DALLAS - Feb. 6, 2019 // PRNewswire // - RAVE Restaurant Group, Inc. (NASDAQ: RAVE) today reported financial results for the second quarter of fiscal 2019 ended December 23, 2018.
Second Quarter Highlights:
"We're proud to deliver our third consecutive quarter of growth in comparable store sales and profitability," said Scott Crane, Chief Executive Officer for RAVE Restaurant Group, Inc. "Our second quarter results demonstrate that our strategic plan is firmly on track. With the recent promotions of Bob Bafundo to President and Andrea Allen to Chief Accounting and Administrative Officer at Rave, we feel we have a talented team in place to build success. Bob has been instrumental in shoring up our franchise base at Pizza Inn and has already made great strides with Pie Five franchisees. Investments in new menu offerings, updated technologies, and operational processes give us confidence in our ability to continue to deliver results for our consumers, franchisees, and shareholders. Our teams continue to focus on sales growth for all of our brands and we are adding franchise development resources to continue expansion of Pizza Inn, Pie Five, and our newest concept, PIE."
Second Quarter and Year to Date Fiscal 2019 Operating Results
Pizza Inn comparable store and total domestic retail sales increased by 2.7% and 1.8%, respectively, during the second quarter of fiscal 2019 compared to the same period of the prior year. Year to date, Pizza Inn comparable store and total domestic retail sales increased by 2.5% and 1.1%, respectively, compared to the same period of the prior year.
"Pizza Inn had its eighth consecutive quarter of growth in comparable store retail sales," said Bob Bafundo, President of RAVE Restaurant Group, Inc. "This momentum continues to be driven by the key initiatives in our strategy including all-day buffet, online ordering, Rewards program, and recently remodeled franchise locations. All day buffet, now more than 14 months beyond rollout, continues to drive transactions, especially in off-peak periods such as afternoons and late evenings. We are in our third consecutive year of double digit growth in online ordering sales and recent investments in new technology should continue to build on this trend. Pizza Inn's Rewards program continues to build membership while improving frequency and average check. In addition, many of our legacy franchisees are investing in the future of the brand by remodeling their restaurants. Since releasing our new design and décor packages last year, we've completed five remodels averaging 19% sales growth year over year and have seven more in the pipeline."
The Company continued its rollout of Pizza Inn Express, or PIE, that debuted in 2018 with two additional units in the second quarter of fiscal 2019 bringing the unit count to seven at the end of the quarter.
"As the country learns more about PIE, our pipeline of potential multi-unit licensees is growing," said Bafundo. "PIE is opening us up to opportunities to design food service solutions that will work for licensees in their unique, non-traditional settings including travel centers, convenience stores, airports, and universities. We see endless possibilities and applications for the PIE model. In fact, we've already been approached by retail prospects interested in adding PIE as an enhancement to their existing menus. We're proud of the progress to date, but we're still in the early stages of expanding the brand."
Pie Five comparable store and system-wide retail sales decreased by 3.6% and 11.5%, respectively, for the second quarter of fiscal 2019 compared to the same period of the prior year. Year to date, Pie Five comparable store and system-wide retail sales decreased by 2.7% and 8.8%, respectively, compared to the same period of the prior year.
"With consumer research showing changing consumer preferences, Pie Five is shifting towards a business model focused on delivery, online ordering, carry-out and drive thru initiatives," said Bafundo. "Our menu mix data validates that this strategy is working and led us to create the 'Goldilocks' prototype that delivers a more efficient model that highlights off-premise dining options. As expansion continues for this new model and we build on improved unit economics, the Pie Five system will only get stronger."
Consolidated revenues of $3.2 million and $6.2 million for the second quarter and year to date fiscal 2019 were 23.9% and 35.8% lower, respectively, than the same periods of the prior year. The decrease in total revenues was primarily driven by the reduction in the number of Company-owned restaurants partially offset by changes in revenue recognition as a result of adoption of ASU 2014-09 and Topic 606. Additional detail on the adoption and fiscal 2019 impact of the new revenue recognition standard can be found in the Company's Form 10-Q for the quarterly period ended December 23, 2018 filed with the SEC.
For the three and six month periods ended December 23, 2018, the Company reported net income of $0.2 million and $0.3 million, respectively, compared to a loss of $0.6 million and $0.9 million for the same periods of the prior year. On a fully diluted basis, net income was $0.02 per share for both the second quarter and year to date fiscal 2019, compared to a net loss of $0.04 per share and $0.07 per share for the same periods of the prior year. The increase for both periods was primarily due to improvements in the Company-owned restaurants segment and reduced general and administrative expenses.
"Our second quarter and year to date results demonstrate the capabilities of our strengthened corporate structure and the strides that we've made over the past two years," said Crane. "Efforts to consolidate operations, including closing underperforming restaurants and upgrading technologies, have made our performance less volatile and more predictable. We've shored up the balance sheet, improved our cash position, and are generating positive cash flows from operations."
Development Review
During the second quarter of fiscal 2019, the Pizza Inn domestic unit count increased by two to 155 units, including 7 PIE units, while international units decreased by three to 48 units.
"Due to strong average unit volumes and legacy franchisee development, we are on track to deliver budgeted openings for Pizza Inn restaurants," said Bafundo. "We will be announcing new commitments later this quarter and also additional plans for remodeling existing locations."
In the second quarter of fiscal 2019, Pie Five opened two new domestic units. Eight Pie Five domestic units closed during the quarter, bringing the domestic unit count to 65 restaurants at the end of the quarter.
"At Pie Five, we're addressing restaurant-level challenges and stabilizing the system for future growth," said Bafundo. "We are confident that Pie Five is starting to gain positive traction with these initiatives. Although we anticipate additional consolidation from first generation restaurants, we continue to have strong interest in the 'Goldilocks' model including several development opportunities in the pipeline."
Conference Call
A conference call and audio webcast have been scheduled to discuss these results. Details of the conference call are as follows:
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's financial statements are prepared in accordance with United States generally accepted accounting principles ("GAAP"). However, the Company also presents and discusses certain non-GAAP financial measures that it believes are useful to investors as measures of operating performance. Management may also use such non-GAAP financial measures in evaluating the effectiveness of business strategies and for planning and budgeting purposes. 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.
The Company 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. 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 sale of assets, costs related to impairment, discontinued operations and closed and 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, franchises and/or licenses approximately 268 Pie Five Pizza Co. and Pizza Inn restaurants and Pizza Inn Express kiosks domestically and internationally. Pizza Inn is an international chain featuring freshly made pizzas, along with salads, pastas, and desserts. 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 Express, or PIE, is developing unique opportunities to provide freshly made pizza from non-traditional outlets. 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
Renmark Financial Communications Inc.
Bettina Filippone: bfilippone@renmarkfinancial.com
Tel: (416) 644-2020
www.renmarkfinancial.com
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.