RMCF - Earnings call transcript Q2 2018 | Rocky Mountain Chocolate Factory, Inc.

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Operator

Hello everyone and welcome to Rocky Mountain Chocolate Factory's Second Quarter Operating Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. Please note today's event is being recorded. The statements made on this conference call which are not historical facts are forward-looking statements based upon the company's current plan and strategies, and reflect the company's current assessment of the risks and uncertainties related to its business, including such things as product demand and market acceptance, the economic and business environment, and the impact of government pressures, currency risks, capacity, efficiency, and supply constraints, and other risks detailed in the company's press releases, shareholder communication, and Securities and Exchange Commission filings.

company SEC to filings. the XX-Q reviewing information, XX-K and additional urges consider you its For At the to conference time, call this I'd over Mr. like to turn Franklin Crail, President. go please Sir, ahead.

Franklin Crail

Mountain of afternoon call. Merryman, conference the Frank summary the Mr. Officer. our with with Crail, Mountain Operating welcome Operator. me fiscal fiscal Rocky will I'm everyone Bryan his any providing and have. you We're answer to of company's six second presentation, Factory you, questions second to start the quarter Chief first may Good a quarter call to Thank today XXXX you going Bryan operating Rocky Chocolate conclusion we both months Chocolate of President that here happy Factory's results. be XXXX is and At and of today

point, So like to the Bryan. call turn over to at this I

Bryan Merryman

cover start I would year-to-date results Thanks today’s attended Frank. to then call. second that I thank with our everyone the also quarter. will like and

For number stores same-store stores by in XXX.X%. in our franchise domestic domestic franchise Total stores sales network X.X%. royalty X%. Same-store cafes fiscal the X.X% average to to driven This franchise increase locations. company-owned decreases the decreased fees by retail by shipments franchise revenues mostly sales brands and outside fees. to decreased fees Rocky driven locations and increases domestic Same-store Factory a customers decreased units. Royalty domestic in closure increased franchise company-owned stores, XXXX X.X% sales and decreased partially Mountain the in Factory Franchise Factory offset underperforming was same-store X%, operations. primarily and franchise first X.X%. in declined fees. sale all increased of decreased overall to Retail factory marketing X.X% decrease and And U-Swirl the Same-store X.X%. of and of due in fees all by offset sales license sales franchise cafes of by decrease domestic Chocolate franchisees primarily company-owned sales purchased across decreased revenues Mountain at at accounts Chocolate a decline due Rocky sales half XX.X% of in XX.X%, XX% of XX.X%. certain

in We no quarter have of the certain international primarily license basis in to margins current XX.X% license the year. in fees was by from increased This with fees Factory XX.X%. the points international prior decrease XX driven commodities. cost

Net EBITDA Excluding compared X.X% and year, G&A versus $X,XXX,XXX expenses $X,XXX,XXX. per retail $X,XXX,XXX in $X.XX compared share sales to Diluted $X,XXX,XXX. was decreased lower on income expenses cost. marketing in the current lower prior in year. operating the was Adjusted expenses, and $X.XX at came to earnings

first $X.X current one amount Mountain ratio share. six with approximately Rocky to in dividend Factory in cash paid the its company consecutive on shareholders of to quarterly cash, September one X opening, XX, million we Rocky months, location. the and and the per international stores, Cold franchise During XXXX $X.XX domestic cobranded XXth three of Stone opened the stores, finished Mountain five We Chocolate the quarter X.X

franchise by countries Factory revenues total sales license average due second stores. the decreased XX.X% X.X% This Royalty X.X%, sale the decreased the In was purchased to X.X%. Republic and of at revenues due the agreements cafes and primarily cafes. of certain units network franchise customers quarter. Retail same-store company-owned of decreased at a in in the decreased decreased Qatar. in the store and Chocolate Mountain franchise domestic We Mountain X% stores in stores store brands decrease also executed Panama, covering all domestic sales franchised sales stores XX.X% increase Same quarter, license result operation, franchise closure partially stores Rocky sales fees number Same quarter, A across X.X%. X.X%. sales in Total and outside domestic franchise decrease pounds X.X%. decreased same-store in company-owned the Vietnam, Same domestic Factory of of of domestic X.X%. Factory State decreased offset Chocolate decreased to at the decreased of U-Swirl in fees. Rocky in shipments store the operation. our by marketing XX.X% franchise X.X% and cafes in fees to

fee of XX.X% result XXX For of versus the increased with Franchise XXX%. decrease fees is the commodities. was quarter Again, of points last year. due franchise This to license the XX.X% State associated to this the quarter, increased margins cost certain the basis a international Qatar. in in

to Rocky $X.XX company’s over it Mountain Store, XXth said expenses in retail $X,XXX,XXX the With during Chocolate the and share shareholders months X.X paid three cash consecutive $X.XX Adjusted stores million. one the quarterly the year quarter. We at current million finished Net year. XX, current the versus prior September domestic on I one $X,XXX,XXX EBITDA to earlier three were Factory Cold quarter per stores, cash the Diluted of with in share. decreased we back remarks. and again quarter. with are in per turn versus expenses $XXX,XXX that in in five came Excluding Those and quarter dividend X my more $X.X We was store. International opened ratio the Frank. operating of earnings income as amount Stone co-branded in next X.X% to $XXX,XXX ended prepared I in August, will

Operator

it is on is your phone Crail possible mute? Mr.

Franklin Crail

be any happy Yes, it might you and I’m at have. was. Thanks answer we Bryan sorry. questions time, this to would

Operator

Please comes Instructions] Management first Capital ahead Call from Tim go with your today our Corporation. question question. from [Operator And

Tim Call

see quantify international where any and you of opportunity? growth you could I that was future if wondering

Bryan Merryman

the Thanks Kim. future quantify really I can't opportunities.

I of in to to We expansion. really a international including but or don't it are working as expectations want speculate China, number create countries relates

in and We very have a Canada good Korea. operation South

go, want create really kind any those will We I in expectations how to international as of smaller countries relates it think is Philippines, the I in some see well it have to don't sold operations. future going we but and

Tim Call

additional some your operating spending With the to huge and spending timeline flow it? from but benefits that that reinvesting decline see where company, the should where that when should not when should your website amounts and see some will operations manufacturing, cash you’ve we in will mail-order that, we when and what’s only of spending, and of we see spent we it,

Bryan Merryman

of back year's we hope of the in see our and I factory benefits that last year. half this the spending

The first as some saw of expected. went year margin half We this improvements.

and see in some of more built I six the think months. some margin expect inventory some so the the past the really next we to expansion year efficiency We’ve for improvements. in back saw half

so be that, spent I of months that So, the improvement the think allocated part factory we where in will maintenance CapEx last and of year, capital of next in hopefully we most see the will we fiscal of spending and the the six year two of the in last benefits to of in the factory what year. most margin spent see have were years will the first the

Internet sales we in Most we happen In seeing rmcf.com put terms of of small of December. and from of right are very percentages mail-order of over good now. there, and our really the month not XX% Internet numbers very, our efforts site mail-order

past spend increase we will our can to this going and see we advertising significantly we in year are We sales. the some if done that haven't

now, so numbers but it We worth in have the increases big about. are talking is not it small really

So will ask we questions, and have I that and don't ahead your I hopefully go all if again. it if see didn’t of know answered I

Tim Call

Bryan. you, Thank did. You

Operator

have follow-up do We Call Instructions] [Operator Corporation. a Management from question from Capital Tim

Tim Call

is Internet significant that’s only increase of As to not your with going so going forth flow cash - to and and operations be cash grow spending your will over free operations, and soon. flow, it's your in your grow the

spending free grow subsides cash flow that as even will So your more.

significant next the that there expectation should that to dividend have benefit the long-term loyal years increased buybacks shareholders. over an that, more or Given your two be share you

Bryan Merryman

Tim. great That’s question

Over the our next years completely of repay two debt. will long-term we all

service that is CapEx. and We source debt we significantly factory, invested investing service is heavily. free are as will the million could have $X.X a in to well half last having use working of year very right been We’ve that mainly about do we that debt - our initiatives preliminary could there be year the -- maintenance as invest that back on annually. dividend, the some we heavily obviously and the said to cash but increase flow away going back the with getting factory Our

the free dividend. So flow both increase areas can could of use produce those to we that some cash

of the that of think uses as be a some produce have possible revenues, was that flow could it and could for variety used increase lower, dividend there was our tax if I reform over some increase too the next two and cash that rate all also, is significant to we well. if hopefully So, and years

events exactly positive materialize that some hope and is that’s right. are there we - to yes your So, question

Tim Call

that no And of is so XXX% might some next years two interest two the and so debt years? over fall expense by possibility in

Bryan Merryman

we to we but instance incurring zero, we interest would credit it the be to If are definitely started go the line wouldn't would use maybe for expense - zero. now

Tim Call

Thank you very much.

Bryan Merryman

Sure.

Operator

your from [Operator Please Instructions] question. comes Our go ahead question Jason with next Cassidy.

Jason Cassidy

any be was September. there update at you have the said, the of an in Hi over if believe thought or end active it to last was - I matter, call would update I wondering you the quarter Bryan, least litigation by

Bryan Merryman

completely were relates and The and expect litigation it dismissed as those no judgments. claims we in The to company won matters activity the future. the summary

Jason Cassidy

thank you. great, Okay,

Operator

management this no additional the conference to over like and remarks. to for I’m call And gentlemen at back any closing ladies turn showing I’d time questions.

Franklin Crail

thanks listening an conference bye. We you you Again, to for very you look months. in three update and Thank great forward and to a bye, you, quarter talking day thank Have Operator. our much with second call. again, giving

Operator

And the X:XX X-XXX-XXX-XXXX, you today. digital of X-XXX-XXX-XXXX conference, ladies this dial access Eastern replay and to beginning or may Time gentlemen at

Today’s today’s for number, to be We conference number prompted be will record name conference enter a presentation. Please your XXXXXXXX. company and is joining. you that now concluded. You Again do XXXXXXXX. will attending when thank has which

now You disconnect lines. may your

Rocky Mountain Chocolate Factory (RMCF) 5 Oct 172018 Q2 Earnings call transcript