Rocky Mountain Chocolate Factory(RMCF) - 2023 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenue for Q2 2023 was $7.5 million, down from $7.9 million in the previous year [23] - Total gross profit decreased to $1.5 million from $1.9 million, with gross margin dropping to approximately 27.2% from 31.5% [27] - Operating loss was $2.2 million compared to operating income of $0.3 million in the prior year [28] - Net loss for the quarter was $3.6 million or $0.59 per share, compared to net income of $0.2 million or $0.03 per share [29] - Adjusted EBITDA decreased to $1 million from $1.6 million year-over-year [29] - Cash balance at the end of the quarter was $5.4 million, down from $7.6 million at the end of the last fiscal year [30] Business Line Data and Key Metrics Changes - Total factory sales for Q2 2023 were $4.8 million, down from $5.2 million in the previous year, attributed to lower shipments to non-Rocky Mountain customers and lower sales to franchised stores [24] - Same-store sales at domestic Rocky Mountain Chocolate Factory locations decreased by 3%, while same-store sales at domestic frozen yogurt stores increased by 16% [25] - Retail sales remained flat at approximately $0.8 million [25] - Royalty and marketing revenue was approximately $1.9 million, remaining relatively flat [26] Market Data and Key Metrics Changes - The company faced macroeconomic pressures, including inflation and higher input costs due to supply chain issues [6][17] - Labor shortages at the factory in Durango impacted productivity during the quarter [17] Company Strategy and Development Direction - The company is focused on business transformation, enhancing operational efficiencies, and improving margins and profitability [6][19] - A renewed commitment to franchisees is expected to lead to consistent store growth and better productivity [22] - The company plans to finalize a multi-year strategic plan focusing on store growth, branding, and operational improvements [33] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by inflation and supply chain issues but expressed confidence in the strategic initiatives being implemented [6][17] - The company aims to improve operational efficiencies and is actively identifying opportunities for margin improvements [19][21] - Management emphasized the importance of franchisee success for overall company success [22] Other Important Information - The company has made significant additions to its executive team, including a new CFO and VP of Sales and Marketing [8][10] - A national franchisee convention was held to strengthen relationships with franchisees and gather feedback [14] - The company plans to establish a franchisee advisory council to provide input on brand and operational strategies [15] Q&A Session Summary Question: What are the company's plans for addressing the current challenges? - Management highlighted ongoing efforts to enhance operational efficiencies and implement cost-saving initiatives [17][19] Question: How does the company plan to improve franchisee relations? - The company is committed to maintaining open communication with franchisees and has set goals for store visits to understand their needs better [12][13]