RAVE Restaurant Group Results

RAVE Restaurant Group, Inc. Reports Second Fiscal Quarter 2018 Financial Results

Total consolidated revenue decreased 38.1% to $4.2 million compared to $6.8 million in the second quarter of fiscal 2017. - Pizza Inn domestic comparable store retail sales increased 2.7% from the same period of the prior year, while total domestic retail sales decreased by 3.3%.

RAVE Restaurant Group

RAVE Restaurant Group, Inc. (NASDAQ:  RAVE) today reported financial results for the second quarter of fiscal 2018 ended December 24, 2017. 

Second Quarter Highlights

  • Total consolidated revenue decreased 38.1% to $4.2 million compared to $6.8 million in the second quarter of fiscal 2017.  
  • Pizza Inn domestic comparable store retail sales increased 2.7% from the same period of the prior year, while total domestic retail sales decreased by 3.3%. 
  • Pie Five comparable store retail sales decreased 13.7% from the same period of the prior year, while total system-wide retail sales decreased by 18.8%. 
  • Company-owned Pie Five average weekly sales increased 10.2% year over year. 
  • Net loss improved by $7.3 million to $0.6 million for the second quarter of fiscal 2018 compared to $7.9 million for the same quarter of the prior year, primarily due to closures of underperforming Company Pie Five units, lower closed store expenses, increased gains from sale of assets, lower impairment expenses, lower lease termination expenses, and reductions to general and administrative expenses. 
  • On a fully diluted basis, the company reported a loss of $0.04 per share for the second quarter of fiscal 2018 compared to a loss of $0.74 per share for the same period of the prior year. 
  • Adjusted EBITDA of ($0.2) million was $0.9 million better than the same quarter of the prior year. 
  • Company-owned Pie Five operating cash flow decreased $0.1 million from the same period of the prior year. 
  • Net reduction of three Pie Five restaurants during the quarter brought the total Pie Five restaurants open at the end of the quarter to 80. 

"By all indications, we have a solid plan in place that is driving improvements to profitability of continuing operations and lowering overhead expenses," said Scott Crane, Chief Executive Officer of Rave Restaurant Group, Inc. "As we simplify our business through the outsourcing of our supply chain and distribution business, as well as reducing our corporate store footprint, we will lessen our overall financial exposure and improve the stability of our business model."

Second Quarter Fiscal 2018 Operating Results

Revenues of $4.2 million and $9.6 million for the second quarter and year to date fiscal 2018 were 38.1% and 32.4% lower, respectively, than the same periods of the prior year. For the three and six month periods ended December 24, 2017, the Company reported a net loss of $0.6 million and $0.9 million, respectively, compared to a loss of $7.9 millionand $9.4 million for the same periods of the prior year. On a fully diluted basis, the loss was $0.04 per share and $0.07per share, respectively, for the second quarter and year to date fiscal 2018, compared to a loss of $0.74 per share and $0.89 per share for the same periods of the prior year. The decreased loss for the three month period ended December 24, 2017 was primarily the result of $5.8 million improvement in loss from continuing operations before taxes from Company-owned restaurants, $0.8 million improvement in gain on sale of assets, and $0.5 million decrease in corporate general and administrative expenses. The decreased loss for the six month period ended December 24, 2017 was primarily the result of $6.4 million improvement in loss from continuing operations before taxes from Company-owned restaurants, $0.9 million improvement in gain on sale of assets, and $0.4 million decrease in corporate general and administrative expenses. The Company continued to provide a full valuation allowance against its deferred tax assets.  Adjusted EBITDA improved $0.9 million and $1.4 million for the three and six month periods ended December 24, 2017to ($0.2) million and $0.5 million, respectively. The improvement in Adjusted EBITDA was driven by improvements to net loss, decreased depreciation and amortization, increased average weekly sales at Company-owned Pie Five locations, and positive comparable sales at Pizza Inn locations. 

During the fiscal quarter ended December 24, 2017, the Company discontinued its Norco distribution division and revised its arrangements with third party suppliers and distributors of food, equipment and supplies. As a result, sale of food, equipment and supplies is no longer recognized as revenue and the cost of such items is no longer included in cost of sales. The Company now recognizes incentive revenues received from third party suppliers and distributors as revenue.

"Our new, simplified approach to supply chain management provides more transparency and efficiency for our franchisees. It has also provided us opportunities to make reductions in general and administrative costs," said Crane.

Pie Five system-wide retail sales decreased 18.8% for the second quarter of fiscal 2018 when compared to the same period in the prior year, primarily driven by a 15.5% decrease in average units open. Comparable store retail sales decreased by 13.7% for the most recent fiscal quarter compared to the same period in the prior year. Year to date, Pie Five system-wide retail sales decreased 18.0% compared to the same period in the prior year, primarily driven by a 10.8% decrease in average units open. Comparable store retail sales decreased by 15.5% during the first six months of fiscal 2018 compared to the same period of the prior year. 

In keeping with health-based consumer trends, Pie Five recently introduced a cauliflower pizza crust to its dough line-up. The new cauliflower crust, along with continued testing of other product innovations, are all part of enhancing the Pie Five guest experience.

"We continue to see an opportunity to take advantage of growth in areas such as delivery, cauliflower pizza crusts, and shareable pizzas, with the goal of increasing frequency among our loyal guest base," said Crane.

Pizza Inn total domestic retail sales decreased 3.3% and 2.1%, respectively, for the three and six month periods ended December 24, 2017, compared to the same periods of the prior year. Pizza Inn domestic comparable store retail sales increased 2.7% and 2.2%, respectively, for the three and six month periods ended December 24, 2017, compared to the same periods of the prior year.  

"We are pleased that Pizza Inn continues to ride a growth trajectory with positive same store sales trends," said Crane. "We recently announced a new concept, P.I.E, developed as a complement to the brand refresh and expansion initiatives at Pizza Inn. Convenience stores are a $575 billion industry with 70% of sales attributed to in-store purchases. This new concept allows Pizza Inn to diversify its footprint and is a great way to reach new customers in a faster setting, while still serving the same iconic, quality pizza our guests have come to expect."

Geared towards convenience stores, but also an airport or entertainment venue option, P.I.E will allow customers to order and pay at a kiosk for grab-and-go, or pick up their food at a designated spot. Pizza Inn has a strong presence in the southeastern part of the country where the convenience store segment has the nation's highest grouping of independent operators.  

Development Review

In the second quarter of fiscal 2018, two new franchised Pie Five restaurants were opened, while five franchised restaurants were closed, bringing the quarter-end total unit count to 80 restaurants. The Company also refranchised 11 Company-owned locations in the DFW market during the quarter. 

"We are diligently pursuing a refranchising strategy at Pie Five," said Crane. "This shift in our model allows us to focus on best-in-class support of our franchise community so that they can, in turn, provide a great guest experience."

During the second fiscal quarter, the number of Pizza Inn domestic units declined to 156, while international units increased to 62.

"We continue to be pleased with new development and remodeling of Pizza Inn units," said Crane. "In addition, our P.I.E concept is attractive to non-traditional operators because it allows them to have the quality of the Pizza Inn platform as an option. Historically, that quality hasn't been available to them at a minimal investment." 

About RAVE Restaurant Group, Inc.

Founded in 1958, Dallas-based RAVE Restaurant Group [NASDAQ: RAVE] owns, operates and franchises approximately 300 Pie Five Pizza Co. and Pizza Inn restaurants domestically and internationally. Pie Five Pizza Co. is a leader in the rapidly growing fast-casual pizza space offering made-to-order pizzas ready in under five minutes. Pizza Inn is an international chain featuring freshly made pizzas, along with salads, pastas, and desserts. The Company's common stock is listed on the Nasdaq Capital Market under the symbol "RAVE". 

 

RAVE RESTAURANT GROUP, INC. 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 

(In thousands, except per share amounts) 

(Unaudited)

Three Months Ended

Six Months Ended

December 24,

December 25,

December 24,

December 25,

2017

2016

2017

2016

REVENUES:

$             4,197

$            6,780

$             9,629

$          14,246

COSTS AND EXPENSES:

Cost of sales

1,055

3,858

3,142

8,305

General and administrative expenses

2,017

2,967

4,111

5,525

Franchise expenses

743

685

1,344

1,263

Pre-opening expenses

(1)

47

114

54

(Gain)/Loss on sale of assets

(166)

656

(165)

699

Impairment of long-lived assets and other lease charges

533

5,057

681

5,226

Bad debt

89

298

213

351

Interest expense

63

2

131

2

Depreciation and amortization expense

288

740

600

1,517

Total costs and expenses

4,621

14,310

10,171

22,942

LOSS FROM CONTINUING OPERATIONS BEFORE TAXES

(424)

(7,530)

(542)

(8,696)

Income tax expense / (benefit)

(27)

5

(14)

10

LOSS FROM CONTINUING OPERATIONS

(397)

(7,535)

(528)

(8,706)

Loss from discontinued operations

(180)

(390)

(405)

(715)

NET LOSS

$               (577)

$           (7,925)

$               (933)

$           (9,421)

LOSS PER SHARE OF COMMON STOCK - BASIC:

Loss from continuing operations

$              (0.03)

$             (0.71)

$              (0.04)

$             (0.82)

Loss from discontinued operations

(0.01)

(0.03)

(0.03)

(0.07)

Net loss

$              (0.04)

$             (0.74)

$              (0.07)

$             (0.89)

LOSS PER SHARE OF COMMON STOCK - DILUTED:

Loss from continuing operations

$              (0.03)

$             (0.71)

$              (0.04)

$             (0.82)

Loss from discontinued operations

$              (0.01)

$             (0.03)

$              (0.03)

$             (0.07)

Net loss

$              (0.04)

$             (0.74)

$              (0.07)

$             (0.89)

Weighted average common shares outstanding - basic

14,344

10,657

12,742

10,575

Weighted average common and potential dilutive common shares outstanding

14,344

10,657

12,742

10,575

See Notes to Unaudited Condensed Consolidated Financial Statements within Form 10-Q.

 

RAVE RESTAURANT GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

December 24,

June 25,

2017 (unaudited)

2017

ASSETS

CURRENT ASSETS

   Cash and Cash Equivalents

$                     1,428

$                        451

   Accounts receivable, less allowance for bad debts accounts of $332 and $249, respectively

1,494

2,761

   Notes receivable

2,060

675

   Inventories

19

79

   Income tax receivable

-

194

   Property held for sale

608

671

   Prepaid expenses and other

448

295

        Total current assets

6,057

5,126

LONG-TERM ASSETS

   Property, plant and equipment, net

1,667

3,808

   Intangible assets definite-lived, net

228

239

   Long-term notes receivable

-

127

   Deposits and other

243

246

        Total assets

$                     8,195

$                     9,546

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES

   Accounts payable - trade

$                     1,428

$                     4,165

   Short-term debt

-

1,000

   Accrued expenses

854

1,265

   Deferred rent

41

101

   Deferred revenues

97

212

Total current liabilities

2,420

6,743

   Convertible notes

1,459

2,749

   Deferred rent, net of current portion

294

655

   Deferred revenues, net of current portion

715

1,425

   Other long-term liabilities

45

53

        Total liabilities

4,933

11,625

SHAREHOLDERS' EQUITY

   Common stock, $.01 par value; authorized 26,000,000 shares; issued 22,015,608 and 17,786,049 shares, respectively; outstanding 14,896,208 and 10,666,649 shares, respectively

220

178

   Additional paid-in capital

33,016

26,784

   Accumulated deficit

(5,338)

(4,405)

   Treasury stock at cost

     Shares in treasury: 7,119,400 

(24,636)

(24,636)

        Total shareholders' equity (deficit)

3,262

(2,079)

$                     8,195

$                     9,546

 See Notes to Unaudited Condensed Consolidated Financial Statements within Form 10-Q.

 

RAVE RESTAURANT GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Six Months Ended

December 24,

December 25,

2017

2016

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

$                (933)

$               (9,421)

Adjustments to reconcile net loss to 

cash used in operating activities:

Depreciation and amortization

581

1,513

Amortization of intangible assets definite-lived

19

26

Amortization of debt issue costs

23

-

Impairment of long-lived assets

681

4,773

Stock compensation expense

19

90

(Gain)/loss on sale/disposal of assets

(166)

699

Provision for bad debt

213

351

Changes in operating assets and liabilities:

Accounts receivable

1,376

100

Inventories

60

(2)

Accounts payable - trade

(3,667)

680

Accrued expenses

(419)

(132)

Deferred rent

(421)

(253)

Deferred revenue

(690)

(246)

Prepaid expenses and other

(150)

182

Cash used in operating activities

(3,474)

(1,640)

CASH FLOWS FROM INVESTING ACTIVITIES:

Proceeds from sale of assets

939

45

Purchase of intangible assets definite-lived

(9)

-

Capital expenditures

(421)

(217)

Cash provided by (used in) investing activities

509

(172)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from sale of stock

4,942

-

Proceeds from stock options

-

806

Net change in other debt

(1,000)

1,000

Cash provided by financing activities 

3,942

1,806

Net increase (decrease) in cash and cash equivalents

977

(6)

Cash and cash equivalents, beginning of period

451

873

Cash and cash equivalents, end of period

$               1,428

$                   867

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Cash paid during the period:

Interest paid

$                  115

$                        -

Taxes paid

$                    48

$                     25

Non-cash activities:

Capital expenditures included in accounts payable

$                  125

$                        -

See Notes to Unaudited Condensed Consolidated Financial Statements within Form 10-Q.

 

RAVE RESTAURANT GROUP, INC.

ADJUSTED EBITDA

(In thousands)

(Unaudited)

Three Months Ended

Six Months Ended

December 24,

December 25,

December 24,

December 25,

2017

2016

2017

2016

 Net loss 

$              (577)

$           (7,925)

$              (933)

$           (9,421)

 Interest expense 

63

2

131

2

 Income taxes 

(27)

5

(14)

10

 Depreciation and amortization 

288

740

600

1,517

 EBITDA 

$              (253)

$           (7,178)

$              (216)

$           (7,892)

 Stock compensation expense 

10

45

19

90

 Pre-opening costs 

(1)

47

114

54

 (Gain)/Loss on sale/disposal of assets 

(166)

656

(165)

699

 Impairment of long-lived assets and other lease charges

533

5,057

681

5,226

 Discontinued operations and closed and non-operating store costs 

(291)

347

72

884

 Adjusted EBITDA 

$              (168)

$           (1,026)

$               505

$              (939)

See Notes to Unaudited Condensed Consolidated Financial Statements within Form 10-Q.



Logos, product and company names mentioned are the property of their respective owners.