MamaMancini's Holdings, Inc.
Q3 2021 Earnings Call Transcript

Published: 14 Dec 2020

[Operator:]

Good afternoon ladies and gentlemen. Thank you for standing by. Welcome to MamaMancini's Third Quarter 2021 Earnings Conference Call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. . This conference is being recorded today, December 14, 2020, and the earnings press release accompanying this conference call was issued at the close of market today. On our call today is MamaMancini's Chairman and CEO, Carl Wolf; President and COO, Matthew Brown; CFO, Larry Morgenstein; and Greg Falesnik, CEO of MZ North America, MamaMancini's investor relations firm.

[Greg Falesnik:]

Thank you, operator. Before we get started, 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 statement include, but are not limited to, statements that express the company's intentions, beliefs, expectations, strategies, predictions, or any other statements related to its future earnings, activities, events or conditions. These statements are based on 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 vary 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 US Securities and Exchange Commission. In addition, such statements could be affected by risks and uncertainties related to factors beyond the company's control. Matters that may 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.

[Carl Wolf:]

Thank you, Greg. And thank you, everyone, for joining us today. I'd like to welcome you to our third quarter 2021 financial results conference call. Third quarter fiscal 2021 was a third-quarter record, highlighted by revenue and net income growth as we aggressively market our products nationwide as well as the expansion of our product line and fortification of our balance sheet.

[Larry Morgenstein:]

Thank you, Carl. Revenue in the third quarter of 2021 increased to a third quarter record of $9.9 million compared to $9.3 million in the same year-ago quarter. Revenue year-to-date increased 27% to a record $31.4 million as compared to $24.7 million in the same year-ago period.

[Matthew Brown:]

Thanks, Larry. Our operations performed admirably throughout the third quarter, contributing to the financial success of the company. We continue to be impressed with the day-to-day resilience of our staff who are committed during these times to our continuous improvement efforts in production planning, scheduling and operational processes to improve efficiencies and manage the costs.

[Carl Wolf:]

As I noted in my opening remarks, we continue to execute on all fronts and have laid the foundation for an incredible year. I am proud of the operational progress our team made in the third quarter, realizing strong year-over-year growth amidst the backdrop of COVID-19. We continued the growth in breadth and depth of our product distribution footprint of retail storefronts nationwide. Our strong financial results are a testament to both our sales engine and continued tireless realization of operational efficiencies. As we move toward the conclusion of 2020 and into 2021, various positive potential outcomes await MamaMancini's from the realization of strategic alternatives to a potential uplisting and continued growth. We are trying for another record-breaking year. I look forward to continue these efforts as we work to create sustainable long-term value for our shareholders. With that, I'll turn this over to the operator. operator?

[Operator:]

. Our first question will come from Howard Halpern with Taglich Brothers.

[Howard Halpern:]

Congratulations guys on solid operating results during this pandemic time. The first question is regarding, were there any kind of – were you seeing any kind of delays in product shipments that should have occurred in the third quarter, but might be falling into the fourth quarter?

[Carl Wolf:]

No. First of all, I'd like to thank everyone. We have close to 50 participants today which is more than a record. And also, if I don't like your question, I am going to put it back on mute again. But in any case, we did not have any delay in shipments. What was delayed was new – realization of new authorizations. Basically the whole industry shut down through July on new commerce. Starting in the middle of August, business really got very dramatic. And now, we have several new placements in the works. And even now this week, which is normally everything is dead, we are very, very active. So, I expect to see very, very robust growth coming in the near future.

[Howard Halpern:]

In terms of, I guess, the balance sheet, the remaining warrants, you anticipate them being exercised or are they going to just remain on the books now for a while?

[Carl Wolf:]

No. The warrants, you're talking about options? Our warrants are all either exercised or expired. There is no more – there was over 5 million warrants. They are all in or not exercised. I mentioned in my discussion that we have about 800,000-plus options. Those are options into our management, employees, and Board of Directors. They will be exercised over the next two-and-a-half to three years.

[Howard Halpern:]

In terms of – now the term loan has gone, you just have your line of credit. What is your capacity in the line of credit, which I think at the end of the third quarter, you had $650,000 outstanding. But just for flexibility purposes, what is your capability on that line?

[Carl Wolf:]

We have a $3.5 million line of credit right now. As I mentioned in my discussion, we have zero outstanding on that. And depending on our needs, that can be expanded.

[Howard Halpern:]

And as was discussed earlier too, you had some new equipment that just started up. What are we looking at in terms of capital expenditures in the fourth quarter? And are they going to continue in the first half of next year or is really the fourth quarter going to button up the amount of CapEx for the year?

[Carl Wolf:]

We are budgeting around $300,000 to $500,000 a year right now with various upgrades and improvements. This quarter, we'll end with the finishing of the packaging room, which was about $300,000 range. And most of that is being financed through loans from M&T Bank.

[Howard Halpern:]

Based on the implementation of the new equipment and the software system, can we anticipate, as we go through next fiscal year, incremental quarterly improvement in gross and operating margins?

[Carl Wolf:]

We hope to see that as we create more efficiencies in our plants, absorbing plant overhead. There is one caveat in that. There is a part of our business which we call direct variable expenses – that is shipping costs, any commissions or royalties and any merchandising expense. So, if the product mix changes at all – and those show up as operating expenses. So, if the product mix changes at all to a customer that has very, very low cost of fulfilling the orders, you then may see a slightly lower gross profit. But right now, based on the mix we have right now, we should see continuing steady improvements in gross profit.

[Howard Halpern:]

One final one for me is, now that hopefully things hopefully might get back to a more normalcy in the second half of next year, with reengagement in the food service area, do you anticipate that the groundwork that you are going to be able to lay down now will bear some fruit in the second half of next year?

[Carl Wolf:]

By then or sooner.

[Howard Halpern:]

Okay. Thanks and keep up the good work, Carl and guys.

[Operator:]

. Our next question comes from Jeff Kobylarz with Diamond Bridge Capital. Please go ahead.

[Jeffrey Kobylarz:]

Thanks for the good update on how you're doing. Can you comment what the impact of higher beef was on your gross margin? Do you have any dollar amount…?

[Carl Wolf:]

It was modest, even though the prices went by a way up. We were able to pass along price increases to customers fairly well. So, all in all, it was a very modest negative impingement .

[Jeffrey Kobylarz:]

Okay, fine.

[Carl Wolf:]

We also cut back certain marketing activities to compensate for it. So, the operating profit remained intact.

[Jeffrey Kobylarz:]

As far as the coronavirus, is there any way you can say, in this year, year-to-date, what the impact was? There is the trend of more heating from home, but then there have been, I assume, delays in orders from customer retailers to put through additional authorizations for placements. Is there any way you could talk about those pros and cons of the virus here?

[Carl Wolf:]

I would say in the spring of the year when there was panic buying and consumer stock up and also panic buying because of meat shortages, it had a positive effect on sales and profits. And then, later in the year, as we grew our business, those sales remainder backed off slightly because there was inventory build. However, our bulk deli business, our hot bar business backed off because of less consumption in supermarkets. That now is starting to perform toward normal. It also pushed back new merchandising activity in authorization, which is running very positive, but running later in the year. All in all, I would say it's been neutral.

[Jeffrey Kobylarz:]

In the press release and what Matt said about how you're increasing your capacity in your plants, can you say how much you've increased your capacity in your plants and what your…?

[Carl Wolf:]

We've given guidance on that. The capacity in the plant is somewhere we think today around $65 million a year with the right product mix. And then, we have options to increase that by another $10 million to $15 million by using – having some of the components made by co-packers for us, not the final product, some of the components. So, we think we have $75 million to $80 million worth of capacity with some modest investments, not major, with where we stand right now.

[Jeffrey Kobylarz:]

You've had a number of great announcements like you said in the press release since August. The Publix 1,250 stores, Walmart 600, et cetera, is there any way to quantify what the annual volume revenue is from those additions?

[Carl Wolf:]

We try not to let people know that because, one, chains don't like that. So, if you notice, we tend to group new placements together. The Walmart was a one-time rotation. It was very successful and we will hear very soon as to whether it's a permanent placement this spring. If so, it would be a very, very nice addition to our volume. But it was not in all stores at Walmart and it was not in for – it was only in for about eight weeks, but we did very well. And then, it appears that we met all of their requirements.

[Jeffrey Kobylarz:]

Good to hear.

[Operator:]

Our next question comes from James Bogin with Legend Capital.

[James Bogin:]

I was wondering if you could give us any update about what you're doing with B. Riley, given that's two-and-a-half months old now or what your plans are to list on the regular NASDAQ?

[Carl Wolf:]

We should have a pretty good idea of where we are on strategic decisions by mid to late January and that would include uplisting. We think we meet all of the requirements except for stock price in terms of equity and earnings. So, we will make a decision at that point.

[Operator:]

This concludes our question-and-answer session. I would like to turn the conference back over to Carl Wolf for any closing remarks.

[Carl Wolf:]

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 roadshows marking on both coasts of the US. 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 IR firm, MZ Group, to arrange. Thank you again for joining us today. We look forward to continuing to update you on our progress. Thanks again.