Rocky Mountain Chocolate Factory(US:RMCF)2023-07-13 22:01Financial Data and Key Metrics Changes - Total revenue in the first quarter was $6.4 million, down from $6.9 million, primarily due to a $0.3 million decrease in product shipments related to the planned exit of certain customers [24] - Net loss from continuing operations was $1.5 million or negative $0.24 per share, compared to a net loss of $0.3 million or negative $0.05 per share in the prior year [32] - Adjusted EBITDA loss was $800,000 compared to an adjusted EBITDA of $700,000, driven by lower revenue and increased operating expenses [32] Business Line Data and Key Metrics Changes - Total sales from the Durango production facility were $4.8 million, down from $5.2 million [24] - Retail store sales at company-operated stores were $192,000 compared to $250,000, with same-store sales at all domestic locations decreasing by 2.7% [25] - Total gross profit from Durango production and retail was $0.3 million, with a gross margin of 5.1%, down from 16.3% due to lower production volume and higher costs [26] Market Data and Key Metrics Changes - Revenue to the Durango store was up 16% year-over-year, with June revenues increasing over 27% and customer count rising by 9% [17] - Monthly pounds shipped increased in June on a year-over-year basis for the first time since November 2022, rising roughly 6% [18] Company Strategy and Development Direction - The company is focused on a strategic transformation plan with three pillars: doing more with less, simplifying operations, and amplifying the brand [2][3] - The exit from the frozen yogurt business is part of the strategy to focus on core chocolate operations [4] - A new royalty structure has been established to attract multi-unit operators and incentivize sales of Durango-sourced products [12][13] Management Comments on Operating Environment and Future Outlook - Management expressed optimism about the ongoing transformation and its potential to improve profitability and market share in the fragmented U.S. chocolate confectionery market [21][22] - The company anticipates tangible results from its strategic initiatives as it progresses through future periods [22] Other Important Information - The company ended the first quarter with a cash balance of $5.1 million, up from $4.7 million at the end of fiscal 2023, and remained debt-free [19] - The company opened two new stores in the first quarter and transferred three existing stores to new owners [21] Q&A Session Summary Question: Regarding the $700,000 of savings implemented - Management confirmed that the savings were realized and partially recognized in the last month of the first quarter, with full benefits expected in the second quarter [41] Question: How many stores in the system do over $1 million? - The top 37 stores average over $1 million, with the count of stores in the $1 million plus range being in the high teens to low 20s [42] Question: Details on the planned exit from certain customers - The exit was related to an e-commerce and wholesaling relationship that was not expected to recur, impacting the first quarter but not future results [47] Question: Will G&A build further from the rates shown in the first quarter? - Management indicated that while G&A may increase due to inventory build for the holiday season, it will be less on a year-over-year basis [51] Question: Can inventory levels be maintained at the lower levels? - Management expressed confidence in tighter inventory management going forward, aiming to keep inventory levels down [55]