Rave Restaurant Group Maintains Steady Performance Amid Challenging Market

Rave Restaurant Group, Inc., the parent company of the Pizza Inn and Pie Five restaurant brands, reported its financial results for the three and six months ended December 29, 2024. Despite a mixed performance across its two main business segments, the company was able to maintain steady overall profitability and cash flow during the period.

Financial Highlights

For the three months ended December 29, 2024, Rave Restaurant Group reported total revenues of $2.9 million, up slightly from $2.7 million in the same period of the prior year. Net income for the quarter was $0.6 million, or $0.04 per share, consistent with the prior year’s Q2 results.

On a year-to-date basis, the company generated $5.9 million in total revenues for the six months ended December 29, 2024, compared to $5.8 million in the first half of the prior fiscal year. Net income for the six-month period was $1.1 million, or $0.08 per share, up from $0.9 million, or $0.07 per share, in the comparable prior-year period.

The company’s adjusted EBITDA, a non-GAAP metric that excludes the impact of certain one-time or non-operational items, increased to $0.8 million for the three-month period and $1.5 million for the six-month period, up from $0.5 million and $1.1 million, respectively, in the prior-year periods.

Table 1: Financial Summary

Segment Performance

Rave Restaurant Group organizes its business into two main operating segments: Pizza Inn Franchising and Pie Five Franchising. The company also reports results for a Corporate administration and other segment.

Pizza Inn Franchising The Pizza Inn Franchising segment, which includes the company’s traditional pizza buffet, delivery/carryout, express, and ghost kitchen restaurant concepts, saw a modest increase in total domestic retail sales during the quarter, up 1.2% to $25.9 million. This was driven by a 0.8% increase in comparable store sales and a slight increase in the average number of Buffet Units open during the period.

For the six-month period, Pizza Inn’s total domestic retail sales declined 0.7% to $51.2 million, as a 0.7% decrease in comparable store sales offset the impact of the higher average Buffet Unit count. The segment’s income before taxes increased 13.4% to $1.8 million in Q2 and 11.8% to $3.6 million year-to-date, reflecting the relatively stable revenue performance and continued focus on managing franchise expenses.

Table 2: Pizza Inn Segment Performance

Pie Five Franchising In contrast, the company’s Pie Five Franchising segment, which operates fast-casual pizza restaurants, experienced a more challenging quarter. Total domestic retail sales for Pie Five declined 37.0% to $2.7 million in Q2 and 37.3% to $5.7 million for the six-month period, driven by a decrease in the average number of units open as well as a 11.4% and 10.0% decline in comparable store sales, respectively.

The segment’s income before taxes decreased 23.1% to $0.2 million in Q2 and 14.5% to $0.4 million year-to-date, reflecting the impact of the lower sales volumes. Management has indicated that Pie Five units will likely decrease modestly in future periods as the company evaluates the optimal footprint for this brand.

Table 3: Pie Five Segment Performance

Operational and Financial Highlights

• The company’s total domestic unit count for both Pizza Inn and Pie Five remained relatively stable during the quarter, with a net decrease of 3 units to 122 total domestic locations.
• International Pizza Inn units increased by 1 to 27 locations during the quarter.
• Adjusted EBITDA, a key non-GAAP metric, increased 50.6% to $0.8 million in Q2 and 36.2% to $1.5 million year-to-date, reflecting improved operational efficiency.
• The company’s cash flow from operations increased to $1.2 million for the six-month period, up from $0.3 million in the prior-year period, driven by improved collections of franchise receivables.
• Rave Restaurant Group continues to maintain a strong balance sheet, with $X.X million in cash and short-term investments as of December 29, 2024.

Outlook and Strategic Priorities

Despite the mixed performance across its two main business segments, Rave Restaurant Group remains cautiously optimistic about the company’s future prospects. Management believes the number of both domestic and international Pizza Inn units will increase modestly in future periods, while Pie Five units are expected to decrease slightly as the company optimizes the brand’s footprint.

The company’s key strategic priorities include:

1. Driving Comparable Sales Growth: Rave Restaurant Group is focused on implementing initiatives to improve the customer experience and increase traffic at its Pizza Inn and Pie Five locations, with the goal of driving sustainable comparable sales growth.

2. Optimizing the Pie Five Footprint: The company will continue to evaluate the performance of its Pie Five restaurants and make strategic decisions to right-size the brand’s footprint in order to improve profitability.

3. Enhancing Operational Efficiency: The company remains committed to streamlining its operations and managing costs across the organization, as evidenced by the improvement in adjusted EBITDA during the period.

4. Pursuing Selective Franchise Growth: Rave Restaurant Group will selectively pursue opportunities to grow its franchise base, particularly for the Pizza Inn brand, in order to expand its geographic reach and drive long-term shareholder value.

Overall, Rave Restaurant Group’s performance in the first half of fiscal 2024 demonstrates the company’s ability to navigate a challenging operating environment. By focusing on its core strengths, optimizing its brand portfolio, and maintaining a strong financial position, the company is well-positioned to continue delivering value to its shareholders in the years ahead.