Mama’s Creations(MAMA) - 2025 Q1 - Quarterly Results

Executive Summary & Highlights First Quarter Fiscal 2025 Financial Highlights Mama's Creations achieved record Q1 FY2025 revenue of $29.8 million, up 29% YoY, generating $3.6 million in operating cash flow, though net income declined due to one-time expenses and commodity price impacts Q1 FY2025 Financial Highlights | Metric | Q1 FY2025 ($M) | Q1 FY2024 ($M) | % Increase (YoY) | | :----------------- | :------------- | :------------- | :--------------- | | Revenues | 29.8 | 23.1 | 29% | | Gross Profit | 7.5 | 6.4 | 17% | | Operating Expenses | 6.7 | 4.4 | 51% | | Net Income | 0.6 | 1.4 | (61)% | | Earnings per Share (Diluted) | 0.01 | 0.04 | (75)% | | Adj. EBITDA (non-GAAP) | 2.5 | 2.5 | 1% | - Net income was impacted by $0.9 million in one-time operating expenses, including $0.5 million in non-cash share-based compensation, to correct options granted by prior management in 2018 and 2019[2] - Operating cash flow increased to $3.6 million in Q1 FY2025[1][3] Key Operational & Strategic Highlights The company achieved key operational milestones in Q1 FY2025, including selection for Costco roadshows, active participation in major trade shows, new product launches, and a significant increase in cash reserves - Selected by Costco Wholesale Corporation for "Costco Roadshows" in the Northeast region to evaluate products for long-term placement in Costco stores nationwide[3] - Participated in leading industry trade shows including UNFI Spring & Summer Show, NATSO Connect, DOT Innovations 2024, National Restaurant Association Show 2024, and IDDBA 2024 Show[3] - Launched several new products and flavors at the IDDBA 2024 show, including breakfast burritos, vacuum-sealed sliced chicken breast, meatball party packs, and gourmet paninis[3] - Cash and cash equivalents increased to $13.0 million as of April 30, 2024, up from $11.0 million on January 31, 2024, driven by $3.6 million in Q1 FY2025 operating cash flow[3] Management Commentary Q1 Performance and Strategic Focus Chairman and CEO Adam L. Michaels highlighted record Q1 revenue of $29.8 million, up 29% YoY, driven by purposeful growth and maintained gross margins around 20% despite commodity price increases, supported by the '4 Cs' strategy for future profitable growth - Q1 revenue grew 29% to a record $29.8 million through purposeful and profitable growth[4] - Commodity price increases, particularly in chicken, impacted gross margin, but proactive labor and procurement efficiencies maintained gross margin around 20%[4] - Generated $3.6 million in operating cash flow this quarter, strengthening the balance sheet and supported by an undrawn credit facility[4] - Emphasized operational execution and the "4 Cs" strategy (Cost, Control, Culture, and Catalyst) combined with macro trends in the deli prepared foods market, laying a foundation for consistent profitable growth in coming quarters[4] Operational Efficiency and CapEx Investments Management actively addresses commodity price increases through customer price adjustments and accelerated CapEx investments to improve the value chain, reduce labor costs, and enhance chicken processing capabilities, aiming to offset Q2 gross margin impacts and fund high-ROI trade promotions - Actively addressing recent commodity price increases through collaboration with customers on price adjustments and implementing automation and operational efficiency improvements[5] - Accelerating capital expenditure investments to improve the value chain, avoid third-party markups, and reduce labor costs, particularly in chicken processing capabilities[5] - Anticipate price increases and efficiency gains to offset most of the expected Q2 gross margin impact[5] - Plans to invest gross margin surplus beyond the high 20% target range into more high-ROI trade promotion activities, with a long-term goal of 10% of revenue[5] Market Expansion and Product Innovation Building on successful Costco collaborations, the company was selected for Northeast Costco roadshows, aiming for long-term national expansion, and launched new products like breakfast burritos and sliced chicken breast at high-ROI industry shows such as IDDBA 2024, enhancing market presence and product diversity - Selected for "Costco Roadshows" in the Northeast, with potential for longer-term placement of new and existing products in Costco stores and national expansion[6] - Collaboration with Costco has expanded over the past twelve months, with products rotating in 5 out of 8 regions[6] - Enhanced industry presence and launched new product pillars by participating in high-ROI industry shows like IDDBA 2024[7] - Introduced new breakfast burritos, vacuum-sealed sliced chicken breast, meatball party packs, and gourmet paninis as key components of a one-stop deli strategy[7] Growth Strategy and M&A Outlook The 'Catalyst' strategy aims for growth through new SKUs, new tier-one customers, and sustained marketing, while a strong balance sheet positions Mama's Creations for attractive M&A opportunities to consolidate the fragmented prepared foods market and become a leading national deli solution provider - The "Catalyst" strategy aims to drive incremental growth through new SKUs with existing customers, develop new tier-one customers, and increase velocity of existing in-store items through sustained marketing and trade promotion investments[8] - The company believes attractive M&A opportunities within the industry, supported by a strong balance sheet, could position it as a consolidator in the fragmented prepared foods market[8] - The goal is to become the leading national one-stop deli solution platform[8] Detailed Financial Results Revenue Performance Q1 FY2025 revenue increased 29% YoY to $29.8 million, driven by enhanced distribution from club rotations, accelerated trade promotions, and healthy volume growth from cross-selling new products to existing customers Revenue Performance | Metric | Q1 FY2025 ($M) | Q1 FY2024 ($M) | % Increase (YoY) | | :------- | :------------- | :------------- | :--------------- | | Revenue | 29.8 | 23.1 | 29% | - Revenue growth primarily attributed to enhanced distribution from strong club rotations and accelerated velocity from incremental trade promotions[9] - Revenue also benefited from healthy and measurable volume growth driven by the company's extensive cross-selling of new products to existing customers[9] Profitability Analysis Gross profit grew 17% to $7.5 million, but gross margin declined to 25.0% due to commodity costs; operating expenses surged 51% to $6.7 million from new hires and one-time non-cash fees, resulting in a 61% net income decrease to $0.6 million and $0.01 diluted EPS Profitability Analysis | Metric | Q1 FY2025 ($M) | Q1 FY2024 ($M) | % Increase (YoY) | | :----------------- | :------------- | :------------- | :--------------- | | Gross Profit | 7.5 | 6.4 | 17% | | Gross Margin % | 25.0% | 27.6% | (2.6) ppts | | Operating Expenses | 6.7 | 4.4 | 51% | | Net Income | 0.6 | 1.4 | (61)% | | Net Income % of Revenue | 1.9% | 6.1% | (4.2) ppts | | Diluted EPS | 0.01 | 0.04 | (75)% | - Gross margin variance primarily attributed to increased commodity costs, partially offset by approved price increases and the activation of installed automation and strategic capital expenditure projects[10] - Operating expenses increased due to several key new hires and non-cash expenses, including depreciation, amortization, and share-based compensation, which included $0.9 million in one-time expenses, of which $0.5 million was non-cash share-based compensation[11][13] - Adjusted EBITDA (non-GAAP) remained consistent year-over-year at $2.5 million[13] Cash Flow and Balance Sheet Overview As of April 30, 2024, cash and cash equivalents increased to $13.0 million from $11.0 million on January 31, 2024, primarily driven by $3.6 million in Q1 FY2025 operating cash flow, with total debt at $8.3 million Cash Flow and Balance Sheet Overview | Metric | As of April 30, 2024 ($M) | As of Jan 31, 2024 ($M) | Change ($M) | | :---------------------- | :------------------------ | :---------------------- | :---------- | | Cash and cash equivalents | 13.0 | 11.0 | 2.0 | | Total Debt | 8.3 | N/A | N/A | - The increase in cash and cash equivalents was primarily driven by $3.6 million in operating cash flow during Q1 FY2025[14] Non-GAAP Financial Measures Adjusted EBITDA Reconciliation The company provides a reconciliation of Adjusted EBITDA (a non-GAAP metric) to GAAP net income (loss), with Q1 FY2025 Adjusted EBITDA at $2.533 million, largely consistent with Q1 FY2024's $2.519 million, after adjustments for interest, taxes, depreciation, amortization, share-based compensation, and one-time legal settlement expenses - Adjusted EBITDA is a non-GAAP financial measure representing net income (loss) excluding interest, taxes, depreciation, and amortization, adjusted for share-based compensation and one-time costs related to a legal settlement[17] Adjusted EBITDA Reconciliation | Metric (in thousands) | Q1 FY2025 | Q1 FY2024 | | :-------------------------- | :-------- | :-------- | | Net Income (Loss) | $553 | $1,401 | | Depreciation | 292 | 248 | | Amortization | 369 | 113 | | Taxes | 179 | 525 | | Interest, net | 35 | 177 | | Share Based Compensation | 205 | 55 | | Stock & Cash Settlement Agreement | 900 | 0 | | Adjusted EBITDA (Non-GAAP) | $2,533 | $2,519 | Company Information & Disclosures About Mama's Creations, Inc. Mama's Creations, Inc. is a leading national marketer and manufacturer of fresh, prepared deli foods available in over 8,000 stores, aiming to be a one-stop deli solution platform through vertical integration and a diverse brand family, meeting evolving consumer needs - Mama's Creations, Inc. is a leading national marketer and manufacturer of fresh, prepared deli foods, available in over 8,000 grocery stores, mass merchandisers, club stores, and convenience stores nationwide[16] - The company's vision is to be a one-stop deli solution platform, leveraging vertical integration and a diverse family of brands to offer a wide array of prepared foods meeting modern consumers' evolving needs[16] Conference Call Details Management hosted an investor conference call on Tuesday, June 11, 2024, at 4:30 PM ET, to discuss Q1 FY2025 financial results and provide a company update - An investor conference call was held on Tuesday, June 11, 2024, at 4:30 PM ET, to discuss the company's Q1 FY2025 financial results[15] - US dial-in, international dial-in, conference ID, and webcast link details were provided[15] Forward-Looking Statements This press release contains forward-looking statements subject to various risks and uncertainties, including public health emergencies, liquidity, customer reliance, competition, raw material and freight pricing pressures, regulatory changes, and intellectual property, which could cause actual results to differ materially from projections - This press release may contain forward-looking statements as defined by Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, often identified by words such as "may," "future," "plan," "will," and "expect"[19] - Such statements are subject to various risks and uncertainties that could cause future circumstances, events, or results to differ materially from those projected in the forward-looking statements[19] - Risk factors include the impact of public health emergencies, liquidity adequacy, reliance on a few customers, loss of key executives, adverse economic conditions or intense competition, market pricing pressures, lack of control over raw material and freight pricing, new competitors and product entry, adverse governmental regulations, product consumption-related liabilities, ability to secure product placement at key retail points, wage and price inflation, quality control maintenance, and intellectual property enforcement issues[19] Investor Relations Contact Investor relations contact information is provided, managed by Lucas A. Zimmerman, Managing Director at MZ Group – MZ North America - Investor Relations Contact: Lucas A. Zimmerman, Managing Director, MZ Group – MZ North America[20] - Contact details: (949) 259-4987, MAMA@mzgroup.us, www.mzgroup.us[20](index=20&type=chunk) Condensed Consolidated Financial Statements Condensed Consolidated Balance Sheets As of April 30, 2024, total assets increased to $47.239 million from $45.101 million on January 31, 2024, driven by higher current assets including cash and cash equivalents, while total liabilities also rose from $25.52 million to $26.893 million Condensed Consolidated Balance Sheets | Metric (in thousands) | As of April 30, 2024 | As of Jan 31, 2024 | | :-------------------------- | :------------------- | :----------------- | | Assets: | | | | Cash and cash equivalents | $13,043 | $11,022 | | Total current assets | $25,369 | $23,566 | | Property, plant, and equipment, net | $5,457 | $4,436 | | Total Assets | $47,239 | $45,101 | | Liabilities: | | | | Accounts payable and accrued expenses | $14,257 | $12,425 | | Total current liabilities | $18,522 | $16,690 | | Total long-term liabilities | $8,371 | $8,830 | | Total Liabilities | $26,893 | $25,520 | | Stockholders' Equity: | | | | Total Stockholders' Equity | $20,346 | $19,581 | Condensed Consolidated Statements of Operations Q1 FY2025 statements show net sales of $29.838 million, up from $23.121 million in Q1 FY2024; gross profit increased to $7.463 million, but operating expenses surged to $6.69 million, leading to a decline in operating and net income Condensed Consolidated Statements of Operations | Metric (in thousands) | Q1 FY2025 | Q1 FY2024 | | :-------------------------- | :-------- | :-------- | | Net sales | $29,838 | $23,121 | | Costs of sales | $22,375 | $16,750 | | Gross profit | $7,463 | $6,371 | | Operating expenses | $6,690 | $4,428 | | Income from operations | $773 | $1,943 | | Net income | $553 | $1,401 | | Net income per common share – diluted | $0.01 | $0.04 | Condensed Consolidated Statements of Cash Flows Q1 FY2025 operating cash flow significantly increased to $3.641 million from $1.611 million in Q1 FY2024; investing cash outflows rose to $1.144 million due to increased capital expenditures, while financing cash outflows slightly decreased, resulting in a net cash increase of $2.021 million and period-end cash of $13.043 million Condensed Consolidated Statements of Cash Flows | Metric (in thousands) | Q1 FY2025 | Q1 FY2024 | | :---------------------------------- | :-------- | :-------- | | Net Cash Provided by Operating Activities | $3,641 | $1,611 | | Net Cash (Used in) Investing Activities | $(1,144) | $(145) | | Net Cash (Used in) Financing Activities | $(476) | $(585) | | Net Increase in Cash | $2,021 | $881 | | Cash and cash equivalents at end of period | $13,043 | $5,259 | - Cash outlays for property, plant, and equipment significantly increased to $1.144 million in Q1 FY2025 from $0.145 million in Q1 FY2024[27]