Mama's Creations - Q3 2024

Transcript

Operator (participant)

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to Mama's Creations third quarter fiscal 2024 earnings conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. This conference is being recorded today, December 12, 2023, and the earnings press release accompanying this conference call was issued after the market closed today. On our call today is Mama's Creations Chairman and CEO Adam L. Michaels, and CFO Anthony Gruber. 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 federal securities laws regarding Mama's Creations. Forward-looking statements include, but are not limited to, statements that express the company's intentions, beliefs, expectations, strategies, predictions, or any other statements relating 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, 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 in other documents which the company files with the U.S. 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 the 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, throughout today's call, the company may refer to adjusted EBITDA, a non-GAAP financial measure, which it believes better reflects the performance of the business on an ongoing basis. A reconciliation of adjusted EBITDA to its most directly comparable GAAP financial measure is included in today's earnings release, which is available on the Mama's Creations website under the Investors tab. And finally, 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 Chairman and CEO, Adam L. Michaels. Adam, the floor is yours.

Adam Michaels (Chairman and CEO)

Thank you, operator, and thank you to everyone for joining us today. I'd like to welcome you to our third quarter fiscal 2024 financial results conference call. I'm very excited to be speaking with you all today, coming out of what was another strong quarter of consistently improving top and bottom line growth, representing even more evidence of what we believe is Mama's true potential over the long term. We continued our reliable cadence of operational execution in the third quarter, with strong double-digit revenue growth and a year-over-year expansion of our gross margin profile by 460 basis points to 30.1%, validating our strategy and internal focus on our three Cs: cost, controls, and culture.

Both revenue and net income were up over 15% consecutively from the second quarter of fiscal 2024, and we are now beginning to see the cumulative results from our efforts over the last year, ranging from our acquisition of CIF to formalizing and improving countless processes throughout the company. Taken together, I believe we remain on track to continue our cadence of planned, persistent, and profitable growth in the years to come. Our team has worked together to drive a significant turnaround in the business in the last year, changing everything including the name. We made countless small changes at every level of the company, from operations to logistics to administration, implementing operational KPIs under the mantra of what gets measured, gets improved.

The results can be clearly seen in our gross margin profile, which improved from 11.9% in Q2 fiscal 2023 to 30.1% today, as well as in our bottom line, with our net income transforming from -$700,000 in Q2 fiscal 2023 to over $2 million today. Looking ahead into the next fiscal year, we see even more opportunities to further margin enhancement, particularly by leveraging strategic CapEx investments to build new in-house capabilities earlier in the value chain, improving automation at our production facilities, and further building the capacity to support potential new tier one national customers. Taken together, these initiatives will position us to invest surplus gross margin into higher and more profitable trade promotion, which will serve as the rocket fuel for the next leg in our revenue growth trajectory.

Early tests in trade promotion have driven promising results, and we look forward to right-sizing our trade promotion investments in the quarters to come. At its core, our strategy and growth are being fueled by macro trends that continue to point in our favor. We are well positioned to capture share, driven by the rapid shift in consumer preference towards deli-prepared foods, which, as a sector, continue to grow in both price and volume. With the effects of the pandemic normalizing, food retailers are now investing heavily to increase space for the fresh, prepared, grab-and-go options to differentiate themselves and appeal to the next generation of shoppers, capturing share from restaurants with healthy, high-quality meals and creative new flavors at a favorable price point relative to takeout.

Research from the Food Marketing Institute, FMI, reports Gen Zers and Millennials consume grocery deli-prepared foods more often, and both report they expect to increase food service purchases in the future. More than half of shoppers recently surveyed say grocery deli-prepared foods represent a good value compared to eating out at a quick-service or fast-casual restaurant or ordering takeout. Grocers have noticed this undeniable macro trend, with 64% of grocery executives polled by Deloitte saying that the fresh department is the most strategically important area for their sales growth during the next 12-36 months, with FMI reporting that three-quarters of food retailers are planning to increase the space they allocate to food service.

In-home dining has become a source of respite for consumers seeking to avoid the ever-present impacts of inflation, with trailing 12-month in-home food inflation running at 2.1%, as compared to more than double that at 5.4% for out-of-home occasions, all on top of what has already been aggressive inflation since COVID began. We firmly believe prepared foods will continue to grow and take market share from the frozen, center aisle, and especially out-of-home occasions, creating a generational opportunity for deli-prepared foods providers such as Mama's Creations. As I've said before, realizing our goal of shaping Mama's Creations into a one-stop shop for deli-prepared foods has required a step change in our corporate structure in many ways. Throughout the third quarter, we remain laser-focused on the continuous foundational improvement of our three C strategy: cost, controls, and culture. Starting with cost.

As is plainly visible in our gross margin profile, our new approach to cost management has driven noticeable savings across the organization, which has enabled our gross margin to grow from 12% when I started, to the 30% range, as you saw today. Our new ability to load share and produce leading products across our two facilities, rather than having them each single-sourced, has established the framework to enable a much greater level of flexibility and agility that will ultimately provide us with both redundancy in production and lower costs. In addition, our significant investments in automation will position us to grow production capacity to support anticipated future tier 1 customer wins, as well as to notably enhance margins, which ultimately positions us to reinvest those gains in trade promotion, the rocket fuel for our growth.

We are already harvesting the fruits, or shall I say, proteins of our labor. For example, our gross margin saw an over 300 basis point improvement year-over-year through significant procurement efficiencies. A further nearly 200 basis points through labor efficiencies as load sharing between facilities helped to drive reduced overtime. While most other companies would be ecstatic for such results, our team only sees it as justification to double down on our three C strategy to capture more savings for us to reinvest. On the controls front, I'm proud to say that we delivered on time in full with the transitioning of our T&L Creative Salads division over to our NetSuite ERP system. This means that our full company is now on the NetSuite platform, providing us with a vastly improved degree of actionable insights into the details of our operations.

While not as sexy, we also implemented our new SEC reporting systems, Workiva, which automates processing, allows us to close our books faster, and frees up our finance team to focus on more value-added activities. Having our financial, operational, and sales analytics at the touch of a button is truly transformational. Something we saw after integrating NetSuite at Mama Mancini's and Olive Branch. As I've said before, what gets measured gets improved. We have proven it together over the past several quarters, and these analytical capabilities that we are investing in in-house will continue to pay dividends for years to come. Another form of proof of our strategy comes from the response of our customers to our products.

We recently heard from our QVC customers, who once again voted Mama Mancini's products as number one in the "I could eat this every day," "Best Sauce," and "Best Smart Swap" categories during the recent 2023 QVC Customer Choice Food Awards. It is truly an honor to receive this level of recognition for the fifth year in a row... beating out countless superb food products offered on QVC, a testament to the joy of our products continue to bring to our QVC loyal consumers. QVC continues to be a tremendous, profitable, and incremental channel for us, which also serves as an efficient R&D and innovation real-time testing platform. Finally, and most importantly, I am proudest of the cultural evolution my teammates and I are creating. This quarter, we launched our first-ever employee engagement survey with an impressive 80% participation rate.

I've seen early results with our amazing VP of HR, Abby Meeks, and she's already sharing with our leadership team the three specific actions we are going to commit to for our people. Abby also helped us implement our first-ever performance management system. I was lucky enough to have a mentor early in my career, Jon Katzenbach, and he taught me that you can't change a culture. You change behaviors, and behavioral change leads to cultural change. I am living that with my 250 colleagues every day at Mama's, and I couldn't be more excited for the renewed culture we are building together. We continue to invest in our people to further grow capabilities, and while not every hire gets a press release, we had several exciting appointments recently.

Concurrent with the retirement of COO Matt Brown at the end of fiscal third quarter, we announced the planned evolution of our leadership team with two new vice president of operations appointments. Eric Felice was promoted to the role of vice president of operations, East Rutherford. Eric maintains over 25 years of operational experience, including over 10 years managing operations at our facility in East Rutherford, New Jersey. In addition, Ray Geer was promoted to the role of vice president of operations, Farmingdale. Ray draws on over 30 years of operations experience, including nearly 10 years managing operations at our facility in Farmingdale, New York.

I am fully confident that these tested leaders, now managing operations, further supported by the superbly talented T&L Creative Salads founder, Anthony Morello, and our tenured Chief Administrative Officer, Steve Burns, that we are well-positioned to continue to realize exciting new operational synergies between our new facilities. I want to share our congratulations to Eric and Ray, and thank Anthony and Steve for their continued leadership. With the successful evolution of our finance and operations organization, I committed to my fellow shareholders that building our sales and marketing organization would be our next area of focus. I am proud to report that we again, are successfully building differentiated capabilities ahead of schedule. We have nearly completed the build-out of our sales organization, growing from a single dedicated sales employee to five today, further supported by our Chief Marketing Officer and head of trade strategy and execution.

Together, their goal is to continue to drive up our average items carried, accelerate our existing velocities, and open new doors, building broad-based distribution. With our new team and capabilities, we increase the likelihood of opening up entirely new channels, whether that is the convenience channel, e-commerce channel, our major mass retailers such as Walmart or Target. These openings will be impactful to our growth trajectory, hence our strategic CapEx investments to prepare for whatever the future may hold. In summary, I firmly believe that we are well-positioned to leverage the build-out of our supercharged sales team and a compelling product portfolio to take market share, continue to grow our SKUs per customer, and ultimately become the premier one-stop-shop deli solution provider in the United States.

As we continue to improve our internal processes firm-wide to become brilliant at the basics, we are building a more resilient and flexible organization that I believe can deliver sustainable value to our fellow shareholders for years to come. With that, I'd like to turn the call over to Anthony Gruber, our Chief Financial Officer, to walk through some key financial details for the third quarter of fiscal 2024. Anthony?

Anthony Gruber (CFO)

Thank you, Adam. Revenue for the third quarter of fiscal 2024 increased 11.5%, $28.7 million, as compared to $25.7 million in the same year-ago quarter. The increase was largely attributable to volume gains driven by same-customer cross-selling, the acquisition of new customers, and successful pricing actions. Gross profit increased 31.6% to $8.6 million, or 30.1% of total revenues in the third quarter of fiscal 2024, as compared to $6.6 million or 25.5% of total revenues in the same year-ago quarter. The increase in gross margin was primarily attributable to successful pricing actions, the normalization of commodity costs, and improvements in procurement, manufacturing, and logistics efficiencies. Operating expenses totaled $5.9 million in the third quarter of fiscal 2024, as compared to $5.1 million in the same year-ago quarter.

As a percentage of sales, operating expenses increased in the third quarter of fiscal 2024 to 20.7% from 19.7%. Operating expenses as a percentage of sales increased due to the addition of several new key hires, who brought new and differentiated capabilities to the organization. This figure includes a tripling of our marketing expenditures this quarter, as we achieve many firsts for the company and build out a best-in-class marketing program. Net income for the third quarter of fiscal 2024 increased 83% to $2 million, or $0.05 per diluted share, as compared to a net income of $1.1 million, or $0.03 per diluted share in the same year ago quarter. This quarter's net income totaled 7% of revenue, in line with management expectations in the mid-single-digit range.

Adjusted EBITDA, a non-GAAP term, increased 67.6% to $3.5 million for the third quarter of fiscal 2024, as compared to an adjusted EBITDA of $2.1 million in the same year ago quarter. Cash and cash equivalents as of October 31st, 2023, were $5.6 million, as compared to $4.4 million as of January 31st, 2023. The increase in cash and cash equivalents was driven by $1.5 million in cash flow from operations in the third quarter of fiscal 2024, $1 million of which was used to pay down the company's debt. As of October 31st, 2023, total debt stood just under $10 million. Looking ahead, we believe that our normalized gross margin profile will continue to hover in the high 20% range.

Our long-term goal, leveraging strategic CapEx investments, procurement efficiencies, and continuous operational efficiencies, would be targeting margins consistently maintained in the low 30% range while rightsizing our trade promotion investments. One fact that I'd like to call out, that we are quite proud of, is that on top of the 460 basis point improvement in gross margins, we still were able to double our trade investment in the quarter. Turning to net income, while we continue to target mid-single-digit net income margins, our long-term goal would be to improve to approximately 10%, with adjusted EBITDA margins in the teens % range. This completes my prepared comments. Now, before we begin for our question and answer session, I'd like to turn the call back to Adam for some closing remarks. Adam?

Adam Michaels (Chairman and CEO)

Thank you, Anthony. Our ambition is to fortify and expand upon the robust groundwork and strategy presented here today, positioning us to continue to drive profitable growth and margin expansion. We will seek to reinvest our surplus gross margins as rocket fuel for our trade promotion budget, which we expect will ultimately snowball into increasingly robust revenue growth. Looking ahead, our near-term sales goals will be achieved by launching highly incremental products to further increase the SKUs per customer, introducing our products to new tier one customers via our supercharged sales team, putting in place high ROI trade promotion programs to accelerate existing product velocities, and further enhancing our margin through continuous operational improvements at every level of the organization. We believe that this approach will not only position Mama's Creations as a one-stop-shop deli solution provider, but drive sustainable shareholder value creation over the long term.

With that, I'll turn it over to the operator to begin our question-and-answer session. Operator?

Operator (participant)

Thank you, sir. We will now begin the question and answer session for telephone participants. If you have a question, please press the star followed by the one on your touch tone phone. If you would like to withdraw your question, please press the star followed by the two. Again, that is the star followed by the one if you have a question. If you are using speaker equipment, you will need to lift the handset before making your selection. I'll now pause as we assemble a queue. Thank you. Our first question comes from the line of Ryan Meyers with Lake Street Capital. Please proceed with your question.

Ryan Meyers (Senior Research Analyst)

Hey, guys. Thanks for taking my questions. Congrats on another solid quarter. Obviously, it looks like we saw sequential revenue growth once again, along with sequential EBITDA growth. Just wondering if you can comment on how we should be thinking about Q4, and what sort of seasonality we should be expecting.

Adam Michaels (Chairman and CEO)

Yeah, thanks, Ryan. Great team effort. Yeah, I think like we spoke about last year and, and, before, Q4 is usually our softest quarter. So I think, you know, not many people are shopping on Thanksgiving Day and Christmas Day, and hopefully people get to take some vacation. So we do know, like you saw last year, it tends to be a little softer. I think we're still, you know, shooting for what we said. You know, we're going to continue to grow faster than the market and continue to gain share. We're seeing that in the high single digits now, between all of that, and we think we could continue to beat that.

Ryan Meyers (Senior Research Analyst)

Got it. That's helpful. And then just wondering if you can comment a little bit more on the new sales hire. You know, what, what kind of productivity have you seen out of them? And then maybe if you can quantify how much new business they've generated during the quarter, and then if you have any sort of comments on how much business you think they can generate next year, whether it's in terms of new customers or just overall revenue growth, would be helpful to understand.

Adam Michaels (Chairman and CEO)

No, it's, it's actually incredible, Ryan. I wish everybody on this call could have joined me. So last week we had our sales meeting. Our entire sales team and the extended team got together to plan out next year and to talk about customers. It was... Yes, you're gonna ask the questions about the, the numbers, and I'm totally great with that, and I'll answer that. But it's the, the culture, the, the energy that we've never had before. Literally, when I started, we had one salesperson. So that was great, and to see that excitement. You know, from what's gonna happen? Everything's gonna happen. So brought in this great guy, Art, who has lived his whole life in the C-store. We have a whopping total of zero dollars in the C-store. We're gonna open that up next year.

Andrew with e-commerce, the work that, you know, Lauren Sella is overseeing and all of our marketing efforts. These are real capabilities that we've never had before as a company, and I expect to see, you know, significant growth next year. Again, I continue to believe we're going to where the market is and continue to grow share. These folks are gonna help us do that more confidently and at a higher rate than would have without them. So new customers, new channels are gonna be incredible. And again, you know, Nick, who's leading all of our trade programming, we didn't have those capabilities before. The level of analysis we're doing now on ROIs, on every single program we're doing, is unheard of in this company beforehand. So we know exactly what we're doing.

We know what to do more of, and equally, 'cause you're not gonna get it all right. If you get it all right, you're not trying hard enough. We know which ones aren't gonna work and why we're not gonna double down on them, you know, next year. So it's been perfect. It has actually exceeded my expectations, this whole sales team coming together, and, and I love it.

Ryan Meyers (Senior Research Analyst)

That's great to hear. And then last question for me: I know average SKU per customer was seven last quarter. Did that trend higher during the quarter, and what is that currently standing at?

Adam Michaels (Chairman and CEO)

Yeah, it's good. So a year ago this time, it was at six. We actually got it up to... It's a little over seven now. So what's happening is we're seeing new customers come in. You know, when new customers come in, remember, this is a weighted average. So when a new customer comes in, and like we said, they usually come in with just a couple SKUs, ironically, that suppresses the average items carried. And even we overcame that and still got over seven for that. The other thing is, some of the customers that did really well this quarter tended to have fewer items 'cause they had much more volume to it. But we continue to make progress. We did better than we did before, and I expect to do even more with our new sales team.

Ryan Meyers (Senior Research Analyst)

That's helpful. Thanks for taking my questions.

Adam Michaels (Chairman and CEO)

Thanks, Ryan.

Operator (participant)

Thank you. Our next question comes from the line of Eric Des Lauriers with Craig-Hallum. Please proceed with your question.

Eric Des Lauriers (Senior Research Analyst)

Great. Thank you for taking my questions, and, congrats on another really impressive quarter here.

Adam Michaels (Chairman and CEO)

Thanks, Eric.

Eric Des Lauriers (Senior Research Analyst)

My first question is a bit of a follow-up to the last question. So, you know, we've seen year-over-year revenue growth accelerate from 5.9% in Q1 to now 11.5% in Q3. I was wondering if you could just help us understand the drivers of that acceleration. You know, obviously, there's a number of things going on here. Presumably, increasing SKUs per store is having the biggest impact there. But if you could just kind of, you know, help flesh that out a bit. You know, are there any sort of velocity changes or new geographies to call out in addition to the increasing SKUs per store? Thanks.

Adam Michaels (Chairman and CEO)

Yeah, absolutely. So a couple of things. So first, what's great is, both of our major businesses, right? The legacy Mancini business and the new Creative Salads business, both of them grew double digits, which was great. So this is a... We're, we're all rowing the boat together. That was great to see. Actually, a super majority of the growth was volume-driven, which is awesome. So I was really happy to see that. So this is actual real sales. This is not a pricing thing, even though we were able to improve our gross margins in price. So we saw that as well. We did get to see great new customers, that brought in. You know, one that I'm really excited about, that I'm sure you guys, you guys know, Albertsons.

We just opened up a whole new division in North Cal, which is one of their biggest divisions, with some of our chicken products. Again, this is something that I love to see. So we had Albertsons. We've been, and Albertsons has been our customer for a while on the legacy Mancini side. What I told you guys is we have customers. Now, let's leverage all these Creative Salads products, all the chicken or the paninis. We got this great with Demoulas now, we're getting in, again, a legacy customer. We now have paninis. They're literally flying off the shelf. It's incredible. Cub Foods, Holiday Markets, so a lot of new customers, exactly to your point. And then, you know, we just spoke about AIC, getting more items into the stores.

And I think one thing that's been great, and I mentioned earlier, the work that Lauren Sella is doing as our Chief Marketing Officer. We've been testing, right? Test, learn, test. Testing a number of programs this past quarter. They're seeing very promising results. It's the marketing that is going to help us from a velocity standpoint. Actually, if you're anywhere on the East Coast, I don't know if you guys know, Z100, Elvis Duran in the Morning show. I think it's one of the most popular morning shows on the East Coast. Lauren did a program with them. Actually, Dan Mancini, the two of them went to the studios, and they don't stop talking about it. They don't stop talking about the meatballs. So that is really starting to help move and get momentum.

People are talking about it, and that's helping with velocities. So I, I really would tell you it's the trifecta. I shared with you new customers, I shared with you strength in average items carried, and now with the marketing, driving velocities. So I think it's all three working together. And this is healthy growth again, this is volume-driven growth in both of our major businesses.

Eric Des Lauriers (Senior Research Analyst)

That's great to hear. I appreciate that color. It sounds like everything's moving in the right direction here.

Adam Michaels (Chairman and CEO)

And not knock on wood.

Eric Des Lauriers (Senior Research Analyst)

My next question is on the margin impacts from CIF. If I look back, it looks like that was sort of expected to have, you know, 100-200 basis points potential gross margin, you know, improvement here. And I'm just wondering how to sort of combine that information with your sort of, you know, target to keep gross margins ideally in the high twenties and sort of reinvest in trade promotion. Is this 1-2 percentage points incremental to that high 20s or is this now, you know, we're staying at high 20s, and now we essentially have, you know, another 100-200 basis points of surplus margin to reinvest?

Adam Michaels (Chairman and CEO)

Yeah. So first, I need to apologize for over-delivering on the high twenties. I'm sorry about that. But I'll keep disappointing. I think that there's two or three things. So I think the first thing is, the CIF acquisition has been tremendous. Ron Loeb, Jeff Siegel, the whole team, I could go through everybody, has just done an amazing job, and we're one team now. We don't even talk about CIF anymore, we're one team. The second thing is, yes, we absolutely see the one... You know, like we said, the 1-2 points. Again, we have over-delivered our thesis on what I brought to the board on the opportunity, so I feel great about saying that. The third, I think, is even more important than numbers.

The talent that we brought in, the folks. So there are folks from CIF that had capabilities that we didn't have before. Rebecca in our freight. I've mentioned to you, freight. When we first started, 200 basis points, 280. As crazy as the numbers are, we got another 50 basis points of improvement this quarter. That's real capabilities that Rebecca brought to the team. What we're able to do in accounts receivables, it is... Yes, it's great that the CIF acquisition got us more sales and got us more margin. The real secret is, it got us great talent and real capabilities in our business, and that's what I'm proudest of.

Eric Des Lauriers (Senior Research Analyst)

That's great to hear. My last couple of questions, I guess, first is just a clarifying question. Did you say earlier, I think it was on the previous question, that you had hired a sort of a new head of the C-store channel? I just wanted to clarify that first.

Adam Michaels (Chairman and CEO)

We did. Yeah. Yep. Yep, Art is just killing it, really already. And he's only been here a month or two, and already connecting with the right brokers, the right distributors. The energy that he brought to the meeting, he actually pushed me. He was yelling at me that I was calling the number too conservatively. How's that? It was, like, his first week here, and he's already calling me out, which I loved. So, yeah, we have a new guy that's running C-stores, e-commerce now. We are building the team that's gonna win.

Eric Des Lauriers (Senior Research Analyst)

Yeah. Yeah, yeah. So you have this new C-store hire. You know, you press released a sort of launch of, you know, direct-to-consumer e-commerce. I think you called out sort of the club opportunity in the press release and then mentioned mass market in your prepared remarks here. You know, just kind of help us, like, frame these opportunities here. I think you said C-store, you know, could even drive, you know, near-term results here. How should we think about these?

You know, I guess one, just in terms of a you know, potential scale relative to the size of your, you know, sort of, traditional grocery channel, and then perhaps, in terms of, you know, whether it's priority or just, you know, when we might be able to see some potential results here. I'm just trying to, you know, understand these opportunities, as they come up. Thank you.

Adam Michaels (Chairman and CEO)

Yeah, you know, look, I... You know, I think Art puts enough pressure on himself, as does everyone on the team. We're not looking. So yes, for our fiscal 2025 plan, we, we built a bottom-up model. Obviously, we won't be sharing that, that bottoms-up, customer-by-customer model, but we have it. Let, let, let's put this into perspective: We're pretty much not in five of the top 10 customers. The three biggest customers in this country, Target, Walmart, and, and banner Kroger, we're not in. So I think that should put in perspective for us the, the level of distribution. And, you know, again, I'm proud, with over 8,000 points of distribution, very proud of that. Over a $100 million business, that's wonderful. We're in, like, like, still probably... I don't even think we're in the bottom of the first.

We're probably in, like, you know, maybe we have one out in the top of the first. That's how early we are in the process. So I think there's tremendous value. But again, we're not going to rush. I'm here for the long haul, Anthony's here for the long haul, and we're going to do things, you know, very organized. We're gonna do it very profitably. So at that, you know, look at the growth that we're having, and the profits are just getting better. The business is getting healthier and healthier. I think if you look at our peers or in my old world at Mondelēz, all the companies that I would look at to acquire, yeah, it's super easy to get growth. I mean, we're losing $100 billion, but don't worry about it, someone else will pay for it.

We are growing smartly, we're growing profitably, and we're accelerating our profit... That's the type of growth that you're gonna see from this business.

Eric Des Lauriers (Senior Research Analyst)

Well, it's certainly very impressive, what you've all been able to do over the past year or so, and certainly looking forward to, as many opportunities to come. Thanks again for taking my questions.

Adam Michaels (Chairman and CEO)

Thanks a lot, Eric.

Operator (participant)

Thank you. Our next question comes from the line of Howard Halpern with Taglich Brothers. Please proceed with your question.

Howard Halpern (Principal Equity Analyst)

Congratulations, guys. Another great quarter.

Adam Michaels (Chairman and CEO)

Thanks, Howard.

Howard Halpern (Principal Equity Analyst)

Scanning the queue that's out there, I saw— Could you describe what was the primary driver with the growth in the Midwest year-over-year and sequentially? Because it seems like there was a nice bump in the quarter.

Adam Michaels (Chairman and CEO)

Yeah, I know. It was great and, you know, probably the only CEO that's happy to see that, you know, we're losing share on the East Coast because we're doing so much better on the Midwest and the West Coast. That was primarily two or three things. One, Costco continues to get stronger and stronger for us, and I spoke about this earlier around this trifecta. So first, this year, we got the largest order ever. It's actually shipping now in the Northeast, over a $1 million order. Two, we've had multiple rotations now in some regions. We've already been, this year already, Northeast, Midwest, Pacific Northwest, L.A. region. I'm sure I'm missing others. And then the third, and I'm super excited, we're producing it now.

You should see it next month if you're out in the West Coast, where we got our sausage and peppers into the L.A. region of Costco, which is wonderful. So this is the first time ever we've had a non-meatball product in Costco. So we hit the triple threat this year, which was awesome. Directly to your question, Costco, we had another rotation in the Midwest, and that Midwest sales.

Howard Halpern (Principal Equity Analyst)

Okay.

Adam Michaels (Chairman and CEO)

Roundy's, I believe, is also in the Midwest, and we continue to do well at Roundy's, which is, if you guys know, a Kroger banner. Underneath the Kroger banner is Roundy's. So those are the answers, Howard.

Howard Halpern (Principal Equity Analyst)

Okay. And what are you seeing in terms of, you know, how you talk about the grocery stores building out this part of their store? Is there an opportunity for the, you know, the Meatballs in a Cup to go in that section of grocery stores going forward?

Adam Michaels (Chairman and CEO)

Well, you must be speaking to Scott Schaefer on our sales team. So actually, it's great that you mentioned that. So Jewel is an Albertsons banner. Jewel is crushing it with our Meatballs in a Cup. So just as a reminder, we developed Meatballs in a Cup as a boxing everybody out, so he gets all of the production. But we actually Scott, we actually sold into Jewel. I shared with the leadership team the other day, we actually got an end cap, so a refrigerated end cap, which is really hard to get. And they had both our beef meatballs and our turkey meatballs on that end cap.

So yes, Howard, directly to your point, while the intention was to have the cups in C-store only really, they're actually starting to do well in the grocery space with Jewel and with others. And then also there's a lot of interest from the club channel for a multi-pack, which we're investigating as well. So it's happening, Howard, it's great.

Howard Halpern (Principal Equity Analyst)

And all that eventually, too, could lead to increased volumes on the e-commerce side?

Adam Michaels (Chairman and CEO)

Yep, we got to actually... Lauren, see that? Now, Lauren must have been happy now, too. So yes, if you go onto our website, shop.mamamancinis.com, you could actually get our meatballs in a cup on our website. So yes, it should help drive e-commerce sales as well.

Howard Halpern (Principal Equity Analyst)

Okay, and just, you know, SG&A question. Are we now at a new level? Is this sufficient to help fuel that double digit, you know, growth that you hopefully will achieve over the next few years?

Adam Michaels (Chairman and CEO)

Yeah, you know what? Let's see. I don't want, you know, and I say this respectfully, with sitting next to Anthony, my CFO, I don't want necessarily, Anthony to be driving what capabilities we need. Obviously, we're going to manage the business well, and we're gonna grow, and we're gonna maintain our profitability, but I wanna bring in great talent, and, and I'm never gonna. I'll make, you know, decisions. I'm. We, as a leadership team, make the decisions on who to bring in, but I wanna bring the capabilities in. That said, we had a great year this year. You see the talent we brought in from sales and marketing and, and logistics. I think we're, you know, we're down to maybe one or two more people that could really accelerate our business.

So I think we're mostly there, but, you know, I wanna bring in the right talent. I wanna also bring in, have the right amount of marketing. You know, Howard, well, that marketing is a below-the-line number. That means it's going to sort of, quote-unquote, "hurt OpEx." I wanna do what's right for this company, and I don't wanna let short-term thinking influence our long-term aspirations. We're gonna be a billion-dollar company, and we need the marketing to do that. But I promise you, I'm a big talker, but I get scared faster than you guys do. So I will make sure that we continue to stay profitable and continue to grow.

Howard Halpern (Principal Equity Analyst)

Okay. Well, thanks, and keep up the great work.

Adam Michaels (Chairman and CEO)

Thanks so much, Howard.

Operator (participant)

Thank you. This concludes our question and answer session, and I will now turn the call back to Chairman and CEO, Adam L. Michaels, for his closing remarks.

Adam Michaels (Chairman and CEO)

Thank you, operator, and thank you again to each of you for joining us on today's earnings conference call. We look forward to continuing to update you on our progress as we strive to deliver value to my fellow shareholders and execute upon our vision of becoming a national one-stop-shop deli solution provider. Thank you.

Operator (participant)

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may now disconnect your lines at this time, and have a wonderful day.