Good morning, ladies and gentlemen. Thank you for standing by. Welcome to today's conference call to discuss the Rocky Mountain Chocolate Factory's financial results and new Strategic Transformation Plan. [Operator Instructions] As a reminder, this conference is being recorded. Joining us on the call today are the company's CEO, Rob Sarlls; and CFO, Allen Arroyo. Please be advised this conference call will contain statements that are not considered forward-looking statements under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to certain known and unknown risks and uncertainties as well as assumptions that could cause actual results to differ materially from those reflected in those forward-looking statements. These forward-looking statements are also subject to other risks and uncertainties that are described from time to time in the company's filings with the SEC. Do not place undue reliance on any forward-looking statements, which are being made only as of the date of this call. Except as required by law, the company undertakes no obligation to revise or publicly release the results of any revision to any forward-looking statements. The company's presentation also includes certain non-GAAP financial measures, including adjusted EBITDA as supplemental measures of performance of the business. All non-GAAP measures have been reconciled to the most directly comparable GAAP measures in accordance with SEC rules. You will find reconciliation tables and other important information in the earnings press release and Form 8-K furnished to the SEC earlier today, which will be available on the company's Investor Relations section of its website within approximately 24 hours after this call has ended. And now I will turn the call over to the company's CEO, Rob Sarlls. Rob, please go ahead.

Thank you, and good morning, everyone. I'm speaking with you in the presence of our entire leadership team in Chicago as we are all attending the Sweets & Snacks Trade Show. I'm excited to kick off today's call by introducing our Strategic Transformation Plan to revitalize growth and profitability at Rocky Mountain Chocolate Factory. We aim to position our company as America's preferred premium chocolatier with first-class manufacturing and omnichannel retail. Since we assembled this new leadership team in late 2022, we have spent significant time meeting with countless stakeholders across our business. An important objective in our discovery process was determining the key drivers of our business' underperformance over the better part of the past decade. It's no secret that our struggles have been company specific, best captured by the consistent growth our industry has generated over the past 7 years compared to our chocolate factory sales being down 11% over the same time frame. The company fell behind its peers and lost market share. Allow me to share what led to the decline. First, a lack of manufacturing discipline contributed to elevated operating expense levels and compressed margins made more challenging by lower pound volume. Franchise stores were underinvested and increasingly dated. [indiscernible] footprint shrunk meaningfully. The company's focus drifted away from being customer and franchisee centric, and the company made too many investments that strayed away from core chocolate manufacturing, brand marketing, franchising and brick-and-mortar retail. The company ultimately lost its focus on what truly mattered. For the company to be better positioned to benefit from and capture market share in a highly fragmented U.S. chocolate confectionery market, a complete transformation is required. A transformation that both brings Rocky Mountain Chocolate back to its roots while evolving to the needs and preferences of today's consumer. In order…

Thank you, Rob. Please note that all financial results discussed today are for continuing operations, while all variance commentary is on a year-over-year basis unless otherwise stated. Jumping right into our fourth quarter results. For the fourth quarter, total revenue increased 5% to $8.1 million. Breaking down our revenue further. Total factory sales increased 6% to $6.1 million. The increase was driven primarily by higher shipments of products to our franchised and licensed retail stores. Royalty and marketing revenue increased 5% to $1.7 million. Retail sales were $270,000 compared to $331,000. Same-store sales at all domestic Rocky Mountain Chocolate Factory locations increased 1.5%. Franchise fee revenue increased to $57,000 compared to $43,000. Total factory and retail gross profit was $79,000 compared to $899,000 with gross profit margin of 1.2% compared to 14.7%. The decrease was primarily due to $577,000 of the write-off of obsolete inventory as a result of our aggressive effort to rationalize the products we offer and to reduce overall inventory levels. We drove a significant drawdown of our inventory in the fourth quarter to not only manage working capital more efficiently but to position inventory more closely to our go-forward sales and marketing efforts. Inventory levels relative to our factory sales at fiscal year-end were at the lowest point in 10 years. Total operating expenses increased to $10.1 million compared to $7.2 million. The increase was primarily driven by onetime items, including costs associated with solicitation of proxies, severance payments -- and severance payments. Excluding these nonrecurring items, fiscal Q4 operating expenses were $8.5 million. Net loss from continuing operations was $1.9 million or $0.29 per share compared to net income from continuing operations of $0.4 million or $0.06 per share. Adjusted EBITDA, a non-GAAP measure defined below, was $56,000 compared to $1 million with a decrease,…

Thanks, Allen. This leadership team is fully committed and excited to effect this Strategic Transformation Plan. I look forward to sharing more details in the coming quarters and reporting on our continued progress to all Rocky Mountain Chocolate Factory stakeholders as we work to build the business to its potential of consistently and sustainably generating growth and profitability. With the plan in place, we can now entirely focus our attention on improving execution in the factory, in retail stores and online. This concludes our prepared remarks, and we will now open it up for questions for those participating in the call. Operator, back to you.

[Operator Instructions] And our first question will come from Roger Lipton of Lipton Financial Services.

The $1.2 million of savings, is much of that in place at the moment? Or is that going to be kind of put in place in the course of the next 12 months?

Roger, thanks for your question. It's a good question. We're going to be reporting our fourth -- first quarter earnings not too long from now. And at that point, we'll report the sum total of what's been already gathered. And yes, there has already been a decent chunk of that $1.2 million already put into place. Some of it relates to some of my earlier comments about closing third-party warehousing that's not needed, SKU rationalization and other process improvements that have already taken place in the factory.

And the 25% to 30% and the $1.2 million is, no doubt, part of that 25% to 30% gross margin objective. Correct?

Absolutely. Of course, we'd love it to be more and more top line by getting the OpEx right, sets the stage and the table for more profitable business being added going forward.

And can you put a little more precise time frame on that -- on your hope for the 25% to 30% gross margin? 3 to 5 years is a long time.

No, it absolutely is. But realize this is a 10-year resurrection that we're underway. And we're only in basically the beginning to middle of year 1. So the $1.2 million, if you were to put it against our current volumes, is a pretty meaningful bump to factory gross margins as a start. We intend for more of that to happen. And as we basically achieve levels, we'll be reupdating.

Right. And I should know the answer to this, but you know better than I. What's the price of chocolate doing these days?

Price of chocolate, price of cocoa, prices of sugar, all those things are rather hefty right now. I believe sugar is at an 11-year high. Cocoa has been not as unstable as sugar prices, but it's been high-ish. And one thing that we're very excited about is this is a year for which the Farm Bill in the United States has come up. And you should know that this company and this leadership team has been working actively with [indiscernible] officials in Colorado to really apply efficient and directed pressure to Congress to make amendments in the Farm Bill so that the whole industry that utilizes sugar can get more relief.

Right. And lastly, along the same line, I would imagine that your prices -- your sale price of product and your franchisees' sale price of product are up materially versus a year ago. Roughly what kind of a price impact is there year-to-year?

We took a high single-digit increase last fiscal year. What we should share with everybody is, given our confidence and the progress we've been making in our OpEx improvements, we have promised our franchisees that short of a force majeure event, there will be no price increase in fiscal 2024.

And now we will address questions that have been received via e-mail. One moment for our first question. And the first question received was help us understand the investment, both capitalized and expensed items, necessary to fully execute your Strategic Transformation Plan.

Well, that's a good question, and I'm going to trade off some of that to Allen to finish. To start, and I said this as recently as yesterday to some of our industry peers at the Sweets & Snack Show, which used to be called the Candy Show once upon a time, the company was not thinking of itself as a manufacturer of candy first. And so less than full attention was given to the optimization of what equipment is in the factory, doing what and with whom. All of those things have been given an incredible amount of scrutiny by Scott Ouellet, Tyson Snider and new other members of our team. And so a fair bit of investment will come in capital investment with new equipment in the factory not only to streamline and get efficiency but also to give us capabilities to meet new product demand for consumers and also thinking about the labor situation, which is going to remain challenging, we see, for the foreseeable future as it is anywhere in the United States. So we're more mindful to make capital investments so that we can do more pounds per factory employee than we have in the past. And so if we can get some good increases in volume, we're not having to throw on tons of increase in people. And then there's investment in things that aren't capital intensive for the factory that are more systems and data that have the same benefit. I'm going to turn it over to Allen to answer that.

Yes. Yes. I would say that we have made investments as we've talked about on this call and previous calls to bolster our team, mainly in manufacturing. So we've made that forward investment. But from a capital basis, we believe we're going to spend the lion's share of our budget on capital equipment in the manufacturing facility. We also have money earmarked for ERP systems to upgrade that for financial information that's going to lead to better decisions and deployment of capital. So we -- it's a sizable amount that we have allocated for that in the next 12 months. And then based on our projections of the business, that will continue. But there's definitely a sizable investment in CapEx in the next 12 to 18 months.

And our next question, one moment, would be how should we think about the timing and impact of an acceleration or e-commerce sales; and b, the rationalization of your retail footprint and pace of new store openings.

Sure. I'll answer the second part of that question first. So all franchisors like us in the normal course are closing stores on a regular basis. We've -- and actually, ironically, there have been fewer closings during the COVID period than one might have expected. So those will be slightly more accelerated than the pace of the past and a lot of the data gathered from my 50 in 50 visits from -- the highest number of field visits we've had by our team in many, many years and gaining also some analytical additional information from third-party sources, we're going to be trying to get the bulk of those done in the next 2 years. New store openings, I think, will continue to pace normal course. We have a whole bunch that are coming in the next 2 quarters. But realize we will be pivoting to a new brand, a new store look sometime in fiscal '24. With all of that rollout with other sorts of enhancements to the attractiveness of investing in the Rocky Mountain Chocolate franchise, we expect the new store volume to be more meaningfully taking off in fiscal '25 and beyond. And then back to the omnichannel and other spending related to e-com, that is more a function of return on ad spend and there's been a more concerted effort to put more dollars and focus on that. That can be more immediate. It's coming from a much smaller base because, as I indicated earlier, omnichannel sales hit a multiyear low in fiscal '23. So frankly, for fiscal '24, omnichannel sales should look very robust compared to the prior 2 years.

And we have an additional question. Will new stores be opened under the current or revised format? And what will be the financial impact of closing 25 to 35 stores?

Okay. I'll answer the second part of that first. So with the analysis we've done of our store universe and a good example of which is the stores that were closed in the latter part of fiscal year '23, virtually all of them fell far below our average unit volume, which was $574,000. So realize many of our less successful stores not only have lower annual sales volumes. They also ironically make more product in-store and buy less factory product. So the financial impact of the stores leaving our network will not be as significant as one might think. When you put all those facts in play, it is closer to de minimis than not. And what was the first part of the question again, I'm sorry?

One moment. The first part was will new stores be opened under the current or revised format?

Yes. So new stores are opening right now. And if you think of any franchisor doing a brand and store image upgrade, the safest answer to the question is the stores that are opening right now are going to be the last stores if they want to, to wait to do some of the adjustments and accepting the new branding and the new store look. And we're being mindful of that and being very open with new franchisees about what's coming down the pike.

I am showing no further questions at this time. We do appreciate your attendance and participation. You may now disconnect. Have a wonderful day.

Thanks, everyone.

Thank you.

Thank you.