Mama's Creations, Inc. (MAMA) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the MamaMancini's Virtual Roadshow Webinar. Today's conference is being recorded. The slides accompanying this call are available on the webcast link that was provided in the press release as well as the company's Investor Relations website at www.mamamancinis.com. Before we begin, we would like to remind you that some of the statements made today may be considered forward-looking. These forward-looking statements are subject to a matter of risks and uncertainties that could cause actual performance or results to differ materially including the risk that the results may be different than currently anticipated. Please note that these forward-looking statements speak only as of the date of this presentation, and we undertake no obligation to update these forward-looking statements in light of new information or future events, except to the extent required by applicable securities laws. Please refer to all SEC filings. At this time, it's my pleasure to introduce you to Carl Wolf, CEO and Chairman, who will be presenting the story today. Carl, the floor is yours.

Good morning, everyone, and thank you for joining our Virtual Roadshow today. I'm going to go through an investor deck that is slightly shorter than and updated from our prior decks, and then we will have time to take investor calls. Forward-looking statements, which have already been read, everyone should be aware of them. And I'd like to move to Deck 3, Slide 3, which is MamaMancini's overview. And what we'd like to do on the overview is point out our core business, which is a manufacturer and distributor, especially pre-prepared, frozen and refrigerated all-natural food products. We're now in about 45,000 locations, and we're in such national chains as Walmart, which includes Sam's Club, Whole Foods and Kroger. It's a scalable business model, and we're in the prepared foods market that meets consumers' lifestyle. Today's consumers' demands are for quality, fresh natural foods with nutritional benefits. Across the board, our operating margins, our return on operating expenses and expanding cash flows have been positive, and we recently announced a partnership with Beyond Meat to offer plant-based Italian foods, greatly expanding our addressable market. We recently entered the food service market and food service business is approximately as large as our existing supermarket and club store business. I also would like to mention that we are also very actively soliciting business in the c-store market, which has about 300,000 locations across the country, as the marketplace has expanded to more quality foods. And we also are sourcing business for selling product into Canada. We have an experienced management team with over 48% insider ownership. Our products are real. The gentleman you see in the next slide, Dan Mancini, is our spokesperson. He's very often on QVC. He was just there a week or so ago and virtually sold out a couple of hundred thousand dollars worth of product on a Sunday afternoon. Dan has taken the recipes from his grandmother Anna Mancini. And our products are simple, ingredients you can read and understand, and as Dan says, "Every Sunday, I would wake to the amazing aroma of my grandmothers frying meatballs, I call this a scented memory." One of the key things in the next slide and one of the key things is we want to have a product line that is growing and makes sense. And what we're doing is we're selling to what we call the perimeter of the supermarket. The perimeter of the supermarket is fresh prepared foods that normally are consumed either that day or the next day. A recent survey shows that about 70% of consumers decide what they want for dinner after 12:00. Often, people today now eat different things at dinners as well as at different times. So supermarkets, while they're -- center of the store, which is dry goods, such purveyors as Kraft, Campbell Soup, Heinz et cetera are selling -- General Mills are selling product, is decreasing 1% or 2% a year, whereas the purchase order is growing, one of the reasons it's growing is that consumers want food that is easy to put out and also taste delicious. So the supermarket business is growing because they've been competing with takeout food or restaurant dining foods. So there's a number of statistics here in the next -- in this slide that shows that the business is growing very rapidly, and we're in -- we're swimming the right way on the stream that really helps. What's very interesting, if you go to the next to the last bullet, plant-based meat market is expected to grow $4.5 billion and expected to grow to $85 billion by 2030. So -- and what's happened though is that supermarkets that have put an emphasis on high quality food, have seen greater sales increases and greater margins. Our products are all-natural, and we have 26 different items, is led by meatballs. And as you can see in this slide, some of the products we offer. What's very interesting, what seems to be growing very rapidly is stuffed pepper kit. And what we do is we send the supermarket a kit of stuffed pepper filling and cheese and sauce, and they supply the peppers. Recently, we now have a new kit. We just started selling, where we ship the peppers fresh as well so that they don't have to search in the store for any of it, and that area is growing very, very dramatically for us. Another very rapidly growing area for us is sausage and peppers, a great-tasting product. And last but not least, which is growing right now are antibiotic free meatballs. And also, as you can see in the square, on the lower left, plant-based meatballs, are just beginning right now for business. What's very important though, is the market survey on the bottom. And this survey was taken among 2,000 people twice. And as you know, some of the presidential surveys today are among 600 people, 700 people, the larger the survey, the more accurate. And we have a 92% intend-to-purchase again, which is extraordinarily high. And there's actually 0% that said they will definitely not purchase. So our quality is really drives our business. So anyway, this is just showing what's going on with the plant-based market. I'm sure all of you have heard the various Beyond Meat new placements, et cetera. And by the way, we just -- which was in a press release, recently presented our Beyond Meat product on QVC, we had 11 minute time allocation, we sold out in 7 minutes. And we expect to be on very soon with another shelling. But Beyond Meat, as you know, from everything from McDonald's to RB's and Kentucky Fried Chicken is really the brand. And we tried about 8 to 10 different other products beside Beyond, and this worked best for us. We probably did about 25 reiterations of the recipe, not as easy as anyone would think. And we are just shipping our first orders of Beyond. In the next few weeks, we'll be announcing some of the customers that we have. And so we're very, very optimistic for the future of this line. This is a slide that just points out the benefits of our product. To give you an example, our Turkey Meatball have 22 calories an ounce. Hummus has about 55 to 60 per ounce. And if you look at some of the competitors, they're as high as 80 calories per ounce, we're 22. And we have no soy in any of our products or soy protein -- soy flour or soy protein, and we have no artificial ingredients. So we think we have a really great superior line of products. In fact, we put together -- just on a side, we put together a MamaMancini's diet, which we didn't go out with because for various reasons. But anyway, it would have -- if you can take a portion -- a 10-ounce portion of our meatballs and sauce and put it over lettuce on a salad, you would have a dinner for less than 300 calories. Our sales channel, we're now starting to sell to all the major chains that you can see in the pictures listed here. What's very interesting is that, although we may sell someone like Kroger, which is just rolling out right now, that's one item. So we have 26 items. So our growth isn't just from selling a chain. It's from selling new items to existing chains as well as getting new chains. So as you can see, we now are gaining national distribution, more will happen. We will get more placements in the coming year. So we're really very, very excited. The food service area, it is very, very interesting. It has not really shown any sales or any meaningful sales results to date. However, we have made some changes there, which we are very, very excited about. We have 3 people right now working on that area. Every day, samples go out, presentations are made, and we believe that in the coming year, we will see some very, very significant business. Our products are delicious and unique. QVC is the largest direct-to-consumer marketer. QVC has moved up with us in volume in each of the last 2 years, and based upon what we see right now, should have a very substantial increase this year. However, that is very preliminary and yet to be proven. But in any case, we often sell-out, and we're often the leading food product or one of the top 3 in a given shell. On the Sirius Radio Campaign, it's been very effective for us. We like to buy over holiday flights, usually 1,000. We've increased the number of flights to 8 from originally what was 5 to 6 over the last several years, and we are on all the major news channels. Our rates are locked in. And this year, which should be an interesting year, we think we'll have a lot of increase in listenership. This shows some of the major chains that we've penetrated. So as an example, we're in all Publix. We sell Publix right now, 5 items. However, 3 of the items -- I'm sorry, we sell Publix 7 items, 3 of the items are in test of 350 of 1,150 stores. We believe that test is going well. So we would basically double our potential Publix business. We presented to Publix 3 more items, which we're very hopeful on. So even though it shows 100% distribution, the key is to try to get anywhere from 7 to 12 items per customer. So as you can see, going down the line, we have a lot of full distribution, but also a lot of potential. Whole Foods, so you can see there is a very exciting opportunity, we're now 100% penetration at Whole Foods. And again, this is the same chart on the center of the store versus the perimeter of the store. Our goal is to basically get 5-plus major accounts each year, generating a $3 million to $5 million in revenue. There are some accounts that would be $15 million to $25 million in revenue, hopefully, some of them will occur. But right now, if we can do that our volume would increase -- with growth in our existing accounts would increase approximately 45% in the next year. Our manufacturing and testing capabilities is a major project that has occurred and will continue to occur. An announcement today, hiring Steve Burns as our Executive Vice President. Steve has a background in finance and accounting and controls. He was our lead director. And we see very significant operating efficiency -- efficiencies that can be achieved in the next 6 months or sooner. Our plant is a Level 2 safe quality food plant. We're in the midst of a modest cost, adding new holding freezer space and loading dock areas. We've for a modest amount of money have increased production capacity. So we think we're in pretty good shape to handle increases in business. Our goal would be to be able to handle up to $70 million to $80 million business from our existing operations, plus some outside co-packers, which we're working on right now. So we think we're in more than good shape. Just the financial highlights, the last 12 months, we did $24.7 million in sales. We've already made a guidance of $10 million in sales for this quarter ending January 31, we feel confident on that. So you're talking about close to $35 million in sales versus last year, we did $28 million, as you can see, $28.5 million in the bar graph. Our gross profit margins were lower this year, some of that was offset by reclassification of operating expenses. However, so our goal this year is to move gross profit margin back up to 35% to 37% range, that is our emphasis this year, we think we can do that, which would be very, very beneficial to the company. In terms of overheads, the company sees a modest increase in overheads, mainly in management. Cash provided by operations have been very strong. Although last year shows a very strong number as well, we continue to move down our long-term note, which was $2.5 million, it was down to $1.5 million as of October 31. We know already that it will be substantially lower as of January 31. And our cash and equivalents are approximately $600,000, it could be higher. We have available working capital line, which we're not using. So we think that we're -- have more than available cash. If we do what we think we hope to do in the coming year, our debt should continue to move down, and we will not have any need to raise capital. We do have, as people are aware, some warrants outstanding, if the stock remains strong, it's very possible that they will be converted, $3.3 million, actually, $5 million of the loans are -- and last day is going to be between July and November, so we think that the stock remains recently high and it will be reasonable to convert into [ foreign ] which would add about $5 million to $7 million in cash into the company. And here's our last page for the summary are the management -- key management. I'd like to mention a few people. One, Matt Brown, who is -- runs our operations, very dedicated. One of the keys in running the business is ability to grow and learn. We have a philosophy in our company. What if it's broken, fix it, let's not dwell on it. Entrepreneurs or entrepreneurial companies, probably make more mistakes than [indiscernible] are the one that just keep making mistakes. So we have a saying, broken, fix it, move on. Scott Shaffer is in his mid-30s, he is our Tiger, Vice President -- Executive Vice President -- Senior Vice President of Sales. He is a tremendous salesperson. I am very, very pleased with his ability to dock accounts and follow through. Dan Mancini often goes on sales calls on QVC, he is the face of our brand. And he is a very, very supportive accompany. Steve Burns, whose background, you saw it today in the press release, is -- will be -- is a very integral part of the business. Chris Styler, our Executive Chef, we sent out his vitae, I think about 6 or 9 months ago, you can go look it up. He has written 19 cookbooks, has produced several TV shows. And most importantly, aside from developing new recipes for us, he knows how to convert small batches to large batches. We have a rule that if we have a new product or a tweak in a product, Chris must watch the production to make sure it comes out the way we think it is. So we think we're in pretty good shape. My own background, I'm a serial entrepreneur. As many of you know, started Alpine Lace brands, developed it from nothing into a $250 million retail business within NASDAQ. I was involved with 2 other NASDAQ companies as the Chairman or co-Chairman of the board. So I'm pretty aware of the area we're in. And now the key takeaways are the same as before. What we have done. Again, we think we're in the right industry. We have the right product. Our margins are good. Incrementally, we believe we are in 20% to 25% operating profit on each additional sale. So we can leverage those sales, substantial additional sales. It will flow down to operating profit for the company. Cash flow is very strong. And we continue to develop new products. And we think the Beyond Meat product could be the game-changer for the company. It's way too early to tell. The product is first, just going to customers right now. We'll see, but it could be a very, very exciting opportunity. Again our management. I think our team now is pretty complete, and we're very, very happy with that. With that, I'd like to open to Q&A.

[Operator Instructions] And we will take our first question from Howard Halpern with Taglich Brothers.

Can you, I guess, talk a little bit about Costco and what your penetration is there as well as comparing these club stores to the supermarket locations in terms of volume and general consumption by consumers?

Club stores have much higher volume per location than supermarkets. We have had very significant penetration in BJ's and Sam's Club. Costco also had limited penetration up to now. We do get rotations with Costco. It is the #1 priority for the company. In fact, I have a call with them by chance, later this afternoon. Costco has very, very high-volume per stores, so we're on it and our proven success makes us very, very helpful that we will continue to get additional business with Costco.

Okay. In December, you had announced 3,700 new product placements with Tier 1 retailers. Has that -- have shipments begun? Or can you just describe the status of that?

All the shipments have begun except for 400 locations, which are now expected in February.

Okay. And just based on those shipments. I know we haven't finished quite the fourth quarter yet, but that -- those shipments in place should get your first quarter off to a pretty good start for the year?

Yes.

Okay. And I guess I haven't touched on this before, but what is your opportunity in Canada?

In Canada, we've spent a long time. We started last May in Canada, and we are very, very hopeful that we are signing our projections, and we have indications that we will get our first order in the next 2 weeks for Canada. In terms of our projections, we show modest [ mindset ]. However, Canada on a basis -- population basis, could have $5 million to $7 million in volume just on a pro rata basis to the United States. What's interesting in Canada is some product is priced very, very competitively based upon the marketplace. And that's why our product has done very well. Our sales -- new major sales trip to Canada in the next 2 weeks.

Okay. And lastly, if you could just talk about the food service, I know you've been working on it. And I guess you said you made a couple of tweaks or changes to it. But in terms of the pipeline, do you have any general anticipation on when a significant or a meaningful order might be coming down the road in the next 6 to 9 months?

We show in our projections for this year, this coming year, 2021, modest sales in food service. However, one major account can add $5 million to $7 million in sales. So right now, we're assuming a number of medium to small accounts happening by the summer. We have a new key person who is out selling for us. He is relentless. As soon as I wake up, I have texts, as soon as I go to bed, I have texts. And I believe he will get some. And we have a lot of samples and a lot of meetings going on. So I think we'll have some significant business. However, until you have a commitment, it is very, very hard to put that in a projection.

Okay. Well, just keep up the great work that you're doing.

We also have 2 other people working on food service, by the way. One is on schools and universities, meeting with Beyond products and...

And just do you anticipate the Beyond Meat products will fit well within that food service area?

Yes, very well.

Okay. Okay, keep up the good work, Carl.

Thank you.

And ladies and gentlemen, this does conclude our question-and-answer session for today. I would like to turn the conference back to Mr. Wolf for any additional or closing remarks.

Everyone, thank you very, very much for participating in the call and I hope that we will be able to give you more updates in the near future. Thank you again.

Ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.