Rocky Mountain Chocolate Factory (RMCF) 12 Oct 232024 Q2 Earnings call transcript

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 second 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. Please be advised this conference call will contain statements that are considered forward-looking statements under Private Securities Litigation Reform Act of 1995. those subject well known cause as to materially are and unknown actual statements forward-looking differ as these uncertainties assumptions from forward-looking to and certain risks results statements. These in reflected that could These and that forward-looking time the are risks the with to uncertainties company's time statements filings subject from SEC. other also in are to described of Do only as made which are not being place undue the reliance this date on any forward-looking statements, call. of update undertakes Except any or as publicly by obligation required revise company statements. no the forward-looking to law, The EBITDA also includes business. performance including company's certain presentation non-GAAP and of measures, financial of adjusted supplemental measures the All release non-GAAP website reconciliation have reconciled after on Form the the XX to website Rob and [indiscernible] find information today, hours page company's company's tables with accordance comparable to the the the important will measures X-K CEO, has measures are call furnished in over Relations Sarlls. GAAP on turn will earlier currently the with been section available rules, SEC Investor and on to company's will earnings its the you this which now ended. And the SEC of SEC's be other I directly in available approximately call an and ahead. go Rob, please

you, Thank morning, good and everyone.

more as to elevate amplify to initiatives These generate less the holiday of and business the do Mountain through Strategic simplify expected the the our operations remove the and season. Rocky growth our the enter and X we During with quarters material quarter, in growth Chocolate continued Plan, ahead are Transformation execution to focus impediments of the the we pillars revenue brand. of

year. lead business expected have strong made the during for outsized our back in Specifically, the the to results the fiscal demand of and half holidays we our products to e-commerce are to improvements

I'd strategy. the XXXX. half channels like fiscal of with, sales e-commerce of To In for all fiscal In exceed the expect fact, to made implementation progress the Specialty these Retail we've second our Sales. begin we towards and long-term to the highlight combination our from of

with First, do more to less.

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compared us our labor a to efficient we salaries hires. a During first facility to employees new in pound compensation quarter. Despite to to more the higher the manage helped This which to productivity throughput. reduce for experienced fiscal production our provides pay compared base quarter, attract increased foundation reduction former turnover in Chocolate a structure and XX% our Durango quicker for to the ultimately ramp at establish Rocky and return for increase team, help company, per and processing the produced us has we attrition enabled Mountain employee long-term to

National highest in completed our of recently we the operations, Franchisee franchisee XXXX during performing some September. the Structure Convention Volume focus implementation and our simplify and Annual Royalty showcased streamlined we our Discount Program. to Second, Which of franchisees

waste our work SKU volume-based products towards Mountain franchisees reduction for experience cost consumer savings top in making preference XX% also units for of time, products, an to better of well are improved even target popular discount of deliver progress franchisees, of incentivizing from our especially alignment result most of lower increase to economics receive while In storage Durango. We continued production to a and of will underperforming more customers higher those up Rocky and and rate as X%, offerings sales We're our sales, as items. franchisees. our with sunset eligible multiunit low addition purchases royalty through Chocolate multiple operators. as X% we as as to empowers expenses In providing anticipate with our and to all this franchisees a the now believe we reduced supplies our store to product SKUs become of

transformational Third, reenergized and a Convention, a in National unveiled brand our Elevate, Franchisee Amplify history convention during network. Annual XXXX of highest franchisee we which attended company, refresh real of was our the our reflection the to

bringing Our experience name brand Chocolate XX rich the of refresh Rocky over logo, customers for a provides Mountain streamlined our building to years. history and upon trade

resulted doubling last to to I made As significant this we have benefit, of checkout. same the more our activating fees transaction of higher experience, couple removal a to volumes. Since This earlier, e-commerce a at and year. transparent including of in tripling has shipping months shopping online improvements of sales we mentioned experienced more volume the compared experience than a leading

enhancements increased California, possible of a California removal, In reach population commencing our renowned addition partnership company. By XX% cold chain within over of with shipments recently Durango. the made adding we delivery could our days, shipping now our we Western region. rollout something have completed serve with U.S. nationally the not to to or throughout logistics X-day for cheaply customers X service facilities coverage the fee can third-party from the by do in These from we easily were

our support inaugurating reengagement quarter, We in the expect investment in all-important with first further these our Elevate, to and the return under Amplify we leadership nearly initiatives enter new this season. investor growth we will team. holiday as community decade To our participated a conference past the

the not of reaffirm to to engagement improvements X-year to the in message plans reach for shareholders Mountain but participation we're proactive Chocolate. The commitment Rocky also are our serve prospective to plan. transformation X- the of active with foundational today our future about amplifies and making only investors, these our Our events

strategy store to caring company-owned can news, to to like X% Our expect these by and is quarter, we a and and stores, I improvements, I'd additional now location exemplifies well with fresh store lit, Other by which grand Mountain run, production customer local and developments was fully yielding work continue with higher a our to the store. that in customers. Durango staff network driven is average of initiatives should for logistics. We sales financial our This few ample in revenue implementation our In be transaction. to from our at clean July, strong product, a facility and at Durango short result year-over-year attending retail We company-owned stocked celebrated our the operational Christi long-term grand reopening. the reopening privileged sampling how Rocky passionate benefits. store per increased team highlight Corpus and Chocolate

prior can substantial August franchise of example and and With since locations were the new of sales Christi network. above generating sales have of a has Corpus well management, store our the remained classic up existing year transformations XX% the potential versus impact our is incremental XX%. on from for underperforming the within

out brand nationwide part continue, expect trend see as updates our roll of to of our storefronts as we We refresh. this

To to consumer Excluding the facility for planned been place. sales volumes, fiscal all same-store licensed continuing our Durango of labor packaging not and take will chocolate plan, compared during locations. our a demand where summer, temperatures exit Durango from in our customers impacted our also unchanged the shipped co-packers needs, to half base final bearing the are X quarter remove to and to consumer implement handle fulfillment prior And year, domestic volumes of beyond. and fall, accelerated modestly, despite hard our which the higher from this this to production efforts but lastly, transformation holiday we We're as our third-party pound over and final partnered headwinds working to challenge the volumes wholesale items Durango, of second now crucial we and fruit. to summarize, handle with confectionery strategic future this also necessary assembly second planned our a fiscal is the constraints high plan, prior increase. This this year year's franchise has our of strategic move and any year. the products. Likewise, only increased across record approximately in box is we respected are fulfill Labor

to discuss hand through to remarks. highlights continue closing We we building a we're fiscal growth fiscal quarter before Allen? long-term year. I our second foundation as now Mountain our returning for will Chocolate and the execute profitability Rocky over remainder of Arroyo this plan Allen strong CFO, and it progress to financial to our position for

continuing financial Thank you, that note operations. Please for results Rob. today all discussed are

is basis, commentary variance all on year-over-year stated. While unless a otherwise

Now of this prior customers related on store of Christi of results. Total the July, to from mostly in was to We moving unchanged the planned offset lower our the from the out-of-network year. Corpus million million reopening $X.X shipments the in year. $X.X of two earlier revenue benefited exit which products

prior store the during increase all Same-store to revenue to sales to million increased our Christi $X.X Mountain year X.X% store at year. million. were sales due and Retail company-operated up the compared marketing closure Durango was the the increased $XX,XXX. prior sales XX% Chocolate X% Corpus $X.X And company-owned at to compared in were store. Same-store to revenue domestic million. Royalty Rocky $XX,XXX Total increased to franchise year-over-year. our fee for of reopening our and in further product a $X.X to sales. Looking partially million quarter compared compared was sales compared $X.X to $XXX,XXX. This the stores locations at $XXX,XXX

primarily with Moving manager profit million XX.X%. margin higher decrease the professional Total to production management compared the to operating the costs associated by creation as store. gross primarily was wages was following to loss year, partially inflation well operations The a to XX% $X prior the improved was continuing costs compared lower million from of franchise compared as million of million. a to and and net was role from and volume or loss we our personnel and in costs. proxies continuing million offset share by due with related as or severance gross adjusted professional to and increased retail due employee of labor was $X.X product in related to severance operations lower per contested $X offset of The margins employee compared of fees loss to were solicitation operations related improvement $X.X gross was cost, to fees $X.XX associated relocations. This benefited with to attributable better Durango to proxies on, Net $X.XX per to cost solicitation higher million well $X.X period with lower EBITDA $X.X million relocation. partially shortage. Adjusted associated expenses retail flagship compared of resolved year-ago This contested a add-back and The $X.X $XXX,XXX. as from $XXX,XXX share. EBITDA X.X% primarily Total as a costs the profit

cash sheet. We a purchases position of to closing compared end company We for reductions. at turn cash million was I'd XXXX. that, million back balance primarily with the XXXX, inventories ended and property of in million fiscal the as the decrease balance quarter call our equipment, with over inventory XX, free. With by of year-end of to second of partially to to to our $X And August debt fiscal the remarks. the Turning XXXX. total second $X.X at compared The ended like million offset to quarter $X.X Rob remains $X.X attributable

stakeholders Thanks, orderly sustainable long our create for run. the to strategic over sequence, executing all value transformation methodical and in an Allen. designed remain laser-focused our We on of plan

as remarks. the into our as concludes look to to pain updates are we we great continue premier to some future our solid future. Rocky While We business, journey for short-term Mountain laid confident providing forward Chocolate's was build prepared in plan foundation our have and and groundwork the fortify a America's on we the company position our ear. This solidify necessary of believe chocolate

back Operator, be We answer any to now. will you. to questions glad

question Services. from from of coming Financial Instructions] Lipton Lipton Our the [Operator First Roger line

Good.

to quick stores? of couple terms a franchisees refresh to encouraging our Christi Corpus in refresh that what you're what spend you did you them Just their spend? -- so questions. The helped of And much, are asking

What we a everything great running really, look" That's X-part of went a seek the we deliver "old the Yes. it a through. going. than is Thanks, and you to question. where network. from I Christi correctly it's a store with consistently store with how store for That's run we're which that still your offer relatively Corpus well-run there a store good do is has what although that the experience, newer-looking experience, know And most it's question. just and network. simply refresh our across and Roger,

spend Corpus. So in whole was we $XX,XXX. lot than it a have less to didn't I maybe mean

we're It with lift start X low store will over going months. Durango Corpus the our spread a We're the that's talking thereafter. bigger firm help stores. about. going engaging That right next process network with And for and That to it be deal. a to to out And figures franchisees. our our you're us X and Christi high be to will As refresh, the to XX sooner now, in is figures. happen that going of to that's with meaningful then XX the

the that obviously, what you think year, affected be X in of, months, can factors so in is those next a which over And recent of lot your the quarter, do your what, The there are substantially here, moving parts alleviated? shipments operations. terms part most your to large factors extent across a of

Well, laid a success. that was lot that in, to quarters, in primarily things with last X are of greater barriers logistical the groundwork

send all want Durango of used store. a sent every we store. We single Durango to remind to I from just shareholders, from co-brand trucks So truck our single every to

those chocolate of where product is our of a shops, of the And trucking full core of changed are of of the chocolate we pillars majority been our and now Durango, All super and full of and the them all miles out company somebody done delivery shops final our nearly to have having non-full us. of ran by expertise. part effort which our not that's things not focus that's simplify

having in ultimately to management And so getting and overall. more to done fresher the franchisees focus, benefits and of there's that product terms if quickly in benefits

GiftXday in single E-com, All impossible was Durango. are there And how now a limits day. barriers those packages I of my [ could ] terms many Durango noted prohibitive in or In as fundamental to were leave remarks, gone. from

So this. our E-com benefit can from

coming to to stores stores other enhancements delivery make down more Our the now, buy pounds. to for there's and it easier line

order. structure realign looking So the we're how of to even they

more. All sell things enabling are to up them of ramp those and

e-commerce, and revenue How But about sales, second the Okay. e-commerce you the is your a total talked base? retail of half. of specialty in higher much combination lot obviously that

total was in year we XX%, 'XX, about called Well, look if fiscal you at what omnichannel the XX-K of XX% sales.

to we're majority hits for be that, number, that X in fiscal the 'XX, so the looking nominal higher significantly number And and the in months. of super all of course, back

the & from coming of Peter question with next Sidoti Our line Company. Siodti

point? Allen, Two future cash hand, your to, at and quick burn this so questions. need cash your One for on can you financing any speak

So position. year we great the started cash in good,

X investments in not significant and made have months cash accumulative. has been the equipment, we've first as We mentioned, obviously,

position. recently months the However, of our with last the strongly We we Wells with X with Fargo. the we the our did believe renew hand in, about on cash cash feel still year, credit and cash line in of coming

had that a temporarily into And we if tap do we could to. so have we revolver

there's again, no needs there's forecasted financing. again, So long-term no for

end of But we the balance. feel However, the going the there year generate go is very necessity, we if year, to with into line some the about a in Again, should strong of we could cash credit. with cash position shape. our great we came confident half back and the we're in the year

there's equipped our now. a exploring is we'll equipment possibility put right on and to Also, We're that financing. unencumbered some look

That is correct.

how you you are sense of first terms in came do this give had fifth you're along Rob, Are to third it inning, about inning, feel you process? on board, the the a at done. [indiscernible] in how feel Can where inning? you the the you you point? you get in far me

this. it's inning I'm in, Well, late to that's funny, transformation. second and of don't Peter. total of once true The terms scorecard mid-Xs, Like with you're changes situations. feeling know, the all sort I in

gruntwork, thing Rocky a encountered before. huge not is still done that the huge network we've mean, consumers to a Chocolate ourselves to of to our Mountain I present the and thing for refresh have go. brand lot think I really, more a

We're opportunity about retail come a us that in a new refresh, with buyer insanely the brand gives to excited specialty really be that's bringing we're going the new store on, of exciting. to that something packaging and and lot

the next So we come get year. to really really afterburners hit

Okay. must Roger Well, you to be something have doing call. the right Lipton on

So very you thank much.

gentlemen. call. And conference I'm showing in This further at questions concludes no you, ladies time. and Thank queue today's the this

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

operator. you, Thank

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