Mama's Creations, Inc.

listening mode. Following the presentation, the conference will be open for questions. This conference is being recorded today, Tuesday, April 8, 2025, and the earnings press release accompanying this conference call was issued after the market closed today. On our call today is MAMAS Creations Chairman and CEO Adam L. Michaels and CFO Anthony Gruber. Before we get started, I'll read a disclaimer about four linking statements. This conference call may contain, in addition to historical information, forward-looking statements within the meaning of federal securities laws regarding bombers' creation. 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 forwarding statement due to numerous factors discussed from time to time in the company's 10-K and other documents which the company filed with the U.S. Securities and Exchange Commission. In addition, such statements could be affected by risks and uncertainties related to factors beyond the company's control. Matters that may cause actual results to differ materially from those in the forelinking 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 Creation 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 forwarding statements to reflect future events, information, or circumstances that arise after the date of this conference call. At this time, I would 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 fourth quarter fiscal 25 financial results conference call. The fourth quarter is highlighted by robust 25.7% broad-based revenue growth and a 440 basis point sequential improvement to a fiscal year record quarterly gross margin of 27%. These results were enabled by the completion of strategic CapEx investments in our Farmingdale facility. to more than double our chicken capacity. Our world-class leadership team, which was finalized in the quarter, and a continued focus on our four Cs, costs, 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. Restaurant price fatigue is combining with menu fatigue, a situation where consumers become bored or uninspired by a restaurant's menu to bring consumers back to the grocery store for both savings and variety. The February CPI highlighted these trends as away-from-home inflation was up another 40 basis points while at-home was flat, creating almost a 2x variance between away-from-home and at-home inflation over the past 12 months. In the restaurant and food service space, Fitch projects food away-from-home spending growth to continue to slide to low single digits in 2025 down from mid-single digits in 2024, driven by consumers tightening their wallets. The away-from-home channel still accounts for slightly over half of overall U.S. food spending, which provides significant market potential for our deli-prepared foods to capture, particularly in recessionary environments where consumers eat out less. Mama's Creations, on the other hand, is growing several times that fast, 19.4% in fiscal 25, consistently and methodically gaining market share. So we are in the right segment of the market with the right products at the right time at the right price with the right strategy. Prepared foods have continued to expand both in popularity and across demographics. A recent Progressive Grocers Consumer Expenditure Study reported more than two-thirds of shoppers recently purchased deli prepared foods. And overall, consumer satisfaction with prepared foods has increased. An impressive 85% of millennials made these purchases in the past month, followed by 84% of Gen Zers. The most important factor when consumers purchase prepared foods is value, followed by quality, taste, and freshness. Dare I say grandma quality remains a key component and consumer decision-making. Given these tailwinds, 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 Mamas Creations product offerings is, in my opinion, second to none in variety, quality, service, and value. We are more than just meatballs, and in fact, these days meatballs are no longer our top-selling product. Grocers are recognizing that and building out their deli-prepared food assortment with us as their one-stop shop. To address this incredible opportunity, a short two and a half years ago, we formed an initial 3C strategy to improve our cost, 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've spent the past two years methodically tackling our biggest operational challenges, guided by the principle of what gets measured gets improved. Our first focus was cost. Back in Q2 of fiscal year 23, gross margins were just 11.9%. And through hundreds of small, meaningful changes, like intentional freight management, smarter procurement actions, and strategic labor planning, particularly by reducing overtime, we're now steadily back to our near-term margin goal in the high 20s. These gains weren't theoretical. They were reinvested right back into our business. Our Farmingdale facility now houses new grills, paid for with cash flow from operations that more than doubles our chicken capacity and significantly reduces labor hours. Chicken throughput in Q4 was 34% ahead of Q3 and a whopping 90% ahead of prior years. And thanks to Ray and his team, we're getting more efficient every day. We've also brought previously outsourced services in-house, building sustainable margin improvements and reducing our reliance on external support. By moving upstream, we also opened the aperture of partners we can use, further driving procurement efficiencies and ensuring adequate supply of raw materials. Did I mention those beef and chicken contracts, which help to blunt against macro spikes in the market? The second C, controls, has seen an equally impactful transformation. Our NetSuite ERP rollout continues to enhance pricing, margin, and inventory visibility. As we showed at our recent investor day, we added a warehouse management system that helps us minimize the need for large inventories, unlocking even more working capital. As one of our country's founding fathers and of my alma mater, Ben Franklin said, a place for everything and everything in its place. Our warehouse management system does just that. In quality, new x-ray and PCR testing build on our grandma quality promise and raise the bar on food safety. And these quality improvements are being noticed inside and outside of the company. Just last month, we received our annual unannounced Costco audit, scoring a 99.8%. a level my mother can tell you I did not reach in college. Our annual safe quality foods audits earlier this year scored a 98% in East Rutherford and a 97% in Farmingdale, made that much more impressive in Farmingdale since that too was unannounced. Finally, in Q4, we kicked off MAMA's first ever sales and operations planning efforts, S&OP, bringing demand and supply together to optimize our production planning. While it'll take a quarter or two to get up and running, I believe we will all look back and say our S&OP efforts were a major unlock to further gross margin expansion, let alone improvements for our customers with case fill rates. To support these improvements and strengthen our third C, culture, we've completed the build out of what I believe is a truly world-class senior leadership team. Chris Darling, our new chief commercial officer, joins us with over 20 years of experience building iconic deli brands at companies like Boar's Head and Albertsons. He's already made a meaningful impact on the business, adding outstanding new team members and building the capabilities of our existing team. It didn't hurt that with his contacts and reputation, he's already been to Cincinnati to share our portfolio with Kroger and to Minneapolis to feed our friends at Target. Starting next month, thanks to Chris, You could find not one, but two new items at Lidl, a first for mamas, as they took in two new sleeve items and are interested in others, using the entire chicken breast, helping us to trim more and more of our own chicken in-house. Chris joins Skip Tappan, our chief operating officer, who brings three decades of supply chain leadership from giants like Walmart, Gordon Food Service, and Campbell's. In the short time since joining, Skip has improved labor efficiency by reworking our shift structure and brought strong project management discipline to our grilling operations. If you thought I was passionate about what gets measured gets improved, you have not spent time with Skip. Dynamic modeling he has developed with Eric, Ray, and plant leadership allows us to understand in real time the impact our sales mix and operating decisions have on our trimming operations. chicken costs, and inventory management. On a personal note, my wife has said having another person in the office to geek out with on operating KPIs has helped our evening dinner conversation. I'd also like to remind everyone that with over half of our expected protein needs for the new fiscal year locked in via fixed price agreements, we have built a robust foundation to buffer near-term commodity fluctuations to the greatest extent possible. We continue to focus on selling new products that leverage our entire chicken breast, such as our cheese stuffed chicken meatballs, premium chicken strips, and new fajita and teriyaki chicken trim meals for one, which allows us to trim more often, creating a cycle of higher gross margins through significant cost savings. By mid-year, we expect in-house trimming will support over half of our chicken needs from a small fraction today. As discussed in our investor day, the margin impact of this cannot be understated. Finally, our fourth C, Catapult, has exceeded our expectations. In Q4, as I've shared, we got into Walmart. We are now in all eight regions of Costco, as well as all Albertsons regions. Q4 also saw us get our first item into Kroger's Home Chef division. We have secured upcoming launches at Lidl, our first ever all eight region Q1 digital multi-vendor mailer, MVM, national buy at Costco, as well as a major Q1 C-Store launch at Sheetz with our paninis. In Q1, we will also launch at Amazon Fresh with new technology and extended shelf-life meals for one, as well as our new non-protein items at BJ's. Lauren and the marketing team continue to strengthen the Mama's brand through through high-return marketing initiatives and targeted digital expansion with our key retail partners. Our growing Costco business is unlocking additional value through Instacart, where in March we more than doubled our sales record on the platform, and we continue to post a ROAS, or return on advertising spend, of well over $5. Notably, more than 70% of our Instacart consumers are new to brand. creating a virtuous cycle of household penetration that will create dividends for years to come. Our Walmart partnership is delivering even stronger performance, with a ROAS approaching $9. This is driving meaningful visibility and trial for our new chicken offerings, both online and in-store. We also successfully executed our second annual National Meatball Day campaign, generating 50% more entrance and newsletter signups over a prior year. These consumers represent a growing owned audience we can re-engage with cost effectively. But organic is not our only growth engine. With this exceptional team in place, we're in the best position yet to optimize operations, scale efficiently, and pursue potential M&A, which I've been looking forward to. As we've been very vocal about our ideal target candidate for some time, we've seen an incredible amount of deal flow and are pleased with some of the opportunities we see in the marketplace. While we will never acquire a company for the sake of acquiring something, if we feel there is a fair price opportunity that is incremental or strategic to our business, we will pursue it. But it all starts with a strong foundation and I'm incredibly proud of the one we've built. With that, before handing the call over to Anthony, I'd like to take a moment to thank our colleague, Steve Burns, our chief administrative officer and board member, for his service to the company as he moves to retire from both his executive and board roles at the end of this month. Steve has been with the company since the beginning, holding the ship together and helping to ensure my onboarding was incredibly smooth. With his duties successfully transitioned to Skip and Chris, and our leadership team structured for future success, he felt this was an appropriate time to retire, and April 30th will be his last day. On behalf of the entire team at MAMAS, I'd like to sincerely wish him a happy and well-deserved retirement. 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 fourth quarter and year-end fiscal 25. Anthony?

Thank you, Adam. I'd like to second that and thank Steve for his hard work at the company over the years. We all wish him a happy retirement. Now moving to the financial results. Revenue for the fourth quarter of fiscal 2025 increased 25.7% to $33.6 million as compared to $26.7 million in the same year-ago quarter. Revenue for fiscal year 2025 increased 19.4% It's $123.3 million as compared to $103.3 million in the prior year. The increase was largely attributable to volume gains driven by same-customer cross-selling of new items, increased ROI trade promotions to drive higher velocities in existing customers, and new customer door expansion. Gross profit increased 16.1% to $9.1 million, or 27% of total revenues in the fourth quarter of fiscal 2025, as compared to $7.8 million, or 29.3% of total revenues in the same year-ago quarter. Gross profit increased 0.7% to $30.5 million or 24.8% of total revenues in fiscal 2025 as compared to $30.3 million or 29.4% of total revenues in the prior year. The difference in gross margin was primarily attributable to significant commodity cost increases from historical averages as well as a non-recurring impact from construction surrounding new, now completed installation of strategic CAPEX projects at the Farmingdale facility. In addition, we are evaluating new targeted pricing and costing actions every day in partnership with our customers and suppliers to weather macro storms as best we can, while concurrently maintaining our targeted margin profile. While it's a fluid process, We have great customer relationships and pricing actions have been taken and implemented, which alongside our chicken contracts, which locked in attractive pricing for half our volume, helped to defend our gross margin targets in the face of historically aggressive poultry inflation. With chicken breasts currently selling in the mid $2 range per pound. 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 right-sizing our trade promotion investments from low single-digit percent goal of 10%, but never at the expense of hitting our margin targets. Operating expenses totaled $7.2 million in the fourth quarter of fiscal 2025 as compared to $5.9 million in the same year-ago quarter. As a percentage of sales, operating expenses decreased in the fourth quarter of 2025 to 21.3% from 21.9% in the prior year period. Operating expenses totaled $25.7 million in fiscal 2025 as compared to $21.4 million in fiscal 2024. As a percentage of sales, operating expenses remained flat in fiscal 2025 at 20.8% of sales. Operating expenses in the fourth quarter benefited from increased operating leverage partially offset by strategic new hires to build capabilities, as well as a 93% year-over-year increase in marketing spend across the entirety of the fiscal year, an area of historical underinvestment to help drive repeatable and profitable growth. Net income for the fourth quarter of fiscal 2025 increased to $1.6 million or $0.04 per diluted share as compared to net income of $1.4 million or $0.04 per diluted share in the same year-ago quarter. Net income for fiscal 2025 totaled $3.7 million or $0.09 per diluted share as compared to net income of $6.5 million or $0.17 per diluted share in the prior year. Fourth quarter net income totaled 4.8% of revenue as compared to 5.3% in the same year-ago quarter. Adjusted EBITDA, a non-GAAP measure, increased 8.8% to 3.1 million for the fourth quarter of fiscal 2025 as compared to 2.9 million in the same year-ago quarter. Adjusted EBITDA totaled $9.2 million in fiscal 2025 as compared to $11.7 million in the prior year. Our long-term goal is to achieve adjusted EBITDA margins in the teens percentage range. Cash and cash equivalents as of January 31st, 2025 totaled $7.2 million as compared to $11 million as of January 31st, 2024. The change in cash and cash equivalents was primarily driven by $5.1 million in strategic capital investments and $3.6 million of debt pay down year to date, partially offset by working capital improvements. As of January 31st, 2025, total debt stood at $5.1 million as compared to $8.7 million as of January 31st, 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 or organic 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 run the call back to Adam for some closing remarks. Adam?

Thanks, Anthony. In closing, We're entering the next phase of our journey with a sturdier ship, a more experienced crew, and a more advanced navigational system. The operational headwinds from earlier in the year are now behind us and the deli prepared food space is full of opportunity as consumer habits shift and retailers invest in convenient, high quality options. We've built a best in class leadership team, made smart investments in capacity and automation, and proven that we can grow both revenue and margin in a disciplined way. With strong customer relationships, an expanded product portfolio and customer base, and a healthy balance sheet, we're positioned to lead this category, not just as a participant, but as a consolidator and category shaper. I'm incredibly proud of what our team has accomplished this quarter and year, and even more excited for what lies ahead. With that, operator, Let's open the line for questions.

Thank you, sir.

We will now begin the question and answer session for telephone participants. If you have a question, please press the star followed by the one on your touchtone phone. If you would like to withdraw your question, please press the star followed by the two. Again, that is the star followed by the one if you have a question. If you are using speaker equipment, you will need to lift the handset before making your selection.

I will now pause as we assemble AEQ.

Our first question comes from the line of George Kelly with Roth Capital Partners. Please proceed with your question.

Hey, everybody. Thanks for taking my questions. Maybe I'll start with a couple on pricing. I was curious if you could break down your growth in 4Q by pricing and volume. And then I think you said in your prepared remarks that you had either just taken pricing or you were planning on taking pricing. And I'm curious if I heard that right and how much additional pricing you plan taking.

Yeah, thanks, George. So your question on pricing. So actually, probably 90%. definitely over 85% of our revenue growth was volume-driven, so really important. We are a volume-driven business. We look at pricing every day. It's not something we do once a year or once a quarter seasonally. Every day we're looking at what's happening in the markets from a commodity perspective, and immediately it's a big learning from when I first got here. We take immediate action, and we actually anticipate what's going on. So we've taken pricing. Some of that pricing has been implemented already. Some is going to be happening throughout the course of the month, the next two months. And again, we're clear and we really see our customers as partners. They see the same data we do. If not, we certainly share it with them. This is all readily available data on the price of beef and chicken. And when beef or chicken can start to move, we immediately say, look, we need another 10 cents. We need another 20 cents, whatever that number is. And we work collaboratively on that. So hopefully that's helpful.

And, and just brought like sort of round numbers or just ballparking it. Do you plan on, would this be all in like a loaded mid single digit pricing increase?

Um, if you look at it, fortunately or unfortunately, um, You know, you guys are seeing what's happening with commodity prices. Some of the numbers have to be even more than that if that's what we need to do. What's been great and actually what's been very helpful is when I first got here, when Anthony and I first got here, we took a significant amount of, and you were here from the beginning, a significant amount of pricing. So what's great is we're not playing catch up. So the pricing doesn't have to be as crazy as people that weren't prepared for it. But no, and sometimes it has to be low double digits. But we work collaboratively with our partners. And I will tell you, for a super majority of it, the customers totally understand. And we work together to implement it.

OK, understood. And then just one more question, and then I'll hop back in the queue. A couple months ago at your analyst day, you offered up some guidance for this fiscal year, this upcoming fiscal year 2026. You talked about double digit revenue growth and then I think EBITDA margin sort of starting the year in the high single digit range and exiting in the double digit range. I was curious if you're still comfortable with those ranges and is there anything as we move through the year that you'd like to flag with respect to, I don't know if there's new big customers coming on board that might sort of make the quarterlies uneven or anything else that's worth flagging.

So first, respectfully, Mr. George, I don't use the G word. So we did speak about, you know, you know, on the top line, we continue to gain and we did an amazing job this year. If you put in perspective, top line, the deli prepared categories growing in the, you know, let's call it about 5% range. We grew literally 19.4%. So the team is doing an amazing job gaining share every single quarter. I think every single quarter, sorry, I know, every single quarter since we've been here, we've been gaining share and we will continue to do that. I believe we can grow double digits consistently. And I think in the nine or maybe the 10th quarter we've been doing this, We've done that. So that's definitely to your first piece. Profit-wise, again, I'll be just a little bit, I'll always have this caveat on if something uber crazy goes on from a commodities perspective, that will be difficult. But I think that from an EBITDA perspective, I think we actually said that the long-term goal is in the teens percentage, but we should be in the double digits.

Understood. Thank you.

Thank you.

Our next question comes from the line of Eric DesLauriers with Craig Hallam. Please proceed with your question.

Great. Thank you for taking my questions, and congrats on yet another strong quarter here. So my first two questions are kind of around commodity pricing and these protein contracts. good timing with locking in some fixed pricing here. So just first on the chicken breast pricing, you know, that's really kind of taken off in recent months and much more so than other aspects of chicken pricing. I'm just wondering if you have any sort of view on what's driving the greater price increases on breast versus other parts of chicken. And if you have any views on, you know, how that may trend throughout the year, obviously a bit of a, crystal ball question at the end there, but I'm just wondering your views on chicken breast pricing versus chicken pricing in general.

Yes, I'll say a couple things. So the first thing is, you know, again, beef actually is still a higher commodity than chicken, right? So as people have less funds, they move to a cheaper commodity and chicken, at least for now, is still there. So that's one element to it. There's competition also. So fast food, I'm sure, well, your body's a temple, but other people know that, you know, I think McDonald's just came out with a chicken Big Mac and a lot of the other fast food places, they're taking a lot of the supply. So that's one, you know, so obviously we know supply is, is demand is up. That's not good. Second, the third thing is the element that, you know, somewhat, I don't, This is a smaller piece of it. Everyone talks about the avian flu and everything. That's certainly hurt eggs. Not enough time now to go into the difference between eggs. Actually, the egg chickens are different than the broiler chickens, but there is a little bit of that. I think overall, a little bit, there's just so much talking about it, and it has given the producers some freedom to raise prices, possibly somewhat artificially. We are planning. It is difficult right now. Like you said, and Anthony Morello and team gets all the credit for getting us into a contract, that is massive for us that we have locked in more than half our demand. The fact that we're trimming now, that allows us to buy from more places and buy the jumbo, which is more readily available, versus having to buy portioned chicken. That also helps us. Um, the fact that another thing that, uh, Chris and his team is doing the ability to sell both the top and the bottom of the chicken lowers our costs as well, because we're using the entire chicken. So while I always have to go in with the planning of, you know, the worst case, which is chicken will continue to go up. Um, I know that this team has done an incredible job to blunt a lot of that. And, you know, we're seeing it, uh, our business is holding, for lack of a better word, as chicken prices keep going up. The last thing, and it goes into George's question, we're not bashful this time around. As prices go up, again, this is wildly known numbers, we go to our customers immediately and say, look, this is where we are. We need to raise prices or, very important, or I just can't sell it to you. So I will tell you, hopefully I've been consistent with all of our investors, that we have to make a margin. I do tons of nonprofit work. That is at night. During the day, our job is to make a profit. And if the customers are not able to meet us on pricing, then we're going to have to find customers that do. What's wonderful is that... a lot of new sales. You saw some of it in the press release. I could talk to you literally all day about all the new work that Tony and Scott and Chris and team are doing to get us more sales. And that actually allows us to be a little picky, right? So I don't love it, but the team's doing a great job managing the chicken commodity prices. Is that helpful?

Yes. Yeah, no, that's very helpful. Thank you for that. And then just as kind of a follow-on here, so you guys are contracted for now over half of your protein needs. I think that might even be a slight increase from the last time you spoke on that topic. But just in general, I wonder if you can kind of drill down on that a bit more. Like, should we think of this as, you know, 50% plus of your protein purchases every week or month are spot, or excuse me, are fixed price? you know, the balance is spot or is it more like you guys are contracted for the first six months and the last six months are exposed to, to, to spot pricing. It's funny if you can kind of drill down into, you know, what exactly being contracted for 50% of your needs means.

No, that's great. And you're totally in my head. So first of all, this is all year long. This is a year long contract and it's spread out. So every single week we get, you know, X pallets of chicken. So the good news is this is for the entire year until December 31st. What that means, and actually I just had a conversation with Scott just before this call, what that means is we like to spread out. So you're not allowed or we won't let you as a customer buy $100 today and nothing for the next three weeks and then buy $100 next month. It's all spread out. We get a load every single week, well, multiple loads every single week. So it allows us a very smooth gross margin profile. I am all about consistency, right? Eric, you hear it from me all the time. I don't want to look like, you know, up and down whipsaw. I like slow and steady. I'm going to bore you to death type numbers. And that's what we were able to do with the contract that we put in place.

All right. That's very helpful and good to hear as well. Last question from me. So obviously, you know, utilizing the breast trimmings is going to be a big driver of your gross margin or at least product margin improvement throughout the year. You've laid out this goal of going from a small minority now to the majority of your chicken being trimmed in-house by mid-year. I'm just wondering if you could kind of step us through that a bit more. You know, obviously you have these new products that are utilizing the breast trimmings. Maybe just any kind of comments on, you know, how those are faring in the market right now and maybe how much, like when you look at your total distribution, like how penetrated are you with these new products now? And, you know, how will that change by mid-year to help get you to that majority of chicken trimmed in-house?

Yeah, it's wonderful. So two elements. The first one is, let's be clear, from an operations side, we could do all five days, six days immediately. So from an operations perspective, Skip and Ray and his team have prepared us properly. We have, and actually you saw, Eric, the trimmers, multiple trimmers. So we're in great shape operationally. The question is, can we actually sell the products? And with Chris coming in and Scott and team, it is actually pretty incredible how fast, at least they're beating my personal expectations on getting items in. So you tried. We had an amazing rotation at Costco last month in the Midwest with our chicken stuffed meatballs. They flew off the shelves. They literally went faster than we expected. Velocities were higher. And there's talk about expanding that. That is pure trimming. That's pure bottoms. We are already shipping right now brand new to Albertsons strips, these roasted strips. It's my new favorite meal. I brought them home for my kids. Barbecue chicken strips. That's all bottoms. We're doing that already. So we just got in and we start actually next month. New fajita items at BJ's, which is the same strips. The trimming, the new MFOs are starting to go out. So... That was too long-winded. I apologize. We're doing an amazing job beating my personal expectations, but still massively underpenetrated. There's tons of space for these to go to, but it seems every time we bring them, I mentioned to you the new Lidl items. That is using the bottom of the chicken. I'll tell you what, not that I did wrong, but last year we didn't tell the sales team to go sell them because we didn't have it all prepared. This year it was the first thing at our strategy sessions back in November to prepare for the year. This was the year of the chicken bottoms. And Chris is doing an amazing job focusing his team, and he just keeps knocking them down every time he goes.

All righty. That's good to hear, and I appreciate you taking my questions. Congrats again on the strong quarter.

Thank you, sir. Team effort. Thank you.

And as a reminder, if anyone has any questions, you may press star and the number one to join the queue. Our next question comes from the line of Nicholas Sherwood with Maxim. Please proceed with your question.

Good evening, and thank you for taking my questions. My first question relates to the rollout at Walmart locations. It started with two SKUs at 2,000 stores. Is there any increased demand to add more SKUs to that rollout or increase the store count? Can you kind of give us an update on how that's been proceeding?

Yeah, thanks, Nicholas. It's been going well, actually. It's actually, we hear back from Walmart that it's actually a top seller for them in that set, which is wonderful. I mentioned to you earlier the success we're having with the online and the ROAS improvements that we're getting. on the marketing efforts that Lauren's doing. We have increased actually from a four count perspective, but I'm really focused on it. And again, just like all the items, chicken's tough and we gotta get the pricing on the items. We're in conversations with them, we continue to do more, they continue to ask for more. I feel good, I feel like, but it's slow and steady. That's the reason why we didn't go into all of them at once. Flow and steady wins the race, and that's what we've been doing. But the feedback that we're getting, the data, the internal data that we're getting, great units per store per week, and they're increasing.

Understood. And then my next question is related to trade promotions. I noticed that it looked like trade promotion was down quarter to quarter and then also year over year. Can you talk about how – I know increasing trade promotion is one of the key growth drivers that you've laid out to us. Are you planning on ramping that up in the first half of this fiscal year? And also, how is some of that trade promotion interacting with the pricing that you've taken recently and you're planning to take in the next couple of months?

I love that. See that? The dollar I gave you to ask that question was perfect. There you go. So I hope, you know, I tell you guys that I say what I'm going to do and I do what I'm going to say. I told you guys we wanted to do more in the trade promotion space. We wanted to get up. My aspirations get to closer to 10%. I equally told you when I did not have the margin, we weren't going to do it. I got to get to these high 20s numbers. And what you see is absolutely correct. We went down from about 2.6% in Q3 to 2.1% in Q4. And that's just because we just didn't have, I felt good with, the team felt good with the 27%, but I just wanted to be more measured. As we get stronger and drive more gross margin, we can actually invest more in the trade. So it's something that I absolutely want to do. Chris is very passionate about investing. Lauren's passionate about investing in the marketing side of the house. But we can only do that if we have the gross margin to support it.

Understood. And then my last question is, so, you know, in a previous press release, you said that a lot of your sourcing, you're not going to be affected by the tariffs for your product sourcing. But, you know, you've talked the construction at Farmingdale is done. Now you're moving to expand the East Rutherford facility. Are you seeing tariffs impacting any sort of sourcing of business? I mean, building materials or machinery related to that?

Yeah, so hopefully I didn't say that there's no impact. I appreciate and hopefully I'm smart enough to know that eventually there will be secondary and tertiary. Hopefully what I was clear on is from a primary perspective, from a perspective of our biggest supplies are chicken and beef. That is all domestically sourced. Most of our other ingredients are all domestically sourced. But in time, if you knew the answer, please tell me. I don't. I don't know what's going to happen with all the tariffs, but what we're doing, and we have Alberto here to lead our procurement efforts, we're very proactive. We've been speaking about this for many, many months now. We've actually moved stuff around, but what I can tell you is right now, we're not seeing it impact our business. We're very good at multi-sourcing. We're very good at, you know, most of our suppliers are domestic, if not almost nearly all of our suppliers are domestic. We're holding strong and, again, I guess the planning has helped. From an equipment perspective, again, same sort of thing. I just had a conversation with Eric just a few hours ago. We're very proactive. We actually plan for maintenance, preventative maintenance. So we know our top machinery. you know, whatever pieces break, you know, through over time, right? Grills, the grill bars have X amount of hours before you have to replace them. The blower motors, the same things. So what we do is we proactively bring in replacement parts in advance, even though we don't need them to make sure that we have them if needed. So again, that further wanted us from any near-end tariff concerns because we have the pieces that we need right now.

Awesome. Thank you for providing all that detail, and I'll return to the queue. Thanks, Nicholas. Thank you.

This concludes our question and answer session. I will now hand the call back to Chairman and CEO, Adam L. Michael, for his 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 my fellow shareholders and execute upon our vision of becoming a leading national one-stop shop deli solution provider. Thank you.

And ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may now disconnect your lines at this time and have a wonderful day.