Rocky Mountain Chocolate Factory(US:RMCF)2026-01-13 22:29Financial Performance - Basic loss per share improved from $(0.11) for Q3 2024 to $(0.02) for Q3 2025, indicating a positive trend in financial performance [124]. - Basic loss per share improved from $(0.47) for the nine months ended November 30, 2024 to $(0.15) for the nine months ended November 30, 2025, indicating overall financial improvement [137]. - The company reported a consolidated net loss of $1.1 million for the nine months ended November 30, 2025, an improvement from a net loss of $3.2 million in the same period of 2024 [156]. Revenue and Sales - Revenues decreased by 4.4% from $7.9 million in Q3 2024 to $7.5 million in Q3 2025, primarily due to the non-renewal of an unprofitable contract [125][126]. - Total revenues for the nine months ended November 30, 2025, were $20.739 million, a slight increase of 0.3% compared to $20.680 million in the same period of 2024 [138]. - Durango product and retail sales decreased by 4.0%, or $0.7 million, for the nine months ended November 30, 2025, primarily due to the non-renewal of an unprofitable contract [139]. - Franchise fees increased by 17.3% to $95 thousand in Q3 2025 compared to $81 thousand in Q3 2024, reflecting improved franchise performance [127]. - Royalty and marketing fees increased by $0.8 million, or 21.5%, during the nine months ended November 30, 2025, compared to the same period in 2024 [140]. Cost and Expenses - Total cost of sales decreased by 17.6% from $6.0 million in Q3 2024 to $5.0 million in Q3 2025, contributing to improved profitability [128]. - Total cost of sales decreased by 8.7%, or $1.393 million, to $14.587 million for the nine months ended November 30, 2025 [141]. - Retail operating expenses increased by 122.2% due to the acquisition of a third retail store in August 2025 [134]. - General and administrative expenses decreased to 15.1% of total revenues for the nine months ended November 30, 2025, down from 20.7% in the same period of 2024 [147]. Gross Margin - Total gross margin increased to 21.4% in Q3 2025 from 10.0% in Q3 2024, driven by sales price increases [129][130]. - Total gross margin increased by 75.8% to $1.646 million, with a gross margin percentage of 10.1% for the nine months ended November 30, 2025, compared to 5.5% in 2024 [142][143]. Cash Flow and Working Capital - Cash flows used in investing activities were $0.5 million during the nine months ended November 30, 2025, primarily due to the acquisition of a retail store for $0.2 million [157]. - As of November 30, 2025, working capital increased to $3.6 million from $2.4 million as of February 28, 2025, mainly due to $1.8 million in proceeds from notes payable [154]. Debt and Credit Agreements - The company entered into a new credit agreement on August 28, 2025, with an outstanding balance of $6.6 million as of November 30, 2025 [161]. - The Company entered into a credit agreement with RMCF2 for a principal amount of $1.2 million, maturing on September 30, 2027, with a 12% annual interest rate [164]. - As of November 30, 2025, the Company repaid $0.6 million of the outstanding principal [164]. - The RMCF2 Credit Agreement limits capital expenditures to $3.5 million per year and includes financial covenants measured quarterly [165]. - The Company was not in compliance with the liabilities to tangible net worth covenant of 2.0:1.0 as of November 30, 2025, but complied with all other covenants [166]. Future Plans and Obligations - The company signed four area development agreements to add 34 new franchise stores over the next three to five years, supporting future growth [121]. - The Company has purchase obligations of approximately $4.2 million as of November 30, 2025, primarily for future purchases of commodities [170]. - The Company plans to issue 1,500,000 shares of common stock at $1.80 per share, generating total proceeds of approximately $2.7 million [168]. Economic Factors - The company experienced higher raw material, labor, and freight costs due to macroeconomic inflationary trends, although these trends have moderated [119]. - Inflationary factors, including increased costs of ingredients and labor, directly affect the Company's operations and may impact future lease costs [171]. - The Company experiences seasonal fluctuations in sales, with stronger sales during key holidays and the summer vacation season [173].