Rocky Mountain Chocolate Factory, Inc. (RMCF) Q3 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call presents mixed signals. Positive aspects include improved gross margins, reduced net loss, and strategic franchise growth. However, challenges like higher input costs, franchise development hurdles, and operational inefficiencies persist. The Q&A reveals cautious optimism about future growth but highlights execution risks and lack of transparency on raw material costs. The absence of market cap data suggests a neutral rating due to balanced positive and negative factors, with a slight inclination towards improvement due to operational strategies and margin recovery.
Key Financial Performance
Gross Manufacturing Margin 21.4% for the quarter ended November 30, 2025, compared to 10% for the same quarter of the prior year and a negative 0.6% for the previous quarter ended August 31. The improvement was due to targeted price adjustments, SKU rationalization, and production labor efficiencies.
Total Revenue $7.5 million for the fiscal third quarter of '26 compared to $7.9 million in the prior year. The decline was due to the intentional exit from low or negative margin revenue streams as part of the margin-first strategy.
Total Product and Retail Gross Profit $1.4 million in the third quarter of fiscal '26 compared to $0.7 million in the same quarter last year. The increase was driven by pricing actions, improved product mix, and labor efficiencies, though partially offset by higher material and freight costs.
Total Costs and Expenses $7.5 million, down from $8.6 million in the same quarter last year. Savings were realized across nearly all areas of operations.
Net Loss $0.2 million or negative $0.02 per share compared to the net loss of $0.8 million or negative $0.11 per share in the prior year. The improvement was driven by increases in gross profit and lower costs and expenses.
EBITDA $0.4 million in the third quarter of fiscal '26 compared to a negative $0.4 million in the same quarter last year. The improvement was driven by increases in gross profit and lower costs and expenses.
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Operating Highlights
New packaging and store layout: All stores transitioned to new packaging, with legacy copper packaging phased out. Full remodels of stores to align with the new brand identity are scheduled to begin after March 1, aiming for completion by October 2026.
Digital initiatives: DoorDash storefronts launched, providing a white-labeled zero-commission model. Unique store websites created for all domestic locations, enabling online purchases for local pickup or delivery.
Technology upgrades: Over 120 stores now use a new POS system, providing richer data on customer behavior and store performance. ERP system implementation continues to improve operational efficiency.
Franchise development: Two new stores under construction and 34 stores under area development agreements. Focus on partnering with well-capitalized, operationally sophisticated operators.
Market expansion: New stores opened in Chicago, Illinois, and Charleston, South Carolina, with positive sales trends. Remodel of Corpus Christi, Texas store led to consistent growth.
Margin improvement: Gross manufacturing margin improved to 21.4% from 10% YoY. Targeted price adjustments and SKU rationalization contributed to margin expansion.
Cost savings: Eliminated low-contributing SKUs, temporary labor, and overtime hours. Added a second production shift, with potential savings of $500,000 to $1 million in the cost structure.
Input cost management: Locked in 20% of annual cocoa consumption at favorable prices, benefiting from the elimination of a 10% tariff on cocoa.
Margin-first transformation strategy: Focused on profitability and long-term value creation by exiting low-margin revenue streams and simplifying the business strategy.
Franchisee recruitment and retention: Hired a new VP of Franchise Development and improved digital marketing to attract quality franchisees. Increased average store ownership per franchisee from 1.34 to 1.39.
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Risk or Challenges
Revenue Pressure: The company experienced near-term revenue pressure and a modest net loss due to prioritizing profitability and long-term value creation over lower-quality revenue.
Higher Input Costs: Persistently higher input costs and near-term inefficiencies related to production transition are impacting financial performance.
Franchise Development Challenges: While franchise development is progressing, the company faces challenges in reducing overall development costs and shortening the timeline from lease signing to store opening, which currently stands at about 6 months.
Store Closures: The company is allowing the closure of underperforming locations, which could negatively impact revenue in the short term.
Operational Complexity: Efforts to simplify production and reduce operational complexity are ongoing, but inefficiencies remain, particularly in production labor and scheduling.
Economic Uncertainty: The company is exposed to economic uncertainties that could affect consumer spending and franchisee performance.
Technology Implementation Risks: The implementation of new POS and ERP systems is ongoing, with potential risks related to process alignment and operational disruptions.
Material Costs and Freight Costs: Short-term operational inefficiencies related to higher material and freight costs are partially offsetting gains in gross profit.
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Guidance & Outlook
Margin Expansion: The company expects to maintain and further expand margins through disciplined execution, improved product mix, price adjustments, SKU rationalization, and production labor efficiencies. They anticipate $500,000 to $1 million in additional cost savings and benefits from lower input costs, including the elimination of a 10% tariff on cocoa.
Franchise Development: The company has 2 new stores under construction and 34 stores under area development agreements, with a 4- to 5-year build-out period. They aim to expand thoughtfully into new and existing markets, focusing on quality over quantity and reducing development costs and timelines. Remodels of existing stores are planned to align with the new brand identity by October 2026.
Digital and Technology Initiatives: The company plans to roll out a loyalty program in the first half of 2026 and continue advancing digital initiatives, including DoorDash storefronts and individual store websites. Over 120 stores are live on a new POS system, with plans to increase penetration for better data-driven decisions.
Financial Position: The company completed a $2.7 million equity capital raise, strengthening its balance sheet and providing flexibility for investments in operations, franchise development, and technology initiatives. They aim to return to positive cash flow generation over the coming quarters.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:Can you talk about the 34 new stores, the agreement there, the pace of deployment, and future store growth targets?
A:The 34 area development agreements involve 4 franchisees (3 existing, 1 new). The rollout will be measured but will accelerate in later years, with stores starting within 3-4 years and completing within 4-5 years. Additional agreements are in the pipeline.
Q:How have you lined up the financing for these stores?
A:The franchisees are well-capitalized and financially sophisticated, minimizing the need for significant debt to build stores.
Q:What is the impact of cocoa price changes on margins, and how much margin expansion is expected?
A:Cocoa futures are trading at over $5,100, down from previous highs. The company locked in pricing at $5,000 for 20% of expected production. While chocolate prices move with cocoa prices, the company expects a margin tailwind as cocoa prices decrease.
Q:What percent of raw materials are chocolate or cocoa?
A:The company has not disclosed the percentage of raw materials that are chocolate or cocoa.
Q:Where is the company in its journey of recapping the balance sheet, and what are the future plans?
A:The next phase involves reducing debt and investing in the company, funded by free cash flow rather than additional equity issuance.
Q:When do you expect the accelerated franchising effort to begin affecting the top line?
A:It takes about 3 years for a store to mature and 6 months from lease signing to opening. The company expects new stores to generate at least $1 million in annual sales within 3 years. Revenue growth from new stores is expected to show up next year, with a focus on improving same-store sales and e-commerce.
Q:What are the biggest obstacles to growing the business?
A:The main obstacle is execution. The company needs to execute profitably, grow the top line through the franchise system, and improve efficiency.
Q:Review of Unclear Management Responses
A:The company avoided disclosing the percentage of raw materials that are chocolate or cocoa, despite being asked directly.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Franchise
action
addition
adjustment
agreement interest
area development
awareness
backlog franchise
balance
benefit
brand direction
capability
construction store
cost
customer
development agreement
development backlog
elimination
franchise development
franchisee
improvement
interest operator
location
margin
model
month
network
partner
price
production
profitability
progress
sale
scheduling
store construction
store website
technology
term result
transformation decision
RMCF Transcript
Rocky Mountain Chocolate Factory, Inc. (RMCF) Q3 2026 Earnings Call Transcript
Unknown1-14
The earnings call presents mixed signals. Positive aspects include improved gross margins, reduced net loss, and strategic franchise growth. However, challenges like higher input costs, franchise development hurdles, and operational inefficiencies persist. The Q&A reveals cautious optimism about future growth but highlights execution risks and lack of transparency on raw material costs. The absence of market cap data suggests a neutral rating due to balanced positive and negative factors, with a slight inclination towards improvement due to operational strategies and margin recovery.
Rocky Mountain Chocolate Factory, Inc. (RMCF) Q2 2026 Earnings Call Transcript
Unknown10-14
Despite revenue growth and strategic initiatives like dynamic pricing and brand repositioning, the company faces challenges such as consistent net losses, high-interest debt, and unclear guidance on store openings. The Q&A highlighted uncertainties in cash burn and factory improvements. Although cocoa price easing may improve margins, the overall sentiment remains negative due to financial strain and lack of clear positive catalysts.
Rocky Mountain Chocolate Factory, Inc. (RMCF) Q1 2026 Earnings Call Transcript
Positive7-16
The earnings call highlights improved financial metrics, including first positive EBITDA in years and reduced net loss, which are strong indicators of financial recovery. Despite flat revenue, improved margins and reduced expenses are positive. The Q&A section reveals management's focus on operational efficiencies and franchisee support, but a lack of specific guidance and leadership clarity could temper optimism. Overall, the financial improvements and strategic focus suggest a positive stock reaction, tempered by uncertainties in leadership and future guidance.
Rocky Mountain Chocolate Factory, Inc. (RMCF) Q4 2025 Earnings Call Transcript
Unknown6-20
The earnings call highlights several negative factors: increased losses, higher costs, supply chain issues, and competitive pressures. Refinancing increased debt, and cash reserves decreased significantly. While revenue grew, margins declined due to raw material costs. The Q&A section did not alleviate concerns, with management providing unclear responses. Despite some positive feedback on rebranding, the overall financial and operational challenges suggest a likely negative stock price reaction in the short term.
RMCF Report
Frequently Asked Questions
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Why do some answers appear as “Unclear” or “Inaudible”?
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They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
