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

Our next presenter also hails from the great state of New Jersey, MamaMancini's. Mamamancini's, ticker MMMB, needs no introduction to most patrons that have attended the events in years past and enjoyed their wonderful meatballs. Talking about it just makes me hungry. The company is a marketer and distributor of specialty prepared, refrigerated and frozen all-natural Italian foods. The product portfolio consists of over 20 products, including meatballs, meat loaf, chicken parmesan, sausages, and dinner kids with beef, turkey, chicken and pork varieties. The company's products are now sold at over 45,000 locations nationwide, including well-known retailers such as Walmart, Kroger, Publix, Costco and Albertsons. The company also has a major presence on QVC, the largest direct-to-consumer marketer in the world. Joining us to give an overview of the company today is the Chairman and CEO of MamaMancini's, Mr. Carl Wolf. Carl, thank you again for feeding us. The floor is now yours.

Thank you, Chris, and good morning, everyone. Since we have a relatively short period of time, I'm going to go through the slides fairly quickly. You can look at them later if you miss something, and we'll try to have ample time for questions and with some comments I have on what's happening in the company and the economy. So we have our forward-looking statement. And this is the overview of the company. The share price is $1.30. I think, today is $1.25. And we're -- as Chris said, we're a manufacturer and distributor of specialty pre-prepared frozen and refrigerated all-natural products. We're in 45,000 locations. We have a scalable business model. We are in a very, very good quadrant of the economy, which I'll talk about in a minute. And we are all -- generally speaking, all-natural, made with simple ingredients, taste good and priced very competitively. Our profits have been increasing. We've had sequentially increased sales and record profits in the last several quarters. We've given guidance on sales for this coming quarter, which should see a further increase to record sales. Our fiscal year ends on January 31, but we're very optimistic about our profits as well. We just made a partnership with Beyond Meat this fall to make plant-based meatballs, and we'll have a comment on a minute. We're beginning a food service operation. We're visiting several customers. We expect some major sales. And also, we are starting to sell to Canada. Our first sale has been booked, and we should have several more. My management team, which is on the last page, is very experienced. I don't know if we'll have time to get to it, but we'll talk about it then. Very slow deck here. What basically it says this Dan Mancini, who is a co-founder of the company, came in with the world's best meatball. It's a real meatball. He is our brand ambassador. He's on QVC, and our products are real and natural. This is a very important slide. What it's showing is that where we sell, mainly in supermarkets and club stores, is growing very rapidly, about 8% to 10%, a year over the last several years. The center of the store, meanwhile, is decreasing 1% to 2%. So we are -- it's always good to be in a growing industry, and also where people are buying fresh prepared foods, which is our major area, people are willing to pay more for high quality. The next bullets basically talk about the size, which is fairly large. It's over $30 billion in sales. Our products are all-natural. We have 26 different products, and the picture on the slide shows many of them which was mentioned prior. I want to mention 2 areas which are showing very significant growth right now, that's Pasta Bowls. We have 5 items. We're going to 8, momentarily. We've gotten a lot of new authorizations for placements, and thus far, sales have been very, very strong. We just started shipping Winn-Dixie Southern stores, about 500 locations in the last month. We have been authorized another major chain in the Northeast, and we expect another major, major chain out of the Southwest all within the next month or 2. Very important in this size and intent to purchase. We've done 2 major consumer surveys, sample sized at about 2000. And it shows that 92%, both of them repeated the same, would likely buy or definitely buy our products. 0% would not buy our product. And normally in the food business, which I'm a veteran, you would find that 65% to 70% is considered a winner. As was mentioned in the early part of the call, we partnered with Beyond Meat. We expect to announce several major national and local customers in the next month, and we're waiting for the first shipment. It started a little slower than we thought, but it's coming along very, very well and could be a very, very significant addition to the company. And that was the second thing I wanted to talk about. So on the -- this chart is just showing some of the chains we deal with and where we have had penetration. So as an example, we sell Publix, which is a very large 1,200 store regional chain in the Southeast. Even though we sell Publix a number of items, I think a total of 8, we are not at all stores with 5 of -- 6 of them -- 5 of them. And they -- if we are successful, which we believe are, we will roll out with them. So even though you see a chain that we're 100% penetrated, we can take part of those 26 items and keep adding to it and also go into full distribution. So we have made a lot of significant strides, and we now sell Whole Foods National. It's a new customer. We sell BJ's, which is an East Coast club store chain with about 200 locations. In any case, we've added to our items that we offer. We had 1, now we have 2, we expect 3 by May. So even though we sell a chain, there's a lot more business available. Sam's Club is a very important customer to us, and we expect that to continue. Our growth strategy is pretty simple. We're going after larger accounts. And each addition, we're shooting for a $3 million to $5 million potential. We'll take less. But generally speaking, we want to manage those larger sales and merchandise it, how it goes out in the marketplace, et cetera. We have made significant improvements to our plant. We're a Level 2 Safe Quality Food USDA inspected plant. We get a typical rating in the mid-90s, which is in the top 1% of all plants in the country. And we're doing right now, which is very important, an operation study. We issued a press release. We think we'll be able to decrease our cost and increase more production out of the existing facilities. We've improved our in-house labs. They're very important, and we now have 5 people in Quality Assurance. Financial highlights. Basically, we projected the last quarter to be over $10 million in sales. So we would be over $35 million in sales versus $28 million last year. Our gross margins, which show a little bit lower as part of it as accounting for depreciation this year versus last, and we expect gross margin to improve modestly or significantly depending on how well the operation [ runs ] Our cash provided by operations is very positive. Our bank loan, which was down to $1.5 million as of October 31, will show a very, very significant additional reduction by January 31. On management, I'm not going to go into -- dramatically on that, except that I've had 35 years of food experience. And I started Alpine Lace Brands with my wife. We were a public company. Goldman Sachs was our banker. Merrill Lynch was our NASDAQ. We did an auction to sell the company. It was very, very successful. We were public, and people who invested in our company had about a 29% ROI each year. I'm going to go to -- this is the summary, which are the key takeaways we mentioned before, but I want to talk about a few things that I'm sure in people's mind. Coronavirus, thus far, appears to be having a slightly beneficial effect to the company. One, beef prices have been sluggish, and we've had vendors who held their prices when they went up. But we think it's very possible to have a decline in beef. We're not sure yet, but it is a very key element in our area. Supermarket business and club store business will still go on. People are eating out less and traveling less. So -- and whether at the supermarket, they still want to have high-quality food that is takeout and fully prepared. Our products fit that mold, so we think we'll do fine. In our supply chain, where we appear to be domestically supplied, one item is onions, which comes from overseas, which may be impinged, but we'll use fresh [indiscernible] and dropping them ourselves. New customers are coming along very positively, and we expect to have the major reports several new customers that are coming into the spring. And I mentioned Beyond [ Meat doing ] very well and the operational [indiscernible] thus far appears very, very positive. I'm going to turn the call over to questions. I hope I didn't race through it too fast, but I know everyone has a lot of questions.

We do actually have several questions. First and foremost, someone would like to know if it is possible to give an update concerning the renewal of the debt commitments. Are the maturities still the same or not? And what amount of liquidity could be drawn from it in case of a downturn due to the coronavirus?

Okay. Our major bank debt [indiscernible] Bank. Our long-term debt is virtually nil, which is a $2.5 million debt. And our credit line for working capital has been increased, and that has been renewed for a 2-year rate. The [ pool termination ] has been increased. We also achieved a higher credit line for property, plant and equipment. Now today, the Fed rate was reduced by 0.5 point, so that will further reduce our interest, which is already -- our interest was running around 6.25%, 6.5%. We met some metrics, and that was brought down to, I think, below 6%, and now it should go a little bit lower. So we think we're fine. Next question?

Yes. Someone would like to know how popular you believe the Beyond Meat products are going to be for you folks looking about 1 to 3 years out?

So, Beyond Meat are [ here to stay ]. They are constantly improving the products. I think where they have some ingredients that are not -- are considered further processed. I think that they will -- they're slowly cleaning it up and making a better product. Also we -- so I think Beyond Meat will be a very, very big factor in our business. We were just talking today about a new item of Beyond Meat meat sauce, which would be our second item. We now make meatballs. So Beyond Meat makes a delicious sausage. So a sausage dish also would be very, very positive.

Next question is, do you folks disclose how much revenue you make per retailer? And how big is Costco for the company?

Costco is -- we are on in and outs with Costco. We sell either 1 or 2 divisions a year. Costco is a very good customer. We will sell [ to ] Costco. We have commitments already to sell [ to ] Costco this year. We are hoping to sell more divisions of Costco and sell them for longer periods of time. A fully executed accepted product at Costco would represent $20 million to $25 million per year per SKU. So Costco is on top of our radar, and we're working very hard on that.

Excellent. Next question is, what are you most excited in terms of revenue growth in 2020? And can you try to quantify it?

I don't like to do that and the retailers especially don't like that. First, I will take QVC. We're considered a top brand there. We often are within the top 1 or 2 items presented per shelf. They would like to dramatically increase our business. All of our major customers, our top 4 customers, have all shown very, very significant increases in volume, and we expect that. But we have some major, major new customers. We just started shipping Kroger in modest distribution. We are now selling Whole Foods National. We are selling Albertsons-Safeway in some divisions, but keep getting more divisions as we are successful. And we've just started selling Southern food to Winn-Dixie in 500 locations, and we have several other chain. So we're -- our goal is to be at a $50 million run rate by the end of this year and then expand to $70 million to $80 million. What's very important to note is that our incremental operating profit is between 20% and 25%.

Very good. And next question is, how does MamaMancini's differ from the last public company you grew and sold?

Well, the last company was Alpine Lace, and there [indiscernible]. The company has no reason to [indiscernible]. And Alpine Lace was a low fat, low sodium cheese. We marketed it very heavily. And we were very successful. We had a niche in the market. We were the first to promote to the market on that concept, which we then sold. We gained distribution in virtually every supermarket of the country. In the case of MamaMancini's, we have a much higher-margin product with much higher incremental operating profits, and we've been building that. We have a very, very high-quality product. And over time, we then sort of grandfathered a company that [indiscernible] very fast-growing [indiscernible]. So there's a lot of similarities. Our business is concentrated in the same area, which is in the perishable section of retail. I haven't mentioned food service, though. And food service is an opportunity to double our sales. We have a lot of things going on. It started out slow. We thought we'd have more business last fall. But right now, it looks very, very positive. We're really staying on top of it. Just an aside, we're starting a new project right now to sell independent delicatessens in retail outlets. A [indiscernible] but that could be a very, very large business. Alpine Lace [indiscernible] business in that sector several years ago. Alpine Lace ultimately became a $250 million business in retail, about $110 million in wholesale.

And finally, one more question. Somebody wants you to do a brag about your product. How good tasting are the meatballs?

They're very good. Very, very good. What happens when you sell products, your own food, you don't like to taste it because if you see anything wrong, you're -- you ruin your night. But anyway, I would say I'm always very, very pleasantly surprised that our products are very, very good. Very homemade, not overly seasoned and very, very nutritional. Our -- to give you an example, our Turkey meatballs, a 4-ounce portion -- a 5-ounce portion of 2 meatballs and sauce, is a total of 110 calories. So you could put that on a salad and have a nice meal for using the sauce as your salad dressing. You would have a nice meal for under 200 calories.

Excellent. Well, that is all the time we have today, and thank you all for joining us.