RAVE Restaurant Group, Inc. Reports Third Quarter 2020 Financial Results
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RAVE Restaurant Group, Inc. Reports Third Quarter 2020 Financial Results

DALLAS, June 29, 2020 // PRNewswire // - RAVE Restaurant Group, Inc. (NASDAQ: RAVE) today reported financial results for the third quarter of fiscal 2020 ended March 29, 2020.

Third Quarter Highlights:

  • Pizza Inn domestic comparable store retail sales decreased 7.8% in the third quarter of fiscal 2020 compared to the same period of the prior year.
  • Pie Five comparable store retail sales decreased 21.4% in the third quarter of fiscal 2020 compared to the same period of the prior year.
  • Total revenue decreased by $0.4 million to $2.7 million for the third quarter of fiscal 2020 compared to the same period of the prior year.
  • Loss before taxes was $0.5 million for the third quarter of fiscal 2020 compared to a $0.3 million loss for the same period of the prior year.
  • The Company recorded net loss of $4.5 million for the third quarter of fiscal 2020 compared to net loss of $0.3 million for the same period of the prior year primarily due to a $4.3 million increase in the reserve against net deferred tax assets;
  • On a fully diluted basis, net loss increased $0.28 per share to $0.30 per share for the third quarter of fiscal 2020 compared to $0.02 per share for the same period of the prior year.
  • Adjusted EBITDA for the third quarter of fiscal 2020 decreased $0.2 million from the same period of the prior year.
  • Cash and cash equivalents decreased $0.4 million during the third quarter of fiscal 2020 to $1.5 million at March 29, 2020.
  • Pizza Inn domestic unit count finished at 152.
  • Pizza Inn international unit count finished at 37.
  • Pie Five domestic unit count finished at 43.

"During this unprecedented time for the restaurant industry, I'm extremely proud of how our franchisees and team members have responded," said Brandon Solano, Chief Executive Officer of Rave Restaurant Group, Inc. "I've been inspired by our system's resilience and their tireless efforts to ensure that our restaurants remain a safe place to work and dine during the Coronavirus outbreak. Additionally, we have taken extensive measures to protect Rave's financial stability. We looked at all areas to reduce expenses, including furloughing two-thirds of our support staff and an across-the-board 20% pay reduction for all other employees and executive leadership late in the third quarter. I am grateful for our team's sacrifices and the continued support of our guests and communities."

The Company's basic net loss increased $0.28 per share to $0.30 per share for the three months ended March 29, 2020, compared to basic net loss of $0.02 per share for the same period of the prior year. The Company had net loss of $4.5 million for the third quarter of fiscal 2020 and compared to net loss of $0.3 million for the same period of the prior year. Revenues were $2.7 million for the three months ended March 29, 2020 compared to $3.1 million in the comparable period in the prior fiscal year. The decline in revenue was primarily due to decreases in restaurant sales, franchise royalties and franchise license fees, partially offset by an increase in advertising funds.

EBITDA of -$0.4 million for the third quarter of fiscal 2020 was a $0.3 million decrease from the same period of the prior year. Adjusted EBITDA of $0.0 million for the third quarter of fiscal 2020 was a $0.2 million decrease from the same period of the prior year.

Third Quarter and Year to Date Fiscal 2020 Operating Results

Pizza Inn domestic comparable store retail sales decreased by 7.8% during the third quarter of fiscal 2020 compared to the same period of the prior year driven by a significant decline in sales during March related to COVID-19. Year to date, Pizza Inn domestic comparable store retail sales decreased by 1.2% compared to the same period of the prior year.

"As our buffet business was particularly challenged, we took prompt action to maximize value to guests and reduce the impact of dining room closures," said Solano. "Pizza Inn launched Contactless Buffet To-Go for carryout and delivery to provide guests a customized buffet option in the comfort and safety of their own homes. We also recognized the need for off-premise solutions and quickly expanded our online footprint along with negotiating favorable terms with third-party delivery services. Last month, we introduced the 'Right Way Buffet™' that allows our buffet locations to open their dining rooms while practicing enhanced health and safety measures."

Pie Five domestic comparable store retail sales decreased by 21.4% during the third quarter of fiscal 2020 compared to the same period of the prior year primarily driven by COVID-19. Year to date, Pie Five domestic comparable store sales decreased by 14.4% compared to the same period of the prior year.

"At Pie Five, we are continuing to work with franchisees to mitigate the effects of the pandemic," said Solano. "Although sales and traffic continue to reflect the impact of this crisis, we believe the investments we made in building a strong loyalty program, third-party delivery partnerships and digital capabilities have positioned us to stay connected to our consumers. Our everyday value offerings have helped to ensure that all of our guests have access to affordable dining options throughout this crisis. I'm also proud of our efforts to serve essential workers that have been bravely serving us in communities across the country."

Consolidated revenues of $2.7 million and $8.4 million for the third quarter and year to date fiscal 2020 were 11.9% and 9.1% lower, respectively, than the same periods of the prior year.

Development Review

During the third quarter of fiscal 2020, Pizza Inn opened three domestic units and closed four units to finish the quarter at 152 domestic units comprised of 83 Buffet Units, 56 Delco/Express Units and 13 PIE Units. As of today, we have 79 domestic Buffet Units, 53 Delco/Express Units and 12 PIE Units open for business with eight temporary closures.

In the third quarter of fiscal 2020, Pie Five opened zero new domestic units and closed ten domestic units, bringing the domestic unit count to 43 restaurants at the end of the quarter. As of today, we have 32 Pie Five restaurants open for business with six temporary closures.

Conference Call

A conference call and audio webcast have been scheduled to discuss these results. Details of the conference call are as follows:

  • Date: Monday, June 29, 2020
  • Time: 3:30 p.m. Central Standard 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.

About RAVE Restaurant Group, Inc.

Founded in 1958, Dallas-based RAVE Restaurant Group [NASDAQ: RAVE] owns, operates and franchises more than 230 Pie Five Pizza, Pizza Inn and PIE restaurants domestically and internationally. Pie Five Pizza is a leader in the 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. PIE is a kiosk concept that offers a fast, convenient way to serve customers the same iconic, quality pizza they have come to expect from Pizza Inn. The Company's common stock is listed on the Nasdaq Capital Market under the symbol "RAVE".

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, severance, gain/loss on sale of assets, costs related to impairment and other lease charges, discontinued operations, franchisee default and closed store revenue/expense, and closed and non-operating store costs.

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.

RAVE RESTAURANT GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

                           
                           
             

Three Months Ended

 

Nine Months Ended

             

March 29,

 

March 24,

 

March 29,

 

March 24,

             

2020

 

2019

 

2020

 

2019

                           
                           

REVENUES:

     

$     2,705

 

$     3,070

 

$     8,411

 

$     9,256

                           

COSTS AND EXPENSES:

                   
 

Cost of sales

     

104

 

382

 

353

 

715

 

General and administrative expenses

     

1,655

 

1,569

 

4,583

 

4,623

 

Franchise expenses

     

860

 

888

 

2,564

 

2,841

 

Loss (gain) on sale of assets

     

18

 

104

 

7

 

(250)

 

Impairment of long-lived assets and other lease charges

     

495

 

219

 

836

 

389

 

Bad debt

     

11

 

16

 

39

 

211

 

Interest expense

     

24

 

26

 

75

 

77

 

Depreciation and amortization expense

     

45

 

120

 

141

 

385

 

 

     Total costs and expenses

     

3,212

 

3,324

 

8,598

 

8,991

                           

INCOME (LOSS) BEFORE TAXES

     

(507)

 

(254)

 

(187)

 

265

 

Income tax expense

     

4,008

 

9

 

4,077

 

188

NET INCOME (LOSS)

     

(4,515)

 

(263)

 

(4,264)

 

77

                           

INCOME (LOSS) PER SHARE OF COMMON STOCK - BASIC:

 

$     (0.30)

 

$     (0.02)

 

$     (0.28)

 

$       0.01

                           

INCOME (LOSS) PER SHARE OF COMMON STOCK - DILUTED:

 

$     (0.30)

 

$     (0.02)

 

$     (0.28)

 

$       0.01

                           

Weighted average common shares outstanding - basic

     

15,133

 

15,071

 

15,123

 

15,069

                           

Weighted average common and potential dilutive common shares outstanding

                   
     

15,133

 

15,071

 

15,123

 

15,902

                           

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

RAVE RESTAURANT GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

(Unaudited)

         
   

March 29,

 

June 30,

   

2020

 

2019

         

ASSETS

       
         

CURRENT ASSETS

       

   Cash and cash equivalents

 

$      1,535

 

$      2,264

   Accounts receivable, less allowance for bad debts of $254 and $209, respectively

       
 

1,214

 

1,191

   Notes receivable, less allowance for bad debt of $916 and $916, respectively

 

802

 

389

   Inventories

 

-

 

7

   Income tax receivable

 

4

 

4

   Property held for sale

 

-

 

231

   Deferred contract charges

 

44

 

38

   Prepaid expenses and other

 

413

 

346

        Total current assets

 

4,012

 

4,470

         

LONG-TERM ASSETS

       

   Property, plant and equipment, net

 

399

 

500

   Operating lease right of use asset, net

 

3,712

 

-

   Intangible assets definite-lived, net

 

164

 

196

   Long-term notes receivable

 

200

 

735

   Deferred tax asset, net

 

-

 

4,060

   Long-term deferred contract charges

 

241

 

232

   Deposits and other

 

240

 

233

     Total assets

 

$      8,968

 

$    10,426

         

LIABILITIES AND SHAREHOLDERS' EQUITY

       

CURRENT LIABILITIES

       

   Accounts payable - trade

 

$         299

 

$         400

   Accounts payable - lease termination impairments

 

376

 

832

   Accrued expenses

 

1,154

 

834

   Deferred rent

 

-

 

37

   Operating lease liability, current

 

620

 

-

   Deferred revenues

 

154

 

275

     Total current liabilities

 

2,603

 

2,378

         

LONG-TERM LIABILITIES

       

   Convertible notes

 

1,542

 

1,584

   Deferred rent, net of current portion

 

-

 

397

   Operating lease liability, net of current portion

 

3,635

 

-

   Deferred revenues, net of current portion

 

996

 

1,561

   Other long-term liabilities

 

51

 

72

     Total liabilities

 

8,827

 

5,992

         

COMMITMENTS AND CONTINGENCIES (SEE NOTE 5)

       
         

SHAREHOLDERS' EQUITY

       

   Common stock, $.01 par value; authorized 26,000,000 shares; issued 22,231,014 and 22,208,141 shares, respectively; outstanding 15,145,860 and 15,090,837 shares, respectively

       
       
 

222

 

222

   Additional paid-in capital

 

33,203

 

33,327

   Accumulated deficit

 

(8,747)

 

(4,483)

   Treasury stock at cost

       

     Shares in treasury: 7,085,154 and 7,117,304, respectively

 

(24,537)

 

(24,632)

        Total shareholders' equity

 

141

 

4,434

         
         

        Total liabilities and shareholders' equity

 

$      8,968

 

$    10,426

         

See accompanying Notes to Unaudited Condensed Consolidated Financial Statement.

RAVE RESTAURANT GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

           

Nine Months Ended

           

March 29,

 

March 24,

           

2020

 

2019

                 

CASH FLOWS FROM OPERATING ACTIVITIES:

     

 

     Net income (loss)

$             (4,264)

 

$                    77

     Adjustments to reconcile net income to cash provided by (used in) operating activities:

     

 

          Impairment of fixed assets and other assets

836

 

389

 

          Stock compensation expense

(104)

 

410

 

          Depreciation and amortization

109

 

353

 

          Amortization of operating lease asset

(396)

 

-

 

          Amortization of intangible assets definite-lived

32

 

32

 

          Amortization of debt issue costs

22

 

19

 

          Gain on the sale of assets

7

 

(250)

 

          Provision for bad debt

39

 

25

 

          Provision for bad debt (notes receivable)

-

 

186

 

          Deferred income tax

4,060

 

151

 

     Changes in operating assets and liabilities:

     

 

          Accounts receivable

(62)

 

202

 

          Operating notes receivable

14

 

-

 

          Inventories

7

 

(10)

 

          Prepaid expenses, deposits and other, net

(74)

 

(201)

 

          Deferred revenue

(661)

 

(758)

 

          Accounts payable - trade

(101)

 

(19)

 

          Accounts payable - lease termination impairments

(972)

 

(64)

 

          Operating lease liability

380

 

-

 

          Accrued expenses, deferred rent and other

325

 

(121)

 

               Cash (used in) provided by operating activities

(803)

 

421

                 
                 

CASH FLOWS FROM INVESTING ACTIVITIES:

     

 

     Payments received on notes receivable from fixed asset sales

117

 

-

 

     Proceeds from sale of assets

-

 

169

 

     Purchase of property, plant and equipment

(53)

 

(76)

 

          Cash provided by investing activities

64

 

93

                 
                 

CASH FLOWS FROM FINANCING ACTIVITIES:

     

 

     Proceeds from sale of stock

14

 

36

 

     Equity issuance costs

(4)

 

(4)

 

          Cash provided by financing activities

10

 

32

                 

Net (decrease)/increase in cash and cash equivalents

(729)

 

546

Cash and cash equivalents, beginning of period

2,264

 

1,386

Cash and cash equivalents, end of period

$               1,535

 

$               1,932

                 
                 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

     
                 

CASH PAID FOR:

     

 

          Interest

$                    66

 

$                    71

 

          Income taxes

$                    18

 

$                  145

                 

 

Non-cash activities:

     

 

          Conversion of notes to common shares

$                    64

 

$                       -

                 

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

RAVE RESTAURANT GROUP, INC.

ADJUSTED EBITDA

(In thousands)

             
             
 

Three Months Ended

 

Nine Months Ended

 

March 29,

March 24,

 

March 29,

 

March 24,

 

2020

2019

 

2020

 

2019

 Net income 

$   (4,515)

$      (263)

 

$   (4,264)

 

$          77

 Interest expense 

24

26

 

75

 

77

 Income taxes 

4,008

9

 

4,077

 

188

 Depreciation and amortization 

45

120

 

141

 

385

 EBITDA 

$      (438)

$      (108)

 

$          29

 

$        727

 Stock compensation expense (income) 

(19)

129

 

(104)

 

410

 Severance 

38

-

 

157

 

-

 Loss (gain) on sale/disposal of assets 

18

104

 

7

 

(250)

 Impairment of long-lived assets and other lease charges

495

219

 

836

 

389

 Franchisee default and closed store revenue 

(133)

(248)

 

(587)

 

(714)

 Closed and non-operating store costs 

45

70

 

50

 

151

 Adjusted EBITDA 

$            6

$        166

 

$        388

 

$        713

             


SOURCE RAVE Restaurant Group, Inc.

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