Rave Restaurant (RAVE) - 2024 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements The company reported increased net income for both three and six-month periods, with total assets slightly decreasing and total liabilities significantly reduced, resulting in higher shareholders' equity Condensed Consolidated Statements of Income (Unaudited) | (In thousands) | Three Months Ended Dec 24, 2023 | Three Months Ended Dec 25, 2022 | Six Months Ended Dec 24, 2023 | Six Months Ended Dec 25, 2022 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $2,792 | $2,866 | $5,881 | $5,871 | | Income Before Taxes | $540 | $488 | $1,058 | $887 | | Net Income | $553 | $348 | $939 | $655 | | Diluted EPS | $0.04 | $0.02 | $0.07 | $0.04 | Condensed Consolidated Balance Sheets (Unaudited) | (In thousands) | Dec 24, 2023 | June 25, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $5,306 | $5,328 | | Total current assets | $7,106 | $6,834 | | Total assets | $14,160 | $14,237 | | Total current liabilities | $1,697 | $2,198 | | Total liabilities | $3,059 | $3,846 | | Total shareholders' equity | $11,101 | $10,391 | Condensed Consolidated Statements of Cash Flows (Unaudited) | (In thousands) | Six Months Ended Dec 24, 2023 | Six Months Ended Dec 25, 2022 | | :--- | :--- | :--- | | Cash provided by operating activities | $305 | $792 | | Cash used in investing activities | $(16) | $(77) | | Cash used in financing activities | $(311) | $(5,009) | | Net decrease in cash | $(22) | $(4,294) | | Cash and cash equivalents, end of period | $5,306 | $3,429 | Notes to Unaudited Condensed Consolidated Financial Statements The notes detail accounting policies, revenue recognition, lease accounting, segment reporting, and stock-based compensation - The company's revenue is primarily generated from franchise royalties, supplier and distributor incentives, and advertising fund contributions[29][37] - The company has two reportable operating segments: Pizza Inn Franchising and Pie Five Franchising. Corporate administration costs are partially allocated to these segments[61][62] Segment Income Before Taxes (Six Months Ended) | (In thousands) | Six Months Ended Dec 24, 2023 | Six Months Ended Dec 25, 2022 | | :--- | :--- | :--- | | Pizza Inn Franchising | $3,263 | $3,206 | | Pie Five Franchising | $469 | $503 | | Corporate administration and other | $(2,674) | $(2,822) | | Total Income before taxes | $1,058 | $887 | - As of December 24, 2023, there was $328 thousand in unamortized stock-based compensation expense related to Restricted Stock Units (RSUs), to be amortized over the next ten months[55][56] Management's Discussion and Analysis of Financial Condition and Results of Operations Management reports increased net income, stable revenues, Pizza Inn sales growth, Pie Five sales decline, and stable Adjusted EBITDA - Net income for the three months ended Dec 24, 2023, was $0.6 million ($0.04 per share), compared to $0.3 million ($0.02 per share) in the prior-year period[70] - For the six months ended Dec 24, 2023, net income was $0.9 million ($0.07 per share) on stable revenues of $5.9 million, compared to $0.7 million ($0.04 per share) in the prior-year period[71] Adjusted EBITDA Reconciliation (in thousands) | | Six Months Ended Dec 24, 2023 | Six Months Ended Dec 25, 2022 | | :--- | :--- | :--- | | Net income | $939 | $655 | | EBITDA | $1,170 | $992 | | Adjusted EBITDA | $1,170 | $1,157 | Pizza Inn Brand Summary Pizza Inn's domestic retail sales grew, driven by increased Buffet Units and comparable store sales, despite international unit decline - Pizza Inn total domestic retail sales increased by 8.3% to $51.6 million for the six months ended Dec 24, 2023, compared to the prior year[79] - The growth was driven by an increase in average Buffet Units open (from 73 to 77) and a $3.2 million increase in comparable store retail sales over the six-month period[79] Pizza Inn Unit Count Change (Six Months Ended Dec 24, 2023) | Unit Type | Beginning Units | Opened | Closed | Ending Units | | :--- | :--- | :--- | :--- | :--- | | Domestic | 123 | 4 | 15 | 112 | | Buffet Units | 77 | 3 | 3 | 77 | | Delco/Express | 41 | 1 | 11 | 31 | | International | 34 | 0 | 16 | 18 | | Total Units | 157 | 4 | 31 | 130 | Pie Five Brand Summary Pie Five's domestic retail sales decreased due to a reduction in average open units, though comparable store sales remained stable - Pie Five total domestic retail sales decreased by 11.4% for the three months ended Dec 24, 2023, due to a decrease in average units open from 31 to 25[83] - Comparable store retail sales for Pie Five remained relatively stable at $4.3 million for the quarter[83] - The total number of domestic Pie Five units decreased by 3 to 24 during the six months ended December 24, 2023, with management expecting a modest future decrease[84] Financial Results Total revenues remained flat, with mixed performance in franchise revenues and overall reduced expenses contributing to higher income - For the six-month period, Pizza Inn franchise revenues increased 1.1% to $4.9 million, driven by higher domestic royalties and default/closed store revenues[89] - Pie Five franchise revenues decreased 8.9% to $0.9 million for the six-month period, due to lower domestic royalties, advertising revenues, and supplier incentives[90] - General and administrative expenses decreased by 4.9% to $2.7 million for the six-month period, primarily due to decreased corporate expenses[91] Liquidity and Capital Resources Cash from operations decreased, while cash used in financing activities significantly reduced, with management confident in sufficient liquidity - Cash provided by operating activities was $0.3 million for the six-month period, a decrease from $0.8 million in the prior year, mainly due to the impact of an employee retention credit collected in the prior year[101][105] - Cash used in financing activities was $0.3 million, primarily for taxes paid on vested RSUs, compared to $5.0 million in the prior year which was mainly for treasury stock purchases[103] - Management believes cash on hand and net cash from operations will be sufficient to fund operations for the next 12 months and beyond[104] Quantitative and Qualitative Disclosures About Market Risk This section is not required for a smaller reporting company, and consequently, no information is provided - Not required for a smaller reporting company[115] Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls - The Company's management, including the principal executive officer and principal financial officer, concluded that the Company's disclosure controls and procedures were effective as of the end of the period covered by this report[117] - There were no changes in the Company's internal controls over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting[117] PART II. OTHER INFORMATION Legal Proceedings The company is subject to various claims and legal matters, which management believes will not materially affect its financial condition - The Company is subject to various claims and contingencies arising out of the normal course of business, but management believes they will not have a material adverse effect on the Company's financial condition[118] Risk Factors This section is not required for a smaller reporting company, and consequently, no information is provided - Not required for a smaller reporting company[119] Unregistered Sales of Equity Securities, Use of Proceeds This item is not applicable to the company for the current reporting period - Not applicable[120] Exhibits This section lists various exhibits filed with the Form 10-Q, including corporate governance documents and required certifications - Lists various exhibits filed with the report, including corporate governance documents, compensation plans, material contracts, and required certifications[126]