EPS of $0.03 decreased by 34.3% from previous year
Gross margin of 24.2%
Net income of 1.15M
"The second quarter was highlighted by strong 14% broad-based revenue growth against a healthy backdrop of operational execution and a continued focus on our 4Cs: cost, controls, culture and catapults." - Adam L. Michaels
Mamas Creations Inc (MAMA) Q2 FY2025 Results Analysis: 14% Revenue Growth Driven by Catapult Strategy; Commodities and Construction Press Margins, Walmart/Costco Wins, and Path to Low-30% Gross Margins
Executive Summary
Mamas Creations Inc reported Q2 FY2025 revenue of $28.38 million, up 14% year over year, supported by pricing actions, volume gains, and stronger new-customer penetration, including notable retailer wins (Walmart expanding to ~2,000 stores; Costco National Buy across six regions). However, gross margins bore a temporary drag from mid-quarter construction at Farmingdale that reduced margins by approximately 500 basis points. Management projects normalized gross margins in the high-20% range and targets long-run gross margins in the low-30% range, aided by strategic CapEx, procurement efficiencies, and ongoing operating improvements. Adjusted EBITDA was $2.67 million (approx. 9.4% of revenue), and net income was $1.15 million (4.0% of revenue), reflecting ongoing investment in capacity and go-to-market capabilities. Free cash flow remained negative in the quarter due to capex and working capital dynamics, underscoring a deliberate investment phase to support high-velocity growth and channel expansion. The company maintains a bullish long-term thesis around a national one-stop deli solution, supported by a strengthened balance sheet (net debt of about $3.5 million) and a broader M&A pipeline. The near-term risks center on commodity price volatility (chicken/beef) and the execution cadence of CapEx, while the catalysts include Walmart/Costco ramp, private-label trade programs, and the progression of CapEx-enabled margin expansion.
Management commentary from the Q2 earnings call emphasized:
- Growth and strategy: “The second quarter was highlighted by strong 14% broad-based revenue growth against a healthy backdrop of operational execution and a continued focus on our 4Cs: cost, controls, culture and catapults.” (Adam L. Michaels)
- Growth cadence and guidance discipline: “I’d like to stick to this double digit. … I’ll stick to the double-digit number now.” (Adam L. Michaels)
- Margin dynamics and CapEx impact: “Construction … had an impact of about 500 basis points on our gross margin.” and “These CapEx investments have the potential to offset some of the commodity inflation … move our gross margins into the low-30% range over the long term.” (Adam L. Michaels)
- Operational improvements and controls: NetSuite ERP implementation improving pricing, margins and inventory management; SKU rationalization reducing complexity by >35% of SKUs (0.5% of revenue impact) (Adam L. Michaels; CFO Anthony Gruber)
- Strategic leadership and growth channels: Appointment of Skip Tappan as COO to optimize end-to-end supply chain; Catapult levers for trade promotions and marketing, including Walmart entry and Costco National Buy (Adam L. Michaels)
- Retail channel momentum: Walmart entry (2,000 stores to start) and broader Costco regional expansion; back-to-school reset window as a catalyst for near-term velocity (Adam L. Michaels)
The second quarter was highlighted by strong 14% broad-based revenue growth against a healthy backdrop of operational execution and a continued focus on our 4Cs: cost, controls, culture and catapults.
— Adam L. Michaels
These CapEx investments are incredibly important given the commodity pressures we're seeing today. From jumbo chicken breasts that were on the market for $1.16 a pound in January to a recent high of over $2 a pound, chicken prices are historically high. While we may be fairly differentiated in our ability to maintain margin strength in this commodity cost environment, these investments have the potential to offset some of the commodity inflation and ultimately move our gross margins into the low-30% range over the long term.
— Adam L. Michaels
Forward Guidance
Management presents a phased margin and growth trajectory anchored in CapEx-driven efficiency gains and accelerated trade promotion investments. Key points:
- Gross margin normalization: Expected to hover in the high-20% range on a normalized basis, with a long-run target of low-30% gross margins supported by CapEx, better procurement, and cost controls.
- Trade promotion: Long-term goal to raise trade spend toward 10% of revenue from the current low-single-digit share; near-term ramp constrained by 3Q construction headwinds, with more meaningful lift anticipated in 2025.
- EBITDA trajectory: Long-term target for adjusted EBITDA margins in the teens; ongoing investment in capacity, marketing, and channel expansion to unlock scale.
- Growth cadence: A double-digit revenue growth target remains a stated objective, anchored by Walmart/Costco wins, new doors with independents, and ongoing cross-sell of new items to existing customers.
- CapEx and M&A: Mid-single-digit million CapEx planned in 2024 to automate and expand capabilities; ongoing M&A pipeline to consolidate a fragmented prepared foods market. Investors should monitor commodity price trends (chicken/beef), the timing and ROI of new grills and processing equipment, the progression of Walmart/CDS rollout, and the effectiveness of trade promo programs in lifting velocity and SKU penetration.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
MAMA Focus
24.24%
5.68%
5.15%
61.96%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Mamas Creations is at an inflection point where near-term margin headwinds from ongoing CapEx and commodity dynamics give way to a multi-year efficiency-driven margin expansion and accelerated top-line growth through major retailer wins. The Walmart rollout, Costco National Buy, and expanding door strategy underpin a credible path to higher velocity and broader distribution. The company projects normalized gross margins in the high-20s with a long-term trajectory toward the low-30s, supported by NetSuite-based visibility, SKU rationalization, and in-house processing capabilities. The trajectory for Adjusted EBITDA margins in the teens remains plausible if trade promotions scale in line with revenue growth and commodity prices stabilize. Key catalysts include the Walmart launch execution in 2,000 stores and the full realization of the Costco program across all six regions, as well as additional M&A opportunities that could compress the cost of growth and accelerate scale. Investors should monitor commodity price trends, cadence of CapEx completion (Farmingdale project) and its margin impact, Walmart/Costco ramp, and the ROI of trade promotional initiatives.
Key Investment Factors
Growth Potential
High potential from expanding national deli platform (Walmart, Costco, KC-level distribution) and continued SKU expansion across major retailers; the Catapult strategy (trade promotion, marketing, new doors, and optimized pricing) supports faster velocity growth and breadth of distribution. Expected margin uplift from CapEx-driven efficiency and private-label dynamics could drive gross margins toward the low- to mid-30s over time.
Profitability Risk
Commodity cost volatility (especially chicken) remains a key risk; near-term margin compression from ongoing Farmingdale construction; execution risk related to achieving scale with new facilities and maintaining service levels during rapid store expansions; reliance on marquee retailers (Walmart/Costco) exposes the company to channel concentration; negative FCF in the near term due to capex and working capital needs.
Financial Position
Solid balance sheet for a small-cap specialty foods producer: cash ~$7.4m with total debt ~$6.8m and net debt ~$3.5m; current ratio ~1.37; plan to fund CapEx from cash flow and existing revolver facilities; long horizon target for margin expansion and EBITDA growth provides a foundation for potential M&A opportunities.
SWOT Analysis
Strengths
Positive revenue trajectory: Q2 FY2025 revenue up 14% YoY to $28.38m driven by volume and pricing actions.
Retail channel expansion: Walmart entry (2,000 stores; multiple protein offerings) and Costco National Buy with multi-region coverage and multiple SKUs.
Mama's Creations Inc (MAMA) Q2 FY2026 Results: Crown I Acquisition Drives Scale and Cross-Channel Growth in a Turbulent Consumer-Defensive Landscape...