MAMA - NASDAQ

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to Mama's Creations' Third Quarter Fiscal 2025 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 16, 2024, and the earnings press release accompanying this conference call was issued after the market close today. On our call today is Mama's Creations' Chairman and CEO, Adam L. Michaels; and CFO, Anthony Gruber. 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 meanings of federal securities laws regarding Mama's Creations. 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 the company's 10-K and other documents, which the company filed with the US 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. In addition, throughout today's call, the company may refer to adjusted EBITDA, a non-GAAP financial measure, which it believes provides helpful information to investors about the performance of the business on an ongoing basis. A reconciliation of adjusted EBITDA to its most directly comparable GAAP financial measure is included in today's earnings release, which is available on the Mama's Creations website under the Investors tab. 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 and CEO, Adam L. Michaels. Adam, the floor is yours.

Thank you, operator, and thank you to everyone for joining us today. I'd like to welcome you to our third quarter fiscal '25 financial results conference call. The third quarter was highlighted by 10% broad based revenue growth as we completed CapEx investments in our Farmingdale facility to double our chicken capacity, added world class executive leadership and a continued focus on our 4 Cs cost, controls, culture and catapult. Our goal to emerge as a leading One Stop Shop Deli Solution on a national scale is grounded in a purposeful, persistent and patient strategic plan to capture what is a generational change in consumer preferences. Rising restaurant prices and inflation are bringing consumers back to the grocery store, but with higher expectations. They want an experience and to be excited about quality products across formats and flavors. In turn, grocery retailers have had to pivot quickly and differentiate to be able to cater to customers, including the introduction of new deli prepared meals, the shelf space of which continues to expand. While Circana forecasts volume growth in total retail food and beverage next year to be between 0% and 1%. Deli prepared is growing at more than 5% today and Mama's Creations is growing around 3x that fast consistently and methodically gaining market share. So we are all in the right segment of the market with the right products at the right time. With this kind of growth, Prepared Foods have become the most important perimeter category for retailers and wholesalers. In a recent survey by Supermarket News, 66% of retailers and wholesalers said that they plan to increase their assortment of Prepared Foods in the year ahead more than any other perimeter department. 38% of retailers and wholesalers said they plan to expand the space of their Prepared Foods, which was the most of any of the fresh departments. The plans to expand Prepared Foods can be explained very simply. It is grounded in the increasing sales and profitability of these areas of the store. The opportunity we are facing is clearly significant. We're in the right place at the right time and with the right product portfolio. The Mama's Creations product offering is, in my opinion, second to none in variety, quality and service. Grocers are recognizing that. Since I joined as CEO in September of 2022, we have refocused to address this incredible opportunity. We formed an initial 3C strategy to improve our costs, controls and culture, areas that in my opinion required the most attention. We rebuilt and strengthened the foundations of our business and became brilliant at the basics. We methodically addressed the biggest pain points across each of these areas and implemented key operational KPIs under the mantra of what gets measured gets improved. The first was cost. Our gross margins were 11.9% in the quarter ending July 31st, 2022, with significant potential that needs to be unlocked. The path to our targeted high 20% gross margin profile took countless small improvements throughout the organization. From step changes in freight and procurement efficiencies to implementing processes to reduce labor over time, our operations run much more efficiently today than ever before being able to successfully navigate as we have recently seen with historically high chicken prices commodity headwinds that may come our way. The improved margins and cash flow are being directly and immediately put back into further investment in CapEx such as the grills we installed in our Farmingdale facility, doubling chicken capacity and increasing labor efficiencies through reduced overtime, creating a cycle of higher and higher gross margins. Beyond COGS, we're building new capabilities in-house, which has allowed us to wean ourselves off of the higher professional services and support we relied on in the past. Second were our controls. I've been sharing with you over the past year the successful implementation of our NetSuite ERP system, providing unparalleled visibility to our business, improving pricing, margins, inventory management and so much more. Just this quarter, we added new modules to our NetSuite system, including a warehouse management system, which is already delivering value, driving our inventory to its lowest level since our team came together, freeing up even more cash flow. New controls and quality are strengthening our policies and procedures, making us even prouder of our grandma quality manufacturing. Just recently, we added X-ray technology to our existing metal detection and are installing cutting-edge PCR testing to ensure that what comes into our plant is as safe as possible. I want to share my congratulations to our teams across East Rutherford and Farmingdale facilities for successfully navigating our third-party audits this year, including two industry recognized SQF audits as well as two major customer audits. With scores of 97 and 299s, we're incredibly proud of their accomplishments. That said, my mother did ask where that one outstanding point went. To further focus on our first 2 Cs, we recently completed the build out of our industry leading senior team. Chris Darling, our new Chief Commercial Officer brings over 20 years of experience in executive leadership from a storied career in the Deli where he led world class commercial organizations at industry leading firms such as Boar's Head, HEB, Ahold and Albertsons. Most importantly, Chris knows how to build a national brand and particularly in the Prepared Meals Solution Space. He has already picked up the ball and is leading our fiscal year '26 planning. Hold on tight, I'm not sure Chris has ever planned anything small. Chris joined Skip Tappan, our Chief Operating Officer, an end-to-end supply chain leader bringing over 30 years of experience with Gordon Food Service, Walmart, Campbell Soup and Procter & Gamble. In his first few weeks here, Skip has already had a deep impact on our business, bringing much needed structure to our staffing models to minimize overtime, which we are now moving from two extended shifts to a three shift model, as well as implementing rigorous project management and KPIs to our grilling operations and implementations. Most importantly, Skip has a great attitude and a hands-on approach to management, which has ingratiated himself quickly to the team. With our world class leadership team now in place, we are better positioned to fully optimize operations, execute on our catapult growth strategy and begin to more rigorously evaluate, acquire and integrate potential future M&A opportunities. I cannot stress enough the quality of our team that we have for a company our size. We are truly blessed. The third C was culture, where we implemented formalized processes and a companywide culture committee to ensure we are doing right by our employees at every level of the organization. Our team has a passion for learning and everyone on our team is striving to do more. We just rolled out our second annual employee engagement survey and are excited to see the results next month. Our focus on culture is driving more production efficiency, higher retention and higher quality of our products because we're all pulling the wagon together. With the successful evolution of our finance operations and HR organizations underway and financial results reflecting this, we have put in place the processes and culture to begin to accelerate growth. At our Investor Day in East Rutherford in February, we announced the introduction of a fourth C, catapult, representing the investments in trade promotion and marketing that we are making to grow the business profitably at a faster rate. Our continued success demonstrates with some help from new stores, new items and a little bit of trade rocket fuel what type of growth is possible. With the hiring of Chris Darling, the build out of our sales leadership team, our first catapult lever is now complete. The sales team now works more seamlessly with their operations counterparts and stronger demand and supply planning is enabling enhanced service levels and lower logistics costs. I am proud of how our new sales team has come together and we are actively seeking out additional talent in areas that can step change our growth. The team delivered this quarter in spades, nicely balancing across our three growth pillars, driving average items carried at existing customers such as four new items at BJ's driving velocities of existing items such as the successful Publix Pub Sub program and getting into new doors such as our first orders at Walmart and our National Buy at Costco, opening up the Texas region and the Southeast region for the first time. Coming from a humble Northeast authentic Italian meatball company, in two short years, meatballs are no longer our biggest item sold. And as of this quarter, over 47% of our sales are west of the Ohio River. Our One Stop Shop Deli Solution is not a mantra or a tagline for a stress ball. It is our new way of working. The second catapult lever is trade promotion, seeking to accelerate the velocities of our existing SKUs by driving trial and larger baskets, combo buys with complementary products, multi buys of our family of products and print and online circulars are just a few of the recent tactics we have used to deliver growth we have seen this year. This quarter saw our trade spend nearly triple sequentially, anchored by strong ROI programs at Publix with their Pub Sub program as well as digital coupon programs at BJ's. BJ's is a great example of a strong program ROIs, but even stronger stickiness. After our successful digital promotion, our weekly volumes have consistently stayed nearly 40% higher than the preprogram volume, even though we have stopped promoting. On Instacart, another example, our ROAS, which is return on advertising spend, is consistently over $5 and only getting better. While we are happy with the revenue part of a circular promo, we find an added benefit with this type of promotion. The stores are more vigilant about ensuring our products are on the shelves at all times, driving even further velocity. The third lever in catapult led by Lauren Sella, our CMO, is marketing, which saw a 75% increase in investment this quarter, reflecting return to norms and correcting historical underinvestment in this area. We had a significant step-up in media investment in Q3, supporting with search the rollout of our new Walmart items as well as our BJ items. In addition, we invested in promoting our 3-pound jumbo meatball sleeve as part of the Costco National Buy as well as marketing our MamaMancini branded meals in Publix stores. This media was precisely targeted to Costco shoppers in the National Buy regions as well as shoppers around the Publix locations through social, programmatic and search campaigns. With the Costco National Buy, we also ramped up our Instacart presence and an impressive 70% of the sales through the platform in the quarter were new to brand, helping to bring in new buyers to our portfolio. We're also thrilled to announce that Mama's is being recognized by the industry for our innovation, having received two additional traded innovation awards. Our On-the-Go Cups won the Prepared Foods' Spirit of Innovation Awards in the alternative channel category and our Retail Paninis received the Convenience Store News 2024 Best New Product Award in the deli category. These awards not only drive awareness of those specific products, but also bring additional valuable trade visibility to Mama's Creations. As we discussed last quarter, we're continuing to drive our convenience store channel penetration. In October, we are first time exhibitors at the National Association of Convenience Stores, NACS, Trade Show in Las Vegas. We saw a lot of positive response to our offerings and are continuing the discussions with potential retailers. We're investing mid-single-digit millions in CapEx this year, already paid for and funded from cash flow from operations, with the goal of improving automation at both of our production facilities, while concurrently building new in-house capabilities earlier in the value chain. These investments paired with ongoing operational improvements have the potential to offset some of the commodity pricing fluctuations and ultimately move our gross margins into the low 30% range over the long-term, while concurrently growing our trade promotion investments from low-single-digit percentage of revenue today towards our long-term goal of 10%. After six long months of construction, I can now say our Farmingdale facility is construction hat free. I'll be the first to tell you that it did not go as planned. And we all learned a lot about town permitting, limited pride equipment providers have in their trade and the quality of their installations. While there are so many things I'm excited about with the recent hiring of Skip, it's the structure and project management that Skip will bring to our next CapEx expansion that makes me feel even better about what's to come. But as they say, it is all behind us and we continue to march forward. We now have two new grills in our Farmingdale facility. This doubles our chicken capacity, which will allow for higher labor efficiencies through reduced overtime, as previously our chicken rolls were running effectively 20 plus hours a day. We also were able to upgrade our existing rolls with new parts, which have increased their reliability substantially. In addition, the installation of additional chicken processing equipment insources key value added services that are previously outsourced, lowering our cost of goods. And in the case of chicken, it has the potential to lower our costs by close to a full dollar per pound and improve margins of what remains a difficult commodity environment with chicken prices still nearly 50% higher year-over-year. We have been learning how to effectively trim our chicken, balance sales of the various chicken output cuts to maximize how much we can trim and expect it to start to make a more meaningful impact in our margin profile early next year. That being said, nothing worth doing is easy and the installation of these new chicken grills were no different. As previously discussed, the conclusion of significant construction at Farmingdale bled into the first half of the third quarter. While it is now complete, that pain impacted margins by about 400 basis points in the third quarter with all construction now completed. The team has already done a great job bouncing back and results from November have already seen this impact being fully reversed. These CapEx investments are incredibly important given the commodity pressures we're seeing today. From jumbo chicken breasts that were on the market for about $1 per pound in January to a recent high over the summer of $2 a pound, it is now stabilizing around $1.50 a pound still nearly 50% higher than prior year at this time. We've been incredibly proactive and aggressive in addressing these trends through the aforementioned CapEx investments, labor management improvements and successful pricing actions across the board with only a select few necessary pricing actions remaining, which will help us to weather the worst of future storms. While we may be fairly differentiated in our ability to maintain relative margin strength in this unprecedented commodity cost environment, our retailer partners are well aware of these pressures and have an understanding of what is needed to combat these industry-wide headwinds. As we continue to improve and build on our 4 Cs, I'm incredibly proud of our team's accomplishments and believe we are only at the beginning of our journey. In 2023, we built the foundation of a more resilient and flexible organization. And now in 2024, we are investing in the CapEx upon this foundation to position us for a high level of purposeful and profitable growth in the year ahead as we strive to create sustainable long-term value for our fellow shareholders. With that, I'd now like to turn the call over to Anthony Gruber, our Chief Financial Officer to walk through some key financial details for the third quarter of fiscal '25. Anthony?

Thank you, Adam. Revenue for the third quarter of fiscal 2025 increased 10% to $31.5 million as compared to $28.7 million in the same year ago quarter. The increase was largely attributable to successful pricing actions as well as volume gains driven by increased demand, successful trade promotions, same customer cross selling of new items and new customer door expansion. While we continue to take appropriate pricing actions, still over 90% of our growth is volume driven. We have continued to gain share in all nine quarters since this team has been together. Gross profit totaled $7.1 million or 22.6% of total revenues, in the third quarter of fiscal 2025, as compared to $8.6 million or 30.1% of total revenues in the same year ago quarter. The difference in gross margin was primarily attributable to significant commodity cost increases from historical averages as well as non-recurring impact from construction surrounding the now completed installation of strategic CapEx projects at the company's Farmingdale facility. Management estimates construction pressures negatively impacted corporate margins by approximately 400 basis points with additional pressures coming from chicken pricing. These construction challenges are now firmly behind us as we saw a step change improvement in our preliminary unaudited November gross margin profile fully reversing the construction headwinds seen in Q3 with significant room for further growth. Operating expenses were $6.6 million in the third quarter of fiscal 2025 as compared to $5.9 million in the same year ago quarter. As a percentage of sales, operating expenses were 20.8% as compared to 20.7% in the same year ago quarter. Operating expenses as a percentage of sales were relatively flat driven by further freight efficiency improvements of an additional 90 basis points versus prior year, offset by a 75% increase in marketing spend versus prior year, an area of historical underinvestment to help drive repeatable and profitable growth. Net income for the third quarter of fiscal 2025 totaled $0.4 million or $0.01 per diluted share as compared to net income of $2 million or $0.05 per diluted share in the same year ago quarter. Third quarter net income totaled 1.3% of revenue as compared to 7% in the same year ago quarter. Adjusted EBITDA, a non-GAAP measure, totaled $1.7 million for the third quarter of fiscal '25 as compared to $3.5 million in the same year ago quarter. Cash and cash equivalents as of October 31st, 2024 totaled $9.3 million as compared to $11 million as of January 31st, 2024. The change in cash and cash equivalents was primarily driven by $5 million in capital investments and $2.5 million of debt pay down year-to-date, partially offset by working capital improvements as third quarter cash flow from operations increased 23.7% year-over-year. As of October 31st, 2024, total debt stood at $6.3 million. This cash war chest coupled with our commercial lines of credit, reduced debt and a stronger balance sheet is preparing us well for whatever inorganic opportunities proactively or reactively come our way. Looking ahead, we believe that our normalized gross margin profile not including major commodity fluctuations will continue to hover in the high 20% range. Our long-term goal leveraging strategic CapEx investments, procurement efficiencies and continuous operational improvements would be targeting margins consistently maintained in the low 30% range, while rightsizing our trade promotion investments from low-single-digit percent of revenue today closer to our goal of 10%. Turning to adjusted EBITDA, our long term-goal is to achieve adjusted EBITDA margins in the teens percentage range. This completes my prepared comments. Now 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, Anthony. In summary, the quarter continued our cadence of purposeful and profitable growth with the temporary construction related pressures now largely behind us as of the middle of the third quarter. Looking ahead, there's a compelling and growing opportunity in the deli space as grocery stores invest in Grab-and-Go food offerings to inch into the restaurant territory and inflation pushes consumers towards alternatives. In the past two years, we have built the team and company to become an innovative Prepared Foods leader in what is currently a fragmented market. We have several levers available to drive growth from new SKUs and existing customers to new Tier 1 customers and continued investments in marketing and trade promotion to increase velocities of our existing in-store items. We also believe that supported by our strong balance sheet, attractively priced M&A opportunities in the industry could enable us to become a consolidator in the fragmented Prepared Foods market and emerge as a leading One Stop Shop Deli Solution on a national scale. The fun has only just begun and I look forward to speaking with you all in the year ahead. With that, I'll turn it over to the operator to begin our question-and-answer session. Operator?

Thank you, sir. We will now begin the question-and-answer session for telephone participants. [Operator Instructions] Our first question comes from the line of Ryan Meyers with Lake Street Capital. Please proceed with your question.

Hey, guys. Thanks for taking my questions. As we think about the revenue for the fourth quarter, obviously, traditionally we'll see a step down from the third quarter. Do you expect that trend will continue here in Q4 or are some of the recent customer wins with Walmart and even Costco enough to offset what we traditionally see here sequentially? Really any commentary on Q4 would be helpful.

Thanks, Ryan. Actually, I think the sales team has done an incredible job, trying to fix that. I know historically we did have a little softer in Q4. Some of the things are still there, right? So think of Thanksgiving, people they take our products off-the-shelf for a week, put more turkeys there. Same thing for Christmas time, they take our products off and put more hams there. But what we're seeing is actually the sales team did a great job at getting some incremental rotations. I just mentioned earlier that our trade programs are getting a lot stronger, a lot deeper, a lot broader with respect to seeing the same Publix Sub Pub program. We're doing it again this in Q4. Definitely we've had more of these rotations of Sub Pub programs than we've had in the past. So maybe a little bit, but I certainly feel even more confident in Q4 this year than I did last year because of the great work the sales team is doing. And then equally I have to say the operations team to fulfill this is awesome as well. So I hope to tell you that not as strong as much of a pullback as it was in prior years.

Okay, got it. And then thinking about the gross margins, it sounds like you called out the 400 basis point impact from the construction related costs and the remainder was commodity. Have you guys seen any improvements in the commodity pricing yet? And then as a follow-up to that, when do you think you'll see the full impact to the margin improvement from the recent CapEx project?

Yes. So sort of two questions in there. The first one is, are we done with all the construction stuff? And the answer is yes, absolutely. That impact, we did not see in November already and things are going well there. Commodity wise, it's still tough, but again I got to give credit to my team. So we're talking about so chicken for instance that has come down. So I think when I spoke to you last where if you were looking at the market numbers they're north of $2 Now it's close to $1.50. And I think that there's some slight improvement that could still be there. And then beef prices again equally, right, equally important to us. The team has done a great job at doing some working with our partners. You're seeing some really good top line numbers. That allows us to commit to partner with our suppliers to say look things are going really well here. If I could tell you that we're going to have this amount of volume can you get a better price on your side? And the answer is, yes. So not only do I see the numbers coming down a little bit for us, but because we have a better sense of our business and the business is doing better, we're actually able to capture some better procurement numbers, some better numbers on our costs. So I'm optimistic that Q4 and then going into next year, so Anthony Morello and team are doing a great job. I've spoken to you in the past about possibly looking at contracts for the year, right? These are not financial contracts. These are just actual we're going to take in X amount of chicken or beef for that matter as well. And if we're able to do that our suppliers are able to get us better rates. So I will tell you as challenging the markets are going to continue to be challenging next year and you could read the same stuff I am, potential things that impact tariffs. Obviously that doesn't impact us personally because everything we do is domestic, but that has a knock on effect on people that don't do that, right? Although there are some headwinds there, our team is doing an amazing job preparing for next year and we're already seeing some of the contract conversations that we're having a superior pricing model relative to this year. So I'm really optimistic going forward.

Got it. That sounds good. Thanks for taking my questions.

Thanks, Ryan.

Thank you. Our next question comes from the line of Eric Des Lauriers with Craig Hallum. Please proceed with your question.

Great. Thank you for taking my questions. First one for me, just a bit of a follow-up on gross margins here. So obviously, chicken prices, commodity prices overall, headwind in the quarter, backing out the construction headwinds about mid-20s gross margins. Do you need commodity prices to improve to get you back to your high-20s gross margin target or some of these things that you just mentioned, contracts and other areas of efficiency, can those in and of themselves get you back to that high-20s target? And then just on the kind of new longer term target of the low-30s, just wondering what might need to happen to get you into that range? Thanks.

Yes. So first, Eric, I tell you that holidays are coming up. So as a gift, if you could get me lower commodity prices, I'm all for that. So I won't I'll totally accept that. That said, we do not need commodity prices to go back down to last year's numbers to get us to the mid to the high-20s that we've always been talking about. Again, the beauty of bringing Skip in and Chris and all these new folks is the ability to have bringing great ideas and to give us me included a release valve so I could do other things. I'll give you a great example. So Steve in Farmingdale and our team has cut SKUs another 100 SKUs down to we're now down to 250 SKUs in our Farmingdale facility. That was a total of 0.5 point of revenue of all those numbers. But we're seeing actually two-thirds of that revenue flowing back into our existing products. So I'm able to have significant improvement in operations lowering COGS, lowering our costs, increasing our efficiencies in labor all by almost for free. That's the type of focus. Those are the types of things and I can give you 10 more that are going to help us continue to move that gross margin up. Would I love more commodity tailwinds? Absolutely. But do I need them for us to be successful in our high-20s? We do not.

Thank you. That's very helpful. And then just in terms of the new longer term targets in the low-30s, I guess, this kind of parlayed into the next question I have. Just wondering if you have any other CapEx projects sort of earmarked for the quarters ahead? And if so, could you just sort of talk about how we should be thinking about those? Are these as sort of intensive of an installation process as we saw this year? So I guess just a comment overall on any new CapEx projects over the next couple of quarters and then the ability to sort of what you need to do to get to the low-30s longer term target? Thanks.

Yes. There's still again, I'll tell you and this is what always happens, right? You put the money in and you don't get the return that day. The biggest thing for us has to be optimizing the trimming of the chicken. So we have the machinery in. It is working. There's nothing to continue anymore, thank goodness. But we haven't optimized it, right? We haven't optimized it on how we do it and we haven't optimized it on being able to sell all the items. I'm really excited next week we have a big major launch at another with one of our club customers on this exact trim product of chicken. You're going to look at it and you're going to say that's awesome because of the revenue. You're going to say it it's awesome because it's branded. You're going to say it because it's an awesome customer. I'm going to say, actually I don't care about all three of those. I care about it because it unlocks, it uses up some of the other parts of the chicken that allows us to sell our portion chicken, our chicken breast at a lower price. Again, that is just one example of many that I could give to help us understand how we're going to keep getting further and further up into the high-20s. And then again guys let's remember and I take responsibility the construction did not go as I would like it. We were in the 30s last year. There is no reason why we're not going to absolutely get there again. To your question on more CapEx, I do like to digest. My mother always yells at me if I eat too much too quickly. I think we're perfectly fine in our Farmingdale facility. I think I'm really excited about some opportunities next year in our East Rutherford facility. There's more opportunities to drive more productivity. And oh, by the way, we can't seem to make the chicken fast enough, so we could add more capacity there. But we're going to do that after we see the Farmingdale facility making the margins that they've made a year ago. And again, I'm patient. If you take one thing from my conversation earlier, my messages earlier, it's patience and profitability. I'm not going anywhere and we're going to be patient. Hope that's helpful.

Great. Thank you for taking my questions. Yes, it's very helpful. Thank you.

Thank you. Our next question comes from the line of Anthony Vendetti with Maxim Group. Please proceed with your question.

Thank you. Yes, just a couple of questions on the revenues and then the Northeast region. So if you could talk about what specifically was it a particular customer like Walmart or Costco that drove the outperformance in revenues this quarter? And then or was it a region? You mentioned West Mississippi, I think, it's 47% of revenues. And then also on the regions, I think the Northeast was down 12.6%. Any specific reason there, what's going on with the Northeast region? Obviously, you made up for that and other regions. So maybe if you could tie all that together, those are my questions. Thanks.

Yes, that's perfect. Thank you. So I think the thing that I love the most to your first question, I love the balance of our portfolio. So looking at a chicken versus beef, looking at our different club customers, all three of them did extraordinarily well this quarter. Our retailers, I've spoken to you earlier last time about the growth on the West Coast. Albertsons is doing a great job. I think we added three or four new divisions of Albertsons thanks to Tony and the team. So new items I told you the balance of new items that we got in like BJ's the new programming, the new doors, Walmart, I told you it's still very early. If I could tell you that we're getting reorders that's probably a good thing. The reorders are twice the size more than twice the size of the initial orders. That's a good thing. So I would tell you everywhere we're doing well. There's no one thing that's piquing the curve. You mentioned earlier the regions. It's amazing. I mentioned this earlier. It's quite possibly the thing I'm proudest of. Northeast meatball company to a fact that meatballs aren't even the biggest item we have anymore, though I'd like it to continue to grow fast grow well. And we're in all 50 states. Actually, Luke is very proud to say it's the only thing that he cares about me making sure I'm doing. We sold in Puerto Rico this year because of the Costco Southeast rotation. You name it, we are in all 50 states, District of Columbia and Puerto Rico. I love that breadth. You did mention and I spoke to you we spoke about it last quarter as well. There is a legacy business that we had from our acquisition a New York Street business that for some of it, some of it is very good. Other parts of it quite honestly was not profitable. And I've been very transparent with you last quarter that we only sell profitable, we only take profitable growth. So I've been very the team and I have been very intentional about reducing that unprofitable sales, well first obviously giving them the opportunity to make it profitable and if not pulling back from it. So the slight decline that you see on the East Coast, our core customers, every customer that you would know is actually doing better. The aholds of the world, right? These are doing better. Weis is doing tremendous. We actually have some C store new C store customers, some new cups customers that are doing really well. That's over 100% growth. What's happening is we're being very intentional to pull back on the unprofitable street business, which is not the future of our $1 billion company.

Okay. So just the last follow-up on that is, the Northeast region, what do you think accounted for the decline there?

Yes. The street business accounts for 100% of the Northeast decline.

Okay, great.

Does that make sense?

I appreciate the color. I'll hop back in the queue. Yes, no problem. Thanks.

Absolutely.

Thank you. Our next question comes from the line of George Kelly with ROTH Capital Partners. Please proceed with your question.

Hey, everybody. Thanks for taking my questions. First one is just on the quarterly impact from pricing, curious how much of that 10% growth was driven from pricing? And then you talked in your prepared remarks about planning to take additional pricing. I was just curious how much you plan on taking and when?

Yes. So, as hard as I work to take price and see that realized, my sales team is doing too well at driving too much volume and selling too well. Pricing probably accounts for 10%, yes 10% of that growth. So almost 90% of our growth is volume driven. And I promise you I'm working hard on taking pricing. It's just the sales team is doing better than me at selling. So that's to your first question. The pricing that we're taking is targeted. So if you remember from when we all started two years ago pretty much I took pricing in mass on every single customer, every single product, every single everything because we are so out of place on our pricing. We have done a great job. Sales team gets all the credit for, getting us to a place where it is now and you guys have heard me say this before, you know me, every quarter I look at every single item on every single invoice for every single customer. My friend Bill Gates helps me with the SORT function and every single item that does not hit our margin target, sales team knows they get a call from me. It is a very, very, very short list now. It is hard for me to find stuff. So the pricing that we have to take is not going to be dramatic, because it's down to only a few items on a few customers. But it's not something I do quarterly or annually. It's literally something I do every week. Every week I'm looking at order level profitability and we don't wait to identify issues and immediately speak with the customers to either take a price, right? We have to or we offer them alternative items that we already have existing, but we cannot again, you guys know I do a lot of nonprofit work, but I do that at night, not during the day.

Okay. That's helpful. Thank you. And then two additional quick, unrelated follow-up questions. First, can you just comment on what you're seeing with respect to M&A? Multiples, are there things you're being shown, etcetera? Just a quick update there. And then second question, you laid out the construction and commodity improvement and some internal measures to improve your gross margin. I know that's really sort of put a damper the gross margin this year. Some of these unexpected things have really kind of limited your ability to accelerate trade spend. And I'm curious with what you see now, do you think next year in fiscal year '26, you'll have an ability to really accelerate trade spend? And that's all I had. Thank you.

Yes. So I'll go backwards since you just asked the question. Trade, we're moving up. So just to put in perspective and you guys are better at this math than I am. Trade between trade, R&D and marketing, we increased our spend 42%. So it's significant. So trade it was like $1 million more than $1.5 million in those areas. Trade is up 25% from last year. I told you marketing was up 75%. So we're getting there, right? Do I want to spend more? Absolutely. But did you see some of this trade spend in marketing in this quarter? We did. I have to be able to invest. I'm going to be very prudent, but we are definitely investing. I can tell you that I have more trade in the fiscal year plan for next year that we actually have a board meeting on Wednesday. So I got to get the board to approve it. But I will continue to drive towards our goals on increasing trade and increasing marketing. To your first question on M&A, I guess I'm cheating because I keep talking about all the reasons why I'm excited with Skip and Chris coming in here. Reason 73 why I'm so excited is because it actually frees up some of my time. I will tell you I probably shouldn't have been spending as much time as I was on all the construction and all the running the day to day. What's happening is now the team is freeing me up to be focusing. I'm already spending more time in just this quarter on M&A than I have in the past. I like what I see. We have a nice pipeline again. This is something that I share with the Board every quarter. Anthony has already given me a hard time the number of NDAs that we have to sign and everything and data rooms that we're opening up. But, I'm busy doing that. That said, I just will not overpay. I want M&A. I expect that we'll have M&A. But unlike in my past careers, I do not need M&A. And that means that I'm not going to overpay for something when we have such great growth internally. So I'm happy with the pipeline. There are some people that are a bit more realistic than others on what those multiples should be and that's fine. That's their prerogative. It's equally my prerogative to say no, thank you. There have been times that people have given a multiple. I've respectfully, hopefully said no, thank you, and they came back six months later. So again I feel good about the pipeline of M&A. I feel great about the time I'm going to have now that Skip and Chris are here.

Understood. Thank you.

Thank you. And this concludes our question-and-answer session. I'll now hand the call back to Chairman and CEO, Adam L. Michaels for his 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 fellow shareholders and execute upon our vision of becoming a national One Stop Shop Deli Solution provider. Thank you and Happy Holidays.