RAVE Restaurant Group, Inc. Reports Fourth Quarter and Fiscal Year 2019 Financial Results

RAVE Restaurant Group, Inc. (NASDAQ: RAVE) today reported financial results for the fourth quarter and fiscal year ended June 30, 2019.

Fourth Quarter Highlights:

  • Total revenue increased to $3.1 million for the fourth quarter of fiscal 2019 compared to $2.8 million for the same period of the prior year.
  • RAVE total comparable store domestic retail sales decreased 0.7% in the fourth quarter of fiscal 2019 compared to the same period of the prior year.
  • Pizza Inn domestic comparable store retail sales increased 2.2% in the fourth quarter of fiscal 2019 compared to the same period of the prior year, while total Pizza Inn domestic retail sales increased 0.8%.
  • Pie Five comparable store retail sales decreased 7.3% in the fourth quarter of fiscal 2019 compared to the same period of the prior year, while total system-wide Pie Five retail sales decreased 22.1% primarily due to a decrease in average units open during the quarter.
  • The Company recorded a net loss of $0.8 million for the fourth quarter of fiscal 2019 compared to net income of $3.3 million for the same period of the prior year.
  • The Company maintained its valuation allowance against net deferred tax assets in the fourth quarter of fiscal 2019 compared to a partial reversal in the same period of the prior year that resulted in a $3.4 million tax benefit.
  • On a fully diluted basis, the Company had a net loss of $0.05 per share for the fourth quarter of fiscal 2019 compared to net income of $0.21 per share for the same period of the prior year.
  • Adjusted EBITDA of a $0.3 million loss for the fourth quarter of fiscal 2019 decreased $0.6 million from the same period of the prior year.
  • Cash and cash equivalents increased to $2.3 million as of the end of the fourth quarter of fiscal 2019, a $0.3 million increase during the quarter.
  • Pizza Inn domestic unit count including PIE finished at 155.
  • Pizza Inn international unit count finished at 48.
  • Pie Five domestic unit count finished at 58.

Annual Highlights:

  • RAVE fiscal 2019 total comparable store retail sales increased 0.5% compared to fiscal 2018.
  • Pizza Inn fiscal 2019 domestic comparable store retail sales increased 2.6% from the prior year, while total domestic retail sales increased 1.8%.
  • Pie Five fiscal 2019 comparable store retail sales decreased 4.4% from the prior year, while total system-wide retail sales decreased 14.6%.
  • Total consolidated revenue decreased 18.5% in fiscal 2019 to $12.3 million.
  • Net income decreased by $2.7 million to a net loss of $0.8 million for fiscal 2019 compared to net income of $1.9 million in the prior year.
  • The Company maintained its valuation allowance against net deferred tax assets in fiscal 2019 compared to a partial reversal in the prior year that resulted in a $3.4 million tax benefit.
  • On a fully diluted basis, the Company reported a net loss of $0.05 per share in fiscal 2019 compared to net income of $0.13 per share in the prior year.
  • Adjusted EBITDA of $1.2 million for fiscal 2019 was a $0.6 million increase from the prior year.
  • Domestic Pizza Inn units increased by two during the year bringing domestic total units open at the end of the 2019 fiscal year to 155.
  • International Pizza Inn units decreased by ten during the year bringing the international total units open at the end of the 2019 fiscal year to 48.
  • Pie Five units open at the end of the 2019 fiscal year was 58.
  • Fiscal years 2019 and 2018 included 52 weeks and 53 weeks, respectively. In order to reflect comparable 53 week periods, the Company has included the first week of fiscal 2019 in both annual periods in the presentation of total retail sales and comparable store retail sales.

The Company’s net loss of $0.8 million in the fourth quarter of fiscal 2019, or $0.05 per diluted share, was a decrease of $4.2 million, or $0.26 per diluted share, compared to the same period of the prior year. The decrease in net income in the fourth quarter of fiscal 2019 over the prior year was largely due to increases in impairments of long-lived assets and other lease charges of $1.1 million and decreased tax benefit of $3.0 million compared to the same period of the prior year.

The Company’s net loss of $0.8 million in fiscal 2019, or $0.05 per diluted share, was a decrease of $2.7 million, or $0.18 per diluted share, compared to the same period of the prior year. The decrease in net income for fiscal 2019 compared to the prior year was primarily due to decreased tax benefit of $3.3 million partially offset by a $0.2 million improvement in continuing operations before taxes and the absence of the prior year’s $0.4 million in net loss from discontinued operations.

Adjusted EBITDA of a $0.3 million loss in the fourth quarter of fiscal 2019was a decrease of $0.6 million compared to the same period of the prior year.

Adjusted EBITDA of $1.2 million for the 2019 fiscal year was an increase of $0.6 million compared to the same period of the prior year.   

“Last quarter, we continued to make important improvements in leadership and overall strategy at both RAVE brands,” said Bob Bafundo, President of RAVE Restaurant Group. “We continue to focus on the two primary levers for our business – growing same-store sales and adding new restaurants. By adding the right talent and growing each brand, we believe we are clearly setting the path for future success.”

Fourth Quarter Fiscal 2019 Operating Results 

Pizza Inn total domestic and comparable store retail sales increased by 0.8% and 2.2%, respectively, during the fourth quarter of fiscal 2019 compared to the same period of the prior year.

“Pizza Inn had another positive quarter,” said Bafundo.  “We’ve made tremendous progress and have seen exceptional results from our strategy of aligning with franchisees on brand objectives and improving communication across the system. In addition, initiatives such as all-day buffet and restaurant remodels continue to drive sales and traffic growth. We are proud of the renewed excitement around this brand and look forward to additional successes in 2020.”

Pie Five total domestic and comparable store retail sales decreased by 22.1% and 7.3%, respectively, for the fourth quarter of fiscal 2019 compared to the same period of the prior year.

“To improve service consistency and operational efficiency at Pie Five, we’ve added Scott Black to the team as our new Vice President of Operations,” said Bafundo. “Scott has a proven track record of success with over 30 years of experience in the food and beverage industry, specifically in the pizza segment and as a restaurant owner. Scott is assisting us in sharpening our distinctive service model to create a guest experience that capitalizes on the customization, approachability, and speed of dining with Pie Five.”

Consolidated revenues for the fourth quarter of fiscal 2019 were $3.1 million compared to $2.8 million in the same period of the prior year.

Fiscal Year 2019 Operating Results

Pizza Inn comparable store retail sales increased by 2.6% and total domestic retail sales increased by 1.8% during fiscal 2019 compared to the prior year.

Pie Five comparable store retail sales and system-wide retail sales decreased by 4.4% and 14.6%, respectively, during fiscal 2019 compared to the prior year.

“Pizza Inn has now been on a positive course for ten straight quarters and we are confident this sales momentum will continue,” said Bafundo. “At Pie Five, we still have work to do in optimizing the service model and building our local restaurant marketing programs in our trade areas. We anticipate that improvements in these areas along with strategic investments in third-party delivery, online ordering and carry-out will all have a long-term impact on off-premise sales and traffic growth.”

Consolidated revenues during fiscal 2019 were $12.3 million compared to $15.1 million in the same period of the prior year primarily as a result of lower Company-owned restaurant count.

The Company’s cash and cash equivalents increased to $2.4 million as of June 30, 2019, a $0.9 million improvement over the prior year end. The increase in cash and cash equivalents resulted from $0.6 million in cash provided by operating activities, $0.2 million in cash provided by investing activities, and $0.1 million in cash provided by financing activities.

Development Review

During the fourth quarter of fiscal 2019, Pizza Inn domestic unit count including PIE decreased by one.

“With existing franchisees signing on for multi-unit development agreements, Pizza Inn is now outperforming our recent pace of development,” said Bafundo.  “It’s exciting to see our legacy brand growing again and we expect new development to keep the pipeline full for the coming quarters.”

The Company continued its rollout of Pizza Inn Express, or PIE, that debuted in 2018 with one new opening in the fourth quarter of fiscal 2019 bringing the unit count to nine at the end of the quarter.

“As one of the only restaurant-branded concepts in the convenience store space, PIE continues to gain traction,” said Bafundo.  “Only 18 months ago, we started with a blank slate and took a year to develop this non-traditional model and define operational systems. Today, we have a concept that provides a seamless customer experience with the same quality pizza found in our traditional locations.  The development opportunities for this concept are both promising and significant.”

In the fourth quarter of fiscal 2019, Pie Five opened one new domestic unit, closed four domestic units and transferred one Company-owned unit to a franchisee, bringing the domestic unit count to 58 restaurants at the end of the quarter.

“We continue to experience strong interest in Pie Five,” said Bafundo. “With our Goldilocks model, we have lowered the new store development investment as well as ongoing occupancy costs. This strategy has begun to show positive results in improving restaurant fundamentals. Non-traditional development is surpassing projections and, as we leverage these opportunities, we expect this success to continue.”

About RAVE Restaurant Group, Inc.

Founded in 1958, Dallas-based RAVE Restaurant Group [NASDAQ: RAVE] owns, operates, franchises and/or licenses 261 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”.