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Date

Tuesday, June 2, 2026 at 9 a.m. ET

Call participants

• Chief Executive Officer — Jeffrey Richart Geygan
• Chief Financial Officer — Carrie E. Cass

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Risks

• CEO Geygan stated, "The results fell short of what we set out to achieve," attributing the primary shortfall to product assortment misalignment and a $1.5 million revenue gap in packaged goods.
• CFO Cass reported a net loss of $3.4 million and a negative gross profit of $900 thousand, both worsened from the comparable period.
• One-time charges included costs from disposing outdated packaging and temporary disruptions in ecommerce, which negatively affected quarterly performance.
• Shipping economics for ecommerce remain a pressure point for online sales, with management acknowledging historically, shipping costs on certain box products were too high relative to order value.

Takeaways

• Total revenue -- $6.8 million, down from $8.9 million, mainly due to lower packaged product sales and deliberate exit from a negative-margin specialty customer.
• Product sales -- $5.1 million, a decrease from $7.1 million, driven by misaligned package assortment and reduced specialty market volume.
• Franchise and royalty fees -- $1.6 million versus $1.8 million, reflecting pressure on store-level performance.
• Total product and retail gross profit -- -$900 thousand, declining from -$800 thousand, reflecting negative mix and shortfall in packaged business.
• Total costs and expenses -- $9.8 million, a reduction from $11.6 million, attributed to efficiencies after relocating consumer packaging operations to Durango.
• Net loss -- $3.4 million or -$0.38 per share, compared to a net loss of $2.9 million or -$0.37 per share.
• Cash balance -- $1.2 million at period end, up from $700 thousand in the prior year.
• Total inventory -- $4.1 million, down from $4.6 million at the previous year-end.
• Debt outstanding -- $6.6 million as of Feb. 28, 2026.
• Packaged product shortfall -- $1.5 million below internal expectations, with the negative impact most pronounced in ecommerce channels.
• Specialty customer exit -- Revenue impact of nearly $1.5 million, with the loss concentrated in the quarter due to seasonality.
• Gross margin -- Company reported achieving the highest gross margin mix in over two years, now approaching long-range targets.
• Remodeled store sales -- Corpus Christi location posted a sequential sales increase of 10%-15% post-remodel; Chicago State Street location annualizing at $1.1 million, Charleston at approximately $600 thousand annualized.
• Company-owned store count -- Four company stores now represent 3% of total U.S. store count; management indicates a future target of 5%-10% company-owned.
• Average units per operator -- 1.4, with management noting the metric is "creeping higher."
• Franchise development pipeline -- Forty area development agreements are committed, involving both geographic and vertical market expansion.
• Third party delivery -- Average basket size via these channels "roughly 2x in-store transaction values," with commissions at or below 20% on negotiated agreements.
• Corporate shipping rates -- Negotiated for ecommerce to address cost pressures; management expects a “material” improvement in cost structure.
• POS system rollout -- Expanded new point-of-sale platform across system, enabling improved data analytics on average basket, transaction counts, and item mix.
• Planned product assortment changes -- New box formats (thirty-four, six, and four-piece assortments) and switch to paper cup packaging, targeted for shelf placement by Labor Day.

Summary

Rocky Mountain Chocolate Factory (RMCF +0.32%) reported significant revenue and gross margin declines primarily due to errors in product assortment strategy and the strategic exit from an unprofitable specialty customer. Management committed to a full overhaul of its packaged product lines, supported by consumer research and changes in packaging to improve competitiveness and reduce costs. Efficiency gains and ongoing store remodels demonstrate progress in operational transformation, with selective company-owned expansion, increased focus on multiunit franchisees, and the pursuit of higher margin channels such as third-party delivery. The financial performance for the period reflected pressure from both temporary and structural factors, with continued volatility expected as the company repositions its brand experience and franchise model.

• Management referenced its ongoing shift to data-driven decisions for product assortment, in contrast to prior reliance on internal store-level sales data lacking consumer survey input.
• New area development agreements now include vertical market expansion in resort locations, diversifying growth beyond geography.
• Systemwide POS data is now being leveraged to guide assortment, merchandising standards, and guest engagement strategies.
• Management is prioritizing a move toward greater consistency across locations, with the aim to dedicate 60% of store space to signature products defining the Rocky Mountain brand.
• Plans call for targeting large urban markets on the East Coast that currently lack a company presence, including Boston, New York City, and Atlanta.

Industry glossary

• ADA (Area Development Agreement): Contract granting a franchisee the rights to develop multiple stores within a specified region or market segment.

Full Conference Call Transcript

Jeffrey Richart Geygan: Thank you, and good morning, everyone. Before I get into our broader business discussion, I want to address our fiscal fourth quarter. The results fell short of what we set out to achieve and accountability for that rests with me. The primary issue driving this shortfall was our packaged product assortment decision that did not align with our guest expectation. Particularly with our boxed offerings. We leaned too heavily into larger format boxes and a mix of large and mountain sized pieces of candy that retrospectively did not align with guest preferences. That impacted revenue having an outsized effect on profitability.

For reference, our lowest margin sales are ingredients, followed by supplies, then bulk candy, and finally, our best margin item is a packaged product. Package sales for the quarter were roughly $1.5 million below expectations affecting store sales, and disproportionately impacting our ecommerce business which is largely made up of packaged product. Since year end, we have conducted extensive consumer research involving more than 1 thousand participants which has provided us with a clearer understanding of where our packaged assortment strategy missed the mark. Current feedback points to demand for greater assortment variety, more small piece format offerings, and a mix of items including caramels, nuts, creams, toffee, solid molded chocolates, and meltaways.

We are addressing this situation now and expect to have a full lineup of reconfigured packaged items on store shelves by Labor Day. Our offerings will include 34, 6, and 4 piece sized assortments. Boxes will be slimmed down, and use paper cups instead of plastic trays allowing greater product flexibility and speed of change. We believe our updated box configuration and related content selection are better aligned with how stores and online guests want to be served with this item. We will be using cup style packaging which we believe will improve presentation, reduce production and packaging costs, and lower our price points to improve competitive positioning while driving greater sales volumes.

The quarter was also impacted by several other factors, most of which were temporary or onetime in nature. For example, we deliberately exited from a specialty markets customer relationship with a negative margin offering This impacted revenue by nearly $1.5 million. To round it out, we also experienced temporary disruptions related to our ecommerce transition, incurred costs associated with disposing of supplies of outdated packaging, and faced an elevated level of professional service fees all of which impacted fourth quarter results. While these items created near term pressure, they do not change our long term strategic view. Our business transformation remains intact, and on track.

What this does reinforce is the importance of disciplined execution as we remain adaptive in response to incoming data. What gives us confidence today is what we see across the balance of the business. Over the past year, we have implemented multiple price adjustments influenced product mix, and launched operational changes that materially improved the underlying economics of RMCF both at the sales and production levels. Based on our margin analysis of the products we sold in Q4, and continuing to our just concluded Q1 we achieved the highest gross margin mix in over 2 years. Our gross margin is now close to our long term target, allowing us to shift more of our efforts towards revenue growth.

The work we have done around price adjustments production process review, SKU rationalization, and other operational changes producing measurable results. The fourth quarter results do not fully reflect that progress, but the underlying data is clearer and gives us conviction as we move forward. We are also working on the economic around ecommerce shipping which has continued to be a pressure point for online sales. Historically, shipping costs on certain box products were too high relative to order value. We have negotiated corporate shipping rates that will materially improve our ecommerce cost structure. This is exactly how we have approached our transformational process since the beginning.

We identify what is not working, address it directly, and move forward with improved processes. The results from this quarter and full year were not what we wanted but that does not change the fact our business is in much better off structurally than it was when the transformation began. Stronger data and analytics, better margin on revenue, improved production throughput, higher product quality, and reduced scrap and waste levels. Looking at more recent developments, reviewing the franchise and retail store operations of our business, we continue to see encouraging performance trends in our newly designed and remodeled stores. Our Chicago State Street store is currently running at approximately $1.1 million in annualized sales.

And we believe this location has meaningful upside yet to be realized. We are also encouraged by the performance of our Charleston, South Carolina which is currently operating at an approximate $600 thousand annualized run rate consistent with our expectations for a brand new store and a brand new market. Unlike Chicago, where we entered an existing market in which Rocky Mountain Chocolate is already well known. This is an import this is important to realize when setting expectation for building a new versus existing markets. We believe Charleston will reach its run rate revenue within an-- its first 3 years of operations while we continue building brand awareness and local market familiarity.

On the other hand, our company owned store in Corpus Christi Texas was remodeled and has since generated an approximate 10 to 15% sales increase following its reopening. We are also seeing encouraging trends at the Concord Mills, North Carolina store, which just recently completed its remodel. These are important proof points because they demonstrate our refreshed brand, stronger in store presentation, and new operating models are resonating with guests. RMCF recently acquired the franchise store in Nashville, Tennessee providing another opportunity to test merchandising and guest engagement initiatives in a company controlled environment.

Company store acquisitions are typically accretive to earnings and provide a valuable learning and testing platform as we launch new products and product lines and develop new guest engagement concepts designed to drive store level sales and improve profitability. More broadly, we continue to believe there is a role for selective company owned stores within the system. Today, we have 4 company owned locations representing 3% of our domestic store census. it is reasonable to think company stores will represent between 5% and 10% of our store base in future years. We believe to be good franchisors, we must know how to run an excellent store so we can train our current and prospective operators with that knowledge.

We measure franchisee success by store sales growth, average ticket dollar value, items per transaction, and overall profitability. We think an ideal franchisee should aspire to own and operate a local area complex of multiple sites to maximize their franchise business value. We continue to measure stores owned per operator and the number is creeping higher. Now at 1.4 units. We are attracting and developing just these type of entrepreneurial operators as evidenced by our increasing area development agreements, or ADAs. Which span both geographic and vertical markets. An exciting development and 1 that gives us great confidence our transformation is still in its early stages.

Over time, we will work to identify a handful of strategic locations to convert to company stores as we develop our long term strategy that improves system economics, strengthens our operating visibility, and creates additional testing capabilities. Our Nashville presence, for instance, could serve us strategically over time as we think about how we need to provide regional support and the distribution necessary to serve the Eastern Seaboard and parts of the Midwest. To date, we have no presence in Boston, New York City, Philadelphia, Washington DC, or Atlanta. Markets we intend to target through our franchise development initiatives.

We have and are developing an ADA to build 9 locations in Miami, with 2 already underway and a 3rd in the planning phases. As we grow our East Coast presence, efficient and timely distribution and store service will be of paramount importance. We opened our newest location in Tinton Falls, New Jersey last Friday, it is located just minutes away from our Long Branch store, both of which are owned by a financially sophisticated and well capitalized operator. We are well underway in developing more expansive plans to support East Coast growth We are also advancing opportunities in existing markets including Chicago, where we have an additional franchise store lease under a letter of intent.

On the new development front for franchisee expansion, we recently added a new 6-store ADA bringing committed future development to 40 locations over the next 3 to 5 years. This 1 is our first vertical market development agreement which includes Rocky Mountain winter and summer resort locations. The operator currently owns our Vail and Breckenridge locations and is now focused on other high end resorts in the Rocky Mountains. He has a proven and exceptional operational record with Rocky Mountain Chocolate Factory. In parallel, we are continuing to strengthen the operating platform that underpins the RMCF brand. With a clear focus on helping franchisees increase sales, and improve store level profitability.

We have expanded the rollout of our upgraded POS platform across the system. That data and feedback have improved how we evaluate product mix, store performance, and guest behavior. The analytics have created game changing insights and opportunities for our business. This POS data provides measurable insights into average basket size, transaction counts, and items per transaction. The visibility is valuable not only for our corporate team, but also for our franchisees giving us fact based foundation for coaching and making merchandising and assortment decisions. Ultimately, we are creating an environment that helps store level personnel evolve from simply taking orders to actively driving sales and engagement with guests.

We continue to reinforce merchandising standards across the system so the guest experience is more consistent. And the Rocky Mountain 5 senses experience becomes more pronounced across all locations. This includes the smell of caramel the sight of beautifully crafted apples and colorful premium candies, the sounds of spatulas as they shape our handmade fudge. You taste and feel that first bite of a delicious piece of chocolate or caramel apple All taken together, create the Rocky Mountain moment that we have been delivering for over 45 years to each guest as they experience our local chocolate theatrics.

We are more focused than ever on delivering the 5 senses and Rocky Mountain Moments experience as we work with franchisees to enrich each guest engagement and improve the overall in store experience. Moving on, our third party delivery initiative is another area where we see encouraging data and financial results. Average basket size through these platforms are running roughly 2x in store transaction values And surprisingly, roughly half of these transactions are fulfilled through in store pickup. Rather than direct delivery. This reinforces our view that third party delivery is not simply a delivery channel, but also a guest acquisition channel. A convenience channel. An incremental order generation tool with higher average transaction values.

With commissions remaining at or below 20%, on negotiated agreements, we believe the economics will remain attractive as penetration increases. We also have a white label version of order online that is without commission expense, yet fulfills in the same way as traditional third party delivery. We have made this available to all of our locations through newly developed store websites which are branded RMCF but curated to each local store's market and operator. This represents a meaningful shift in how we are supporting franchisees at the store level. On guest engagement, we are continuing to develop our loyal in mobile, app platform with our new app expected to launch late summer.

We are also positioning for the rollout of our planned collaboration with Miraculous the popular animated children's series, which will be centered on a limited time caramel apple promotion in store merchandising, which is planned to launch on September 15 and run through October 31. We are really excited by this partnership. Taken together, these initiatives are intended to create more moments of discovery around the brand drive repeat engagement, and extend the Rocky Mountain experience beyond the 4 walls of our stores. We are placing greater emphasis on merchandising and assortment standards across the franchise system to create a consistent and repeatable guest experience.

While many of these standards have historically existed within our franchise agreements, execution, and enforcement have not always been uniform across location. As part of this effort, we are working towards dedicating 60% of store selling space to products that define the Rocky Mountain chocolate Factory brand. Our next phase of store level SKU alignment is designed to ensure store guests can consistently find our most popular and highly demanded signature products whether visiting a store in Long Branch, New Jersey or Los Angeles, California. Greater consistency across the system will strengthen brand presentation improve the guest experience, and support stronger store level sales and profitability. The foundation is in place.

We are focused on disciplined execution across this system, converting operational improvements into sustainable growth and positive earnings. As we enter our new fiscal year, our priorities are clear. First, execute with precision in the package and ecommerce categories. Second, build on the meaningful margin improvements we have already achieved and third, convert the progress we are seeing in the retail performance franchise development, digital engagement, and cost disciplines into consistent positive financial results. We know what we need to do. We are executing to achieve it. Transformation is never linear. And we have not represented it to be. Where we encounter obstacles, we adapt and move forward. Stronger, and with better information. that is exactly what we are doing.

We remain committed to long term strategic thinking that transcends any single quarter's results. To borrow from Warren Buffett, games are won by players who focus on the playing field, not by those whose eyes are glued to the scoreboard. With that, I will turn the call over to Carrie to walk you through our fourth quarter and fiscal year financial results.

Carrie E. Cass: Thank you, Jeffrey. Please note that unless stated otherwise, all comparisons are on a year over year base Total revenue for the fourth fiscal quarter was 6.8 million compared to 8.9 million in the same period last year. Product sales were 5.1 million compared to 7.1 million last year, and franchise and royalty fees were 1.6 million compared to 1.8 million in the same period last year. Total product and retail gross profit was a -$900 thousand compared to a -$800 thousand in the same period last year.

The decrease in revenue and gross profit primarily reflects the underperformance of our packaged assortment business, the deliberate reduction of certain low or negative margin specialty market business, and select temporary items during the quarter that Jeffrey outlined earlier. Partially offset by continued factory efficiency gains. Total costs and expenses were 9.8 million compared to 11.6 million in the same period last year. The decrease was primarily attributed to efficiencies obtained by relocating our consumer packaging operations back to our Durango production facility. Net loss was 3.4 million or a negative 38¢ per share. Compared to a net loss of $2.9 million or negative $0.37 per share in the same period last year. Turning to the balance sheet.

Ended our fiscal year with a cash balance of 1.2 million compared to a 700 thousand at the end of the fiscal year 2025. We also ended our fiscal year with total inventory of 4.1 million compared to 4.6 million last year. As of 02/28/2026, we have total debt outstanding of 6.6 million. This concludes our prepared remarks. We will now open up for Q&A. Operator, back to you.

Operator: Certainly. Star 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 again. Our next question-- our 1st question will come from Andrew Rim of Adinson Partners. Your line is open, Andrew.

Analyst (Andrew Rim): Hey, guys. I am not sure exactly how to ask this question, but you mentioned changing the product assortment or product mix in your package assortment. That was what was disappointing in the quarter. How did you arrive at that original assortment?

Jeffrey Richart Geygan: Good morning, Andrew. Good question. We use the data from store level sales that we had at the time. Which indicated that large size pieces and truffles were the most popularly demanded items, and followed suit to build boxes around that?

Analyst (Andrew Rim): Okay. And so the change is that the now you are doing a consumer survey and then that will kind of drive the assortment on a go forward basis.

Jeffrey Richart Geygan: that is correct. We did not have the same level of survey when we initially started. And in fact, 1 thousand survey receipts we received included a number from our franchisees themselves as we service-- we surveyed both existing customers prospective customers, and added franchisees to that as we wanted to get feedback from them untarnished or separate from that of guests. So prior in going back further, on the again, just focusing on the items that are in these package assortment boxes historically, Previously, you or it had not been done based on data?

Analyst (Andrew Rim): And it sounds like it also would not have been done based on consumer survey But that-- what was the prior to using data, how was that arrived at?

Jeffrey Richart Geygan: Well, the to be clear, the contents of the previous boxes were determined from the data we had from store level sales. Which included-- was really long on truffles. And it turned out that our consumer, our guest, is most interested in buying a large truffle in store behind a candy case, but not necessarily in a package.

Analyst (Andrew Rim): Got it. Okay. You mentioned that you exited business with a specialty customer and you mentioned what the impact was in the quarter. Can you say what the impact is on an annualized basis since you will need the next 3 quarters to kind of fully annualize that impact.

Jeffrey Richart Geygan: The vast majority of the sale from that Specialty market customer occurred in Q4.

Analyst (Andrew Rim): Okay. So is that a seasonal customer? Is that is that what?

Jeffrey Richart Geygan: Yes. It was. And, frankly, most of our specialty markets customers are seasonal. Where shipments occur generally in the fourth quarter around either the Christmas or Valentine's holiday? Some to a lesser extent around Mother's Day, but our busiest single day of the year is Valentine's Day. Our busiest season, of course, is, the Christmas holiday.

Analyst (Andrew Rim): And then you mentioned the remodel in Corpus Christi. Can you just give us a sense of when you do remodel, is same store sales, the bump is at the primary way that you evaluate the effectiveness of a remodel, or what are the other metrics that you guys focus on to help you determine the effectiveness of a remodel?

Jeffrey Richart Geygan: Yeah, Andrew. it is a good question. And it is like a quadratic equation. There are a lot of variables in here. Obviously, the 1 that we measure most acutely is store sales. Followed by profitability or mix. Followed by basket size, average transaction value. But a lot once you start drilling down a lot of that is, your local operator. We happen to have an excellent store manager in our company owned Corpus Christi store. Which is why throughout my comments today, we have talked about qualitatively do we work with franchisees to help them develop stronger engagement with guests. We think that is critically important.

However, we also get the qualitative information through various types of use, think Google, Yelp, and so on. And we hear consistently with remodels The, our guests love the new store design. And if you have not been in 1, self evident when you walk in and you think, wow. This is really nice. Welcome to the 20 first century.

Analyst (Andrew Rim): Alright. Thanks a lot, guys. Appreciate the time.

Jeffrey Richart Geygan: Yep. Thanks for your questions.

Operator: And our next question will be coming from the line of Peter Thomas Sidoti and Company.

Analyst (Peter Thomas Sidoti): Hi. 2 quick questions. 1, how far along are you in terms of the turnaround at this point? In other words, when do you think you will be in a position to start selling new aggressively marketing new franchises?

Jeffrey Richart Geygan: Oh, we are Peter, we are already done that. Hi. Thank you for your question, by the way. Yeah. We are already done that, in fact. Our franchise development department is quite busy. Evidence that we have got 40 area development agreements that are ADAs, but we are also working, with existing franchisees on 1 offs. And there are a number of area development agreements that are in process right now that we hope to be able to communicate to in the near future. But we have got 40 queued up here. We have expectations to have more than that in the future. But bear in mind, on the base of a 140 stores, that is 30%.

So we got to keep our eye on it all. To build those out.

Analyst (Peter Thomas Sidoti): Right. what is the limit what is limiting your ability to sell more franchises at this point in time?

Jeffrey Richart Geygan: Oh, yeah. that is a good question. I think just having the right qualified, respective developer or, operator And we are working very diligently. We are out at trade shows and soliciting and Clearly, we need to do more with SEO. But I am pretty satisfied with what we have done with that development. And bear in mind, we have to make sure we get it right, which means we have to make sure that we can get the store opened inside of our target is 6 months. And we are trying to drive costs down with our franchise development team is done an excellent job on that.

In my last talk, and they have taken a meaningful percentage out of from the first to the most recent store. And there is further room for cost reduction in building stores. Which to an operator, it is really important if they are looking at ROI, which a financially sophisticated operator will be.

Analyst (Peter Thomas Sidoti): Right. So in general, what percentage of new franchises are being sold to existing franchisees?

Jeffrey Richart Geygan: Well, of the 40, there are 9 that are brand new guy, and the 31 are with existing. And our-- and, Peter, of course, our strategy was let's go to our existing customer, the guy that already knows and loves the brand. So that was the easy 1. Then the next leg of the trip, is let's go to outside guys and see if we can get interest there. But I have been very clear. We want new franchisees that are multiunit, have multiunit capabilities, and I have said, and I am not sure if I have said it on a public call, but I have said it many times.

If a prospective franchisee does not want to open 10, 12 stores, probably not the right guy for us. We want to put someone up, for example, in New York City or Manhattan and Long Island and say, hey. You want to build 10, 20, 30 stores here? Now you talk We are-- I am very disinterested in a guy that wants to open 1 store somewhere on Long Island. This does not make sense.

Analyst (Peter Thomas Sidoti): Alright. So I will give up my franchise on Fire Island.

Jeffrey Richart Geygan: I know we talked about it, but if we build 30 and that, we win elsewhere.

Analyst (Peter Thomas Sidoti): Alright. And just my other question, In terms of is there a target on when you think you will be in a position to be positive cash flow generating We have not disclosed that.

Jeffrey Richart Geygan: But between everyone and me on this call, it is as soon as possible. that is absolutely our goal.

Analyst (Peter Thomas Sidoti): Alright. Thank you very much.

Jeffrey Richart Geygan: Yeah. Appreciate your questions, dude.

Operator: To turn the call back over for closing remarks.

Jeffrey Richart Geygan: I think we just want to thank everybody for your patience as we work through this transformation. We really have aspirational plans it is frustrating for us, and I suspect for many investors that this quarter was not better. But it is not for lack of effort here. And we do have a high level of confidence in our plan of execution. With that, I thank you. We will report Q1, which just ended on the 05/30/2031, will report out 10-Q on July 14. We will have a conference call shortly after that. So that is in a short 6 weeks.

I hope to be able to give you a lot more updates on how we are going to Peter's point with area developments and so on. Until then, thank you all, and feel free to reach out Carrie and me if you have any other questions.

Operator: And this concludes today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.