Mama's Creations Q2 Earnings Call Highlights

Mama’s Creations NASDAQ: MAMA reported fiscal second-quarter revenue growth of 55% and said expanded retail distribution, contributions from the Bay Shore acquisition and new product launches helped drive operating leverage and higher profitability. For the quarter, revenue increased to $54.6 million from $35.2 million a year earlier. Net income more than doubled to $2.6 million, or $0.06 per diluted share, from $1.3 million, or $0.03 per diluted share. Adjusted EBITDA, a non-GAAP measure, rose 68.9% to $5.5 million, while adjusted EBITDA margin expanded to 10.1% from 9.3% in the prior-year quarter. Chairman and Chief Executive Officer Adam O'Michaels said the results reflected the company's strategy of investing in product launches before realizing greater scale and leverage. “Every single bottom-line metric grew faster than revenue,” O'Michaels said, citing income from operations, adjusted EBITDA and net income. Gross profit rose 49.1% to $13.1 million. Gross margin was 24.0%, compared with 24.9% in the year-ago period but up from 23.6% in the fiscal first quarter. Chief Financial Officer Anthony Gruber said the sequential improvement reflected new packaging technologies and protein form factors moving toward steady-state production following first-quarter launches. Management said it continues to target corporate gross margins in the mid- to high-20% range. O'Michaels said progress toward that goal will depend in part on increasing sales of chicken “bottom” products, which allow the company to use more of its chicken inputs and reduce trimming costs, as well as further improvement at the Bay Shore facility. Operating expenses rose in dollars to $10.1 million from $7.1 million, largely due to the Bay Shore acquisition, but declined as a percentage of revenue. Operating expenses represented 18.5% of revenue, down 160 basis points from 20.1% a year earlier. During the question-and-answer session, O'Michaels said the company intentionally shifted about $500,000 of marketing spending into trade promotions during the quarter because it was seeing stronger returns. He said Mama's spent more than $1 million more on trade activity than it did in the prior-year period. Mama's announced its first launch with Kroger, beginning next month in the retailer's Louisville division. The initial rollout will cover more than 100 stores and include four products, including three chicken-bottom stock-keeping units. O'Michaels said the company plans to begin in one division and expand over time if product performance supports additional distribution. The company also said it was approved for Costco's second-half multi-vendor mailer promotion across all eight U.S. regions.