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?