Rocky Mountain Chocolate Factory Inc. (Nasdaq: RMCF) (the
“Company”, “we”, “RMC”, or “Rocky Mountain Chocolate”), an
international franchisor and producer of premium chocolates and
other confectionery products including gourmet caramel apples, is
reporting financial and operating results for its second quarter
ended August 31, 2023. The Company will host a conference call
tomorrow at 8:30 a.m. Eastern time to discuss the results.
“We continue to execute against the pillars of
our Strategic Transformation Plan to establish Rocky Mountain
Chocolate as America’s preferred premium chocolate company,” said
Rob Sarlls, CEO of RMC. “The initiatives we have implemented this
fiscal year are expected to generate material revenue growth in the
quarters ahead as we enter the holiday season. During the fiscal
second quarter, we removed several impediments that held back our
eCommerce business and we are now fulfilling orders with trusted
third-party service providers. These providers have favorable
geographic locations that can reach consumers within 48 hours—a
capability we lacked in Durango. We also eliminated customer
shipping charges and have begun to utilize more effective ad spend.
When coupled with purchase orders in-hand from our specialty retail
partners, we expect the combination of eCommerce and specialty
retail sales in fiscal 2H’24 to exceed the sales from these
channels for all of fiscal 2023.
“With respect to efficiency gains during the
quarter, to ‘do more with less’ we reduced our driver fleet by 33%
while maintaining consistent pound volume shipped from our Durango
facility, which is a direct result of our logistic optimization
efforts. We also calibrated our employee compensation structure to
reduce turnover in the short-term and help establish a long-term
foundation for accelerated product throughput. Notwithstanding
recent increases in base pay for our processing team, we
experienced a 16% reduction in labor salaries per pound produced
versus fiscal Q1’24.
“To ‘simplify and focus’ our operations, during
the quarter we completed the implementation of a streamlined
franchisee royalty structure and volume-based discount program.
This new royalty structure and discount program will incentivize
our highest-performing franchisees to become multi-unit operators,
while empowering them to deliver even more sales of Rocky Mountain
Chocolate products. Lastly, we continue to make progress towards
our 25% SKU reduction target, as we work to sunset underperforming
chocolate SKUs and increase production of our most popular
items.
“To ‘amplify and elevate’ our brand, last month
we unveiled a transformational brand refresh during our 2023 Annual
National Franchisee Convention, which achieved record attendance.
This brand refresh provides a streamlined, and highly recognizable,
trade name and logo that builds upon our rich history of bringing
the Rocky Mountain experience to customers since 1981. Further, to
reaffirm our commitment to proactive engagement with shareholders
and prospective investors, we participated in our first investor
conference in nearly a decade during the quarter, inaugurating our
re-engagement with the investor community under the new leadership
team. This active participation also amplifies the reach of our
message about the plans for the future of Rocky Mountain
Chocolate.
“As we look to the remainder of fiscal 2024, we
are well on our way towards laying the foundation of our multi-year
plan for Rocky Mountain Chocolate, and we expect to continue seeing
tangible results to our growth and profitability as we progress
through the periods ahead.”
Fiscal Q2 2024 Financial Results vs.
Year-Ago Quarter
- Total revenue of
$6.6 million in the second quarter of 2024 was approximately
unchanged compared to $6.6 million in the second quarter of 2023.
During the quarter, the Company benefitted from the reopening of
the Corpus Christi store in July, which mostly offset lower
shipments of product related to the planned exit of two
out-of-network customers earlier this year.
- Total product and
retail gross profit was $0.4 million in the second quarter of 2024
compared to $1.2 million in the second quarter of 2023, with gross
margin of 7.6% compared to 23.3%. The decrease was primarily due to
lower production volume and higher costs related to wages and
inflation as the Company resolved a labor shortage. This was
partially offset by higher retail gross margins primarily
attributable to better cost management and higher basket sizes at
the Durango company-owned store.
- Total operating
expenses decreased 16% to $7.6 million in the second quarter of
2024 compared to $9.0 million in the second quarter of 2023. The
improvement was primarily due to lower professional fees associated
with the contested solicitation of proxies in the prior year, as
well as lower costs related to employee severance and relocation.
This was partially offset by increased franchise and personnel
costs.
- Net loss from
continuing operations decreased 68% to $1.0 million or $(0.16) per
share in the second quarter of 2024, compared to a net loss from
continuing operations of $3.2 million or $(0.51) per share in in
the second quarter of 2023.
- Adjusted EBITDA (a
non-GAAP measure defined below) was $(0.6) million in the second
quarter of 2024 compared to $0.7 million in the second quarter of
2023. The year-ago period benefitted from a $2.8 million add-back
related to professional fees associated with the contested
solicitation of proxies, as well as costs associated with employee
severance and relocation.
Conference Call Information
The Company will conduct a conference call on
October 12, 2023 at 8:30 a.m. Eastern time to discuss its financial
results. A question-and-answer session will follow management’s
opening remarks. The conference call details are as follows:
Date: Thursday, October 12, 2023Time: 8:30 a.m.
Eastern timeDial-in registration link: hereLive webcast
registration link: here
Please dial into the conference call 5-10
minutes prior to the start time. An operator will register your
name and organization. If you have any difficulty connecting with
the conference call, please contact the Company’s investor
relations team at RMCF@elevate-ir.com.
The conference call will also be broadcast live
and available for replay in the investor relations section of the
Company’s website at https://ir.rmcf.com/.
Non-GAAP Financial Measures
To supplement the Company’s consolidated
financial statements, which are prepared and presented in
accordance with GAAP, Rocky Mountain Chocolate provides investors
with certain non-GAAP financial measures, such as adjusted EBITDA.
The presentation of these non-GAAP financial measures is not
intended to be considered in isolation or as a substitute for, or
superior to, the financial information prepared and presented in
accordance with GAAP.
Adjusted EBITDA, a non-GAAP financial measure,
is computed by adding depreciation and amortization, stock-based
compensation expenses, costs associated with non-recurring expenses
(which include costs associated with proxy contests and related
matters, costs associated with the departure of executive officers,
costs recognized to retain new executive officers, event specific
inventory disposal costs, and gains and losses associated with
long-lived asset sales and impairment) to GAAP income (loss) from
operations.
This non-GAAP financial measure may have
limitations as an analytical tool, and this measure should not be
considered in isolation or as a substitute for analysis of results
as reported under GAAP. Management uses adjusted EBITDA because it
believes that adjusted EBITDA provides additional analytical
information on the nature of ongoing operations excluding expenses
not expected to recur in future periods, non-cash charges and
variations in the effective tax rate among periods. Management
believes that adjusted EBITDA is useful to investors because it
provides a measure of operating performance and its ability to
generate cash that is unaffected by non-cash accounting measures
and non-recurring expenses. However, due to these limitations,
management uses adjusted EBITDA as a measure of performance only in
conjunction with GAAP measures of performance such as income from
operations and net income. Reconciliations of this non-GAAP measure
to its most comparable GAAP measure are included at the end of this
press release.
About Rocky Mountain Chocolate Factory,
Inc.
Rocky Mountain Chocolate Factory, Inc. (dba
“Rocky Mountain Chocolate”) is an international franchiser of
premium chocolate and confection stores, and a producer of an
extensive line of premium chocolates and other confectionery
products, including gourmet caramel apples. Rocky Mountain
Chocolate was named one of America’s Best on Newsweek's list of
"America's Best Retailers 2023" in the chocolate and candy stores
category. The Company is headquartered in Durango, Colorado. Its
subsidiaries, franchisees and licensees currently operate over 260
Rocky Mountain Chocolate stores across the United States, with
several international locations. The Company's common stock is
listed on the Nasdaq Global Market under the symbol "RMCF."
Forward-Looking Statements
This press release includes statements of our
expectations, intentions, plans and beliefs that constitute
“forward-looking statements” within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, and are intended to
come within the safe harbor protection provided by those sections.
These forward-looking statements involve various risks and
uncertainties. The statements, other than statements of historical
fact, included in this press release are forward-looking
statements. Many of the forward-looking statements contained in
this document may be identified by the use of forward-looking words
such as "will," "intend," "believe," "expect," "anticipate,"
"should," "plan," "estimate," "potential," or similar expressions.
However, the absence of these words or similar expressions does not
mean that a statement is not forward-looking. All statements that
address operating performance, events or developments that we
expect or anticipate will occur in the future - including
statements expressing general views about future operating results
- are forward-looking statements. Management of the Company
believes that these forward-looking statements are reasonable as
and when made. However, caution should be taken not to place undue
reliance on any such forward-looking statements because such
statements speak only as of the date of this press release. The
Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by law. In addition,
forward-looking statements are subject to certain risks and
uncertainties that could cause our Company’s actual results to
differ materially from historical experience and our present
expectations or projections. These risks and uncertainties include,
but are not limited to: inflationary impacts, changes in the
confectionery business environment, seasonality, consumer interest
in our products, receptiveness of our products internationally,
consumer and retail trends, costs and availability of raw
materials, competition, the success of our co-branding strategy,
the success of international expansion efforts and the effect of
government regulations. For a detailed discussion of the risks and
uncertainties that may cause our actual results to differ from the
forward-looking statements contained herein, please see the section
entitled “Risk Factors” contained in our most recent Annual Report
on Form 10-K and subsequent Quarterly Reports on Form 10-Q, each
filed with the Securities and Exchange Commission.
Investor Contact
Sean Mansouri, CFAElevate IR720-330-2829RMCF@elevate-ir.com
STORE INFORMATION |
|
|
New stores opened duringthe three months endedAugust 31, 2023 |
|
Stores open as of August 31, 2023 |
United States |
|
|
|
|
|
|
|
Rocky Mountain Chocolate
Factory |
|
|
|
|
|
|
|
Franchise Stores |
|
1 |
|
|
|
150 |
|
Company-Owned Stores |
|
1 |
|
|
|
2 |
|
Co-brand Stores |
|
1 |
|
|
|
113 |
|
International License
Stores |
|
0 |
|
|
|
4 |
|
Total |
|
3 |
|
|
|
269 |
|
|
|
|
|
|
|
|
|
SELECTED BALANCE SHEET DATA |
(in thousands) |
(unaudited) |
|
|
August 31, 2023 |
|
|
February 28, 2023 |
|
Current Assets |
$ |
10,102 |
|
|
$ |
11,205 |
|
Total Assets |
|
20,535 |
|
|
|
21,987 |
|
Current Liabilities |
|
5,582 |
|
|
|
5,010 |
|
Total Liabilities |
|
7,663 |
|
|
|
7,617 |
|
Stockholder's Equity |
$ |
12,872 |
|
|
$ |
14,370 |
|
|
|
|
|
|
|
|
|
CONSOLIDATED STATEMENTS OF OPERATIONS |
(in thousands, except share and per share data) |
(unaudited) |
|
|
Three Months Ended August 31, |
Three Months Ended August 31, |
|
|
2023 |
|
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
Product sales |
$ |
4,707 |
|
|
$ |
4,808 |
|
|
71.8 |
% |
|
73.3 |
% |
Royalty and marketing fees |
|
1,501 |
|
|
|
1,441 |
|
|
22.9 |
% |
|
22.0 |
% |
Franchise fees |
|
41 |
|
|
|
45 |
|
|
0.6 |
% |
|
0.7 |
% |
Retail sales |
|
309 |
|
|
|
264 |
|
|
4.7 |
% |
|
4.0 |
% |
Total Revenues |
|
6,558 |
|
|
|
6,558 |
|
|
100.0 |
% |
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and
expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
4,633 |
|
|
|
3,890 |
|
|
70.6 |
% |
|
59.3 |
% |
Franchise costs |
|
613 |
|
|
|
449 |
|
|
9.3 |
% |
|
6.8 |
% |
Sales and marketing |
|
442 |
|
|
|
428 |
|
|
6.7 |
% |
|
6.5 |
% |
General and administrative |
|
1,687 |
|
|
|
4,037 |
|
|
25.7 |
% |
|
61.6 |
% |
Retail operating |
|
162 |
|
|
|
151 |
|
|
2.5 |
% |
|
2.3 |
% |
Depreciation and amortization, exclusive of depreciation and
amortization expense of $183 and $160 included in cost of sales,
respectively |
|
32 |
|
|
|
29 |
|
|
0.5 |
% |
|
0.4 |
% |
Total Costs and Expenses |
|
7,569 |
|
|
|
8,984 |
|
|
115.4 |
% |
|
137.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from
operations |
|
(1,011 |
) |
|
|
(2,426 |
) |
|
-15.4 |
% |
|
-37.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
(6 |
) |
|
|
- |
|
|
-0.1 |
% |
|
0.0 |
% |
Interest income |
|
18 |
|
|
|
5 |
|
|
0.3 |
% |
|
0.1 |
% |
Other Income, net |
|
12 |
|
|
|
5 |
|
|
0.2 |
% |
|
0.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before
income taxes |
|
(999 |
) |
|
|
(2,421 |
) |
|
-15.2 |
% |
|
-36.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income
taxes |
|
- |
|
|
|
731 |
|
|
0.0 |
% |
|
11.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) from
continuing operations |
|
(999 |
) |
|
|
(3,152 |
) |
|
-15.2 |
% |
|
-48.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued
Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from discontinued
operations, net of tax |
|
- |
|
|
|
(489 |
) |
|
|
|
|
|
|
Gain on disposal of
discontinued operations, net of tax |
|
- |
|
|
|
- |
|
|
|
|
|
|
|
Net income (loss) from
discontinued operations, net of tax |
|
- |
|
|
|
(489 |
) |
|
|
|
|
|
|
Consolidated Net
(Loss) Earnings |
|
(999 |
) |
|
|
(3,641 |
) |
|
|
|
|
|
|
Basic Earnings (loss)
Per Common Share |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations |
$ |
(0.16 |
) |
|
$ |
(0.51 |
) |
|
|
|
|
|
|
Earnings (loss) from discontinued operations |
$ |
- |
|
|
$ |
(0.08 |
) |
|
|
|
|
|
|
Net Earnings |
$ |
(0.16 |
) |
|
$ |
(0.59 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings
(loss) Per Common Share |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations |
$ |
(0.16 |
) |
|
$ |
(0.51 |
) |
|
|
|
|
|
|
Earnings (loss) from discontinued operations |
$ |
- |
|
|
$ |
(0.08 |
) |
|
|
|
|
|
|
Net Earnings |
$ |
(0.16 |
) |
|
$ |
(0.59 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
Common Shares Outstanding |
|
6,293,078 |
|
|
|
6,215,186 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive Effect of
Employee Stock Awards |
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
Common Shares Outstanding, Assuming Dilution |
|
6,293,078 |
|
|
|
6,215,186 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED STATEMENTS OF OPERATIONS |
(in thousands, except share and per share data) |
(unaudited) |
|
|
Six Months Ended August 31, |
Six Months Ended August 31, |
|
|
2023 |
|
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
Product sales |
$ |
9,531 |
|
|
$ |
9,966 |
|
|
73.3 |
% |
|
74.0 |
% |
Royalty and marketing fees |
|
2,876 |
|
|
|
2,881 |
|
|
22.1 |
% |
|
21.4 |
% |
Franchise fees |
|
86 |
|
|
|
99 |
|
|
0.7 |
% |
|
0.7 |
% |
Retail sales |
|
501 |
|
|
|
514 |
|
|
3.9 |
% |
|
3.8 |
% |
Total Revenues |
|
12,994 |
|
|
|
13,460 |
|
|
100.0 |
% |
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and
expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
9,391 |
|
|
|
8,416 |
|
|
72.3 |
% |
|
62.5 |
% |
Franchise costs |
|
1,293 |
|
|
|
868 |
|
|
10.0 |
% |
|
6.4 |
% |
Sales and marketing |
|
915 |
|
|
|
909 |
|
|
7.0 |
% |
|
6.8 |
% |
General and administrative |
|
3,619 |
|
|
|
5,643 |
|
|
27.9 |
% |
|
41.9 |
% |
Retail operating |
|
265 |
|
|
|
309 |
|
|
2.0 |
% |
|
2.3 |
% |
Depreciation and amortization, exclusive of depreciation and
amortization expense of $354 and $320 included in cost of sales,
respectively |
|
63 |
|
|
|
58 |
|
|
0.5 |
% |
|
0.4 |
% |
Total Costs and Expenses |
|
15,546 |
|
|
|
16,203 |
|
|
119.6 |
% |
|
120.4 |
% |
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
Income (loss) from
operations |
|
(2,552 |
) |
|
|
(2,743 |
) |
|
-19.6 |
% |
|
-20.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
(12 |
) |
|
|
- |
|
|
-0.1 |
% |
|
0.0 |
% |
Interest income |
|
38 |
|
|
|
7 |
|
|
0.3 |
% |
|
0.1 |
% |
Other Income, net |
|
26 |
|
|
|
7 |
|
|
0.2 |
% |
|
0.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before
income taxes |
|
(2,526 |
) |
|
|
(2,736 |
) |
|
-19.4 |
% |
|
-20.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income
taxes |
|
- |
|
|
|
702 |
|
|
0.0 |
% |
|
5.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss from
continuing operations |
|
(2,526 |
) |
|
|
(3,438 |
) |
|
-19.4 |
% |
|
-25.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued
Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from discontinued
operations, net of tax |
|
69 |
|
|
|
(318 |
) |
|
|
|
|
|
|
Gain on disposal of
discontinued operations, net of tax |
|
635 |
|
|
|
- |
|
|
|
|
|
|
|
Net income (loss) from
discontinued operations, net of tax |
|
704 |
|
|
|
(318 |
) |
|
|
|
|
|
|
Consolidated Net
(Loss) Earnings |
|
(1,822 |
) |
|
|
(3,756 |
) |
|
|
|
|
|
|
Basic Earnings (loss)
Per Common Share |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations |
$ |
(0.40 |
) |
|
$ |
(0.55 |
) |
|
|
|
|
|
|
Earnings (loss) from discontinued operations |
$ |
0.11 |
|
|
$ |
(0.05 |
) |
|
|
|
|
|
|
Net Earnings |
$ |
(0.29 |
) |
|
$ |
(0.60 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings
(loss) Per Common Share |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations |
$ |
(0.40 |
) |
|
$ |
(0.55 |
) |
|
|
|
|
|
|
Earnings (loss) from discontinued operations |
$ |
0.11 |
|
|
$ |
(0.05 |
) |
|
|
|
|
|
|
Net Earnings |
$ |
(0.29 |
) |
|
$ |
(0.60 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
Common Shares Outstanding |
|
6,284,846 |
|
|
|
6,211,815 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive Effect of
Employee Stock Awards |
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
Common Shares Outstanding, Assuming Dilution |
|
6,284,846 |
|
|
|
6,211,815 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP RECONCILIATION |
ADJUSTED EBITDA |
(in thousands) |
(unaudited) |
(unaudited) |
|
Three Months Ended August 31, |
|
|
|
|
|
2023 |
|
|
|
2022 |
|
|
Change |
|
GAAP: Income from
Operations |
$ |
(1,011 |
) |
|
$ |
(2,426 |
) |
|
n/m |
|
Depreciation and Amortization |
|
215 |
|
|
|
189 |
|
|
|
|
Stock-Based Compensation Expense |
|
123 |
|
|
|
149 |
|
|
|
|
Costs associated with non-recurring expenses (1) |
|
68 |
|
|
|
2,792 |
|
|
|
|
Non-GAAP, adjusted EBITDA |
$ |
(605 |
) |
|
$ |
704 |
|
|
n/m |
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended August 31, |
|
|
|
|
|
2023 |
|
|
|
2022 |
|
|
Change |
|
GAAP: Income (loss) from
Operations |
$ |
(2,552 |
) |
|
$ |
(2,743 |
) |
|
n/m |
|
Depreciation and Amortization |
|
417 |
|
|
|
378 |
|
|
|
|
Stock-Based Compensation Expense |
|
325 |
|
|
|
281 |
|
|
|
|
Costs associated with non-recurring expenses (1) |
|
441 |
|
|
|
3,449 |
|
|
|
|
Non-GAAP, adjusted EBITDA |
$ |
(1,369 |
) |
|
$ |
1,365 |
|
|
n/m |
|
|
|
|
|
|
|
|
|
|
|
|
(1) Non-recurring expenses include costs associated with the
departure of the former Senior Vice President – Franchise
Development, the retention of a new Chief Executive Officer, staff
relocation and severance costs associated with hiring and
separations, costs associated with a stockholder’s contested
solicitation of proxies and non-recurring gains or losses on the
sale of long-lived assets.
Rocky Mountain Chocolate... (NASDAQ:RMCF)
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Rocky Mountain Chocolate... (NASDAQ:RMCF)
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From Apr 2023 to Apr 2024