RAVE Restaurant Group, Inc. Reports Second Fiscal Quarter Financial Results
Continued revenue growth and store count for Pie Five Pizza Co.
DALLAS, Feb. 10, 2016 /PRNewswire/ -- RAVE Restaurant Group, Inc. (NASDAQ:RAVE) today reported financial results for the second quarter of fiscal 2016 ended December 27, 2015.
Second Quarter Highlights:
Revenues of $15.3 million and $29.9 million for the second quarter and year to date fiscal 2016 were 37.6% and 33.0%, respectively, higher than the same periods of the prior year. For the three and six months ended December 27, 2015, the Company reported a net loss of $4.8 million and $5.4 million, respectively, compared to a loss of $0.4 million and $0.7 million for the comparable periods of the prior year. On a fully diluted basis, the loss was $0.45 per share and $0.50 per share for the second quarter and year to date fiscal 2016, compared to a loss of $0.04 per share and $0.07 per share for the same periods of the prior year. The increased losses for the three and six month periods ended December 27, 2015 were primarily the result of a $1.0 million non-cash impairment expense attributable to three Company-owned Pie Five restaurants and a $3.5 million valuation allowance against deferred tax assets, as well as increased pre-opening expenses, general and administrative expenses and franchise costs related to opening of Company-owned Pie Five restaurants and the expansion of the Pie Five franchise system. Year-to-date Adjusted EBITDA for the first six months improved by $0.1 million to a positive $0.3 million.
"We entered several new Company-owned Pie Five markets in the past year, which allowed us to gain a foothold in several large metropolitan markets. Sales in some of these areas have been slower to materialize than expected," said Randy Gier, Chief Executive Officer for Rave Restaurant Group, Inc. "As a result, we elected to fully impair three Company stores that we identified as poor real estate selections and have further evolved our criteria for new unit development."
Second Quarter Fiscal 2016 Operating Results
Total revenues for the second quarter of fiscal 2016 and the comparable prior year quarter were $15.3 million and $11.1 million, respectively, an increase of 37.6% year over year. Additional franchise development fees previously received from Pie Five franchisees have been deferred and will be recognized as future restaurants are opened. Pizza Inn domestic comparable store retail sales decreased 1.7% from the same period in the prior year.
For Pie Five, system-wide retail sales increased 151% for the second quarter of fiscal 2016 when compared to the same period in the prior year driven by a 185% increase in average units open, while system-wide average weekly sales decreased by 9.9%. Comparable store retail sales decreased by 1.6% for the most recent fiscal quarter compared to the same period in the prior year. As previously reported, Pie Five was overlapping significant, double-digit comparable store gains in the prior year. In addition, Pie Five has experienced some cannibalization from new restaurants in the Dallas market, which makes up a disproportionate share of the current comparable store base. The decrease in Pie Five average weekly sales was primarily due to entry into new company markets and several franchise stores that opened with unusually high volume in the prior year.
The Company's decision to take the $3.5 million valuation allowance against its deferred tax assets was influenced significantly by the Company's recent net income losses. The valuation allowance may be reversed in the future when the Company is generating consistently positive net income.
"As previously stated, both brands were overlapping strong prior year results," said Gier. "So far in the current quarter, and excluding the impact of the severe snowstorm in January, we are experiencing flat comps in both brands. We remain focused on opportunities to accelerate growth at each brand."
In the second quarter of fiscal 2016, 14 new Pie Five restaurants were opened, comprised of three Company-owned restaurants and eleven franchised restaurants, bringing the fiscal quarter-end total unit count to 82 restaurants. So far in the current quarter the Company has signed two new franchise development agreements with existing franchisees for up to 17 Pie Five restaurants. The Company currently has franchise restaurant development commitments totaling approximately 450 Pie Five restaurants.
"We are excited to be further expanding the geographic reach of Pie Five as we march towards the 100-restaurant mark," said Gier. "In the second quarter we opened our first franchised restaurants in Arkansas, Colorado, Delaware, and Kentucky, expanding our reach to 49 franchised restaurants and 33 Company-owned restaurants in 24 states."
Non-GAAP Financial Measures
The Company uses certain non-GAAP financial measures in evaluating operating performance. 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. Adjusted EBITDA represents earnings before interest, taxes, depreciation and amortization, stock compensation expense, pre-opening expense, gain/loss on sale of assets, costs related to closed restaurants and impairment charges. A reconciliation of Adjusted EBITDA 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 and franchises more than 300 Pie Five Pizza Co. and Pizza Inn restaurants domestically and internationally. 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 is an international chain featuring freshly made pizzas, along with salads, pastas, and desserts. The Company's common stock is listed on the Nasdaq Capital Market under the symbol "RAVE". For more information, please visit www.raverg.com.
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SOURCE RAVE Restaurant Group, Inc.