Rocky Mountain Chocolate Factory, Inc.

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to today's conference call to discuss Rocky Mountain Chocolate Factory's financial results for the fiscal first quarter 2026. At this time, all participants are in a listen-only mode. As a reminder, this conference is being recorded. Joining us on the call today is the company's interim CEO, Jeff Gagan, and CFO, Carrie Cass. Please be advised this conference call will be seen statements that are considered forward-looking statements under the Private Securities Litigation 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 includes a non-capable measure of performance. EBITDA is defined as net income before interest, taxes, depreciation, or amortization. A reconciliation to the most directly comparable gap measures is included in the company's earnings press release furnished to the SEC and available on the EDGAR system 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 company's interim CEO, Jeff Gagan. Jeff, please go ahead.

Thank you and good morning, everyone. It's been just about a month since our last conference call. However, I'd like to take a moment to reflect on the big picture at Rocky Mountain Chocolate Factory. Over the past year, we focused on stabilizing the business, including streamlining operations, rebuilding franchisee trust, integrity, and selling skills, all while implementing operational systems required to scale effectively. Our new foundation is now largely in place. During our first fiscal quarter, we began to see our work translating into tangible results as continued evidence of our larger business transformation. We're no longer in a rebuilding mode. We're now in an execution mode. After laying the groundwork through a series of foundational initiatives, we're operating with greater precision, accountability, and clarity. Our team is aligned around our shared goals and vision. Our franchisees are better supported with tools and insights to improve store level operating results. Our brand is evolving to reflect our premium positioning to deliver both product excellence and positive in-store experience. The momentum we're building is evident. While there's still work to be done, we're encouraged by the progress we've made and the discipline we're applying across every aspect of our business. Today, I'll take you through some specifics of ongoing developments. I'll begin with supply chain. During our first quarter, we waived all freight charges for franchisees and licensees in an effort to drive volume and improve product freshness across all stores. Effective June 1st, we shifted to a flat monthly fee program for freight delivery. We believe this plan will encourage more frequent store orders and provide a more consistent and higher quality in-store experience for consumers. We implemented a product price adjustment in March and again in June and will continue to review all input costs, making necessary adjustments to ensure we achieve our targeted gross margin. We're seeing a steady improvement in our margin capture as the adjusted pricing flows through our financial results. Knowing this incrementally and in concert with our franchisees and licensees allows them to adjust their in-store pricing to maintain store-level profitability. With both our ERP and POS systems in place, we now have the ability to adjust pricing dynamically, supporting tighter cost alignment while managing to our targeted gross margin. Adoption of our new POS system accelerated during the quarter, bringing a new level of visibility to both corporate and franchisee operations. These tools are enhancing decision making across production, pricing, and marketing, providing key insights that simply weren't available before. As we collect more store level financial data, we're able to provide improved analysis into store performance, and help with product mix and merchandising designed to drive in-store sales and improve profitability. We're gaining additional perspective on what best in class looks like, which helps in coaching currently underperforming stores and has been instrumental as we accelerate initiatives to expand new store locations. We rolled out our new POS system to over 100 stores, and we expect continued deployment over the next few months as we aim to achieve 100% compliance. Our recent ERP implementation also continues to enhance our visibility into inventory, procurement, and manufacturing operational performance. As we continue to refine inputs and work through data normalization, We expect the system will generate timely analytics, enabling us to respond to changes with greater speed and precision. We recently hired Luis Burgos, a seasoned and highly qualified VP of Operations, to take over all manufacturing and logistics activities. He comes to us with Six Sigma, lean manufacturing, and continuous improvement certifications and tremendous experience. We believe he is the most qualified VP of operation the company has employed. His addition to the executive team is significant. Turning to new store development, on June 3rd, we opened our newest store in Charleston, South Carolina. The first to feature our fully refreshed brand identity and modern store layout. We're encouraged by early feedback and anticipate strong results as we enter the busy fall and holiday months. In downtown Chicago, construction is expected to begin shortly on a premier location at One State Street. We're targeting an opening ahead of the holiday season and are excited by the prospects and brand recognition this marquee store will bring to Chicago and the surrounding areas. Beyond these two locations, we're in lease negotiations for several new units and actively building a development pipeline that reflects both growth and selectivity. Our goal remains to expand with the right partners in the right locations as we're being careful to identify capable, competent operators as a critical precondition of our acceleration strategy. We're seeking operators that are well capitalized, financially sophisticated, and entrepreneurial with prior franchising experience to join our growing family of franchisees. The rollout of our brand refresh is an important milestone in our transformation. It has been deliberately sequenced to ensure consistency across the system. The sequencing includes new packaging, updated in-store merchandising, and a redesigned e-commerce platform. We're bringing our existing group of loyal and seasoned franchisees along, providing an unprecedented level of support and business analytics to encourage improved operating results, which we can now measure effectively and frequently. There's a growing excitement among many current franchisees as they see greater opportunity to improve their current locations and look at expanding with new ones, some of which may be new builds and others which may be transfers, as we continue to assist with new store ownership. One of our internal goals is to improve the ratio of store ownership across a limited number of franchisees. Currently, we have 1.34 RMCF stores per owner. Our largest multi-uneral owner has four locations. We plan to track these numbers as we believe they are indicative of the efficacy of our store and franchisee development strategy. System-wide signage updates are underway. Our Durango Company Store unveiled its new signage in June. Our Corpus Christi Company Store is expected to begin displaying its new signage this week. Our new consumer packaging, both our traditional boxed chocolate and grab-and-go totes, are expected to begin shipping to stores this month. We expect to display these on our refreshed website, rmcf.com, shortly after these items hit store shelves. Overall, interest from both current and prospective franchisees has increased as our refreshed identity, new packaging, updated website, and other exciting developments continue to launch. Our messaging is crystal clear about the type and caliber of operator we're looking to attract and accept into our system. This represents a radical departure from past practices of RMCF's franchise development efforts. The next major milestone in our branding initiative is a full relaunch of our digital presence. We're advancing toward a modern e-commerce experience that complements our in-store environment. Our redesigned website is set to launch shortly alongside the rollout of our new packaging. Together, we expect these upgrades will enhance brand presentation, deliver a more intuitive shopping journey, and lay the foundation for stronger online conversions and premium gifting opportunities such that our new website will be a complete departure from our current platform, both in look and feel. We intend to supplement our new website with contemporary social media and marketing initiatives to drive direct-to-consumer traffic through e-commerce and further direct those consumers to a nearby store to enjoy the full lineup of our premium offerings, most of which can only be found in-store. We're preparing to make DoorDash and other food delivery platforms a required part of operating an RMCF location wherever feasible. We think this represents an untapped opportunity for many stores and will improve store revenue while capturing new customers. Following the rollout of our new e-commerce platform, our sights are set on revitalizing the Rocky Mountain Chocolate Factory loyalty program. The program today is limited in scope and available only in a handful of stores. As the POS rollout is complete and we begin to gain greater traction online, we believe there will be significant opportunity to create an engaging loyalty program that increases both transaction frequency and and basket size across in-store and digital channels. Finally, our refreshed website is expected to include a section for new franchisees, which has previously been hosted on a separate website. It's far more intuitive to present a new franchise opportunity on the rmcf.com website, as we believe many of our most enthusiastic consumers want to own a franchise location. please be sure to visit our new website next month. In closing, when we look at the full body of work, not just from the past few months, but over the last 15 months, the impact is now beginning to show in our current quarterly results. We're still very early in realizing the financial potential of our business transformation, but recent margin improvement And our first quarter of positive EBITDA in several years is an indication our strategy is taking hold. As we look at the remainder of fiscal 2026, we're focused on generating profit and returning to growth. The first quarter demonstrated our foundational investments and operational improvements are beginning to produce these desired results. And we believe this trend will continue to build throughout the year. In short, We believe we are in a better position to execute than we've been in many years. With what we believe is the right strategy, team, and infrastructure, we're positioned to drive sustainable growth and long-term value creation. Thank you for your time and attention. I'll now hand it over to Carrie Cass, our CFO, to walk you through our fiscal Q1 financial results. Carrie?

Thank you, Jeff. Please note that unless stated otherwise, all comparisons are on a year-over-year basis. Total revenue for the quarter was $6.4 million, essentially flat compared to the prior period. Product sales were $4.7 million compared to $5.3 million last year, and franchise and royalty fees were $1.7 million compared to $1.1 million. We did not renew a large specialty market customer since we were unable to reach a mutually beneficial agreement on product price. To our benefit, we improved overall margin while dropping nearly $500,000 in sales, which is reflected in the year-over-year number. Total product and retail gross profit was $0.3 million compared to a negative $0.3 million. The improvement was primarily driven by adjustments to pricing and operational efficiencies in Our costs and expenses were 6.5 million, down from 8 million last year. The decrease was primarily driven by lower G&A costs and other operating efficiencies. Net loss was 0.3 million, or a negative 4 cents per share, compared to a net loss of 1.7 million, or a negative 26 cents per share. EBITDA for the quarter was 2 million, compared with a negative 1.4 million last year. Turning to the balance sheet, as of May 31st, 25, we had a cash balance of 0.9 million compared to 0.7 million at February 28th, 25. And as of May 31st, we had 6 million in debt outstanding related to our term loan, which is essentially flat compared to our debt position at February 28th. This concludes our prepared remarks. We will now open it up to Q&A. Operator, back to you.