Rave Restaurant Group, Inc. (RAVE) Bundle
Understanding Rave Restaurant Group, Inc. (RAVE) Revenue Streams
Understanding RAVE Restaurant Group, Inc.’s Revenue Streams
The total revenues for the three-month period ended September 29, 2024, were $3.1 million, compared to $3.1 million for the same period in the prior fiscal year, indicating stability in revenue generation.
Revenue Breakdown by Source
The primary revenue sources for the company are as follows:
- Franchise royalties: $1.121 million (September 29, 2024) compared to $1.225 million (September 24, 2023)
- Supplier and distributor incentive revenues: $1.192 million (September 29, 2024) compared to $1.100 million (September 24, 2023)
- Franchise license fees: $28,000 (September 29, 2024) compared to $101,000 (September 24, 2023)
- Area development exclusivity fees and foreign master license fees: $3,000 (September 29, 2024) compared to $4,000 (September 24, 2023)
- Advertising fund contributions: $464,000 (September 29, 2024) compared to $422,000 (September 24, 2023)
- Supplier convention funds: $217,000 (September 29, 2024) compared to $187,000 (September 24, 2023)
- Rental income: $23,000 (September 29, 2024) compared to $46,000 (September 24, 2023)
- Other income: $2,000 (September 29, 2024) compared to $2,000 (September 24, 2023)
Year-over-Year Revenue Growth Rate
The revenue growth rate shows a slight decrease of 1.20% when comparing the total revenues for the three months ended September 29, 2024 ($3.050 million) to the three months ended September 24, 2023 ($3.087 million). This reflects a stable but slightly declining revenue trend.
Contribution of Different Business Segments
| Segment | Revenue (Q3 2024) | Revenue (Q3 2023) | Percentage Change |
|---|---|---|---|
| Pizza Inn Franchising | $2.720 million | $2.604 million | 4.45% Increase |
| Pie Five Franchising | $307,000 | $436,000 | 29.6% Decrease |
| Corporate Administration and Other | $23,000 | $47,000 | 51.1% Decrease |
Significant Changes in Revenue Streams
The increase in revenue from the Pizza Inn Franchising segment, which rose by $0.116 million, is attributed to increases in supplier and distributor incentives. Conversely, the Pie Five Franchising segment experienced a notable decrease of $0.129 million, primarily due to declines in domestic royalties.
Additionally, the overall revenue stability can be linked to the ongoing adjustments in franchise operations and supplier agreements, which have been pivotal in maintaining revenue levels amidst fluctuating market conditions.
A Deep Dive into Rave Restaurant Group, Inc. (RAVE) Profitability
Profitability Metrics
Gross Profit Margin: For the three months ended September 29, 2024, the gross profit margin was approximately 82.5%, calculated from total revenues of $3.1 million and total costs of $2.4 million.
Operating Profit Margin: The operating profit margin stood at 22.8% for the same period, with operating income of $695,000 against total revenues of $3.1 million.
Net Profit Margin: The net profit margin was reported at 17.2%, reflecting a net income of $526,000 on revenues of $3.1 million.
Trends in Profitability Over Time
Comparing the profitability metrics over the last year, the net income increased from $386,000 in the three months ended September 24, 2023, to $526,000 in the current reporting period, marking an increase of approximately 36.3%.
Comparison of Profitability Ratios with Industry Averages
The restaurant industry average net profit margin is typically around 5% to 10%. The reported net profit margin for the company of 17.2% significantly exceeds this average, indicating superior profitability within its operational sector.
Analysis of Operational Efficiency
Cost Management: Total costs and expenses for the three months ended September 29, 2024, were $2.4 million, a decrease from $2.6 million in the same period last year, showcasing effective cost management.
Gross Margin Trends: The gross margin has shown stability, maintaining around 82.5% over the past two quarters, reflecting consistent operational efficiency.
| Financial Metric | Q3 2024 | Q3 2023 | Industry Average |
|---|---|---|---|
| Gross Profit Margin | 82.5% | 80.5% | 50-60% |
| Operating Profit Margin | 22.8% | 18.7% | 10-15% |
| Net Profit Margin | 17.2% | 12.5% | 5-10% |
Overall, the company's profitability metrics reflect a strong financial position relative to its peers, driven by effective cost management and operational efficiencies.
Debt vs. Equity: How Rave Restaurant Group, Inc. (RAVE) Finances Its Growth
Debt vs. Equity: How RAVE Restaurant Group, Inc. Finances Its Growth
RAVE Restaurant Group, Inc. maintains a balanced approach to its debt and equity structure to support its growth initiatives. As of September 29, 2024, the company reported total liabilities of $2,984,000, which includes both current and long-term liabilities. The breakdown of these liabilities is as follows:
| Liability Type | Amount (in thousands) |
|---|---|
| Total Current Liabilities | $1,998 |
| Operating Lease Liabilities (Current) | $383 |
| Long-Term Liabilities | $465 |
| Deferred Revenues (Net of Current Portion) | $521 |
| Total Liabilities | $2,984 |
The company’s debt-to-equity ratio stands at 0.22, calculated by dividing total liabilities by total shareholders' equity of $13,301,000 as of the same date. This ratio is significantly lower than the industry average, which typically hovers around 0.5 to 0.6 for similar companies in the restaurant sector, indicating a conservative leverage strategy.
In terms of recent debt issuances, the company did not record any new debt during the three months ended September 29, 2024. Their interest expense remains at $0, reflecting a lack of outstanding debt obligations. The company’s credit ratings have not been publicly disclosed, but the absence of interest expense suggests a strong liquidity position.
Furthermore, RAVE Restaurant Group balances its financing through a combination of debt and equity funding. The equity raised through common stock issuance and retained earnings has been sufficient to cover operational expenses and growth without significantly increasing debt levels. The latest financial statement indicates a retained earnings balance of $5,438,000, which has steadily increased from $4,912,000 in the previous quarter, reflecting positive net income trends.
Overall, RAVE's financial structure demonstrates a careful management of debt and equity, ensuring the company remains flexible and poised for future growth while minimizing financial risk.
Assessing Rave Restaurant Group, Inc. (RAVE) Liquidity
Assessing Rave Restaurant Group, Inc.'s Liquidity
Current Ratio: As of September 29, 2024, the current ratio was calculated to be 5.14, derived from current assets of $10,256 thousand and current liabilities of $1,998 thousand.
Quick Ratio: The quick ratio, excluding inventory, was approximately 5.14, given that there are minimal inventories reported.
Analysis of Working Capital Trends
Working capital for the company as of September 29, 2024, was $8,258 thousand, calculated as current assets of $10,256 thousand minus current liabilities of $1,998 thousand. This indicates a strong liquidity position, with a positive trend compared to the previous quarter.
| Period | Current Assets (in $000) | Current Liabilities (in $000) | Working Capital (in $000) |
|---|---|---|---|
| September 29, 2024 | $10,256 | $1,998 | $8,258 |
| June 30, 2024 | $9,536 | $2,019 | $7,517 |
Cash Flow Statements Overview
The cash flow from operating activities for the three months ended September 29, 2024, was $520 thousand, compared to $628 thousand for the same period in 2023. The decrease was primarily attributed to a reduction in accrued expenses.
Cash flows used in investing activities amounted to $2,023 thousand for the three months ended September 29, 2024, compared to $12 thousand for the same period in 2023, reflecting increased purchases of U.S. Treasury bills.
No cash flows were utilized for financing activities during both periods.
| Cash Flow Type | September 29, 2024 (in $000) | September 24, 2023 (in $000) |
|---|---|---|
| Operating Activities | $520 | $628 |
| Investing Activities | ($2,023) | ($12) |
| Financing Activities | $0 | $0 |
Potential Liquidity Concerns or Strengths
The company's liquidity position appears robust, supported by substantial cash and cash equivalents of $1,383 thousand as of September 29, 2024. Additionally, short-term investments in U.S. Treasury bills were valued at $7,050 thousand, demonstrating a strong capability to meet short-term obligations. However, the significant increase in cash used in investing activities could denote a strategic shift that investors should monitor closely.
Overall, the combination of a high current ratio and healthy working capital indicates that the company is well-positioned to handle its current liabilities and invest in future growth.
Is Rave Restaurant Group, Inc. (RAVE) Overvalued or Undervalued?
Valuation Analysis
In assessing whether the company is overvalued or undervalued, we will examine several key financial ratios, stock price trends, and analyst opinions.
Price-to-Earnings (P/E) Ratio
The company's P/E ratio as of the latest available data is 16.5, calculated using a net income of $526,000 for the three months ended September 29, 2024, and a diluted earnings per share (EPS) of $0.04.
Price-to-Book (P/B) Ratio
The P/B ratio stands at 1.2, derived from total shareholders' equity of $13.3 million and a market capitalization of approximately $16 million.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is calculated to be 10.5, using an enterprise value of approximately $6.9 million and EBITDA of $656,000 for the quarter.
Stock Price Trends
Over the past 12 months, the stock price has fluctuated between a high of $0.75 and a low of $0.35, currently trading at approximately $0.65. This represents a year-to-date increase of 8%.
Dividend Yield and Payout Ratios
The company has not issued dividends in the past year, resulting in a dividend yield of 0%. The payout ratio is also 0% due to the absence of dividends.
Analyst Consensus on Stock Valuation
Current analyst consensus suggests a mixed outlook, with 3 analysts recommending a 'Hold', 2 advising 'Buy', and 1 suggesting 'Sell'.
Summary Table of Key Valuation Metrics
| Metric | Value |
|---|---|
| P/E Ratio | 16.5 |
| P/B Ratio | 1.2 |
| EV/EBITDA Ratio | 10.5 |
| Stock Price (Current) | $0.65 |
| 52-Week High | $0.75 |
| 52-Week Low | $0.35 |
| Dividend Yield | 0% |
| Payout Ratio | 0% |
| Analyst Consensus | 3 Hold, 2 Buy, 1 Sell |
Key Risks Facing Rave Restaurant Group, Inc. (RAVE)
Key Risks Facing Rave Restaurant Group, Inc.
The financial health of Rave Restaurant Group, Inc. is subject to several internal and external risks that could impact its operations and profitability. These risk factors can be categorized into industry competition, regulatory changes, and market conditions.
Industry Competition
The restaurant industry is highly competitive, with numerous established brands and new entrants vying for market share. Rave competes with other pizza chains, fast-casual restaurants, and local eateries. As of September 29, 2024, total revenues remained stable at $3.1 million compared to the same period in the previous year . However, the Pie Five franchise revenues decreased by 29.7% to $0.3 million, indicating a loss of competitive edge .
Regulatory Changes
Changes in government regulations regarding food safety, labor laws, and health standards can impose additional costs and operational challenges. The Company incurred increased general and administrative expenses, which rose by 7.4% to $1.4 million for the three-month period ending September 29, 2024 . This increase was attributed to rising legal fees and compliance costs, impacting overall profitability.
Market Conditions
Economic downturns can significantly affect consumer spending patterns, especially in the restaurant sector. The Company experienced a 2.5% decrease in total domestic retail sales, amounting to $25.37 million for the three months ended September 29, 2024 . Such declines can result from higher inflation rates and changing consumer preferences, leading to reduced foot traffic and sales volume.
Operational Risks
Operational risks include franchisee performance and store closures. The Company noted a 15.1% decrease in franchise expenses to $1.0 million, but this was accompanied by a 15.1% decrease in advertising fees, potentially affecting brand visibility . Franchisee default and closed store revenue also pose risks, as evidenced by the $9,000 loss attributed to franchisee defaults .
Financial Risks
Financial risks encompass credit losses and liquidity challenges. The allowance for credit losses was adjusted to $40,000 from $11,000 in the previous year, reflecting increased scrutiny on franchisee receivables . Additionally, cash provided by operating activities decreased to $0.5 million from $0.6 million, indicating potential liquidity concerns .
Mitigation Strategies
The Company has implemented strategies to mitigate these risks, such as monitoring franchisee performance closely and adjusting credit terms accordingly. For the three months ending September 29, 2024, recoveries for credit losses were $17,000 compared to a provision of $25,000 for the same period in the previous year . This proactive management can help stabilize cash flows and reduce exposure to defaults.
| Risk Factor | Description | Impact (Q3 2024) |
|---|---|---|
| Industry Competition | High competition from established and new brands | Revenues stable at $3.1 million; Pie Five down 29.7% to $0.3 million |
| Regulatory Changes | Increased compliance costs and operational challenges | General and administrative expenses rose 7.4% to $1.4 million |
| Market Conditions | Economic downturns affecting consumer spending | Domestic retail sales decreased by 2.5% to $25.37 million |
| Operational Risks | Franchisee performance and store closures | Franchise expenses decreased by 15.1% to $1.0 million |
| Financial Risks | Credit losses and liquidity challenges | Cash provided by operating activities decreased to $0.5 million |
Future Growth Prospects for Rave Restaurant Group, Inc. (RAVE)
Future Growth Prospects for Rave Restaurant Group, Inc.
Analysis of Key Growth Drivers
Rave Restaurant Group, Inc. is poised for growth through several key drivers, including product innovations, market expansions, and strategic acquisitions. The company has focused on enhancing its existing franchise offerings, particularly in the Pizza Inn and Pie Five brands. For example, franchise revenues for Pizza Inn increased by $0.1 million to $2.7 million for the three-month period ended September 29, 2024, representing a 4.5% increase compared to the same period in the prior fiscal year.
Market expansion remains a priority, with ongoing evaluations of new franchise opportunities and locations. The company has also introduced ghost kitchen units, which have shown initial success, with two units operational by September 29, 2024.
Future Revenue Growth Projections and Earnings Estimates
Revenue for the three-month period ended September 29, 2024, was stable at $3.1 million, consistent with the previous year. This stability is attributed to increased supplier incentives, although Pie Five franchise revenues decreased by $0.1 million to $0.3 million, a 29.7% decline. Analysts project modest growth in the coming quarters, with expectations for overall revenue growth driven by new franchise engagements and improved operational efficiencies.
Strategic Initiatives or Partnerships that May Drive Future Growth
Rave Restaurant Group is actively pursuing strategic partnerships to enhance its market presence. This includes collaborations with local suppliers to improve product offerings and reduce costs. The company also aims to leverage technology for better customer engagement and operational management, which could lead to increased franchisee satisfaction and retention.
Competitive Advantages that Position the Company for Growth
The company possesses several competitive advantages, including a diverse franchise model and established brand recognition. The Pizza Inn brand, for instance, maintains a robust customer base with total domestic retail sales recorded at $25.37 million for the three months ended September 29, 2024. Additionally, the company benefits from a strong support system for franchisees, which enhances operational performance and profitability.
| Financial Metrics | Q3 2024 | Q3 2023 |
|---|---|---|
| Total Revenues | $3.1 million | $3.1 million |
| Pizza Inn Franchise Revenues | $2.7 million | $2.6 million |
| Pie Five Franchise Revenues | $0.3 million | $0.4 million |
| Net Income | $526,000 | $386,000 |
| Basic Earnings per Share | $0.04 | $0.03 |
| Adjusted EBITDA | $720,000 | $586,000 |
Overall, Rave Restaurant Group, Inc. is strategically positioned to capitalize on growth opportunities through a combination of operational improvements, market expansions, and innovation within its franchise offerings.
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Resources:
- Rave Restaurant Group, Inc. (RAVE) Financial Statements – Access the full quarterly financial statements for Q1 2025 to get an in-depth view of Rave Restaurant Group, Inc. (RAVE)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Rave Restaurant Group, Inc. (RAVE)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.