Rocky Mountain Chocolate Factory(US:RMCF)2023-10-16 20:14Financial Performance - Basic loss per share from continuing operations improved from $(0.51) in Q3 2022 to $(0.16) in Q3 2023[94] - Basic loss per share from continuing operations decreased from $(0.55) for the six months ended August 31, 2022, to $(0.40) for the six months ended August 31, 2023[115] - The company reported a net loss of $1.8 million for the six months ended August 31, 2023, an improvement from a net loss of $3.8 million in the comparable 2022 period[137] Revenue and Sales - Revenues from continuing operations remained stable at approximately $6.6 million for both Q3 2022 and Q3 2023[94] - Revenues from continuing operations decreased by 3.5% from $13.5 million for the six months ended August 31, 2022, to $13.0 million for the six months ended August 31, 2023[115] - Durango Product sales decreased by 2.1% to $4.7 million in Q3 2023, primarily due to a 34.0% decrease in shipments to customers outside the franchised network[95][96] - Retail sales at Company-owned stores increased by 17.4% to $308.9 thousand in Q3 2023, driven by the opening of a new store[97] - Retail sales at Company-owned stores declined by 2.5% during the six months ended August 31, 2023, compared to the same period in 2022[118] Costs and Expenses - Total costs decreased by 15.8% to $7.5 million in Q3 2023, with general and administrative expenses dropping by 58.2%[101] - Cost of sales for Durango products increased by 12.2% from $8.21 million for the six months ended August 31, 2022, to $9.21 million for the six months ended August 31, 2023[122] - General and administrative expenses decreased to 27.9% of total revenues for the six months ended August 31, 2023, compared to 41.9% for the six months ended August 31, 2022[128] Margins - Durango Product gross margin fell to 3.7% in Q3 2023 from 21.3% in Q3 2022, attributed to increased overhead costs and inflation[104] - Retail gross margin improved to 68.1% in Q3 2023 from 59.0% in Q3 2022, reflecting better cost management[105] - Total gross margin decreased from 19.7% for the six months ended August 31, 2022, to 6.4% for the six months ended August 31, 2023[122] Franchise and Royalty Fees - Royalty and marketing fees rose by 4.1% to $1.5 million in Q3 2023, supported by a 2.3% increase in same store sales at domestic franchise locations[95][98] - Franchise costs as a percentage of total royalty and marketing fees rose to 39.8% in Q3 2023 from 30.2% in Q3 2022, driven by increased professional fees and compensation expenses[106] - Franchise costs increased to 43.7% of total royalty and marketing fees and franchise fee revenue for the six months ended August 31, 2023, from 29.1% for the same period in 2022[126] Cash Flow and Working Capital - Working capital decreased from $6.2 million as of February 28, 2023, to $4.5 million as of August 31, 2023, a decrease of $1.8 million[135] - Cash and cash equivalent balances decreased by approximately $700,000 to $4.0 million as of August 31, 2023, compared to $4.7 million as of February 28, 2023[136] - Operating activities used cash of $966,538 during the six months ended August 31, 2023, compared to $1,584,693 in the same period of 2022[137] - Investing activities provided cash of $234,077, primarily due to cash from the sale of U-Swirl assets amounting to $1,417,768, partially offset by property and equipment purchases of $1,251,728[138] Interest Income - Net interest income increased to $11,400 in Q3 2023 from $3,900 in Q3 2022, due to higher interest income on cash balances[112] - Net interest income increased to $25,000 for the six months ended August 31, 2023, compared to $6,500 for the same period in 2022[132] Operational Challenges - Inflationary factors, including increased costs of ingredients and labor, directly affect operations, with no assurance that increased costs can be passed on to customers[141] - The company is subject to seasonal fluctuations in sales, with historically stronger sales during key holidays and the summer vacation season[143]