RAVE Restaurant Group, Inc.

Revenue for the third quarter of fiscal 2020 was $2.7 million, down $0.4 million from the prior year period. Loss before taxes was $0.5 million versus a $0.3 million loss a year ago, and net loss was $4.5 million versus $0.3 million, primarily due to a $4.3 million increase to the reserve against net deferred assets and lease impairment charges. Net loss per share was $0.30, up $0.28 from $0.02 in the prior year period; adjusted EBITDA decreased $0.2 million year over year. Pizza Inn domestic comp retail sales declined 7.8% and Pie Five domestic comparable same-store sales declined 21.4%. For the quarter, Pizza Inn opened 3 domestic units and closed 4 to end at 152 domestic units, while Pie Five closed 10 domestic units to end at 43 domestic restaurants. Cash and cash equivalents declined $0.4 million to $1.5 million at March 29, 2020, due to lease settlements, severance, and relocation expenses. Management did not provide formal next-quarter or full-year numerical guidance on the call, but said fourth-quarter revenues and expenses were both impacted by COVID-19 and that the company is focused on improving profitability and bottom-line results.

Brandon Solano framed the quarter as a turnaround story disrupted by COVID-19, saying the company had been building momentum before the pandemic hit. He emphasized resilience, franchisee effort, and a willingness to make tough decisions, including furloughing two-thirds of support staff and cutting pay 20% across the board late in the quarter. Strategically, he said Pizza Inn is adapting with contactless buffet-to-go, expanded delivery, and the Right Way Buffet, while Pie Five is being repositioned with a sharper fast-casual focus, new product and pricing tests, and a stronger emphasis on differentiation and unit economics.

Clint Fendley reported third-quarter revenue of $2.7 million, a $0.5 million loss before taxes, and net loss of $4.5 million, with the larger loss tied mainly to a $4.3 million increase in the reserve against net deferred tax assets and lease impairment charges. He said net loss per share was $0.30 versus $0.02 a year ago and that adjusted EBITDA decreased by $0.2 million year over year. He also noted cash and cash equivalents of $1.5 million at quarter end, down $0.4 million, with the decline driven by lease settlements, severance, and relocation expenses.

The most notable shareholder question was whether RAVE should consider exiting Pie Five and focus only on Pizza Inn. Solano rejected that idea, saying the company has “no intention of giving up on Pie Five,” believes the brand can be turned around, and has already streamlined overhead and shared resources across the company. Another question focused on the PPP/SBA loan; Solano said RAVE is not returning the $656,830 loan because the company is eligible and lacks access to other capital. An analyst also asked about the $4.3 million deferred tax reserve increase, and Fendley explained it reflected a $4 million asset tied to expected future profitability that had to be written down because COVID made profitability look further out.