Q3 2025 Rocky Mountain Chocolate Factory Inc Earnings Call
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Speaker Change: 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 third quarter 2025. At this time, all participants are in a listen-only mode. As a reminder, this conference is being recorded.
Speaker Change: Joining us on the call today is the company's interim CEO Jeff Geygan and CFO Carrie Cass.
Speaker Change: Please be advised, this conference call will contain statements that are considered forward-looking statements under the Private Security Litigations 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: Acceptance 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-GAAP financial measures, including Adjust the CBD as supplemental measures of performance of the business.
Speaker Change: All non-GAP measures have been reconciled to the most directly comparable GAP measures in accordance with FCC rules.
Speaker Change: You will find reconciliation, tables, and other important information in the earnings press release in Form 8K, furnished to the SEC earlier today.
Speaker Change: and are currently available on the company's EdGuard page on the SEC's website and will be available on the company's investor relations section of the website within approximately 24 hours after this call has ended.
Speaker Change: And now, I would like to turn the call over to the company's interim CEO, Jeff Geygan. Jeff, please go ahead.
Jeff Geygan: Thank you and good afternoon. This quarter we continue to advance our initiatives to strengthen Rocky Mountain Chocolate Factory's foundation and drive future revenue growth and profitability.
Jeff Geygan: Building on the initiatives discussed during our last call, we have concentrated on improving our liquidity, revitalizing our franchise network, and executing key operational priorities as we advance through this transformational process.
Jeff Geygan: The results from the current quarter mask the underlying qualitative improvements resulting from the transformation of the company and the evolution that involves us doing things differently.
Jeff Geygan: Today we'll share updates on these initiatives and highlight our ongoing commitment to delivering value for all stakeholders.
Jeff Geygan: Beginning with new store openings, we recently announced plans for two new stores and one new kiosk in three U.S. markets including Chicago, Illinois, Charleston, South Carolina, and Brandon, Florida.
Jeff Geygan: Each of these openings are being launched with existing Rocky Mountain Chocolate Factory store owners validating our improved store design and franchisee focused business attitude.
Jeff Geygan: We anticipate Brandon and Charleston to open in the coming months, with Chicago opening this summer.
We also recently completed several store transfers.
Jeff Geygan: a process in which an existing store is sold to a new owner. This is an important part of our long-term strategy to elevate our franchise system and improve our AUV, or average unit volume, an important metric in the franchise world.
Jeff Geygan: We have become proactive in replacing owners in locations that we deem desirable and potentially more profitable under new management.
Jeff Geygan: We are able to assist a store transfer by facilitating that transfer from a current owner to a new owner, thus preserving the most desirable locations while allowing those less desirable locations to shut down under similar circumstances.
Jeff Geygan: For example, we've just completed transfers of both our Vail, Colorado and Steamboat Springs, Colorado locations.
Jeff Geygan: whereas we opted to allow the Tilton, NH location to close after the first of this year.
Jeff Geygan: This new process has been developed and managed successfully by our VP of Franchise Development, Cara Conklin, who's been with the company just over one year.
Jeff Geygan: We have been very intentional in managing our network of existing stores and continuously looking for prospective owners who are financially sophisticated Entrepreneurial and well capitalized to become part of our growing family of successful franchisees
Jeff Geygan: We plan to attract new owners who have the capacity and the operating skills to become multi-unit operators, one of the key metrics in our long-term vision.
Jeff Geygan: These developments reflect the growing interest in our improved franchise model and our focus on building a world-class franchise business.
Jeff Geygan: In addition to these announced openings and transfers, we have a growing pipeline of desirable locations and qualified owners, and we foresee a return to growth in the number of franchise stores for the first time in over a decade.
Jeff Geygan: Turning to holiday season, I'm pleased to report that we fulfilled nearly 100% of franchisee and specialty market demand, an important accomplishment and significant improvement from last year.
Jeff Geygan: The strong holiday performance underscores our ability to deliver under pressure and highlights the potential for improved results as we refine our process and drive operating efficiencies across the business.
Jeff Geygan: It also reinforces the trust grantees place in us to support their business during critically important selling periods.
Jeff Geygan: With respect to our operating infrastructure, on January 6th, we launched our new ERP system, which integrates important business functions such as inventory management, procurement, production scheduling, and financial reporting.
Jeff Geygan: With this system in place, we anticipate improved cost management, a reduction in time of potential errors resulting from manual processes, and enhanced strategic decision-making driven by near real-time insights and analytics.
Jeff Geygan: We expect our ERP system, along with our current deployment of an upgraded store-based POS system, to provide improved visibility into consumer purchasing behavior, enabling us to identify opportunities to optimize pricing and factory output.
and ultimately drive higher operating profits.
Jeff Geygan: Our new branding offers a modern aesthetic without losing sight of our heritage of premium quality and craftsmanship.
Jeff Geygan: Our new store design will offer customers an engaging in-store experience accompanied by an elegant assortment of packaged items.
Jeff Geygan: This marks an important step in our path to invigorate franchise store growth as we believe this work will position RMCF as a unique and appealing brand for both store owners and consumers.
Jeff Geygan: Our e-commerce business including RMCF and Amazon.com has become a rapidly growing unit of our overall business with sales nearly tripling during October, November, and December versus last year.
Jeff Geygan: This growth was supported by improvements from our marketing efforts tailored to online customers, which included personalized email campaigns, social media ads, and promotions designed to drive traffic to our website and further to our network of stores.
Jeff Geygan: We also better leverage data analytics this year to understand consumer preferences, allowing us to offer more relevant products.
Jeff Geygan: To further enhance the online shopping experience, we've made targeted investments in people who are more proficient with website optimization, digital marketing, social media, and related marketing campaigns. We expect to see substantial improvements in our digital assets in the near term.
We welcome your frequent visits and purchases on rmcf.com
Jeff Geygan: We're also in the process of expanding our loyalty program, which is designed to increase customer attention and reward repeat purchases, both in-store and online. We're using DoorDash and other similar customer engagement applications to drive higher store-level sales.
Jeff Geygan: By extending a variety of programs to more stores, we expect to build stronger connections with consumers and encourage brand loyalty across multiple channels.
Jeff Geygan: On the personnel front, we've made strategic hires to strengthen our executive management team and support our franchise network. This includes a new VP of Franchise Business Support, Lizzie Mae Kerr.
Jeff Geygan: and a VP of Marketing, Jeremy Garcia, both of whom bring improved levels of experience and track record of success in their respective fields. Our executive management team build out is complete.
Jeff Geygan: We're well-positioned to execute our long-term vision for the company driven by the right people sitting in the right seats.
Jeff Geygan: Additionally, we announced the appointment of two new board members, Mel Keating and Al Harper, who both bring executive experience to our boardroom. Their insights will be invaluable as we continue to refine and execute our long-term vision for the company.
Jeff Geygan: As announced previously, we secured a six million dollar credit facility on September 30th, providing the necessary flexibility to invest in our operations and growth initiatives in a thoughtful and methodical way, allowing us to build a company of lasting value.
Jeff Geygan: We're in the midst of a historic transformation of the company that continues to evolve. We have finished assembling our executive management team and are focused on our franchise network offering premium confectionary products and gourmet apples in a retail store format serving consumers of all ages.
Jeff Geygan: Looking further at our performance this quarter, while we are making progress there's still substantial work ahead that is required to accelerate revenue growth and optimize cost to increase overall profitability.
Jeff Geygan: We face both gross and operating margin pressures stemming from a host of issues that we believe are transitory.
Jeff Geygan: We're in a continuous process of addressing and rectifying both revenue and cost issues and anticipate improved results in the quarters ahead. We're well positioned to address these issues, particularly with the deployment of our new ARP system.
Jeff Geygan: which will dramatically improve our access to relevant and timely data and analytics. Concurrently, we're pursuing a variety of margin-enhancing initiatives. Our efforts are already yielding results.
Jeff Geygan: In closing, we understand there's tremendous power in driving continuous improvement and the subsequent delivery of results.
Jeff Geygan: We are laying the foundation for substantial revenue growth and improved profitability through strategic investments in our people, operations, franchise network, and brand.
Jeff Geygan: We still have work to do in this transformational process as we evolve and recognize we have to do things differently.
Jeff Geygan: We are developing a culture of discipline, one in which we believe we have the business discipline to make a series of good decisions consistent with our long-term vision. We have disciplined people who engage in disciplined thought and take disciplined action in approach and process.
Jeff Geygan: Our ongoing commitment and long-term operating horizon enables us to execute a strategic plan that we believe will create substantial equity value for our stockholders to the benefit of our franchisees
Jeff Geygan: customers and consumers. Thank you. I'll now hand it over to our CFO Carrie Cass who will discuss our Q3 financial results.
Carrie Cass: Thank you, Jeff. Please note that unless stated otherwise, all comparisons are on a year-over-year basis.
Now, moving on to our fiscal third quarter 2025 results.
Carrie Cass: Product sales were $6.4 million compared to $6.1 million last year, and franchise and royalty fees were $1.1 million compared to $1.2 million in the same period last year.
Carrie Cass: The decrease in growth margin was primarily driven by higher supply, third-party vendor, and labor costs.
Carrie Cass: Total costs and expenses increased to $8.6 million compared to $8.5 million in the year-ago period, driven in part by non-recurring professional expenses.
Carrie Cass: Our last fiscal year, sorry, the quarter ended November of twenty-three.
was negative 12 cents per share.
Carrie Cass: Our EBITDA improved to a 41,000 positive number compared to a negative 0.3 million a year ago. Turning to the balance sheet, we ended the fiscal third quarter with a cash balance of 1.1 million compared to 2.1 million at February 28, 24.
Carrie Cass: Accounts receivable at the fiscal quarter ended were $4.1 million compared to $2.2 million February 28, 2024.
Carrie Cass: Accounts receivable was elevated as a result of increased demand across all panels.
Carrie Cass: We ended the fiscal quarter with total revenue of inventories of $5.7 million compared to $4.3 million at February 28, 2024.
Carrie Cass: which reflects our strategic buildup of inventory at the factory to ensure we were well positioned to meet the needs of our franchisees during the critical holiday season.
Carrie Cass: Our accounts payable at the fiscal quarter ended were $2.1 million compared to $3.4 million at February 28, 2024.
Carrie Cass: We ended the quarter with a current ratio of 2.66 compared to 1.6 or 1.2 at February 28, 2024.
Long-term debt at our fiscal quarter ended with $6 million.
There was no long-term debt
Carrie Cass: February 29, 2024. Long-term debt is a credit facility put in place on September 30th to replace our $3.5 million long-term credit line, or short-term credit line, excuse me.
Carrie Cass: This concludes our prepared remarks. We'll be glad to answer any questions now. Operator, back to you.
Speaker Change: Thank you. At this time, if you would like to ask a question, please press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised.
Speaker Change: If you would like to remove yourself, please press star 1 again. One moment while we compile the Q&A roster.
Speaker Change: And at this time, while we're waiting for participants to join, I'd like to turn the call over to the company's investor relations advisor, Sean Manzari. Please go ahead.
Speaker Change: So to kick things off, Jeff, Carrie, what kind of benefits do you expect to drive from the new ERP system?
Speaker Change: John, thanks. There are a host of benefits, but the real value of new ERP is we're going to have timely, accurate data and analytics to assist us in making managerial decisions to drive profitability as we go forward.
Speaker Change: Understood. And can either of you provide an update on the rebranding initiative and its potential impact on franchisee interest?
Coincidentally, we had our Franchisee Advisory Council call earlier today.
and the level of enthusiasm amongst this.
Speaker Change: group of 12 who represent the greater group has been very high as evidenced by the fact that we have three of our existing franchisees willing to
Speaker Change: opened the first three stores, two main stores, one being a kiosk, and I think everyone who's seen our new logo and the new store design are quite excited about it as we're excited to roll that out.
Speaker Change: Thank you. And what progress has been made on new store openings and are there any specific geographies that you are targeting?
Thank you.
Speaker Change: Cara Conklin, who I mentioned earlier, is working vigorously to create a pipeline here. We have the three stores that we've mentioned. That's all that we've announced to date, but we have a robust pipeline.
Speaker Change: Excellent. Those are all the questions that we received via email. Operator, back to you.
At this time, there are no calls in the queue.
Speaker Change: And I would like to go ahead and thank everybody for joining the call today.
Speaker Change: You may all disconnect your lines at this time and have a wonderful day. Thank you for your participation.