RAVE Restaurant Group, Inc. Reports Fourth Quarter and Fiscal Year 2020 Financial Results
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RAVE Restaurant Group, Inc. Reports Fourth Quarter and Fiscal Year 2020 Financial Results

DALLAS, Sept. 30, 2020 // PRNewswire // - RAVE Restaurant Group, Inc. (NASDAQ: RAVE) today reported financial results for the fourth quarter and fiscal year ended June 28, 2020.

Fourth Quarter Highlights:

  • Pizza Inn domestic comparable store retail sales decreased 39% in the fourth quarter of fiscal 2020 compared to the same period of the prior year.
  • Pie Five comparable store retail sales decreased 37.9% in the fourth quarter of fiscal 2020 compared to the same period of the prior year.
  • Total revenue decreased by $1.5 million to $1.6 million for the fourth quarter of fiscal 2020 compared to the same period of the prior year.
  • Income before taxes was $32 thousand for the fourth quarter of fiscal 2020 compared to a loss before taxes of $1.1 million for the same period of the prior year.
  • The Company recorded net income of $31 thousand for the fourth quarter of fiscal 2020 compared to net loss of $0.8 million for the same period of the prior year.
  • On a fully diluted basis, net income increased $0.05 per share to $0.00 per share for the fourth quarter of fiscal 2020 compared to net loss of $0.05 per share for the same period of the prior year.
  • Cash and cash equivalents increased $1.4 million during the fourth quarter of fiscal 2020 to $3.0 million at June 28, 2020.
  • Pizza Inn domestic unit count finished at 151.
  • Pizza Inn international unit count finished at 38.
  • Pie Five domestic unit count finished at 42.

Annual Highlights:

  • Fiscal 2020 contained 52 weeks compared to 53 weeks in fiscal 2019.
  • RAVE total domestic comparable store retail sales decreased 10.5% for the 53 weeks ended June 28, 2020 compared to the 53 weeks ended June 30, 2019.
  • Pizza Inn domestic comparable store retail sales for the 53 weeks ended June 28, 2020 decreased 8.8% compared to the same period of the prior year, while total domestic retail sales decreased 13.7%.
  • Pie Five comparable store retail sales for the 53 weeks ended June 28, 2020 decreased 15.7% compared to the same period of the prior year, while total systemwide retail sales decreased 37.4%.
  • Total consolidated revenue decreased 18.6% in fiscal 2020 to $10.0 million.
  • Net income before tax improved by $0.6 million to a loss of $0.2 million in fiscal 2020 compared to a loss of $0.8 million in fiscal 2019.
  • Net income decreased by $3.5 million to a net loss of $4.2 million for fiscal 2020 compared to net loss of $0.7 million in the prior year.
  • On a fully diluted basis, the Company reported a net loss of $0.28 per share in fiscal 2020 compared to net loss of $0.05 per share in the prior year.
  • Adjusted EBITDA of $0.6 million for fiscal 2020 was a $0.2 million increase from the prior year.
  • Domestic Pizza Inn units decreased by four during the year bringing domestic total units open at the end of the 2020 fiscal year to 151.
  • International Pizza Inn units decreased by ten during the year bringing the total international units open at the end of the 2020 fiscal year to 38.
  • Pie Five units decreased by sixteen during the year bringing total units open at the end of the 2020 fiscal year to 42.

"The COVID-19 pandemic has presented unprecedented challenges to both of our brands but, as our recovery efforts progress, it is encouraging to see our focus on safety, convenience, quality and value resonating with our customers," said Brandon Solano, Chief Executive Officer of Rave Restaurant Group, Inc. "I continue to be inspired by the coordinated response from our franchisees and restaurant support team to drive traffic and incremental sales through new channels and operations."

"At Pizza Inn, we are focusing on safely reopening dining rooms by launching the Right-Way Buffet and relying on third-party home delivery to add new revenue streams," said Solano. "It's our top priority to ensure our guests feel safe inside our dining room and our New Right-Way Buffet is our way of giving them the same buffet experience with enhanced safety measures. Guest feedback has been very positive, with many customers communicating their appreciation for the option of enjoying the same Pizza Inn variety and quality that they have loved for over 60 years. For guests who feel more comfortable enjoying Pizza Inn at home, our Contactless Buffet To-Go is still available for carryout and delivery. In addition, 40% of our system is utilizing third-party home delivery and we anticipate this number to continue to increase."

"A majority of our Pie Five locations are also utilizing third-party delivery and we continue to leverage the Circle of Crust loyalty app as a traffic driver for the brand," said Solano. "In addition, we are also working on exciting new menu enhancements that should be in test later this year and focusing efforts on operational efficiency and positive guest experience."

Clint Fendley, Vice President of Finance at RAVE, commented, "Income before taxes of $32 thousand for the fourth quarter of fiscal 2020 reflects our aggressive efforts to control costs in the face of the reduced revenue caused by the COVID-19 pandemic. For all of fiscal 2020, the $0.2 million loss before taxes was a $0.6 million improvement over fiscal 2019 largely as the result of reduced impairment costs. Net loss of $4.2 million for the full 2020 fiscal year was primarily the result of income tax expense of $4.1 million attributable to a valuation allowance on our deferred tax assets taken in the third quarter. We believe that the budgetary measures we have taken during the last several months and our financial performance during this unprecedented pandemic bode well for the future of the Company."

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 costs, gain/loss sale of assets, costs related to impairment, 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.

About RAVE Restaurant Group, Inc.

Founded in 1958, Dallas-based RAVE Restaurant Group [NASDAQ: RAVE] owns, operates, franchises and/or licenses 231 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. 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 the website.

RAVE RESTAURANT GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

                       
                     
                     
       

Three Months Ended

 

Fiscal Year Ended

       

June 28,

 

June 30,

 

June 28,

 

June 30,

       

2020

 

2019

 

2020

 

2019

                     
                     

REVENUES:

$             1,617

 

$            3,063

 

$           10,028

 

$          12,319

                     

COSTS AND EXPENSES:

             
 

Cost of sales

86

 

405

 

439

 

1,120

 

General and administrative expenses

920

 

651

 

5,503

 

5,274

 

Franchise expenses

487

 

937

 

3,051

 

3,778

 

Pre-opening expenses

-

 

-

 

-

 

-

 

Gain on sale of assets

(31)

 

(301)

 

(24)

 

(551)

 

Impairment of long-lived assets and other lease charges

44

 

1,275

 

880

 

1,664

 

Bad debt

14

 

1,054

 

53

 

1,265

 

Interest expense

20

 

27

 

95

 

104

 

Depreciation and amortization expense

45

 

81

 

186

 

466

   

Total costs and expenses

1,585

 

4,129

 

10,183

 

13,120

                     

INCOME (LOSS) BEFORE TAXES

32

 

(1,066)

 

(155)

 

(801)

 

Income tax expense (benefit)

1

 

(239)

 

4,078

 

(51)

NET INCOME (LOSS)

31

 

(827)

 

(4,233)

 

(750)

                     

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

$               0.00

 

$             (0.05)

 

$              (0.28)

 

$             (0.05)

                     

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

$               0.00

 

$             (0.05)

 

$              (0.28)

 

$             (0.05)

                     
                     

Weighted average common shares outstanding - basic

15,194

 

15,072

 

15,144

 

15,070

                     

Weighted average common and

             
 

potential dilutive common shares outstanding

15,992

 

15,072

 

15,144

 

15,070

                     

See accompanying Notes to Consolidated Financial Statements.

 

RAVE RESTAURANT GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

 
   

June 28,

 

June 30,

   

2020

 

2019

         

ASSETS

       
         

CURRENT ASSETS

       

   Cash and cash equivalents

 

$       2,969

 

$       2,264

   Restricted Cash

 

234

 

233

   Accounts receivable, less allowance for bad debts

       

     of $269 and $209, respectively

 

965

 

1,191

   Notes receivable, less allowance for bad debt of $0 and $916, respectively

 

546

 

389

   Inventories

 

-

 

7

   Income tax receivable

 

-

 

4

   Property held for sale

 

-

 

231

   Deferred contract charges

 

44

 

38

   Prepaid expenses and other

 

174

 

346

        Total current assets

 

4,932

 

4,703

         

LONG-TERM ASSETS

       

   Property, plant and equipment, net

 

366

 

500

   Operating lease right of use asset, net

 

3,567

 

-

   Intangible assets definite-lived, net

 

155

 

196

   Long-term notes receivable

 

449

 

735

   Deferred tax asset, net

 

-

 

4,060

   Long-term deferred contract charges

 

231

 

232

   Deposits and other

 

5

 

-

     Total assets

 

$       9,705

 

$     10,426

         

LIABILITIES AND SHAREHOLDERS' EQUITY

       

CURRENT LIABILITIES

       

   Accounts payable - trade

 

$          446

 

$          400

   Accounts payable - lease termination impairments

 

407

 

832

   Accrued expenses

 

775

 

834

   Deferred rent

 

0

 

37

   Operating lease liability, current

 

632

 

0

   Deferred revenues

 

254

 

275

     Total current liabilities

 

2,514

 

2,378

         

LONG-TERM LIABILITIES

       

   Convertible notes

 

1,549

 

1,584

   PPP Loan

 

657

 

0

   Deferred rent, net of current portion

 

0

 

397

   Operating lease liability, net of current portion

 

3,471

 

0

   Deferred revenues, net of current portion

 

960

 

1,561

   Other long-term liabilities

 

51

 

72

     Total liabilities

 

9,202

 

5,992

         

COMMITMENTS AND CONTINGENCIES (SEE NOTE J)

       
         

SHAREHOLDERS' EQUITY

       

   Common stock, $.01 par value; authorized 26,000,000

       

     shares; issued 22,550,376 and 22,208,141 shares, respectively;

       

     outstanding 15,465,222 and 15,090,837 shares, respectively

 

225

 

222

   Additional paid-in capital

 

33,531

 

33,327

   Accumulated deficit

 

-8,716

 

-4,483

   Treasury stock at cost

       

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

 

-24,537

 

-24,632

        Total shareholders' equity

 

503

 

4,434

         
         

        Total liabilities and shareholders' equity

 

$       9,705

 

$     10,426

         

See accompanying Notes to Consolidated Financial Statements.

 

 

RAVE RESTAURANT GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

                 
           

Fiscal Year Ended

           

June 28,

 

June 30,

           

2020

 

2019

                 

CASH FLOWS FROM OPERATING ACTIVITIES:

     
 

Net loss

 

$             (4,233)

 

$                (750)

 

Adjustments to reconcile net loss to cash

     
   

   provided by (used in) operating activities:

     
   

Impairment of long-lived assets and other lease charges

880

 

1,664

   

Stock compensation expense

(104)

 

36

   

Depreciation and amortization

145

 

423

   

Amortization of operating lease asset

471

 

-

   

Amortization of intangible assets definite-lived

41

 

43

   

Amortization of debt issue costs

29

 

22

   

Gain on the sale of assets

(24)

 

(551)

   

Provision for bad debt (accounts receivable)

53

 

349

   

Provision for bad debt (notes receivable)

-

 

916

   

Deferred income tax asset (net)

4,060

 

(198)

 

Changes in operating assets and liabilities:

     
   

Accounts receivable

132

 

226

   

Operating notes receivable

104

 

50

   

Inventories

7

 

(1)

   

Prepaid expenses, deposits and other, net

167

 

(446)

   

Restricted Cash

(1)

 

-

   

Deferred revenue

(587)

 

(409)

   

Accounts payable - trade

46

 

(21)

   

Accounts payable - lease termination impairments

(985)

 

(418)

   

Operating lease liability

(494)

 

-

   

Accrued expenses, deferred rent and other

(67)

 

(276)

   

   Cash (used in) provided by operating activities

(360)

 

659

                 
                 

CASH FLOWS FROM INVESTING ACTIVITIES:

     
 

Notes receivable from fixed asset sales

123

 

201

 

Proceeds from sale of assets

-

 

11

 

Capital Expenditures

(56)

 

(81)

   

Cash provided by investing activities

67

 

131

                 
                 

CASH FLOWS FROM FINANCING ACTIVITIES:

     
 

Proceeds from sale of stock

357

 

88

 

Equity issuance costs

(15)

 

-

 

Proceeds from PPP Loan

657

 

-

   

Cash provided by financing activities

999

 

88

                 

Net increase in cash and cash equivalents

706

 

878

Cash, cash equivalents and restricted cash beginning of period

2,497

 

1,619

Cash, cash equivalents and restricted cash end of period

$               3,203

 

$               2,497

                 
                 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

     
                 

CASH PAID FOR:

     
   

Interest

$                    66

 

$                    72

   

Income taxes

$                    18

 

$                  168

                 
 

Non-cash activities:

     
   

Conversion of notes to common shares

$                    64

 

$                      4

   

Notes receivable from sales of fixed assets

$                      -

 

$                  654

   

Operating lease right of use assets at adoption

$               4,150

 

$                       -

   

Operating lease liability at adoption

     

$               4,636

 

$                       -

                 

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

 

               

RAVE RESTAURANT GROUP, INC.

ADJUSTED EBITDA

(In thousands)

               
               
 

Three Months Ended

 

Fiscal Year Ended

 

June 28,

 

June 30,

 

June 28,

 

June 30,

 

2020

 

2019

 

2020

 

2019

 Net income 

$           31

 

$       (827)

 

$    (4,233)

 

$       (750)

 Interest expense 

20

 

27

 

95

 

104

 Income taxes 

1

 

(239)

 

4,078

 

(51)

 Depreciation and amortization 

45

 

81

 

186

 

466

 EBITDA 

$           97

 

$       (958)

 

$         126

 

$       (231)

 Stock compensation expense (income) 

-

 

(374)

 

(104)

 

36

 Severance 

-

 

-

 

157

 

-

 Pre-opening costs 

-

 

-

 

-

 

-

 Loss (gain) on sale/disposal of assets 

(31)

 

(301)

 

(24)

 

(551)

 Impairment of long-lived assets and other lease charges

44

 

1,275

 

880

 

1,664

 Franchisee default and closed store revenue 

(19)

 

(63)

 

(606)

 

(777)

 Closed and non-operating store costs 

87

 

87

 

137

 

238

 Adjusted EBITDA 

$         178

 

$       (334)

 

$         566

 

$         379

SOURCE RAVE Restaurant Group, Inc.

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