DALLAS - Feb. 6, 2018 // PRNewswire // - RAVE Restaurant Group, Inc. (NASDAQ: RAVE) today reported financial results for the second quarter of fiscal 2018 ended December 24, 2017.
Second Quarter Highlights:
"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 million and $9.4 million for the same periods of the prior year. On a fully diluted basis, the loss was $0.04 per share and $0.07 per 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, 2017 to ($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."
A conference call and audio webcast have been scheduled to discuss these results. Details of the conference call are as follows:
Date:
Wednesday, February 7, 2018
Time:
5:00 p.m. Central time
Dial-In #:
1-844-492-3725 U.S. & Canada
1-412-317-5108 International
The conference call will be webcast at raverg.com. A web-based archive of the conference call will also be available at the above website.
Non-GAAP Financial Measures
The Company uses certain non-GAAP financial measures in evaluating operating performance. EBITDA, Adjusted EBITDA and restaurant operating cash flow are non-GAAP financial measures that the Company believes are useful to investors in understanding its operating performance. However, these non-GAAP financial measures should not be viewed as an alternative or substitute for its financial statements prepared in accordance with generally accepted accounting principles.
RAVE Restaurant Group, Inc. considers EBITDA and Adjusted EBITDA to be important supplemental measures of operating performance that are commonly used by securities analysts, investors and other parties interested in our industry. The Company believes that EBITDA is helpful to investors in evaluating its results of operations without the impact of expenses affected by financing methods, accounting methods and the tax environment. The Company believes that Adjusted EBITDA provides additional useful information to investors by excluding non-operational or non-recurring expenses to provide a measure of operating performance that is more comparable from period to period. The Company believes that restaurant operating cash flow is a useful metric to investors in evaluating the ongoing operating performance of Company-owned Pie Five and Pizza Inn restaurants and comparing such store operating performance from period to period. Management also uses these non-GAAP financial measures for evaluating operating performance, assessing the effectiveness of business strategies, projecting future capital needs, budgeting and other planning purposes
"EBITDA" represents earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA represents earnings before interest, taxes, depreciation and amortization, stock compensation expense, pre-opening expense, gain/loss on sale of assets, costs related to impairment, other lease charges, non-operating store costs and discontinued operations. "Restaurant operating cash flow" represents the pre-tax income earned by Company-owned restaurants before (1) allocated marketing and advertising expenses, (2) depreciation and amortization, (3) pre-opening expenses, (4) operations management and extraordinary expenses, (5) impairment and other lease charges, and (6) non-operating store costs. A reconciliation of these non-GAAP financial measures to net income is included with the accompanying financial statements.
Note Regarding Forward Looking Statements
Certain statements in this press release, other than historical information, may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and are intended to be covered by the safe harbors created thereby. These forward-looking statements are based on current expectations that involve numerous risks, uncertainties and assumptions. Assumptions relating to these forward-looking statements involve judgments with respect to, among other things, future economic, competitive and market conditions, regulatory framework and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of RAVE Restaurant Group, Inc. Although the assumptions underlying these forward-looking statements are believed to be reasonable, any of the assumptions could be inaccurate and, therefore, there can be no assurance that any forward-looking statements will prove to be accurate. In light of the significant uncertainties inherent in these forward-looking statements, the inclusion of such information should not be regarded as a representation that the objectives and plans of RAVE Restaurant Group, Inc. will be achieved.
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". For more information, please visit www.raverg.com.
Investor Relations
RAVE Restaurant Group, Inc.
469-384-5000
See Notes to Unaudited Condensed Consolidated Financial Statements within Form 10-Q.
SOURCE RAVE Restaurant Group, Inc.
Founded in 1958, Dallas-based RAVE Restaurant Group owns, operates and franchises Pie Five Pizza Co. and Pizza Inn restaurants domestically and internationally.