Release Date: September 10, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Mama's Creations Inc (MAMA, Financial) reported a strong 14% revenue growth for the second quarter of fiscal 2025.
- The company successfully implemented cost control measures, resulting in reduced SG&A expenses by 254 basis points.
- New customer acquisitions, including Walmart and Costco, are expected to drive future growth.
- Significant investments in CapEx, such as new grills, are expected to improve margins and operational efficiency.
- The company has a strong balance sheet with reduced debt and sufficient cash reserves to support future growth initiatives.
Negative Points
- Gross margins decreased to 24.2% from 30.3% in the same year-ago quarter, primarily due to commodity cost increases and construction impacts.
- Net income for the quarter decreased to $1.1 million from $1.7 million in the same year-ago quarter.
- Commodity price volatility, particularly in chicken prices, remains a significant concern.
- Construction activities impacted margins by approximately 500 basis points during the quarter.
- C-store penetration has been slower than expected, impacting potential growth in that segment.
Q & A Highlights
Q: Can you speak to what you're thinking about for revenue growth rate for the full year, especially now that we brought on a large customer like Walmart?
A: Yes, I think we're going to stick with the double-digit growth rate target for the year. The team is doing everything we committed to, and we feel good about maintaining this target despite uncertainties like changing rates and political factors.
Q: Outside of the construction impact, are there any other headwinds that still remain? Do you feel confident you'll be at the high 20s in gross margin in the second two quarters of the year?
A: The main headwinds are construction, which is mostly completed, and commodity prices, particularly chicken. Despite high chicken prices, our team has managed efficiencies well, and we expect to maintain high 20s gross margins.
Q: How long does it typically take for customers to request new items after initial placement?
A: It varies significantly. Some customers request new items almost immediately, even before receiving the first item, while others may take longer. Our team is agile and ready to meet customer needs quickly.
Q: Can you comment on the remaining construction and how much longer it may take?
A: The construction is mostly completed, with only fine-tuning left. The grills are operational, and we expect the fine-tuning to take days or weeks, not months.
Q: How is C-store penetration progressing, and how are the comp offerings trending?
A: The cups are doing well, particularly in the Northeast. C-store penetration has been slower than expected due to personnel transitions, but we feel good about our current position. C-stores are a small percentage of our business, so the impact is limited.
Q: How much of the 14.5% growth in the quarter was due to pricing, and what are your plans for pricing in the back half of the year?
A: About 80% of our growth was volume-driven, with 20% from pricing. We don't expect to take more pricing in the back half of the year unless commodity prices, particularly chicken, come down.
Q: When will the real ramp in trade spend occur, and are you seeing the returns you hoped for with the current spend?
A: The significant ramp in trade spend will likely occur in early 2025. We have seen excellent returns on our current trade spend, including free trade programs and high returns on digital marketing efforts.
Q: What products are launching at Walmart, and what are you seeing with respect to M&A?
A: The Walmart products are our proteins, and we will share more details soon. On M&A, we have a growing list of potential targets and are actively exploring opportunities, although internal projects have taken priority recently.
Q: How are you working with Walmart to promote the activation of your new SKUs?
A: We are using a combination of in-store promotions and digital marketing, including geo-targeting and QR codes, to drive awareness and sales.
Q: How many additional stores are you in with Costco's national buy, and do you expect more products to be part of that program?
A: We are now in six regions with Costco, the most we've ever been. We have multiple products in Costco, and we expect to add more items soon. The national buy will start impacting our top line in Q4.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
