Mama's Creations Inc
NASDAQ:MAMA
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Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to MamaMancini's Fourth Quarter and Fiscal Year 2020 Earnings Conference Call. [Operator Instructions]
This conference is being recorded today, April 24, 2020, and the earnings press release accompanying this conference call was issued at the close of market yesterday.
On our call today is MamaMancini's Chairman and CEO, Carl Wolf; President and COO, Matthew Brown; CFO, Larry Morgenstein; and Greg Falesnik, Managing Director of MZ North America, MamaMancini's Investor Relations firm.
I would now like to turn the conference over to Greg to read a disclaimer about the forward-looking statements.
Thank you, operator. Before we get started today, I'll read a disclaimer about forward-looking statements. This conference call may contain, in addition to historical information, forward-looking statements within the meaning of the federal securities laws regarding MamaMancini's.
Forward-looking statements include, but are not limited to, statements that express the company's intentions, beliefs, expectations, strategies, predictions and any other statements relating to its future earnings, activities, events or conditions. These statements are based on our current expectations, estimates and projections about the company's business based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict.
Therefore, actual outcomes and results may and are likely to differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors discussed from time to time in this report and other documents, which the company files with the U.S. Securities and Exchange Commission.
In addition, such statements could be affected by risks and uncertainties related to factors beyond the company's control. The matters that cause actual results to differ materially from those in forward-looking statements include, among other factors, the loss of key management personnel, availability of capital and any major litigation regarding the company.
In addition, this conference call contains time-sensitive information that reflects management's best analysis only as of the date and time of this conference call.
The company does not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events, information or circumstances that arise after the date of this conference call.
At this time, I'd like to turn the call over to Carl Wolf, the company's Chairman and Chief Executive Officer. Carl, the floor is yours.
Thank you, Greg. And thank you, everyone, for joining us today. I'd like to welcome you to our fourth quarter and fiscal year 2020 financial results conference call. The fourth quarter of fiscal 2020 was a record quarter, highlighted by continued revenue growth as we aggressively market our products nationwide as well as the expansion of our product line to include a plant-based option in partnership with Beyond Meat.
To that end, we're very pleased with our progress with sales increasing 48% to a record $10.1 million in the fourth quarter, exceeding guidance and driving a net income to a record $0.4 million. Our revenue growth was driven by new placements, effective merchandising events and continued success of our multichannel marketing efforts. Our successful multipronged marketing efforts include radio campaign, social media efforts and continued work with QVC. I'd like to touch on a few of these now. We continue to see success in our SiriusXM radio advertising campaigns, as evidenced by the launch of our 6 campaigns in calendar 2019. For each campaign, SiriusXM platform distributes an estimated 1,000 MamaMancini's commercials on all major talk and news channels, reaching over 75 million consumers, an avenue which we have found as a cost-effective way to drive sales across various geographic locations with current and new customers of our products.
On the social media side of things, we continue to maintain a robust reach, engaging new customers and encouraging repeat purchases. To date, we have 300,000 likes and continue to geotarget likely consumers who live within 5 miles of specific retail locations. As an example, we are presently using the medium to introduce our new pasta bowls in the southeast. We believe that our recent accolades and product launches resonate well with consumers. Our QVC efforts have seen notable success as well with Dan Mancini's live pitches driving impressive sales on their platforms. We have recently increased our on-air presence notably and have seen encouraging growth as a result. As many of you are aware, QVC is the world's largest direct-to-consumer marketing and is available in over 100 million homes throughout the U.S. In this past week ending April 20, QVC received orders for over 15,000 units of our Three Cheese Meatballs and Sauce. This is a record for us.
Before turning the call over to Larry to review the financials, I wanted to also touch on some of our recent successes with respect to existing and new account growth, product placement growth and our recent partnership with Beyond Meat. During the quarter, we announced new product placements with 3,700 Tier 1 retailers nationwide, including Whole Foods Market in Kroger, which is an a limited test, with additional placements at Winn Dixie, BI-LO and Hannaford Supermarkets. We also recently announced the new authorizations to new and existing Tier 1 retailers in the fourth quarter of 2019, including sausage and peppers, 4 of our innovative new pasta bowl product lines for supermarkets, beef meatballs and sauce, beef and meat loaf and several pasta and meatball entrees. These are all added revenue in the fourth quarter and are progressing nicely.
One of the products we're most excited about is our new partnership with Beyond Meat to introduce a new line of wholly cooked authentic Italian foods using Beyond Meat's plant-based Beyond Beef. Beyond Meat is a clear leader in the rapidly growing plant-based meat -- industry, and we believe this partnership provides an expedited entry into an exciting new market segment for MamaMancini's. We expect to be announcing our placements for this line for shipment beginning shortly, while we've already successfully introduced these products on QVC in January. In fact, you can watch Dan Mancini live today on the 10:00 show on QVC, and hopefully, you will purchase our Beyond Meatballs then.
The strong foundations we've established with the build-out of our manufacturing capabilities and product lines, paired with our effective marketing efforts to date, have resulted in record growth positioning for us for an incredible fiscal 2021, which we firmly believe will help drive significant shareholder value as we move forward. Now before going further, I'd like to turn the call over to Larry Morgenstein, our Chief Financial Officer, to walk through some key financial details from the fourth quarter and fiscal year 2020. Larry?
Thank you, Carl. Revenue for the fourth quarter of fiscal 2020 increased 48% to a record $10.1 million compared to $6.8 million in the same year ago quarter. Revenue for the fiscal year 2020 increased 22% to $34.8 million compared to $28.5 million in fiscal 2019. The revenue increase was primarily a result of increased volume to new product introductions.
Gross profit increased 34.5% to $3.1 million in the fourth quarter of fiscal 2020 compared to $2.3 million in the same year ago quarter. Gross profit as a percentage of revenue in the fourth quarter of fiscal 2020 increased 30.8% as compared to 33.8% in the same year ago quarter. The lower gross profit margin was primarily related to a change in product mix towards everyday low pricing rather than higher co-op advertising merchandising.
Gross profit in fiscal year 2020 increased 12% to $11.1 million compared to $9.9 million in the fiscal year 2019. The increase in gross profit is primarily due to increased sales. Operating expenses totaled $2.5 million in the fourth quarter of fiscal 2020 compared to $2.1 million in the same year ago quarter. Operating expenses totaled $9 million in fiscal 2020, a modest $0.6 million increase over $8.4 million in fiscal 2019. Operating expenses were 26% of sales for the year versus 30% in the prior year. Operating expenses increased primarily due to increases in freight, commission related mainly to higher sales and professional fees related to increased investor relation initiatives.
Net income for the fourth quarter of fiscal 2020 grew significantly to a record $0.4 million or $0.01 a share as compared to a net loss of approximately $17,000 or $0.00 per share in the same period a year ago.
Net income in fiscal 2020 grew 238% to a record $1.5 million or $0.05 a share as compared to a net income of $0.5 million or $0.01 a share in fiscal year 2019. The increase in net income was primarily attributed to $1.2 million increased gross profit, while operating expenses only increased $0.6 million and reduced interest expenses of $0.4 million. Cash and cash equivalents totaled $0.4 million as of January 31, 2020, as compared to $0.6 million as of January 31, 2019. We recently paid down $2.1 million of our 5-year $2.5 million term [ note ] from M&T.
Cash flow from operations for fiscal 2020 was $1.8 million compared to $1.4 million in fiscal 2019. We do not anticipate raising additional capital and are confident that the cash on hand is sufficient to support operations as we grow.
Finally, before wrapping up on the financial section, I want to touch base on our payables, which stood at 34.3 days outstanding on a consolidated basis as of January 31, 2020. This is a notable improvement when compared to 39.8 days payable outstanding at January 31, 2019.
We expect the payables outstanding to continue to improve throughout fiscal year 2021, as we continue to extract better pricing and turns from our vendors. That completes my comments.
I now would like to turn over the call to Matt Brown, our President and Chief Operating Officer. Matt?
Thanks, Larry. As Carl and Larry have highlighted, Q4 fiscal 2020 saw record revenue. To that point, the plant saw record production, not only throughout Q4 fiscal 2020, but fiscal year 2020.
With better procedures in place from our Q3 learnings, Q4 showed improved profits. The plant saw its first quarter where we expanded our kit assembly business, and it reached nearly 50% of our overall production.
This business will continue to help us solidify our position in stores perimeters as they see the value of and "prepared in-store offerings".
When we spoke on our Q3 fiscal 2020 business, we had begun the discussions of more automation and technology to help offset increasing labor costs, a factor of minimum wage increases. As we approached the end of Q4 fiscal 2020, we were able to put some of this into motion. We acquired another forming machine, along with a few more ovens. The former enabled us to fully utilize our continuous cooking process, while at the same time filling all of our rack ovens.
This was accomplished with fewer employees as the new former requires less labor to operate. So while overall labor did increase on a daily basis during Q4 due simply to increased production hours, we were successful in offsetting wage increases through the use of this new technology.
Quality control remains strong as we continue to see savings in the area of micro testing through the use of the in-house lab. QC has also stepped up its focus to not only ensure quality and safety during the production process, but to also ensure accuracy of recipes and procedures through daily audits of these recipes. This process will help us see a reduction in waste as we improve our yields.
Last we spoke, we had signed on with Oracle's NetSuite accounting program, an ERP system. We have been working diligently with the NetSuite team on the transfer of data and continue to familiarize ourselves with the program, which is critical for our team as we prepare to go live with this system this summer. We expect this system to transform the way we operate the plant now and are hopeful that we will see cost savings through efficiencies in purchasing, production scheduling, logistics and everyday accounting functions.
On a side note, as we are all aware, COVID-19 did not officially hit the country until our fiscal Q1 2021. However, as it is so much on the minds of everyone these days, I would like to at least say that the plant has been on the forefront of this pandemic with regards to our employees' health and the safety of our operation. We continue to monitor the situation and listen to CDC and USDA guidelines as they become available to us. While we understand our business is classified as essential, and the orders continue to come in from supermarkets looking to keep their shelves full, we are producing as much as we can under very controlled conditions and are working very closely with our customers to ensure that they have product to offer their customers in a timely fashion.
So at this point, I'd like to turn the call back over to Carl for some final notes before wrapping up the call for Q&A. Carl?
Thank you, Larry and Matt. As I noted in my opening remarks, the fourth quarter of fiscal 2020 was highlighted by our robust revenue growth, exceeding our internal expectations of $10 million for the quarter and positioning us for an incredible new year. We continue to secure groundbreaking new placements at Tier 1 retailers nationwide, while enjoying the high level of success on QVC, often selling out within minutes. Our increasingly robust client base has rightfully come to associate our brand with a high level of quality and has effectively created recurring revenue base for MamaMancini's as a result.
Regarding the current situation with COVID-19, I'm pleased to announce that our business has seen very strong demand growth amidst this terrible pandemic, driven by consumer sheltering in place and making majority of food purchases from grocery stores. We're deemed an essential business and continue to operate only pausing for periodic deep cleanings at the facility.
We continue to make groundbreaking progress financially, and I look forward to continued shareholder value creation in the months ahead.
I'd like to thank our employees for their hard work during these trying times. They are the ones who make our incredible growth possible. We appreciate the support of our investors and look forward to providing further operational updates in the near future.
With that, I'll turn it over to the operator. Operator?
[Operator Instructions] The first question is from Howard Halpern, an analyst.
This is Howard from Taglich Brothers. Congratulations on your fourth quarter and full year. With all the work that you've put into the year and set up for further operating efficiencies, what would your objectives be for gross and operating margins moving forward?
Well, we're hoping to get up to the mid-30s in gross profit as we have higher volume. Right now, because COVID, probably gross margin will remain close to or slightly more positive than we have right now with increased sales. But things should calm down by the middle of the year or the -- and we should see gross profit around 35%.
Okay, okay. And in terms of all the new placements that you've had and plus your established business, what kind of order rates are you seeing during this environment?
Very strong. The pasta bowls appear to be very successful. And thus far, though it's on limited basis because of COVID, the new Beyond product has done very well. We sold out on QVC. We expect to sell out again today, on today's showing and we do have new placements, chains that would not like us to announce ahead of time. So we'll be announcing them as they occur.
Okay. And in terms of now, I mean, your established business now is growing very, very nicely. And we've talked about in the past moving into food services, which obviously has changed a little bit. So what are your thoughts on the food services and where you would, I guess, target strategically in the food services, such as, I don't know, hospitals and convenience stores and such that. What progress has been made?
Right now, we're still moving ahead on convenience stores. The other parts of food service, which goes through major hospitals, et cetera, go through major distributors, which are having a lot of issues with the rest of their trade, that is on hold for now. I don't think that will -- we have pretty much ceased running expenses there for the time being. And we'll take it up. We'll pick it up from there.
And one other side note, too. Has there been any interruption because I -- in -- with Canada? Have you been able to ship to Canada? Or do anything...
No, we haven't. Canada, we have our first orders. That's on hold with everything else. And hopefully, that will pick up later in the year. Right now, our key emphasis is, we have a number of new placements and existing placements. So we're concentrating on supplying those and also running the plant efficiently and also making sure our supply chain is good.
Right. And there's no concerns with your supply chain, your suppliers of beef and such are firmly in place.
Our supply is in place. There has been a modest increase in the cost of chopped beef. That has been absorbed by the higher volume in the plant. That is why I said the margin would be pretty much where it's at now and then hopefully go up in the second quarter.
The plants that are now being affected in the Midwest and [indiscernible] will probably -- those that are majorly infected will close for 2 weeks, some of them already have, and reopen. So the supply chain should open up. Also, food service, which takes a dramatic part of the raw material, is down. So overall, there will be more than ample product.
Okay. Well, keep up the good work. You're in the right place at the right time right now, and I'll be watching 10:00 QVC.
All right, thank you.
The next question comes from [ William Lapp ].
It was a good quarter. Can you give us any light on Costco? How you're doing with that? Are you in their stores? And do you see more placements there?
We're shipping to Costco on a regional basis actually this week. So -- and we'll continue into May. Costco does in and out placements, we -- not for the full year. So we actually present with Costco, and we'll see what happens, but we're very optimistic. And that is the product that has been sold in Costco successfully in the past.
Is the Beyond Meat product have a higher gross margin than the other products?
No. But it has -- no, it's slightly lower gross margin. However, the selling price is substantially higher. So the gross margin is about the same as our regular products in -- per pound.
So is the Beyond Meat, is the main sales in that mainly in QVC or are the stores also buying quite a bit of it?
We're just starting. As I mentioned in the thing that, first, there were a number of major commitments, and they were put on hold because of the COVID-19. However, there are some that are going out in -- actually, this -- some is this week as well.
Now when you -- I don't watch QVC, but is the price of the product the same in QVC as in the stores, if you buy there. When the Beyond Meat goes in the store, will that have the same price on the shelf as the QVC? Or are they different?
QVC offerings tend to be a different pack and products. So it's not directly comparable to what's in the stores. However, QVC is giving money back guarantee for the lifetime, 3 easy payments and ships to your door. So its price per pound is higher, but there are other benefits to the consumer.
And did you say they sold 15,000 on the last commercial? Or was I...
No. They sold 15,000 last week of our Three Cheese and Sauce offer.
Okay, Okay. And if the demand increases for your products, as you're growing here, you have the capacity to make -- to meet the increased demand. Am I correct or incorrect?
We have -- we're in -- yes, we have the capacity.
Is there any thoughts about -- we've talked before about whether this could be uplisted but based on $1.5 price or $1.40, any thoughts on that on the future about uplisting?
We believe that we have a good shot at uplisting later this year. Our net worth will meet the NASDAQ requirements. And then if we do a reverse split, we think it would be positive because it would be in conjunction with the uplisting.
The next question comes from [ Olivier Colombo ].
Congratulations on the excellent fiscal year 2020. I have 3 questions for you. The first one is regarding QVC. You're seeing a lot of momentum there, and I have the impression that you're on that platform on a regular basis. How often per quarter do you plan to be on that network?
It's not -- - QVC plans normally shows within 2 to 4 weeks -- or actually 1 to 4 weeks. So right now, we have very, very heavy commitments through May and then you take it day-by-day with them. But since we're doing very, very well, we pretty much consistently expect the high demand for the product.
This summer, they have Christmas in July and -- which is a very important function, which is for sales later in the year. They bought -- actually, some of it's sold in July, and a lot of it is sold for shipments later in the year. And we believe we will have a number of products on that as well.
And are those products exclusively for QVC? Or could you potentially, based on their success, bring them to retail stores?
Normally, what we sell on QVC is a variation of what we sell in the supermarkets in a different format or pack size. So we'll have the opportunity to sell that in the supermarkets.
Okay. That's perfect. Then I have a question. If you look at the regions breakdown, you've had some real progress of -- in the Northeast, increasing 42% last year. Southwest is the smallest region, but had the fastest growth, is roughly 85%. Are there any chains that you're missing there, major chains on the West Coast that you are missing? And if yes, what are your initiatives to be more active with them?
The major chain as we've done a -- is Albertsons Safeway. We've been doing a region-by-region rollout, and we've been successful. So our strong hope is that we would continue to get additional business in that sector. Also, if we have success with Costco in the Northeast, we would hope to move to the west with our products. Costco is a much larger factor on the West Coast than elsewhere in the country.
That's correct. And my last question is regarding the warrants. You have roughly 6 million warrants outstanding at roughly $1 million -- sorry, at $1 strike price. They mature in June this year and in April 2021. Now that the stock is significantly above that price, have you seen anybody exercise?
Now not really. The warrants, there's 2 different sets of warrants at $1 and $1.50 strike price. So the strike price is actually more like an average of $1.20. Some of the -- the majority of the warrants expire between June and November. We have filed an S1 registration, which was notified in an SEC filing. We are waiting to get a final approval. We think at that point some of those warrants will be converted.
There are no more questions in the queue. This concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks.
Okay. Thank you, operator. As a final, -- sorry, I've lost that because there's a different thing. Thank you, operator. As a final note, once COVID-19 subsides, we will continue to be active in attending top investor conferences and investor non-deal roadshow marketing on both coasts of the U.S.
In the meantime, we will continue our efforts on a virtual basis. If interested in scheduling a meeting with management when we are in your region, please reach out to our firm, MZ Group, to arrange. Thank you again for joining us today. We look forward to continuing to update you on our progress.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.