Q1 2025 Rocky Mountain Chocolate Factory Inc Earnings Call

Speaker Change: [music].

Operator: Good evening, ladies and gentlemen. Thank you for standing by.

Operator: And good evening, ladies and gentlemen, thank you for standing by. Welcome to today's conference call to discuss Rocky Mountain Chocolate Factory's financial results for the fiscal first quarter of 2025. At this time, all participants are in a listen-only mode.

Okay.

Speaker Change: And good evening, ladies and gentlemen, thank you for standing by welcome to today's conference call to discuss Rocky Mountain Chocolate factory its financial results for the fiscal first quarter 'twenty 'twenty fives.

Operator: Welcome to today's conference call to discuss Rocky Mountain Chocolate Factory's financial results for the fiscal 1st quarter, 2025. At this time, all participants are needless in the only mode. As a reminder, this conference is being recorded.

Speaker Change: At this time all participants are in a listen only mode.

Operator: As a reminder, this conference call is being recorded. Joining us on the call today is the company's interim CEO, Jeff Geoghegan. Please be advised that this conference call will contain 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.

Speaker Change: As a reminder, this conference is being recorded.

Operator: Joining us on the call today is the company's interim CEO, Jeff and Geygan.

Speaker Change: Joining us on the call today is the company's interim CEO, Jeff Gagan. Please be advised that this conference call will contain statements that are considered forward looking statements under the private Securities Litigation Reform Act of 1995.

Operator: 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. Unknown Attendee, Allen Arroyo, Robert Sarlls, Rocky Moun, The company's presentation also includes certain non-GAAP financial measures, including adjusted EBITDA, as supplemental measures of performance of the business.

Operator: Please be advised that this conference call will contain 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.

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 in the company's filings with the SEC.

Operator: 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: Do not place undue reliance on any forward looking statements, which are being made only as of the date of this call.

Speaker Change: Except as required by law the company undertakes no obligation to publicly update or revise any forward looking statements. The company's presentation also include certain non-GAAP financial measures, including adjusted EBITDA as supplemental measures of performance of the business.

Operator: 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 SEC rules. 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 his website within approximately 24 hours after this call has ended.

Operator: All non-GAAP measures have been reconciled to the most directly comparable GAAP measures in accordance with SEC rules. You will find reconciliation tables and other important information in the earnings press release and Form 8K furnished to the FCC earlier today, which are currently available on the company's Edgar page on the SEC website and will be available on the company's investor relations section of its website within approximately 24 hours after this call has ended. And now, I will turn the call over to the company's interim CEO, Jeff Gagin. Jeff, please go ahead.

Speaker Change: Our non-GAAP measures have been reconciled to the most directly comparable GAAP measures in accordance with FCC rules.

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.

Speaker Change: Relations section of its website within approximately 24 hours. After this call has ended.

Operator: And now, I will turn the call over to the company's Interim CEO, Jeff Gagan. Jeff, please go ahead.

Speaker Change: And now I will turn the call over to the company's interim CEO, Jeff Gagan, Jeff. Please go ahead.

Jeffrey Richart Geygan: Thank you and good evening, everyone. We've been working through a transitional period at Rocky Mountain Chocolate Factory as we revamp the framework of our transformational plan and the leadership team assigned to it. My intention is to utilize today's call to address recent developments and to elaborate on the components of our updated three-year plan. Before I continue, I'd like to take a moment to formally introduce myself as this marks the first occasion where I've had the privilege of addressing our shareholders, employees, and franchisees in this forum.

Jeffrey Geygan: Thank you and good evening, everyone. We've been working through a transitional period at Rocky Mountain Chocolate Factory as we revamped the framework of our transformational plan and leadership team assigned to execute it. My intention is to utilize today's call to address recent developments into elaborate on the components of our updated three-year strategic plan.

Jeff Gagan: Thank you and good evening, everyone. We've been working through a transitional period at Rocky Mountain Chocolate factory as we revamped the framework of our transformational plan our leadership team signed executed by.

Speaker Change: My intention is to utilize today's call to address recent developments and to elaborate on the components of our updated three year strategic plan.

Jeffrey Geygan: Before I continue, I'd like to take a moment to formally introduce myself. This marks the first occasion where I've had the privilege of addressing our shareholders, employees, and franchises in this form. My background includes over three decades of experience in the capital markets and investment management with an emphasis on strategic financial analysis, active engagement, and supporting the execution of operational turnaround. In August of 2021, I was appointed to the Board of Directors of RMCF, serving as Board Chair from May of 2022 to June of 24, where I advise prior leadership on the development of RMCF's transformational plan.

Jeff Gagan: Before I continue I'd like to take a moment to formally introduce myself.

Speaker Change: March the first occasion, where I've had the privilege of addressing our shareholders plays and franchisees in this form.

Jeffrey Richart Geygan: My background includes over three decades of experience in the capital markets and investment management with an emphasis on strategic financial analysis. Unknown Attendee, Allen Arroyo, Robert Sarlls, Rocky Moun, In August of 2021, I was appointed to the Board of Directors of RMCF, serving as its chair from May 22 to June 24, where I advised prior leadership on the development of RMCF's transformational plan.

Speaker Change: My background includes over three decades of experience in the capital markets and investment management with an emphasis on strategic financial analysis.

Jeff Gagan: Active engagement and supporting the execution of operational turnarounds.

Speaker Change: In August of 2021, I was appointed to the board of directors of our Mcf, serving as board chair from May of 'twenty, two to June 24, where I advised prior leadership on the development of <unk>.

Jeffrey Geygan: Well, the company achieves several key objectives during the initial launch of our strategic plan, including the divestiture of the non-core, useful, frozen yoga business. Earlier this year, they came clear to the board that adjustments towards the strategic framework and executive team would be necessary to refocus the operational turnaround we were seeking.

Jeffrey Richart Geygan: While the company achieved several key objectives during the initial launch of our strategic plan, including the divestiture of the non-core U-Swirl frozen yogurt business, Earlier this year, it became clear to the board that adjustments to our strategic framework and executive team would be necessary to refocus the operational turnaround we were, Recognizing the need for direct on-site leadership at our production facility, on May 16th, I made the decision to move to Durango and step into the role of interim CEO, relinquishing my duties as RMCF's board chair in accordance with our governance policies, while also taking a leave of absence from Global Value Investment Corp. in order to dedicate my full time and attention to returning RMCF to profitability and long-term growth. We're in the final stages of appointing a new CFO to lead our finance. One who will live and work in Durango.

Speaker Change: Amcs transformational plan.

Speaker Change: While the company achieved several key objectives during the initial launch of our strategic plan, including the divestiture of noncore U swirl frozen yogurt business.

Speaker Change: Earlier this year it became clear to the board that adjustments to our strategic framework and executive team would be necessary to refocus the operational turnaround we were seeking.

Jeffrey Geygan: Recognizing one need for direct onsite leadership at our facility, on May 16th, I made a decision to move to Durango and step into the role of Interim CEO, relinquishing my duties as RMCS Board Chair in accordance with the governance policies, but also taking a leave of absence from Global Value Investment Core in order to dedicate my full-time attention to returning RMCS to profitability and long-term growth. We're in the final stages of appointing a new CFO to lead our finance team, one who will live and work in Durango. We expect to release more detail shortly. The mandate from the Board of Directors is clear.

Speaker Change: Recognizing the need for direct on site leadership at our production facility on May 16th I made the decision to move to Durango and step into the role of interim CEO relinquishing my duties as our Mcs Board chair in accordance with our governance policies. While also taking a leave of absence from global value investment Corp in order to that.

Speaker Change: Kate My full time and attention to returning RMC app to profitability and long term growth.

Speaker Change: We're in the final stages of appointing a new CFO to lead our finance team, one who live and work in Durango, we expect to release more details shortly.

Jeffrey Richart Geygan: We expect to release more details shortly. The mandate from the Board of Directors is clear. First, identify and rectify deficiencies in our prior multi-year strategy to more effectively build towards a profitable future for the business. Unknown Attendee, Allen Arroyo, Robert Sarlls, and Rocky Moun. Third, return our retail store count to growth as we exit fiscal 25 and establish a foundation upon which we can achieve our three-year growth target. And finally, oversee the reconstruction of a strong executive team based on site and at our Durango production facility who possess the skills to execute our strategic plan.

Jeffrey Geygan: First, identify and rectify deficiencies in our prior multi-year strategy to more effectively build towards a profitable future for the business. Second, improve our near-term liquidity position of the company. Third, return our retail store account to growth as we exit fiscal 25 and establish a foundation upon which we can achieve our three-year growth target. Finally, obviously, the reconstruction of the strong executive team based onsite in our Durango production facility who possess the skills to execute our strategic plan.

The mandate from the board of Directors is clear first identified rectify deficiencies in our prior multi year strategy to more effectively build towards a profitable future for the business.

Speaker Change: Second improve our near term liquidity position of the company.

Speaker Change: Third return, our retail store count to growth as we exit fiscal 'twenty five and establish a foundation upon which we can achieve our three year growth target.

Speaker Change: And finally oversee the reconstruction of the strong executive team based onsite in our drank a production facility, who possess the skills to execute our strategic plan.

Jeffrey Richart Geygan: I'll now expand upon the updates to our strategic plan and the recent groundwork we've laid to improve our liquidity position. For those newer to our s Unknown Attendee, Allen Arroyo, Robert Sarlls, and Rocky Moun, our business strategy is designed to better align sales, marketing, and production, which will, in turn, enable us to strategically expand our store network and increase our production throughput with targeted capital investment. This alignment will also ensure more timely delivery of products and services to customers across each of our three sales channels, which are franchisee, e-commerce, and specialty marketing.

Jeffrey Geygan: I now expand upon the update to our strategic plan and the recent groundwork we've made to improve our liquidity position. For those newer to our story, Rocky Mountain Talk Effectory is a decades-old Colorado business that has developed notable brand equity, a loyal franchise base, and generations of top-level living consumers. Our business strategy is designed to better align sales, marketing, and production, which will turn it able us to strategically expand our store network and increase our production throughput with targeted capital investments. This alignment will also ensure more timely delivery of products and services to customers across each of our three sales channels, which are franchisee, e-commerce, and specialty markets.

Speaker Change: Now expand upon the updates to our strategic plan and the recent groundwork we've laid to improve our liquidity position.

For those newer to our story Rocky Mountain Chocolate factory as a decades old Colorado business and its developed notable brand equity a loyal franchise base and generations of chocolate loving consumers.

Our business strategy is designed to better align sales marketing and production, which will in turn enable us to strategically expand our store network and increase our production throughput with targeted capital investments.

Speaker Change: This alignment will also ensure more timely delivery of products and services to customers across each of our three sales channels, which are franchisee E.

Jeffrey Richart Geygan: We intend to execute our strategic plan by empowering our employees, franchisees, and co-branding partners with data-driven insights and analytics to improve their merchandising, product assortment, and customer experience. We are committed to enabling our franchisees to make timely and well-informed decisions to improve store-level profitability and sales growth. We believe our best and most immediate revenue opportunity lies with our current franchise store network. Supporting our franchisees remains our number one priority.

Speaker Change: Commerce and specialty markets.

Jeffrey Geygan: We intend to execute our strategic plan by empowering our employees, franchisees, and co-branding partners with data-driven insights and analytics to improve their merchandising, product, and franchisee's to make timely and well-informed decisions to improve store-level profitability and sales group. We believe our best and most immediate revenue opportunity lies with our current franchise store network; supporting our franchisees remains our number one priority. To further our commitment to improving the franchisee experience, we are deploying dedicated business consultants. We'll visit our franchisees nationwide, implement business optimization strategies, and provide insights and tend to allow stores to operate more profitably.

We intend to execute our strategic plan by empowering our employees franchisees and co branding partners with data driven insights and analytics to improve their merchandising product assortment and customer experience.

Speaker Change: We are committed to enabling our franchisees to make timely and well informed decisions to improve store level profitability and sales growth.

Speaker Change: We believe our best and most immediate revenue opportunity lies with our current franchise store network supporting our franchisees remains our number one priority.

Jeffrey Richart Geygan: To further our commitment to improving the franchisee experience, we are deploying dedicated business consultants who will visit our franchisees nationwide to implement business optimization strategies and provide insights intended to allow stores to operate more profitably. For example, we need to better communicate our industry-leading volume-based royalty payment program, which creates a mutually beneficial relationship that offers discounted royalty rates for franchisees that emphasize the most popular products made in our Durango facility.

Speaker Change: To further our commitment to improving the franchise. The experience we are deploying dedicated business consultants, who will visit our franchisees nationwide implement business optimization strategies and provide insights intended to allow stores to operate more profitably for example, we need to better communicate our industry leading.

Jeffrey Geygan: For example, we need better communicate our industry-leading volume-based loyalty payment program, which creates a mutually beneficial relationship that offers discounted relative rates for franchisee's that emphasize the most popular products made in our range of facilities. Arroyo. Our initial analysis of the opportunity within our retail store network is promising, and we believe we can return the same store sales volume growth as we exit this fiscal year on top of the 15% price increase to franchisees that went into effect on June 1st. In addition to improving store level economics, our total network of stores must return to growth.

Speaker Change: Volume based royalty payment program, which creates mutually beneficial relationship that offers discounted royalty rates for franchisees that emphasize the most popular products made in our Durango facility.

Jeffrey Richart Geygan: Our initial analysis of the opportunity within our retail store network is promising, and we believe we can return the same store sales volume growth as we exit this fiscal year on top of the 15% price increase for franchisees that went into effect on June 1st. In addition to improving store level economics, our total network of stores must return to growth. Over the past few months, we've initiated agreements for several new stores, as well as a newly designed kiosk concept that will be launched soon.

Speaker Change: Our initial analysis of the opportunity within our retail store network is promising and we believe we can return to same store sales volume growth as we exit this fiscal year on top of 15% price increase to franchisees that went into effect on June 1st.

Speaker Change: In addition to improving store level economics, our total network of stores must return to growth over the past few months, we've initiated agreements with several new stores as well as newly designed kiosk concept that will be launched soon.

Jeffrey Geygan: Over the past few months, we've initiated agreements for several new stores as well as newly designed P.A.S. concept that will be launched soon. A recent and important change to our expansion strategy has been depth to size and store transfers and place and store closures. Rather than having a franchisee, close to store that we believe is in a favorable location, but under operated, we're now actively taking steps to keep the location and replace the operator. We've successfully transferred ownership of two legacy stores recently. For fiscal year 25, we're targeting net and store growth, marking the end of our multi-year pattern of store contraction.

Jeffrey Richart Geygan: A recent and important change to our expansion strategy has been to emphasize historic transfers in place of historic closures. Unknown Attendee, Allen Arroyo, Robert Sarlls, Rocky Moun, We're now actively taking steps to keep the location and replace the operator.

A recent and important change to our expansion strategy has been depth the size store transfers and placements toward hausers, rather than having a franchisee closed the store that we believe is in a favorable location, but under operated.

Speaker Change: We're now actively taking steps to keep location and replace the operator, we've successfully transferred ownership of two legacy stores recently.

Speaker Change: For fiscal year 'twenty five we're targeting net store growth Mark the end of our multi year pattern of store contraction.

Jeffrey Richart Geygan: We've successfully transferred ownership of two legacy stores recently. For fiscal year 25, we're targeting net store growth, marking the end of our multi-year pattern of store contraction. This will be accomplished by opening new stores across eight strategic markets that we have identified, including Boston, New York City, Atlanta, Chicago, Portland, Seattle, and a few others. These markets have been selected based upon convenient distribution routes and favorable consumer demographics.

Jeffrey Geygan: This will be accomplished by opening new stores across eight strategic markets that we have identified, including Boston, New York City, Atlanta, Chicago, Portland, Seattle, and a few others. These markets have been selected based upon convenient distribution routes and favorable consumer demographics.

Speaker Change: This will be accomplished by opening new stores across eight strategic markets that we have identified including Boston, New York City, Atlanta, Chicago, Portland, Seattle, and a few others. These markets have been selected based upon convenient distribution routes and.

Jeffrey Geygan: Beyond our store network, another key growth opportunity is within our e-commerce channel, and this is in this necessary and supportive sales channel with the opportunity to drive incremental revenue and build greater brand awareness. Improving inventory management is imperative the success of our e-commerce strategy by internally sufficient stock with products for our franchisees as well as online customers. Today, e-commerce accounts for just 3% of total revenue. We expect to significantly increase that mix over the next three years. Additionally, our updated strategic plan recognizes the important role played by our specialty market retailers and co-branded partners. The presence of arm CF products in stores like Costco not only creates favorable economics for the company, but more importantly serves as a means to which we can increase awareness and reach of our products with the ultimate goal of driving more traffic to our franchise stores.

Jeffrey Richart Geygan: Beyond our store network, another key growth opportunity is within our e-commerce channel. This is a necessary and supportive sales channel with the opportunity to drive incremental revenue and build greater brand awareness. Improving inventory management is imperative to the success of our e-commerce strategy by ensuring we have sufficient stock of products for our franchisees as well as online customers. Today, e-commerce accounts for just 3% of total revenue.

Speaker Change: Favorable consumer demographics.

Speaker Change: Beyond our store network. Another key growth opportunity is within our E Commerce channel and this isn't necessary in support of sales channel with the opportunity to drive incremental revenue and build greater brand awareness.

Speaker Change: Improving inventory management is imperative the success of our ecommerce strategy by internally have sufficient stock with products for our franchisees as well as online customers.

Speaker Change: Today E Commerce accounts for just 3% of total revenue, we expect to significantly increase that mix over the next three years.

Jeffrey Richart Geygan: We expect to significantly increase that mix over the next three years. Additionally, our updated strategic plan recognizes the important role played by our specialty market retailers and co-branded partners. The presence of RMCF products in stores like Costco not only creates favorable economics for the company but, more importantly, a means through which we can increase awareness and reach of our products with the ultimate goal of driving more traffic to our franchised store.

Speaker Change: Additionally, our updated strategic plan recognizes the important role played by our specialty market retailers and co branded partners.

Speaker Change: The presence of arms CF products in stores like Costco, not only creates favorable economics to the <unk>.

Speaker Change: But more importantly services means through which we can increase awareness and reach of our products with the ultimate goal of driving more traffic to our franchised stores.

Jeffrey Richart Geygan: I'd be remiss if I didn't mention the synergies and brand exposure created through Unknown Attendee, Allen Arroyo, Robert Sarlls, and Rocky Moun. Over the next three years, we intend to develop these strategic relationships to further drive brand awareness and throughput while expanding our tool set for inventory management. Our mission to deliver high-quality confectionery products, along with the seasonal nature of our business, creates a challenging paradigm for aligning inventory levels with consumer demand.

Jeffrey Geygan: I've been remiss by didn't mention the synergies and brand exposure creative through work with our primary co-brand partner, co-hostone creamry, which includes more than 100 locations today. Over the next three years, we intend to develop these strategic relationships to further drive brand awareness and throughput while expanding our toolset for inventory management. Our business deliver high quality confectionary products, along with seasonal nature of our business, creates a challenging paradigm for aligning inventory levels with consumer demand. As we look to increase our production output in the years to come, these channels outside of our franchise network represent the means to which we can manage incremental inventory produced outside of our traditional peak seasonal demand.

Speaker Change: I'd be remiss, if I didn't mention the synergies and brand exposure creative to.

Work with our primary co brand partner Cold Stone creamery, which includes more than 100 locations today.

Speaker Change: Over the next three years, we intend to develop these strategic relationships to further drive brand awareness and throughput, while expanding our toolset for inventory management.

Speaker Change: Our mission to deliver high quality confectionery products, along with seasonal nature of our business creates a challenging paradigm for aligning inventory levels with consumer demand.

Jeffrey Richart Geygan: As we look to increase our production output in the years to come, these channels outside of our franchise network represent the means through which we can manage incremental inventory produced outside of our traditional peak seasonal demand. Expanding on this point, as well as our production and supply chain considerations, to be sure, our performance during the holiday season of fiscal 24 did not meet our expectations and was a key factor that led to the implementation of many of the strategic and organizational changes I've outlined. Unfortunately, the shortfall is attributable primarily to business execution missteps, bottlenecks in our production output, and general inefficiencies across our supply chain.

Speaker Change: As we look to increase our production output in the years to come these channels outside outside of our franchise network represent the means through which we can manage incremental inventory produced outside of our traditional peak seasonal demand.

Jeffrey Geygan: Expanding on this point as well as our production and supply chain consideration.

Speaker Change: Expanding on this point as well as our production and supply chain considerations.

Jeffrey Geygan: James, to be sure, our performance during the holiday season of fiscal 24 did not meet our expectation and was a key factor that led to the implementation of many of the strategic and organizational changes I've outlined. Unfortunately, the shortfall is attributable primarily to business execution missteps, bottlenecks in our production output, and general inefficiencies across our supply chain. We deployed an excess of 3 million and capex towards new equipment and production efficiency investments over the past year, in part to address these supply chain challenges, and we intend to continue investing in the business at a more measured pace to further support and augment our prior investments.

Speaker Change: To be sure our performance during the holiday season of fiscal 'twenty four did not meet our expectations and was a key factor that led to the implementation of many of the strategic and organizational change I've outlined.

Speaker Change: Unfortunately, the shortfall is attributable primarily to business execution missteps bottlenecks in our production output and general inefficiencies across our supply chain.

Jeffrey Richart Geygan: We deployed in excess of $3 million in CapEx towards new equipment and production efficiency investments over the past year, in part to address these supply chain challenges, and we intend to continue investing in the business at a more measured pace to further support and augment our prior investments, all designed to improve product quality, predictability, and cost-effective production from our Durango facility. We believe these investments will enable us to drive material improvements in our output, increasing current capacity in tandem with providing refinements across sourcing and procurement, and deliver cost savings as we scale our efforts.

Speaker Change: We deployed in excess of $3 million in capex towards new equipment of production efficiency investments over the past year and part to address the supply chain challenges and we intend to continue investing in the business at a more measured pace to further support and augment our prior investments all designed to improve product quality predict.

Jeffrey Geygan: All designed to improve product quality, predictability, and cost-effective production from our Durango facility. We believe these investments will enable us to drive material improvements in our output, increase in current capacity and, tandem with providing refinement across sourcing and procurement, and deliver cost savings as we scale our efforts.

Speaker Change: Stability and cost effective production from our Durango facility.

Speaker Change: We believe these investments will enable us to drive material improvements in our output.

Speaker Change: Recent current capacity in tandem with providing refinement to cross sourcing and procurement and will deliver cost savings as we scale our efforts.

Jeffrey Geygan: To finance these investments and initiatives, we'll need to improve our liquidity profile. We're currently negotiating agreements to add several million dollars of additional liquidity to a combination of non-core asset sales, a new term loan agreement, and replacing our current credit facility. We're also improving our supply chain and logistics systems with the implementation of a new ERP system that will deepen our insights into operations and serve as a foundation for many of our data-driven initiatives. It was apparent that our business required a current generation ERP solution that can provide better real time insights in your production and business operations.

Jeffrey Richart Geygan: To finance these investments and initiatives, we'll need to improve our liquidity profile. We're currently negotiating agreements to add several million dollars of additional liquidity through a combination of non-core asset sales, a new term loan agreement, and replacing our current credit facility. We're also improving our supply chain and logistics systems with the implementation of a new ERP system that will deepen our insights into operations and serve as a foundation for many of our data-driven initiatives.

Speaker Change: To finance these investments and initiatives will need to improve our liquidity profile. We're currently negotiating agreements to add several million dollars of additional liquidity through a combination of noncore asset sales.

Speaker Change: The new term loan agreement and replacing our current credit facility.

We're also improving our supply chain and logistics systems with the implementation of a new ERP system.

Speaker Change: That will deepen our insights into operations and serve as a foundation for many of our data driven initiatives.

Jeffrey Richart Geygan: Unknown Attendee, Allen Arroyo, Robert Sarlls, Rocky Moun, Our updated ERP system will improve our responsiveness at the manufacturing level and will allow us to orient our production around our fastest moving products. We expect to deploy our new ERP system this fall ahead of the holiday season.

Speaker Change: It was apparent to our business required current generation ERP solution that can provide better real time insights into our production and business operations.

Jeffrey Geygan: Our updated ERP system will improve our responsiveness at the manufacturing level and allow us to orient our production around our fastest moving products. We expected to deploy our new ERP system this fall ahead of the holiday season. We're also in the process of launching a new PLS system across our network of franchise stores. Today we've installed 24 units, with an additional 51 store scheduled to be installed within months. We expect to have over 100 stores using our new PLS by fiscal year-end. This will provide additional insights for our business consultants as they continue to engage with operators to improve store-level sales and profitability.

Speaker Change: Our updated ERP system will improve our responsiveness at the manufacturing level and will allow us to Orient our production around our fastest moving products.

Speaker Change: We expect to deploy our newly ERP system. This fall ahead of the holiday season.

Jeffrey Richart Geygan: We're also in the process of launching a new POS system across our network of franchise stores. Unknown Attendee, Allen Arroyo, Robert Sarlls, Rocky Moun, We expect to have over 100 stores using our new POS by fiscal year end. This will provide additional insights for our business consultants as they continue to engage with operators to improve store-level sales and profitability. All of this is being managed under the steady hand of our Senior Vice President of IT, Ryan McGrath, who has done an excellent job remaining on schedule and within budget.

Speaker Change: We're also in the process of latching, a new Pos system across our network of franchise stores today.

Speaker Change: To date, we have installed 24 units with an additional 51 stores scheduled to be installed within months.

Speaker Change: We expect to have over 100 stores using our new Pos by fiscal year end.

Speaker Change: This will provide additional insights for our business consultants as they continued to engage with the operators to improve store level sales and profitability.

Jeffrey Geygan: All of this is being managed under the steady hand of our Senior Vice President of IT, Ryan McGrath, who is doing an excellent job remaining on schedule and within budget.

All of this is being managed under the steady hand of our senior Vice President of <unk>.

Speaker Change: Ryan Mcgrath, who has done an excellent job remaining on schedule and within budget.

Jeffrey Geygan: In closing, I'd like to share a few financial and operational targets we've established for both the year ahead and the three years out. Exiting fiscal 25, we believe we can return to a 20% gross margin. We expect our total store footprint to return to growth in fiscal 25. We're returning to adjusted even top profitability as we exit the year. Looking ahead three years to the conclusion of fiscal year 27, we believe we can generate gross margins in the range of 25 to 30% driven by a combination of consistent revenue and volume growth. Disciplined operating expense control and franchise store expense.

Jeffrey Richart Geygan: In closing, I'd like to share a few financial and operational targets we've established for both the year ahead and the three years out. Exiting fiscal 25, we believe we can return to a 20% gross margin. We expect our total store footprint to return to growth in fiscal 25. And we're returning to adjusted EBITDA profitability as we exit the year. Looking ahead three years to the conclusion of fiscal year 27, we believe we can generate gross margins in the range of 25 to 30% driven by a combination of consistent revenue and volume growth, disciplined operating expense control, and franchise store expansion. When combined with return to revenue growth, increased store count, and prudent OPEX management, we believe that the business can generate a 10 to 12% adjusted EBITDA margin in fiscal year 27.

Speaker Change: In closing I'd like to share a few financial and operational targets. We've established for both the year ahead and the three years out.

Speaker Change: Exiting fiscal 'twenty five we believe we can return to a 20% gross margin.

Speaker Change: We expect our stock total store footprint to return to growth in fiscal 'twenty five we're returning to adjusted EBITDA profitability as we exit the year.

Speaker Change: Looking ahead three years to the conclusion of fiscal year 'twenty seven we believe we can generate gross margins in the range of 25% to 30% driven by a combination of consistent revenue and volume growth.

Jeffrey Geygan: Johnson. When combined with return to revenue growth, increased our count, and prudent opx management, we believe the business can generate a 10 to 12% adjusted e-vit on margin in fiscal 27.

Speaker Change: Disciplined operating expense control and franchise store expansion.

Speaker Change: When combined with returned to revenue growth increased store count and prudent Opex management, we believe the business can generate 10% to 12% adjusted EBITDA margin in fiscal 'twenty seven.

Jeffrey Richart Geygan: Before I open the call to Q&A, I'd like to reiterate a few key themes. Despite the recent significant challenges that necessitated a broad range of senior management departures and a strategic realignment, we have a well-conceived strategic plan that we expect to lead to a renewal of growth. The steps I've outlined, refining our strategic framework. Unknown Attendee, Allen Arroyo, Robert Sarlls, Rocky Moun, upgrading our leadership team, expanding our retail e-commerce presence, and investing in production and supply chain improvements are all aimed at driving sustainable growth and profitability to enhance shareholder value.

Jeffrey Geygan: Before I open the call with Q&A, I'd like to reiterate a few key things. These spite the recent significant challenges that necessitated a broad range of senior management to researchers, and as strategic agreement, we have a well-conceived strategic plan that we expect to lead to a renewal of growth. The steps of outlined, refining our strategic framework, strengthened our liquidity position, upgrade in our leadership team, expanding our retail e-commerce presence, and investing in production and supply chain improvements, are all aimed to drive a sustainable growth profitability to enhance shareholder value. The company continues to have a well-recognized brand, a loyal consumer following, and a resilient customer base.

Speaker Change: Before I open the call to Q&A I'd like to reiterate a few key themes.

Speaker Change: Despite the recent significant challenges that necessitated a broad range of senior management departures and a strategically alignment we have a well conceived strategic plan that we expect to lead to a renewal of growth.

Speaker Change: These steps have outlined refining our strategic framework strengthen our liquidity position.

Upgrading our leadership team expanding our retail ecommerce presence and investing in production and supply chain improvements are all aimed at driving sustainable growth and profitability to enhance shareholder value.

Speaker Change: The company continues to have a well recognized brand a loyal consumer following and a resilient customer base with confident the initiatives. We have begun to implement since I arrived in Durango will position us to achieve our future targets and return Rocky Mountain Chocolate factory to a state of sustainable profitable growth.

Jeffrey Richart Geygan: The company continues to have a well-recognized brand, a loyal consumer following, and a resilient customer base. We're confident the initiatives we've begun to implement since I arrived in Durango will position us to achieve our future targets and return Rocky Mountain Chocolate Factory to a state of sustainable and profitable growth. I want to thank our Board of Directors for their support during this challenging time. I'd also like to recognize our senior leadership team in Durango and beyond, who have been outstanding in their support, insights, and extremely hard work in helping to stabilize our business and engage wholeheartedly in our newly developed strategic path forward. Operator, I'll now take questions.

Jeffrey Geygan: With confident initiatives we've begun to implement since I arrived in Durandle, possessing us to achieve our future targets and return Rocky Mouth talk-up battery to a state of sustainable and profitable growth.

Jeffrey Geygan: I want to thank our board of directors for their support during this challenging time. I'd also like to recognize our senior leadership team in Angle-Mion, who have been outstanding in their support, insights, and extremely hard work, and helping to stabilize our business and engage wholeheartedly in a newly developed strategic path forward.

Speaker Change: I want to thank our board of directors for their support during this challenging time.

Speaker Change: I'd also like to recognize our senior leadership team and to Wrangle Mian who've been outstanding and their support insights and extremely hard work in helping to stabilize our business and engage wholeheartedly and a newly developed strategic path forward.

Operator: Operator, I'll now take questions. Thank you, ladies and gentlemen. Before we open the call for live Q&A, the company would like to address questions that have been received via email over the past week.

Speaker Change: Operator, I will now take questions.

Operator: Thank you. Ladies and gentlemen, before we open the call for live Q&A, the company would like to address questions that have been received via email over the past week. I would now like to turn the call over to Sean Mansouri, Rocky Mountain Chocolate Factory's External Investor Relations Advisor.

Speaker Change: Okay.

Speaker Change: Thank you, ladies and gentlemen, before we open the call for live Q&A.

Speaker Change: Company would like to address questions that have been received via E mail over the past week I would now like to turn the call over to Sean Mansouri Rocky Mountain Chocolate factory's external Investor Relations adviser.

Sean Mansouri: I would now like to turn the call over to Sean Mancere, Rocky Mouth Chocolate Factories, external investor relations advisor. Thank you, Latif. And thank you to everyone who submitted questions over the past week, and even as recently over the past hour after issuing our results.

Sean Mansouri: Thank you, Lateef. And thank you to everyone who submitted questions over the past week and, even as recently as this past hour after issuing our results. So our first question to address here, Jeff, what's the current status of the search for both a permanent CEO and CFO?

Sean Mansouri: Thank you Latif and thank you to everyone, who submitted questions over the past week and even as recently over the past hour after issuing our results. So our first question to address here, Jeff What's the current status of the search for a permanent CEO and CFO.

Sean Mansouri: So our first question to address here, Jeff, what's the current status of the search for both a permanent CEO and CFO? Thanks, Sean. We're moving forward with both searches and expect announcements shortly.

Jeffrey Richart Geygan: Thanks, Sean. We're moving forward with both searches and expect to have announcements shortly.

Thanks, Sean we're moving forward with both searches and expect to have announcements shortly.

Sean Mansouri: Okay.

Jeffrey Richart Geygan: Okay. And can you expand on your highest priorities for capital allocation in the next 12 to 36 months?

Sean Mansouri: And can you expand on your highest priorities for capital allocation in the next 12 to 36 months? Yeah, of course. Investing in production, facility, and derango to improve cost efficiency and uptime operations, continuing to build out our distribution system and committing to expand store account with multi-unit operators while investing in our brand and store design.

Speaker Change: Okay and can you expand on your highest priorities for capital allocation in the next 12 months to 36 months.

Jeffrey Richart Geygan: Of course. Investing in a production facility in Durango to improve cost efficiency and uptime operations, continuing to build out our distribution system, and committing to expand store count with multi-unit operators while investing in our brand and store design.

Speaker Change: Of course investing in production facility in Durango to improve cost efficiency and uptime operations.

Speaker Change: Continuing to build out our distribution system.

Speaker Change: And committing to expand store count with multi unit operators, while investing in our brand and store design.

Jeffrey Richart Geygan: Great. And can you expand upon the product mix that you believe will help to reinvigorate sales and expand gross margins? What are your fastest moving and highest margin products?

Sean Mansouri: Great.

Sean Mansouri: And can you expand upon the product mix that you believe will help to reinvigorate sales and expand gross margins? What are your fastest moving in highest margin products? Yeah, sure. Our most popular items are milk become bears, peanut butterpales, and English top of all, of which are high-volume items. It's most efficient to produce long runs of our popular items, all of which have leading profit margins. We'll drive greater sales penetration across our system by ensuring we have our most popular products in all locations and available in inventory to meet demand.

Speaker Change: Great and can you expand upon the product mix that you believe will help to reinvigorate sales and expand gross margins.

Jeffrey Richart Geygan: Yeah, sure. Our most popular items are milk pecan bears, peanut butter pails, and English coffee, all of which are high-volume items. It's most efficient to produce long runs of our popular items, all of which have leading profit margins, will drive greater sales penetration across our system by ensuring we have our most popular products in all locations and available in inventory to meet demand.

Speaker Change: Are your fastest moving and highest margin products.

Speaker Change: Yes, sure our most popular items are milk become bears a peanut butter pales in English coffee all of which are high volume items.

Speaker Change: It's most efficient to produce long runs of our popular items all of which have leading profit margins will drive greater sales penetration across our system by ensuring we have our most popular products in all locations and available inventory to meet demand.

Sean Mansouri: Great. And how are you thinking about the geographic expansion strategy for Rocky Mountain Chocolate Factory? We're focused on developing markets in which there are favorable demographics and easily expandable distribution lanes such as take Boston, New York City, Atlanta, or Seattle, Portland, and on into California.

unknown: Unknown Attendee, Allen Arroyo, Robert Sarlls, and Rocky Moun

Speaker Change: Great.

And how are you thinking about the geographic expansion strategy for Rocky Mountain Chocolate factory.

Jeffrey Richart Geygan: We're focused on developing markets in which there are favorable demographics and easily expandable distribution lanes, such as, say, Boston, New York City, Atlanta, or Seattle, Portland, and on into California.

Speaker Change: We're focused on developing markets in which there are favorable demographics and easily expandable distribution lanes, such as tape, Boston, New York City, Atlanta, or Seattle, Portland and on into California.

Sean Mansouri: Okay.

Sean Mansouri: And last question here, what is the board's long-term vision for the RMCF brand, the franchisees, and the manufacturing operations? Yeah. Great question. To develop a best-in-class franchise offering based upon a broad network of stores, continuing to provide premium confectionery products supported by expanded e-commerce sales.

Jeffrey Richart Geygan: And last question here: What is the board's long-term vision for the RMCF brand, the franchisees, and the manufacturing operation? Yeah, great.

Speaker Change: Okay.

Speaker Change: And last question here, what is the board's long term vision for the RMC up brand the franchisees and the manufacturing operations.

Jeffrey Richart Geygan: Yeah, great question. To develop a best-in-class franchise offering based upon a broad network of stores continuing to provide premium confectionery products supported by expanded e-commerce sales.

Speaker Change: Yes, great question to develop a best in class franchise offering based upon a broad network of stores continuing to provide premium confectionery products supported by expanded E Commerce sales.

Sean Mansouri: Great.

Sean Mansouri: Great. Lateef, that wraps up the questions that came in via email. If you'd like to open it up for live questions, please. Yes, sir. As a reminder, to ask a question, you will need to press

Sean Mansouri: Latif, that wraps up the Q&A that came in via email. If you'd like to open it up for live Q&A, please.

Speaker Change: Great.

Speaker Change: That wraps up the Q&A that came in via email if you'd like to open it up for live Q&A. Please.

Operator: Yes, sir. As a reminder, to ask a question, you will need to press star one one on your telephone. Again, that's star one one on your telephone to ask a question. To remove yourself from the question queue, you may press star one one again. Please stand by while we compile the Q&A roster. Again, that's star 11 to ask a question at this time. This does conclude today's conference call. You may now disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.

Operator: Yes, sir. As a reminder to ask a question, you will need to press star 1-1 on your telephone. Again, that star 1-1 on your telephone to ask a question.

Speaker Change: Yes, Sir as a reminder to ask a question you will need to press star one one on your telephone again Thats Star one one on your telephone to ask a question to remove yourself from the question queue. You May Press Star one one again, please standby, while we compile the Q&A roster.

Operator: To remove yourself from the question, Q, you may press star 1-1 again. Please stand by while we compile the Q&A roster. Again, that star 1-1 to ask a question at this time.

Speaker Change: Again, Thats Star one one to ask a question at this time.

Operator: This does conclude today's conference call.

Speaker Change: Yeah.

Operator: You may now disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.

Speaker Change: This does conclude today's conference call.

Speaker Change: You may now disconnect your phone lines at this time and have a wonderful day.

Speaker Change: Thank you for your participation.

Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Sure.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: Yeah.