Q3 2024 Rocky Mountain Chocolate Factory Inc Earnings Call
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Good morning ladies and gentlemen. Thank you for standing by. Welcome to today's conference call to discuss Rocky Mountain Chocolate's financial results for the fiscal third quarter, 2024. At this time, all participants are in a listening mode. As a reminder, this conference
Good morning, ladies and gentlemen, thank you for standing by welcome to today's conference call to discuss Rocky Mountain Chocolate <unk> financial results for the fiscal third quarter 2024 at this time all participants are in listen only mode.
As a reminder, this conference is being recorded.
Speaker Change: Joining us in the call today are the company CEO, Rob Sarls, and CFO, Al Noreo.
Joining us on the call today are the company's CEO, Rob soils and CFO Alan Please.
Speaker Change: Please be advised at this conference call will contain four leaking statements that are considered four leaking statements under the Privacy Community Sotigation Form Act of 1995. These four leaking statements are said to certain, known and unknown risks and uncertainties, as well as assumptions that could cause actual results to differ materially from those reflected in these four leaking statements. These four leaking statements are also subject to other risks and uncertainties that are described from time to time the company's following with the SEC.
Speaker Change: Please be advised that this conference call will contain forward looking statements.
Speaker Change: Considered forward looking statements under the private Securities Litigation Reform Act of 1995.
Speaker Change: These forward looking statements are subject to certain known and unknown risks and uncertainties as well as assumptions that could cause actual results to differ materially from those reflected in these forward looking statements.
Speaker Change: These forward looking statements are also subject to other risks and uncertainties that are described from time to time, the company's filings with the SEC.
Speaker Change: Do not place under reliance on any for looking statements, which are being made only as is the date of this call, except as required by law, the company undertakes no obligation to publicly update or revise any for looking statement.
Speaker Change: Do not place undue reliance on any forward looking statements, which are being made only as of the date of this call except as required by law. The company undertakes no obligation to publicly update or revise any forward looking statements.
Speaker Change: The company's presentation also includes certain non-gap financial measures, including adjusted EBITDA as supplemental measures of performance of the business.
Speaker Change: The company's presentation also includes certain non-GAAP financial measures, including adjusted EBITDA as supplemental measures of performance of the business.
Speaker Change: All non-gap measures have been reconciled to the most regular comparable gap measures in accordance with the FCC rules.
Speaker Change: All non-GAAP measures have been reconciled to the most directly comparable GAAP measures in accordance with the FCC rules.
Speaker Change: You will find reconciliation tables and other important information in the earnings press release and form 8k furnace to the SEC earlier today, which are currently available on the company's egg or page on the SEC's website and will be available on the company's best relationship section of its website within approximately 24 hours after this call is ended. And now I will turn the call over to the company CEO Rob Salz. Rob, please go ahead. Thank you.
Speaker Change: You will find reconciliation tables and other important information in the earnings press release and form 8-K furnished to the SEC earlier today, which are currently available on the company's Edgar page on the Sec's website and will be available on the company's Investor Relations section of its web site within approximately 24 hours. After this call has ended.
Speaker Change: And now I will turn the call over to the company's CEO Rob Salt.
Please go ahead.
Rob Salt: Thank you and good morning, everyone.
Rob Salz: We accomplished a major pivot in our business in the fiscal third quarter.
Rob Salt: We accomplished a major pivot in our business in the fiscal third quarter, but the permanent relocation of our consumer packaging functions to a third party world class co Packer in Utah.
Rob Salz: with the permit relocation of our consumer packaging function.
Rob Salz: to a third-party world-class co-packer in Utah.
Rob Salz: This co-packer will now handle all of the final assembly of her boxed and toted chocolates.
Rob Salt: This co Packer will now handle all of the final assembly of our box and total chocolates.
Rob Salz: fulfilling a critical need within our simplified and focus strategic objective. Labor availability has been a challenge in Durango for a while, particularly for our
Rob Salt: So filling a critical need within our simplify and focus strategic objectives.
Rob Salt: Labor availability has been a challenge in Durango for a while particularly for our labor intensive.
Rob Salt: Packaging operation.
Rob Salz: It has historically taken anywhere between 15 and 50 people. The hand pack has sorted chocolate boxes and other toted items with manpower needs typically peaking during the holiday season.
It has historically taken anywhere between 15 and 50 people the hand packet sorted chocolate boxes and other totaled items with manpower needs typically, peaking during the holiday season.
Rob Salz: We had a particularly tough year with labor in 2023, such that we were frequently deploying chocolate manufacturing talent to fill and complete box.
Rob Salt: We had a particularly tough year with labor in 2023.
Such that we were frequently deploying chocolate manufacturing talent.
Rob Salt: Phil and complete box chocolate needs. This.
Rob Salz: This not only reduced our availability to fully meet seasonal holiday production requirements.
Rob Salt: This not only reduced our availability to fully meet seasonal holiday protection requirements.
Rob Salz: but also impacted our ability to capitalize on new business opportunities.
Rob Salt: But also impacted our ability to capitalize on new business opportunities, including ecommerce.
Rob Salz: This difficult but critically needed transition, the third party co-packing came with additional one-time relocation cost.
Rob Salt: This difficult, but critically need to transition to third party co packing came with additional one time relocation costs, including additional transportation and expedited production cost to prioritize the delivery of inventory to our.
Rob Salz: including additional transportation and expedited production costs to prioritize the delivery of inventory to our franchisee network and Omni Channel partners.
Rob Salt: Z network and Omnichannel partners.
Rob Salt: Although this had a temporary impact on margins it was and.
Rob Salz: an essential step to ensure positive outcome for our partners and to strengthen our long-term position.
Rob Salt: Central staff to ensure a positive outcome for our partners and to strengthen our long term positioning.
Rob Salz: The combined effects of these factors prevented us from fully capturing anticipated holiday volume.
Rob Salt: The combined effects of these factors prevented us from fully capturing anticipated holiday volumes.
Rob Salz: And we estimate the resulting impact have been approximately an excess of 1 million.
Rob Salt: And we estimate the resulting impact has been approximately in excess of $1 million.
Rob Salt: Unrealized product sales.
Rob Salz: Despite the short-term impact, we are pleased with the net results of the packaging move to Utah. And I'm proud of the hard work by our operations and supply chain team.
Rob Salt: Despite the short term impact we are pleased with the net result of the packaging move to Utah and I'm proud of the hard work by our operations and supply chain team to facilitate this relocation effort in the midst of our busiest season.
Rob Salz: facilitate this relocation effort in the midst of our business.
Rob Salz: As a consequence, we've eliminated the long-standing production ceiling we faced in Durango, and this move has created substantial additional capacity to meet future demands.
Rob Salt: As a consequence, we've eliminated the longstanding production ceiling, we faced in Durango and this move has created substantial additional capacity to meet future demand.
Rob Salz: As evidence in December alone, we produced in Durango nearly 50% more pounds of premium chocolate products than we did in the entirety of the fiscal fourth quarter of the prior year.
Rob Salt: As evidenced in December alone, we produced in Durango, nearly 50% more pounds of premium chocolate products than we did in the entirety of the fiscal fourth quarter of the prior year.
Rob Salz: This is a direct result of labor relief in Durango as our production team can now focus on what they do best.
Rob Salt: This is a direct result of labor relief in Durango as our production team can now focus on what they do best.
Rob Salz: making even more high quality premium chocolate and confection.
Making even more high quality premium chocolate and confectionery products.
Rob Salz: This improved configuration empowers us to meet the higher demand volumes we anticipate from new and existing specialty retail on the channel partners.
Rob Salt: This improved configuration empowers us to meet the higher demand volumes, we anticipate from new and existing specialty retail omni channel partners as well as planned expansion in E Commerce, and our franchise network, which.
Rob Salz: as well as planned expansion and e-commerce and our franchise network, which we planned to explain.
Rob Salt: Which we plan to expand in the years ahead.
Rob Salz: quickly turning to several other milestones that reflect the ongoing execution of our strategic transformation plan.
Rob Salt: Quickly turning to several other milestones that reflect the ongoing execution of our strategic transformation plan.
Rob Salz: To do more with last, we once again made meaningful reductions in GNA.
To do more with less we once again made meaningful reductions in G&A.
Rob Salz: marking our third consecutive quarter double digit sequential improvement.
Marking our third consecutive quarter of double digit sequential improvement.
Rob Salz: We also may continue progress in growing our product gross margin.
Rob Salt: We also made continued progress in growing our product gross margins, which reached the double digits on an adjusted basis for the first time in a year.
Rob Salz: with reach to double digits on an adjusted basis for the first time in a year. Damplify now.
Rob Salt: To amplify and elevate the Rocky Mountain Chocolate brand.
Rob Salz: We engage in award-winning retail and hospitality designed firm, design well spent co, to leave the aesthetic refresh.
Rob Salt: We engaged an award winning retail and hospitality design firm design, well spend co to lead the aesthetic refresh.
Rob Salz: of both company and franchisee own storefront.
Of both company and franchisee owned storefronts.
Rob Salz: Additionally, as we announced in November, we completed the build out of our senior leadership team, but the addition of Kara Kotlin as our VP of franchise development, who joins us from Focus Brand.
Rob Salt: Additionally, as we announced in November we completed the build out of our senior leadership team with the addition of <unk> as our VP of franchise development, who joins us from focus brands.
Rob Salz: Cara brings nearly 20 years of franchise and operating experience. She has a proven track record with multi-unit operators, an area in which we are focusing on much more in the future.
Rob Salt: Tara brings nearly 20 years of franchise and operating experience. She has a proven track record with multi unit operators scenario in which we are focusing on much more in the future.
Rob Salz: And that was importantly a passion for the transformation and elevation of our brand in the franchise business world.
Rob Salt: And as importantly, a passion for the transformation and elevation of our brand and the franchise business World.
Rob Salz: CARE is already out in front of current and prospective franchisees, pushing forward our stated plans to expand our franchise store base over the next several years.
Rob Salt: Gary has already out in front of current and prospective franchisees pushing forward. Our stated plans to expand our franchise store base over the next several years.
Rob Salt: Turning to the board in December we added the appointment of Steve Craig a season business strategist and successful retail developer to the board of directors.
Rob Salz: In December we added the appointment of Steve Craig, a season business strategist and successful retail developer to the board of directors.
Rob Salz: For nearly four decades, Steve has developed own and operated commercial real estate, primarily outdoor malls for retail shops and restaurants throughout the United States.
Rob Salt: For nearly four decades, Steve has developed owned and operated commercial real estate, primarily outdoor malls for retail shops and restaurants throughout the United States.
Rob Salz: He brings nearly 30 years of executive and board experience with both public and private company.
Rob Salt: He brings nearly 30 years of executive and board experience with both public and private companies.
Rob Salz: Steve is also committed to the development of aspiring entrepreneurial youth having funded an endowment and founding the Steven L Craig School of Business and Missouri Western State University.
Rob Salt: Steve is also committed to the development of aspiring entrepreneur youth.
Rob Salt: <unk> funded and dominant in founding the Steven L. Craig School of business and Missouri Western State University.
Rob Salz: And in fact, the Craig School of Business Center for franchise development, which offers training to students interested in franchise ownership, has graduated 33 students who were awarded franchises
Rob Salt: And in fact, the Craig School of business Center for franchise development, which offers training students interested in franchise ownership. As graduated 33 students who were awarded franchises. But this includes 15 alumni currently operating actually 10 alumni operating 15, Rocky Mountain chocolate stores.
Rob Salz: but this includes 15 alumni currently operating. Actually, 10 alumni operating, 15 Rocky Mountain Chocolate stores, some of which are among our best offers.
Rob Salt: Some of which are among our best operators.
Rob Salz: Steve's direct experience is a multi-unit operator and franchisee of Rocky Mountain Chocolates since 2011 made him an ideal addition to our board. To summarize the quarter,
Steve's directly experienced as a multi unit operator, and franchisee of Rocky Mountain chocolate since 2011 made him an ideal addition to our board.
Rob Salt: To summarize the quarter.
Rob Salt: Our new management team is fully built.
Rob Salz: and laser focus on executing on our strategic transformation play.
Rob Salt: And laser focused on executing on our strategic transformation plan.
Rob Salz: The lessons learned from the holiday season and our relocation of our consumer packaging to Utah.
Rob Salt: The lessons learned from the holiday season, and our relocation of our consumer packaging to Utah.
Rob Salz: have us well equipped to better capitalize on the upcoming Valentine's Day Demand cycle and other critical business opportunities going forward, including e-commerce and expanding business with existing and new specialty retail customers with more
Rob Salt: <unk> is well equipped to better capitalize on the upcoming Valentine's day demand cycle and other critical business opportunities going forward.
<unk> e-commerce, and expanding business with existing and new specialty retail customers with much greater certainty.
Rob Salz: The hard work continues and we're nearing an inflection point as we've prepared to return to growth and profitability in fiscal 2025.
Rob Salt: The hard work continues and we're nearing an inflection point as we prepare to return to growth and profitability in fiscal 2025.
Rob Salz: I will now hand it over to RSCFO Allen to discuss our fiscal Q3 financial highlights before returning for closing remarks. Allen.
Rob Salt: I will now hand, it over to our CFO Allen.
Allen: To discuss our fiscal Q3 financial highlights before returning for closing remarks Alan.
Allen: Thank you, Rob. Please note that all financial results discussed today are for continuing operations, while all variance commentary is on a year-over-year basis unless stated otherwise.
Alan: Thank you Rob. Please note that all financial results discussed today are for continuing operations, while all variance commentary is on a year over year basis unless stated otherwise.
Alan: Moving onto our results.
Allen: total revenue was $7.7 million compared to $8.8 million in the prior year.
Alan: <unk> revenue was $7 7 million compared to $8 8 million in the prior year the.
Allen: The decrease was attributable to higher factory overhead and production constraints related to the personnel at our Durango facility.
Alan: The decrease was attributable to higher factory overhead and production constraints related to personnel at our Durango facility.
Allen: The latter of which impacted fulfillment and asked that strong holiday seasonal demand.
Alan: The latter of which impacted fulfillment and offset strong holiday seasonal demand.
Taking a deeper look at our sales.
Allen: Total product sales were 6.1 million compared to 7.3 million.
Alan: Total product sales were $6 1 million compared to $7 3 million.
Allen: Royalty and marketing revenue was 1.2 million versus approximately flat over year the prior year.
Alan: Royalty and marketing revenue was $1 2 million versus approximately flat over year the prior year.
Allen: Retail sales that are company operating stores increase 21% to 364,000 compared to 3002,000.
Retail sales at our company operated stores increased 21% Q3 hundred 64000 compared to 300 in 2000.
Allen: The increase was a result of opening of a second company own store in July 2023.
Alan: The increase was a result of opening of our second company owned store in July 2023.
Allen: Same-store sales for our company owned store in Durango decreased 1.1%.
Same store sales for our company owned store in Durango decreased one 1% year over year, primarily due to the aforementioned production constraints.
Allen: year over year, primarily due to the aforementioned production
Allen: Same store sales across all domestic Rocky Mountain chocolate factory locations decreased 2.1% during the quarter compared to the prior year.
Alan: Same store sales across all domestic Rocky Mountain chocolate factory locations decreased two 1% during the quarter compared to the prior year.
Allen: And franchise fee revenue was 41,000 compared to 49.
Alan: And franchise fee revenue was 41000 compared to $49.
Allen: Total products and retail gross profit was 0.7 million compared to 1.9 million.
Alan: Total product and retail gross profit was 0.7 million compared to $1 9 million with a gross margin of 10, 2% compared to 24, 5%.
Allen: with a gross margin of 10.2% compared to 24.5%.
Allen: The decrease was primarily attributable to the previously mentioned constraints, which led to lower product availability and overhead of some absorption.
Alan: The decrease was primarily attributable to the previously mentioned constraints, which led to lower product availability and overhead.
Alan: Absorption.
Allen: The decrease in gross margin was also due to one-time costs associated with the relocation of packaging operations to Salt Lake City, Utah.
Alan: The decrease in gross margin was also due to onetime costs associated with the relocation of packaging operations to Salt Lake City, Utah.
Allen: Total operating expenses decrease 7% to 8.5 million compared to 9 million.
Total operating expenses decreased 7% to $8 5 million compared to $9 million.
Allen: The improvement was due primarily to a decrease in professional fees related to the cost associated with the contested solicitation of proxies in fiscal 2023.
Alan: The improvement was due primarily to a decrease in professional fees related to the costs associated with the contested solicitation of proxies in fiscal 2023.
Allen: Net loss from continuing operations was 0.8 million or 12 cents per share.
Alan: Net loss from continuing operations was zero point $8 million or <unk> 12 per share.
Allen: compared to a net loss from continuing operations of 0.2 million or three cents per share.
Compared to a net loss from continuing operations of zero point $2 million or <unk> <unk> per share.
Allen: Adjusted EBITDA loss was 3 million compared to adjusted EBITDA of 1.2 million.
Adjusted EBITDA loss was $3 million compared to adjusted EBITDA of $1 $2 million.
Allen: The decrease was primarily due to lower sales and gross margins.
Alan: The decrease was primarily due to lower sales and gross margin, partially offset by lower sales and marketing expenses and franchise costs.
Allen: partially offset by lower sales and marketing expenses and franchise costs.
Allen: Turning to our balance sheet, we ended the third quarter with a cash balance of 2.1 million compared to 4.7 million at the end of fiscal year 2023.
Alan: Turning to our balance sheet. We ended the ended the third quarter with a cash balance of $2 1 million compared to $4 7 million at the end of fiscal year 2023.
Alan: The net decrease in cash was primarily due.
Allen: You cash used in operations and the purchase of property and equipment, partially offset by the sale of useful apps.
Alan: Cash used in operations and the purchase of property and equipment, partially offset by the sale of U swirl assets.
Allen: For the nine months through the end of the third quarter, we spent 2.5 billion in capital expenditure.
Alan: For the nine months through the end of the third quarter, we spent $2 5 billion in capital expenditures.
Allen: The highest level for such time period in over a decade.
Alan: The highest level for such time period in over a decade.
Allen: And the near future will be exploring the use of equipment based financing as part of our capital structure.
Alan: In the near future, we'll be exploring the use of equipment based financing as part of our capital structure.
Allen: We ended the third quarter with total inventory of 3.7 million roughly flat compared to the year end fiscal 2023.
Alan: We ended the third quarter with total inventories of $3 7 million roughly flat compared to the year end fiscal 2023.
Allen: As of November 30th, 2023, we utilize 1.0 million from our
Alan: As of November 32023, we utilized one point.
Alan: Zero million dollars from our line of credit.
Allen: However, our balance sheet remains free of any long-term debt.
Alan: However, our balance sheet remains free of any long term debt.
Allen: With that, I'd like to turn the call back over to Rob for closing remarks.
Alan: With that I'd like to turn the call back over to Rob for closing remarks.
Rob Salt: Thanks Alan.
Rob: Looking to the clause of fiscal 24 and beyond, the actions we've taken over the past year have laid the groundwork for the future of the business.
Rob Salt: Looking to the close of fiscal 'twenty, four and beyond the actions we've taken over the past year has laid the groundwork for the future of the business. We're in a much stronger position going into the 2025 fiscal year to support and sustain our current business and take better advantage of new Biz.
Operator: Good morning, ladies and gentlemen. Thank you for standing by. Welcome to today's conference call to discuss Rocky Mountain Chocolates' financial results for the fiscal third quarter of 2024. At this time, all participants are in a listen-only mode.
Rob: We're in a much stronger position going into the 2025 fiscal year to support and sustain our current business.
Operator: As a reminder, this conference call is being recorded. Joining us on the call today are the company's CEO, Rob Sarles, and CFO, Alan Arroyo. Please be advised that this conference call will contain forward-looking statements that are considered forward-looking statements under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to certain known and unknown risks and uncertainties, as well as assumptions that could cause actual results to differ materially from those reflected in these forward-looking statements. These forward-looking statements are also subject to other risks and uncertainties that are described from time to time in the company's filings with the SEC. Do not place undue reliance on any forward-looking statements which are being made only as of the date of this call. Except as required by law, the company undertakes no obligation to publicly update or revise any forward-looking statement. The company's presentation also includes certain non-GAAP financial measures, including adjusted EBITDA, as supplemental measures of performance of the business. All non-GAAP measures have been reconciled to the most directly comparable GAAP measures in accordance with the FCC rules.
Rob: and take better advantage in new business opportunities than we were entering fiscal 2020.
Rob Salt: Opportunities than we were entering fiscal 2024.
Rob: Our efforts and execution of the transformation plan are beginning to bear
Rob Salt: Our efforts and execution of the transformation plan are beginning to bear fruit.
Rob: And we have the right team in place to accelerate the execution next year. That concludes our prepared remarks.
Rob Salt: And we have the right team in place to accelerate the execution next year.
Rob Salt: That concludes our prepared remarks, we'll be glad to answer any questions now.
Rob Salt: Operator back to you.
Speaker Change: Thank you. If you'd like to ask a question, please press star 11.
Rob Salt: Thank you if you'd like to ask a question. Please press star one one.
Rob Salt: Yeah.
Speaker Change: Again, to ask a question, please press star 11.
Rob Salt: Again to ask a question. Please press star one one.
Speaker Change: Our first question comes from Jim McElfrey with Dawson James. Your line is open.
Speaker Change: Our first question comes from Jim Mccaffrey with Dawson James Your line is open.
Jim Mccaffrey: Yes, Thank you and good morning.
Jim Mccaffrey: Good morning, Tim.
Jim McElfrey: I'm trying to understand the inventory levels and the issues that you had with the co-packaging. It seems like
Jim Mccaffrey: I'm trying to understand the inventory levels and the and the issues that you had with the co packaging it seems like.
Jim McElfrey: If you're having trouble with the co-packaging that you would have just shipped out as much inventory as you had and that inventory level should go down. I'm just, if you can help me understand what's going on there.
Jim Mccaffrey: It's if you are having trouble with the co packaging that you would have just shipped out as much inventory as you.
You will find reconciliation tables and other important information in the earnings press release and Form 8K furnished to the SEC earlier today, which are currently available on the company's Edgar page on the SEC's website and will be available on the company's best relations section of its website within approximately 24 hours after this call has ended. Now, I will turn the call over to the company's CEO, Rob Charles. Rob, please go ahead.
Jim Mccaffrey: And that inventory levels should go down.
Speaker Change: Just if you can help me understand what's going on there.
Yes sure so.
Speaker Change: Typically our inventory builds going into, let's call out the September October time frame.
Speaker Change: Typically our inventory builds going into let's call. It the September October timeframe.
Speaker Change: And we had challenges in labor throughout the fiscal year, back in June, we had to institute a pretty meaningful, hourly wage increase to attract new talent to work in the production facility. And then we decided to work in the production facility and then we decided to
Speaker Change: And we had challenges in labor throughout the fiscal year.
Speaker Change: Back in June we had to Institute a.
Thank you and good morning everyone. We accomplished a major pivot in our business in the fiscal third quarter with the permit relocation of our consumer packaging function to a third-party, world-class co-packer in Utah. This coat packer will now handle all of the final assembly of our boxed and toted chocolates, fulfilling a critical need within our Simplify and Focus strategic objective. Labor availability has been a challenge in Durango for a while, particularly for our labor-intensive packaging operation. It is historically taken anywhere between 15 and 50 people to hand pack assorted chocolate boxes and other toted items, with manpower needs typically peaking during the holiday season.
Speaker Change: Pretty meaningful hourly wage increase to attract new talent.
To work in the and the production facility.
Speaker Change: And then we typically.
Speaker Change: In past years, I've needed to add on, again, as I said in my prepared remarks anywhere from 15 to 50 folks.
Speaker Change: In past years, we've needed to add on again as I said in my prepared remarks anywhere from 15% to 50 folks too.
Speaker Change: to package up the final box product. So we deliberately managed our inventories lean going into the end of last fiscal year.
Speaker Change: Two package final box products so.
Speaker Change: We deliberately managed our inventories lean going into the end of last fiscal year.
Speaker Change: And it was the ramp up for the current fiscal year that was made difficult by the labor challenges. So we would have probably had, when no, we definitely would have had, higher inventory levels that we've been able to recruit faster than we had anticipated.
Speaker Change: And it was the ramp up for the current fiscal year that was made difficult by the labor challenges. So.
We would have probably had window, we definitely would have had higher inventory levels and we've been able to recruit faster than we had anticipated and the move to get the outsource of the final packaging, which had always been in our strategic plan was.
Speaker Change: And the move to get the outsourced of the final packaging, which had always been in our strategic plan was accelerated to make sure that we met as much of the current holiday for 23 as we as we possibly.
We had a particularly tough year with labor in 2023, such that we were frequently deploying chocolate manufacturing talent to fill and complete box chocolate needs. This not only reduced our availability to fully meet seasonal holiday production requirements but also impacted our ability to capitalize on new business opportunities, including e-commerce. This difficult but critically needed transition to third-party copacking came with additional one-time relocation costs, including additional transportation and expedited production costs to prioritize the delivery of inventory to our franchisee network and omni-channel partners. Although this had a temporary impact on margin, it was an essential step to ensure a positive outcome for our partners and to strengthen our long-term position. The combined effects of these factors prevented us from fully capturing anticipated holiday volumes.
Speaker Change: Was accelerated to make sure that we met as much of the current holiday for 'twenty three as we as we possibly could.
Speaker Change: Okay, and then I'm also trying to understand the packaging move.
Speaker Change: Okay, and then I'm also trying to understand.
Speaker Change: The packaging move.
Speaker Change: So I, you know, I know that it's been part of the plan, but was it.
Speaker Change: I know that it's been part of the plan, but was it.
Speaker Change: Was it delayed this quarter or did you have specific issues with the move this quarter?
Speaker Change: Was it delayed this quarter or did you have specific issues with the move this quarter.
Speaker Change: No, there was no scheduled move at the beginning of the current fiscal year.
Speaker Change: No.
Speaker Change: There was no scheduled move at the beginning of the current fiscal year as the labor situation unfolded Durango. It became imperative that we find an immediate solution because we could not get enough labor to do the very manual hand packing of individuals chocolates into assorted boxes are dropping them into what we call <unk>.
Speaker Change: As the labor situation unfolded Durango, it became imperative that we find an immediate solution because we could not get enough labor to do the very manual hand packing of individual chocolates into a sorted boxes or dropping them into what we call the stand-up totes. So getting the
Speaker Change: Standup totes.
Speaker Change: So.
Speaker Change: Getting.
And we estimate the resulting impact would have been approximately in excess of one million in unrealized products. Despite the short-term impact, we are pleased with the net result of the packaging move to Utah, and I'm proud of the hard work by our operations and supply chain team to facilitate this relocation effort in the midst of our busiest. As a consequence, we've eliminated the longstanding production ceiling we faced in Durango, and this move has created substantial additional capacity to meet future demands. As evidence, in December alone, we produced in Durango nearly 50% more pounds of premium chocolate products than we did in the entirety of the fiscal fourth quarter of the prior year.
Speaker Change: The co packing into Utah, the second week of October really ensured that we can meet the supermajority of the demand, but not all of the demand that we possibly could so it was a very necessary very immediately needed move it happens to fit with the strategic plan and a completely sets us up for the future.
Speaker Change: second week of October really ensured that we can meet the supermajority of the demand, but not all of the demand that we possibly could. So it was a very necessary, very immediately needed move. It happens to fit with the strategic plan and it completely steps us up for the future where there's unlimited labor to access in Utah as we ramp up our business.
Speaker Change: Where theres unlimited labor to.
Speaker Change: To access in Utah, as we ramp up our business going forward.
Speaker Change: And is that transition complete now? Are there any remaining issues that you need to address in order to finish up that transition? No. That transition was essentially completed while the bus was running at 100 miles an hour.
Speaker Change: And is that.
Speaker Change: Is that transition complete now yes, there are there any remaining issues that you need to address in order to.
Speaker Change: Finish up with that transition no that transition was essentially completed while the button is running at 100 miles an hour.
Speaker Change: The good news is some of the extra costs that we incurred in the quarter.
Speaker Change: The good news is some of the extra costs that we incurred in the quarter.
Speaker Change: We had a different charge from the co-packer was done with hourly rates of people. That is moving to per piece pricing as of 11 days ago. So we're going to have much greater visibility.
This is a direct result of labor relief in Durango as our production team can now focus on what they do best, making even more high-quality premium chocolate and confectionery. This improved configuration empowers us to meet the higher demand volumes we anticipate from new and existing specialty retail omni-channel partners, as well as planned expansion in e-commerce and our franchise, which we plan to expand in the years ahead. Quickly turning to several other milestones that reflect the ongoing execution of our strategic transformation plan. To do more with less, we once again made meaningful reductions in DNA, marking our third consecutive quarter double-digit sequential improvement.
Speaker Change: We had a different charge from the co Packer was done with hourly rates of people that is moving to per piece pricing as of 11 days ago.
Speaker Change: So we're going to have.
Speaker Change: Much greater visibility and also accountability of our new co packing partner to be as efficient as they can be and that will give us a benefit going forward.
Speaker Change: and also accountability of our new co-packing partners be as efficient as they can be. And that will give us a benefit going.
Speaker Change: Okay. And just to more if I might be you mentioned the capital spending in the quarter. Can you?
Speaker Change: Okay, and just two more if I might.
Speaker Change: You mentioned the capital spending.
In the quarter, Ken can you.
Speaker Change: indicate what your capital spending needs are for this fiscal year and next if you have
Ken: Indicate what your capital spending needs are for this fiscal year and next if you have.
Speaker Change: If you can. Yeah, but let me start and then I'll have Alan finish. So the number we cited a 2.5 mil. That was through November, so that's a nine month number.
Speaker Change: If you can yes, let me start and then I'll have Alan finished so the number we cited a 2.5 1000.
We also made continued progress in growing our product gross margin, with reach to double digits on an adjusted basis for the first time in a year, to amplify and elevate the Rocky Mountain Chocolate brand. We engaged an award-winning retail and hospitality design firm, Design Well Spent Co., to lead the aesthetic refresh of both company and franchisee-owned storefronts. Additionally, as we announced in November, we completed the build out of our senior leadership team with the addition of Kara Conklin as our VP of Franchise Development, who joins us from Focus Brand. Kara brings nearly 20 years of franchise and operating experience. She has a proven track record with multi-unit operators, an area which we are focusing on much more in the future.
Alan: That was through November so thats, a nine month number.
Speaker Change: Um, and Alan, why don't you take it from there? Yeah, no, we've essentially spent, um, most of the Catholics for the fiscal year.
Speaker Change: And Alan why don't you take it from there yes, no we've essentially spent.
Most of the Capex for the fiscal year.
Alan: We have some payments remaining, but essentially we're complete with that. We're currently planning our capital allocation strategy for fiscal 25.
Have some payments remaining but essentially we are complete with that we're currently planning our capital allocation strategy for fiscal 'twenty, five which again, we had a strategic plan that we see.
Alan: which, again, we had a strategic plan that we signaled earlier in the year that said over the two years it would be about six to six and a half million. So we're currently evaluating that. Again, our priorities to get into operating cash flow positive quickly, but we are monitoring that. But as far as this fiscal year, most of the spend
Speaker Change: Signaled earlier in the year that said over the two years it would be about six to $6 5 million. So we're currently evaluating that again, our priority is to get into operating cash flow positive.
Speaker Change: Quickly, but we are monitoring that but as far as this fiscal year most of the spend is occur.
Speaker Change: And when you said that over the two years, a six to six and a half million, were you referring to fiscal 24 and 25 or 26? Yeah, correct. Yes, no, 24 and 25 when we announced that earlier in the year. Okay. And I'm sorry, just one more. The
And, as importantly, a passion for the transformation and elevation of our brand in the franchise business world. CARA is already out in front of current and prospective franchisees, pushing forward our stated plans to expand our franchise store base over the next several years. Turning to the board.
Speaker Change: And when you said that over the two years six to $6 5 million.
Speaker Change: Are you referring to fiscal 'twenty, four 'twenty five or correct when you say.
Speaker Change: <unk> 24, and 25, when we announced that earlier in the year.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: And I'm, sorry, just one more.
In December, we added the appointment of Steve Craig, a seasoned business strategist and successful retail developer, to the board of directors. For nearly four decades, Craig has developed, owned, and operated commercial real estate, primarily outdoor malls for retail shops and restaurants throughout the United States. He brings nearly 30 years of executive and board experience with both public and private companies. Steve is also committed to the development of aspiring entrepreneurial youth, having funded an endowment and founded the Stephen L. Craig School of Business at Missouri Western State University. And in fact, the Craig School of Business Center for Franchise Development, which offers training to students interested in franchise ownership, has graduated 33 students who have been awarded franchises.
Speaker Change: The gross margin with the <unk>.
Speaker Change: Packaging now move to Utah.
Speaker Change: Does that just get you back to what prior gross margins are, or should that result in?
Speaker Change: Is does that just gets you back to what prior gross margins are or should that result in.
Let's call it.
Speaker Change: Nothing's permanent, but let's call it a permanent improvement in gross margin.
<unk> permanent, but let's call it a permanent improvement in gross margins.
Speaker Change: Yes.
Speaker Change: That's a hard one to answer. Let me do the best I can and have Alan chime in.
That's a hard one to answer let me let me do the best I can and have Alan chime in.
Alan: Clearly, we're looking to improve margins of doing everything we can to get there. This was really more of a function of sealing.
Clearly, we're looking to improve margins are doing everyday mechanic get there. This was really more of a function of ceilings.
Alan: and prevention to do what you can do in terms of meeting needs or expanding the opportunity of the business.
And prevention.
Speaker Change: Do what you can do in terms of meeting needs or expanding the opportunity of the business. So.
Alan: There's always a quote unquote added cost when you go outside versus inside.
But this includes 15 alumni currently operating, actually 10 alumni operating 15 Rocky Mountain Chocolate Stores, some of which are among our best operators. Steve's direct experience as a multi-unit operator and franchisee of Rocky Mountain Chocolates since 2011 made him an ideal addition. To summarize the quarter... Our new management team is fully built and laser-focused on executing on our strategic transformation plan. The lessons learned from the holiday season and our relocation of our consumer packaging to Utah have us well-equipped to better capitalize on the upcoming Valentine's Day demand cycle and other critical business opportunities going forward, including e-commerce and expanding business with existing and new specialty retail customers with much greater certainty. The hard work continues, and we're nearing an inflection point as we prepare to return to growth and profitability in fiscal 2025. I will now hand it over to our CFO, Allen, to discuss our fiscal Q3 financial highlights before returning for closing remarks. Allen?
Speaker Change: There is always quote unquote added costs when you go outside versus inside but the fact of the matter is that when you are either pain.
Alan: The fact of the matter is that when you are either paying
Alan: time in a half or double time to existing employees to shift away.
Speaker Change: And a half or double time to existing employees to shift away.
Alan: from manufacturing products to packing products and or dealing with
Speaker Change: Manufacturing product to package products.
Speaker Change: And we're dealing with.
Speaker Change: You know, having the higher expensive temporary talent in Durango.
Speaker Change: Having to hire expensive temporary talent in Durango.
Speaker Change: You know, the added cost becomes less of an issue rather than just actual availability to complete what you can complete. So volume solves a lot. And volume solves a lot.
Speaker Change: The added cost becomes less of an issue rather than just actual availability to complete when you can complete so.
Speaker Change: Volume solves a lot.
Speaker Change: Margins get better with volume.
Speaker Change: We've been needing to ramp up volume for a couple years and proceeding all of us that have joined in the last year and a half or so. So enabling to open up that volume.
Speaker Change: We've been needing to ramp up volume for a couple of years, even preceding all of us that have joined in the last year and a half or so so enabling to open up that volume capture without any limitation, that's going to provide more of this solved with respect to operating margins and I think anything else Alan anything to add no no I think that cover.
Speaker Change: Capture without any limitation that's going to provide more of this solve with respect to operating margins and I think anything else now and anything that no No, no, I think that covers it. I think the the outsourcing of the packaging itself doesn't improve it but as Rob mentioned being able to increase throughput is what's going to bring the margin improvement overall
Speaker Change: I think the the.
Speaker Change: The outsourcing of the packaging itself doesn't improve it but as Rob mentioned being able to increase throughput is what's going to bring the margin improvement overall.
Alan: Thank you, Rob. Please note that all financial results discussed today are for continuing operations, while all variance commentary is on a year-over-year basis unless stated otherwise. Moving on to our results, total revenue was $7.7 million compared to $8.8 million in the prior year. The decrease was attributable to higher factory overhead and production constraints related to personnel at our Durango facility, the latter of which impacted fulfillment and offset strong holiday seasonal demand. Taking a deeper look at our sales, total product sales were $6.1 million compared to $7.3 million. Royalty and marketing revenue was $1.2 million versus approximately flat over the prior year. Retail sales at our company-operated stores increased 21% to $364,000 compared to $302,000. The increase was a result of the opening of a second company-owned store in July 2023. Same store sales for our company-owned store in Durango decreased 1.1% year over year, primarily due to the aforementioned production. Same store sales across all domestic Rocky Mountain Chocolate Factory locations decreased 2.1 percent during the quarter compared to the prior year.
Speaker Change: Okay, very good. Thank you and
Speaker Change: Okay very good.
Speaker Change: Thank you and.
Speaker Change: I'll talk to you later. Thank you. Appreciate the questions, Jim. Thank you.
Speaker Change: I'll talk to you later, thank you I appreciate the questions Jim Thank you.
Speaker Change: Thank you as reminder to ask a question, please press star 1-1.
Speaker Change: Thank you as a reminder to ask a question. Please press star one one.
Speaker Change: Our next question comes from Roger Lipton with LFSI. Your line is open.
Speaker Change: Our next question comes from Roger Lipton with LSI. Your line is open.
Roger Lipton: Good morning Rob and Alan. Good morning.
Roger Lipton: Yes, good morning, Robin Alan Good morning.
Roger Lipton: Sounds like yours.
Roger Lipton: set up. I could say finally, it hasn't been so long, it just seems they're way beyond the stock. But
Roger Lipton: Setup.
Finally, it hasnt been so long as it seems that way if you own the stock.
Roger Lipton: But you talked about being set up now to deliver against the.
Roger Lipton: being set up now to deliver against the new demand, I'm the channel demands over work. In particular, what are the, I'm the channels that you expected
Roger Lipton: New demand Omnichannel demand is over with.
Roger Lipton: In particular, what are the omni channels that you expect to see this increased demand from.
Speaker Change: Great question. And just for everybody's benefit, realize that we have two primary businesses.
Speaker Change: Great question.
Speaker Change: And just for everybody's benefit.
Realize that we have two primary businesses one in the most important in our hearts is taken care of our franchisees.
Speaker Change: Winning the most important in our hearts is taking care of our franchisee.
Speaker Change: And that is a, you know, that's a super majority of our businesses, everybody knows.
And that is that's a super majority of our business as everybody knows.
Speaker Change: But we've had a long-standing multi-decade business of working with specialty retailers.
Speaker Change: But we've had a long standing multi decade business of working with specialty retailers.
Speaker Change: and also have an e-commerce opportunity that we've yet to fully hit the gas pedal on. And so speaking backwards e-commerce can be much better met and fulfilled when you have no ceiling on how much box chocolate you can make from a labor standpoint. So that will open up e-commerce at some point in the very near end future. With the specialty retailer, again, we've had multi-decade relationships.
Speaker Change: And also have a e-commerce opportunity that we've yet to fully hit the gas pedal on.
And so speaking backwards ecommerce can be much better met and fulfilled when you have no ceiling on how much box chocolate you can make from a labor standpoint, so that will open up e-commerce at some point in the very.
Alan: Total product and retail gross profit was $0.7 million compared to $1.9 million, with a gross margin of 10.2% compared to 24.5%. The decrease was primarily attributable to the previously mentioned constraints which led to lower product availability and overhead of some absorption. The decrease in gross margin was also due to one-time costs associated with the relocation of packaging operations to Salt Lake City, Utah. However, total operating expenses decreased 7% to $8.5 million compared to $9 million. The improvement was due primarily to a decrease in professional fees related to the costs associated with the contested solicitation of proxies in fiscal 2023. Net loss from continuing operations was $0.8 million, or $0.12 per share, compared to a net loss from continuing operations of $0.2 million or $0.03 per share. The adjusted EBITDA loss was $3 million compared to adjusted EBITDA of $1.2 million.
Speaker Change: Mir in future with the specialty retailer again, we've had multi decade relationships.
Speaker Change: We've had a particularly excellent fulfillment.
Speaker Change: We've had a particularly excellent fulfillment with a couple of them. Despite the challenges we had that we'd like to see us do more volume and then Andrew for it and his team.
Speaker Change: with a couple of them despite the challenges we had that would like to see us do more volume. And then Andrew Ford and his team have been actively courting other retail opportunities where we are now a more attractive option than some heritage brands that are in the marketplace. And we continue to pursue those and look forward to having further updates in future quarters. Okay.
Speaker Change: <unk> had been actively courting other.
Retail opportunities.
Speaker Change: Where we are now a more attractive option than some heritage brands that are in the marketplace and we continue to pursue those.
Speaker Change: Look forward to having further updates in future quarters.
Okay.
Speaker Change: And.
Speaker Change: You mentioned Steve.
Speaker Change: Steve <unk> Steve.
Speaker Change: Steve Alzes, I recall, it was built chip only. Is there a relationship there? No, it's Steve Craig. Project Steve Craig.
Speaker Change: Steve analysis as I recall it was chipotle.
Speaker Change: Relationship there now.
Speaker Change: Steve Craig.
Speaker Change: Projects, Steve Greg.
Speaker Change: Okay.
Speaker Change: Steve Craig I'd put us <unk> like the bureau that problem.
Speaker Change: Okay, thank you, gentlemen. I still would love to come to Durango one of these days and maybe Utah.
Speaker Change: Okay. Thank you gentlemen, I still would love to come to their anger, one of these days and maybe Utah now.
Speaker Change: see the new package. Come to Durango. Well, it's okay. That does fine. It's easier to get this all makes it even Durango. But whichever. Thank you very much. Talk to you soon. Great. Thank you for the questions.
Speaker Change: Yeah.
Speaker Change: Kevin the Durango.
Speaker Change: Okay.
Speaker Change: That's fine that's easier to get the Salt Lake City, the Durango, but.
Did you ever thank you very much like Houston, great Roger Thanks for the questions.
Alan: The decrease was primarily due to lower sales and gross margin, partially offset by lower sales and marketing expenses and franchise costs. Turning to our balance sheet, we ended the third quarter with a cash balance of $2.1 million, compared to $4.7 million at the end of fiscal year 2023. The net decrease in cash was primarily due to cash used in operations and the purchase of property and equipment, partially offset by the sale of useful assets.
Speaker Change: Thank you there are no further questions.
Speaker Change: Thank you, ladies and gentlemen. This concludes today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation. Thanks, everyone. Thanks, Michelle.
Speaker Change: Thank you ladies and gentlemen. This concludes today's conference call. You may disconnect. Your phone lines at this time and have a wonderful day. Thank you for your participation. Thanks.
Speaker Change: Thanks, everyone and thanks Michelle.
Speaker Change: Youre welcome.
Speaker Change: Thanks for watching!
Speaker Change: Okay.
Speaker Change: [music].
Alan: For the nine months through the end of the third quarter, we spent $2.5 billion in capital expenditures, the highest level for such a time period in over a decade. In the near future, we'll be exploring the use of equipment-based financing as part of our capital structure. We ended the third quarter with total inventories of 3.7 million, roughly flat compared to the year-end fiscal 2023. As of November 30th, 2023, we utilized one point, zero million from our line of credit. However, our balance sheet remains free of any long-term debt.
Okay.
Speaker Change: Yeah.
Okay.
Speaker Change: [music].
With that, I'd like to turn the call back over to Rob for closing remarks. Thanks, Alan. Looking to the close of fiscal 24 and beyond, the actions we've taken over the past year have laid the groundwork for the future of the business. We're in a much stronger position going into the 2025 fiscal year to support and sustain our current business, and take better advantage of new business opportunities than we were entering fiscal 2012. Our efforts and execution of the transformation plan are beginning, and we have the right team in place to accelerate the execution. That concludes our prepared remarks. We'll be glad to answer any questions. Operator back to you. Thank you. If you'd like to ask a question, please press star one one.
Operator: Again, to ask a question, please press star 11. Our first question comes from Jim McElfrey with Dawson James. Your line is open. Yeah, thank you, and good morning. Good morning, Tim.
Jim McElfrey: I'm trying to understand the inventory levels and the issues that you had with the co-packaging. It seems like if you're having trouble with the co-packaging, you should have just shipped out as much inventory as you had, and that inventory level should go down. If you can help me understand what's going on there, Yeah, sure, so typically, our inventory builds going into, let's call it the September-October timeframe, and we have challenges with labor throughout the fiscal year. Back in June, we had to institute a pretty meaningful hourly wage increase to attract new talent to work in the production facility. And then we usually do.
In recent years, I've needed to add on again, as I said in my prepared remarks, anywhere from 15 to 50 folks to package a final box product. So we deliberately managed our inventories lean going into the end of last fiscal year. And it was the ramp-up for the current fiscal year that was made difficult by the labor challenges.
So we would probably have, no, we definitely would have had higher inventory levels had we been able to recruit faster than we had anticipated. And the move to get the outsourcing of the final packaging, which had always been in our strategic plan, was accelerated to make sure that we met as much of the current holiday for 23 as we possibly could. Okay, and then I'm also trying to understand the packaging move. So I, you know, I know that it's been part of the plan, but was it? Was it delayed this quarter, or did you have specific issues with the move this quarter? No, there was no scheduled move at the beginning of the current fiscal year.
As the labor situation unfolded, Durango, it became imperative that we find an immediate solution because we could not get enough labor to do the very manual hand-packing of individual chocolates into assorted boxes or dropping them into what we call these stand-up totes. So, getting the co-packing into Utah in the second week of October really ensured that we could meet the super majority of the demand, but not all of the demand that we possibly could. So it was a very necessary, very immediately needed move.
It happens to fit with a strategic plan, and it completely sets us up for the future, where there's unlimited labor to access in Utah as we ramp up our business. And is that, is that transition complete now? Are there any remaining issues that you need to address in order to finish up that transition? No, that transition was essentially completed while the bus was running at 100 miles an hour.
The good news is some of the extra costs that we incurred in the quarter. We had a different charge from the co-packer for an hourly rate for people. That is moving to per piece pricing as of 11 days ago. So we're going to have, you know, much greater visibility and also accountability for our new co-packing partners to be as efficient as they can be. And that will give us a benefit going forward. Okay. And just two more, if I might. You mentioned capital spending in the quarter. Can you, can you?
Alan: indicate what your capital spending needs are for this fiscal year and next if you have, if you can. Yeah. Let me start and then I'll have Alan finish. So the number we cited was two point five million, that was through November. So that's a nine month number. And Alan, why don't you take it from there? Yeah, no.
Alan: We've essentially spent most of the capital expenditures for the fiscal year. We have some payments remaining, but essentially, we're complete with that. We're currently planning our capital allocation strategy for fiscal 25, which, again, we had a strategic plan that we signaled earlier in the year that said, over the two years, it would be about $6 to $6.5 million.
Alan: So we're currently evaluating that. Again, our priority is to get into operating cash flow positive quickly, but we are monitoring that. But as far as this fiscal year, most of the spend, and when you said that over the two years, the six to six and a half million, were you referring to fiscal twenty four and twenty five or twenty six, twenty four, and twenty five when we announced that earlier in the year?
Okay. Um, and I'm sorry, just one more, the gross margin with the packaging now moved to Utah. Does that just get you back to what prior gross margins were, or should that result in, Uh, nothing's permanent, but let's call it a permanent improvement in gross margin. That's a hard one to answer.
Let me do the best I can and have Alan chime in. Clearly, we're looking to improve margins and doing everything we can to get there. This was really more of a function of ceiling and prevention to do what you can in terms of meeting needs or expanding the opportunities of the business. There's always an added cost when you go outside versus inside.
The fact of the matter is that when you are either paying time and a half or double time to existing employees to shift away from manufacturing product to packing product and or dealing with, um, you know, having to hire expensive temporary talent in Durango. The added cost becomes less of an issue rather than just actual availability to complete what you can complete. So, um, volume solves a lot. And margins get better with volume.
We've been needing to ramp up volume for a couple of years, even before all of us that have joined in the last year and a half or so. So enabling to open up that volume capture without any limitation is going to provide more of a solution with respect to operating margins than I think anything else. Alan, anything to add? No, no, I think that covers it. I think the outsourcing of the packaging itself doesn't improve it.
Alan: But as Rob mentioned, being able to increase throughput is what's going to bring about the margin improvement overall. Okay, very good. Thank you, and I'll talk to you later.
Jim McElfrey: Thank you. I appreciate the questions, Jim. Thank you. Thank you. As a reminder, to ask a question, please press star 11. Our next question comes from Roger Lipton with LFSI. Your line is open. Yes, good morning, Rob and Alan. Good morning, sounds like you're set up, I could say finally, it hasn't been so long, it just seems that way beyond the stock. But you talked about being set up now to deliver against the new demand, omnichannel demand, and so forth. In particular, what are the omni-channels that you see this increased demand on?
Roger Lipton: Great question. And just for everybody's benefit, realize that we have two primary businesses. One and the most important things in our hearts is taking care of our franchisees. And that is, you know, that's the super majority of our business, as everybody knows. But we've had a long-standing, multi-decade business of working with specialty retailers and also have an e-commerce opportunity that we've yet to fully hit the gas pedal on. And so, speaking backwards, e-commerce can be much better met and fulfilled when you have no ceiling on how much boxed chocolate you can make from a labor standpoint.
So, that will open up e-commerce at some point in the very near future. With the specialty retailer, again, we've had multi-decade relationships. We've had particularly excellent fulfillment with a couple of them despite the challenges we had that would like to see us do more volume. And then Andrew Ford and his team have been actively courting other retail opportunities where we are now a more attractive option than some heritage brands that are in the marketplace. And we continue to pursue those and look forward to having further updates in future quarters. And, you mentioned Steve Elf. Deval's, as I recall, it was built on a Chipotle relationship.
Roger Lipton: No, it's Steve Craig. Roger. Yeah. I used a Steve Craig, I could've sworn I used a Steve L. No problem.
Roger Lipton: Okay. Thank you, gentlemen. I still would love to come to Durango one of these days, or maybe Utah, see the new package. Come to Durango. Well, okay, that's fine. It's easier to get to Salt Lake City than to Durango, but whichever.
Operator: Thank you very much. Talk to you soon. Great, Roger. Thanks for the questions. Thank you. There are no further questions. Thank you, ladies and gentlemen. This concludes today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation. Thanks, everyone. Thanks, Michelle. You're welcome. Thanks for watching!