MAMA - NASDAQ

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to Mama's Creations First Quarter Fiscal 2026 Earnings Conference Call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. This conference is being recorded today, Tuesday, June 3, 2025, and the earnings press release accompanying this conference call was issued after the market closed today. On our call today is Mama's Creations' Chairman and CEO, Adam L. Michaels, and its 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 meaning of the federal security 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 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 files 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 Mama's Creations website under the Investor tab. Finally, this conference call contains time-sensitive information that reflects management's best analysis only as of today, and the time of this conference call. The company does not take 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. You, Adam. The floor is yours.

Thank you, operator. Thank you to everyone for joining us today. I'd like to welcome you to our first quarter fiscal 2026 financial results conference call. Our fiscal first quarter saw robust performance, driven by sustained momentum in market share gains, and significant progress across our core four C's. Revenue grew approximately 18% year over year, to a record $35.3 million, driven more than 90% by volume. Further supported by targeted customer expansions and successful new product introductions across multiple channels. We achieved these gains despite a continued challenging macroeconomic environment highlighting the resiliency and relevance of our value-oriented grandma quality deli prepared foods offerings across any macroeconomic landscape. We are pleased to report that gross margins returned to our near-term target range, achieving 26.1% in the quarter, and that is with a record investment throughout the quarter, and high ROI trade promotion, which was a robust 6% of gross revenue in the quarter up from 2% last quarter. This improvement reflects our strategic CapEx investments, as well as ongoing efficiency gains in both procurement and production. While inflationary pressures remain elevated, our proactive measures to manage commodity volatility continue to bear fruit. Specifically, we secured fixed price contracts covering more than half of our anticipated volume protein volume needs for fiscal 2026, providing substantial margin stability in an unpredictable macro environment. Turning to market dynamics, we continue to benefit from ongoing shifts towards deli prepared foods due to increasing restaurant price fatigue and consumer trade-down trends. The latest CPI data underscores this dynamic, revealing a nearly twofold disparity between at-home and away-from-home inflation rates. In April, while at-home inflation actually decreased 40 basis points, away-from-home increased the same amount, putting further pressure on restaurants. With grocery store inflation notably lower, shoppers are increasingly opting for supermarket prepared foods, positioning Mama's Creations to capture incremental consumer spend. This generational shift is clearly supported by recent progressive grocer data indicating that more than two-thirds of shoppers have purchased deli prepared meals recently, with millennials and Gen

Thank you, Adam. Moving to the financial results. Revenue for the first quarter of fiscal 2026 increased 18% to $35.3 million as compared to $29.8 million in the same year-ago quarter. The increase was largely attributable to volume gains driven by same customer cross-selling of new items, accelerating velocities of existing items, and new customer door extraction, partially offset by a tripling of trade promotion investments from 2.16% of gross revenue, which grew 23.4% to $37.5 million in the quarter. Targeted pricing actions were successfully negotiated in Q1 and all pricing implemented by May to ensure the company maintained gross margin targets. Gross profit increased 23.1% to $9.2 million, or 26.1% of total revenues in the fiscal first quarter of fiscal 2026 as compared to $7.5 million or 25% of total revenues in the same year-ago quarter. The difference in gross margin was primarily attributable to operational efficiency improvements across the organization partially offset by continued chicken commodity headway. Operating expenses totaled $7.6 million in the first quarter of fiscal 2026, as compared to $6.7 million in the same year-ago quarter. As a percentage of sales, operating expenses decreased in the first fiscal quarter of 2026 to 21.6% from 22.4%. Operating expenses in the first quarter benefited from increased operating leverage and ongoing operational efficiency improvements, partially offset by a 71% year-over-year increase in marketing spend, an area of historical underinvestment, to help drive repeatable and profitable brand growth. Looking ahead, we continue to believe that our normalized gross margin profile, including major commodity fluctuations, will continue to hover in the high 20% range while rightsizing our trade promotion investments from low single-digit percent of revenue today closer to our goal of 10%, which we made meaningful steps towards in the first quarter growing trade from 2% to 6% of gross revenue, but never at the expense of hitting our gross margin targets. Net income for the first quarter of fiscal 2026 increased 123% to $1.2 million or three cents per diluted share, as compared to net income of $600,000 or one cent per diluted share in the same year-ago quarter. First quarter net income totaled 3.5% of revenue, as compared to 1.9% in the same year-ago quarter. Adjusted EBITDA, a non-GAAP measure, increased 12% to $2.8 million for the first quarter of fiscal 2026 as compared to $2.5 million in the same year-ago quarter. Cash and cash equivalents as of April 30, 2025, grew to $12 million as compared to $7.2 million as of January 31, 2025. The change in cash and cash equivalents was primarily driven by $6 million in cash flow from operations during the first quarter, primarily driven by improved profitability and working capital optimization. As of April 30, 2025, total debt stood at $4.6 million as compared to $8.3 million as of April 30, 2024. 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. 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 closing, we're incredibly optimistic about the road ahead. Having emerged from recent operational challenges stronger, wiser, and better positioned for sustainable growth. The strategic investments we've made in new production capabilities, enhanced automation, and stronger management are now fully operational and already delivering meaningful returns. These improvements are matched by our expanded distribution footprint, deepened customer relationships, and increasingly robust grandma quality product offerings. As consumer habits continue shifting towards convenient, high-quality, deli prepared foods, and our customers continuing to grapple with labor shortages, we are well prepared to capitalize on these trends, continuing our transformation into a truly national one-stop-shop deli solutions provider. I couldn't be prouder of what our team has achieved this quarter and throughout the past year. And I am truly excited about the opportunities that lie ahead. With that, operator, let's open the lines for questions. Thank you.

With that, we will now be conducting a question and answer session. For telephone participants, if you have a question, please press star one. If you would like to withdraw your question, please press the star followed by the number two. Again, that is star one if you have a question. If you are using speaker equipment, you will need to lift the handset before making your selection. One moment while we poll for questions. And 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. You know, congrats on another really strong quarter growth here. Ahead of our expectations. So, you know, just wondering how we should be thinking about growth rates for the balance of the rest of the year given the strong growth rate you reported this quarter. Maybe what you're seeing here in Q2 and kind of if you're still confident and be able to kind of generate that double-digit growth rate?

Yeah. Thanks, Ryan. Again, continue to be just prouder and prouder every quarter on the team. Look. I feel good. I'm proud. You know, I think we had Q4 around 25, 26% growth. Now we have 18% growth. You know, I still feel comfortable at the double-digit growth number. Obviously, we don't know. Lots of things are happening to our end consumers. What I do know though is I feel stronger and stronger that our customers, our retailers, are asking for this stuff. Consumers are looking for it. They're expanding the shelf set. Labor is getting harder and harder. Which they need more of our help with, which we're able to do. So you know, I feel good with the double-digit growth, but you know, we have to, you know, I wanna stay focused. And, also, it has to be profitable growth. Right? So it's important that the stuff that we're bringing forward, we're developing in our new product development process, is profitable for us, is a good value to the end consumer, and then of course, to the retailer as well.

Okay. Got it. And then, you know, switching gears a bit here and thinking about the gross margins for the business, you know, are you confident in the sense that you have part of the chicken hedged as well as the efficiencies and throughput improvements that you guys are making that you can see gross margin improvement throughout the year. Or is there a little too much volatility in the kind of suppliers? Or how should we be thinking about kind of gross margins as we progress through the year? Yeah. So absolutely. You know, there is that volatility out there.

Let's start again. And I think it's really important and, you know, understanding gross to net. I know it's something I've done my entire life. I know not everybody has done it. So for all intents and purposes, as a reminder, we grew about we had about 26% gross margin. In addition to that, we put six points of margin of trade on that. So in reality, theoretically, if we did not do the trade gross margin would have been 26 plus six is a 32% margin. It's an incredible margin that Skip and our operations team was able to deliver. Now we said hopefully, we've been very clear we see great opportunities now that we have Chris here Lauren to invest that trade, you know, at the right places to build our brands. It's a good ROI. We feel certainly, we feel internally, hence, why we did it. And we think it's a good return for our investors. That this is where you want to invest. This is where you wanna see the accelerated growth. This is where you wanna see the stronger brand, getting our name out on in the marketplace, I think that's really important. You know, going forward, yeah, it's hard. You know, I the team has done incredible work. Chicken is literally, without exaggeration, 50% up. Versus prior year. That's a hard number. Obviously, you don't nearly see any see that at all, in our numbers. But that's because the team has done a great job. We have you know, we have contracts for our chicken. The team has done an amazing job. As I mentioned, just a minute ago. We're trimming more than we had planned. The tumbling that we're doing is actually increasing the yield. So while you do see these macro headwinds, our team is doing an incredible job to blunt those headwinds, and you're seeing again, 26 plus six to me is a 32% margin. That's pretty amazing. Really do hope chicken prices go down. Chicken prices have literally not changed. For the entire month of May. Was the easiest, average calculation that Anthony did for us. Super simple. But, you know, all the quote, unquote experts say that chicken prices are going to come down. Our job is that's going to help our gross margin. So we can fix these high 20 numbers when we feel that the number's, quite a bit higher than that, reinvest that into trade and that's what we're gonna do.

Got it. That's super helpful. Thanks for taking my questions.

You got it. Thanks, Ryan.

And 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, and congrats on another very strong quarter here. And on that chicken trimming coming in nicely ahead of expectations. That's actually where my first question is. So could you just kinda help us understand the sort of ability you have to continue increasing the mix of you know, in-house trimmed chicken I would imagine, you know, you sort of get to an appropriate sales mix, and then it's more about increasing overall sales. So just kind of trying to understand if you know, trimming a % of chicken in-house is something achievable, you know, within the next year? Or is this maybe like, a two or three-year goal? Can you just kinda help us understand sort of where you are in this you know, broader strategy?

Absolutely, Eric. And thank you. So it is absolutely this year. So my our goal is to develop the sales items I should have mentioned from the very beginning, I actually I just got back last night. My team still at IDDBA. If you guys remember, International Dairy, Deli, and Bakery Association. This is our Super Bowl, and Lauren has done an amazing job putting it all together for us. Our sales team is down there. Chef Chris is down there, and we're getting great reactions. So as we develop these new items, which we have, it's about selling them in. And Chris and his team have done an amazing job getting strips into BJ's, like I mentioned, Albertsons. These are major players. Right? The chicken stuffed meatballs, personally, most importantly, are is my house favorite. Our kids love them, and they're doing a great job at Costco. And then I mentioned some great work that, we just got with Publix. And getting these new meals for one, which uses our chicken trim. So super clearly, from an operational standpoint, we could do all of the trimming today, %. It's not an operational issue. Thanks to you. And, Eric, I know you've been there. You've seen the trimmers. Right? We have multiple trimmers, multiple we have exactly what we need from an operational standpoint. It is now the job, which we've done really well. Develop the products, which we've done, get them sold in, which we're doing, and that's why we're ahead of plan on the trimming. And the more we sell in, the faster we sell it in, the more we can trim ourselves. So this is absolutely an in-year thing.

It's great to hear. And I hope how crucial that can be for margin, so great to hear. So I guess just kinda sticking on this topic quickly. So, you know, it's clear that all the you know, capital investments you've made into the facilities the past you know, year, year and a half, like, really starting to bear fruit here? What other CapEx projects are on the horizon? If any? I mean, I know, you know, you've significantly expanded your capacity. Maybe there's not any you know, near-term need to add any new pieces of equipment. But just kinda wanted to check-in here, see if there's any other CapEx projects you know, over the next call it, twelve months or so that we should, be aware of.

Yeah. Nothing too major. Again, we do stuff every day. Know? We just Anthony just approved for us a new stuffing machine. The chicken stuffed meatballs are doing well. Already exceeding plan. And already, we anticipate machinery is not gonna be enough, we already got another machine. The situation, though, is it's a hundred thousand dollars, and we get it in three weeks. It's not like the one year year $1,000,000 plus grills that you saw installed last year. So there's nothing super major that I expect this year from Capital. Andy and I look at our, we actually do two things. I'm not sure if you're allowed you know, if others do it. But Anthony and I look at our CapEx and our actual, M&A spending. In one bucket. So last year was the year about us investing in ourselves. Right? Go to the gym and things like that. Right? Investing in ourselves. This year, we feel good. Again, we don't need it. But we very much want an acquisition this year. So Anthony says, Adam, you can't get both. You can't get a new grill and a company. So, Adam, you know, this is the year that we're gonna put our money into, acquisitions, and that's what, doing very well. I feel good with the progress we're making, and know, excited to hopefully share more in the future.

Awesome. All great to hear. Thanks for taking my questions, and congrats again.

Thanks, Eric.

And 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. A couple for you. First, Adam, I think you said in your prepared remarks that you refined your M&A criteria. So I was wondering if if that's the case, could you walk through any changes there?

Yeah. It's not. Thanks, George. Again, it just it's getting, more focused. Again, the three things are the three things. Right? It hasn't changed. We worked hard on those. What's wonderful is we are seeing actually, it's a bit of a surprise. A lot of inbound interest. So people are coming to us and saying, hey. I heard your know, you might be interested in expanding organically inorganically. You know? What do you think about us? So what it's been great is pipeline is quite full. And the more you see the more we realize that we want and what is more important and less important. So, again and I've shared some of this with you already. Absolutely. You know, there's an alien in my body. If I buy a non-deli company. Right? Deli company with their own manufacturing. That is absolutely, critical. Does it have to be West Of The Mississippi? You know, our team, Rebecca, is doing an incredible job from a logistics standpoint. The improvements we have made in logistics are mind-blowing. So can we save more by being on the West Coast or on the Western side of the country? Yeah. We can save a little bit of money. But it's not critical. I hope you guys I don't expect you guys to have read the entire Ten ten q. In five minutes, but I am super impressed with our geographic distribution. Remember, when when we all started when Anthony and I first started here, we were a Northeast meatball company. I mean, our if you look at the geographical split of our products, we're we're all around 25%, 26, 27. I don't think much bigger than that. So we are showing we are proving that because we have the volume across the country, going out to Seattle is not that huge a deal. We are doing an incredible job. Most of our stuff, almost entirely is full truckloads. The sales of the business is getting so big, we don't need to do LTL. So that drives a lot of efficiency internally. So that's just one example of, you know, we just continue to refine and see where we are. But the core three things haven't changed. We're doing a great job. The team is getting very hands-on. My extended leadership team called give you one last thing. You know, I spent I was the M&A guy, and I did, you know, 98.3% of the work. There are a couple opportunities that are getting pretty live. I have brought the rest of my leadership team in. So, hopefully, that gives you some sense that, you know, I'm really not even in the let's just build a pipeline stage. We're well past that. So hopefully, that helps.

It does. Yeah. That's good context. Thank you. And then second question for you. On Costco. You included a little note about the MVM that you ran in the quarter in your press release and commented in your prepared remarks. So I guess the question is two questions. A, do you have additional promotions with Costco planned for the year, and can you give any update on timing or what what those promotions might look like? And then b, you know, you've done so well at club. I'm curious with with respect to Costco. What's what's, like, the near and medium-term opportunity?

So the first question around Costco, yes. We have an incredible partnership. Scott, gets a lot of that credit, how he's built these relationships with these eight different buyers. As a reminder, Costco is somewhat unique in the sense that there is no national buyer. So we work with eight different buyers, and they share, learnings with each other. I hope to do more. We'll see more. You know, I could tell you, coming up, we have actually a rotation next quarter on our chicken stuffed meatballs. We're constantly talking with them about other things. We're in conversations with them. And just for clarity, we did a digital MVM, in Q1. We're in conversations about an MVM possibly. There's no guarantees, but, we're in talks there. So I expect Costco to get stronger and stronger. I will tell you I personally believe that Costco is in a very strong position as a retailer. Right, for the, for the consumers today. So much to your second point, I love the broader club channel as well. I could speak to you forever on Costco. I could equally speak to you forever on BJ's. Great new items. If you guys are, if you have BJ's near you, my new favorite item actually is our, roasted sweet potatoes. Super clean, tastes great. We were actually sharing those at IDDBA. Beautiful color. So we have that product. We have a new tortellini product that's coming out with BJ's. Two things that are really interesting. Hopefully, you noticed something on those two that I just shared. There's no commodities. There's no chicken in there. There's no beef in there. Obviously, that helps a lot. It gives me at least an extra thirteen or fourteen minutes of sleep, at night. That we have some more of those type items. So BJ's were doing great. And Sam's is a tremendous partner getting stronger and stronger with the items that we have there. Some possibly new items coming up. So, you know, I'm very bullish on the club space. And each of these three that I just mentioned could be massive partners for us. They already are.

Okay. Excellent. And then just a quick one. For Anthony. On pricing, the pricing that you had fully implemented in May, I think you said, how much is there any way to think about just can you give any kind of quantification there? And that's all I had. Thank you.

Yeah. I would give a quantification at this time. I think we'll be speaking about that probably during our next call. So I don't wanna go into that just yet. It's different by item. It's different by customer. But the goal is that, you know, we maintain our, our ultimate margin. And the customers realize that. What's wonderful about our business positive or negative, I'm always the optimist, you could go right now to the USDA website and you could see what the price of chicken is and see what the price of beef is. So when we go and speak with our customer or yeah, our customers, first of all, it's very collaborative. Right? They see the same thing we do, and we work jointly. To, find the best way. I'll give you actually one quick example. It's not just about price per se. We have some partners that will work with us and say, hey. Don't we double the size of our packaging? Right? First of that cuts packaging costs. Right? If we could put twice as much in the same Corvette box, that saves on packaging. It also saves on logistics. We could get more on the pallet. And the super double top secret thing that's awesome is that by having a bit having more in each box, when the team opens that box to put it out on the shelf, there's twice as much that's going out on the shelf, which gives us a better shelf presence. So, yes. It is incredibly collaborative, and we do it, you know, one on one with customers.

Thanks. And our final question comes from the line of Anthony Vendetti with Maxim Group. Please proceed with your question.

Thank you. Adam, I was wondering if you can give us any update on how the rollout is going in Walmart and then any color on Kroger or Target.

Yeah. Absolutely. So, Chris and Peter are spending a lot of time in Cincinnati with Kroger, and Minneapolis with Target. We got to see a number of them at IDDBA. That's going well. We'll see how that goes. But definitely, we've made the most progress this year with Chris on board than we have in my two years prior. Walmart's also doing well. I mentioned to you, and again, I love these broader partnerships. I told you about how well we're doing with their digital partnership and their digital team. Literally double-digit ROAS. We're actually expanding the four count. The four count's doing quite well. And we're actually expanding, doors to that item. We've had a number of conversations about expanding the number of items. So I feel I feel really good. Again, I want and it's important to us just like I just spoke to you earlier about, I like you know, nice equal distribution of geographic split. I like I always talk to you about we have a great balance of beef versus chicken. It's equally important to me that, you know, as best as we can, we continue to diversify our customers, which makes, you know, a potential Kroger or Target opportunity really exciting. But then also in look where we're already you could already see it in stores if you guys go out. We just got two new items into Lidl. Chicken stuffed meatballs, one being one of them. Sheetz, the paninis at Sheetz are doing incredibly well. Just launched in Amazon Fresh. So, again, you know, I love all my children equally. Same sort of thing. Lots of great opportunity with customers.

And then just a follow-up just to make sure I'm doing the math correct here. So you obviously saw the ROI of putting 6% of gross revenue into trade promotion. If you put if you had instead of putting 6% hadn't put anything in there, would your gross margin be 32%?

So, obviously, an easy answer would be sure. But the truth of the matter is to understand the elasticity of you know, would we have gotten the digital MVM at, Costco? It's sort of binary. I don't know. Maybe. But this certainly helped a lot. Would we have gotten know, I was you know, my mom my my parents live in Florida. They're very proud when they see it in the public circular that says Mama Mancini's PubSub program. Would they have branded the item if we didn't use all the trade? I don't know. Maybe. But what I can tell you, and this is something that Chris and I look at a lot, we actually compare, like, the Publix work that we did the, amount of gross margin increase that we got at Publix higher than the incremental trade that we put in. Comparing year over year. So that to me says, that's a really good ROI. So hopefully, that's that's helpful to, to answer your question.

Sure. Sure. No. There's there's always a balance slash trade-off there. Just lastly, I know you've significantly increased the number of chicken SKUs. Maybe just just in put things in context, when you took over as chairman and CEO, how many SKUs total SKUs were there, and how many total SKUs do you have at this point including I know some of the SKUs are, like, okay. It comes in this single serve pack versus multipack. But if you included all, not just the the difference, let's say, chicken skew, but, like, okay. You know, it also comes in different forms. How would you count the number of SKUs today versus what you what you had when you took over?

Yeah. So I don't know what you think about this, but I can actually tell you that we've significantly reduced the number of SKUs since I've started. Like, actually cut more than 50% of the SKUs. Why? Oh, first of all, you know, I'm cheap, and we're more efficient if we need to have fewer raw materials. And we could strengthen, increase the volume of fewer items. Two, were lots of items that just were not profitable. At all. Yeah. So why do you why do you need that? Why do you need a blueberry and a boysenberry cream cheese? It's important that I kept the chocolate chip cream cheese because that's what my boys love the most. But we actually have fewer SKUs. Now what we have is more strategic SKUs. So we have a massively more I say massively, maybe it's a dozen. Lauren will yell at me. Maybe it's a little more, a little less. But of these chicken, quote unquote, bottom skew, the artisan cut chicken, we have more of those because that's what we need to sell. So, you know, to me, it's it's less about how many SKUs do we have. The answer is fewer. It's more about do we have the right SKUs? And we absolutely compare to where I was three years ago. Here, I'll give you one more. We had nothing for c store. Anthony and I first started. Right? Everything that we made was, you know, a three-pound container. Not many people go into you know, sheets looking for three pounds of meatballs. So we developed the cups. We developed these incredibly successful paninis. I will tell you the number one taker at IDDBA this this year. Was the paninis. That was the most requested item. Both by customers I just mostly think people just needed something to eat for lunch while they were there. So we didn't have you know, those things before. Now we could get into the convenience channel. That's why we're doing so well at Sheets and others. So it's about the strategic customer, items. That are more important than just the absolute amount.

Okay. Very helpful. Thanks so much. I'll hop back in the queue.

Absolutely.

Thank you. And with that, this does conclude our question and answer session. I would now like to hand the call back over to Chairman and CEO, Adam L. Michaels, for closing remarks.

Thank you, operator, and thank you again to each of you for joining us today. 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 leading national one-stop-shop deli solution provider. Thank you very much.