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Participants

Jeff Geygan; Interim CEO; Rocky Mountain Chocolate Factory Inc (Delaware)

Carrie Cass; CFO; Rocky Mountain Chocolate Factory Inc (Delaware)

Sean Mansouri; IR; Rocky Mountain Chocolate Factory Inc (Delaware)

Presentation

Operator

Good evening. Ladies and gentlemen, thank you for standing by. Welcome to today's conference call to discuss Rocky Mountain chocolate factories' financial results for the fiscal third quarter 2025.
(Operator Instructions) As a reminder, this conference is being recorded.
Joining us on the call today is the company's interim CEO, Jeff Gaygan and CFO, Carrie Kass.
Please be advised, this conference call will contain statements that are -- considered forward-looking statements under the private Security litigations Reform Act of 1995. 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.
These 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, 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 including a Justa as supplemental measures of performance of the business.
All non-GAAP measures have been reconciled to the most directly comparable GAAP measures in accordance with excuse me with SEC rules, you will find reconciliation tables and other important information in the earnings press release and Form 8-K furnished to the SEC earlier today and 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 the website within approximately 24 hours after this call has ended.
And now I would like to turn the call over to the company's interim CEO, Jeff Gaygan. Jeff, please go ahead.

Jeff Geygan

Thank you. And good afternoon this quarter, we continue to advance our initiatives to strengthen Rocky Mountain, chocolate factories, foundation and drive future revenue growth and profitability.
Building on the initiatives discussed during our last call, we have concentrated on improving our liquidity, revitalizing our franchise network and executing key operational priorities. As we advance through this transformational process, the results from the current quarter mask the underlying qualitative improvements resulting from the transformation of the company and the evolution that involves us doing things differently. Today, we'll share updates on these initiatives and highlight our ongoing commitment to delivering value for all stakeholders.
Beginning with new store openings. We recently announced plans for two new stores and one new kiosk in three us markets including Chicago, Illinois; Charleston, South Carolina; and Brandon, Florida. Each of these openings are being launched with existing Rocky Mountain Chocolate factory store owners validating our improved store design and franchisee focused business attitude.
We anticipate Brandon and Charleston to open in the coming months with Chicago opening this summer. We also recently completed several store transfers, a process in which an existing store is sold to a new owner. This is an important part of our long term strategy to evaluate our -- franchise system and improve our AUV or average unit volume, an important metric in the franchise world.
We have become proactive in replacing owners in locations that we deem desirable and potentially more profitable. Under new management, we're able to assist a store transfer by facilitating that transfer from a current owner to a new owner, thus preserving the most desirable locations while allowing those less desirable locations to shut down under similar circumstances.
For example, we just completed transfers of both Arval, Colorado, and Steamboat Springs, Colorado locations. Whereas we opted to allow the till New Hampshire location to close. After the 1st of this year, this new process has been developed and managed successfully by our VP of franchise development. Kara Conklin who's been with the company just over one year.
We have been very intentional in managing our network of existing stores and continuously looking for prospective owners who are financially sophisticated, entrepreneurial and well capitalized to become part of our growing family of successful franchisees. We plan to attract new owners who have the capacity and the operating skills to become multi-unit operators. One of the key metrics in our long term vision, these developments reflect the growing interest in our improved franchise model and our focus on building a world class franchise business.
In addition to these announced openings and transfers, we have a growing pipeline of desirable locations and qualified owners and we foresee a return to growth in a number of franchise stores for the first time in over a decade.
Turning to holiday season, I'm pleased to report that we fulfilled nearly 100% of franchisee and specialty market demand. An important accomplishment and significant improvement from last year. The strong holiday performance underscores our ability to deliver under pressure and highlights the potential for improved results as we refine our process and drive operating efficiencies across the business.
It also reinforces the trust franchisees place in us to support their business during critically important selling periods with respect to our operating infrastructure. On January 6, we launched our new ERP system which integrates important business functions such as inventory management, procurement, production, scheduling and financial reporting with this system in place. We anticipate improved cost management, a reduction in time and potential errors resulting from manual processes and enhanced strategic decision making driven by near real time insights and analytics.
We expect our P system with along with our current deployment of an upgraded store based POS system to provide improved visibility into consumer purchasing behavior, enabling us to identify opportunities to optimize pricing and factory output and ultimately drive higher operating profits.
As highlighted on our last conference call, our rebranding initiatives, new store design and updated packaging are nearly complete. Although we initially aimed to complete this effort much sooner. The extended timeline allowed us to enhance and fine tune the final design work which we believe will dramatically improve the customer experience.
Our new branding offers a modern aesthetic without losing sight of our heritage of premium quality and craftsmanship. Our new store design will offer customers an engaging in store experience accompanied by an elegant assortment of packaged items. This marks an important step in our path to invigorate franchise store growth. As we believe this work will position RMCF as a unique and appealing brand for both store owners and consumers.
Our ecommerce business including RCF and Amazon.com has become a rapidly growing unit of our overall business with sales nearly tripling during October, November and December versus last year, this growth. This growth was supported by improvements from our marketing efforts tailored to online customers which included personalized email campaigns, social media ads and promotions designed to drive traffic to our website and further to our network of stores.
We also better leverage data analytics this year to understand consumer preferences, allowing us to offer more relevant products to further enhance the online shopping experience. We've made targeted investments in people who are more proficient with website optimization, digital marketing, social media and related marketing campaigns. We expect to see substantial improvements in our digital assets in the near term.
We welcome your frequent visits and purchases on RMCF.com. We're also in the process of expanding our loyalty program which is designed to increase customer attention and reward repeat repeat purchases both in store and online.
We're using doordash and other similar customer customer engagement applications to drive higher store level sales by extending a variety of programs to more stores. We expect to build stronger connections with consumers and encourage brand loyalty across multiple channels.
On the personnel front, we made strategic hires to strengthen our executive management team and support our franchise network. This includes a new VP of franchise business support, [Lizzie Mae Kerr] and a VP of Marketing, [Jeremy Garcia], both of whom bring improved levels of experience and track records of success in their respective fields. Our executive management team build out is complete.
We're well positioned to execute our long term vision for the company driven by the right people sitting in the right seats. Additionally, we announced the appointment of two new Board members, Mel Keating and Al Harper who both bring executive experience to our boardroom. Their insights will be invaluable as we continue to refine and execute our long term vision for the company.
As announced previously, we secured a $6 million credit facility on September 30, providing the necessary flexibility to invest in our operations and growth initiatives in a thoughtful and methodical way allowing us to build a company of lasting value.
We're in the midst of an historic transformation of the company that continues to evolve. We have finished assembling our executive management team and are focused on our franchise network offering premium confectionery products and Gourmet apples and a retail store format serving consumers of all ages.
Looking further at our performance this quarter. While we are making progress, there's still substantial work ahead that is required to accelerate revenue growth and optimize cost to increase overall profitability.
We face both gross and operating margin pressure stemming from a host of issues that we believe are transitory. We're in a continuous process of addressing and rectifying both revenue and cost issues and anticipate approved results in the quarters ahead.
We're well positioned to address these issues, particularly with the deployment of our new AP system, which will dramatically improve our access to relevant and timely data and analytics. Concurrently, we're pursuing a variety of margin enhancing initiatives. Our efforts are already yielding results in closing. We understand there's tremendous power in driving continuous improvement and the subsequent delivery of results. We're laying the foundation for substantial revenue growth and improved profitability through strategic investments in our people operations, franchise network and brand we still have work to do in this transformational process as we evolve and recognize we have to do things differently.
We're developing a culture of discipline, one of which we believe we have the business discipline to make a series of good decisions consistent with our long term vision.
We have disciplined people who engage in disciplined thought and take disciplined action and approach and process. Our ongoing commitment and long term operating horizon enables us to execute a strategic plan that we believe will create substantial equity value for our stockholders to the benefit of our franchisees, customers, and consumers.
Thank you. I'll now hand it over to our CFO Carrie Cass who will discuss our Q3 financial results.