Mama Mancini's
Q2 2021
By Manuel Maurício
September 15, 2021
Mama Mancini’s posted its Q2 results a week ago. I’m doing this write-up in the form of bullet points. It’s easier for me and I guess that, by now, you should know the story well. If you don’t, please red my previous write-ups to get up to speed.
- Revenue went up by 18%
- Whereas profits have declined by 40%. The management attributes the decline to increased packaging and transportation inflationary pressures.
- They also expect things to go back to normal in a couple of quarters which should benefit margins as they will pass these increased costs to its customers with a lag of about 2 months.
But that doesn’t tell the whole story. If you listen to Carl Wolf (CEO) on the earnings call and on a recent presentation that he gave to Taglich Brothers, you’ll realize that there’s plenty of growth coming.
Acquisition
- I know this is old news, but we should be seeing an acquisition very soon. The company has raised debt recently so this means that they should be about to close a deal.
- They’re looking for more than one acquisition. Mergers and Acquisitions will be a major part of the story going forward (this entails some new risks).
- They’re looking to find managers that want to stay in place and, dare I say, replace Carl in the long run.
- Looking for companies with capacity for ready-to-go meals.
- Seeing a lot of small companies at ridiculously high valuations. Carl knows how this works and gives his own example. When Mama Mancini’s first raised capital, it did it a $20 million valuation with $4 million in revenue and no profit. It was a story stock. Carl doesn’t want a story stock. He wants a good, profitable company at an attractive valuation (6-15x adjusted EBITDA).
- Carl already has commitments with clients in the ready-to-eat space just waiting for the acquisition to happen.
Convenience stores
- Huge opportunity. The CEO mentioned recently that the volume coming from the convenience stores “could be incredible”. And Carl isn’t the type of person to say this lightly. Read the September 2020 write-up with my conversation with the CEO to better understand this opportunity.
- Carl now has a verbal commitment for hundreds of stores with a large convenience store chain. Trial will commence in the fall.
- He has updated his forecasts and they don’t really seem to align with the previous math. I’ve sent Carl an email asking about this, but either way, the prospects are really good.
- We’re talking about millions of dollars of additional revenue.
I’m still very comfortable owning Mama Mancini’s. Carl is a very good CEO and, together with the rest of the board, they’re setting up the company to become a growth machine once he leaves. I expect that the next couple of years will be great for the company and for us shareholders too.
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