Mama's Creations, Inc. Q1 FY2027 earnings call

- **Macro Industry Tailwinds** - Survey data shows deli-prepared foods and high-quality protein are fast-growing categories for grocers, with 70% of consumers visiting the deli at least monthly, and 33-43% of younger consumers visiting weekly. Deli-prepared foods are increasingly replacing quick-serve restaurant meals as consumers seek cheaper, healthier options, driving ongoing growth for MAMAS Creations' core market. - 89% of grocers rank private label/store brands as a top merchandising strategy, aligning with MAMAS Creations' dual branded/private label growth strategy.

- **Four Cs Operating Framework Progress** *Cost*: Bayshore facility integration is complete, with centralized sourcing/logistics, full ERP transition, and rebalanced production footprint that improves utilization and reduces overtime. The East Rutherford facility expansion is complete, with additional cold storage installation ongoing, all delivered ahead of schedule and under budget. Q1 gross margin was temporarily impacted by one-time startup costs for new packaging, production technologies and new product launches. *Controls*: Full ERP integration across all three facilities is complete, unifying procurement, production, inventory and sales operations, delivering faster close processes, more granular cost visibility and improved inventory accuracy. The company also upgraded its Warehouse Management System and launched its first Transportation Management System to improve operational efficiency. Two successful unannounced FDA food safety audits were completed this quarter. *Culture*: The company now has ~600 employees across three facilities, and launched three new cross-facility employee engagement, onboarding, and retention programs this quarter to reinforce shared culture and reduce turnover. *Catapult Growth Strategy*: The company launched over a dozen new items with major national retailers including Walmart, Target, and Food Lion this quarter, the most new launches in a single quarter in company history. Costco's business has become structural after the prior year's $10 million one-time digital promotion, with San Diego Costco recently adding MAMAS Creations' beef meatballs as an everyday item, the second region to grant everyday status. Marketing investments delivered strong returns, with 5.6X ROAS on Instacart, 29.5X ROAS on Walmart media, and 10X year-over-year sales growth at BJ's. New item launches are on track to hit the company's 2027 goal of adding at least two new SKUs to each of its top 10 customers.

The transcript does not break out financial performance for separate product segments. Overall company revenue for Q1 FY27 increased 49.7% year-over-year to $52.8 million. Gross profit rose 35.3% YoY to $12.4 million (23.6% of total revenue, compared to 26.1% in the year-ago quarter). Operating expenses totaled $9.8 million, falling to 18.5% of revenue from 21.6% YoY. Net income increased 66.3% YoY to $2.1 million (3.9% of revenue, compared to 3.5% YoY). Adjusted EBITDA increased 71.2% YoY to $4.9 million. As of quarter end, the company held $24.4 million in cash and cash equivalents and $5.1 million in total debt.

- Management reaffirms its target of double-digit organic revenue growth for full fiscal 2027, noting new item acquisition is already ahead of internal plan. - Management maintains its corporate gross margin target of mid-to-high 20s, expecting gross margin to improve as new Q1 product launches move from the startup phase to steady-state production, and as Bayshore facility integration continues to deliver efficiency gains. - The long-term target of reaching $1 billion in total revenue remains in place, with management noting the line of sight to this goal has never been clearer. - Operating expenses as a percentage of revenue are expected to return to the company's historical steady state of ~20% in Q2 and subsequent quarters, after the intentional Q1 shift of marketing spend to trade promotion for new product launches.

- Forward-looking statements are inherently subject to risks and uncertainties that could cause actual future results to differ materially from current expectations, with detailed risk factors disclosed in the company's Form 10-K and subsequent SEC filings. - Large-scale ERP system integrations carry inherent operational risk, though MAMAS Creations completed its full three-facility integration ahead of schedule with no major disruptions. - New production and packaging technologies carry initial startup learning costs that can temporarily compress margins during launch phases, even as they position the company for long-term growth.

Q: New product launches at Walmart, Target, and other major retailers happened late in Q1. How much revenue did they contribute in the quarter, and should we expect sequential revenue growth in Q2? / A: All of the launch and startup costs for these new items were recorded in Q1, but almost no revenue from the new products was recognized in the quarter, since they launched mid-to-late April. Velocity of the new items is already increasing substantially, and process optimizations (such as simplifying product labeling for Walmart) have already cut per-unit costs, so sequential growth is expected in Q2.

Q: Can you quantify the temporary gross margin impact of new product startup costs, and explain the nature of those costs? / A: Total labor and raw material inefficiency from startup was between $500,000 and $1 million. The company also intentionally shifted ~$500,000 from marketing budgets to trade promotion to support new launches at Target, Food Lion, and Publix. Without these adjustments, gross margin would have been above 25% in Q1, in line with the company's target range. Startup costs came from learning to use new packaging machinery and HPP technology, iterating new protein form factors like shredded chicken, and initial low utilization on new lines, all one-time expenses that are already improving.

Q: Bayshore integration is now complete after the full ERP transition. Are there any remaining major integration tasks, and what capacity does this free up for management? / A: The full ERP transition was the last major hurdle for Bayshore integration, and it was completed ahead of schedule with no major issues, so no large remaining integration work is left. Completion of integration frees up senior management time to focus more on M&A pipeline development and new business development, with management already seeing improved capacity utilization at Bayshore as it produces new items for Walmart and Food Lion, exactly as planned.

Q: What is the remaining capacity at Bayshore, and will additional capacity be needed soon via new facilities or acquisition? / A: The Bayshore acquisition combined with the East Rutherford facility expansion gives the company enough existing capacity to double its current revenue from ~$200 million to ~$400 million, which covers growth needs for the next couple of years. Management will still continue pursuing accretive acquisitions that add new capabilities, customers, or additional capacity, but capacity constraints do not force an near-term need for additional facilities.

Q: Does management still reaffirm full-year double-digit organic growth guidance? / A: Management absolutely reaffirms the full-year double-digit organic growth target. New item acquisition is already ahead of internal plan, with far more new items placed at top customers through the first quarter than planned, so growth is on track to meet the full-year target.