Q2 2025 Mama's Creations Inc Earnings Call
Good afternoon, ladies and gentlemen, thank you for standing by.
Thomas creation: It comes from Thomas creation second quarter fiscal 2025 earnings conference call.
Thomas creation: During todays presentation, all parties will be in a listen only mode. Following the presentation. The conference will be opened for questions.
Thomas creation: The conference is being recorded today September 10.
Thomas creation: 2024.
Thomas creation: The earnings press release accompanying this conference call was issued after market close today.
Speaker Change: On our call today is mom as crazy as chairman and CEO, Adam Al Michaels and CFO Anthony Group.
Before we get started I'll read the disclaimer about forward looking statements.
Speaker Change: 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 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.
Speaker Change: Therefore, actual outcomes and results may and are likely to differ materially from what did you expressed or forecasted in the <unk>.
Speaker Change: We're looking statements due to numerous factors discussed from time to time in the company's 10-K and other documents 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 companys control matters that may cause the 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.
Speaker Change: Major litigation regarding the company.
Speaker Change: In addition throughout today's call the company may refer to adjusted EBITDA, a non-GAAP financial measures, which it believes provide helpful information to investors about 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 Mommas creations website under the investors tab.
Speaker Change: 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.
Speaker Change: <unk> 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.
Speaker Change: At this time I'd like to turn the call over to chairman and CEO, Adam Al Michaels, Adam the floor is yours.
Speaker Change: Thank you operator, and thank you to everyone for joining us today.
Speaker Change: I'd like to welcome you to our second quarter fiscal 'twenty five financial results Conference call.
Speaker Change: Second quarter was highlighted by strong 14% broad based revenue growth against a healthy backdrop of operational execution and a continued focus on our four c's cost controls culture and catapult our goal to emerge as a leading one stop shop Kelly's solution on a national scale is ground.
Speaker Change: And our purposeful persistent and patient strategic plan to capture what is a generational change in our consumer preferences.
A significant driver of this change it's been a challenge and change in the restaurant industry underlying by a seismic shift in consumer preferences inflation consumers with less disposable income and rising labor costs are only some of the issues that have combined to challenge the ability of restaurants to run their businesses profitably.
Speaker Change: And in turn have forced them to raise prices food.
Speaker Change: Food delivery, which was expected to improve restaurant sales is increasingly turning away customers between the service fees delivery fees and kept Saturday at checkout. The price of a meal on a third party delivery can be far higher than many consumers expect.
Speaker Change: Again restaurant owners are often left to raised menu prices to cover service commission fees or risk, losing out on convenience mining customers.
Speaker Change: Rising interest restaurant prices and inflation are bringing consumers back to the grocery store, but with higher expectations. They want an experience and to be excited about the quality products across multiple retailers and formats.
Speaker Change: In turn grocery retailers have had to pivot quickly and differentiate to be able to cater to customers, including the introduction of new definitely prepared meals the shelf space.
Speaker Change: Which continues to expand as our CFO. Anthony Group are noted in an interview last month with the Wall Street Journal.
Nearly three quarters of households purchased deli prepared foods at least once during the 52 weeks ending October seven 2023. According to the power of foodservice that retailer retail toy twenty-three published by F&I food industry.
Association.
Speaker Change: The report also revealed.
Speaker Change: Annual Deli prepared purchase frequency up 9.8 occasions.
Speaker Change: $8.38 spend per transaction and yearly dollar spent per buyer of $82 up 7.2% based on Nielsen data.
Compared to a year ago, 25% of consumers say that they that everyplace quick service and fast casual restaurant meals with foodservice at retail up 17% the year prior.
Speaker Change: The result of this substantial change in consumer preferences is being felt now in the grocery aisle July its consumption report from IRI announced that Delhi again, it leads the perimeter on unit growth.
Speaker Change: With $30 billion Deli prepared sub category was up 5% in dollars in July and up even more five 2% and units prepared meats, a $6 $2 billion subset of Deli prepared where we focus on the most was up 10, 5% over the last 52 weeks and up 11, 9% in <unk>.
Speaker Change: Units.
Speaker Change: Consumers are seeking out new flavors and customers are seeking to meet their needs.
Speaker Change: Mom as one stop shop strategy was and is tailor made for this virtuous cycle of category growth.
Speaker Change: The opportunity we're facing is clearly significant we're in the right place at the right time with the right product portfolio.
Speaker Change: Creations products product offering is in my opinion second to none in variety quality and service grocers are recognizing that.
Speaker Change: Since I joined as CEO in September of 2022, we have refocused to address this incredible opportunity. We formed an initial three strategy to improve our cost controls and culture areas that in my opinion requires the most attention we rebuilt and strengthened the foundations of our business and became brilliant at the base.
Speaker Change: Thanks.
Speaker Change: We methodically address the biggest pain points across each of these areas and implemented key operational kpis under the mantra of what gets measured gets improved.
Speaker Change: First what's cost.
Speaker Change: Our gross margins were 11, 9% in the quarter ending July 31st 2022 with significant potential that needed to be unlocked the path to our targeted high twenty's gross margin profile to countless small improvements throughout the organization.
Speaker Change: From step changes in freight and procurement efficiencies and implementing processes to reduce labor overtime, our operations run much more efficiently today than ever before being able to successfully navigate as we have recently seen with hot historically high north of $2, a pound chicken prices commodity.
Speaker Change: Wins that may come our way.
Speaker Change: The improved margins and cash flow are being directly and immediately put back into further further investment and capex such as the Grilles, we installed in our Farmingdale facility over the last several weeks doubling chicken capacity and increasing labor efficiencies through reduced over time, creating a cycle of higher.
Speaker Change: And higher gross margins.
Speaker Change: Logistics management, which has been a highlight of our efficiency efforts, having been cut in half since our team came together reduced a further 40 basis points. This quarter driven by greater use of full truckloads versus less than truckload L. T. L orders as well as stronger partnerships with our logistics three pls.
Speaker Change: Yes.
Speaker Change: Beyond cards, we're building new capabilities in house, which has allowed us to wean ourselves off of the higher professional services and support we relied on in the past, reducing our SG&A by 254 basis points versus prior year.
Speaker Change: Second while our controls I've.
Speaker Change: I have been sharing with you over the past year. The successful implementation of our net suite ERP system, providing unparalleled visibility to our business.
Speaker Change: Moving pricing margins inventory management and so much more.
Speaker Change: Laurence seller are incredibly agile chief marketing officer has taken over our new product development process.
Adding some needed end to end structure, and possibly counterintuitively, allowing us to get new items out even faster cheaper and more efficiently.
Speaker Change: New controls and quality are strengthening our policies and procedures.
Make us even prouder of our Grandma quality manufacturing just last month, we added X-ray technology to our existing metal detection and are investigating cutting edge PCR testing to ensure what comes into our plants is as safe as possible.
Speaker Change: We are also reaping the benefits of driving down complexity in our business SKU rationalization is a major focus for us driving down inventory, improving buying power, reducing waste and saving time.
Speaker Change: And our creative salads in Olive branch businesses. For example, our efforts to date. This year have resulted in cutting over 150 skus.
Speaker Change: 35% of our portfolio impacting only about a half a percent of our revenues.
Speaker Change: Massive complexity reduction without noticeably impacting our top line as much of these orders flowed back into our existing items.
Speaker Change: To further focus on these first two CS we recently appointed end to end supply chain leader Skip tap in to the role of Chief operating officer, bringing over 30 years of experience to mamas as a senior supply chain executive and significant end to end supply chain mastery from time with CT in foodservice.
Walmart Campbell's soup and Procter <unk> Gamble.
Speaker Change: Skip has strong strategic and tactical business planning skills and proven ability to deliver significant improvements in broad based operating results and we'll be focusing on supply chain optimization business planning cash flow and cost optimization asset utilization and organizational capability building.
Speaker Change: While skips operational skills are laudable, it's his team and people skills that I am most excited to see take mamas to the next level.
Speaker Change: The third C was culture, where we implemented formalized processes and a company wide culture Committee to ensure we're doing right by our employees at every level of the organization.
Speaker Change: Our team has a passion for learning and everyone on our team is striving to do more.
Speaker Change: As such we're starting to roll out various training programs from 101 straight out of mom's pantry to focused functional training, depending on particular roles as to Richard Branson, One said trained people well enough. So they can leave treat them well enough. So they don't want to.
Speaker Change: Our focus on culture is driving more production efficiency higher retention and higher quality of our products because we're all pulling the wagon together.
Speaker Change: With the successful evolution of our finance operations and HR organizations underway and financial results, reflecting this we have put in place the processes and culture to begin to accelerate growth.
At our Investor day in East Rutherford in February we announced the introduction of a fourth C catapult, representing the investments in trade promotion and marketing that we are making to grow the business profitably at a faster rate.
Speaker Change: Our 14% growth in the second quarter after 29% growth in Q1, and 17% growth in the quarter before that demonstrates with some help from new stores, new items and a little bit of trade rocket fuel what type of growth as possible.
Speaker Change: Today, we have grown our sales leadership team our first catapult lever the six dedicated employees, which is especially important as we enter the new back to school reset window.
Speaker Change: The sales team now works more seamlessly with their operations counterpart, and stronger demand and supply planning is delivering us enhance service levels and lower logistics costs I am proud power new sales team has come together and we will actively seek out additional sales talent in areas that can step change our growth.
Speaker Change: Yeah.
Speaker Change: For the second quarter I am so proud of the new doors, our sales team opened up among dozens and dozens of new independents, mostly in the west driving nearly 40% growth in that region. We are proud to add Costco, North Kao, Spartan Nash fresh thyme and rallies to our family of customers.
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So, adding more of the legacy products and existing customers, including stop and shop Publix and Schnooks. In addition, we are cross selling success of our new brands and existing customers, including round knees.
Over company B J's wait for an aldi.
Speaker Change: And starting next month, we're adding Walmart to our customer list with the addition of two new protein offerings at about 2000 stores to start.
Speaker Change: Walmart was a major target for us this year and the achievement continues to reinforce what we say we do.
Speaker Change: However, this is just the beginning.
Speaker Change: This represents a single product across two skus in about half the Walmart locations.
Speaker Change: We expect the same success, we have had recently with our launches at Albertsons and Q V C.
Be replicated at Walmart.
Speaker Change: And like Publix, and Bj's and so many others once we get our foot in the door new additional items seem to always be requested.
Speaker Change: The second catapult lever is trade promotion seeking to accelerate the velocities of our existing skus by driving trial and larger baskets combo buys with complementary products multi buys of our family of products and print and online circulars are just a few of the recent tactics, we have used to deliver the growth you're seeing today.
Speaker Change: Hey.
Speaker Change: We're seeing tremendous results from these programs such as stop and shop combo by circular with Tony pasta, while we're happy with the revenue part of the circular be finding an added benefit with a promotion there.
Speaker Change: The stores are actually more vigilant about ensuring our products on the shelf at all times, which drives further velocity.
Laurence Seller: The third lever in catapult is marketing Laurence seller, our innovative and tech enabled chief marketing officer is driving strategic marketing Activations, such as digital media and in store advertising Laurence partnership with Dan and Scott during the Cosco Roadshow created a multiplying effect partnering with <unk>.
Graham: Graham Influencers to activate the events in the physical as well as the virtual world.
The road show was a success and our sources now confirms for rotation in the Costco North East region Congratulations team.
Graham: We also received a cosco national Bye for our successful three pound branded branded meatballs sleeves picked up in six regions two of which are new regions for us Costco was high volume warehouses are ideal venues for our products, while our strict focus on margins insurers.
Graham: Each sales meets our requirements regardless of customer.
Graham: Our team has recently engaged a digital marketing agency to catapult the Costco national by their strategic customers and we will be investing in geo targeting media to build awareness and drive retail. Additionally, we're continuing to leverage new marketing technology, such as our custom QR code.
Graham: <unk> platform to further engage with our consumers. The Costco three pound me ballpark is the first item to carry our customer code and drives consumers to receive recipes offer Bruce and importantly entry into our CRM database through E mail capture.
Graham: And finally, we're pleased to have been named a finalist in the Deli business news beyond the flavor innovation awards for our flame grilled any needs in the next month, we will be able to share. Some additional exciting award news with you as well.
Speaker Change: Taken together the goal of catapult is to continue to drive up our average items carried which increased this quarter again, the 7.6 half a point more than last year and a quarter point more than prior quarter.
Speaker Change: Also continue accelerating the velocity of our existing items and the only thing in opening up new doors to build broad based national distribution.
Speaker Change: I promise, we are just getting started.
Speaker Change: With our new team and capabilities, we increased the likelihood of opening up entirely new channels, whether that's the convenience channel E Commerce channel or additional major retail customers such as our recent Walmart when Kroger target HEB food Lion and others opening these can be.
Speaker Change: Impactful to our growth trajectory, hence our strategic capex investments to prepare for whatever the future may hold.
Speaker Change: We're investing mid single digit million dollars in Capex. This year already paid for and funded from cash flow from operations with the goal of improving automation at both of our production facilities, while concurrently building new in house capabilities earlier in the value chain.
Speaker Change: Investments paired with ongoing operational improvements have the potential to offset some of the commodity inflation price inflation and ultimately move our gross margins into the low 30% range over the long term, while concurrently growing our trade promotion investments from low single digits percentage today.
Speaker Change: Towards our long term goal of 10%.
Speaker Change: Some recent examples I'm excited about are the installation of two new grilles in our Farmingdale facility.
Speaker Change: This doubles, our chicken capacity, which will allow for higher labor efficiencies through reduced overtime as previously our chicken grills were running effectively 20 plus hours a day. In addition, the installation of additional chicken processing equipment in sources key value added services that are that were.
Speaker Change: Previously outsourced lowering our cost of goods and improving margins in what remains a difficult commodity environment.
That being said nothing worth doing is easy and the installation of these new chicken Grilles, we're no different.
Speaker Change: <unk> construction took place at Farmingdale throughout the second quarter and the first half of the third quarter, which impacted margins by about 500 basis points in Q2.
Speaker Change: With that construction, mostly concluded last week.
Speaker Change: We faced some degree of short term pain from this but for an incredibly incredible long term game that provides significant runway for our chicken business for years to come.
Speaker Change: These capex investments are incredibly important given the commodity pressures, we're seeing today from jumbo chicken breast that were on the market for $1 16, a pass on them in January to a recent high of over $2 a pound chicken prices are historically high while not as extreme as chicken beef prices are seeing continued upward pressure as well.
Speaker Change: We have been incredibly proactive and aggressive in addressing these trends through the accor mentioned capex investments and successful pricing actions across the board, which will help us to weather the worst of the storm as stated earlier the intensive construction efforts in farmingdale during the quarter had an impact of about 500.
Speaker Change: <unk> points on our gross margin.
Speaker Change: While we may be fairly differentiated in our ability to maintain margin strength in this commodity cost environment. Our retail partners are well aware of these pressures have an understanding of what is needed to combat these industry wide headwinds together.
Speaker Change: As we continue to improve and build on our four CS I'm incredibly proud of our team's accomplishments and believe we are only at the beginning of our journey.
Speaker Change: In 2023, we built the foundation of a more resilient and flexible organization and now in 2024, we're using this foundation as the launch pad for purposeful and profitable growth to help create sustainable long term value for our fellow shareholders.
Anthony Gruber: With that I'd like to turn the call over to Anthony Gruber, Our Chief Financial Officer to walk us through some key financial data details for the second quarter of fiscal 'twenty five Anthony.
Adam: Thank you Adam.
Anthony Gruber: Revenue for the second quarter of fiscal 2025 increased 14% to $28 4 million as compared to $24 8 million in the same year ago quarter.
Speaker Change: The increase was largely attributable to successful pricing actions as well as volume gains driven by increased demand successful trade promotions same customer cross selling these new items and new customer door expansion.
Speaker Change: Gross profit totaled $6 9 million or 24, 2% of total revenues in the second quarter of fiscal 2025.
Speaker Change: As compared to $7 5 million were 33% of total revenues in the same year ago quarter.
Speaker Change: And gross margin was primarily attributable to significant commodity cost increases from historical averages as well as nonrecurring impact on construction surrounding the now mostly completed installation of strategic Capex projects, which management estimates negatively impacted corporate growth.
Speaker Change: Margins by approximately 500 basis points.
Speaker Change: Operating expenses were flat at $5 3 million in the second quarter of fiscal 2025, as compared to $5 2 million in the same year ago quarter.
As a percentage of sales operating expenses decreased to 18, 6% from 21, 1% in the same year ago quarter.
Speaker Change: Operating expenses as a percentage of sales decreased due to lower payroll expense insurance costs rational fees and freight expenses.
Speaker Change: Net income for the second quarter of fiscal 2025.
Speaker Change: $1 1 million or <unk> <unk> per diluted share as compared to net income of $1 7 million.
Speaker Change: <unk> per diluted share in the same year ago quarter.
Speaker Change: Second quarter net income totaled 4% of revenue as compared to 7%.
Speaker Change: AME year ago quarter.
Speaker Change: Adjusted EBITDA, a non-GAAP measure totaled $2 7 million for the second quarter of fiscal 2025 as compared to $3 million in the same year ago quarter.
Speaker Change: Cash and cash equivalents as of July 31, 2024 seven.
Speaker Change: $7 4 million as compared to $11 million as of January 31, 2024.
Speaker Change: The change in cash and cash equivalents was primarily driven by $3 5 million in capital investments and $2 million of debt Paydown.
Speaker Change: As of July 31, 2024, total debt stood at $6 $8 million.
Speaker Change: The cash forecast, coupled with our commercial lines of credit reduced debt and a stronger balance sheet is preparing as well for whatever inorganic opportunities proactively or reactively come our way.
Speaker Change: Looking ahead, we believe that our normalized gross margin profile not including major commodity fluctuations will continue to hover in the high 20% range.
Speaker Change: Our long term goal leveraging strategic capex investments procurement efficiencies and continuous operational improvements would be targeting margins really consistently maintained in the low 30% range, while right sizing our trade promotion investment from low single digit percent of revenue today closer to.
Speaker Change: Our goal of 10%.
Speaker Change: Turning to adjusted EBITDA, our long term goal is to achieve adjusted EBITDA margins in the teens percentage range.
Speaker Change: This completes my prepared comments.
Speaker Change: And before we begin our question and answer session I'd like to turn the call back to Adam for some closing remarks.
Adam: Thank you Anthony in summary, the key.
<unk> continued our cadence of purposeful and profitable growth.
Adam: Impacted by temporary construction related pressures that are now largely behind us as of the middle of the third quarter.
Speaker Change: Looking ahead, there is a compelling and growing opportunity in the deli space at grocery stores invest in grab and go food offerings to inch into retail restaurant territory and inflation pushes consumers towards alternatives.
Speaker Change: In the past two years, we have built the team and company to become an innovative prepared foods leader and what is currently a fragmented market.
We have several levers available to drive growth from new Skus and existing customers to new tier one customers and continued investments in marketing and trade promotion to increased velocities of our existing in store items.
Speaker Change: We also believe that supported by our strong balance sheet attractively priced M&A opportunities in the industry could enable us to become a consolidator in a fragmented prepared foods market and emerge as a leading one stop shop deli solution on a national scale.
Speaker Change: <unk> has only just begun and I look forward to speaking with you all in the year ahead.
Speaker Change: With that I'll turn it over to the operator to begin our question and answer session operator.
Speaker Change: Thank you well now be conducting a question and answer session.
Speaker Change: If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue.
Speaker Change: Okay.
For participants with speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.
Speaker Change: Okay.
Speaker Change: Thank you. Our first question is from Ryan Meyers with Lake Street Capital. Please proceed with your question.
Ryan Meyers: Hey, guys. Congrats on the nice quarter first question for me just wondering if you can speak to what you're thinking about for revenue growth rate for the full year, especially now that we brought on a large customer like Walmart I know last quarter, you communicate a double digit growth rate is kind of a target for the year, but any commentary on that would be helpful.
Brian: Yes, Thanks, Brian.
Speaker Change: Yeah, I think we're going to stick look I'm really proud of the team. The team is doing everything we told you what we're going to do and we did it.
Speaker Change: You know I'd like to stick to this double digit I don't know, what's going to happen I know theyre changing rates presidential debate Tonight I, just don't want to speak to where we are but I feel good with what we are committed to doing.
Speaker Change: And now.
Speaker Change: We keep doing that quarter after quarter, so I'll stick to the mid single digit mid sorry, the double digit number right now.
Speaker Change: Got it makes sense and then thinking about gross margin. So it sounds like there was a 500 basis point impact, which you don't surprisingly that's kind of a rebound quicker than I think what we were expecting.
Speaker Change: So outside of that the construction the construction impact is there any other headwinds that silverman.
Speaker Change: Acyclic asking you guys feel relatively confident you'll be at the high Twenty's and the second two quarters of the year.
Speaker Change: Yeah, no. Thank you and I really do appreciate you, saying that and I really want to give a shout out to the team in farmingdale the amount of construction.
Anthony: Is it is significant so I really appreciate Anthony right a whole team that are doing the work there I do believe they have done even better than we had planned.
Anthony: Really there's only two things that keep me up at night, the construction, which again I was just there last week, it's looking beautiful all four grilles are up and I'll be there tomorrow. So that's one and that's towards the end and then the second one is commodity prices no one would've expected I speak to anybody.
Anthony: That will listen to me or I will speak to anybody at all.
Anthony: That the chicken prices were just not going down if you look at these charts I don't know what's going on at.
It should be going down now hum.
Anthony: It does everyone's hoping it does but those are the only two things that keep me up at night, the construction pretty much all done now in the commodities that are unfortunately, I don't have as much control over I do say, sorry, I take that back one thing that the Farmingdale team is doing so well is yes commodities stink.
Anthony: And what we're doing is by bringing the trimming and tumbling ourselves that's massively blunted that so you guys can do your own math to see the massive commodity increase you don't see that by any stretch of imagination in our gross margin numbers and Thats, a testament to what the team's doing to manage efficiencies better.
Anthony: Overtime is down labor is down, bringing the trimming and tumbling, it's it's really pretty cool. So I appreciate you, bringing it up.
Anthony: But yeah, that's where we are.
Speaker Change: Got it that makes sense to me thanks for taking my questions.
Speaker Change: Absolutely. Thank you.
Speaker Change: Okay.
Speaker Change: Thank you. Our next question is from Eric Laurie here with Craig Hallum Capital Group. Please proceed with your question.
Eric Laurie: Great. Thank you for taking my questions and congrats again.
Eric Laurie: On the new hires it's happened in the great news around Walmart and Costco.
Speaker Change: Super Bowl <unk>.
Speaker Change: Question here.
Eric Laurie: So you mentioned that once you get into new doors, you seem to always get request for new items and we've certainly seen that over recent quarters. Here. My question is how long does it typically take for customers to request new items as this sort of a three to six month thing or 12 to 18 month kind of any any help you can give us there.
Eric Laurie: It's it's incredible I would tell you I swear to God Ah Tony out West is doing an amazing job opening up our west Coast operations, you see that in just the sheer volume that is going out west we just got into a new customer.
Eric Laurie: Just a week or two ago and they've already added two items I swear to God.
Eric Laurie: They haven't even received the first item that we gave them. So yes, it could take forever equally I swear.
Just got two new items into a customer that they haven't even received the first item and that wasn't even plant. So I'm not sure. You know we don't know the thing is we're ready right. That's why we have the capacity. That's why we have the agility just what we're able to accomplish.
Eric Laurie: Yeah, what we're able to accomplish in east Rutherford with Eric leading the charge. There. It is the agility choline is just awesome. So I'm really proud of the team and.
Eric Laurie: If if you the customer needs. It we will have it on the truck for you.
Speaker Change: S E T.
Speaker Change: Oh, that's great to hear.
Speaker Change: Just one quick one on the on the construction. So you mentioned that it's largely behind them could you just comment on sort of what what does remain.
Sure.
Willing to and estimate on perhaps how much longer that construction may take.
Again, it's mostly completed now now it's the fine tuning I mean, it's literally that's a great I'd just say that it's literally to fine tuning of the grille. So the girls are working the grilles are producing chicken right now are they producing the same hundred percent that are two other rails are doing right now no they're not at that level, yet so it's the fine tuning.
Speaker Change: That takes a little bit of time, but again, we're talking about days and weeks nothing more than that and the hard sort of quote unquote scary stuff up will the grille actually show up or will we get you know the town approvals that is 100% passed US now now it's just a fine tuning.
Speaker Change: Okay.
Speaker Change: That's great to hear.
Last question from me here, just a comment on.
Speaker Change: How C store penetration is progressing and then Relatedly just any comments on how the in a cup offerings are trending as well. Thank you.
Yeah. The the cups continue to do nicely not not crazy, but continue to get momentum. We just saw if you guys are in the northeast stop and shop just took it out.
Speaker Change: Not our original intention, but it's great that they have them and theyre actually doing well so I'm happy with the cops again, the cops are still more of a C store thing.
Speaker Change: C store, it's been a little slower than I would've liked I'll tell you. So we had some personnel transitions I feel really good with where we are now I feel even better with where we are right now but that is held us back a little bit with the C store work. So what's important is the C store was sort of gravy on our.
Speaker Change: Internal plans. So it was a small one 2%. So yes, we want it we will absolutely get it but it's slower than we originally planned and since it's a very small percentage of our business. It won't have a biggest impact on our annual.
Speaker Change: Well it makes sense congrats again, thanks guys.
Speaker Change: Thanks, Sir.
Speaker Change: Okay.
Speaker Change: Thank you. Our next question is from George Kelly with Roth Capital Partners. Please proceed with your question.
George Kelly: Hey, everybody thanks for taking my questions.
George Kelly: So a few for you first.
George Kelly: You're 14, 5% growth in the quarter I'm curious how much of that was pricing and what are your plans.
Speaker Change: With respect to pricing in the back half of the year.
Speaker Change: Thanks George.
Speaker Change: Pricing was so more than Oh about 80% of our grow that revenue growth is all volume driven it's incredible I don't think I've ever been in a company that so much of our growth is actually volume driven we have been taking pricing, we have been getting that and yeah.
Let's call it the 20%.
A little bit of me wishes, we could do a little more 80 percentage a very impressive volume growth.
Speaker Change: But that's roughly where they are.
Speaker Change: 14%.
Speaker Change: I don't expect I'm, I'm happy with where the pricing that we've done is.
Speaker Change: If commodities could come down if the chicken could come down.
Good I have no we have no need obviously you guys. All read the same papers I do I think it's getting harder and harder to take price. So we were very intentional about that we knew that I've done this once or 200 times in my lifetime. So we wanted to be some of the first to do it and we did a whole bunch of it in January February March time frame I think it's gonna be a lot harder going in the back half of the year.
Speaker Change: But I equally as long as chicken.
Speaker Change: Stopped going up which it has it's plateaued if he could start coming down I don't foresee us needing to take price now that said, there's still a you know the pricing that we took in the beginning of the year wasn't in the back of the year. So we'll get the benefit of that pricing for the next 12 months, but I don't expect to have to take more pricing as well as chicken.
Speaker Change: Comes down.
Speaker Change: Okay understood that's helpful.
Speaker Change: Then next question on your trade spend.
Speaker Change: <unk>.
Speaker Change: I understand that dynamic.
Speaker Change: Its youre waiting for your gross margin to rebound and it sounds like there's still going to be a bit of pressure from construction in <unk>. So is it fair to say that you know the real ramp then in trade spend we should probably wait until calendar year 'twenty five.
Speaker Change: Or do you anticipate I mean.
Speaker Change: Sure.
Speaker Change: Still an opportunity this year to start to push on that more and then the second question is are you seeing anything.
Speaker Change: With the spend that you have committed thus far are you seeing the returns that you hoped for.
Yeah, absolutely great questions.
Speaker Change: While slightly disappointed you're probably right I think youre not going to see the aspirations that I have of 10% trade youre not going to see this year by any stretch of imagination.
Speaker Change: So I think youre going to see the ramp up more in the beginning of next year, you'll probably right now that said one thing that's just incredible about having the trade of talent here is <unk>.
Speaker Change: You'd be surprised on how many programs we got for free.
Speaker Change: So you know there's a lot of folks that would tell you having branded items only as like the right answer remember, we have a mix of branded and private label well the magic of private label is people invest the the retailers invest for us without any cost to us. So we have seen tremendous I would tell you a lot of the first half.
Speaker Change: Of the year growth.
Speaker Change: Lot of it has to do with just great velocities growths from end caps I told you about some of the club customers, what you're seeing us doing in Costco right. Now is it's just silly shout out to Scott for getting that done.
One youre seeing amazing stuff at Costco.
Speaker Change: A lot of the stuff that we're getting is is as free trade for lack of a better word. So yes, I want to keep investing in trade what's more important to me you guys know I'm. The the margin Guy. So I have been pulling back holding back and I'm not going to be putting a huge amount of money on trade. If we don't have the gross margin to support it.
Speaker Change: See I think what you you said there is right.
Speaker Change: The returns that we've seen are just awesome, even you know I mentioned earlier Lauren with some of our online some of our digital programming, we're seeing ROE as is in the three.
Speaker Change: Five actually one of our big customers are over $6 Rollouts. So you give them a dollar they give you six plus dollars back that's awesome. So we are very well.
What gets measured gets improved is even more in the trade area I see the returns on every single trade program. We do Theres. Some is that something that we repeat and I'm equally happy to find out things that don't work because that's not on our list for next year. So we are measuring that all the time okay.
Speaker Change: Okay, and then two two last quick ones what products are launching at Walmart.
Speaker Change: And what are you seeing with respect to M&A.
And that's all I had thanks for taking my questions.
Speaker Change: Yes, so the Walmart products are proteins I'm going to hold off on that until so it's gonna be end market next month. So I promise you guys will see yet M&A, it's something that we continue to focus on we have been actually Andy and I have our our list. It's a it's a growing list of potential targets Anthony.
Alan: Alan I mean on the number of M D. As we after you sign but.
Anthony: It's good I like to see what we have.
Anthony: I will tell you I have been spending more time than I would've expected on all the construction related stuff in the commodity stuff. It is incredible to have skip here I'm. So excited to have him as part of the team skips here, yes to continue to enhance the two facilities, we have today, but we absolutely high.
Skip: <unk> skip because we're going to have five more facilities all over the country.
Anthony: And.
Speaker Change: My wife says they have to be home every once in a while so having skip here is going to really help a lot, but I'm I'm happy with the M&A pipeline.
Speaker Change: Little slower than I would've liked because focusing on internal stuff, but it is still absolutely 50% of our strategy.
Speaker Change: Okay. Thank you.
George Kelly: Thanks George.
George Kelly: Yeah.
Speaker Change: Thank you. Our next question is from Anthony Vendetti with Maxim. Please proceed with your question.
Anthony Vendetti: Hi, Yeah. This is an insurance speaking for Anthony Yeah. Good evening gentlemen, congrats on the quarter.
Speaker Change: I just want my first question is how are you working with Walmart to promote the activation of new Skus.
Speaker Change: Yeah, So again I don't want to share too much but it's a combination of in store and actually outside digital stuff. So I just mentioned some of the stuff that Lauren is doing now I could tell you on some of the Costco stuff, we're doing geo targeting as people are either in the stores.
Speaker Change: Or are in the proximity to the stores.
Speaker Change: I spoke about the QR codes that we're using so you know you should expect similar type things on the.
Speaker Change: The Walmart lunch.
Understood.
Speaker Change: Go into any of the philosophy that went behind which stores were selected you know 2000 and about half of Walmart stores was it were you targeting specific regions, where your products are already popular or was it more on their side of which stores were chosen.
Speaker Change: So it's a combination.
Speaker Change: No again margin management.
Speaker Change: We wanted to focus we wanted to concentrate in particular D. C is right. If you have you know.
Speaker Change: Five items in every single D C around the world, that's definitely less efficient than being concentrated so it was a combination it was a partnership with a with Walmart on that.
Speaker Change: Okay and then my last question is do you know how many additional stores you're in and Costco with the your first national Bye.
Speaker Change: It's just some detail on if you expect any more of your products to be part of that national by program.
Speaker Change: Yeah, I mean cosco has to be I know everyone is very excited about Walmart as we are I would tell you that Costco is even cooler and just the spectrum of things that we're winning and we have just an incredible partnership with Cosco. So if you think about it first.
Speaker Change: More the most of this is now the most regions we never bidding.
Speaker Change: Six regions were in Texas, as we speak everybody that's in Texas right now it should be able to get our our three pounds.
Speaker Change: Have you seen in that region ever in the history of the company. So the number of regions is incredible. The second thing is the number of items. So I mentioned to you. So the road show that we did 12 months ago at.
Speaker Change: All expectations I personally had I'll speak for myself. So we got the source and we got the national buy so the actual number of items you know before this team. This team of ours today, we only sold meatballs now we have soft sausage and peppers I think that you guys are going to be really happy with additional.
Speaker Change: Stuff that is going to come out immediately and our partnership with Cosco. So the number of items is just magnificent and then just the volume the size I mean, its national by Us.
Speaker Change: Seriously legit relative to anything we've done in the past so I love. The fact that it's all of these different elements together, it's not just we have one product and it's doing really well we have multiple products. It's not that we just have one region. That's doing really well we have multiple reasons. That's what I think is so it's.
Speaker Change: A broad based which I think is very important.
Speaker Change: So then you expect that national Bye.
Speaker Change: Kind of began affecting the topline with the back to school resets or is that something that's mostly in the mostly in Q4. So Q remember you know what our Q4 is in November.
Speaker Change: That's where it's some of it's now like I. Just told you. If you walked into a I think it's actually in our north Kao as we speak it's actually in L. A as we speak I think it's in the Midwest as we speak it's in Texas as we speak.
Speaker Change: But the bigger ones southeast northeast those happen in AR in Q4.
Speaker Change: Okay. Thank you those are all my questions.
Speaker Change: Great. Thank you.
Speaker Change: Yeah.
Speaker Change: This concludes our question and answer session I will now hand, the call back to the chairman and CEO, Adam Al Michaels for his closing remarks.
Speaker Change: 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 our fellow shareholders and execute upon our vision of becoming a national one stop shop Deli solutions provider.
Speaker Change: Ladies and gentlemen, this does conclude today's conference. Thank you for your participation you may now disconnect. Your lines at this time and have a wonderful day.
Speaker Change: Okay.
Speaker Change: Okay.