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RM

Rocky Mountain Chocolate Factory, Inc. (RMCF)·Q2 2026 Earnings Summary

Executive Summary

  • Q2 FY2026 revenue rose to $6.82M from $6.38M YoY, while net loss held at $0.66M (−$0.09/sh vs −$0.11/sh), reflecting pricing gains and mix shift but continued cost pressure and operational inefficiencies .
  • Gross profit on product/retail turned slightly negative (−$0.03M vs +$0.6M YoY) due to higher input costs and inefficiencies despite improved pricing and exit from lower-margin specialty markets .
  • Balance sheet liquidity improved sequentially (cash $2.02M vs $0.89M in Q1) via $1.8M additional borrowings; total debt increased to $7.77M at 12% interest (interest-only, due 9/30/27) .
  • Management underscored transition “from transformational planning to transformational performance,” citing franchise pipeline strength, brand refresh, and operational leadership hires; no formal quantitative guidance was issued .

What Went Well and What Went Wrong

  • What Went Well

    • Rebranding and store development momentum (Charleston opened; Chicago flagship targeted around holidays; new agreements in CA/NJ; remodel uplift in Corpus Christi) .
    • Data/technology upgrades (ERP/POS) enabling faster decisions and better visibility; loyalty program and digital initiatives advancing (website refresh, DoorDash storefront) .
    • Cocoa hedging at lower prices expected to support margins over time; chocolate ~40% of raw materials cost .
    • Quote: “We’re moving from transformational planning to transformational performance.” – Interim CEO Jeff Geygan .
    • Quote: “The combination of openings, remodels and multiunit franchise interest gives us [the] strongest development pipeline in years.” – Geygan .
    • Quote: “We took full advantage [of cocoa price declines], locking in some amount of production… highest price we’ve locked… is $8,000.” – Geygan .

  • What Went Wrong

    • Product/retail gross profit slipped to a small loss as higher inputs and operational inefficiencies offset pricing/mix benefits .
    • Interest expense rose with higher borrowings; total debt reached $7.77M at 12% interest; net loss persisted .
    • Operations still a work-in-progress despite new VP of Operations; improvements largely post-quarter and ongoing testing of best practices .

Financial Results

Revenue and profitability (YoY and QoQ comparisons)

MetricQ2 FY2025Q1 FY2026Q2 FY2026
Total Revenue ($)$6,380,000 $6,373,000 $6,823,000
Sales ($)$4,918,000 $4,718,000 $5,183,000
Franchise & Royalty Fees ($)$1,462,000 $1,655,000 $1,640,000
Product & Retail Gross Profit ($)$600,000 $300,000 $(33,000)
Total Costs & Expenses ($)$7,294,000 $6,518,000 $7,302,000
Loss from Operations ($)$(914,000) $(145,000) $(479,000)
Net Loss ($)$(722,000) $(324,000) $(662,000)
Basic Loss per Share ($)$(0.11) $(0.04) $(0.09)
Wtd Avg Shares (Basic)6,686,537 7,742,317 7,786,384

Segment revenue mix

MetricQ2 FY2025Q1 FY2026Q2 FY2026
Sales ($)$4,918,000 $4,718,000 $5,183,000
Franchise & Royalty Fees ($)$1,462,000 $1,655,000 $1,640,000

Balance sheet snapshot

MetricFY End (Feb 28, 2025)Q1 FY2026 (May 31, 2025)Q2 FY2026 (Aug 31, 2025)
Cash & Equivalents ($)$720,000 $893,000 $2,017,000
Total Debt/Notes Payable ($)$5,957,000 $5,961,000 $7,766,000
Inventories ($)$4,630,000 $4,633,000 $4,136,000
Total Assets ($)$21,175,000 $20,096,000 $22,254,000
Stockholders’ Equity ($)$6,975,000 $6,732,000 $6,126,000

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Company GuidanceFY2026None issuedNone issued; management reiterated focus on execution, development pipeline, and operational improvementsMaintained no formal quantitative guidance

Notes: Management reiterated goals (e.g., net positive annual store growth) but did not provide quantitative ranges (revenue/margins/OpEx/tax) in the press release or on the call .

Earnings Call Themes & Trends

TopicQ4 FY2025 (two quarters back)Q1 FY2026 (previous quarter)Q2 FY2026 (current)Trend
ERP/POS & data visibilityERP go-live; POS in >100 stores; real-time store-level data; foundational to pricing discipline Accelerated POS/ERP adoption; driving visibility/accountability Ongoing utilization to make faster decisions; better store insights Improving execution cadence
Pricing & input costs (cocoa)Dynamic pricing instituted Mar 1; margin target discipline; cocoa inflation weighed on gross profit Pricing realigned across categories; driving margin improvement Locked cocoa at lower prices; chocolate ~40% of raw material cost; margin tailwind expected over time Positive margin trajectory expected
Franchise development/store pipelinePlan to end >10 yrs of net store declines; Chicago flagship, Charleston opened New pipeline building; Chicago expected before holidays New agreements (Folsom, CA; Jersey Shore, NJ); Houston Hobby in negotiations; remodel lift observed Strengthening pipeline
Brand refresh/digitalNew logo, design, packaging; e-comm upgrade planned Brand refresh rolling out; redesigned e-commerce platform summer Website refreshed; new loyalty coming; DoorDash storefront rollout Broader rollout underway
Operations/fulfillment/logisticsBrought consumer packaging in-house; avoid ~$1.5M losses; improved Q4 fulfillment Operating efficiencies, lower G&A; EBITDA positive New VP Ops; overtime/scrap/in-stock initiatives; warehouse optimization Early actions; benefits to come

Management Commentary

  • “We’re moving from transformational planning to transformational performance.” – Interim CEO Jeff Geygan .
  • “We expect most of our remodel work… to begin in early calendar 2026, with the goal of having nearly all stores aligned with the new brand identity in 24 months.” – Geygan .
  • “We took full advantage [of cocoa price declines]… the highest price we’ve locked since I’ve been here is $8,000… Chocolate represents 40% of our raw material costs.” – Geygan .
  • “Total revenue for the quarter was $6.8M… net loss of $0.7M or −$0.09 per share… total costs and expenses were $7.3M, essentially flat YoY.” – CFO Carrie Cass .
  • On capital and liquidity: +$1.8M borrowings in Q2 ($1.2M term loan; $0.6M incremental) at 12% interest, interest-only, maturing 9/30/27; total debt $7.8M; cash $2.0M .

Q&A Highlights

  • Store growth and owned vs. franchised: Target is net positive annual store growth; expect a handful of additional company-owned “strategic” stores to develop markets and test best practices before potential franchise clustering .
  • Capital needs/cash burn: Management does not expect to burn cash over the next 12 months; any capital raise would be at Board discretion .
  • Operations leadership: New COO (Luis Burgos) with 30+ years in manufacturing/operations; FDA rules experience .
  • Input costs/hedging: Cocoa hedges added at lower prices; expected to aid margins over time .

Estimates Context

  • Wall Street (S&P Global) consensus for Q2 FY2026 EPS and revenue was not available; consequently, no beat/miss vs. estimates is presented. Values retrieved from S&P Global.*
MetricQ2 FY2026 ActualConsensusBeat/Miss
Revenue ($)$6,823,000 N/A*N/A
EPS (Basic LPS) ($)$(0.09) N/A*N/A

*Values retrieved from S&P Global.

Key Takeaways for Investors

  • Revenue growth returned YoY in Q2 on higher sales and stable franchise fees, but product/retail gross profit remained under pressure; watch for margin inflection as hedges flow through COGS and operational initiatives mature .
  • Liquidity improved sequentially via incremental borrowings ahead of holiday-heavy Q3/Q4; monitor interest expense (12%) and debt trajectory as cash generation improves seasonally .
  • Store economics/brand refresh appear to be resonating with operators; near-term catalysts include Chicago flagship opening, additional remodels, and potential new-unit signings .
  • Digital and loyalty initiatives (refreshed site, DoorDash storefront, upcoming loyalty rollout) should support omnichannel demand and franchisee unit economics into holiday season and beyond .
  • Management refrained from formal quantitative guidance; execution against ERP/POS-enabled pricing and operations is the valuation debate—holiday sell-through and gross profit recovery are key stock drivers .
  • Specialty market exits/repricing and mix shift away from lower-margin channels should structurally aid profitability, contingent on factory/fulfillment efficiency gains .
  • Watch cocoa price trends and hedge coverage cadence; management locked at lower levels vs prior highs, positioning for gradual gross margin normalization if operational improvements hold .

Additional Relevant Press Releases (Q2 FY2026 window)

  • Camarillo, CA store acquired (Aug 19, 2025): expands company-operated base for testing best practices in Southern California .
  • Q2 results call scheduling (Oct 6, 2025) .

Cross-references:

  • Q2 FY2026 press release and financials .
  • Q2 FY2026 earnings call transcript – and –.
  • Q1 FY2026 press release and financials .
  • Q4 FY2025 release/call (for context and trend commentary) –.