RAVE Restaurant Group, Inc. Reports Third Quarter Results
DALLAS, TX / ACCESSWIRE / May 4, 2023 / RAVE Restaurant Group, Inc. (NASDAQ:RAVE) today reported financial results for the third quarter of fiscal 2023 ended March 26, 2023.
Third Quarter Highlights:
- Total revenue increased by
$0.4 million to$3.0 million for the third quarter of fiscal 2023 compared to the same period of the prior year. - Adjusted EBITDA remained stable at
$0.6 million for the third quarters of both fiscal 2023 and fiscal 2022. - Pizza Inn domestic comparable store retail sales increased
15.6% in the third quarter of fiscal 2023 compared to the same period of the prior year. - Pie Five domestic comparable store retail sales increased
8.1% in the third quarter of fiscal 2023 compared to the same period of the prior year. - The Company recorded net income of
$0.3 million for the third quarter of fiscal 2023 compared to net income of$0.5 million for the same period of the prior year. - Income before taxes decreased by
$0.1 million to$0.4 million for the third quarter of fiscal 2023 compared to the same period of the prior year. - On a fully diluted basis, net income decreased by
$0.01 t o$0.02 per share for the third quarter of fiscal 2023 compared to the same period of the prior year. - Cash and cash equivalents were
$3.9 million at March 26, 2023. - Pizza Inn domestic unit count finished at 122.
- Pizza Inn international unit count finished at 33.
- Pie Five domestic unit count finished at 30.
"Our third quarter results mark 12 consecutive quarters of profitability for RAVE driven by strong top line, strategic investing in the future of our business, and strong cost controls," said Brandon Solano, Chief Executive Officer of RAVE Restaurant Group, Inc. "Our third quarter showed continued strong same store sales growth at both Pizza Inn and Pie Five, EBITDA stability as well as strong operating cash performance.
"We continue to make investment decisions with a goal of driving long-term performance and competitiveness," Solano said. "We continue to innovate and invest in key initiatives we believe will provide returns long after our initial investments. While our Q3 same store and total sales were remarkably strong, Q3 pre-tax profit was below year ago as we invested in our new image prototype including preparation for our first reimages of existing franchise buffets, construction of new Pizza Inn Buffets, technology and the install of Revel point-of-sale, and in strategic positions and travel to support these initiatives.
"In fiscal 2022, we delivered the first Pizza Inn buffet unit count growth in 24 years. In Q3, we did not open any buffets but closed zero buffets, leaving us net positive in buffet store count year to date. We continue to focus on building our strong pipeline of new buffet stores, including our first new-image Pizza Inn currently under construction and slated to open in May in Asheboro, North Carolina. We are also poised to begin scale reimage efforts at Pizza Inn buffets in the coming months, providing customers with an enhanced Pizza Inn experience across our footprint."
Solano continued, "The restaurant industry continues to abandon dine-in, leaving us an opportunity to win with our differentiated strategy, focusing on the value and variety of Pizza Inn's buffet while opportunistically capturing delivery and carry-out. We are also targeting geographies where successful Pizza Inn buffets once stood, opening stores to adoring fans who are excited to welcome back Pizza Inn, validating our belief in the strong 'latent brand equity' of Pizza Inn.
"The most significant Pie Five menu and operations changes in our history have been rolled out to all traditional stores and we are seeing strong consumer and franchisee acceptance and an improvement in same store sales consistent with our testing. These menu changes included the elimination of large pizzas, reinforcing our position as an individual pizza brand where everyone gets what they want with no compromises. In February, we rolled out an initiative to capture the family or group occasion lost with the elimination of large pizzas called the Pie Five 'Free 4th All,' delivering a fourth pizza free when consumers buy three pizzas. The Free 4th All rollout results have been positive, driving significant ticket and value for consumers, consistent with our testing.
"I'm proud of our results and the inspired efforts of our team members and franchisees. They are a gritty, resilient bunch and I feel great about our future."
Clint Fendley, Chief Financial Officer of RAVE Restaurant Group, Inc., further elaborated, "We are pleased to report our 12th consecutive quarter of profitability and another solid quarter of same store sales for both of our segments. During fiscal 2023 and continuing throughout the third quarter, we have strategically invested in additional team members, critical technologies and an enhanced store experience as we prepare for new Pizza Inn buffet openings, which are expected during our upcoming fourth quarter.
"These investments have negatively impacted our third quarter net income, however, it should be noted that the primary driver of our third quarter net income decline was an increase in our income tax expense of
"As we look forward to the fourth quarter, we are excited to open our new Pizza Inn buffets and share an enhanced dining experience with our customers."
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-based compensation expense, severance, gain/loss on sale of assets, costs related to impairment and other lease charges, franchise default and closed store revenue/expense, 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.
About RAVE Restaurant Group, Inc.
Dallas-based RAVE Restaurant Group [NASDAQ:RAVE] has inspired restaurant innovation and countless customer smiles with its trailblazing pizza concepts. The Company owns, franchises, licenses and supplies Pie Five and Pizza Inn restaurants operating domestically and internationally. The Pizza Inn experience is unlike your typical buffet. Since 1958, Pizza Inn's house-made dough, house-shredded
Contact:
Investor Relations
RAVE Restaurant Group, Inc.
investorrelations@raverg.com
469-384-5000
RAVE RESTAURANT GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share amounts)
(Unaudited)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| March 26, 2023 | March 27, 2022 | March 26, 2023 | March 27, 2022 | |||||||||||||
REVENUES: | $ | 2,970 | $ | 2,620 | $ | 8,841 | $ | 7,869 | ||||||||
COSTS AND EXPENSES: | ||||||||||||||||
Cost of sales | - | 1 | - | 1 | ||||||||||||
General and administrative expenses | 1,486 | 1,357 | 4,282 | 3,940 | ||||||||||||
Franchise expenses | 964 | 705 | 3,033 | 2,475 | ||||||||||||
Impairment of long-lived assets and other lease charges | - | - | 5 | - | ||||||||||||
Bad debt expense | 28 | 1 | 37 | 9 | ||||||||||||
Interest expense | - | 14 | 1 | 61 | ||||||||||||
Depreciation and amortization expense | 54 | 46 | 158 | 138 | ||||||||||||
Total costs and expenses | 2,532 | 2,124 | 7,516 | 6,624 | ||||||||||||
INCOME BEFORE TAXES | 438 | 496 | 1,325 | 1,245 | ||||||||||||
Income tax expense | (115 | ) | (3 | ) | (347 | ) | (10 | ) | ||||||||
NET INCOME | $ | 323 | $ | 493 | $ | 978 | $ | 1,235 | ||||||||
INCOME PER SHARE OF COMMON STOCK - BASIC: | $ | 0.02 | $ | 0.03 | $ | 0.06 | $ | 0.07 | ||||||||
INCOME PER SHARE OF COMMON STOCK - DILUTED: | $ | 0.02 | $ | 0.03 | $ | 0.06 | $ | 0.07 | ||||||||
Weighted average common shares outstanding - basic | 14,154 | 18,005 | 15,712 | 18,005 | ||||||||||||
Weighted average common and potential dilutive common shares outstanding | 14,154 | 18,452 | 15,712 | 18,686 | ||||||||||||
RAVE RESTAURANT GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
(Unaudited)
| March 26, 2023 | June 26, 2022 | |||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash and cash equivalents | $ | 3,867 | $ | 7,723 | ||||
Accounts receivable, less allowance for bad debts of | 1,492 | 1,981 | ||||||
Notes receivable, current | 165 | 172 | ||||||
Property held for sale | 19 | - | ||||||
Deferred contract charges, current | 32 | 36 | ||||||
Prepaid expenses and other current assets | 181 | 146 | ||||||
Total current assets | 5,756 | 10,058 | ||||||
LONG-TERM ASSETS | ||||||||
Property, plant and equipment, net | 283 | 365 | ||||||
Operating lease right of use asset, net | 1,337 | 1,664 | ||||||
Intangible assets definite-lived, net | 302 | 232 | ||||||
Notes receivable, net of current portion | 96 | 201 | ||||||
Deferred tax asset, net | 5,500 | 5,772 | ||||||
Deferred contract charges, net of current portion | 216 | 224 | ||||||
Total assets | $ | 13,490 | $ | 18,516 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable - trade | $ | 465 | $ | 669 | ||||
Accrued expenses | 747 | 1,082 | ||||||
Other current liabilities | 1 | 81 | ||||||
Operating lease liability, current | 481 | 490 | ||||||
Short term loan | - | 30 | ||||||
Deferred revenues, current | 342 | 538 | ||||||
Total current liabilities | 2,036 | 2,890 | ||||||
LONG-TERM LIABILITIES | ||||||||
Operating lease liability, net of current portion | 1,066 | 1,421 | ||||||
Deferred revenues, net of current portion | 718 | 793 | ||||||
Total liabilities | 3,820 | 5,104 | ||||||
COMMITMENTS AND CONTINGENCIES (SEE NOTE D) | ||||||||
SHAREHOLDERS' EQUITY | ||||||||
Common stock, | 251 | 251 | ||||||
Additional paid-in capital | 37,643 | 37,384 | ||||||
Retained earnings | 1,804 | 826 | ||||||
Treasury stock at cost | ||||||||
Shares in treasury: 10,935,605 and 7,578,628 respectively | (30,028 | ) | (25,049 | ) | ||||
Total shareholders' equity | 9,670 | 13,412 | ||||||
Total liabilities and shareholders' equity | $ | 13,490 | $ | 18,516 | ||||
RAVE RESTAURANT GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Nine Months Ended | |||||||
| March 26, 2023 | March 27, 2022 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net income | $ | 978 | $ | 1,235 | |||
Adjustments to reconcile net income to cash provided by operating activities: | |||||||
Impairment of long-lived assets and other lease charges | 5 | - | |||||
Stock-based compensation expense | 259 | 127 | |||||
Depreciation and amortization | 105 | 105 | |||||
Amortization of operating right of use assets | 327 | 314 | |||||
Amortization of intangible assets definite-lived | 53 | 33 | |||||
Amortization of debt issue costs | - | 21 | |||||
Allowance for bad debts | 37 | 9 | |||||
Deferred income tax | 272 | - | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | 452 | (273 | ) | ||||
Notes receivable | 22 | 28 | |||||
Deferred contract charges | 12 | (17 | ) | ||||
Prepaid expenses and other | (35 | ) | 65 | ||||
Accounts payable - trade | (204 | ) | (29 | ) | |||
Accrued expenses | (415 | ) | (175 | ) | |||
Operating lease liability | (364 | ) | (347 | ) | |||
Deferred revenues | (271 | ) | (571 | ) | |||
Cash provided by operating activities | 1,233 | 525 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Payments received on notes receivable | 90 | 240 | |||||
Proceeds from sale of assets | 5 | - | |||||
Purchase of intangible assets definite-lived | (123 | ) | (46 | ) | |||
Purchase of property, plant and equipment | (52 | ) | (25 | ) | |||
Cash (used in)/provided by investing activities | (80 | ) | 169 | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Purchase of treasury stock | (4,979 | ) | - | ||||
Payment of convertible notes | - | (1,597 | ) | ||||
Payments on short term loan | (30 | ) | (190 | ) | |||
Cash (used in) financing activities | (5,009 | ) | (1,787 | ) | |||
Net (decrease) in cash and cash equivalents | (3,856 | ) | (1,093 | ) | |||
Cash and cash equivalents, beginning of period | 7,723 | 8,330 | |||||
Cash and cash equivalents, end of period | $ | 3,867 | $ | 7,237 | |||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | |||||||
CASH PAID FOR: | |||||||
Income taxes | $ | 90 | $ | 8 | |||
RAVE RESTAURANT GROUP, INC.
ADJUSTED EBITDA
(In thousands)
(Unaudited)
| Three Months Ended | Nine Months Ended | ||||||||||
| March 26, 2023 | March 27, 2022 | March 26, 2023 | March 27, 2022 | ||||||||
Net income | $ | 323 | $ | 493 | $ | 978 | $ | 1,235 | |||
Interest expense | - | 14 | 1 | 61 | |||||||
Income taxes | 115 | 3 | 347 | 10 | |||||||
Depreciation and amortization | 54 | 46 | 158 | 138 | |||||||
EBITDA | $ | 492 | $ | 556 | $ | 1,484 | $ | 1,444 | |||
Stock-based compensation expense | 86 | 42 | 259 | 127 | |||||||
Severance | - | - | - | 33 | |||||||
Impairment of long-lived assets and other lease charges | - | - | 5 | - | |||||||
Franchisee default and closed store revenue | (10) | (9) | (23) | (21) | |||||||
Closed and non-operating store costs | - | 1 | - | 3 | |||||||
Adjusted EBITDA | $ | 568 | $ | 590 | $ | 1,725 | $ | 1,586 | |||
SOURCE: RAVE Restaurant Group, Inc.
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