Rocky Mountain Chocolate Reports Fiscal Q2 Revenue of $6.7 Million

Rocky Mountain Chocolate reported fiscal second-quarter revenue of $6.7 million, down from $6.8 million a year earlier. Revenue rose 9% sequentially from the first quarter. The company is pursuing strategic alternatives to strengthen its financial position. It completed a sale-leaseback of its Durango property and secured a new $2 million loan.

Operational initiatives center on product and innovation, supply chain, and the retail experience, with a focus on product availability and franchisee support. Management also cited progress in operational efficiency and brand modernization, including technology. Net loss widened to $1.3 million from $0.7 million a year earlier, as costs increased at company-owned stores and in administrative operations. Rocky Mountain Chocolate held a conference call to discuss its fiscal second-quarter 2027 financial results.

Interim CEO Alan Harper, COO David Denker and CFO Carrie Kass joined the call. The company cautioned that forward-looking statements are subject to known and unknown risks, uncertainties and assumptions that could cause actual results to differ materially. It also referred readers to risks described in its SEC filings and said not to place undue reliance on forward-looking statements, which speak only as of the date of the call. The statements are made under the Private Securities Litigation Reform Act of 1995.

The Company undertakes no obligation to publicly update or revise forward-looking statements, except as required by law. The call was then handed to interim CEO Alan Harper. Harper said that since taking the interim CEO role in June, he has been encouraged by the leadership team's alignment around shared priorities. He also acknowledged David Denker's recent promotion to Chief Operating Officer, noting Denker's role in advancing operational priorities and improving coordination across the business.

Harper said management has clarified responsibilities, strengthened coordination and increased accountability to support the quality and consistency customers expect. He described Rocky Mountain Chocolate as an established brand with a long history of making products valued by guests. Harper said the second quarter brought early progress in production and gross margin, while the company still needs to improve its results. He said the near-term priority remains disciplined execution.

The section ends as he begins discussing work to improve operations. We are actively working to address our debt and working capital needs. During the quarter, the Board established a strategic committee to review financial and strategic alternatives aimed at strengthening the company’s financial position and maximizing long-term shareholder value. Options under consideration include financing, a possible sale, merger or other business combination, and a going-private transaction.

After quarter-end, we completed a sale-leaseback of the Durango property and used the proceeds to repay debt. Separately, we signed a new $2 million loan agreement. Carrie will provide more detail on these transactions shortly. As the strategic review proceeds, our focus remains on improving the business we operate today.

We need to support franchisees and stores, execute through the holiday season, and build a stronger operating foundation for sustainable growth and long-term shareholder value. I’ll now hand it over to David to discuss our operational progress. David Denker, Chief Operating Officer: Thank you, Al, and hello, everyone. Our operating priority is to build a more disciplined and scalable operating model.

These efforts are intended to improve product availability, strengthen franchise economics and enhance the guest experience. They are organized around three strategic pillars: product, production and innovation; supply chain and logistics; and retail experience and omnichannel growth. Across all three, the company aims to simplify operations, increase visibility and accountability, and expand what works. The current focus is on improving performance across the factory, stores and franchise network while building a stronger foundation for sustainable growth.

As the strategic review continues, the company says it remains responsible for strengthening the underlying business. Demand for the company’s products remained strong during the second quarter. August was an early proof point, with production and shipments reaching their highest level of the calendar year. Operations are being managed using measures such as equipment uptime, throughput, yield and scrap, product availability, and order fulfillment.

The company is also tightening its operating cadence from demand planning through finished goods, including production scheduling, material readiness and equipment reliability. The goal is to We aim to identify constraints early and address them before they lead to missed production or customer orders. Our current priority is to establish the discipline and visibility needed to maintain higher throughput during the holiday season and beyond. Our first pillar is product, production and innovation.

Improvements to our reporting platform and ERP are providing better visibility into demand, inventory and production requirements, helping us match Durango’s output with the needs of stores and franchisees. We are strengthening production planning and selectively using qualified third-party products when they complement our capabilities and support availability. Simplifying the assortment does not mean reducing innovation. It means concentrating on a more focused range and a more deliberate calendar that balances core products with seasonal items, limited-time offerings and gifting occasions.

This approach is intended to improve factory efficiency, keep more products in stock and enhance product mix and margins over time. The second pillar is supply chain and logistics. The opportunity extends beyond freight: we are assessing the full cost and reliability of moving product from Our work spans the path from ingredients through manufacturing to the store. It covers diversifying suppliers, disciplined purchasing, inventory management, freight optimization, secure delivery and reducing product damage.

Better execution should improve product availability for franchisees while lowering avoidable friction costs and working capital over time. Our third pillar is improving the retail experience and expanding omnichannel growth. We increasingly use company-owned stores as operating laboratories for the broader system. During the quarter, we acquired the Chino Hills store, bringing our company-owned store count to five, compared with three one year ago.

These locations let us test merchandising, labor models, product presentation, training, technology and new guest experiences in a controlled setting. Applying successful approaches across the franchise network should help us move faster while remaining disciplined about franchisees’ time and capital. During the second quarter, we completed a store-traffic pilot at our corporate locations. Together with our POS data, it provides a more complete view of store performance, including traffic, conversion and average transaction Store productivity depends on traffic, conversion and basket, including value, items per transaction, product mix, sales and profitability.

Better data helps us identify which part of that equation presents an opportunity at each location. Rather than applying the same approach everywhere, we can use those insights to share best practices, align staffing, refine merchandising and assess whether initiatives are improving productivity. We are using the same discipline for remodels, reviewing sales, profitability, basket performance and guest feedback before deciding what to scale. We are also working to connect the guest relationship across physical and digital channels while preserving the distinctiveness of the in-store experience.

Handcrafted products, caramel apples, fudge, live product theater and the sensory experience in our stores set us apart. Our learning management system and merchandising standards are designed to help chocolatiers deliver that experience consistently. In parallel, Rocky Rewards, our mobile app, digital ordering, third-party delivery, website enhancements and corporate gifting support our digital channels. The company aims to offer guests more ways to shop across occasions, increase visit frequency and retention, and grow customer value while generating additional demand for its stores.

It said a stronger franchise system is essential to Rocky Mountain Chocolate’s long-term health. During the quarter, the company opened franchise stores in Folsom, California, and Tinton Falls, New Jersey, completed two remodels, and continued bringing franchisees onto its integrated ordering platform and third-party delivery channels. The company said its strategy centers on the franchisee value proposition. Improving product availability, simplifying operations, strengthening merchandising, and providing better training, data, and demand-generation tools should make the system easier and more productive to run.

Its near-term priority is to execute through the holiday season, while the work underway is intended to strengthen the business. Over the long term, the company sees meaningful opportunity to improve performance across the business and aims to preserve what has made Rocky Mountain Chocolate special for 45 years while developing the operating capabilities needed for its next chapter. Chief Financial Officer Carrie Kass said comparisons are year over year unless otherwise noted. Revenue in the fiscal second quarter totaled 6.7 million, versus 6.8 million in the same quarter last year.

It rose 9% sequentially from the first quarter, reflecting the company’s typical seasonal increase in activity. Product sales were 5.3 million, compared with 5.2 million a year earlier, up 2%. Higher retail sales, driven by a larger company-owned store base and price increases, were more than offset by lower Durango product sales and royalty and marketing fees. The decline in royalty and marketing fees reflected fewer franchise stores and amendments to franchise agreements.

Total product and retail gross profit increased 2.4 million, compared with roughly breakeven in the same period last year. Gross margin rose to 8% from a negative 0.6% a year earlier. Total costs and expenses were 7.7 million, compared with 7.3 million in the same period last year. The increase primarily reflected the larger company-owned store base and higher franchise Higher general and administrative costs were partly offset by lower cost of sales and sales and marketing expenses.

Net loss was 1.3 million, or a negative $0.14 per share, versus a net loss of 0.7 million, or negative $0.09 per share in the same period last year. At the end of the second quarter, cash was 0.4 million, compared with 1.2 million at the end of fiscal year 26. Inventory totaled 2.6 million, down from 4.1 million at the end of fiscal year 26. As of August 31, 2026, total debt outstanding was 6.9 million, compared with 6.6 million at the end of fiscal year 26.

As Al mentioned earlier, after quarter-end the company signed an agreement to sell and lease back its Durango facility for approximately 6.6 million. Proceeds from the sale were used to repay existing promissory notes of 6.6 million, which carried a 12% interest rate. On 10-1-26, the company entered into a lease to continue using the facility. Rent for the first year is 624000, equal to 9.45% of the purchase price.

Further details are in the press release and related Form 8-K. In addition, on 10-16-26, the company entered into a 2 million loan agreement with Alpine The loan matures in October of 2028 and carries an interest rate of prime +1%. Over the past two years, the company has changed many aspects of its business. Investments include new technologies: an ERP system, a point-of-sale platform, websites tailored to each store and integrated with third-party delivery providers, and a recently introduced loyalty program.

The company says these tools support more efficient operations, better-informed decisions, and stronger engagement with guests. The brand has also been updated with a new logo and store design. A new range of box assortments and refreshed holiday packaging is being launched. The company says these changes are intended to meet guest expectations while maintaining the heritage and quality it has upheld for more than four decades.

The speaker described the company as culturally different from the one they joined in August of '24. They said the organization has built an aligned, accountable leadership team focused on results across all functions, from Durango to the field. There is a stronger sense of The company said it has made decisions to stabilize the business while maintaining a disciplined approach to its long-term positioning. Factory efficiency has improved, franchisees have stronger tools and support, and the brand is evolving to connect with today's guests.

As the holiday season begins, the organization is focused on keeping standard products available, supporting franchisees and delivering a consistent, premium guest experience. The speaker said work remains but expressed confidence in the company's direction, then handed the discussion back to Al for closing remarks. Interim Chief Executive Officer Alan Harper said the second quarter demonstrated that improved coordination and execution can lift production and gross margin. He acknowledged that further work is needed to restore a stronger growth and margin profile.

Priorities include executing through the holiday season, supporting franchisees and stores, carefully managing the company's financial position and assessing credible strategic alternatives. Harper began outlining the three operating pillars. The speaker said David’s outlined framework provides a clear basis for execution and that the company expects to continue reporting meaningful progress as the business advances. The speaker thanked employees, franchisees, board members and shareholders for their ongoing commitment and support, then concluded the prepared remarks and asked the operator to close the call.

The operator said the conference call had ended and invited participants to disconnect. The transcript is provided for informational purposes; automated transcription may contain errors or omissions. The company’s SEC filings and official press releases are the sources for official statements and financial information. Statements from corporate participants and analysts reflect their views as of the call date and may change without notice.