Executive Summary / Key Takeaways

• Mama's Creations is transforming from a regional meatball company into a national one-stop-shop deli solutions provider, leveraging strategic acquisitions and a focused "four C's" strategy (Cost, Controls, Culture, Catapult).
• Recent performance highlights include robust Q1 Fiscal 2026 revenue growth of 18% year-over-year, driven overwhelmingly by volume, and a return to target gross margins of 26.1%, enabled by operational efficiencies and CapEx benefits despite commodity headwinds.
• Key operational and technological advancements, such as doubled chicken capacity, in-house trimming/tumbling, a new WMS, and S&OP implementation, are foundational to margin expansion and support increased investment in growth initiatives.
• The "Catapult" strategy is yielding significant results through new customer wins (Walmart (WMT), Costco (COST) national programs, Lidl, Amazon Fresh, Sheetz), product expansions, and intensified, high-ROI trade promotion (6% of gross revenue in Q1 FY2026, targeting 10%).
• A strengthened balance sheet with rising cash reserves ($12.0M in Q1 FY2026) and reduced debt positions the company for potential strategic M&A, which remains a key part of the long-term vision to consolidate the fragmented deli market.

Setting the Scene: A Deli Powerhouse in the Making

Mama's Creations, Inc. (NASDAQ:MAMA) is rapidly evolving within the dynamic landscape of the prepared refrigerated foods market. What began as a marketer and manufacturer primarily focused on Italian-style meatballs and sauces has strategically expanded its portfolio through acquisitions and organic development to become a diversified provider of ready-to-serve meals, packaged proteins, salads, and more. The company's stated vision is clear: to become a national one-stop-shop deli solutions platform, leveraging vertical integration and a diverse family of brands including MamaMancinis, Creative Salads, and Olive Branch.

This transformation is occurring against a backdrop of significant shifts in consumer behavior. Rising restaurant prices and menu fatigue are driving consumers back to the grocery store, seeking value, convenience, and quality in the deli aisle. This trend is underscored by CPI data showing a nearly twofold disparity between at-home and away-from-home inflation, with grocery inflation notably lower. Data indicates that over two-thirds of shoppers are purchasing deli prepared meals, with millennials and Gen Z particularly driving growth. Retailers, facing their own labor challenges, are increasingly looking for turnkey, high-quality prepared food solutions to expand their offerings and capture this growing demand. The deli prepared market is growing at over 5% annually, and Mama's Creations has consistently outpaced this, growing around three times faster, methodically gaining market share.

The company's strategic response to this opportunity is encapsulated in its "four C's" framework: Cost, Controls, Culture, and Catapult. This strategy, initiated under the current leadership, began by rebuilding the foundational elements of the business (Cost, Controls, Culture) to enable accelerated growth (Catapult).

Competitive Positioning in a Fragmented Market

The prepared refrigerated foods market is competitive, featuring a mix of large, diversified food conglomerates and smaller, specialized players. Mama's Creations competes directly and indirectly with companies like Conagra Brands (CAG), Tyson Foods (TSN), Hormel Foods (HRL), and Kraft Heinz (KHC), among others. While precise, directly comparable market share figures for all niche competitors are not publicly detailed, Mama's holds an estimated 2-5% aggregate market share in the U.S. prepared refrigerated foods market, but its growth trajectory of 10-15% year-over-year significantly outpaces the industry average and many larger peers like CAG (5-7%) and KHC (2-4%).

Mama's differentiates itself through its focus on "grandma quality," clean ingredients, and a value-oriented offering that resonates with consumers trading down from restaurants. Its strategic positioning as a one-stop-shop provider, offering a broad range of deli solutions, aims to make it an indispensable partner for retailers seeking to simplify their sourcing.

Compared to larger competitors, Mama's benefits from greater agility and a focused approach to the deli segment. Its in-house operational efficiencies, such as streamlined production and procurement, can lead to lower operating costs per unit in specific product categories compared to some peers. For instance, its in-house trimming processes contribute to cost advantages in chicken products compared to vertically integrated players like Tyson Foods, which may have lower raw material costs but different operational structures. However, larger competitors benefit from superior economies of scale, broader distribution networks, and often greater financial resources for extensive marketing and R&A. Kraft Heinz, for example, boasts higher operating margins (15-18%) and ROE (12-14%) than Mama's (operating margins around 8-10%, ROE around 6-8%), indicating stronger overall financial health and cash flow generation. Hormel's strong brand loyalty and international reach also present competitive factors.

Mama's strategic response involves leveraging its differentiated product quality and service levels to build strong retailer partnerships, utilizing targeted trade promotions and digital marketing to drive velocity, and pursuing M&A to gain scale and expand capabilities, directly addressing the competitive pressures from larger, more resourced players.

Technological and Operational Foundation for Growth

Central to Mama's strategy and competitive differentiation are its ongoing investments in operational efficiency and technology. The company has made significant capital expenditures to enhance its production capabilities, particularly at its Farmingdale facility.

A key operational advancement is the installation of new grill lines, which has more than doubled the company's chicken capacity. This expansion is not merely about volume; it's designed to drive higher labor efficiencies by reducing reliance on extensive overtime and enabling steady production across a more efficient five-day work week. Furthermore, the company has brought previously outsourced services in-house, notably chicken trimming and tumbling. This allows Mama's to purchase the entire chicken breast, which is often more readily available and can be sourced from a wider pool of suppliers, enhancing procurement flexibility and potentially lowering costs. The in-house trimming processes are already outperforming initial targets, running 35% ahead of plan, while new tumbling procedures have increased yields by roughly 10%. Management expects in-house trimming to support over half of the company's chicken needs by mid-fiscal year 2026, a significant increase from a small fraction previously. This operational shift has the potential to lower chicken costs by close to a full dollar per pound, providing a substantial boost to margins, especially in a volatile commodity environment.

Beyond production, Mama's has implemented a warehouse management system (WMS) at its Farmingdale facility, with plans to replicate it at East Rutherford. This system provides real-time visibility into inventory, improving accuracy, minimizing waste, and unlocking valuable working capital. The company is also rolling out Sales and Operations Planning (S&OP) in Q2 Fiscal 2026 to better align demand and supply, optimizing production planning for further efficiency gains, higher quality, and improved service levels to customers.

Quality control is another area of focus, with the addition of X-ray technology to existing metal detection and the installation of cutting-edge PCR testing. These investments reinforce the company's "grandma quality" promise and raise the bar on food safety, contributing to strong audit scores (e.g., Costco 99.8%, SQF 98% and 97%) that are critical for maintaining and expanding retailer relationships.

For investors, these technological and operational improvements are not just technical details; they are fundamental drivers of the investment thesis. They enhance the company's competitive moat by improving cost structure, increasing production flexibility, ensuring product quality, and strengthening supply chain resilience. These efficiencies directly contribute to margin expansion and free up capital and profitability that can be reinvested into growth initiatives, such as increased trade promotion and potential M&A.

Recent Financial Performance: Momentum Builds

Mama's Creations has demonstrated strong financial momentum, particularly in its most recent quarter. For the three months ended April 30, 2025 (Q1 Fiscal 2026), the company reported net sales of $35.3 million, an impressive 18% increase compared to $29.8 million in the same period last year. This growth was predominantly volume-driven, with over 90% attributable to increased unit sales, reflecting strong underlying demand and successful market penetration. This follows robust growth in prior quarters, including a 25.7% increase in Q4 Fiscal 2025 and a 19.4% increase for the full Fiscal Year 2025.

Gross profit for Q1 Fiscal 2026 increased 23.1% to $9.2 million, resulting in a gross profit margin of 26.1%. This marks a return to the company's near-term target range and represents a significant improvement from the 25.0% margin in Q1 Fiscal 2025 and the temporarily impacted margins in Q3 (22.6%) and Q2 (24.2%) Fiscal 2025, which were affected by construction related to CapEx projects and commodity price pressures. The margin recovery in Q1 Fiscal 2026 is a direct result of the operational efficiencies gained from strategic CapEx investments, procurement improvements (including fixed-price protein contracts covering over half of anticipated volume for FY2026), and process optimizations like in-house trimming, despite continued elevated commodity prices. Operating expenses for Q1 Fiscal 2026 totaled $7.6 million, or 21.6% of net sales, down from 22.4% in the prior year period. This decrease as a percentage of sales reflects improved operating leverage, partially offset by strategic investments in marketing (up 71% year-over-year) and new hires aimed at driving future growth. Income from operations for the quarter was $1.6 million, leading to net income of $1.2 million, a substantial 123% increase from $0.6 million in Q1 Fiscal 2025. Adjusted EBITDA also saw healthy growth, increasing 12% to $2.8 million.

The company's geographic revenue distribution highlights its successful expansion beyond its Northeast origins. While the Northeast still contributes significantly ($9.9M in Q1 FY2026 gross revenue), the Southeast ($8.5M), Midwest ($9.3M), and West ($9.8M) regions now represent substantial and growing portions of the business. By Q3 Fiscal 2025, over 47% of sales were west of the Ohio River, demonstrating the effectiveness of the national expansion strategy.

Liquidity and Balance Sheet Strength

Mama's Creations has significantly strengthened its financial position, providing a solid foundation for future growth initiatives, including potential M&A. As of April 30, 2025, cash and cash equivalents stood at $12.0 million, a substantial increase from $7.2 million at the end of Fiscal Year 2025.

This increase was primarily driven by robust cash flow from operations, which totaled $6.0 million for the three months ended April 30, 2025. This strong operating cash flow reflects improved profitability and effective working capital management, including optimization of accounts receivable and inventory. Net cash used in investing activities was modest at $0.5 million, primarily for ongoing machinery and equipment purchases, indicating that the major CapEx cycle related to the Farmingdale facility expansion is largely complete. Net cash used in financing activities was $0.6 million, mainly for scheduled payments on the Term Loan and finance leases.

Total debt has decreased to $4.6 million as of April 30, 2025, down from $8.3 million a year prior. This includes a Term Loan balance of approximately $2.4 million and other obligations. The company also maintains a $5.5 million working capital line of credit with MT Bank (MTB), which had no outstanding balance as of April 30, 2025, providing additional financial flexibility. While there are upcoming obligations, including a $750 thousand promissory note payment in December 2025 and a $1.5 million common stock payment related to the CIF acquisition in June 2025, management believes its current cash resources and projected operating cash flows are sufficient to meet its cash requirements for at least the next twelve months.

The fortified balance sheet, characterized by increasing cash reserves and reduced debt, is a critical enabler of the company's strategic objectives. It provides the financial capacity to pursue potential strategic acquisitions without relying heavily on external financing, while also supporting continued organic investments in operations, technology, and market expansion.

Outlook and Growth Catalysts

Management remains confident in the company's ability to sustain double-digit revenue growth. This outlook is underpinned by several key catalysts and strategic initiatives designed to drive continued expansion.

The "Catapult" strategy, focused on accelerating growth through increased market investment, is already yielding tangible results. The company is securing exciting new distribution wins, adding new customer accounts and product placements at major national retailers. Recent successes include new chicken items sold into existing customers like Albertsons (ACI), BJ's (BJ), Costco, and Publix, as well as initial entry into significant new customers such as Lidl, Amazon Fresh, and Sheetz, often leveraging products that utilize the entire chicken breast. The launch of two new protein offerings in approximately 2,000 Walmart stores is a major milestone, providing access to a vast new customer base. A national digital multivendor mailer (MVM) program with Costco in all eight regions in Q1 FY2026 resulted in a fourfold increase in revenue and gross profit compared to the prior year's rotation, demonstrating the power of expanded reach and targeted promotion.

Mama's is significantly intensifying its investment in trade promotion and marketing. Trade spend reached a record 6% of gross revenues in Q1 Fiscal 2026, more than triple the investment in the prior quarter and historical averages. This increased spend is strategic, focused on high-ROI programs designed to accelerate velocities, drive trial, and build brand awareness. Examples include accelerated investments at Publix, leading to inclusion in weekly circulars and branding of their meatball pub sub, and trade investments at Costco that opened the door to the national MVM. Marketing investments also increased substantially (up 70% YoY in Q1 FY2026), delivering strong returns on ad spend (ROAS) on platforms like Instacart (> $6 ROAS) and Walmart digital campaigns (double-digit ROAS), effectively bringing new households to the Mama's brand. The long-term goal is to increase trade promotion investments to 10% of gross revenue, a move management believes is crucial for building a national brand and becoming an indispensable retailer partner, provided it can be done without sacrificing margin targets.

The outlook for gross margins remains positive, with a near-term expectation to hover in the high 20% range and a long-term goal of consistently maintaining margins in the low 30% range. This expansion is expected to be driven by the continued realization of benefits from strategic CapEx investments, ongoing operational efficiencies, and proactive procurement strategies, including the fixed-price protein contracts.

Finally, M&A remains a potential catalyst. With a strengthened balance sheet and improved operational infrastructure, the company is actively evaluating potential acquisition targets that align with its refined criteria: deli companies with manufacturing capabilities that enhance category leadership, expand capabilities, or scale operations at a fair price. Management describes the M&A pipeline as "quite full" and views inorganic growth as a way to accelerate its transformation into a consolidator and category shaper in the fragmented prepared foods market.

Risks and Challenges

Despite the positive momentum and strategic progress, Mama's Creations faces several risks and challenges inherent in its industry and growth phase.

The prepared foods market is subject to intense competition from both large established players and smaller niche providers. Changes in consumer preferences, economic conditions, and retailer strategies can impact demand and pricing power. The cyclical nature of the grocery industry and general macroeconomic downturns could affect sales and earnings variability.

Commodity price volatility, particularly for key inputs like chicken and beef, remains a significant challenge. While the company has implemented mitigation strategies such as fixed-price contracts and in-house processing to blunt the impact, sustained or extreme price increases could pressure gross margins if they cannot be fully offset by efficiencies or passed on to customers through pricing actions. A 1% increase in commodity prices is estimated to negatively impact costs of sales by approximately $193 thousand on an annualized basis.

Operational risks include potential supply chain disruptions, challenges in maintaining consistent product quality across expanding production facilities, and the ability to scale operations efficiently to meet growing demand. While recent construction challenges at the Farmingdale facility are resolved, future CapEx projects or operational expansions could encounter unexpected delays or costs.

The company has identified material weaknesses in its internal control over financial reporting related to segregation of duties, transaction authorization/approval support, and documentation of review procedures. While remediation actions are underway with a target completion by January 31, 2026, the failure to effectively remediate these weaknesses could impact financial reporting reliability.

Reliance on a limited number of customers also presents a risk. For the