RMCF - Earnings call 3 2024 | Rocky Mountain Chocolate Factory, Inc.

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Operator

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to today's conference call to discuss Rocky Mountain Chocolate's financial results for the fiscal third quarter 2024. [Operator Instructions] As a reminder, this conference is being recorded.

Joining us on the call today are the company's CEO, Rob Sarlls; and CFO, Allen Arroyo. this forward-looking will Securities statements Act XXXX. that that forward-looking Litigation advised of considered are under be conference contain call statements Reform Please the Private time risks subject could subject that actual to the are uncertainties these results in from and known These forward-looking as materially cause to that differ other from reflected statements as well risks with are and forward-looking time filings are also unknown the those and to statements. These uncertainties assumptions statements to certain company's described in forward-looking SEC. on place undue of forward-looking not being Do are made call. as reliance date any the statements, of which only this financial company or supplemental as including of as by statements. The adjusted performance also forward-looking measures Except business. of obligation non-GAAP to presentation undertakes revise law, measures, any publicly update the EBITDA company's required the certain no includes non-GAAP directly have SEC most All with comparable GAAP reconciled the the been in accordance rules. measures to measures

and and SEC's available find company's the will will are currently page in on reconciliation furnished tables earlier which and other SEC the on X-K the Form EDGAR important information today, You release website the press earnings to call available will ended. Sarlls. be company's section this Relations its And within go ahead. company's please the Rob, approximately over after hours now Investor website I to call turn XX Rob the of the on has CEO,

Robert Sarlls

people. a of particularly relocation co-packer and in in objectives. Labor hand good our our Thank assembly will permit accomplished historically pack toted consumer toted labor-intensive within in operation. our for boxes all Durango business anywhere our It of and availability need chocolate pivot in is for critical has and simplify fiscal a functions XX other everyone. Utah. the while, XX fulfilling focus between world-class you, chocolates, taken and packaging The has our a strategic the challenge been quarter to toted major now co-packer This morning, the of also and a such a boxed packaging third with to We final were production items handle with fill including opportunities, network expedited particularly to the and transition, availability holiday only critically e-commerce. meet new deploying third-party impacted but we difficult that transportation chocolate year during We requirements costs manpower with chocolate partners. relocation complete and of capitalize in manufacturing not our additional to with needs. This had holiday needs on season. co-packing our fully franchisee frequently the ability business to costs, prioritize omnichannel inventory to needed typically peaking our This came delivery reduced seasonal additional a onetime the XXXX, box tough labor including talent production and third-party but

us essential anticipated Although prevented impact supply chain sales. Despite proud excess Utah, facilitate short-term net our in hard the operations our the of effort on has margins, to been this fully midst team of the was factors an unrealized season. our combined relocation with had to positive and effects to we the work to we pleased The and are in the million holiday temporary of impact move approximately outcome these strengthen packaging a volumes, and $X of and our step and it for positioning. impact, long-term a ensure product busiest result capturing estimate by I'm partners from this of the resulting

additional consequence, this capacity and production a has meet in long-standing move As eliminated Durango, demand. we've faced we future ceiling the to substantial created

in the quarter in chocolate even they premium more to and volumes demand us is the high-quality December result focus more and and meaningful several we than of configuration as we ahead. XX% G&A, our to to premium anticipate alone, other our specialty milestones more network, do best, reductions improved franchise labor team direct products. This that relief once the well fiscal a in pounds prior do meet expand turning the expansion chocolate we produced years transformation fourth with plan. To of did now nearly which of Durango of new e-commerce in plan in in can confectionery omnichannel our third existing as in retail our empowers what production making from the sequential planned partners as on Durango made Quickly This again year. entirety we of less, ongoing the products evidenced, reflect we As marking double-digit execution consecutive strategic quarter higher of improvement.

elevate lead in Chocolate retail We the and growing Well Spent margins. adjusted double on also of owned engaged to year. design aesthetic first hospitality digits Rocky Co. To and in our both for a company and product progress which we an Mountain brand, refresh reached time gross made basis award-winning firm, the storefronts. continued amplify to the an franchisee Design

Focus more several to prospective plans of we scenario we years Kara addition the of in of joins store announced base as operating the the brand elevation operators experience. track importantly, Kara Brands. nearly as brings completed our we the leadership multiunit on in She already November, our out business proven years. the our is franchise Additionally, much Conklin our VP as of of senior franchise from current next expand franchisees and the team are in has future. And transformation in stated franchise which with focusing build-out in pushing front of XX Franchise Kara who world. with Development, and over a and for us record our a forward passion

Directors. appointment the business Turning we to the and Steve developer to strategist Craig In Board. Board added retail successful seasoned a December, of the of

quarter, some private commercial developed, him owned School Utah, as e-commerce retail nearing founding continues, forward, States. He hard brings point addition our Chocolate on executing X and executive aspiring and the the Western going an our expanding United is upcoming laser outdoor inflection companies. having our Steve for return our business and the nearly including prepare to throughout real lessons State retail of time with nearly equipped committed Franchise estate, to an since with capitalize ideal to XX XXXX strategic Chocolate has opportunities both and have existing work experience in and graduated other new and and public stores, which Board The growth were of XX Mountain years management we're specialty ownership, of franchise to our who greater plan. is alumni on Board. For new experience has and certainty. The along Missouri interested funded currently in of much the is our students includes to L. and XX holiday our franchises, QX we from can of the fully to development this stay Business relocation with but youth fiscal franchisee the restaurants Craig XX ] highlights an summarize business profitability Rocky And at our and better transformation well team To Craig XXXX. season for of operator learned Development, made for and financial Steven us before the direct among endowment Mountain cycle downtime students and fact, in of offers remarks. fiscal operating also [ entrepreneurial multiunit packaging over awarded my University. a closing demand operators. Steve's Allen? actually in shops are primarily Business returning training malls focused Center I operated Rocky Steve CFO, built will to best on operating consumer to critical School it Allen hand discuss decades, to customers which now

Allen Arroyo

variants today all for is commentary you, Rob. year-over-year results continuing a operations financial while stated discussed Thank Please are all basis, unless note that on otherwise.

Salt City, $X.XX Utah. Total the decreased $X.X $XXX,XXX. The also sales our The operations decreased which the offset $X.X aforementioned production associated with compared $X.XX $X.X to Durango The was year-over-year, million. constraints, XX.X%. The during was overhead the the due associated or Moving costs sales. operating in which company-operated Lake to result to and primarily Total decrease decrease was to year. onetime gross the operations $X.X share. Adjusted to July $X $X.X store product and store Retail Chocolate million. opening led sales from loss Durango of per primarily franchise increased compared decrease professional to compared partially company-owned gross company-owned proxies EBITDA strong or attributable $X.X compared availability seasonal compared margin prior impacted Total demand. Taking a sales attributable facility, product million. $XX,XXX. million locations per quarter to fiscal look XX% share at related million year. to to to and due to a -- our by relocation to $X.X $X.X a over X.X% was XXXX. of factory with prior improvement to and loss prior on of to $X.X compared in primarily lower The and revenue expenses XXXX. X% a $X Same-store at million from fulfillment X.X% million gross compared and million to to Net continuing compared increase stores $XX,XXX to at costs previously lower million EBITDA, for profit the year was margin second net contested Mountain packaging in deeper loss related costs. versus marketing a latter sales absorption. $XXX,XXX domestic marketing to in in product a overhead results. was Rocky were decrease of and constraints the mentioned was franchise decreased across flat margin to And compared was Total expenses decrease continuing adjusted the the gross of $X.X Factory production was offset was retail sales million $X.X sales to to due Royalty approximately holiday The fees the all personnel in compared fee constraints. Same-store with due revenue was of and to solicitation our primarily of million revenue the lower million our million our of XX.X% higher operations was year. to

$X.X XXXX. The million sheet. offset operations partially at to net and of the ended with the the sale fiscal quarter useful to to was decrease equipment assets. in cash used cash by of the purchase cash due third property We our primarily million and a compared year Turning of in end balance of balance $X.X

financing third million $X.X quarter, of a over level decade. In spent of will the for to be the near in end For exploring the such the fiscal as roughly period we flat the capital months X capital compared third the year-end in structure. XXXX. future, We our time highest inventories of the the part equipment-based ended quarter expenditures, total million, with of we use through $X.X

As million credit. XX, from of of November line our XXXX, utilized $X.X we

for Rob closing any balance to like our free long-term turn sheet I'd remains the remarks. that, to However, With back call of debt. over

Robert Sarlls

Allen. Thanks,

to year close groundwork past Looking over the and we've much the the and fiscal we stronger the of taken We're business a fiscal going of business opportunities better take year 'XX were to the than into actions XXXX future laid fiscal of have beyond, position in our advantage business. sustain current new the XXXX. and support entering the for

the year. That We'll concludes our efforts beginning bear and Our place to plan answer Operator, now. team right fruit, the to the in to prepared are of you. remarks. and glad execution next to have be accelerate any transformation questions back we execution

Operator

Instructions] James. McElfrey from Dawson comes [Operator question Our with first Jim

Unknown Analyst

as have to you understand on you're understand would go if the issues the the with seems I'm just having level inventory that -- trouble shipped down. you co-packaging, and with help going there? the should have it that what's if like trying co-packaging can just it's inventory out inventory me as you you and I'm levels much the had

Robert Sarlls

sure. Yes,

production facility. final years remarks, typically new package said add And frame. June, call time attract So had meaningful hourly it, in the anywhere past in box let's I labor from September, to as typically, the we my going the increase we October had to XX talent folks institute our challenges on, a to to to then And work year. Back wage products. inventory in needed prepared in throughout to again, in builds fiscal into, pretty we XX

So into was ramp-up the the the it last and managed made inventories lean going was fiscal year, our end we deliberately fiscal year difficult of current labor the by for that challenges.

-- had that we than recruit the when get and would had of always the to would higher had we was possibly we to to levels, much been of probably have had for we able definitely have has packaging, 'XX in inventory we anticipated outsource the faster been strategic accelerated as could. there plan sure move as our we current holiday final make which met the So

Unknown Analyst

the understand to trying also I'm packaging then And move. Okay.

plan. the quarter? have it's move I this with was that Or been issues of So quarter? you know But did it part the delayed this specific

Robert Sarlls

the at year. scheduled there no was No, beginning current the fiscal of move

became labor labor the standup chocolates imperative As them Durango, it solution assorted we hand call find dropping we situation an unfolded because to the of enough not individual the do boxes manual totes. or that packing get we into into could immediate what very

the but demand possibly So super getting the week not Utah, can October demand, second meet the that co-packing ensure we really into the the that could. majority of of we all of

necessary, So it was we ramp unlimited It with where business sets happens up future fit there's very a the needed Utah the labor strategic us our in access very immediately to and going it as to plan move. up for forward. completely

Unknown Analyst

And complete is that transition now?

Robert Sarlls

Yes.

Unknown Analyst

transition? issues remaining you need any in to to that finish order address that there off Are -- there Is

Robert Sarlls

the hour. miles while good costs we That we that have moving per news people. of the from XX days incurred was essentially the piece in was some at a charge XXX was the an running transition co-packer done is the ago. of pricing hourly with The is That different of as quarter, rates extra No. bus completed to

So of new accountability be also our going us going to that And they will visibility as benefit can be. give much to as partner efficient a and forward. we're greater have co-packing

Unknown Analyst

Can this Okay. the mentioned I you next you X fiscal are -- capital more, capital you what The for year the might. you spending And if quarter. in just -- indicate have spending if your if and can? needs

Robert Sarlls

Yes.

Allen finish. then and start, me Let have I'll

that So the was November. at cited $X.X million, number through we

why number. it X-month you from And take Allen, don't a that's there? So

Allen Arroyo

Yes. No, the fiscal of spent the year. essentially most for we've CapEx

would we some have over fiscal said we plan X payments currently a for We're remaining, we're had to with in that that but that. We million. million essentially, $X year again, strategic allocation it about the earlier signaled capital which our complete strategy years, planning -- 'XX, $X.X be the

as evaluating get fiscal are monitoring of this we the that. Again, priority year, occurred. most operating that. is far our we're So cash flow to But currently but quickly, into positive has spend as

Unknown Analyst

million were said And 'XX that $X years, you to when or you $X.X 'XX? and 'XX 'XX X and fiscal over the referring to million,

Allen Arroyo

Yes, 'XX earlier when the no we that year. in and 'XX announced

Unknown Analyst

let's permanent, but more, nothing it to should margins? gross are? what it margin get -- and moved just that result the -- I'm that the sorry, -- permanent Okay back is one prior to gross you improvement just Or with Utah, packaging a does now margins in, call call in gross is let's

Robert Sarlls

a one to That's hard answer.

get the Clearly, really margins me or do chime of what needs do opportunity to and I function and Let you do can ceilings everything the prevention business. best a Allen doing more can have of meeting and in. improve was This in to we're can the terms looking of we expanding there. of to

go hire what are temporary or time fact outside actual matter employees to cost the But an of from always added the there's times to issue is complete. just when to So you dealing double cost" becomes "added to you shift you less versus manufacturing rather having availability away that talent when expensive with product paying of X.X existing to than complete and/or inside. Durango, the product can packing in either

So volume the volume, and years to or lot been get of solves in a all ramp even joined we've volume have better so. preceding years for last us with a margins that couple up X.X of needing

without with provide going capture anything volume And respect to open that to to any anything think enabling margins. of else. more I this So add? Allen, solve up limitation, operating that's to

Allen Arroyo

No, no.

think it. covers that I

Rob mentioned, to it. going improvement increase the I of to doesn't the think overall. improve itself is being margin bring throughput But outsourcing packaging able as what's

Operator

next Roger LFSI. comes our with Lipton Instructions] from [Operator question

Roger Lipton

to finally, I so could been particular, increased just say, the expect from? It sounds new like the hasn't demand it you way you you Alan and that deliver their omnichannels this seems long. now see stock. But set demand forth. to you In so demand up and the set if what own omnichannel talked being up, against Rob about are

Robert Sarlls

of And And our care a -- is X a super specialty of we long-standing, with everybody gas e-commerce pedal that the we've knows. one our taking opportunity our just that most have hit question. also hearts that in But and realize primary benefit, in majority the had working business retailers businesses, everybody's an yet to is I of franchisees. we've on. that's Great important multi-decade a have fully businesses for

make And can fulfilled so e-commerce how from standpoint. no and when box ceiling speaking backwards, be you better labor much can you met chocolate have on much a

at some the open that up e-commerce future. in very will near point So end

a With them would where see volume. And been forward a his updates we us with in the the Andrew a marketplace. that challenges courting Ford more in like the actively and those relationships. fulfillment team quarters. have retailer, further specialty of to we then some excellent that more future had to multi-decade do are had again, other couple And brands attractive had We've despite retail we we've to option continue now heritage are opportunities pursue look than having and particularly

Roger Lipton

mentioned chipotle. you it there? Ells. as built there I Ells steve Steve relationship And was Okay. recall, a Is

Robert Sarlls

it's No, Craig. Steve

Roger Lipton

Craig. I you this I Roger. thought on Steve Steve Ells use It's could Craig. I'll be wrong. Steve said but

Robert Sarlls

problem. No

Roger Lipton

gentlemen. Okay. maybe come of I one to Durango would and still Utah see new now these the days pack... Thank love to to you,

Robert Sarlls

Durango. to Come

Roger Lipton

It's to Well City to Durango, fine. Lake get Salt it's but That's than easier whichever. okay.

Operator

Thank questions. Thank conference you. ladies This concludes today's There are and you, no further gentlemen. call.

have lines phone your this you a time, day. disconnect wonderful your for may and Thank at You participation.

Robert Sarlls

Thanks, Thanks, Michelle. everyone.

Allen Arroyo

you. Thank

Operator

welcome. You're

Rocky Mountain Chocolate Factory (RMCF) 11 Jan 242024 Q3 Earnings call transcript