Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to Mama's Creations' Second Quarter Fiscal 2024 Earnings Conference Call. [Operator Instructions]. This conference is being recorded today, September 12, 2023, and an 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'd like to 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 or 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 other -- any major litigation regarding the company. In addition, throughout today's call, the company may refer to adjusted EBITDA on non-GAAP financial measures, 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 floor over to Chairman and CEO, Adam L. Michaels. Adam, the floor is yours.

Thank you, operator, and thank you to everyone for joining us today. I'd like to welcome you to our second quarter fiscal '24 financial results conference call. I am pleased to announce another very strong quarter. This time, highlighted by 8.5% revenue growth and the expansion of our gross margin profile into the 30% range. As we build the foundation for robust revenue growth in the second half, this margin enhancement ensures we are well positioned to grow profitably to make the most of each sale. In the 1 short year since I joined the company, our team has worked together to drive a significant turnaround in the business, improving profitability from a net loss a year ago to the robust 7% net income margins we saw this quarter. This does not happen by chance. We developed a plan and executed that plan to realize improvement firm-wide, and our sustained margin enhancement is the result of doing countless small things right. Looking ahead, we see opportunities for even further improvement. Just last month, our team shared with our Board and received approval for the most transformational capital investment request in the company's history, all funded from cash flow from operations. These strategic investments in automation and in-sourcing, value-added capabilities have the potential to meaningfully enhance our margin profile almost immediately, allowing us to reinvest that margin as rocket fuel for growth. As I have often said, it is better to ride a wave than fight against it. We completely support the view well documented in the current industry press that more than ever, consumers' and retailers' desire for fresh, clean and easy-to-prepare meals has never been stronger. It is important to remind ourselves that grocery store prepared meals are not a new habit we have to create. More than 8…

Thank you, Adam. Revenue for the second quarter of fiscal 2024 increased 8.5% to $24.8 million as compared to $22.9 million in the same year ago quarter. The increase was largely attributable to strong organic volume growth, driven by new customers and successful cross-selling efforts into existing customers, which increased our weighted average items carried metric by more than a full point versus prior year to over 7 items carried in the second quarter. Gross profit increased 175% to $7.5 million or 30.3% of total revenues in the second fiscal quarter of 2024 as compared to $2.7 million or 11.9% of total revenues in the same year-ago quarter. The increase in gross margin was primarily attributable to the normalization of commodity costs, successful pricing actions and improvements in operational efficiencies across the organization. The company continues to identify procurement, manufacturing and logistics efficiencies and cost savings through strong buying power created through the acquisition of T&L Creative Salads, Olive Branch and most recently, Chef Inspirational Foods. Operating expenses totaled $5.2 million in the second quarter of fiscal 2024 as compared to $3.6 million in the same year ago quarter. As a percentage of sales, operating expenses increased in the second quarter of fiscal 2024 to 21.1% from 15.6%. 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. Net income for the second quarter of fiscal 2024 increased 335% to $1.7 million or $0.05 per diluted share as compared to a net loss of $0.7 million or $0.02 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 857% to $2.9 million…

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 to reinvest that rocket fuel into the business. In addition, we will continue to leverage our enhanced people capabilities, our CapEx efficiency and our marketing and trade to accelerate our aspiration to be the premier one-stop shop deli solution. To summarize, this will be achieved by launching highly incremental products to further increase the SKUs per customer, introducing our products to new customers via our supercharged sales team, put in place high ROI trade and marketing programs to accelerate existing product velocities and further enhancing our margins through continuous operational improvements at every level of the organization. We believe that this approach will not only position Mama's Creations as the one-stop shop deli solution provider to 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?

Thank you. Ladies and gentlemen, at this time, we'll be conducting a question-and-answer session. [Operator Instructions]. Our first question comes from the line of Eric Des Lauriers, Craig-Hallum Capital Group.

Congrats on the very impressive quarter here. I guess specifically, I've been impressed by the success you guys have had so far in increasing those SKUs per store. Obviously, that's kind of a key part of this one-stop shop vision. So this quarter, more than 1 full point to over 7%. I'm just wondering if you could help us understand where you think this number can go? However you want to take that, whether that's sort of opportunity over the next year or 2 or even just as part of this broader one-stop shop vision, what does that opportunity look like for the company?

[indiscernible] opportunity from an AIC, an average items carried, we started at 5%. We've been together now less than a year, we're up to 7%. I think we could do a lot more. Just think about, the secret is the fact that we have the full spectrum. So we have the proteins. We have beef meatballs, meat loaf. Sausage and pepper is great. You don't like the beef, we got chicken. We got Balsamic chicken, we got chicken strips, shredded chicken. You don't like meat at all. We have salads, green salads. We have grain salads whether it be Mediterranean Farro, Israeli Couscous. You don't like any of the [indiscernible], we have sandwiches. You like paninis, I got tons of paninis. You don't like that, I have wraps. We have olives. So sincerely, I think I just named 6 or 7, I gave you 3, 7 times 3 is 21, and I promise you, every single 1 of those items, we're selling today. So it's -- we don't even have to innovate we have the offering. So what we see is beautiful. I've mentioned to you, we've done a great job at BJ's. Literally, when I started, we had like 1 item. Now, we have 10 items. We got 4 new items into Weis, 5 new items into Hannaford's, 4 new items into Acme. I mean I could go on. What's happening is they realize now we have these offerings, and our sales team is doing a great job, already has great relationships with these customers. Now it's just easier for them. So as a buyer, I could either have to deal with 25 different people. That means 25 trucks coming in every day, 25 accounts receivables and making sure they're sending the invoice right or I could call Mama's Creations and whether I want a protein, a salad, a sandwich, olives, it's 1 invoice. It's 1 truck coming. It legitimately just makes their life easier. And that's where we're seeing it, and it's working. Every day, it's working because just a reminder, I think the 7 almost understates it, that's a weighted average. So when you get a new item in, a new customer, they usually start small. So that's going to temper that number. As it goes up, as time goes on, they keep adding to that portfolio. So I feel great that I gave you 21 and I could go higher than that.

Yes. No, that's very impressive and great color. I appreciate that. My next question is kind of on margins and the new hires that you guys have done. So nice margin improvement year-over-year despite making those several new key hires. I'm just wondering if you could help us understand your hiring needs for the leadership team over the next year or so. Any more key roles to fill that we should be aware of? And then just kind of overall, I would love to hear your view on sort of how we should expect operating leverage to play out going forward?

Yes. I think we're most of the way there. I mean I'm really proud, and hopefully, you guys see -- believe me, our HR team is pretty tired. We brought in a lot of great folks and filled a lot of capability gaps that we had. I think that's going to slow down considerably. With the gun to my head right now, I think that there's -- I can only think of we talk about 2 or 3 more people with specific capabilities. I've mentioned earlier, I'm really excited about e-commerce, bringing someone dedicated like that. I think that there's opportunities for -- with our in-the-cups offering, and I told you that convenience is a big focus for us. I'd love to get a dedicated convenience channel person. So hopefully, what you're seeing is, first of all, they're almost all exclusively sales, right? It's going to drive revenue. But now you're at the onesies and twosies. So I think what we're at now is we have the capabilities we need and now it's about driving more and more revenue to offset the increased capabilities that we have. So yes, it's all about absorption, right?

Our next question comes from the line of Ryan Meyers with Lake Street Capital Markets.

Nice work on the quarter. Just wondering if you can talk a little bit about your level of confidence with the revenue acceleration in the second half of the year? And how much visibility you have there?

Yes. Thanks, Ryan. We feel good. So first of all, let's be clear. We're bringing -- these folks have just come on. You got to find out where the bathroom is on the first day and then their log in. So I don't see it happening immediately, but we already have great stuff. So I think the combination of -- had a very successful IDDBA in June. We're already seeing those new orders coming in. It's great to see -- we've been working on a number of other businesses that we've been cultivating. I feel good. I feel good with where we are. But again, tempered, it's going to take time. So the way we look at it is roughly, you can look at the deli, deli is growing in the mid-single digits, and we expect very much to be gaining market share. That is our goal. That is what we're looking at every month and every quarter. We've done that every single month that we've been together, every single quarter we've been together, and I expect that to continue. So the way I look at it is continue to gain market share in the deli and deli prepared space.

Got it. That's helpful. And then, obviously, really strong gross margin during the quarter around 30% or so. So how should we think about that in the second half of the year? I mean, is that 30% the new baseline? I know you talked a little bit about it coming into kind of the high 20s. But where do we kind of come down from that 30%? Or how should we think about that in the second half of the year?

Yes. I still want to stick to the high 20% number. I'm all for underpromising and overdelivering. One thing that I've been very clear on is I want to continue to invest. So I definitely want to be in this high 20s. If there is more margin to be had, that gives us more opportunity to drive our marketing agenda, that gives us more margin to drive trade promotion, how do you drive more trial. So one thing that you've heard me say before, and you see all the surveys that are done. If I could get it into consumers' mouths, they recommend it to their friends and they keep buying it. So I am very passionate about taking this additional margin and reinvesting to drive more trial. It's really exciting now with our new Head of Trade Strategy, Marketing. We're actually getting into more marketing and trade programs with our most strategic customers. So we're having a blast really working with the Ahold and Albertsons and Sam's Clubs of the world to see public is wise. I mean, I can go on forever, how we could accelerate our growth. So now that we have the margins, now we can reinvest it. So it's not about how high can I go with the margins, it's how do I use that margin dollars to supercharge the top line. That's where we're focused on.

Our next question comes from the line of Howard Halpern with Taglich Brothers.

Congratulations. Great quarter with great momentum. And you've talked about, I guess, the efficiencies, but -- is there -- do you still have room to take a little bit of price if you wanted to? Or as you increase the number of SKUs in your -- on your customer shelves? Is there a possibility of a little more price taking?

Yes. What I think is wonderful, and the whole team does an amazing job, and you've heard me say this before, we are so vigilant. We are tracking our like invoice level profitability, SKU level profitability literally on a weekly basis, sometimes on a daily basis. So we are seeing and watching both the pricing side of it, but then also every single day, we're getting on what's happening with commodities, chicken and beef, such that we are just incredibly reactive and agile if that is required. I think that what's great is we have tremendous relationships with our customers, long-standing relationships with our customers, and they see the same things we do, and we share that information. So first of all, I feel great that where we've priced, we've built in additional. So we don't -- every price -- every change in commodities, we don't have to immediately react because we've already kind of factored some of that in. But if it is required, yes. Recently, we had to move on 2 particular items, and we got it in. We have a great sales team that is just very close with the customer. They see where we are. I've told you before quite honestly, probably last year and even the beginning of this year, we almost didn't even keep up with full food and beverage inflation. So customers see us as -- there's still room for us, if needed. But I think the combination, and it's really important, yes, there is the pricing element to it [indiscernible] every single day of the week. But the other thing that Matt and Anthony are doing an incredible job on is managing our operations. And hopefully, you're seeing, every day we're getting them better at freight, at procurement, at labor. So yes, I got the pricing opportunity, but also every day, I'm getting more and more efficient that I'm doing, which gives me more flexibility because I don't have to constantly go back, not to the customer, but to the end consumer. I don't want to raise prices too high that the end consumer has to make trade-offs. So it's great. It's really the gift of getting the best of both worlds, price and operational efficiency.

Okay. And in terms of your sales team and your existing customers, are you -- are they targeting some of your customers that are increasing their, I guess, real estate within the deli department? And is that a focus and a push for you guys?

So the question is, are our customers -- so our customers are actually expanding. It's one of the things that was wonderful. Our customers are actually expanding their shelf space. So what they have to do is they have to go to their trusted manufacturers and say, "Guys, I have more room, do you have anything else for us." And that's what opens the door for us to, yes, we have originally maybe the sausage and peppers, and we might have some of the grilled chicken. Hey, but have you tried our new Korean meatballs, Korean-style meatballs? Or have you tried the General Tso's Chicken? Or have you tried this new? I'm really -- we're doing really well now with our Paninis. So they're actually -- they need more stuff. Remember, I mentioned 2/3 of customers said that they're going to be expanding their prepared food space, right? They need us. And we have shown both quality and service that we're the right guys to give the additional business to.

Okay. And one last one, is the CapEx or the increase in CapEx spending going to start in the second half of this year and throughout next year? Or is it going to start next fiscal year?

It's kind of started yesterday, Howard. We are so excited about the investments that we're making for our business. We've actually already ordered a whole bunch of stuff. We are well on our way with that because it's just going to drive and like I mentioned, just immediate margin improvement. There is so much opportunity for us in not just capacity expansion because we're doing so well, but for actual margin and automation to actually improve our margins. So we have the footprint, which is great. And yes, I hope to see it. We're already -- literally, we're already doing it and planning for it.

That concludes our question-and-answer session. I'd like to hand it back to Chairman and CEO, Adam Michaels. Please conclude.

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 solution provider. Thank you.

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