Operator:

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to today's conference call to discuss Rocky Mountain Chocolate Factory's Financial Results for the Fiscal First Quarter 2026. [Operator Instructions] As a reminder, this conference is being recorded. Joining us on the call today is the company's Interim CEO, Jeff Geygan; and CFO, Carrie Cass. Please be advised this conference call will be containing statements that are 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 these 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 publicly update or revise any forward-looking statements. The company's presentation includes a non-GAAP [indiscernible]. EBITDA is defined as net income before interest, taxes, depreciation or amortization. A reconciliation to the most directly comparable GAAP measures is included in the company's earnings press release furnished to the SEC and available on the EDGAR system on the SEC's website and will be available on the company's Investor Relations section of the website within approximately 24 hours after this call has ended. And now I would like to turn the call over to company's Interim CEO, Jeff Geygan. Jeff, please go ahead. Jeffrey Richart Geygan: Thank you, and good morning, everyone. It's been just about a month since our last conference call. However, I'd like to take a moment to reflect on the big picture at Rocky Mountain Chocolate Factory. Over the past year, we focused on stabilizing the business, including streamlining operations, rebuilding franchisee trust, integrity and selling skills, all while implementing operational systems required to scale effectively. Our new foundation is now largely in place. During our first fiscal quarter, we began to see our work translating into tangible results as continued evidence of our larger business transformation. We're no longer in a rebuilding mode. We're now in an execution mode. After laying the groundwork through a series of foundational initiatives, we are operating with greater precision, accountability and clarity. Our team is aligned around our shared goals and vision. Our franchisees are better supported with tools and insights to improve store level operating results. Our brand is evolving to reflect our premium positioning to deliver both product excellence and positive in-store experience. The momentum we're building is evident. While there's still work to be done, we're encouraged by the progress we've made and the discipline we're applying across every aspect of our business. Today, I'll take you through some specifics of ongoing developments. I'll begin with supply chain. During our first quarter, we waived all freight charges for franchisees and licensees in an effort to drive volume and improve product freshness across all stores. Effective June 1, we shifted to a flat monthly fee program for freight delivery. We believe this plan will encourage more frequent store orders and provide a more consistent and higher quality in-store experience for consumers. We implemented a product price adjustment in March and again in June, and we'll continue to review all input costs, making necessary adjustments to ensure we achieve our targeted gross margin. We're seeing a steady improvement in our margin capture as the adjusted pricing flows through our financial results. Doing this incrementally and in concert with our franchisees and licensees allows them to adjust their in-store pricing to maintain store level profitability. 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. Adoption of our new POS system accelerated during the quarter, bringing a new level of visibility to both corporate and franchisee operations. These tools are enhancing decision-making across production, pricing and marketing, providing key insights that simply weren't available before. As we collect more store-level financial data, we're able to provide improved analysis into store performance and help with product mix and merchandising designed to drive in-store sales and improve profitability. We're gaining additional perspective on what best-in-class looks like, which helps in coaching currently underperforming stores and has been instrumental as we accelerate initiatives to expand new store locations. We rolled out our new POS system to over 100 stores, and we expect continued deployment over the next few months as we aim to achieve 100% compliance. Our recent ERP implementation also continues to enhance our visibility into inventory, procurement and manufacturing operational performance. As we continue to refine inputs and work through data normalization, we expect the system will generate timely analytics, enabling us to respond to changes with greater speed and precision. We recently hired Luis Burgos, a seasoned and highly qualified VP of Operations to take over all manufacturing and logistics activities. He comes to us with Six Sigma, Lean Manufacturing and continuous improvement certifications and tremendous experience. We believe he is the most qualified VP of Operation the company has employed. His addition to the executive team is significant. Turning to new store development. On June 3, we opened our newest store in Charleston, South Carolina, the first to feature our fully refreshed brand identity and modern store layout. We're encouraged by early feedback and anticipate strong results as we enter the busy fall and holiday months. In downtown Chicago, construction is expected to begin shortly on a premier location at 1 State Street. We're targeting an opening ahead of the holiday season and are excited by the prospects and brand recognition this marquee store will bring to Chicago and the surrounding areas. Beyond these 2 locations, we're in lease negotiations for several new units and actively building a development pipeline that reflects both growth and selectivity. Our goal remains to expand with the right partners in the right locations as we're being careful to identify capable, competent operators as a critical precondition of our acceleration strategy. We're seeking operators that are well capitalized, financially sophisticated and entrepreneurial with prior franchising experience to join our growing family of franchisees. The rollout of our brand refresh is an important milestone in our transformation. It has been deliberately sequenced to ensure consistency across the system. The sequencing includes new packaging, updated in-store merchandising and a redesigned e-commerce platform. We're bringing our existing group of loyal and seasoned franchisees along, providing an unprecedented level of support and business analytics to encourage improved operating results, which we can now measure effectively and frequently. There's a growing excitement among many current franchisees as they seek greater opportunity to improve their current locations and look at expanding with new ones, some of which may be new builds and others, which may be transfers as we continue to assist with new store ownership. One of our internal goals is to improve the ratio of store ownership across a limited number of franchisees. Currently, we have 1.34 RMCF stores per owner. Our largest multiunit owner has 4 locations. We plan to track these numbers as we believe they are indicative of the efficacy of our store and franchisee development strategy. System-wide signage updates are underway. Our Durango company store unveiled its new signage in June. Our Corpus Christi company store is expected to begin displaying its new signage this week. Our new consumer packaging, both our traditional box chocolate and grab-and-go totes are expected to begin shipping to stores this month. We expect to display these on our refreshed website, rmcf.com, shortly after these items hit store shelves. Overall, interest from both current and prospective franchisees has increased as our refreshed identity, new packaging, updated website and other exciting developments continue to launch. Our messaging is crystal clear about the type and caliber of operator we're looking to attract and accept into our system. This represents a radical departure from past practices of RMCF's franchise development efforts. The next major milestone in our branding initiative is a full relaunch of our digital presence. We're advancing toward a modern e- commerce experience that complements our in-store environment. Our redesigned website is set to launch shortly alongside the rollout of our new packaging. Together, we expect these upgrades will enhance brand presentation, deliver a more intuitive shopping journey and lay the foundation for stronger online conversions and premium gifting opportunities such that our new website will be a complete departure from our current platform, both in look and feel. We intend to supplement our new website with contemporary social media and marketing initiatives to drive direct-to-consumer traffic through e-commerce and further direct those consumers to a nearby store to enjoy the full lineup of our premium offerings, most of which can only be found in store. We're preparing to make DoorDash and other food delivery platforms a required part of operating an RMCF location wherever feasible. We think this represents an untapped opportunity for many stores and will improve store revenue while capturing new customers. Following the rollout of our new e-commerce platform, our sights are set on revitalizing the Rocky Mountain Chocolate Factory loyalty program. The program today is limited in scope and available only in a handful of stores. As the POS rollout is complete and we begin to gain greater traction online, we believe there will be significant opportunity to create an engaging loyalty program that increases both transaction frequency and basket size across in-store and digital channels. Finally, our refreshed website is expected to include a section for new franchisees, which has previously been hosted on a separate website. It's far more intuitive to present a new franchise opportunity on the rmcf.com website as we believe many of our most enthusiastic consumers want to own a franchise location. Please be sure to visit our new website next month. In closing, when we look at the full body of work, not just from the past few months, but over the last 15 months, the impact is now beginning to show in our current quarterly results. We're still very early in realizing the financial potential of our business transformation, but recent margin improvement and our first quarter of positive EBITDA in several years is an indication that our strategy is taking hold. As we look at the remainder of fiscal 2026, we're focused on generating profit and returning to growth. The first quarter demonstrated our foundational investments and operational improvements are beginning to improve to produce these desired results, and we believe this trend will continue to build throughout the year. In short, we believe we are in a better position to execute than we've been in many years with what we believe is the right strategy, team and infrastructure, we're positioned to drive sustainable growth and long- term value creation. Thank you for your time and attention. I'll now hand it over to Carrie Cass, our CFO, to walk you through our fiscal Q1 financial results. Carrie? Carrie E. Cass: Thank you, Jeff. Please note that unless stated otherwise, all comparisons are on a year-over-year basis. Total revenue for the quarter was $6.4 million, essentially flat compared to the prior period. Product sales were $4.7 million compared to $5.3 million last year, and franchise and royalty fees were $1.7 million compared to $1.1 million. We did not renew a large specialty market customer since we were unable to reach a mutually beneficial agreement on product price. To our benefit, we improved overall margin while dropping nearly $500,000 in sales, which is reflected in the year-over-year number. Total product and retail gross profit was $0.3 million compared to a negative $0.3 million. The improvement was primarily driven by adjustments to pricing and operational efficiencies. Our costs and expenses were $6.5 million, down from $8 million last year. The decrease was primarily driven by lower G&A costs and other operating efficiencies. Net loss was $0.3 million or a negative $0.04 per share compared to a net loss of $1.7 million or negative $0.26 per share. EBITDA for the quarter was $2 million compared with a negative $1.4 million last year. Turning to the balance sheet. As of May 31, '25, we had a cash balance of $0.9 million compared to $0.7 million at February 28, '25. And as of May 31, we had $6 million in debt outstanding related to our term loan, which is essentially flat compared to our debt position at February 28. This concludes our prepared remarks. We will now open it up to Q&A. Operator, back to you. Operator: [Operator Instructions] Okay. Thank you, ladies and gentlemen. The company would like to address questions that have been received via e-mail over the past week. I would now like to turn the call over to Sean Mansouri, FMCS External Investor Relations adviser. Sean Mansouri: Thank you. Before getting into live Q&A, we do want to address a few questions that were submitted via e-mail over the past week and as recently as this morning. So to kick things off, Jeff, Carrie, starting with number one here, you mentioned a flat fee freight charge. What early indicators are you watching to evaluate whether it's driving the intended shift in franchisee ordering behavior? Jeffrey Richart Geygan: Yes. Thank you, Sean. We're able to see order frequency, which under the previous scheme had started to fade from every 2 weeks to, in many cases, 4 weeks and in a few cases, every 6 weeks, which, of course, meant we weren't getting the fresh product in stores that we desired. By waiving the fee, we encouraged all franchisees to order on a more frequent basis, which would be every 2 weeks, and we can see that as evidenced through our ERP and POS systems. Sean Mansouri: Thank you. And this next one, your ERP rollout is still undergoing refinement. As that data stabilizes, what processes or decisions do you expect to look materially different 6 months from now? Jeffrey Richart Geygan: Yes. Great question. I'm being mindful of giving forward guidance, I just speak generally about the quality of the data that we're getting and how that contrasts with what we might previously have seen. The ERP data that we received today gives us great insight into manufacturing efficiencies, order frequency, profitability and a whole host of other issues, which will be instrumental in our decision-making across virtually every department. Sean Mansouri: Thanks. And with the e-commerce relaunch scheduled for summer, how does your online strategy differ from the past? And how will success be measured now that it's positioned as a core brand experience? Jeffrey Richart Geygan: Yes. Good question. I think the evidence of -- probably without seeing the new site versus the old site, it's hard to speak to that. So I would encourage everybody to look at the new site. It's very elegant. It's far more contemporary. The user interface experience is vastly improved. So we're excited about rolling that out. We think the results of the refresh will speak for themselves, and we'll report on that in the future. In fact, we'll be excited to share the results. Sean Mansouri: Great. And last one here. You delivered positive EBITDA this quarter. As you look to the remainder of fiscal 2026, what operational levers are most likely to drive continued EBITDA expansion? Jeffrey Richart Geygan: Carrie, do you want to take that one? Carrie E. Cass: Sure. We are for the first time in several quarters, have positive EBITDA. That's attributed to our improved pricing, our SG&A discipline and some factory level efficiencies, and we expect all of those things to improve as we move forward. We expect to continue benefiting from our margin discipline and strong franchisee support tools as we go forward. And we're looking to continue to reduce pricing as we move forward so. Sean Mansouri: And just to clarify, reduced pricing or reduced costs? Carrie E. Cass: Reduced cost and also where we can find efficiencies and benefit everyone in the system, reduce some pricing as well. Sean Mansouri: Perfect. Operator, we'll turn it back to you for the live Q&A. Operator: [Operator Instructions] And I'm showing no questions. This concludes today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. I am showing that we do have a follow-up question from Peter Sidoti. Peter Thomas Sidoti: This is Peter Sidoti from Sidoti & Company. Quick question. Could you talk about your capital needs, the need to raise money to fund your expansion at this point, both your operating side and some of your capital improvements? Jeffrey Richart Geygan: Yes. Peter, this is Jeff. That's a discussion that's ongoing with the Board. Obviously, we're contemplating what the path forward looks like and if we need to... Peter Thomas Sidoti: I'm sorry, I'm having a problem hearing you. Jeffrey Richart Geygan: Yes. Peter, it's a conversation we're having with the Board. And presently, we are not planning to raise capital at this particular moment, but subject to further Board review, we'll make those decisions. Peter Thomas Sidoti: Okay. And what would the capital be needed for? When would you raise capital? Jeffrey Richart Geygan: To be determined, presumably working capital. Peter Thomas Sidoti: Okay. In terms of where we stand. And are you committed to keeping the balance sheet clean and not issuing warrants or rather dilutive capital? Jeffrey Richart Geygan: Again, a decision for the board to make, but that would be my preference. Operator: And our next question will be coming from Doug Garber of Westport Alpha. Doug Garber: I wanted to ask you about your growth strategy to bring in new franchisees and how are you developing that muscle? And then also, what are you doing in terms of improving the processes across the board to support your current franchisees so that their stores are more profitable and look like kind of the ones you have in Durango? Jeffrey Richart Geygan: Yes, sure. Good question. Thanks. And let me start with the beginning. As we contemplate expanding new stores, the first place that we look would be to existing franchisees for obvious reasons. There are people that know and love the brand. We have a number of franchisees that meet our criteria that well capitalized, financially sophisticated and entrepreneurial. And of those leases under review right now, those are, by and large, with existing franchisees who we've identified as appropriate franchisees to expand in target end markets that we want to expand in, bearing in mind that we have -- there's a lot of white space across America for us to expand, number one. Number two, in terms of new franchisees to the system, we have a pretty good network of sources that can refer sophisticated potential franchisees to join us, and we're taking advantage of that, too. On the existing franchisee initiatives, which is really, as we've talked about in the past, our dual mandate of driving same-store sales and improving unit level profitability, we made a pretty serious departure from the way we've done business in the past by employing 5 business consultants who are tasked with going to stores on a semiannual basis with on-site visits looking for -- at both the quality and the performance of the store, providing insights into product mix and merchandising. As well as implementing an annual business plan review so that every store has some type of operating plan that we can work with the franchisees to develop and then review on a quarterly basis. These activities are things that hadn't routinely been done in the past. So we feel good about that. Our franchisees have been very receptive to this type of engagement. In addition, with the POS data that we have today, unlike in the past, we're able to drill down and see very, very microscopic analytics on how a store is operating. And it's not so much just looking at a store in isolation, but when we can sit down with the franchisee and say, this is how your store is operating. This is how your peers are operating. Here are margins that you're earning versus margins that others are earning. And as I had indicated in our prepared comments, that we're circling in on what best-in-class looks like. So this becomes the gold standard. And as we talk to an existing franchisee that may be underperforming, it's no longer just our opinion. It's really factually or data and analytics driven, here's what best-in-class looks like and here's how we can help you get there to improve, again, same-store sales and improve profitability. So does that answer your question? Doug Garber: It does. And I just wanted to follow up on that and understand how much the pricing varies now that you have all this data to analyze from the pricing for your products in stores that are much more profitable than others. How wide is that range? Jeffrey Richart Geygan: Yes. It's a great question. And it's fundamental to us being a franchisor as opposed to being a business that owns all of its stores. We can only suggest what our -- where our franchisees set pricing. They have the discretion to put their prices where they want. And if you take an example of a high-traffic tourist area versus an urban setting, the pricing can be different. What we try to do is challenge franchisees to set the price at an optimal level where they're not destroying demand, but they're maximizing profitability or pricing. And I think that's -- it's a new mindset for a lot of our franchisees where we can literally come in and say, across the system, here's the low and here's the high, here's the median price for this particular item. You skew towards the lower side. Why -- you experiment a little bit, push your prices up and see when you start to -- when your demand starts to decline. So -- and it's real time. So we're getting great data. We're able to share with our franchisees. And by and large, our franchisees have been quite receptive to using different tactics than they may have been in the past. Doug Garber: Great. No, that's good that they're receptive. One or 2 more, if I could, on the P&L line items. The franchise and royalty fees were up about $0.5 million year-over-year. Any color as to why that was? Jeffrey Richart Geygan: And I turn that one over to Carrie. Carrie E. Cass: We have different pricing structures in our different agreements. And there have been quite a few more same-store sales in the current period, which generates a higher royalty for us as well as some catch-up with some old things that were hanging out there that we've been able to collect. Doug Garber: Okay. And then I'm trying to understand, you said the sales revenue, you dropped the wholesale customer and that accounted for about $0.5 million of the decline year-over-year or all of the sales revenue decline. Do I understand that right? Carrie E. Cass: Pretty much, yes. Doug Garber: And then on the cost of sales, that was also down over $1 million year-over-year. Help me understand what that was? Was that related to less volume to that wholesale customer? Or what's -- it's a pretty significant. Is that cocoa prices? What happened there? Carrie E. Cass: Partially we -- that customer that we're discussing, we were losing money on that specific transaction. So yes, a good portion of that drop in cost of goods sold did attribute to us cutting that customer. Additionally, we have also improved our efficiencies in the factory and our scrap. Doug Garber: When did that customer come out of the P&L? Carrie E. Cass: Basically at year-end. Doug Garber: Okay. Should we expect more efficiencies from the factory in terms of the cost of sales? Carrie E. Cass: That is our goal. Doug Garber: Okay. And just last one. G&A was down a good amount year-over-year as well about $240,000. Any color there? Carrie E. Cass: Yes. Again, we've gone about looking at all of the things we spend money on and trying to get rid of a lot of the things that we just don't need. Doug Garber: Well, thanks for your time and congrats on turning the quarter on EBITDA positive. Jeffrey Richart Geygan: Thanks, Doug. Appreciate it. Operator: And our next question will be a follow-up from Peter Sidoti of Sidoti & Company, LLC. Peter Thomas Sidoti: Just one more quick question. Any thoughts on the timing of permanent leadership at this point in time? Jeffrey Richart Geygan: Again, Peter, I hate to keep deferring back to the Board, but it's a conversation that the Board and I have had on an ongoing basis. Operator: Thank you. And this concludes today's conference call. You may disconnect your phone lines, and have a great wonderful day. Thank you for your participation.