NASDAQ:RMCF Rocky Mountain Chocolate Factory Q2 2024 Earnings Report $1.29 +0.00 (+0.01%) Closing price 04/17/2025 03:59 PM EasternExtended Trading$1.25 -0.04 (-2.71%) As of 04/17/2025 04:05 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings History Rocky Mountain Chocolate Factory EPS ResultsActual EPS-$0.16Consensus EPS N/ABeat/MissN/AOne Year Ago EPSN/ARocky Mountain Chocolate Factory Revenue ResultsActual Revenue$6.56 millionExpected RevenueN/ABeat/MissN/AYoY Revenue GrowthN/ARocky Mountain Chocolate Factory Announcement DetailsQuarterQ2 2024Date10/11/2023TimeN/AConference Call DateThursday, October 12, 2023Conference Call Time8:30AM ETUpcoming EarningsRocky Mountain Chocolate Factory's Q4 2025 earnings is scheduled for Wednesday, June 11, 2025Conference Call ResourcesConference Call AudioConference Call TranscriptPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfilePowered by Rocky Mountain Chocolate Factory Q2 2024 Earnings Call TranscriptProvided by QuartrOctober 12, 2023 ShareLink copied to clipboard.There are 5 speakers on the call. Operator00:00:00Good morning, ladies and gentlemen. Thank you for standing by. Welcome to today's conference call to discuss Rocky Mount Chowkon's Financial Results for the Fiscal Second Quarter 2020 4. At this time, all participants are in a listen only mode. As a reminder, this conference is being recorded. Operator00:00:174. Joining us on the call today are the company's CEO, Rob Salz and CFO, Alan Ariano. Please be advised This conference call will contain statements that are considered forward looking statements under Private Securities Litigation Reform Act of 1995. 4. These forward looking statements are subject to certain known and unknown risks and uncertainties as well as assumptions that could cause actual results to differ materially from those reflected in these forward looking statements. Operator00:00:46These forward looking statements are also subject to other risks and uncertainties that are described from time to time in the company's filings with the SEC. Do not place undue reliance on any forward looking statements, 4, which are being made only as of the date of this call. Except as required by law, the company undertakes no obligation to publicly update or revise any forward looking statements. The company's presentation also includes certain non GAAP financial measures, 4, including adjusted EBITDA and supplemental measures of performance of the business. All non GAAP measures have been 4 reconciled to the directly comparable GAAP measures in accordance with SEC rules. Operator00:01:304. You will find reconciliation tables and other important information in the earnings release and Form 8 ks furnished to the SEC 4 earlier today, which are currently available on the company's EDGAR page on the SEC's website and will be available on the company's Investor Relations section of its website within approximately 24 hours after this call has ended. And now, I will turn the call over to the company's CEO, 4, Rob Sals. Rob, please go ahead. Speaker 100:02:01Thank you, and good morning, everyone. 4. During the quarter, we continued to remove impediments to the growth of the business through the execution of the 3 pillars Speaker 200:02:154. We are now in the process of our Speaker 100:02:16strategic transformation plan, do more with less, simplify and focus our operations and amplify and elevate the Rocky Mountain Chocolate brand. These initiatives are expected to generate material revenue growth in the quarters ahead 4. Specifically, the improvements we have made to our e commerce business and the strong demand for products during the holidays 4 are expected to lead to outsized results in the back half of our fiscal year. In fact, we expect the combination of e commerce 4 and specialty retail sales in our fiscal second half to exceed the sales from these channels for all of fiscal 2023. To begin with, I'd like to highlight the progress we've made towards the implementation of our long term strategy. Speaker 100:03:054. First, to do more with less, during the quarter we reduced our driver fleet by 33% 4, while maintaining consistent and ever increasing pound volume shipped from our Durango facility. This is a direct result of our logistics 4. Optimization efforts, which include increasing the use of 3rd party logistics partners to deliver products. 4. Speaker 100:03:27We believe there is additional leverage to be realized in our existing operations and we recently announced that supply chain industry veteran, Scott Ouellette, Has been appointed as Senior Vice President of Manufacturing and Supply Chain to help further this objective. Since joining as an advisor last October, 4. Scott's strong background in the confectionery industry has made him an invaluable asset to our leadership team. And I look forward to continuing to work with him 4 as we execute our plan. During the quarter, we increased our employee compensation structure at the Durango production facility 4 to reduce turnover and help establish a long term foundation for more efficient and ultimately higher throughput. Speaker 100:04:12This has helped us to manage attrition and enabled us to attract former Rocky Mountain Chalkins employees to return to the company, which provides a quicker ramp 4. For productivity compared to new hires. Despite the increase in base pay for our processing team, we experienced a 16% reduction in labor 4.2nd, to simplify and focus the operations, We completed the implementation of our streamlined franchisee royalty structure and volume discount program, which we recently showcased to some of our highest performing franchisees during our 2023 Annual National Franchisee Convention 4 in September. In addition to providing a royalty rate of as low as 4%, our franchisees, especially those with multiple units, 4 are now eligible to receive a volume based discount of up to 5% of all purchases of products and supplies from Durango. We believe this empowers our top franchisees to deliver even more sales of Rocky Mountain chocolate products, 4, while also incentivizing franchisees to become multiunit operators. Speaker 100:05:28We're making continued progress towards our 25% SKU reduction 4. As we work to sunset underperforming SKUs and increase production of our most popular items. 4. In time, we anticipate the alignment of product offerings with consumer preference will result in higher sales, 4. Cost savings through reduced waste and lower storage expenses as well as an improved experience for our customers 4 and better store economics for our franchisees. Speaker 100:05:593rd, to amplify and elevate, we unveiled a transformational brand refresh 4. During our 2023 Annual National Franchisee Convention, which was our highest attended convention in the history of the company, 4, a real reflection of our reenergized franchisee network. Our brand refresh provides a streamlined trade name and logo, 4, building upon our rich history of bringing the Rocky Mountain Chocolate experience to customers for over 40 years. 4. As I mentioned earlier, we made significant improvements to our e commerce experience, including the removal of shipping fees at checkout. Speaker 100:06:384. This has resulted in a more transparent online shopping experience leading to higher volumes. 4. Since activating this benefit, we have experienced a tripling of transaction volume and a more than doubling of sales compared to the same couple of months last year. 4. Speaker 100:06:55In addition to the shipping fee removal, we have increased our coverage for 2 day delivery service with shipments commencing 4. We can now reach over 90% of the U. S. Population within 2 days, something we could not do cheaply 4. These enhancements were made possible by the recently completed rollout of our partnership with a nationally renowned cold chain logistics 4. Speaker 100:07:27We expect these initiatives will support our return to growth as we enter the all important holiday season. 4. To further amplify and elevate, we participated in our 1st investor conference in nearly a decade this past quarter, 4. Inaugurating our re engagement with the investment community under the new leadership team. Our active participation in these events not only serve to reaffirm our commitment 4. Speaker 100:07:53To proactive engagement with shareholders and prospective investors, it also amplifies the reach of our message about the plans for the future of Rocky Mountain Chocolate. The improvements we're making today are foundational to our 3 to 5 year transformation plan. 4. Our strategy implementation is yielding strong operational improvements and we can continue to expect these initiatives to result in short 4 and long term financial benefits. In other news, I'd like to highlight a few additional developments from company owned stores, 4, our Durango production facility and network and logistics. Speaker 100:08:29We increased sales by 7% year over year at our Durango retail store for the quarter, 4, driven by higher average revenue per customer transaction. We celebrated the 4. Grand reopening of our Corpus Christi location in July, which is now a company owned store. This store exemplifies how our Rocky Mountain Chalklets store should be run, 4. Clean and well lit, fully stocked with fresh product, ample sampling and a passionate caring staff attending to our local customers. Speaker 100:09:014. I was privileged to work with the team at that grand reopening. With the new management, sales for August were up 48% versus the prior year and has since remained well above 20%. Corpus Christi is a classic example of the impact store transformations can have 4. We expect to see this trend continue as we roll out updates of our storefronts nationwide as part of our brand refresh. Speaker 100:09:374. Excluding the planned exit of 2 wholesale customers during our prior fiscal year, 2nd quarter sales from our Durango facility increased modestly 4. Despite headwinds from record high temperatures over the summer, which impacted consumer demand for chocolate and confectionery products. 4. Likewise, same store pound shift across the domestic franchise and license locations were also approximately unchanged 4 compared to the prior year. Speaker 100:10:04And lastly, this fall, we partnered with a respected third party co packer 4. To fulfill all our final consumer packaging needs, where final assembly of our box items will now take place. 4. Labor has been a continuing challenge in Durango and we accelerated this planned move to handle not only this year's base holiday volumes, 4, but also to remove any labor constraints as our future Durango production volumes increase. This is crucial for the fulfillment of our strategic plan and necessary to handle higher volumes in the second half of this fiscal year and beyond. Speaker 100:10:444. To summarize, we are working hard to implement our strategic transformation plan and our efforts are bearing fruit. 4. We continue to position Rocky Mountain Chalkins for long term growth and profitability, and we're building a strong foundation 4. I will now hand it over to our CFO, Alan Arroyo, to discuss our fiscal Q2 financial highlights before returning for closing remarks. Speaker 100:11:16Alan? Speaker 300:11:174. Thank you, Rob. Please note that all financial results discussed today are for continuing operations. 4, while all variance commentary is on a year over year basis unless otherwise stated. Now moving on to our results. Speaker 300:11:324. Total revenue of $6,600,000 was unchanged from the $6,600,000 in the prior year. 4. We benefited from the reopening of the Corpus Christi store in July, which mostly offset lower shipments of product related to the planned exit 4. Of 2 out of network customers earlier this year. Speaker 300:11:53Looking further at our sales, total product sales were $4,700,000 4 compared to $4,800,000 Royalty and marketing revenue increased to $1,500,000 4 compared to $1,400,000 Retail sales at our company operated stores increased 17% to $309,000 compared to $263,000 This increase was partially due 4. To a store closure in the prior year and reopening of the Corpus Christi store. Same store sales for our company owned store in Durango 4 were up 7% year over year. Same store sales at all domestic Rocky Mountain Chocolate locations increased 4. 2.3% during the quarter compared to the prior year. Speaker 300:12:47And franchise fee revenue was $41,000 compared to $45,000 Moving on. Total product and retail gross profit 4 was $400,000 compared to $1,200,000 with a gross profit margin of 7.6% 4 compared to 23.3%. The decrease was primarily due to lower production volume 4 and higher costs related to wages and inflation as we resolved a labor shortage. This was partially offset by higher 4. Retail gross margins primarily attributable to cost better cost management following 4, the creation of a flagship operations manager role in our Galangos store. Speaker 300:13:36Total operating expenses were 7.6 $4,000,000 compared to $9,000,000 The improvement was primarily due to lower professional fees associated with the contested solicitation of proxy 4. In the prior year as well as lower costs related to employee severance and relocation. This was partially offset 4 by increased franchise and personnel costs. Net loss from continuing operations improved 68% to 1,000,000 4 or $0.16 per share compared to a net loss from continuing operations of $3,200,000 or 0.51 4. Adjusted EBITDA loss was $600,000 compared to adjusted EBITDA of 700,000 4. Speaker 300:14:25The year ago period benefited from a $2,800,000 add back related to professional fees associated with the contested 4. Solicitation of proxies as well as costs associated with employee severance and relocation. 4. Turning to our balance sheet. We ended the 2nd quarter with a cash balance of $4,000,000 compared to $4,700,000 4 at the end of fiscal 2023. Speaker 300:14:52The decrease in our cash position was primarily attributable 4 to purchases of property and equipment, partially offset by inventory reductions. We ended the 2nd quarter with total inventories 4, up $3,200,000 compared to $3,600,000 at year end fiscal 2023. 4. And as of August 31, 2023, the company remained debt free. With that, I'd like to turn the call back over to Rob for closing remarks. Speaker 100:15:24Thanks, Alan. 4. We remain laser focused on executing our strategic transformation plan in an orderly and methodical sequence, 4, designed to create sustainable value for all of our stakeholders over the long run. While some short term pain was necessary 4. To solidify the foundation for the future of our business, we are confident in our plan and believe we have laid solid groundwork 4 to build a great company into the future. Speaker 100:15:54We look forward to providing updates as we continue on our journey and fortify Rocky Mountain Chalklets position 4 as America's premier chocolatier. This concludes our prepared remarks. We will be glad to answer any questions now. 4. Operator, back to you. Speaker 200:16:344. Operator00:16:434. First question coming from the line of 4. Roger Lipton from Lipton Financial Services. Your line is open. Yes. Speaker 400:16:53Good morning, Alan and Rob. How are you? 4. Good. Just a couple of quick questions. Speaker 400:17:034. The refresh that helped Corpus Christi so much, what did you spend and what are you asking your franchisees to spend in terms of 4? You're encouraging them to refresh their stores. Speaker 100:17:17Yes. Thanks, Roger, for the question. That's really it's a 2 part question. 4. Corpus Christi still has the old look, although it's a relatively newer looking store than most of our network. Speaker 100:17:304. What we refresh there is how that run a good store and simply running it correctly with everything that I just 4. You know, it went through and you know from your experience, a well run store with a great store experience, which is what we deliver and offer and 4. We'll seek to do consistently across the network. That's where we're going. Speaker 100:17:52So we didn't have to spend a whole lot in Corpus. I mean, it was maybe less than 20 4. As to the store refresh you're talking about, that is a bigger deal. That will happen 4. With our network over the next 12 to 24 months, we're in the process of engaging the firm that's going to help us with that right now. Speaker 100:18:11We're going to start with our Durango and Corpus Christi stores and then spread it out sooner thereafter. And that's going to be a meaningful lift for our franchisees. It will be 4. High five figures to low six figures. Speaker 400:18:27And what There are a lot of moving parts here obviously in terms of across your operations. 4. The factors that so substantially affected your shipments in the most recent quarter, to what extent do you think 4. Over the next 6 months, which is the large part of a year, those factors can be alleviated. Speaker 100:18:514? Well, a lot of that groundwork was laid in, in the last two quarters, primarily the things that are logistical barriers 4. So I want to remind all of our shareholders, we used to send a truck from Durango to every single store. 4. We just had a truck from Durango at every single cobrand store. Speaker 100:19:13All of those things have now been changed where the super majority 4. Our full chocolate shops and nearly all of our non full chocolate shops are having the final 4. Of delivery of product onto them by somebody not us. And that's part of the simplifying focus effort of our pillars, 4. We ran a full trucking company out of Durango and that's not our core expertise. Speaker 100:19:404. And so there's benefits to having that in terms of management focus and also ultimately benefits to the franchisees and getting product fresher and done more quickly overall. 4. In terms of e comm, there were fundamental limits to how many packages could leave Durango in a single day. 4. Speaker 100:20:06And as I noted in my remarks, you get 2 day was prohibitive or impossible from Durango. 4. All those barriers are now gone. So our e comm can benefit from this. Our delivery to store is now And there's other enhancements coming down the line to make it easier for stores to buy more pounds. Speaker 100:20:27So we're looking to realign even the structure of how they order. 4. All of those things are enabling them to ramp up and sell more. Speaker 400:20:37Okay. 4. But e commerce, we talked about the combination of e commerce and specialty retail sales, 4. Obviously, a lot higher in the second half. How much is that of your total revenue base? Speaker 100:20:564. Well, if you look at fiscal year 2023, what we called omni channel in the 10 ks 4 was about 12%, 13% of total sales. And so we're looking for that 4. Number, the nominal number to be significantly higher in fiscal 2024 and the super majority of that, of course, all hits in the back 6 months. Speaker 400:21:204. Got it. Okay. All right. Thanks very much. Speaker 400:21:22That's a big help. We'll talk again at Greater Lent offline. Thank you. Speaker 200:21:284. Thank Speaker 100:21:28you for your questions, Roger. Appreciate Speaker 400:21:31it. My Operator00:21:31pleasure. Thank you. And our next question coming from the line of Peter Sidoti with Sidoti and Company. Your line is now open. Speaker 200:21:42Good morning, gentlemen. 4. Two quick questions. Alan, can you speak to your cash on hand, your cash burn and Any need for future financing at this point? Speaker 300:21:56Yes. So we started the year in great cash position. 4. We have made significant investments in equipment, as we've mentioned. And The 1st 6 months has not been cash accumulative. Speaker 300:22:13However, we believe with the cash on hand 4. And with the cash coming in the last 6 months of the year, we still feel strongly about our cash position. We did recently renew our line of credit with 4. Wells Fargo. And so we do have a revolver that we could tap into temporarily if we had to. Speaker 300:22:32So 4. Again, there's no forecasted need for long term financing. 4. If there is some necessity, we could go into the line of credit. But we feel very confident about our cash balance. Speaker 300:22:474. Again, with the strong position we came in the year and with the back half of the year, the cash we're going to generate, we should end the year in great shape. Speaker 100:22:574. Also, our equipment is unencumbered and there's a possibility we'll look to put on some equipment financing. We're exploring that right now. Speaker 300:23:04That is correct. Speaker 200:23:054. And Rob, you came on board, you had a yeoman status to get done. Can you give me a sense How far along you feel you're in the process? Are you in the 1st inning, the 3rd inning, the 5th inning? 4. Speaker 200:23:20How do you feel about it in terms of where you are at this point? Speaker 100:23:24Well, it's funny, Peter. The inning 4. Scorecard changes once you're in, and that's true with all situations like this. I don't know, I'm feeling sort of 4. Late second to mid third in terms of the total transformation. Speaker 100:23:40I think we've done a lot of the grunt work, 4. Still more to go. I mean, really the brand refresh is a huge thing for our network and a huge thing to present ourselves to consumers that have 24. It gives us a lot of opportunity in specialty retail that we're bringing something to a buyer that's going to be really exciting. So 4. Speaker 100:24:10We get to really hit the afterburners really come next year. Speaker 200:24:15Okay. Well, thank you. You must be doing something right to have Roger Lipton on 4. Thank you very much. Speaker 100:24:22Peter, I appreciate your time. Thank you. Operator00:24:274. Thank you. And I'm showing no further questions in the queue at this time. And thank you, ladies and gentlemen.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallRocky Mountain Chocolate Factory Q2 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsPress Release(8-K)Quarterly report(10-Q) Rocky Mountain Chocolate Factory Earnings HeadlinesSpring flavors and Easter treats at Rocky Mountain Chocolate FactoryApril 10, 2025 | msn.comRocky Mountain Chocolate appoints Quinn to board of directorsMarch 14, 2025 | markets.businessinsider.comTrump’s Secret WeaponHave you looked at the stock market recently? Millions of investors are scrambling trying to figure out what's coming next. But here's the truth… This is just the beginning. Trump has made it clear his tariffs are coming, and that the market will get worse before it gets better. Luckily, our FREE Presidential Transition Guide details exactly what will happen in the next 100 days, and how to protect your hard-earned savings during these times. Don't wait for the next crash to wipe you out. Act now.April 18, 2025 | American Alternative (Ad)Rocky Mountain Chocolate Factory Appoints Brian Quinn to Its Board of DirectorsMarch 13, 2025 | globenewswire.comIs Rocky Mountain Chocolate Factory Inc. (NASDAQ:RMCF) the Best Chocolate Stock to Buy According to Hedge Funds?February 11, 2025 | msn.comPaid For By; Rocky Mountain Chocolate Factory - Say I Love You with ChocolateFebruary 8, 2025 | msn.comSee More Rocky Mountain Chocolate Factory Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Rocky Mountain Chocolate Factory? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Rocky Mountain Chocolate Factory and other key companies, straight to your email. Email Address About Rocky Mountain Chocolate FactoryRocky Mountain Chocolate Factory (NASDAQ:RMCF), together with its subsidiaries, operates as a confectionery franchisor, manufacturer, and retail operator. It operates through Franchising, Manufacturing, Retail Stores, and Other segments. The company produces approximately 400 chocolate candies and other confectionery products, including clusters, caramels, creams, toffees, mints, and truffles; and offers 15 varieties of caramel apples and other products that are prepared in individual stores, as well as provides ice cream, coffee, and other sundries. Rocky Mountain Chocolate Factory, Inc. was founded in 1981 and is headquartered in Durango, Colorado.View Rocky Mountain Chocolate Factory ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Archer Aviation Unveils NYC Network Ahead of Key Earnings Report3 Reasons to Like the Look of Amazon Ahead of EarningsTesla Stock Eyes Breakout With Earnings on DeckJohnson & Johnson Earnings Were More Good Than Bad—Time to Buy? 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There are 5 speakers on the call. Operator00:00:00Good morning, ladies and gentlemen. Thank you for standing by. Welcome to today's conference call to discuss Rocky Mount Chowkon's Financial Results for the Fiscal Second Quarter 2020 4. At this time, all participants are in a listen only mode. As a reminder, this conference is being recorded. Operator00:00:174. Joining us on the call today are the company's CEO, Rob Salz and CFO, Alan Ariano. Please be advised This conference call will contain statements that are considered forward looking statements under Private Securities Litigation Reform Act of 1995. 4. These forward looking statements are subject to certain known and unknown risks and uncertainties as well as assumptions that could cause actual results to differ materially from those reflected in these forward looking statements. Operator00:00:46These forward looking statements are also subject to other risks and uncertainties that are described from time to time in the company's filings with the SEC. Do not place undue reliance on any forward looking statements, 4, which are being made only as of the date of this call. Except as required by law, the company undertakes no obligation to publicly update or revise any forward looking statements. The company's presentation also includes certain non GAAP financial measures, 4, including adjusted EBITDA and supplemental measures of performance of the business. All non GAAP measures have been 4 reconciled to the directly comparable GAAP measures in accordance with SEC rules. Operator00:01:304. You will find reconciliation tables and other important information in the earnings release and Form 8 ks furnished to the SEC 4 earlier today, which are currently available on the company's EDGAR page on the SEC's website and will be available on the company's Investor Relations section of its website within approximately 24 hours after this call has ended. And now, I will turn the call over to the company's CEO, 4, Rob Sals. Rob, please go ahead. Speaker 100:02:01Thank you, and good morning, everyone. 4. During the quarter, we continued to remove impediments to the growth of the business through the execution of the 3 pillars Speaker 200:02:154. We are now in the process of our Speaker 100:02:16strategic transformation plan, do more with less, simplify and focus our operations and amplify and elevate the Rocky Mountain Chocolate brand. These initiatives are expected to generate material revenue growth in the quarters ahead 4. Specifically, the improvements we have made to our e commerce business and the strong demand for products during the holidays 4 are expected to lead to outsized results in the back half of our fiscal year. In fact, we expect the combination of e commerce 4 and specialty retail sales in our fiscal second half to exceed the sales from these channels for all of fiscal 2023. To begin with, I'd like to highlight the progress we've made towards the implementation of our long term strategy. Speaker 100:03:054. First, to do more with less, during the quarter we reduced our driver fleet by 33% 4, while maintaining consistent and ever increasing pound volume shipped from our Durango facility. This is a direct result of our logistics 4. Optimization efforts, which include increasing the use of 3rd party logistics partners to deliver products. 4. Speaker 100:03:27We believe there is additional leverage to be realized in our existing operations and we recently announced that supply chain industry veteran, Scott Ouellette, Has been appointed as Senior Vice President of Manufacturing and Supply Chain to help further this objective. Since joining as an advisor last October, 4. Scott's strong background in the confectionery industry has made him an invaluable asset to our leadership team. And I look forward to continuing to work with him 4 as we execute our plan. During the quarter, we increased our employee compensation structure at the Durango production facility 4 to reduce turnover and help establish a long term foundation for more efficient and ultimately higher throughput. Speaker 100:04:12This has helped us to manage attrition and enabled us to attract former Rocky Mountain Chalkins employees to return to the company, which provides a quicker ramp 4. For productivity compared to new hires. Despite the increase in base pay for our processing team, we experienced a 16% reduction in labor 4.2nd, to simplify and focus the operations, We completed the implementation of our streamlined franchisee royalty structure and volume discount program, which we recently showcased to some of our highest performing franchisees during our 2023 Annual National Franchisee Convention 4 in September. In addition to providing a royalty rate of as low as 4%, our franchisees, especially those with multiple units, 4 are now eligible to receive a volume based discount of up to 5% of all purchases of products and supplies from Durango. We believe this empowers our top franchisees to deliver even more sales of Rocky Mountain chocolate products, 4, while also incentivizing franchisees to become multiunit operators. Speaker 100:05:28We're making continued progress towards our 25% SKU reduction 4. As we work to sunset underperforming SKUs and increase production of our most popular items. 4. In time, we anticipate the alignment of product offerings with consumer preference will result in higher sales, 4. Cost savings through reduced waste and lower storage expenses as well as an improved experience for our customers 4 and better store economics for our franchisees. Speaker 100:05:593rd, to amplify and elevate, we unveiled a transformational brand refresh 4. During our 2023 Annual National Franchisee Convention, which was our highest attended convention in the history of the company, 4, a real reflection of our reenergized franchisee network. Our brand refresh provides a streamlined trade name and logo, 4, building upon our rich history of bringing the Rocky Mountain Chocolate experience to customers for over 40 years. 4. As I mentioned earlier, we made significant improvements to our e commerce experience, including the removal of shipping fees at checkout. Speaker 100:06:384. This has resulted in a more transparent online shopping experience leading to higher volumes. 4. Since activating this benefit, we have experienced a tripling of transaction volume and a more than doubling of sales compared to the same couple of months last year. 4. Speaker 100:06:55In addition to the shipping fee removal, we have increased our coverage for 2 day delivery service with shipments commencing 4. We can now reach over 90% of the U. S. Population within 2 days, something we could not do cheaply 4. These enhancements were made possible by the recently completed rollout of our partnership with a nationally renowned cold chain logistics 4. Speaker 100:07:27We expect these initiatives will support our return to growth as we enter the all important holiday season. 4. To further amplify and elevate, we participated in our 1st investor conference in nearly a decade this past quarter, 4. Inaugurating our re engagement with the investment community under the new leadership team. Our active participation in these events not only serve to reaffirm our commitment 4. Speaker 100:07:53To proactive engagement with shareholders and prospective investors, it also amplifies the reach of our message about the plans for the future of Rocky Mountain Chocolate. The improvements we're making today are foundational to our 3 to 5 year transformation plan. 4. Our strategy implementation is yielding strong operational improvements and we can continue to expect these initiatives to result in short 4 and long term financial benefits. In other news, I'd like to highlight a few additional developments from company owned stores, 4, our Durango production facility and network and logistics. Speaker 100:08:29We increased sales by 7% year over year at our Durango retail store for the quarter, 4, driven by higher average revenue per customer transaction. We celebrated the 4. Grand reopening of our Corpus Christi location in July, which is now a company owned store. This store exemplifies how our Rocky Mountain Chalklets store should be run, 4. Clean and well lit, fully stocked with fresh product, ample sampling and a passionate caring staff attending to our local customers. Speaker 100:09:014. I was privileged to work with the team at that grand reopening. With the new management, sales for August were up 48% versus the prior year and has since remained well above 20%. Corpus Christi is a classic example of the impact store transformations can have 4. We expect to see this trend continue as we roll out updates of our storefronts nationwide as part of our brand refresh. Speaker 100:09:374. Excluding the planned exit of 2 wholesale customers during our prior fiscal year, 2nd quarter sales from our Durango facility increased modestly 4. Despite headwinds from record high temperatures over the summer, which impacted consumer demand for chocolate and confectionery products. 4. Likewise, same store pound shift across the domestic franchise and license locations were also approximately unchanged 4 compared to the prior year. Speaker 100:10:04And lastly, this fall, we partnered with a respected third party co packer 4. To fulfill all our final consumer packaging needs, where final assembly of our box items will now take place. 4. Labor has been a continuing challenge in Durango and we accelerated this planned move to handle not only this year's base holiday volumes, 4, but also to remove any labor constraints as our future Durango production volumes increase. This is crucial for the fulfillment of our strategic plan and necessary to handle higher volumes in the second half of this fiscal year and beyond. Speaker 100:10:444. To summarize, we are working hard to implement our strategic transformation plan and our efforts are bearing fruit. 4. We continue to position Rocky Mountain Chalkins for long term growth and profitability, and we're building a strong foundation 4. I will now hand it over to our CFO, Alan Arroyo, to discuss our fiscal Q2 financial highlights before returning for closing remarks. Speaker 100:11:16Alan? Speaker 300:11:174. Thank you, Rob. Please note that all financial results discussed today are for continuing operations. 4, while all variance commentary is on a year over year basis unless otherwise stated. Now moving on to our results. Speaker 300:11:324. Total revenue of $6,600,000 was unchanged from the $6,600,000 in the prior year. 4. We benefited from the reopening of the Corpus Christi store in July, which mostly offset lower shipments of product related to the planned exit 4. Of 2 out of network customers earlier this year. Speaker 300:11:53Looking further at our sales, total product sales were $4,700,000 4 compared to $4,800,000 Royalty and marketing revenue increased to $1,500,000 4 compared to $1,400,000 Retail sales at our company operated stores increased 17% to $309,000 compared to $263,000 This increase was partially due 4. To a store closure in the prior year and reopening of the Corpus Christi store. Same store sales for our company owned store in Durango 4 were up 7% year over year. Same store sales at all domestic Rocky Mountain Chocolate locations increased 4. 2.3% during the quarter compared to the prior year. Speaker 300:12:47And franchise fee revenue was $41,000 compared to $45,000 Moving on. Total product and retail gross profit 4 was $400,000 compared to $1,200,000 with a gross profit margin of 7.6% 4 compared to 23.3%. The decrease was primarily due to lower production volume 4 and higher costs related to wages and inflation as we resolved a labor shortage. This was partially offset by higher 4. Retail gross margins primarily attributable to cost better cost management following 4, the creation of a flagship operations manager role in our Galangos store. Speaker 300:13:36Total operating expenses were 7.6 $4,000,000 compared to $9,000,000 The improvement was primarily due to lower professional fees associated with the contested solicitation of proxy 4. In the prior year as well as lower costs related to employee severance and relocation. This was partially offset 4 by increased franchise and personnel costs. Net loss from continuing operations improved 68% to 1,000,000 4 or $0.16 per share compared to a net loss from continuing operations of $3,200,000 or 0.51 4. Adjusted EBITDA loss was $600,000 compared to adjusted EBITDA of 700,000 4. Speaker 300:14:25The year ago period benefited from a $2,800,000 add back related to professional fees associated with the contested 4. Solicitation of proxies as well as costs associated with employee severance and relocation. 4. Turning to our balance sheet. We ended the 2nd quarter with a cash balance of $4,000,000 compared to $4,700,000 4 at the end of fiscal 2023. Speaker 300:14:52The decrease in our cash position was primarily attributable 4 to purchases of property and equipment, partially offset by inventory reductions. We ended the 2nd quarter with total inventories 4, up $3,200,000 compared to $3,600,000 at year end fiscal 2023. 4. And as of August 31, 2023, the company remained debt free. With that, I'd like to turn the call back over to Rob for closing remarks. Speaker 100:15:24Thanks, Alan. 4. We remain laser focused on executing our strategic transformation plan in an orderly and methodical sequence, 4, designed to create sustainable value for all of our stakeholders over the long run. While some short term pain was necessary 4. To solidify the foundation for the future of our business, we are confident in our plan and believe we have laid solid groundwork 4 to build a great company into the future. Speaker 100:15:54We look forward to providing updates as we continue on our journey and fortify Rocky Mountain Chalklets position 4 as America's premier chocolatier. This concludes our prepared remarks. We will be glad to answer any questions now. 4. Operator, back to you. Speaker 200:16:344. Operator00:16:434. First question coming from the line of 4. Roger Lipton from Lipton Financial Services. Your line is open. Yes. Speaker 400:16:53Good morning, Alan and Rob. How are you? 4. Good. Just a couple of quick questions. Speaker 400:17:034. The refresh that helped Corpus Christi so much, what did you spend and what are you asking your franchisees to spend in terms of 4? You're encouraging them to refresh their stores. Speaker 100:17:17Yes. Thanks, Roger, for the question. That's really it's a 2 part question. 4. Corpus Christi still has the old look, although it's a relatively newer looking store than most of our network. Speaker 100:17:304. What we refresh there is how that run a good store and simply running it correctly with everything that I just 4. You know, it went through and you know from your experience, a well run store with a great store experience, which is what we deliver and offer and 4. We'll seek to do consistently across the network. That's where we're going. Speaker 100:17:52So we didn't have to spend a whole lot in Corpus. I mean, it was maybe less than 20 4. As to the store refresh you're talking about, that is a bigger deal. That will happen 4. With our network over the next 12 to 24 months, we're in the process of engaging the firm that's going to help us with that right now. Speaker 100:18:11We're going to start with our Durango and Corpus Christi stores and then spread it out sooner thereafter. And that's going to be a meaningful lift for our franchisees. It will be 4. High five figures to low six figures. Speaker 400:18:27And what There are a lot of moving parts here obviously in terms of across your operations. 4. The factors that so substantially affected your shipments in the most recent quarter, to what extent do you think 4. Over the next 6 months, which is the large part of a year, those factors can be alleviated. Speaker 100:18:514? Well, a lot of that groundwork was laid in, in the last two quarters, primarily the things that are logistical barriers 4. So I want to remind all of our shareholders, we used to send a truck from Durango to every single store. 4. We just had a truck from Durango at every single cobrand store. Speaker 100:19:13All of those things have now been changed where the super majority 4. Our full chocolate shops and nearly all of our non full chocolate shops are having the final 4. Of delivery of product onto them by somebody not us. And that's part of the simplifying focus effort of our pillars, 4. We ran a full trucking company out of Durango and that's not our core expertise. Speaker 100:19:404. And so there's benefits to having that in terms of management focus and also ultimately benefits to the franchisees and getting product fresher and done more quickly overall. 4. In terms of e comm, there were fundamental limits to how many packages could leave Durango in a single day. 4. Speaker 100:20:06And as I noted in my remarks, you get 2 day was prohibitive or impossible from Durango. 4. All those barriers are now gone. So our e comm can benefit from this. Our delivery to store is now And there's other enhancements coming down the line to make it easier for stores to buy more pounds. Speaker 100:20:27So we're looking to realign even the structure of how they order. 4. All of those things are enabling them to ramp up and sell more. Speaker 400:20:37Okay. 4. But e commerce, we talked about the combination of e commerce and specialty retail sales, 4. Obviously, a lot higher in the second half. How much is that of your total revenue base? Speaker 100:20:564. Well, if you look at fiscal year 2023, what we called omni channel in the 10 ks 4 was about 12%, 13% of total sales. And so we're looking for that 4. Number, the nominal number to be significantly higher in fiscal 2024 and the super majority of that, of course, all hits in the back 6 months. Speaker 400:21:204. Got it. Okay. All right. Thanks very much. Speaker 400:21:22That's a big help. We'll talk again at Greater Lent offline. Thank you. Speaker 200:21:284. Thank Speaker 100:21:28you for your questions, Roger. Appreciate Speaker 400:21:31it. My Operator00:21:31pleasure. Thank you. And our next question coming from the line of Peter Sidoti with Sidoti and Company. Your line is now open. Speaker 200:21:42Good morning, gentlemen. 4. Two quick questions. Alan, can you speak to your cash on hand, your cash burn and Any need for future financing at this point? Speaker 300:21:56Yes. So we started the year in great cash position. 4. We have made significant investments in equipment, as we've mentioned. And The 1st 6 months has not been cash accumulative. Speaker 300:22:13However, we believe with the cash on hand 4. And with the cash coming in the last 6 months of the year, we still feel strongly about our cash position. We did recently renew our line of credit with 4. Wells Fargo. And so we do have a revolver that we could tap into temporarily if we had to. Speaker 300:22:32So 4. Again, there's no forecasted need for long term financing. 4. If there is some necessity, we could go into the line of credit. But we feel very confident about our cash balance. Speaker 300:22:474. Again, with the strong position we came in the year and with the back half of the year, the cash we're going to generate, we should end the year in great shape. Speaker 100:22:574. Also, our equipment is unencumbered and there's a possibility we'll look to put on some equipment financing. We're exploring that right now. Speaker 300:23:04That is correct. Speaker 200:23:054. And Rob, you came on board, you had a yeoman status to get done. Can you give me a sense How far along you feel you're in the process? Are you in the 1st inning, the 3rd inning, the 5th inning? 4. Speaker 200:23:20How do you feel about it in terms of where you are at this point? Speaker 100:23:24Well, it's funny, Peter. The inning 4. Scorecard changes once you're in, and that's true with all situations like this. I don't know, I'm feeling sort of 4. Late second to mid third in terms of the total transformation. Speaker 100:23:40I think we've done a lot of the grunt work, 4. Still more to go. I mean, really the brand refresh is a huge thing for our network and a huge thing to present ourselves to consumers that have 24. It gives us a lot of opportunity in specialty retail that we're bringing something to a buyer that's going to be really exciting. So 4. Speaker 100:24:10We get to really hit the afterburners really come next year. Speaker 200:24:15Okay. Well, thank you. You must be doing something right to have Roger Lipton on 4. Thank you very much. Speaker 100:24:22Peter, I appreciate your time. Thank you. Operator00:24:274. Thank you. And I'm showing no further questions in the queue at this time. And thank you, ladies and gentlemen.Read morePowered by