Mama’s Creations(MAMA) - 2025 Q3 - Quarterly Results

Q3 FY2025 Earnings Overview Mama's Creations reported $31.5 million in Q3 FY2025 revenue, a 10% increase, but saw profitability decline due to construction disruptions and rising chicken prices, while advancing strategic capital projects and management team enhancements Financial Summary Mama's Creations achieved $31.5 million in Q3 FY2025 revenue, a 10% increase, but experienced year-over-year declines in gross profit, net income, diluted EPS, and adjusted EBITDA, primarily due to construction disruptions and rising chicken prices Q3 FY2025 Financial Summary | Metric ($ in millions) | Three Months Ended October 31, 2024 | Three Months Ended October 31, 2023 | Change % | | :------------------- | :---------------------------------- | :---------------------------------- | :--------- | | Revenue | $31.5 | $28.7 | 10.0% | | Gross Profit | $7.1 | $8.6 | (17.6%) | | Operating Expenses | $6.6 | $5.9 | 10.5% | | Net Income | $0.4 | $2.0 | (79.6%) | | Diluted EPS | $0.01 | $0.05 | (80.0%) | | Adjusted EBITDA (Non-GAAP)| $1.7 | $3.5 | (49.6%) | Operational & Strategic Highlights The company completed strategic capital expenditure projects and assembled an industry-leading senior management team in Q3 FY2025, laying the groundwork for future revenue and profit growth, while enhancing market presence through industry events and investor conferences - Strategic capital expenditure projects were completed in September 2024, with preliminary unaudited November 2024 gross margins showing a significant step-change improvement, indicating a full reversal of construction-related headwinds and further improvement potential[3] - The company completed the build-out of an industry-leading senior management team by appointing seasoned CPG and retail executive Chris Darling as Chief Commercial Officer and end-to-end supply chain leader Moore (Skip) Tappan as Chief Operating Officer[4] - Cash and cash equivalents totaled $9.3 million as of October 31, 2024, down from $11.0 million on January 31, 2024, primarily due to $5.0 million in capital investments and $2.5 million in debt repayments, partially offset by a 23.7% year-over-year improvement in working capital from operating cash flow[6] Management Commentary Management highlights the company's strategic achievements in Q3 FY2025, including revenue growth, capital investments, and executive team enhancements, while addressing temporary gross margin pressures and outlining future profitability improvement strategies CEO's Perspective and Strategic Focus CEO Adam L. Michaels emphasized achieving 10% revenue growth and completing key capital investments and senior leadership team assembly to unlock growth potential, noting that Q3 gross margin impacts from construction disruptions and rising chicken prices are now behind them, with significant future improvement expected - The company achieved 10% revenue growth, reaching $31.5 million, and completed capital expenditure investments that doubled rotisserie chicken capacity[7] - Construction-related disruptions at the Farmingdale facility impacted Q3 gross margin by 400 basis points, but preliminary unaudited November gross margins show a step-change improvement, indicating a full reversal of construction headwinds[7] - The company continues to focus on its '4 Cs' strategy (Cost, Control, Culture, and Catapult) to improve profitability through automation, operational efficiencies, new lower-overtime staffing models, and procurement efficiencies and rotisserie upgrades[8] - An industry-leading executive team was completed with the appointment of Chris Darling as Chief Commercial Officer and Skip Tappan as Chief Operating Officer, aiming to optimize operations, execute the 'Catapult' growth plan, and identify future M&A opportunities[9] Detailed Third Quarter Fiscal 2025 Financial Results This section provides a comprehensive breakdown of Mama's Creations' Q3 FY2025 financial performance, detailing revenue, gross profit, operating expenses, net income, and cash and debt positions Revenue Performance Q3 FY2025 revenue increased 10.0% year-over-year to $31.5 million, driven by successful pricing strategies, volume growth from increased demand, effective promotions, cross-selling new products to existing customers, and new customer store expansion Revenue Comparison | Metric | Q3 FY2025 ($ in millions) | Q3 FY2024 ($ in millions) | YOY Growth | | :----- | :------------------------ | :------------------------ | :--------- | | Revenue| 31.5 | 28.7 | 10.0% | - Revenue growth was primarily attributed to successful pricing actions, volume growth from increased demand, effective trade promotions, cross-selling new products to existing customers, and expansion into new customer stores[11] Gross Profit Analysis Q3 FY2025 gross profit was $7.1 million with a 22.6% gross margin, a significant decline from $8.6 million and 30.1% last year, primarily due to higher commodity costs and non-recurring construction impacts at the Farmingdale facility, though post-quarter preliminary November gross margins show a step-change improvement Gross Profit Comparison | Metric | Q3 FY2025 ($ in millions) | Q3 FY2024 ($ in millions) | YOY Change | | :------- | :------------------------ | :------------------------ | :--------- | | Gross Profit | 7.1 | 8.6 | (17.6%) | | Gross Margin | 22.6% | 30.1% | (7.5%) | - The decline in gross margin was primarily attributed to significantly increased commodity costs and non-recurring construction impacts during the strategic capital expenditure project installation at the Farmingdale facility, which is estimated to have negatively impacted gross margin by approximately 400 basis points[12] - Following the third quarter, preliminary unaudited November gross margins showed a step-change improvement, indicating a full reversal of construction headwinds[12] Operating Expenses Q3 FY2025 operating expenses increased to $6.6 million from $5.9 million year-over-year, remaining relatively stable at 20.8% of sales, driven by 90 basis points of freight efficiency offset by a 75% increase in marketing spend aimed at repeatable profitable growth Operating Expenses Comparison | Metric | Q3 FY2025 ($ in millions) | Q3 FY2024 ($ in millions) | YOY Change | | :--------- | :------------------------ | :------------------------ | :--------- | | Operating Expenses | 6.6 | 5.9 | 10.5% | | % of Sales | 20.8% | 20.7% | 0.1% | - Operating expenses as a percentage of sales remained relatively flat, primarily driven by a 90 basis point year-over-year improvement in freight efficiency, offset by a 75% year-over-year increase in marketing spend[13] Net Income and Adjusted EBITDA Q3 FY2025 net income was $0.4 million with $0.01 diluted EPS, a significant decrease from $2.0 million and $0.05 last year, with net income as a percentage of revenue falling from 7.0% to 1.3%, and Adjusted EBITDA (Non-GAAP) nearly halved to $1.7 million from $3.5 million Net Income and Adjusted EBITDA Comparison | Metric | Q3 FY2025 ($ in millions) | Q3 FY2024 ($ in millions) | YOY Change | | :------------------- | :------------------------ | :------------------------ | :--------- | | Net Income | 0.4 | 2.0 | (79.6%) | | Diluted EPS | 0.01 | 0.05 | (80.0%) | | Net Income as % of Revenue | 1.3% | 7.0% | (5.7%) | | Adjusted EBITDA (Non-GAAP)| 1.7 | 3.5 | (49.6%) | Cash and Debt Position As of October 31, 2024, cash and cash equivalents were $9.3 million, down from $11.0 million on January 31, 2024, primarily due to $5.0 million in capital investments and $2.5 million in debt repayments, partially offset by a 23.7% year-over-year improvement in Q3 operating cash flow working capital, with total debt at $6.3 million Cash and Debt Position | Metric | October 31, 2024 ($ in millions) | January 31, 2024 ($ in millions) | | :------------------- | :------------------------------- | :------------------------------- | | Cash and Cash Equivalents | 9.3 | 11.0 | | Total Debt | 6.3 | - | - The decrease in cash and cash equivalents was primarily driven by $5.0 million in capital investments and $2.5 million in debt repayments, partially offset by a 23.7% year-over-year improvement in working capital from Q3 operating cash flow[15] Company Profile and Disclosures This section provides an overview of Mama's Creations, its business vision, and important financial disclosures regarding non-GAAP measures and forward-looking statements About Mama's Creations, Inc. Mama's Creations, Inc. is a leading national manufacturer and marketer of fresh deli prepared foods, distributed across 8,000+ stores, aiming to be a one-stop deli solutions platform through vertical integration and a diverse brand portfolio to meet evolving consumer needs - Mama's Creations, Inc. (NASDAQ: MAMA) is a leading national manufacturer and marketer of fresh deli prepared foods, with products sold in over 8,000 grocery, mass, club, and convenience stores nationwide[18] - The company's vision is to become a one-stop deli solutions platform, leveraging vertical integration and a diverse family of brands to offer a wide range of prepared foods that meet the evolving needs of modern consumers[18] Use of Non-GAAP Financial Measures This press release includes Adjusted EBITDA, a non-GAAP financial measure not intended as a substitute for net income, which the company believes provides useful insights into operational performance and business trends for investors and management when considered with GAAP metrics, despite its inherent limitations - Adjusted EBITDA is a non-GAAP measure representing net income (loss) adjusted for interest, taxes, depreciation, and amortization, as well as stock-based compensation and one-time legal settlement expenses[19] Reconciliation of GAAP Net Income to Adjusted EBITDA (Unaudited, in thousands) | Metric | October 31, 2024 | October 31, 2023 | | :----------------------- | :--------------- | :--------------- | | Net Income | $410 | $2,009 | | Depreciation | 451 | 255 | | Amortization | 388 | 388 | | Taxes | 128 | 568 | | Interest, net | 83 | 124 | | Stock-based compensation | 280 | 110 | | Adjusted EBITDA (Non-GAAP)| $1,740 | $3,454 | Forward-Looking Statements This press release contains forward-looking statements regarding management's expectations, plans, and prospects, which are subject to various known and unknown risks and uncertainties that could cause future results to differ materially from projections, including public health emergencies, liquidity, customer dependence, key executive loss, economic conditions, competition, and pricing pressures - Forward-looking statements include management's views on the company's future expectations, plans, and prospects, often identified by words such as 'may,' 'believe,' 'future,' or 'plan'[22] - Such statements are subject to various known and unknown risks and uncertainties that could cause future results to differ materially from projections, including impacts from public health emergencies, liquidity sufficiency, reliance on a few customers, loss of key executives, adverse economic conditions, or intense competition[22] Consolidated Financial Statements This section presents the company's condensed consolidated balance sheets, statements of operations, and cash flows for the reported periods, providing a detailed view of its financial position and performance Condensed Consolidated Balance Sheets As of October 31, 2024, total assets were $47.9 million, up from $45.1 million on January 31, 2024, primarily driven by a significant increase in net property, plant, and equipment from $4.4 million to $9.8 million, while total liabilities slightly decreased to $24.9 million and stockholders' equity increased to $23.0 million Condensed Consolidated Balance Sheets (in thousands) | Metric | October 31, 2024 (Unaudited) | January 31, 2024 | | :--------------------------------- | :--------------------------- | :--------------- | | ASSETS: | | | | Cash and cash equivalents | $9,319 | $11,022 | | Accounts receivable, net | 8,567 | 7,859 | | Inventories, net | 3,190 | 3,310 | | Prepaid expenses and other current assets | 929 | 1,375 | | Total current assets | 22,005 | 23,566 | | Property, plant and equipment, net | 9,849 | 4,436 | | Intangible assets, net | 3,822 | 4,979 | | Goodwill | 8,633 | 8,633 | | Operating lease right-of-use assets, net | 3,080 | 2,889 | | Deferred tax assets | 413 | 503 | | Deposits | 95 | 95 | | Total assets | $47,897 | $45,101 | | LIABILITIES AND STOCKHOLDERS' EQUITY: | | | | Current liabilities: | | | | Accounts payable and accrued expenses | $13,845 | $12,425 | | Term loan, net | 1,527 | 1,514 | | Operating lease liabilities | 844 | 434 | | Finance lease payables | 369 | 367 | | Related party notes | 2,250 | 1,950 | | Total current liabilities | 18,835 | 16,690 | | Long-term liabilities | 6,064 | 8,830 | | Total liabilities | 24,899 | 25,520 | | Stockholders' equity: | | | | Additional paid-in capital | 24,584 | 23,278 | | Accumulated deficit | (1,436) | (3,547) | | Less: Treasury stock | (150) | (150) | | Total stockholders' equity | 22,998 | 19,581 | | Total liabilities and stockholders' equity | $47,897 | $45,101 | Condensed Consolidated Statements of Operations For the three months ended October 31, 2024, net sales were $31.5 million, up 10.0% year-over-year, but gross profit declined 17.6% to $7.1 million due to increased cost of sales, leading to operating income falling from $2.7 million to $0.6 million, and net income significantly decreasing to $0.4 million with $0.01 diluted EPS Condensed Consolidated Statements of Operations (Unaudited, in thousands, except per share data) | Metric | Three Months Ended October 31, 2024 | Three Months Ended October 31, 2023 | Nine Months Ended October 31, 2024 | Nine Months Ended October 31, 2023 | | :--------------------------------- | :---------------------------------- | :---------------------------------- | :--------------------------------- | :--------------------------------- | | Net sales | $31,523 | $28,648 | $89,743 | $76,559 | | Cost of sales | 24,410 | 20,013 | 68,288 | 54,047 | | Gross profit | 7,113 | 8,635 | 21,455 | 22,512 | | Operating expenses: | | | | | | Research and development | 155 | 124 | 352 | 290 | | Selling, general and administrative expenses | 6,395 | 5,804 | 18,155 | 15,297 | | Total operating expenses | 6,550 | 5,928 | 18,507 | 15,587 | | Operating income | 563 | 2,707 | 2,948 | 6,925 | | Other income (expense) | | | | | | Interest expense | (120) | (124) | (369) | (483) | | Interest income | 37 | — | 192 | — | | Amortization of debt discount | (3) | (6) | (13) | (17) | | Other income | 61 | — | 61 | 27 | | Total other expense | (25) | (130) | (129) | (473) | | Income before provision for income taxes and equity method investment income | 538 | 2,577 | 2,819 | 6,452 | | Equity method investment income | — | — | — | 223 | | Provision for income taxes | (128) | (568) | (708) | (1,522) | | Net income | $410 | $2,009 | $2,111 | $5,153 | | Diluted earnings per share | $0.01 | $0.05 | $0.05 | $0.14 | Condensed Consolidated Statements of Cash Flows For the nine months ended October 31, 2024, net cash from operating activities increased to $6.0 million from $4.9 million year-over-year, while net cash used in investing activities significantly increased to $5.0 million due to higher fixed asset purchases, and net cash used in financing activities was $2.7 million for debt repayments, resulting in ending cash and cash equivalents of $9.3 million Condensed Consolidated Statements of Cash Flows (Unaudited, in thousands) | Metric | Nine Months Ended October 31, 2024 | Nine Months Ended October 31, 2023 | | :--------------------------------- | :--------------------------------- | :--------------------------------- | | Cash flows from operating activities: | | | | Net income | $2,111 | $5,153 | | Adjustments | 3,923 | (275) | | Changes in operating assets and liabilities | 0 | (1) | | Net cash provided by operating activities | 6,034 | 4,878 | | Cash flows from investing activities: | | | | Purchases of property and equipment| (5,022) | (671) | | Cash payment for investment in Chef Inspirational Foods, LLC, net | — | (646) | | Net cash used in investing activities | (5,022) | (1,317) | | Cash flows from financing activities: | | | | Repayments of term loan | (1,274) | (1,265) | | Repayments of related party notes | (1,200) | — | | Repayments of finance lease obligations | (296) | (175) | | Proceeds from exercise of stock options | 55 | 65 | | Net cash used in financing activities | (2,715) | (2,314) | | Net (decrease) increase in cash| (1,703) | 1,247 | | Cash and cash equivalents, beginning of period | 11,022 | 4,378 | | Cash and cash equivalents, end of period | $9,319 | $5,625 | | Supplemental cash flow information: | | | | Income taxes paid | $947 | $112 | | Interest paid | $329 | $477 | Additional Information This section provides details for the upcoming investor conference call and contact information for investor relations Conference Call Details Management will host an investor conference call on Monday, December 16, 2024, at 4:30 PM ET, to discuss Q3 FY2025 financial results and provide a company update, concluding with a Q&A session, with dial-in numbers, conference ID, and webcast link provided - Conference Call Date: Monday, December 16, 2024, at 4:30 PM ET[16] - U.S. Dial-in: 1-877-451-6152, International Dial-in: 1-201-389-0879, Conference ID: 13749939[16] - A conference call replay will be available until Thursday, January 16, 2025, by dialing 1-844-512-2921 (U.S. and Canada) or 1-412-317-6671 (International), with replay PIN: 13749939[17] Investor Relations Contact Investor Relations contact is Lucas A. Zimmerman, Managing Director at MZ Group – MZ North America, with phone, email, and website information provided - Investor Relations Contact: Lucas A. Zimmerman, Managing Director, MZ Group – MZ North America[23] - Contact Information: (949) 259-4987, MAMA@mzgroup.us, **www.mzgroup.us**[23](index=23&type=chunk)