Business Overview and History

Mama's Creations, Inc. has been a leading national marketer and manufacturer of fresh deli prepared foods for over a decade. Originally founded in 2009 as MamaMancini's, the company has successfully navigated the evolving consumer landscape, emerging as a versatile food solutions provider poised for continued growth.

Mama's Creations, Inc. was established in 2009 under the name Mascot Properties, Inc., later changing its name to MamaMancini's Holdings, Inc. before adopting its current name. The company's primary focus has been on marketing, manufacturing, and distributing a range of prepared foods, including beef and turkey meatballs with sauce, grilled, roasted, and breaded chicken, sausage and peppers, and other similar meats and sauces. These products are developed and marketed through its subsidiary, MamaMancini's Inc.

In 2021, Mama's Creations made a significant move by acquiring TL Acquisition Corp., a premier gourmet food manufacturer based in New York. This acquisition expanded the company's capabilities, as TL Acquisition Corp. operates under the names TL Creative Salads and Olive Branch, offering a full line of foods for retail food chains, club stores, delis, bagel stores, caterers, and provision distributors.

The company faced some challenges in its growth journey, notably in 2022 when it experienced a net loss of $251,926 due to increases in cost of goods sold and operating expenses. However, Mama's Creations demonstrated resilience by implementing cost-saving measures and focusing on improving operational efficiency to address these issues.

Despite these challenges, the company has achieved several milestones. In 2021, Mama's Creations acquired a 24% minority interest in Chef Inspirational Foods, LLC, a leading developer, innovator, marketer, and sales company selling prepared foods. This strategic investment allowed the company to expand its product offerings and distribution. Building on this success, in June 2023, Mama's Creations completed the acquisition of the remaining 76% interest in Chef Inspirational Foods for approximately $3.7 million, further solidifying its position in the market.

The company's products have gained recognition and popularity among consumers. For eight consecutive years, QVC customers have voted MamaMancini's products as #1 in several categories, highlighting the brand's strong consumer appeal. Additionally, many of Mama's Creations' meals have been approved as all-natural by the United States Department of Agriculture, catering to the growing demand for healthier food options.

Financial Performance and Liquidity

Mama's Creations has demonstrated strong financial performance in recent years, with consistent revenue growth and improving profitability. In the fiscal year ended January 31, 2024, the company reported total revenue of $103.28 million, a 8.2% increase from the prior year. Net income for the same period was $6.56 million, compared to $2.30 million in the previous year. Operating cash flow and free cash flow for the fiscal year were $11.62 million and $10.84 million, respectively.

For the most recent quarter ended July 31, 2024, Mama's Creations reported revenue of $28.38 million, a 14% increase year-over-year. This growth was driven by successful pricing actions, volume gains from increased demand, successful trade promotions, cross-selling, and new customer wins. However, net income decreased to $1.15 million, primarily due to a 500 basis point impact from construction-related activities at the company's Farmingdale facility, as well as higher commodity costs, particularly for chicken. Operating cash flow and free cash flow for the quarter were -$2.41 million and -$4 million, respectively.

The company's liquidity position remains solid, with $7.4 million in cash and cash equivalents as of July 31, 2024. Mama's Creations has a current ratio of 1.37 and a quick ratio of 1.17, indicating its ability to meet short-term obligations. The company's debt-to-equity ratio is 0.48, suggesting a balanced capital structure.

Mama's Creations has a $5.5 million working capital line of credit with MT Bank, of which $0 was outstanding as of July 31, 2024. The line of credit matures on November 30, 2027. The company also has a $7.5 million term loan with MT Bank, with $3.8 million outstanding and $0.03 million of unamortized debt discount as of July 31, 2024. The term loan matures on January 17, 2027.

Operational Efficiency and Margin Expansion

Mama's Creations has placed a significant focus on improving its operational efficiency and expanding gross margins. The company has implemented various cost-saving initiatives, such as optimizing its logistics operations and implementing process improvements in its manufacturing facilities. These efforts have resulted in a steady increase in gross profit margins, which stood at 29.4% in the fiscal year ended January 31, 2024, compared to 20.8% in the prior year.

However, in the most recent quarter ended July 31, 2024, gross profit margin decreased to 24.2% from 30.3% in the same quarter last year. This decrease was primarily due to significant commodity cost increases and a 500 basis point impact from non-recurring construction activities. Despite this short-term pressure, the company expects its normalized gross margin profile, excluding major commodity fluctuations, to continue hovering in the high-20% range, with a long-term goal of consistently maintaining margins in the low-30% range.

The company's recent acquisitions, including TL Creative Salads, Olive Branch, and Chef Inspirational Foods, have also contributed to margin expansion. By integrating these businesses and leveraging economies of scale, Mama's Creations has been able to enhance its operational efficiency and drive profitability.

Diversified Product Portfolio and Expanding Retail Footprint

Mama's Creations' diverse product portfolio has been a key driver of its growth. In addition to its flagship meatball line, the company now offers a wide range of prepared foods, including sauces, sausage and peppers, and single-serve pasta bowls. The company continues to diversify its product line by introducing new products such as ready to serve meals, bulk deli, and packaged refrigerated protein products. This diversification has allowed Mama's Creations to cater to the evolving preferences of its retail partners and end consumers.

The company's products are currently sold in over 8,000 grocery, mass, club, and convenience stores nationwide. Mama's Creations has successfully expanded its retail footprint, securing placements with leading chains such as Walmart, Costco, Publix, and Kroger. The company's recent national buy with Costco, which includes multiple product SKUs, is a testament to its growing brand recognition and popularity among consumers.

In terms of geographic distribution, Mama's Creations primarily sells its products in the United States. In the second quarter of fiscal 2025, the Northeast, Southeast, Midwest, and West regions contributed roughly 31%, 27%, 21%, and 21% of gross revenue, respectively.

Navigating Industry Challenges

Like many food companies, Mama's Creations has faced headwinds from rising commodity costs, particularly in the protein category. However, the company has demonstrated its ability to navigate these challenges through strategic pricing actions and operational improvements. By investing in automation and in-sourcing key value-added services, Mama's Creations has been able to mitigate the impact of increased input costs and maintain its profitability.

The company has also adapted to changes in consumer behavior, driven in part by the COVID-19 pandemic. Mama's Creations has pivoted to meet the growing demand for convenient, high-quality prepared foods as consumers seek alternatives to traditional restaurant meals. This trend is reflected in the overall growth of the deli prepared foods market, which is a $30 billion subcategory that grew 5% in dollars and 5.2% in units in July 2024 compared to the prior year, according to IRI data. The $6.2 billion prepared meats subset, where Mama's Creations is focused, grew 10.5% in dollars and 11.9% in units over the last 52 weeks.

Experienced Management Team and Acquisition Strategy

Mama's Creations is led by an experienced management team with a proven track record of success. CEO Adam Michaels has over 20 years of leadership experience in the consumer packaged goods industry, having held executive roles at companies such as Hormel and ConAgra Foods.

The company's acquisition strategy has also been a key component of its growth. In addition to the TL Creative Salads and Olive Branch acquisition, Mama's Creations completed the acquisition of the remaining 76% interest in Chef Inspirational Foods in June 2023. These acquisitions have expanded the company's product offerings, manufacturing capabilities, and customer base.

Outlook and Potential Catalysts

Mama's Creations is well-positioned for continued growth, driven by its diversified product portfolio, expanding retail footprint, and focus on operational efficiency. The company has maintained its previously communicated guidance of double-digit revenue growth for the full fiscal year.

Potential catalysts for Mama's Creations include the continued penetration of its products into new retail channels, the successful integration of future acquisitions, and the successful launch of innovative new product offerings. Additionally, the company's strategic investments in automation and in-sourcing of key processes could further enhance its profitability and competitive positioning.

Mama's Creations plans to continue increasing its trade promotion investment, aiming to reach its long-term goal of around 10% of revenue. The company's long-term goal for adjusted EBITDA margins is to achieve the teens percentage range. To support its growth and margin objectives, Mama's Creations expects to continue investing in strategic capital expenditures, including capacity expansion and in-sourcing of key value-added services.

Risks and Challenges

While Mama's Creations has demonstrated resilience in the face of industry headwinds, the company is not without its risks. Fluctuations in commodity prices, particularly in the protein category, could impact the company's margins if it is unable to pass on these costs to its retail partners. This was evident in the most recent quarter, where higher commodity costs, particularly for chicken, negatively impacted gross margins.

Additionally, the highly competitive nature of the prepared foods market could pressure the company's pricing and market share. Mama's Creations also faces risks related to its acquisition strategy, including the successful integration of acquired businesses and the ability to realize expected synergies. The company's reliance on a limited number of large retail customers could also pose a risk, as the loss of a significant customer could have a material impact on its financial performance.

Conclusion

Mama's Creations has evolved from a meatball-focused company to a diversified food solutions provider, offering a comprehensive portfolio of fresh, high-quality prepared foods to retailers nationwide. The company's strong financial performance, operational efficiency, and strategic acquisitions have positioned it for continued growth in the dynamic prepared foods market.

With an experienced management team, a focus on innovation, and a proven track record of navigating industry challenges, Mama's Creations is well-positioned to capitalize on the growing consumer demand for convenient, premium-quality deli offerings. As the company continues to execute on its strategic initiatives and maintain its focus on margin expansion and operational improvements, investors may find it an attractive long-term investment opportunity in the food and beverage sector.