RMCF - Earnings call transcript Q3 2018 | Rocky Mountain Chocolate Factory, Inc.

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Operator

Hello everyone and welcome to Rocky Mountain Chocolate Factory Reports First Nine Months of Fiscal Year 2018 Operating Results Conference Call. All participants will be in a listen-only mode. 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 I to Frank now Crail, will turn CEO. the call over

begin may your You conference.

Frank Crail

Chocolate and Thank Merryman, call. conference the Mr. Officer. with Crail, Mountain Operating to afternoon me Operator. Rocky Frank quarter everyone Company’s of Factory you, Rocky fiscal Chief Good I’m Mountain Bryan Chocolate Factory’s President XXXX here third of is welcome and today

of both going operating giving have. summary answer We’re may conclusion you start you nine we first to today the results. presentation, questions be will the XXXX third Bryan with our months to call at of fiscal and this that any happy quarter a of And

Bryan. this turn at So, I’d to like time, to over the call

Bryan Merryman

and franchised of number the closure decreased the XX.X% location, by driver the of sales X.X%. and stores result Same the cafés X.X% at underperforming fees would attending the note And of more like store acquisition everyone X.X%, start business decreased Chocolate that. all thank partially Factory the XX.X%; offset to going conditions X.X%. to certain Rocky in network a stores, this I is are owned today’s franchise franchised revenues Royalty in sales I’m the decline owned the also increase an a average domestic and primary nine domestic third operating locations licensees, partially in franchise This units of and for customers with location. in than indicative nine-month trends a the outside offset Retail of to Frank. Company Mountain sale Total X.X% of months Company call. decreased decrease that results. was XX.X%; Thanks, shipments stores franchisees the in XX.X% decreased by operation. factory shipments of of by decrease in Company quarter. and owned marketing driven our was increased to revenues trends of

domestic had domestic decrease domestic license international Rocky Mountain increased costs X.X%. margins Factory Chocolate also X.X%. with U-Swirl franchise cafés international while all sales franchise store current margins Total shift. XXX and reported were decreased basis store We brands same declined mix sales in at We no year. fee at XXX%. license in realized prior franchise X.X% year fees Franchise we the the product store sales fees across to dropped store same This due XX.X%. XX.X% had production increased same that Factory points; is versus

fourth $X.XX at year so over versus cash Our X,XXX,XXX X,XXX,XXX the year the to $X.XX quarter, should last -- year. year last current Adjusted this that year. margins versus in are full comparable this year. in year income year share improve prior the to per year. Net was year Diluted margin the XX% comparisons X,XXX,XXX year compared X,XXX,XXX came in earnings was last or in current in EBITDA

Qatar. approximately Panama On $X During license domestic amount XX the five the cash executed December Company RMCF of We the consecutive opened. countries X.X and $X.XX to share. quarter X, of nine the and current X. the quarterly million and U-Swirl international shareholders covering State cash co-branded ratio its to international RMCF dividend a stores, in openings, location in paid Vietnam We Stone of the per with opened, XXth XXXX, agreements of locations three months domestic we five up RMCF stores, one franchise finished Cold and opened

decrease by offset was a shipments pounds revenues same were For the driven and franchisees. by at in X.X%; stores licensees third quarter, of franchise store outside in this increase total increased to unchanged customers purchased XX.X% million. by our $XX partially revenues X.X% Factory and network

increased Royalty Factory sales decreased Rocky franchise margins decrease points same this a Mountain sales domestic franchise decreased owned a or units store the Same fees domestic domestic at decreased total X.X%, result X.X%. store XX.X% increased XX.X%; of sales an of domestic Chocolate to XX.X%; number increase decreased Same Chocolate franchise in product franchise increase result Company was in stores of and certain X.X%. and operation. increased locations at this mix Factory Retail Factory Mountain basis versus all to store Rocky cafés fees sales and domestic and shift. same closure cafés, of average had the sale quarter, the in operations. domestic store Company in of -- this all X.X% also brands franchise stores due We sales and decreased the is costs marketing XX.X% decreased in due U-Swirl franchise X.X%; a X.X%. decrease was In store franchise and at X.X%, across to openings. XXX production in

compared December per $X We consecutive back domestic over co-branded EBITDA other RMCF X.X XXth during retail openings, in to And expenses, Again, was paid million Excluding in the current dividend. two in international $XXX,XXX cash decreased four ratio, RMCF quarter. quarter operating location. the for I’ll Cold quarterly current nine with franchise three RMCF we locations, finished our versus all year quarter expenses to quarter we U-Swirl domestic year. earnings XXXX turn X.X%. and last came the franchise $.XX with that stores share in X $X,XXX,XXX cash $X.XX $X,XXX,XXX to operating prior the Frank. opened last Stone Diluted and at on stores, year. Adjusted Net two income versus the one were approximately and $X,XXX,XXX it months,

Frank Crail

happy questions time, this Thanks, have. any Brian. answer to Operator, be might anyone at would we

Operator

question our Call with Corporation. from Tim [Operator Instructions] first Management Capital is And

Tim Call

also, by in expect you the might your could going with a review And us? litigation here if that quarter Is [indiscernible] costs you about you then, than you know forward? about block. and consolidation Could Ferrero what on industry Nestle talk the and Hello. trend more there bought

Bryan Merryman

please? question I’m sorry. that again, me Can the you, of first Tim, ask part

Tim Call

and the would quarter in costs forward? what going be they Litigation

Bryan Merryman

different current see have year-over-year. forward. and the that do the nine-month In costs going for forward, litigation, we going not the to related litigation period, that costs comparison, But litigation less we much are CherryBerry won’t

had costs. have in bump legal a compliance-related We

exactly So, costs that I more our of legal next year-over-year don’t report numbers. yet. terms picture a in end-up when have where we comparisons, I’ll of lot year-end year quite a know in clear we

So, have really right clarity I good don’t on that now.

compliance-related So, we increase have seen some legal in costs.

competitive. of consolidation, confection I industry terms In think super business is the

and And I think know are just industry. some pricing in customers. under is the do on think of pass consolidation. a I competitively. space see would I expect further a it’s smaller consolidation price confection to an pressure the lot issue able to And being increases further I I companies tough

Operator

question Jason investor. private from is next Cassidy, The

Unidentified Analyst

under here. if the a wondering cost was could sales. like gross of pressure I It bit you little give detail the of margin is on seems

mentioned future? just think this Is trend recover competitive do you You might you continue will pressures. margin a think in pricing or that

Bryan Merryman

is issues. SKUs. are the we SKUs of can a which do improve think work And customers for And we which going is of in margins have that for in than at our with sure. continue is carries lower efficiency SKUs volumes mix, bulk a creates lot think volumes, SKUs. improve product going what significant our our I the to pressure product. you packaged increase to if And or Well, that had across lower a we’ve I consolidate And look creating those forward, increase of product, to margins sales that lot we’ve customers had that

can that’s think a it’s I to that margins. definitely work fix on; something quick we not

this I year year margins think for cash versus to comparable be going last full-year. the

but If on think continuing then but period over it. I we can’t are work we have we can a issue that’s consolidate do going with that up our to SKUs in to of SKUs, can time we’re a so, customers get volumes And work that. we

and backups can continued expand rate are. in bulk see in franchise growth we to expect our at we product, a slight than more packaging We growth, system rapid unless

that address So, have number improve. we also But, forward, could and I some our see growth the we outside will and sales margins take time. going units our if it’s think system definitely in balance of issue; it that we system, some could between can

Operator

Capital the Corporation. Management Call from question And is next with Tim

Tim Call

new about any or talk and tax would law you there going benefits whether the Could forward? charges be

Bryan Merryman

what Company. is Well, the Cuts we at in do effective rate cut tax evaluating to Act process going materially. benefit the of is the going our the the to rate corporate with to are XX.X%, Tax Jobs Obviously around in and Company

ends We February. fiscal that year in also have the

capital some benefit have time help the do what to XXX%. we look Company the treated to expense the them That’s are you we taxes So, to where to relates expenditures could actually And year -- going us. at of we it the going forward. can as balance

very a now. course, have But We may assets to those it’s also and deferred have material that Company. are be benefit or evaluating may of net-net, right to not going to the written be down; we tax

Tim Call

lot How much streamlined, over the the upgraded do two. a factory being operations will and the seeing benefits we that with of into capital and And when put those invest or last of expenditures to start year you investments? in need operations you more

Bryan Merryman

We’ve behind business quarter fourth about plans getting I’ll need through to a lot an operation our investment. investments, to capital the that quarter in what see of we better together. next the factory. talk a We busy in think in in in five far invest our pickup in, the and next been we out. investment for we we’re much year be a expenditure have as product very then, the years from future are and I packaged fourth and year in standpoint the this of And our put And the as should benefits position and after

a numbers quantifying more to position answer you that going give really be do in to question. right a in when not we But, forward, think year-end our So, report position answer now. detailed that and to a I’m I’ll I

Operator

The next question investor. is [ph] Amber, private from Jim

Unidentified Analyst

about Is you developed succinct that based and forward wondering improve to XXXX? have the strategy was I strategy revenues? the there EBITDA going on XXXX a

Bryan Merryman

and We’ve pretax up we’ll In current of right fees; see the Because specialty fees. XX% with our with able we having of are of sales stores, decrease to and also deals our franchise continue fees to issue that talk in from outside And the February, income. XXXX, is challenges; sales, forward. number hopefully marketing unexpected. for system The international make collected increases ends definitely going fiscal not in our in market our we off they’re one some comes been about of decrease XXXX royalty almost that year, XXXX. year and

continue increase really outside And to domestic way system expect out of Factory our We systems stores. our -- figure our have a grow Chocolate will to our sales system. we Mountain to to Rocky

to not that presents opportunity fiscal so, itself. key done some considering in we’re that market acquisition And past franchisees includes going and the things if be of XXXX, that we from in have stores

back operator from a the For franchisee. free Company actually where market to an key likely find key either sophisticated obtain or That we have store will store the hopefully a for or to the instance the an itself. that have existing market expansion that up expansion the Company is in do to us operator finance expand with

We’re additional stores. in of possibly position or consider the encourage financing franchisees to actually out a Company to owned build doing stores,

there’s next stores. done we resources going allocated help So, that doing hopefully the our and will fiscal year, to in things of to us haven’t grow past, some be base

Operator

question Private Brian is next investor. the And [ph], Lundin from

Unidentified Analyst

was give outside color you this any the I wondering sales just systems if the could quarter? on additional

Bryan Merryman

plan I for the expect in plan, this really to -- increase our this and the the and be on was think revenue outside our that period, significant year. we sales quarter on the right right system nine-month

existing customers with growing it those numbers in, happy of come expect where have sales We’re with to and our terms we’re to we expand. customers the and in with mostly continue

Operator

will And comments. I Crail time. there further at the questions Frank for turn this back no to closing over call are

Frank Crail

again Thanks a forward of And conference at Operator. everybody year-end. fiscal look months, to our talking you quarter you, few again Thank third we XXXX with attending for call. in

to and bye. talking day soon. you Bye, great a have So, we’ll be

Operator

This conference call. concludes today’s

now disconnect. may You

Rocky Mountain Chocolate Factory (RMCF) 12 Jan 182018 Q3 Earnings call transcript