On September 10, 2024, Mama's Creations Inc (MAMA, Financial) released its 8-K filing for the second quarter of fiscal 2025, ending July 31, 2024. Mama's Creations Inc is a marketer and manufacturer of fresh deli-prepared foods, found in over 8,400 grocery, mass, club, and convenience stores nationally. The company's broad product portfolio, born from a rich history in Italian foods, now consists of a variety of high-quality, fresh, clean, and easy-to-prepare foods to address the needs of both consumers and retailers.
Performance Overview
Mama's Creations Inc reported a 14% increase in revenue to $28.4 million, surpassing the analyst estimate of $28.15 million. However, the company faced challenges with its gross profit, which decreased by 8% to $6.9 million. Net income also saw a decline, falling 34% to $1.1 million, or $0.03 per diluted share, matching the analyst estimate of $0.03 per share.
Financial Achievements and Challenges
The company's revenue growth was driven by successful pricing actions and increased demand. However, significant commodity cost increases and construction-related disruptions impacted the gross margin, which fell to 24.2% from 30.3% in the same quarter last year. Operating expenses remained relatively flat at $5.3 million, but as a percentage of sales, they decreased to 18.6% from 21.1%.
Key Financial Metrics
| Three Months Ended July 31 | 2024 | 2023 | % Increase |
|---|---|---|---|
| Revenues ($ in millions) | $28.4 | $24.8 | 14% |
| Gross Profit ($ in millions) | $6.9 | $7.5 | (8%) |
| Operating Expenses ($ in millions) | $5.3 | $5.2 | 1% |
| Net Income ($ in millions) | $1.1 | $1.7 | (34%) |
| Earnings per Share (Diluted) | $0.03 | $0.05 | (40%) |
| Adj. EBITDA (non-GAAP) ($ in millions) | $2.7 | $3.0 | (9%) |
Management Commentary
"The second fiscal quarter delivered 14% revenue growth to $28.4 million driven by sustained operational execution and a continued focus on our 4 Cs – Cost, Controls, Culture and Catapult," said Adam L. Michaels, Chairman and CEO of Mama's Creations. "Continued commodity pressures now reaching multi-year highs and construction-related disruptions from the installation of strategic CapEx projects impacted our gross margin profile. However, successful pricing actions and operating margin gains through these CapEx projects enabled us to maintain a mid-20% gross margin profile, validating our profitable growth strategy that is anchored by our core focus on the 4Cs."
Income Statement Highlights
Revenue for the second quarter increased to $28.4 million from $24.8 million in the same year-ago quarter. Gross profit totaled $6.9 million, or 24.2% of total revenues, compared to $7.5 million, or 30.3% of total revenues, in the same year-ago quarter. Operating expenses were relatively flat at $5.3 million, and net income totaled $1.1 million, or $0.03 per diluted share, compared to $1.7 million, or $0.05 per diluted share, in the same year-ago quarter.
Balance Sheet and Cash Flow
As of July 31, 2024, cash and cash equivalents stood at $7.4 million, down from $11.0 million as of January 31, 2024. The decrease was primarily driven by $3.5 million in capital investments and $2.0 million of debt paydown. Total debt stood at $6.8 million.
Analysis
Mama's Creations Inc's revenue growth is a positive indicator of its market demand and successful pricing strategies. However, the decline in gross profit and net income highlights the challenges posed by rising commodity costs and construction-related disruptions. The company's focus on operational efficiency and strategic CapEx investments is expected to improve margins and profitability in the future.
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Explore the complete 8-K earnings release (here) from Mama`s Creations Inc for further details.
