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 fiscal third
quarter ended November 30, 2023.
Fiscal Q3 2024 Financial Results vs.
Year-Ago Quarter
-
Total revenue was $7.7 million in the third quarter of 2024
compared to $8.8 million in the third quarter of 2023. During the
quarter, the Company experienced production constraints in its
Durango facility, which impacted fulfillment and offset strong
holiday seasonal demand.
-
Total product and retail gross profit was $0.7 million in the third
quarter of 2024 compared to $1.9 million in the third quarter of
2023, with gross margin of 10.2% compared to 24.5%. The decrease
was primarily due to higher operating costs due in part to the
aforementioned production constraints, higher expedited shipping
charges, as well as costs incurred with third-party packing
providers.
-
Gross margin was also impacted by a one-time expense associated
with the relocation of consumer packing operations to Salt Lake
City, UT.
-
Total operating expenses improved 7% to $8.5 million in the third
quarter of 2024 compared to $9.0 million in the third quarter of
2023. The improvement was primarily attributed to a decrease in
professional fees related to the costs associated with the
contested solicitation of proxies in fiscal 2023.
-
Net loss from continuing operations was $0.8 million or $(0.12) per
share in the third quarter of 2024, compared to a net loss from
continuing operations of $0.2 million or $(0.03) per share in the
third quarter of 2023.
- Adjusted EBITDA (a non-GAAP measure defined below) was $(0.3)
million in the third quarter of 2024 compared to $1.2 million in
the third quarter of 2023. The decrease was primarily due to lower
sales and gross margin, partially offset by lower sales and
marketing expenses and franchise costs.
“While we experienced strong upfront holiday
seasonal demand during our fiscal third quarter, we faced
production constraints in our Durango facility, which impacted
sales and order fulfillment,” said Rob Sarlls, CEO of RMC. “To
address these challenges, and as part of our ‘simplify and focus’
effort, we initiated a strategic relocation of all consumer
packaging mid-quarter to a third-party provider in Utah, which
enabled our production to better fulfill the continued strong
demand for our packaged product offerings from both our franchisee
network and omni-channel partners. Although this transition had a
temporary impact on our operating margins, it was an essential step
to ensure a positive outcome for our partners and to strengthen our
long-term positioning.
“To ‘do more with less,’ we posted our third
straight quarter of operating margin improvement despite the high
one-time relocation costs. We remain laser focused on getting our
production assets and distribution systems in the right place as we
look ahead to increasing the total number of franchised stores at
the appropriate time.
“To ‘amplify and elevate’ our brand, we engaged
an award-winning retail and hospitality design firm to lead the
aesthetic refresh of both Company and franchisee-owned stores.
Additionally, we completed the buildout of our senior leadership
team with the addition of Kara Conklin, Vice President of Franchise
Development, who joined us from Focus Brands.”
Sarlls continued, “As we close fiscal 2024, the
actions we have taken over the past year have laid the groundwork
for the future of the Company, and we believe we are approaching an
inflection point that will enable Rocky Mountain Chocolate to
return to growth and profitability in fiscal 2025.”
Conference Call Information
The Company will conduct a conference call on
January 11, 2024 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, January 11, 2024Time: 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 during |
|
|
the three months ended |
Stores open as of |
|
November 30, 2023 |
November 30, 2023 |
United States |
|
|
Rocky Mountain Chocolate
Factory |
|
|
Franchise Stores |
0 |
149 |
Company-Owned Stores |
0 |
2 |
Co-brand Stores |
0 |
113 |
International License
Stores |
0 |
4 |
Total |
0 |
268 |
|
|
|
SELECTED BALANCE SHEET DATA |
(in thousands) (unaudited) |
|
November 30, 2023 |
February 28, 2023 |
Current Assets |
$ |
10,080 |
$ |
11,205 |
Total Assets |
|
21,281 |
|
21,987 |
Current Liabilities |
|
7,079 |
|
5,010 |
Total Liabilities |
|
8,999 |
|
7,617 |
Stockholder's Equity |
$ |
12,282 |
$ |
14,370 |
|
|
|
|
Three Months Ended November 30, |
Three Months Ended November 30, |
|
|
2023 |
|
|
2022 |
|
2023 |
|
2022 |
|
Revenues |
|
|
|
|
Product sales |
$ |
6,058 |
|
$ |
7,285 |
|
78.7 |
% |
82.5 |
% |
Royalty and marketing fees |
|
1,235 |
|
|
1,190 |
|
16.0 |
% |
13.5 |
% |
Franchise fees |
|
41 |
|
|
49 |
|
0.5 |
% |
0.6 |
% |
Retail sales |
|
363 |
|
|
301 |
|
4.7 |
% |
3.4 |
% |
Total Revenues |
|
7,697 |
|
|
8,825 |
|
100.0 |
% |
100.0 |
% |
|
|
|
|
|
Costs and
expenses |
|
|
|
|
Cost of sales |
|
5,768 |
|
|
5,727 |
|
74.9 |
% |
64.9 |
% |
Franchise costs |
|
577 |
|
|
476 |
|
7.5 |
% |
5.4 |
% |
Sales and marketing |
|
572 |
|
|
573 |
|
7.4 |
% |
6.5 |
% |
General and administrative |
|
1,333 |
|
|
2,080 |
|
17.3 |
% |
23.6 |
% |
Retail operating |
|
186 |
|
|
138 |
|
2.4 |
% |
1.6 |
% |
Depreciation and amortization, exclusive of depreciation and
amortization expense of $187 and $160 included in cost of sales,
respectively |
|
36 |
|
|
29 |
|
0.5 |
% |
0.3 |
% |
Total Costs and Expenses |
|
8,472 |
|
|
9,023 |
|
110.1 |
% |
102.2 |
% |
|
|
|
|
|
Income (loss) from
operations |
|
(775 |
) |
|
(198 |
) |
-10.1 |
% |
-2.2 |
% |
|
|
|
|
|
Other
income |
|
- |
|
|
|
|
Interest expense |
|
(12 |
) |
|
(4 |
) |
-0.2 |
% |
0.0 |
% |
Interest income |
|
30 |
|
|
7 |
|
0.4 |
% |
0.1 |
% |
Other Income, net |
|
18 |
|
|
3 |
|
0.2 |
% |
0.0 |
% |
|
|
- |
|
|
|
|
Income (loss) before
income taxes |
|
(757 |
) |
|
(195 |
) |
-9.8 |
% |
-2.2 |
% |
|
|
|
|
|
Provision for income
taxes |
|
- |
|
|
- |
|
0.0 |
% |
0.0 |
% |
|
|
|
|
|
Net income (loss) from
continuing operations |
|
(757 |
) |
|
(195 |
) |
-9.8 |
% |
-2.2 |
% |
|
|
|
|
|
Discontinued
Operations |
|
|
|
|
Earnings from discontinued
operations, net of tax |
|
- |
|
|
(16 |
) |
|
|
Gain on disposal of
discontinued operations, net of tax |
|
- |
|
|
- |
|
|
|
Net income (loss) from
discontinued operations, net of tax |
|
- |
|
|
(16 |
) |
|
|
Consolidated Net
(Loss) Earnings |
|
(757 |
) |
|
(211 |
) |
|
|
Basic Earnings (loss)
Per Common |
|
|
|
|
Share |
|
|
|
|
Loss from continuing operations |
$ |
(0.12 |
) |
$ |
(0.03 |
) |
|
|
Earnings (loss) from discontinued operations |
$ |
- |
|
$ |
- |
|
|
|
Net Earnings |
$ |
(0.12 |
) |
$ |
(0.03 |
) |
|
|
|
|
|
|
|
Diluted Earnings
(loss) Per Common |
|
|
|
|
Share |
|
|
|
|
Loss from continuing operations |
$ |
(0.12 |
) |
$ |
(0.03 |
) |
|
|
Earnings (loss) from discontinued operations |
$ |
- |
|
$ |
- |
|
|
|
Net Earnings |
$ |
(0.12 |
) |
$ |
(0.03 |
) |
|
|
|
|
|
|
|
Weighted Average
Common |
|
|
|
|
Shares Outstanding |
|
6,302,159 |
|
|
6,227,002 |
|
|
|
|
|
|
|
|
Dilutive Effect of
Employee Stock |
|
|
|
|
Awards |
|
- |
|
|
11,774 |
|
|
|
|
|
|
|
|
Weighted Average
Common |
|
|
|
|
Shares Outstanding, |
|
|
|
|
Assuming Dilution |
|
6,302,159 |
|
|
6,238,776 |
|
|
|
|
|
|
|
|
|
Nine Months Ended November 30, |
Nine Months Ended November 30, |
|
|
2023 |
|
|
2022 |
|
2023 |
|
2022 |
|
Revenues |
|
|
|
|
Product sales |
$ |
15,589 |
|
$ |
17,251 |
|
75.3 |
% |
77.4 |
% |
Royalty and marketing fees |
|
4,111 |
|
|
4,071 |
|
19.9 |
% |
18.3 |
% |
Franchise fees |
|
127 |
|
|
148 |
|
0.6 |
% |
0.7 |
% |
Retail sales |
|
864 |
|
|
815 |
|
4.2 |
% |
3.7 |
% |
Total Revenues |
|
20,691 |
|
|
22,285 |
|
100.0 |
% |
100.0 |
% |
|
|
|
|
|
Costs and
expenses |
|
|
|
|
Cost of sales |
|
15,159 |
|
|
14,143 |
|
73.3 |
% |
63.5 |
% |
Franchise costs |
|
1,870 |
|
|
1,344 |
|
9.0 |
% |
6.0 |
% |
Sales and marketing |
|
1,487 |
|
|
1,482 |
|
7.2 |
% |
6.6 |
% |
General and administrative |
|
4,952 |
|
|
7,723 |
|
23.9 |
% |
34.7 |
% |
Retail operating |
|
451 |
|
|
447 |
|
2.2 |
% |
2.0 |
% |
Depreciation and amortization, exclusive of depreciation and
amortization expense of $541 and $480 included in cost of sales,
respectively |
|
99 |
|
|
87 |
|
0.5 |
% |
0.4 |
% |
Total Costs and Expenses |
|
24,018 |
|
|
25,226 |
|
116.1 |
% |
113.2 |
% |
|
|
|
- |
|
|
|
Income (loss) from
operations |
|
(3,327 |
) |
|
(2,941 |
) |
-16.1 |
% |
-13.2 |
% |
|
|
|
|
|
Other
income |
|
|
|
|
Interest expense |
|
(24 |
) |
|
(4 |
) |
-0.1 |
% |
0.0 |
% |
Interest income |
|
68 |
|
|
14 |
|
0.3 |
% |
0.1 |
% |
Other Income, net |
|
44 |
|
|
10 |
|
0.2 |
% |
0.0 |
% |
|
|
|
|
|
Income (loss) before
income taxes |
|
(3,283 |
) |
|
(2,931 |
) |
-15.9 |
% |
-13.2 |
% |
|
|
|
|
|
Provision for income
taxes |
|
- |
|
|
702 |
|
0.0 |
% |
3.2 |
% |
|
|
|
|
|
Net loss from
continuing operations |
|
(3,283 |
) |
|
(3,633 |
) |
-15.9 |
% |
-16.3 |
% |
|
|
|
|
|
Discontinued
Operations |
|
|
|
|
Earnings from discontinued
operations, net of tax |
|
69 |
|
|
(334 |
) |
|
|
Gain on disposal of
discontinued operations, net of tax |
|
635 |
|
|
- |
|
|
|
Net income (loss) from
discontinued operations, net of tax |
|
704 |
|
|
(334 |
) |
|
|
Consolidated Net
(Loss) Earnings |
|
(2,579 |
) |
|
(3,967 |
) |
|
|
Basic Earnings (loss)
Per Common |
|
|
|
|
Share |
|
|
|
|
Loss from continuing operations |
$ |
(0.52 |
) |
$ |
(0.58 |
) |
|
|
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 |
$ |
(0.51 |
) |
$ |
(0.57 |
) |
|
|
Earnings (loss) from discontinued operations |
$ |
0.11 |
|
$ |
(0.05 |
) |
|
|
Net Earnings |
$ |
(0.29 |
) |
$ |
(0.60 |
) |
|
|
|
|
|
|
|
Weighted Average
Common |
|
|
|
|
Shares Outstanding |
|
6,290,575 |
|
|
6,219,362 |
|
|
|
|
|
|
|
|
Dilutive Effect of
Employee Stock |
|
|
|
|
Awards |
|
- |
|
|
19,414 |
|
|
|
|
|
|
|
|
Weighted Average
Common |
|
|
|
|
Shares Outstanding, |
|
|
|
|
Assuming Dilution |
|
6,290,575 |
|
|
6,238,776 |
|
|
|
|
|
|
|
|
GAAP RECONCILIATION |
ADJUSTED EBITDA |
(in thousands) |
(unaudited) |
|
Three Months Ended November 30, |
|
|
|
2023 |
|
|
2022 |
|
Change |
GAAP: Income from
Operations |
$ |
(775 |
) |
$ |
(198 |
) |
n/m |
Depreciation and Amortization |
|
223 |
|
|
189 |
|
|
Stock-Based Compensation Expense |
|
166 |
|
|
191 |
|
|
Costs associated with non-recurring expenses |
|
91 |
|
|
1,016 |
|
|
Non-GAAP, adjusted EBITDA |
$ |
(295 |
) |
$ |
1,198 |
|
n/m |
|
Nine Months Ended November 30, |
|
|
|
2023 |
|
|
2022 |
|
Change |
GAAP: Income (loss) from
Operations |
$ |
(3,327 |
) |
$ |
(2,941 |
) |
n/m |
Depreciation and Amortization |
|
640 |
|
|
567 |
|
|
Stock-Based Compensation Expense |
|
491 |
|
|
472 |
|
|
Costs associated with non-recurring expenses |
|
532 |
|
|
4,465 |
|
|
Non-GAAP, adjusted EBITDA |
$ |
(1,664 |
) |
$ |
2,563 |
|
n/m |
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