Andrea Allen - Chief Accounting and Administrative Officer Scott Crane - Chief Executive Officer Bob Bafundo - President.

Good day, and welcome to the RAVE Restaurant’s Fourth Quarter and Fiscal Year 2018 Financial Results Summary Conference Call. All participants will be in a listen-only mode [Operator Instructions]. After today’s presentation, there’ll be an opportunity to ask questions. [Operator Instructions]. Please note this event is being recorded today.

And with that, I’d like to turn the conference over to Andrea Allen. Please go ahead..

Thank you. Good afternoon, and thank you for joining the RAVE Restaurant Group’s fourth quarter and fiscal year 2018 earnings conference call. Everyone should have access to our fourth quarter and fiscal year 2018 earnings release that was published this afternoon. The press release can also be found at www.raverg.com in the Investor Relations section.

Before we begin, I would like to remind everyone that part of our discussions today will include forward-looking statements. These forward-looking statements are not guarantees of future performance, and therefore, you should not put undue reliance on them.

These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. We refer you all to our recent SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial condition.

Please note that during today’s conference call, we will discuss certain non-GAAP financial measures, which we believe can be useful in evaluating our performance. Any discussion of such information should not be considered in isolation or as a substitute for the results prepared in accordance with GAAP.

A reconciliation of comparable GAAP measures is available in our earnings release. With that, I’d like to turn the call over to Scott Crane, our Chief Executive Officer..

Thank you, everybody, for joining the call today. Very pleased to share our full-year and fourth quarter financial results. I’m really encouraged by the progress made with both brands.

The decision we made in fiscal 2018 have laid a solid foundation for our success in coming quarters, as we’re executing against our key elements to our revitalization plans, driving us towards the next phase of growth with positive trends in comparable store retail sales point to a strong turnaround.

For the year, Pizza Inn, most notably, comparable store sales increased 1.8% for the prior year. We attribute the increased traffic, both sales - I’m sorry, restaurant traffic and sales momentum to new initiatives we’ve been implementing.

Both online ordering and all-day buffet have proven to add incremental sales, as well as we’ve observed a direct correlation between remodeled franchise location and an increase in sales. For the year, Pie Five comp sales store retail sales decreased 12.9% from the prior year, while total system sales were down 16.7%.

And as you probably or you’ve looked at today, we are seeing continued momentum and period one, period two, and as yesterday, ended up our first quarter retail sales are continuing to trend positive.

The Pie Five brand face many challenges in the past year, but the recent quarter show the trends are improving, as our top line growth initiatives and new product offerings have been met with several consumer response.

Our new options, including our low-carb cauliflower crust 14-inch shareable pizzas and sandwich melts have led to increased frequency from the oil gas and are introducing new gas to the Pie Five experience. We believe the sales will improve in future quarters, as these new revenue streams continued to expand.

Recently, we announced, as hopefully, you both and all of you heard the promotion of Bob Bafundo, the President of RAVE Restaurant Group. Since joining Pizza Inn two years ago, Bob has played a pivotal role in energizing the brand and strengthening franchise relation.

With Bob’s leadership, Pizza Inn has added online ordering, a new point-of-sale system, offline, or off-premise catering and all-day buffet and rewards program that have been game changers for legacy brand. And with that, I’d like to turn over the call to RAVE’s new President, Bob Bafundo, to share the results for the quarter..

Thanks, Scott. As Scott mentioned, we continue to see progress of both Pizza Inn and Pie Five. RAVE’s total comparable store retail sales increased 0.4% in the fourth quarter compared to the same period of the prior year. Pizza Inn added six consecutive quarter of growth in comparable store retail sales.

For the fourth quarter of fiscal 2018, domestic comparable store retail sales increased 2.5% compared to the same period of the prior year, while total domestic retail sales increased by 0.3%, and we believe this momentum is continuing into 2019. We’re closely watching the impacts of the Hurricane Florence in the Carolinas and our Tennessee markets.

But despite weather challenges, we’re very optimistic about a seventh consecutive quarter of growth in Pizza Inn comparable store retail sales. During the fourth quarter, we opened three of our new Pizza Inn Express, or PIE, kiosk locations, including a PIE kiosk in the Fort Lauderdale Airport.

PIE was introduced as a complement to the existing Pizza Inn model and is quickly gaining traction with our guests due to its convenience and with our operators due to its low startup costs. PIE will allow Pizza Inn to diversify its footprint into convenience stores, malls, travel centers and airport settings.

It also now gives RAVE a business model for virtually every footprint between 50 and 5,000 square feet. During the fourth quarter of fiscal 2018, the number of Pizza Inn domestic units increased by 1 to 153 units and international units finished the year at 58.

At Pizza Inn, we are experiencing renewed interest in our traditional buffet model and see strong interest in our PIE kiosk model from prospective licensees. We have a growing pipeline and look forward to the upcoming opening of our refreshed Pizza Inn restaurant design in the Dallas-Fort Worth market next week.

Pie Five comparable store retail sales decreased 6.4% in the fourth quarter of fiscal 2018, when compared to the prior year. As Scott mentioned, we have been very encouraged by the recent response to new menu offerings, including our very popular cauliflower crust, along with 14-inch pizzas and our sandwich line.

Pie Five is evolving to meet the modern business climate and recently introduced a new prototype that we’re calling the ‘Goldilocks’ layout. It’s a right-sized model that factors in current labor and real estate costs in the fast-casual industry. It offers reduced startup costs and a competitive return for franchisees at the unit level.

This model focuses on speed and simplicity with a limited menu and an emphasis on building off-premise sales through carry out online ordering and third-party delivery. Our first Goldilocks location is expected to open in Garden City, Kansas, next month, and we have additional locations in development.

We finished the year with one company owned and 72 franchised by Pie Five restaurants. Our refranchising initiatives have been largely successful and it is allowed us to partner with our existing franchisees to develop and test new initiatives that drive sales.

At this point, I’m going to turn the call over to our Chief Accounting and Administrative Officer, Andrea Allen, to discuss financial results in further detail..

Thanks, Bob. For the fourth quarter, total revenues decreased $2.8 million, compared to $5.3 million in the same period of the prior year. For fiscal 2018, total revenues decreased to $15.1 million from $26.1 million in the prior year.

Decreased revenues were driven primarily by the reduction of company-owned units, due to transfers to franchisee enclosures. As of the end of fiscal 2018, the company owned one Pie Five restaurant, compared to 13 at the end of 2017. All 283 other domestic and international units are either franchised or licensed.

Net income for the fourth quarter increased to $3.3 million, or $0.21 per diluted share, compared to a loss of $1.1 million, or $0.11 per diluted share in the same period of the prior year.

Net income for fiscal 2018 increased to $1.9 million, or $0.13 per diluted share, compared to a loss of $12.5 million, or $1.18 per diluted share in the prior year.

Increases in the fourth quarter and fiscal 2018 over the comparable period in the prior year were largely due to a $3.4 million benefit from a partial reversal of the previous valuation allowance for net deferred tax assets, $7.9 million increase before tax income from company-owned stores and $2.1 million decrease to corporate administration and other expenses.

Adjusted EBITDA was $330,000 in the fourth quarter, compared to negative $236,000 in the same period of the prior year. Adjusted EBITDA was $619,000 in fiscal 2018, compared to negative $1.7 million in the prior year. The company’s cash and cash equivalents increased to $1.4 million as of June 24, 2018, $900,000 improvement over the prior year-end.

During 2018 fiscal year, our cash used in operating activities was $3.9 million versus $5.5 million used in the prior year. For the year, we had $708,000 in cash provided by investing activities, resulting from net proceeds from the sale of assets of $1.8 million and capital expenditures of $1.1 million.

We had a net of $4.1 million in cash provided from financing activities in fiscal 2018, compared to $4.7 million in the prior year. The cash flows from financing activities in fiscal 2018 was provided by the net proceeds from the sale of stock of $5.1 million, partially offset by a payment of the short-term loan that we have of $1.0 million.

The company’s cash and cash equivalents increased to $1.4 million as of June 24, 2018, $900,000 improvement over the prior year. Total shareholders’ equity at the end of fiscal 2018 was $6.3 million versus the deficit of $2.1 million at the end of fiscal 2017.

As a reminder, we disclosed a great deal of brand-specific in financial and operating performance in our earnings release, tables and in our SEC filings. This information includes brand-specific comp and non-comp restaurant average unit volumes and income statement line item details and earnings explanations.

Our Form 10-K was filed with the SEC earlier this afternoon.

In closing, we believe that we’re on track with executing our strategic plan of simplifying our business model, focusing on branding and top line growth initiatives for our Pie Five and Pizza Inn franchisees and innovating with new products and services that will lead us to continued growth in the future.

With that, let’s open up the line for questions..

We will now begin the question-and-answer session. [Operator Instructions] At this time, there doesn’t appear to be any questions. So with that, we would like to - I’m sorry, it looks like a question did pop in. It looks like we do have a question from [Brent Masters] [ph]. Please go ahead..

Yes, thank you. So quick question on - we’ve got some favorable returns on the Pizza Inn concept, the PIE, Express concept, et cetera. But still it’s hard to share your enthusiasm, I guess, for the Pie Five, which we’re all hopeful will turnaround.

But assuming that, that does turnaround, we get some, at least, get more back positive umbers for the growth.

That combined with the PIE concept, the Pizza Inn continuing to hold steady there, where are your expectations over the next year as far as growing goes combined entities?.

Yes, so a great question. I would say that, I alluded to it a little bit, Brett..

Brent..

Yes, Brent. And the fact that, we - our first quarter ended yesterday - yes, yesterday. And that we’re seeing the - I would say, continued momentum with Pie Five in their sales, call it, negative comps continuing to compress, which is good.

I think that there’s - with this Goldilocks project that Bob talked about, we’ve got a new business model that works. And that’s - to me it’s a big portion of our business model. What is, I think, to your comment, it’s probably unfair the way it comes out with the way I talk about it or the coming [indiscernible] Pizza Inn has been around since 1958.

So Pizza, we’re revitalizing this legacy brand in with a new prototype and now we’ve got growth with current franchisees with remodels, with new stores, with new franchisees, PIE is now a whole new world of convenience stores and outlets, whether it be major big box retailers, et cetera.

And then Pie Five, I think, now we’ve got a model that works for everyone that allows you to have a five-minute pizza made to order or grab and go at your disposal, which is much more affordable. So we’re working on all this stuff.

And I think that what we’re seeing with the 14-inch pizza, the sandwiches, calzone that we’re up, by the way, it’s in one store. But the portability of being able to grab something that’s that high-quality and putting your car and you go.

So there are so many things going on here that I think it’s really exciting, and it’s hard to do all that and have seen that from a press release and/or a call. But that’s, I guess, I’m giving you a long answer to your short question, but that’s where we’re at..

Thank you for that.

Are you prepared to go on record as to any growth projections over the next year?.

I have no idea what that means..

Or revenues or percentage growth basis on revenues?.

No..

Okay..

And today’s next question will be with - from Mike [indiscernible]. Please go ahead..

Yes, good afternoon. How are you all? So I just want to congratulate Bob and Andrea on their promotions. Scott, I’m familiar with your history having read about you biographically. My question really is simple. First off, I see the continued improvement, getting rid of Norco, the six consecutive quarters, you guys are doing great.

I realize, it’s a battleship to turnaround. My only question is, how do you envision the cash burn, it’s like for the next two to three quarters? And do you guys - the last quarter, it sounded like, you’re going to be okay.

I just wanted to make sure that you’re still on that same wavelength of, you think you’re going to be okay for the next two, three, four quarters? Is that a reasonable assumption?.

Yes. So what I would say and Andrea jump in here. So there is no cash burn here on - from here and now. We have put ourselves in a position, again, hang on [if she’s going to like shoot me, if I say some wrong here, just to see now]. [ph].

Yes..

We have - we went from - when I started here year-and-a-half ago of figured out how to make a check run versus now we have cash, we got shareholder equity. We’re growing the business. We are now growing three brands. We are fixing the same hands. So there is no knock on wood, cash renew.

The only downside, which is probably an off-balance sheet thing would be just any other outside leases that are up, but it’s nothing in, yes, I mean, it pales in comparison to what we have dealt with and shouldn’t be an issue..

Okay. That’s really are. Just continue down the path, I think, you’re doing a great job, and welcome aboard to [indiscernible] to your new spot soon. Thanks for taking the call, Scott..

Well, Thank you. No, actually, I appreciate it. Great questions. Thank you..

Okay. Thanks..

And with that, I will conclude today’s question-and-answer session, as well as today’s conference. We do want to thank you for attending today’s presentation. And at this time, you may now disconnect your lines..