MAMA

• Financial Momentum & Leverage: Revenue grew 55% and adjusted EBITDA expanded 69%, driven by new product launches and the Bayshore acquisition. Bottom-line metrics grew faster than revenue, demonstrating operating leverage as overheads shrank as a percentage of sales.
• Strategic M&A Capability: Following a recent capital raise, the company holds over $138 million in cash with virtually no debt. This 'war chest' allows for larger, transformative acquisitions rather than smaller bolt-ons, focusing on capabilities, capacity, and customer access.
• Macro Trends: Management highlights strong tailwinds including the shift from restaurant to ready-to-eat grocery meals, GLP-1 driven demand for high-protein meals, and the 'Grandma Corps' trend favoring traditional, comforting recipes.
• Operational Efficiency ('Cost'): The East Rutherford facility expansion doubled storage capacity. Bayshore margins are improving toward corporate averages due to higher volume absorption and procurement savings. Gross margins improved sequentially to 24.0% as new packaging technologies reached steady state.
• Data & Controls ('Controls'): Enhanced use of Power BI with AI plugins and a unified ERP system provide real-time visibility and benchmarking across all three facilities. Procurement consolidation avoided material cost increases despite inflation.
• Culture & Innovation ('Culture'): Appointment of a Chief People Officer and hiring of operational leaders strengthened infrastructure. The 'Mama’s Secret Pantry' innovation lab facilitates co-creation with key retail partners.
• Distribution Expansion ('Catapult'): Launched in Banner Kroger (Louisville division) with four items. Secured confirmation for a second-half Multi-Vendor Mailer (MVM) at Costco across all eight regions. Over a dozen new placements launched in Q2, with more approved for Q3.

• Gross Margin Target: Maintained target of mid-to-high 20% corporate gross margin. Management expects sequential improvement in Q3 as Bayshore margins normalize and chicken bottom mix increases.
• Revenue Growth: Confirmed comfort with double-digit revenue growth for the remainder of fiscal 2027, citing strong momentum from Walmart, Target, and new Kroger/Sam's Club launches.
• Profitability Focus: Emphasized that profitable growth is prioritized over pure revenue scale; willing to remove lower-velocity SKUs to improve overall portfolio profitability.
• Q3/Q4 Outlook: Expects continued sequential margin improvement in Q3. Costco MVM forecasted to be larger and potentially longer duration than the prior year.

The company operates as a single integrated business segment focused on deli-prepared foods. For the second quarter of fiscal 2027, total revenue increased 55% to $54.6 million. Gross profit was $13.1 million, representing a gross margin of 24.0% (up from 23.6% in Q1 and 24.9% in the prior year quarter). Operating expenses totaled $10.1 million, or 18.5% of revenue, down 160 basis points year-over-year. Net income rose 100.9% to $2.6 million ($0.06 per diluted share), and Adjusted EBITDA grew 68.9% to $5.5 million, with an Adjusted EBITDA margin of 10.1%. The Bayshore acquisition contributed significantly to top-line growth and operational scale.

• Product Velocity Variance: Some new items (e.g., sausage and peppers, meatloaf) have lower velocities than core products like beef meatballs and chicken bottoms, requiring proactive portfolio management to avoid retailer pushback.
• Execution Risk in Acquisitions: Integration of acquired entities like Bayshore requires careful management of culture, operations, and systems to realize synergies and margin improvements.
• Supply Chain & Input Costs: While currently mitigated through diversification, reliance on beef and chicken suppliers exposes the company to potential commodity price volatility.
• Dependence on Key Retailers: Significant revenue concentration in major accounts (Walmart, Costco, Target) creates dependency on their promotional calendars and shelf-space decisions.

Q: Analyst asked about the roadmap for the new Kroger relationship and the impact of the upcoming Costco MVM on H2 outlook and margins.

A: CEO explained the Kroger entry starts small in one division with high-velocity items (chicken/beef) before expanding, following a 'slow and grow' strategy. Regarding Costco, the MVM covers all eight regions, is already partially active, and is forecasted to be larger than last year. Management emphasized they do not sell at a loss to gain shelf space, maintaining healthy margins while driving velocity.

Q: Analyst queried if OPEX leverage was stronger than expected and if marketing spend was shifted to trade spend.

A: CEO confirmed intentional shift of ~$0.5M from marketing to trade to boost ROI, which impacted gross margin slightly but drove higher effectiveness. Total trade spend was over $1M higher YoY. Management prioritizes long-term billion-dollar growth over short-term margin preservation, reinvesting profits into high-ROI promotions to drive store visits and item count.

Q: Analyst asked about the balance sheet flexibility for M&A, specifically if smaller deals are now less attractive.

A: CEO stated that with $138M cash, sub-$25M revenue companies are no longer strategically interesting due to integration effort vs. return. The focus has shifted to larger, transformative acquisitions that bring new capabilities or customer access. Diligence standards remain rigorous regardless of cash position.

Q: Analyst sought details on achieving the mid-to-high 20s gross margin target and the role of chicken bottoms.

A: CEO identified three drivers: 1) Trade spend investments, 2) Increasing the % of chicken bottoms sold (which require trimming, adding ~1% margin per day of trimming), and 3) Bayshore margin normalization. He noted that selling more bottoms allows for more trimming days, potentially adding 2-3 points of margin, alongside 1 point from Bayshore, aiming for 28-29% margins.

Q: Analyst asked about seafood capabilities in M&A and progress in the convenience channel (Sheetz).

A: CEO noted Bayshore previously made seafood, so capability exists, but USDA/HACCP approvals are needed. Seafood remains a strategic gap to fill via M&A. In convenience, Sheetz placements are growing with paninis and wraps, though it remains a secondary channel compared to grocery. The team continues to innovate for this format.