MAMA - NASDAQ

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to MamaMancini’s Third Quarter Fiscal 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, December 12, 2022, and the earnings press release accompanying this conference call was issued after the market closed today. On our call today is MamaMancini’s CEO, Adam Michaels; COO, Matt Brown; and CFO, Anthony Gruber. Before we get started, I’d like to read a disclaimer about forward-looking statements. This conference call may contain in addition to historical information forward-looking statements within the meaning of the 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 CEO, Adam Michaels. Adam, the floor is yours.

Thank you, operator, and thank you everyone for joining us today, I'd like to welcome you to our third quarter fiscal '23 financial results conference call. As this is my first quarter as CEO of MamaMancini's, I wanted to thank my leadership team and our Board for the opportunity to help lead this storied company. I've used the past three months to spend time in the field, speaking with consumers, customers and our sales partners. It is inspiring to hear what our brands mean to them and how they're using them to thrive during the pandemic, and make family time even more special. I'm proud of our team and prouder of the quality and breadth of our portfolio. Thank you. Now back to business. Throughout the third quarter, we continued to execute delivering what we believe is a sustainable return to profitability, further building the foundations for a national deli solutions company, all with the goal of accelerating and expanding our existing portfolio brands while strategically leveraging incremental consumer-driven innovation and accretive near-in 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 channels, addressing the $30 billion plus food service and prepared foods market with our grocer partners. This approach fits well with the significant pandemic-related lifestyle changes that consumers faced in 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 continue to face significant supply chain and labor challenges and are seeking labor efficient, reliable solutions for their hot bar, deli and grab-and-go offerings. As the country continues to evolve stronger out of the pandemic, recessionary pressures will continue to focus our consumers and retailers on high quality, easy to prepare and affordable meal solutions, all of which MamaMancini's delivers on. We feel our offerings position us well for any expected macroeconomic forces. The realization of our goal to shape MamaMancini's into a one-stop shop for these deli prepared food solutions has required a step change in our corporate structure in many ways. My immediate term focus has been and will continue to remain on the continuous improvement of our three C strategy; cost, controls and culture. On the cost front, we have designed and implemented new approaches to cost management, driving noticeable improvements in procurement, manufacturing and logistics management capabilities. As Matt will mention later, our efforts to more efficiently manage labor costs, particularly overtime, outbound logistics and cold storage are realizing noticeable returns, allowing us to reinvest in our business. Commodity costs continue to improve in the quarter as well, providing significant tailwinds for our margin profile. While Q3 gross margins improved over 1,100 basis points as compared to the first half, we believe there is even more opportunity to drive operational efficiencies across both of our facilities. On the controls front, we brought in our new CFO, Anthony Gruber, to help build a strong foundational finance rigor along with the entrepreneurial spirit critical to succeed. We put new financial and operational controls in place to help our teams and provide agility for sales and operations staff. The weekly and monthly cadence of meetings as well as the clear and actionable KPIs we put in place are allowing our teams to communicate easier, make decisions faster with more information. Our quality and consumer engagement playbooks are bringing us closer to the consumer to understand their evolving needs and usages. We're rolling out our new sales broker scorecards so we can all be clear on expectations and track progress to our mutual goals. Our enhanced approach to costing and pricing are already driving margin expansion and we expect to continue to capture this profit growth, while also reinvesting some of this new margin to serve as rocket fuel for our accretive marketing and trade promotions. And last, but certainly not least, building a company culture that is geared for and incentivizes profitable growth. Our people are at the core of what we do and hiring, promoting and retaining talent is paramount to our long-term success. We speak of our vision often to reaffirm, reinforce and remind all of our employees that our one-stop shop deli solution strategy. We have performed full talent assessments for our management, investing in our people and upgrading our talent not only to support today, but to build for tomorrow. Our new CFO is just the beginning. We have already started to build out the finance function. For example, our new Controller started today as well as filling critical needs in logistics and soon procurement. And all of this will not require long maturation. It's happening as we speak. Our team’s enhanced commitment to quality, including my personal favorite, our monthly grandma quality meetings to ensure our products are as good as Mama made them, are already being realized and is what drove us to once again win number one in four categories during the 2022 QVC Customer Choice Awards. The results we have seen in the short time since I started at MamaMancini's has been unprecedented. Supported by strong organic growth as well as growth from our recent acquisitions, we made a sustainable return to profitability and achieved our previously announced goal of $100 million annualized sales run rate, a full quarter earlier than expected. In addition, while it's still very early, preliminarily, the fourth quarter is shaping up well and we are on a healthy trajectory moving into calendar year '23 and beyond. Turning to specific wins in the third quarter, we launched into three new customers and drove double digit new items into existing customers, half of which were through our cross selling of our new T&L products into legacy relationships. Our goal is to grow the average items carried per store several fold to make it easier for consumers to find our products on shelf as well as making our logistics more efficient. Looking ahead to the fourth quarter, we have already successfully sold in and received orders from three new customers and shipped an incremental double digit portfolio of new items into existing customers, further expanding the breadth and depth of our coverage. Overall, we see a bright future for both our top and bottom line results. While we are aware and actively discuss potential headwinds, particularly in recessionary pressures and commodity inflation, we believe we are building a more resilient, flexible organization that is prepared to pivot as needed. In summary, we have seen increasingly strong momentum in recent months. I firmly believe that we are well positioned to build significant additional momentum in calendar year '23 as we drive organic growth, grow the team, expand our capabilities, and seek to become brilliant at the basics. As we continue to fill the deli case, we are evaluating a corporate name change to better reflect our platform company model. This is all with the goal of building sustainable value for our shareholders over the long term. I look forward to further achievements as we seek to realize MamaMancini's significant untapped potential. With that, I'd like to now turn the call over to Anthony Gruber, our recently appointed Chief Financial Officer to walk through some key financial details from the third quarter of fiscal '23. Anthony?

Thank you, Adam. Revenue for the third quarter of fiscal 2023 increased 137% to a record 25.7 million as compared to 10.9 million in the same year ago quarter. The increase in revenue for the third quarter was driven by organic growth across all divisions, chiefly through cross selling as well as by inorganic growth through the acquisition of T&L and Olive Branch. Gross profit increased to a record 6.6 million or 25.5% of total revenues in the third quarter of fiscal 2023 as compared to 2.7 million or 24.4% of total revenues in the same year ago quarter. Gross profit increased in the third quarter back to targeted levels based on normalization of commodity costs, successful pricing actions and strong sales growth. The company continues to identify procurement and logistics efficiencies and cost savings through stronger buying power created through the acquisition of T&L and Olive Branch. Operating expenses totaled 5.1 million in the third quarter of fiscal 2023 as compared to 2.7 million in the same year ago quarter. As a percentage of sales, operating expenses decreased to 19.7% in the third quarter of fiscal 2023 as compared to 24.4% in the same year ago quarter. Operating expenses as a percentage of sales benefited from synergies created through the acquisitions of T&L and Olive Branch. Income from the equity method investment in Chef Inspirational Foods totaled 0.1 million in the third quarter of fiscal 2023. Net income for the third quarter of fiscal 2023 totaled 1.1 million or $0.03 per diluted share as compared to an approximate breakeven in the same year ago quarter. Adjusted EBITDA, a non-GAAP term, increased to 2.1 million for the third quarter of fiscal 2023 as compared to 0.3 million in the same year ago quarter. Cash and cash equivalents as of October 30, 2022 were 3.5 million as compared to 0.9 million at January 31, 2022. Taken in tandem with our credit line, which we paid down by 1.5 million in the quarter and positive 3 million in cash flow from operations in the quarter, I'm comfortable with our liquidity position relative to our near-term requirements. This completes my prepared remarks. I'd like to now turn the call over to Chief Operating Officer, Matt Brown, for an operations update. Matt?

Thank you, Anthony. Operationally, fiscal Q3 was everything we had hoped for and planned. Price increases that were proposed in Q2 were implemented in Q3 as retailers and consumers recognize that the rise in commodity prices had to be passed along and shared equally. Just as the price increases went into effect, commodity prices on our largest purchase proteins fell back from Q2 highs, accentuating the margin tailwinds. This provided for higher margins in the plant and at the market level. As Adam mentioned earlier, I had been tasked with handling the first of the three Cs, cost. Sitting back and watching commodity price normalize in fiscal Q3 was not an option. Our KPIs drive us to keep finding more economical and efficient ways to be productive. To that end, my management team continued to chip away at labor overtimes and was able to pick up yet another point of margin against cost of goods sold, representing greater than 100 basis points in savings over the quarter. Another C that Adam did not mention what is critical to the success inside the operation is consolidation. We've been addressing the need to take advantage of synergies across our business units, helping to gain efficiencies spanning every aspect of the supply chain. In fiscal Q3, we created a dedicated shipping team to focus on consolidating both inbound and outbound freight across our New Jersey and New York facilities. This team was successful in sourcing three new carrier options creating competition that was able to reduce overall freight costs by 200 basis points in fiscal Q3. Another consolidation focus during the quarter was on our third party storage. As MamaMancini's Holdings is first and foremost a manufacturer and marketer of deli solutions, we recognize that we currently leverage the expertise of others when it comes to cold storage. We have utilized multiple locations to hold raw materials and pre-shipped finished goods in an effort to maximize our production capabilities in our plants. However, the saying too many chefs in the kitchen is fitting when recognizing that spreading products across multiple sites can be counterproductive. Fiscal Q3 began the process of consolidating these third parties down from six to four strategic locations, eliminating additional storage costs that were not creating value. We continue to research our cold storage options, including, but not limited to, investing in a centralized facility between the business units that we would control. Our dedicated costing models have empowered the sales team to make smarter decisions with regards to pricing products to our retailers that not only reflect fair perceived value to shoppers, but also provide margin to invest back to help promote our products and keep us top of mind. Our East Rutherford pricing models are nearly complete and we hope to take this learning to Farmingdale over the next quarter. Finally, in Q3, I took our management team to PACK EXPO International in Chicago where we walked the show in a continued effort to find better technology to further increase the plant's efficiencies. We came away with multiple opportunities and started putting ROI documents together that will be addressed with the Board over the next coming weeks. That does conclude my remarks. Before we begin our question-and-answer session, I'd like to turn the call back to Adam for some closing remarks. Adam?

Thank you, Matt. The significant revenue growth we saw this quarter reflects our transition to a national deli solutions company, a vision I outlined on our last earnings call. Our profitability, which certainly benefited from significant sequential commodity cost improvements and successful pricing actions, was concurrently driven by a keen eye on cost controls and synergy realization. As we move through the holiday season and into '23, I anticipate the third quarter will have marked the beginning of a sustainable return to profitability for MamaMancini's as we prepare to embark on the next leg up on our growth trajectory. With that, I'll turn it over to the operator to begin our question-and-answer session. Operator?

Thank you. Ladies and gentlemen, at this time, we will be conducting a question-and-answer session. . Our first question comes from the line of Howard Halpern with Taglich Brothers. Please proceed with your question.

Congratulations, guys. Great quarter. Just a great quarter.

Thanks, Howard. Team effort.

In terms of -- I guess what you put in place I guess with the information and the controls, how have you seen I guess your employees evolve into becoming more productive, inquisitive and getting feedback from the end customers?

Yes, I think it's been great. So I think what's happening is winning helps. So it's a lot easier when you're winning. The team's inspired both the operations team both in Farmingdale and East Rutherford. The sales team, obviously it's easier to sell in when you have a product that's moving with better velocities, getting greater distribution. Inside in our sort of main corporate offices, people are excited. They're enjoying -- they liked what they see. The opportunity to actually cross sell different products, so for all intents and purposes, we have sort of doubled the portfolio, which allows us to sell in multiple products to our customers. So overall, I think we feel great. I really do believe that there's a lot of excitement and the best is yet to come.

And in terms of increasing the number of products per customer and per store, are you looking at what the customer needs are or are you focusing on expanding? I know your Northeast and Southeast and a little bit less in the Midwest and West. Is there any push to get Midwest and West, or you just really want to get those SKUs out to new and existing customers and increasing that?

Yes, so a couple of things. So the first one is, we're national. So a number of our club customers and others were national. I know that we got a big West Coast customer, actually, that's selling in now. So we sold them. We got our first orders for Q4, which I hope to share at the next meeting. I will share at the next meeting. So definitely from a national perspective, we're there. To your other question, what I think has been great is we have a great reputation in the field. So Dan Mancini, Dan is literally the guy going to many of these calls and there's nothing like Dan talking about MamaMancini's products. We're good listeners. We're good service. So another thing, credit to Matt and his team. The service levels that we provide are great. So it's really easy for a customer that -- I'm going to make it up, say they already have our meatballs or our sausage and peppers. They know we have quality. They know we have service. It's, hey, by the way, do you have some chicken or do you have some grilled vegetables or do you have some paninis? We now have all of those. We didn't have them before? So that's how we're getting it in. The customers see the quality, see the service and quite honestly, it's easier for them. If they make one phone call to fill the entire deli case, that's much easier than having to call 25 people to do that. And that's the vision. That's our strategy. And it's working.

And are you seeing that happen even faster than what they want from you in terms of their -- like you talked about their labor supply and labor shortage? So are you seeing things evolve even faster than maybe a year or so ago?

Yes. So I've come in three months in, so I'm not going to tell you what I thought a month ago, a year ago, but what I think we're seeing is that we're being responsive. So you brought up a great point. So we historically or in the past have been selling these kits, which make it -- allows the customers’ labor to be doing some of the work. As the labor got tighter, we are actually responsive and we created our Meals for One program, which allows them really no labor on the customer side. So what I think is really special about our sales team, we're good listeners, understanding different customers want different things. And the beauty is we're able to provide those things, the needs of the customer. So I think the word is agility to our sales force and equally important to our operational team. So it's the balance, and Matt and I have these conversations all the time around how do you balance agility and meeting the needs of our customers with managing complexity, right? In a perfect world, we'd sell 2.4 ounce meatballs or grilled chicken 24 hours a day, that would be the best from an operational standpoint. But obviously, we don't want to do that. We want to meet the needs of our customers. So it's that balance between meeting the needs of our customers with the efficiency that we're trying to get from an operational standpoint.

Okay. And from just the overall -- the G&A expense, are you happy with where that is and it might just increase incrementally as you are able to leverage up well past that $100 million mark?

Yes. I think the word that we all love around the office is absorption. So as we're growing more and more top line revenue, that's allowing us to do one of two things. It allows us to drive down our SG&A or G&A a little bit. But then equally, it allows us to build capabilities. I am extraordinarily passionate about building capabilities within the organization. I've been here three months. You already see that with Anthony, our new CFO, who is doing an amazing job. I mentioned today, we just hired a Controller. So the goal that we have as a leadership team is to drive top line revenue, that's going to allow us to invest additional capabilities in the G&A level without seeing it actually go up on a percentage basis.

Okay. And one last one. How have some of I guess the initial tests gone with the Meatballs in a Cup for convenience stores and other customers?

Yes, it's going well. So it's actually wonderful. So we've mentioned in the past that we had a couple of tests going. We actually got another test of a major grocer that's in place. We actually just got another actually full authorization, it’s not even a test rollout to another major grocer. So we're seeing that which is wonderful. But equally, I think it's important, we're doing it very intentionally with the right cadence, because we're learning a lot. So what we've been able to do is we've been getting feedback from both customers and consumers. One of the things that we heard back is that we wanted a longer shelf life. And we were able to actually do that, because we didn't just go all the way out full bore, we were able to identify those pieces of feedback and we've actually already addressed it and have a solution for it. So now we're able to go out with a much longer shelf life, customers are really loving that. So what I’d say is, like where we are. I do believe it's something that's going to be big for 2023. But we're going to do it very intentionally such that we roll it out, and we have the right product for our consumers.

Okay. Well, thanks. Keep having the team and you keep up the great work. And I'll hop back in.

Thanks so much, Howard.

. Our next question comes from the line of Chris McCampbell with Raymond James. Please proceed with your question.

Congrats on the quarter, Adam. With the color on orders that you've given for the fourth quarter and continual improvements in cost, could you expect a sequential growth in earnings for the fourth quarter?

Yes. So I think the fourth quarter, just first of all, is historically a softer quarter on the top line. So it's a little bit of seasonality. We do feel good. We continue to grow customers. So I do feel that we're going to be able to achieve our goals of this $100 million run rate. So I feel good on the top line. Bottom line, I feel equally as good. So we mentioned earlier a number of price increases. They're actually more coming in January that have already been sold in. Matt and his team's doing an amazing job from an operational standpoint. Freight, incredible. We hired a new person, a new woman in freight and she's really doing an incredible job, more than 100 basis points of improvement already in freight. Matt mentioned the overtime and the labor improvements. So I actually still think we're still staying in line with what we said, which is mid 20s gross margins and high single digits for -- probably mid to high single digits for the bottom line. I think we could continue to do that. We're seeing -- like I said earlier, I see more opportunity ahead than I do behind.

Okay. Thanks, again. Great job.

Thank you.

There are no further questions in the queue. I'd like to hand the call back over to Adam Michaels for closing remarks.

Thank you, operator, and thank you again to each of you for joining us on today's earnings conference call. We look forward to continuing to update you on our progress as we strive to deliver value to our shareholders and execute upon our vision of a national one-stop shop deli solution provider. Happy holidays to all. Thank you.