Rocky Mountain Chocolate Factory(US:RMCF)2024-01-11 15:45Financial Data and Key Metrics Changes - Total revenue decreased to $7.7 million from $8.8 million year-over-year, primarily due to higher factory overhead and production constraints at the Durango facility [13] - Net loss from continuing operations was $0.8 million or $0.12 per share, compared to a net loss of $0.2 million or $0.03 per share in the prior year [23] - Adjusted EBITDA loss was $3 million compared to adjusted EBITDA of $1.2 million, mainly due to lower sales and gross margin [28] Business Line Data and Key Metrics Changes - Total product sales were $6.1 million, down from $7.3 million, while retail sales at company-operated stores increased by 21% to $364,000 due to the opening of a second store [14] - Franchise fee revenue decreased to $41,000 from $49,000 [1] Market Data and Key Metrics Changes - Same-store sales for company-owned stores in Durango decreased by 1.1% year-over-year, while same-store sales across all domestic locations decreased by 2.1% [1] Company Strategy and Development Direction - The company has relocated consumer packaging functions to a third-party co-packer in Utah to alleviate labor constraints and improve production capacity [16][5] - The strategic transformation plan aims to enhance operational efficiency and expand the franchise network, with a focus on e-commerce and specialty retail partnerships [11][6] - The company plans to invest $6 million to $6.5 million in capital expenditures over fiscal years 2024 and 2025 [46] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, stating that the actions taken over the past year have positioned the company for growth and profitability in fiscal 2025 [30] - The management acknowledged challenges in labor availability but emphasized that the transition to co-packing has set the stage for meeting increased demand [38][40] Other Important Information - The company ended the third quarter with a cash balance of $2.1 million, down from $4.7 million at the end of fiscal year 2023, primarily due to cash used in operations and capital expenditures [29] - The company has no long-term debt, which provides financial flexibility [29] Q&A Session Summary Question: Inventory levels and co-packaging issues - Management explained that inventory levels were managed lean due to labor challenges, which impacted the ability to ramp up production [35][36] Question: Transition to co-packing - The transition to co-packing was accelerated due to labor shortages, and the move was completed successfully despite challenges [38][40] Question: Capital spending needs - The company has spent most of its capital expenditures for the fiscal year and is planning for fiscal 2025, with a focus on becoming cash flow positive [46][47] Question: Gross margin improvements - Management indicated that while outsourcing packaging may not directly improve margins, increasing throughput will enhance overall margins [50][52]