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RM

Rocky Mountain Chocolate Factory, Inc. (RMCF)·Q1 2026 Earnings Summary

Executive Summary

  • Q1 FY2026: revenue $6.373M, essentially flat YoY; net loss improved to $(0.324)M (EPS $(0.04)), with EBITDA turning positive at $0.201M as pricing actions and operational efficiencies lifted margins .
  • Product/retail gross profit swung to $0.3M from $(0.3)M YoY; total costs/expenses fell to $6.518M from $8.037M, driven by lower G&A and operating efficiencies .
  • Strategic execution: rolled out simplified freight (moving to flat monthly fee), realigned pricing, and accelerated POS/ERP adoption (100+ stores), supporting real-time analytics and franchisee alignment; Charleston store performing well, Chicago flagship targeted before holidays .
  • No formal quantitative guidance; management reiterated focus on returning to profitability and growth in FY2026. Wall Street consensus (S&P Global) for Q1 FY2026 EPS/revenue was unavailable due to limited coverage . Values retrieved from S&P Global.*
  • Potential stock catalysts: first positive EBITDA in several years, margin uplift from pricing and exiting a loss-making wholesale customer, brand refresh/store pipeline, and operating discipline highlighted on the call .

What Went Well and What Went Wrong

What Went Well

  • “We’re no longer in a rebuilding mode. We’re now in an execution mode.” Positive EBITDA and margin improvements reflect pricing discipline, ERP/POS-driven visibility, and factory efficiencies beginning to flow through .
  • Simplified freight and dynamic pricing model: waiving freight in Q1 then moving to a flat monthly fee; price adjustments in March and June, with POS/ERP enabling targeted margin capture and faster decision-making .
  • Brand and footprint: refreshed branding and modern store layout launched in Charleston; Chicago flagship targeted ahead of holidays; broader pipeline and sequencing of packaging, in-store merchandising, and redesigned e-commerce to align in-store and digital experiences .

What Went Wrong

  • Exited a large specialty wholesale customer that was unprofitable, reducing sales by ~$0.5M but improving margins; product sales declined YoY to $4.718M, though franchise/royalty fees increased .
  • Input costs and operational inefficiencies remain a headwind; CFO noted factory best practices are still being tested and refined post-quarter .
  • Balance sheet still levered with note payable ~$6.0M and higher interest expense ($188k vs $35k YoY); capital needs and equity raise questions surfaced in Q&A (management prefers non-dilutive solutions and is reviewing with Board) .

Financial Results

Quarterly Comparison (oldest → newest)

MetricQ3 2025Q4 2025Q1 2026
Total Revenue ($USD)$7.893M $8.899M $6.373M
Net Loss ($USD)$(0.847)M $(2.895)M $(0.324)M
EPS (Basic)$(0.11) $(0.37) $(0.04)
Loss from Operations ($USD)$(0.700)M $(2.698)M $(0.145)M
Total Costs & Expenses ($USD)$8.593M $11.597M $6.518M

Q1 YoY Comparison

MetricQ1 2025 (May 31, 2024)Q1 2026 (May 31, 2025)
Total Revenue ($USD)$6.407M $6.373M
Sales ($USD)$5.279M $4.718M
Franchise & Royalty Fees ($USD)$1.128M $1.655M
Cost of Sales ($USD)$5.586M $4.392M
Total Costs & Expenses ($USD)$8.037M $6.518M
Loss from Operations ($USD)$(1.630)M $(0.145)M
Net Loss ($USD)$(1.658)M $(0.324)M
EPS (Basic)$(0.26) $(0.04)
EBITDA ($USD)$(1.392)M $0.201M

Segment/Revenue Composition (oldest → newest)

Revenue ComponentQ3 2025Q4 2025Q1 2026
Sales ($USD)$6.719M $7.099M $4.718M
Franchise & Royalty Fees ($USD)$1.174M $1.800M $1.655M
Total Revenue ($USD)$7.893M $8.899M $6.373M

KPIs and Balance Sheet (oldest → newest)

KPIQ3 2025Q4 2025Q1 2026
Product & Retail Gross Profit ($USD)$0.7M $(0.8)M $0.3M
Interest Expense ($USD)$0.160M $0.196M $0.188M
Cash & Equivalents ($USD)$1.089M $0.720M $0.893M
Inventories ($USD)$5.722M $4.630M $4.633M
Note Payable/Debt ($USD)$6.000M $5.957M $5.961M

Estimates vs. Actual (Q1 2026)

MetricConsensus (S&P Global)Actual
Revenue ($USD)N/A*$6.373M
EPS ($USD)N/A*$(0.04)

Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Profitability targetFY2026Return to profitability (qualitative) Reiterated focus on returning to profitability and growth; no numeric ranges provided Maintained
Revenue/margins/OpEx/OI&E/tax/dividendsFY2026NoneNoneNo formal guidance

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2025 and Q3 2025)Current Period (Q1 2026)Trend
POS/ERP rolloutERP launched; POS in 100+ stores; backbone for dynamic pricing and operational visibility Accelerated POS adoption over 100 stores; aim for 100% compliance; ERP enhancing inventory/procurement/manufacturing analytics Improving execution
Pricing & marginsMarch 1 dynamic pricing reset; quarterly adjustments; aim to recapture several million gross profit; gross margin recovery over time Pricing actions in March and June driving margin improvement; dynamic adjustments via POS/ERP Positive margin momentum
Supply chain/logisticsBrought consumer packaging back in-house; warehouse/logistics changes to reduce transit and costs Simplified freight (waive → flat monthly) to increase order frequency and freshness Operational improvement
Specialty wholesaleRepricing/exiting low-margin relationships; improved contribution Dropped a large specialty customer; margins improved despite ~$0.5M sales reduction Mixed (lower sales, better margin)
Store developmentPipeline building; Charleston opened; Chicago in permitting; remodel prototype; target multi-unit operators Charleston performing well; Chicago targeted pre-holidays; leases under negotiation; focus on fewer, stronger operators Building pipeline
Digital/e-commerceRedesigned website mid-July; aim for profitable e-comm in FY26 Redesigned e-commerce launching; loyalty program planned post POS rollout; DoorDash/third-party delivery expansion Expanding capabilities
Cocoa/raw materialsNoted high cocoa costs as margin headwind ——
Capital needsCredit agreement expansion; term loan in FY25; elevated interest expense Board reviewing capital needs; preference to avoid dilutive capital; currently not planning to raise Watch financing strategy

Management Commentary

  • “We’re no longer in a rebuilding mode. We’re now in an execution mode.”
  • “We implemented a product price adjustment in March and again in June … 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.”
  • “We waived all freight charges … Effective June 1st, we shifted to a flat monthly fee program for freight delivery.”
  • “Our Charleston location reflects our refreshed branding … It’s performing well in a previously untapped market … With our new store in Chicago expected to open before the holidays … we are well underway in rebuilding our new store pipeline.”
  • “Our first quarter of positive EBITDA in several years is an indication that our strategy is taking hold.”

Q&A Highlights

  • Capital and dilution: Management currently not planning to raise capital; any capital decisions at Board’s discretion; CEO preference to keep balance sheet clean and avoid dilutive capital .
  • Growth muscle and franchisee support: Focus on expanding with existing franchisees; added five business consultants for semi-annual onsite visits, quarterly plan reviews, merchandising/product mix coaching; POS analytics drive peer benchmarking and best-in-class metrics .
  • Revenue mix and margins: Non-renewal of a large specialty market customer removed ~$0.5M sales and improved margins; cost of sales down >$1M YoY from exiting loss-making volume and factory efficiency improvements .
  • Cost discipline: G&A reduced ~$240k YoY by eliminating non-essential spend; ongoing factory efficiency work to further lower costs and scrap .
  • EBITDA drivers: Pricing, SG&A discipline, and factory efficiencies expected to support continued EBITDA expansion; emphasis on cost reduction and selective pricing actions that benefit system-wide economics .

Estimates Context

  • S&P Global consensus for Q1 FY2026 EPS and revenue was unavailable; as a result, no beat/miss assessment vs Street can be made. Values retrieved from S&P Global.* Actuals: revenue $6.373M and EPS $(0.04) .

Key Takeaways for Investors

  • Margin recovery underway: Dynamic pricing and operational changes turned EBITDA positive while compressing costs; watch continued margin progression in Q2/Q3 seasonally stronger periods .
  • Higher-quality revenue mix: Exiting an unprofitable wholesale relationship lowered sales but improved gross economics; franchise royalties rose with better store-level performance .
  • Execution infrastructure in place: ERP/POS across 100+ stores enabling dynamic pricing, inventory/production analytics, and franchisee coaching; this should tighten unit economics and reduce volatility .
  • Brand-led growth: Charleston launch, Chicago flagship, and refreshed packaging/website set the stage for pipeline acceleration with fewer, stronger multi-unit operators—key to scaling with quality .
  • Cost controls and leverage: Interest expense elevated; note payable ~$6.0M; management favors non-dilutive financing, but Board continues to assess capital needs—monitor liquidity and debt trajectory .
  • Seasonal tailwinds: Q3/Q4 are historically stronger; coupled with efficiencies and pricing discipline, results should show operational leverage if execution holds .
  • Strategic focus: Management tone confident and data-driven; near-term actions prioritize profitability, margin discipline, and franchisee support, which can reset the medium-term thesis around sustainable growth and brand modernization .