Executive Summary

Q2 FY2025 revenue was $6.38M, down 2.7% YoY, with gross margin recovering to 11.5% (vs. 7.7% YoY) and diluted EPS of ($0.11), improving sequentially from ($0.26) in Q1; operating loss narrowed to ($0.91M) from ($1.01M) YoY .
Mix remained stable (product sales $4.92M; franchise and royalty $1.46M), while total costs and expenses fell to $7.29M from $7.57M YoY; net loss improved to ($0.72M) from ($1.00M) YoY .
Liquidity bolstered post-quarter with a new 3-year $6M credit facility (12% interest, interest-only to 9/30/2027), used to retire $3.45M drawn on the prior revolver and fund growth; quarter-end line-of-credit balance was $3.45M, cash $0.97M, inventories $6.12M to prepare for holiday demand .
Management highlighted rebrand near completion, a new store design by year-end, and a pipeline of new franchise locations (first opening in Edmond, OK next month; three more in process), with near-term revenue growth expected from existing stores and e-commerce rather than new units in FY25 .

What Went Well and What Went Wrong

What Went Well

Margin recovery: Gross margin improved to 11.5% (vs. 7.7% YoY) on pricing and operating efficiencies; net loss reduced to ($0.72M) and EPS to ($0.11) from ($0.16) YoY .
Liquidity/financing: Secured a new $6M, 3-year credit facility post-quarter, retiring the prior $4M facility (with $3.45M outstanding) and adding growth capital; interest-only to maturity (12%) .
Strategic progress: Rebrand ~90% complete with a new store design near final; expanding franchise development (Edmond, OK opening; three additional agreements pending). “We are pleased with our progress this quarter as we begin executing our multi-year strategic plan” — Interim CEO Jeff Geygan .

What Went Wrong

Top-line softness: Revenue declined 2.7% YoY to $6.38M; product sales fell slightly (to $4.92M), and franchise/royalty fees were modestly lower YoY .
Working capital pressure: Inventories built to $6.12M (from $4.36M at FY year-end) to support the holiday season; cash declined to $0.97M; line of credit increased to $3.45M at quarter-end .
Near-term growth constraints: Management does not expect brand-new store openings to drive meaningful FY25 revenue; growth near term is expected from existing stores and e-commerce, tempering new-unit contribution this fiscal year .

Financial Results

Headline P&L vs Prior Year and Prior Quarter

Metric	Q2 FY2024 (YoY comp)	Q1 FY2025	Q2 FY2025
Revenue ($M)	$6.56	$6.41	$6.38
Gross Margin (%)	7.7%	(5.8)%	11.5%
Total Costs & Expenses ($M)	$7.57	$8.04	$7.29
Operating Income ($M)	($1.01)	($1.63)	($0.91)
Net Income ($M)	($1.00)	($1.66)	($0.72)
Diluted EPS ($)	($0.16)	($0.26)	($0.11)

Segment/Mix (Revenue Components)

Metric	Q2 FY2024	Q1 FY2025	Q2 FY2025
Product Sales ($M)	$5.02	$5.28	$4.92
Franchise & Royalty Fees ($M)	$1.54	$1.13	$1.46
Total Revenue ($M)	$6.56	$6.41	$6.38

KPIs and Balance Sheet

KPI	Q2 FY2024	Q1 FY2025	Q2 FY2025
Cash & Cash Equivalents ($M)	$2.08 (FY end)	$0.64	$0.97
Inventories ($M)	$4.36 (FY end)	$4.25	$6.12
Line of Credit ($M)	$1.25 (FY end)	$2.00	$3.45
Store Count (units)	—	—	147 (36 states)
Loyalty Program Stores (units)	—	—	21

Note: FY end amounts shown where the company provided comparisons to February 29, 2024.

Estimates vs. Actuals

Metric	Period	S&P Global Consensus	Actual	Surprise
Revenue ($M)	Q2 FY2025	N/A (consensus unavailable at time of query)	$6.38	N/A
Diluted EPS ($)	Q2 FY2025	N/A (consensus unavailable at time of query)	($0.11)	N/A

Consensus from S&P Global was not retrievable due to vendor rate limits at query time; as a result, we cannot assess beat/miss this quarter.

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Gross Margin (exit FY25)	FY2025 exit	~20% target (Q1 call)	Reiterated trajectory via margin recovery commentary; no numeric update in Q2	Maintained
Adjusted EBITDA	FY2025 exit	Near breakeven (Q1 call)	No numeric update provided in Q2	Maintained
Gross Margin	FY2027	25–30% (Q1 call)	No change provided in Q2	Maintained
Adjusted EBITDA Margin	FY2027	10–12% (Q1 call)	No change provided in Q2	Maintained
Net Store Growth	FY2025	Target net growth (Q1 call)	New Edmond, OK opening next month; 3 more agreements pending	Maintained/Progressing
New Stores Revenue Contribution	FY2025	Not quantified	“Wouldn’t see a significant amount of FY25 revenue from brand-new stores”; focus on existing stores and e-comm	Clarified lower

No formal quantitative revenue or EPS guidance was issued in Q2.

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 FY2025)	Current Period (Q2 FY2025)	Trend
Liquidity/Financing	Planned facility replacement; asset sales; working capital actions	New $6M, 3-year facility at 12% interest-only; retired $3.45M revolver	Improving liquidity
Rebrand/Store Design	Brand update to complete later in year	Rebrand ~90% complete; new store design near final; launch by year-end	Execution progressing
Franchise Expansion	Target net store growth; 8 strategic markets; transfers vs closures	Edmond, OK opening next month; 3 more in process; 147 stores/36 states; focus East of Mississippi	Pipeline building
Supply Chain/Operations	Over $3M CapEx; fix holiday ’24 execution issues	Factory wage increases to stabilize labor; improved efficiencies cited in margin recovery	Stabilizing
ERP/POS & Data	ERP this fall; POS rollout to >100 stores by FY-end	ERP deployment targeted early 2025 to improve integration and analytics	On track/slightly shifted
E-commerce/Loyalty	E-comm ~3% sales; growth priority; loyalty rollout	Loyalty live in 21 stores; e-comm set up as independent unit; traffic driver to retail	Building capability

Management Commentary

“We are pleased with our progress this quarter as we begin executing our multi-year strategic plan,” highlighting liquidity strengthening, executive rebuild, franchise expansion, and rebranding momentum — Interim CEO Jeff Geygan .
“Gross margin improved to 11.5% compared to 7.7%. The increase…was primarily attributed to price increases and improved operating efficiencies.” — CFO Carrie Cass .
On liquidity: “A new $6 million credit facility…enabled us to retire our previous $4 million credit facility while providing additional capital for…growth initiatives.” — Interim CEO ; details: 12% interest, interest-only to 9/30/2027 .
On unit growth timing: “I wouldn’t see a significant amount of revenue growth from brand-new stores [in FY25]. The revenue growth opportunity is really from existing stores…as well as e-commerce.” — Interim CEO (Q&A) .
On network footprint and white space: 147 stores across 36 states; “virgin territory” east of the Mississippi (Northeast/Atlantic metros, Atlanta) — Interim CEO (Q&A) .

Q&A Highlights

New store contribution timing: Management downplayed FY25 revenue from brand-new stores; growth in FY25 to focus on existing-store sales and e-commerce, implying a more back-end loaded new-unit revenue curve .
Network logistics and market selection: Logistics (timely deliveries) and route density inform site selection; near-term targets in dense, underpenetrated East Coast/Southeast markets (e.g., Boston, NYC, DC, Atlanta) .
Franchise development pipeline: Encouraging pipeline with emphasis on pairing “right locations with the right operators,” including transfers to keep favorable sites open .

Estimates Context

S&P Global consensus for Q2 FY2025 revenue and EPS was unavailable at query-time due to vendor rate limits, so beat/miss cannot be assessed this quarter. Actuals: revenue $6.38M; diluted EPS ($0.11) .

Key Takeaways for Investors

Margin recovery is the key positive: gross margin rebounded to 11.5% (vs. 7.7% YoY and (5.8)% in Q1), reflecting pricing and early efficiency gains; watch holiday sell-through and post-holiday margin durability .
Liquidity risk moderated: the $6M facility (12%, interest-only) extends runway, retires prior revolver, and funds working capital/capex into peak season and execution of the plan .
Near-term revenue growth will be internally driven: Management guided that FY25 contribution from new stores will be limited; focus shifts to existing-store comps and e-commerce scaling in FY25 .
Execution watch items: holiday inventory build ($6.12M) and factory labor stabilization should translate into better fulfillment and fewer bottlenecks versus last holiday season .
Strategic catalysts into CY2025: rebrand launch and new store design by year-end, ERP deployment early 2025, and franchise openings provide multi-quarter catalysts if execution holds .
Unit growth white space: 147 stores concentrated west of the Mississippi; management sees attractive expansion opportunities in Northeast/Atlantic and Southeast corridors .
No formal numeric guidance: Management reiterated medium-term margin/EBITDA targets from Q1; investors should model FY25 conservatively on existing-store and e-commerce uplift with modest new-unit revenue .

Appendix: Additional Relevant Releases in the Quarter

New $6M credit facility: terms and use of proceeds (retire $3.45M revolver; fund growth), 12% interest, interest-only, matures 9/30/2027 .
Q1 FY2025 baseline: revenue $6.41M, gross margin (5.8)%, EPS ($0.26); management introduced FY25 exit and FY27 margin/EBITDA targets .

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