Rocky Mountain Chocolate Factory(US:RMCF)2022-10-14 14:02Financial Performance - Basic earnings per share decreased from $0.03 in Q3 2021 to a loss of $0.59 in Q3 2022[85] - Revenues decreased by 5.1% from $7.9 million in Q3 2021 to $7.5 million in Q3 2022[85] - Net income decreased from $197,000 in Q3 2021 to a net loss of $3.6 million in Q3 2022[85] - Basic earnings per share decreased from a net income of $0.13 per share for the six months ended August 31, 2021, to a net loss of $0.60 per share for the same period in 2022[105] - Revenues decreased by 1.1% from $15.5 million for the six months ended August 31, 2021, to $15.4 million for the same period in 2022[105] - The company incurred a net loss of $3.8 million during the six months ended August 31, 2022, compared to a net income of $776,738 in the same period in 2021[127] Sales Performance - Factory sales decreased by 6.8% to $4.8 million, while retail sales increased by 1.8% to $796,700 in Q3 2022[86] - Same store pounds purchased by domestic franchise and licensed locations decreased by 15.4% in Q3 2022 compared to Q3 2021[87] - Same store sales at domestic Rocky Mountain Chocolate Factory locations decreased by 3.1%, while U-Swirl Frozen Yogurt cafés increased by 16.2% in Q3 2022[89] - Factory sales decreased by 2.3%, or $236,000, to $9.97 million for the six months ended August 31, 2022, primarily due to a 47.2% decrease in shipments to customers outside the franchised retail network[106][107] - Same store sales at all Company-owned locations increased by 1.1% during the six months ended August 31, 2022, compared to the same period in 2021[108] Cost and Expense Analysis - Total costs increased by 28.0% to $9.6 million in Q3 2022, primarily due to a rise in general and administrative expenses[92] - Total costs and expenses increased by 22.0% to $17.47 million for the six months ended August 31, 2022, compared to $14.32 million for the same period in 2021[112] - General and administrative expenses increased to 54.0% of total revenues for the three months ended August 31, 2022, compared to 23.5% for the same period in 2021, with costs associated with a contested proxy solicitation totaling approximately $1.8 million[99] - General and administrative expenses increased to 37.1% of total revenues for the six months ended August 31, 2022, compared to 17.5% for the same period in 2021[118] - Retail operating expenses as a percentage of retail sales rose from 56.2% in the three months ended August 31, 2021, to 59.1% in the same period of 2022, primarily due to higher salaries and utility costs[100] - Retail operating expenses as a percentage of retail sales rose from 56.2% in the six months ended August 31, 2021, to 59.3% in the six months ended August 31, 2022[119] Margin Analysis - Factory gross margin decreased to 21.3% in Q3 2022 from 26.1% in Q3 2021, attributed to increased costs and lack of Employee Retention Credits[95] - Retail gross margin decreased from 67.1% in Q3 2021 to 62.7% in Q3 2022, primarily due to rising raw material costs[96] - Factory gross margin decreased to 17.6% for the six months ended August 31, 2022, from 20.6% in the same period of 2021, primarily due to wage and material inflation[114] - Retail gross margin decreased from 67.3% during the six months ended August 31, 2021, to 62.7% during the same period in 2022, mainly due to increased raw material costs[115] Franchise and Marketing Costs - Franchise costs as a percentage of total royalty and marketing fees decreased to 27.3% in Q3 2022 from 37.2% in Q3 2021[97] - Franchise costs as a percentage of total royalty and marketing fees decreased to 26.8% in the six months ended August 31, 2022, from 34.4% in the same period of 2021[116] Cash Flow and Working Capital - Working capital decreased by $2.4 million to $7.3 million as of August 31, 2022, from $9.7 million as of February 28, 2022[125] - Cash and cash equivalents decreased by approximately $2.2 million to $5.4 million as of August 31, 2022, compared to $7.6 million as of February 28, 2022[126] - The company recorded income tax expense of $1.4 million on a loss before income taxes of $2.4 million for the six months ended August 31, 2022[123] - Investing activities used cash of $598,878 during the six months ended August 31, 2022, primarily due to purchases of property and equipment[127] - As of August 31, 2022, the company had purchase obligations of approximately $53,000 for future purchases of commodities[129] - The company believes cash flow from operations will be sufficient to fund capital expenditures and working capital requirements for FY 2023[128]