to strengthen our firm-wide margin profile. For example, we have instituted a new pricing process that more accurately and rapidly tracks input costs including commodity cost to ensure that every single sale we make is meeting our required margin profile. In addition, we are conducting a thorough analysis of our suppliers and have already identified several areas where we have the potential to realize significant cost savings. In summary, while we have seen some margin headwinds in calendar year 2022, we are well positioned to build significant momentum in calendar year 2023 as we drive organic growth, grow our team, expand our capabilities and seek to become brilliant at the basics, all with the goal of building sustainable value for our shareholders over the long-term. I look forward to driving new momentum towards the realization of MamaMancini’s significant potential. With that, I’d now like to turn the call over to Larry Morgenstein, our Chief Financial Officer to walk through some key financial details from the second quarter of fiscal 2023. Larry?

Thank you, Adam. Revenue for the second quarter of fiscal 2023 increased 89.4% to 22.9 million, as compared to $12.1 million in the same year ago quarter. The increase in revenue for the second quarter was primarily driven by the December 21 acquisition of T&L Creative Salads Inc. and Olive Branch LLC, as well as organic growth by adding new products with existing customers, particularly in club stores. Gross profit totaled $2.7 million, or 11.9% of total revenues in the second quarter of fiscal 2023, as compared to $3.4 million, or 27.9% of total revenues in the same year-ago quarter. The margin compression was caused by inflation of raw materials, packaging, and freight costs, which outpaced price increases, as well as lower margins in the T&L Creative Salads and Olive Branch LLC business lines, partially offset by the lower overhead of the acquired businesses. Operating expenses totaled $3.6 million in the second quarter of fiscal 2023, as compared to $2.8 million in the same year-ago quarter. As a percentage of sales, operating expenses totaled 15.6% in the second quarter of fiscal 2023, as compared to 23.1% in the same year-ago quarter. Operating expenses in the second quarter increased mainly due to transportation rate increases, as well as professional fees and payroll related to the acquisition of T&L Creative Salads. Net loss for the second quarter of fiscal 2023 totaled $743,000 or $0.02 per diluted share, as compared to a net income of $432,000 or $0.01 per diluted share in the same year-ago quarter. Adjusted EBITDA, a non-GAAP term, totaled a loss of $271,000 for the second quarter of fiscal 2023, as compared to an adjusted EBITDA of $829,000 in the same year-ago quarter. Cash and cash equivalents as of July 31, 2022 were $1.9 million, as compared to $0.9 million at January 31, 2022. Of note, our GAAP financial results year-to-date have reflected significant acquisition-related and non-cash expenses. Taking a look at our cash flows, operating activities provided $296,000 in net cash in the six months ended July 2022 as we continue to realize synergies from the acquired companies and implement our new measures company-wide to improve margins, I believe we are well positioned to return to GAAP profitability. This completes my prepared remarks. I now like to turn over the call over to Chief Operating Officer, Matt Brown for an operations update before we begin our questions and answer sessions. Matt?

Thank you, Larry. On the operations side of the business, fiscal Q2 2023 was anticipating volatile commodity and transportation input costs, proactively adjusting customer pricing and driving operational efficiencies in the plants. At our New Jersey facility, we continued to proactively track commodity inflation and adjust our business with our supply partners accordingly. While inflation continued to be volatile during the quarter, our procurement team did a great job working with our strategic suppliers to keep prices at similar levels to Q1, no small fee. I commend our procurement team for working smart and hard to manage costs and thereby allowing us to more strategically manage our pricing. In fiscal Q2, we saw the full scale introduction of our long awaited Meatballs in a Cup through initial airings on QVC. As a reminder, our Meatballs in a Cup is a game changer for our business as it allows us to enter completely new incremental occasions for our consumers and new incremental retailers, particularly in the fast-growing convenient store channel. The shows on QVC were sellouts and we are shipping a truckload a week over the next three weeks to accommodate the booked sales. As Meatballs in a Cup and Meals for One introduced in Q1 continue to grow, we’ve already put a plan to paper to expand our dedicated production space for these items by creating additional space in our current packaging room. As expected, the more we produce these items, the more we improve our labor efficiencies. Over Q2, we brought down that labor cost per unit on these items by 20% and hope to see this improve even more as we introduce technology to meet the increased demand. At our Long Island facility, we experienced a similar start to fiscal Q2 as seen in New Jersey focusing efforts on managing commodity prices and transportation inflation. We were happy to see a noticeable price softening in our largest commodity ingredient chicken allowing us to enter the third quarter with tailwinds to our margin profile. Plant in Long Island also made some improvements during Q2 with regards to SQF or Safe Quality Food protocols as we began to align the two facilities towards same best practices across the company in anticipation of next year’s food safety audit. As Adam mentioned, we’ve begun the process of updating our costing models on every SKU produced through the two facilities. What the past 18 months have taught us is that the world has changed and we need to be more proactive in how we respond to adjustments in costs associated with commodities, packaging and other components that pertain to our cost of goods manufactured. The models now update with real-time cost changes in an effort to provide us revised recommended pricing and prices to our trade to ensure that we maintain the margins necessary for success. Partner with our internal sales team and external customers to analyze, communicate, and implement these price changes in a transparent and proactive way. I look forward to working with Adam and Anthony as we move forward with the vision of becoming the one stop shop for best-in-class deli solutions. With that, I’ll turn it over to the operator to begin our Q&A session. Operator?

Yes. Thank you, so much. I am super excited and honored for the opportunity to lead MamaMancini's. I see tremendous opportunity going forward, continue to see the excitements that the team is enjoying and I believe that there is tremendous opportunity going forward. With any questions, please reach out to Lucas