Yahoo Finance
Filing
Filing
July 26, 2021
Apr. 30, 2021 Data
Apr. 30, 2021 Data
Price: $2.5. Shares: 35.7m, Cap: $90m.
1. Business
(1) History
(1) History
The company was co-founded by Dan Dougherty(Daniel Mancini), Carl Wolf & Matthew Brown in the fall of 2007. Previously Carl Wolf had run a successful low-fat cheese company in the 1990s. Together they try to utilize Dan's grandma's Italian all-nature meatball receipt in the frozen meatball market.
Carl, Matthew & their family created a food production facility called Joseph Epstein Food Enterprises Inc.(JEFE), which became the sole supplier of the company's products. On the other hand, Dan is in charge of promoting their product in various places like TV, the internet, etc. It seems he is not participating in day to day running of the business but received licensing fees based on the sales volume.
In 2013, they took the company public into the OTC market through a reverse merger.
The company had grown revenue rapidly for the first several years with heavy expenses until fiscal 2015. It achieved $12m revenue but with a $3.5m EBITDA loss with $3.1m spending in advertising.
In fiscal 2016, it intentionally terminated some low-margin accounts. Its shelf placement was down compared to 2015. Its revenue was flat compared to 2015, but the margin improved by 2%. Also, it cut advertising expenses by $1m. As a result, the EBITDA loss was reduced to $2.0m.
In fiscal 2017, it grew revenue by 50% to $18m. Achieved positive FCF for the first time.
In fiscal 2018, revenue grew by another 50% to $27m. Mainly by 35% more sales per shelf plus increases in shelf placement. In Dec. 2017, JEFE was merged into the company without any payment to Wolf's family.
In fiscal 2019, in Q2 and Q4 revenue is down caused by purchasing offices and skipped in-and-out rotation from major retail customers. As a result, full-year revenue didn't grow much but with more profit. It paid down all high-interest debt.
In fiscal 2020, the company is doing well with $35m revenue which is not much different from 2019 if not for the Q2 and Q4 pullback in 2019.
In fiscal 2021, with some help from the pandemic, it achieved 40m in revenue and around 3.5m in income.
(2) Major business
1) Main products are meatballs and meatball sauces. It has much fewer ingredients than other types of meatball products. It seems its user loyalty is very high. Usually, it can generate around 30% gross margin after slotting fees and promotions.
2) Slotting fees and discounts: In 2021, it pays around 1.5m for these fees, down from 1.7m in 2020, which is around 3.5% of total revenue.
3) Licensing fees to Dan Mancini: Annual 6%-2% for sales below $20m, 1% for above $20m. Paid 540k in 2021.
4) It seems Sam's Club is its top customer with over $15m in revenue currently. If it can do the same with Costco, it could add another 15m to 20m in revenue.
(3) Industry
2. Management
(1) Management
Carl Wolf
Carl was the CEO of the company since the beginning. Previously, he found a company in 1983 to promote a low-fat cheese brand called Alpine Lace. Later it went public with very high growth in the life of the company. It had achieved 160m in revenue in the early 1990s. But the income is just around 2m to 3m. In 1997, the company was sold to Land O'Lakes for $62m, which may include some debt as well. At the time, the company might count around 50% of the total US low-fat cheese market. Carl held around 1.6m(30%) shares of the company which is around $15m if using the acquisition price of $9.125/share.
Between 1997 to 2012, Carl seems didn't take any new business venture until he co-founded MMMB. When compared to the previous cheese company, it seems MMMB was running much more smoothly. It consistently increases its EBITDA margin and net earning as the revenue rumped up.
Matthew Brown: president and COO. Carl Wolf's son-in-law. Previously worked for 30 years in sales and marketing in the food industry. In MMMB, it seems he is in charge of the productions.
Daniel Mancini: The meatball recipe holder. Also the face for the product on TVs and Ads etc. He gets royalty payments annually based on the revenue level.
(2) Ownership and Compensation
Total shares 35.7m. Options around 800k at an average price of $0.68.
Carl Wolf: 7.2m shares. 20%.
Matthew Brown: 5.6m shares 16%. All insiders hold 51% of the total shares.
Compensation for all management < 200k per year, very low.
3. Financial data
Notes: In Jan 2014, it changed year-end from December to January. Thus 2014 data only contains one-month data.
Notes: In Jan 2014, it changed year-end from December to January. Thus 2014 data only contains one-month data.
Notes: Debt and cash
(1) Debt is very small and net debt is negative.
(1) Debt is very small and net debt is negative.
Notes: Share information
Shares outstanding: 35.7m + 800k options.
4. Valuation and comments
(1) Currently the company is trading around $91m vs $3.5 annual income. That is around 26 P/E. It is quite expensive. However, given the high growth and past tracking record, it is reasonable to expect the sales and income both will grow quite well in the future. It will still generate quite a good return even with the current price.
(1) Currently the company is trading around $91m vs $3.5 annual income. That is around 26 P/E. It is quite expensive. However, given the high growth and past tracking record, it is reasonable to expect the sales and income both will grow quite well in the future. It will still generate quite a good return even with the current price.
(2) The management seems very good at marketing its product and the company's relationship with its customers seems quite good.
(3) For the first 20m revenue, it roughly generates 5% EBITDA. For the second 20m revenue, it generates roughly 15% EBITDA. For the next 40m, it might be able to generate 20% EBITDA.
(4) The management had a very good tracking record, holds half of the total shares, and takes a very modest salary.
5. Risk
(1) Top one customer(Don't know who) counts 40% of its revenue. Although it is unlikely that their relationship will break, there is still some risk.
(1) Top one customer(Don't know who) counts 40% of its revenue. Although it is unlikely that their relationship will break, there is still some risk.
(2) Retail business is usually very competitive and can change very fast in a short time.
(3) After the pandemic, people might not purchase as much frozen food as before.
(4) CEO is in his 70s and might face retirement soon.
6. Conclusion
Overall, the company is managed very well and growing fast. The management is very aligned with shareholders. The current price is not cheap but can be acceptable if the current growth can be maintained.
7. Links
