RAVE Q3 2025: Pizza Inn's Hidden Growth
Analysis reveals solid Pizza Inn performance despite flat overall topline
Disclaimer: I own shares of Rave Restaurant Group and stand to benefit if they rise in price. I may decide to purchase or sell shares at any time without prior notice. Do your own research and size positions appropriately if you invest. Nothing here is meant to be understood as investment or financial advice.
[EDIT MAY 14, 2025: Gurufocus updated the scores to reflect the latest quarterly results. Hence, I updated the Google sheet and the text in Equity Summary.]
TL;DR
Rave Restaurant Group ($RAVE) delivered Q3 2025 results showing flat revenues but double-digit income growth. The top-line stagnation is due to the business transition taking place.
With $8M in net cash and a fortress balance sheet, the company remains undiscovered due to low trading liquidity and a lack of analyst coverage despite growing profits at double-digit rates.
Once the transition completes and growth accelerates, there is potential for a multiple expansion. Currently, the shares yield 7% annualized FCF.
Calculating cash ROE provides an argument to reactivate the buyback program sooner or later.
The company's pizza-centric business model appears relatively resilient to inflationary pressures and economic headwinds, with new value promotions like the "I$8" weekday buffet showing early success.
Outline
TL;DR
Outline
Introduction
Equity Summary
Q3 2025 Results
Thoughts on Consumer Spending
Valuation
Conclusion
Introduction
Rave Restaurant Group ($RAVE) released its Q3 2025 results last week, providing another data point in the company's ongoing transformation story. While the topline number might appear unimpressive at first glance—flat year-over-year revenues—digging beneath the surface reveals a much more promising picture.
The company continues to execute on its twin-track strategy: reinvigorating the Pizza Inn brand while managing Pie Five's controlled decline. This quarter's results validate management's approach, with Pizza Inn franchising revenues growing an impressive 10% year-over-year, completely masked by the contraction in the Pie Five segment.
Since my February update, several key developments have emerged: the company completed a $1.2M share repurchase in a negotiated transaction, the reimage program is delivering concrete results with measurable ROI for franchisees, and a new value-driven promotion is showing early success. Meanwhile, the company's rock-solid balance sheet with $8M in net cash continues to provide both resilience against potential economic headwinds and optionality for accelerated growth or shareholder returns.
For context, my last update article:
Let's dive deeper into the Q3 numbers to understand what's really happening at $RAVE and why I continue to believe this underfollowed microcap deserves attention.
Equity Summary
Share price as of May 9, 2025 according to Yahoo Finance: $2.74
Shares out: 14.21M as of May 6, 2025 (Q3’25 10-Q).
Repurchased 492K shares at $2.40 in a negotiated transaction from IMA Value fund in February for $1.2M. The fund still owns 6.72% of the company.
Following the transaction, shares are kept in the treasury: 11.4M shares. 1.5M shares can still be repurchased under the existing repurchase authorization.
The reverse/forward split has still not been executed
Shareholders’ Equity: $13.4M (-$0.4M)
Current/non-current assets as of March 30, 2025: $10.3M (-$0.1M) / $5.5M (-$0.3M).
Non-current assets show deferred tax assets of $4.3M, down $0.2M QoQ
ST/LT Liabilities as of March 30, 2025: $1.4M (-$0.5M)/ $0.9M (-$0.1M).
Note that the negotiated buyback transaction impacts Shareholders’ Equity doubly: $1.2M cash was paid to IMA Value Fund, and the value of the shares in the treasury (which are deducted from Shareholders’ Equity) increased by said amount.
Net Debt as of March 30, 2025: $8M
Cash: $0.7M
Short-term investments: $8.0M
Bank debt: 0
Lease liabilities: $0.7M
Market Capitalization, fully diluted (Yahoo Finance has not yet updated the shares outstanding, so I calculate my own)
Options outstanding: 114,286
RSU unvested: 247,328
Market Capitalization = (14.21M + .11M + .25M) x $2.74 = $39.9M
Enterprise Value, fully diluted $31.9M
Insider ownership (Yahoo Finance): 22.05% (- 2.7%), Institutional Ownership (Yahoo Finance): 29.07% (+0.17%)
Websites: