Rocky Mountain Chocolate Factory(RMCF) - 2026 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenue for Q2 2026 was $6.8 million, an increase from $6.4 million in the same period last year [24] - Product sales rose to $5.2 million from $4.9 million year-over-year, while franchise and royalty fees increased to $1.6 million from $1.5 million [24] - The total product and retail gross profit was negative $33,000, reflecting year-over-year comparability factors and timing of inventory adjustments [24] - The net loss was $0.7 million, or negative $0.09 per share, compared to a net loss of $0.7 million or negative $0.11 per share in Q2 2025 [24] Business Line Data and Key Metrics Changes - The company is focusing on franchise growth and operational improvements, with a new VP of Operations implementing cost-saving strategies [5][6] - The franchise development momentum is building, with renewed interest from existing and prospective operators [8][11] Market Data and Key Metrics Changes - The company is expanding its geographic footprint and exploring new markets, including areas with historically little presence [9] - The acquisition of a store in Camarillo, California, is expected to enhance market presence and profitability [17][18] Company Strategy and Development Direction - The company is transitioning from transformational planning to transformational performance, aiming for disciplined execution and long-term value creation [4][22] - A rebranding initiative is underway, modernizing customer touchpoints and enhancing the overall brand experience [11][12] - The company is focused on quality over quantity in franchise recruitment, targeting well-capitalized operators in high-traffic markets [11] Management's Comments on Operating Environment and Future Outlook - Management acknowledges ongoing operational challenges but is optimistic about returning to historic levels of profitability [5][21] - The company is well-positioned for the holiday season, with improved logistics and inventory management [20][21] - Management emphasizes a cultural shift towards a more accountable and results-oriented organization [20][22] Other Important Information - The company has made significant investments in technology and automation while maintaining its handcrafted legacy [7] - A new loyalty program is set to launch, aimed at enhancing customer engagement and understanding purchasing behavior [15][16] Q&A Session Summary Question: Background of the new Chief Operating Officer - The new COO, Luis Burgos, has over 30 years of experience in manufacturing and operations, including roles at Kimberly Clark [28] Question: Targets for new store openings in 2026 and 2027 - The company aims for net positive store growth annually, exceeding closures with new openings [29] Question: Discussion on owned versus franchised stores - The company believes owning stores helps them be better franchisors and plans to strategically acquire more stores for testing and development [30][32] Question: Cash burn and potential need for equity financing - The company does not expect to continue burning cash for the next 12 months, with Q3 and Q4 historically being stronger periods [33][35] Question: Increase in franchise demand beyond visual aspects - The company offers a low labor model and defined costs for new store builds, making it attractive for franchisees [40] Question: Changes in factory operations impacting costs - The new VP of Operations is implementing changes that are still being tested for best practices [42] Question: Impact of easing cocoa prices on margins - Cocoa prices have decreased significantly, which is expected to improve margins as chocolate constitutes 40% of raw material costs [44]