Diversified Restaurant Holdings Inc
Diversified Restaurant — Q1 2019 Earnings Presentation
20 slides from Diversified Restaurant's earnings presentation, May 7, 2019
Slide 1: Q1 2019 Financial Results
Q1 2019 Financial Results May 7, 2019 1
Slide 2: Safe Harbor
Safe Harbor Some of the statements contained in this presentation and the Company’s May 8, 2019 earnings conference call may constitute “forward-looking statements” within the meaning of the Federal Private Securities Litigation Reform Act of 1995. These statements reflect the current views of our s
Slide 3: Q1 2019 Key Information
Q1 2019 Key Information Sales of $40.6M, up $1.1M Sales Negative weather impacts early offset by strong momentum through March Same Store Sales up 4.2% S-S-S Month of March up 8.0% (includes favorable Easter calendar shift) Adjusted EBITDA of $4.5M, 11.1% of sales EBITDA Month of March up 8.0% (incl
Slide 4: DRH Average Check and Traffic Trends
DRH Average Check and Traffic Trends Two consecutive positive quarters of SSS + start to third; average check turned positive in Q2 with reduced promotional activity coupled with menu price increases 7.7% 7.1% 6.6% 6.1% 5.7% 5.5% 4.4% 4.4% 3.3% 3.1% 3.2% 7.7% 2.8% 4.9% 4.6% 2.6% 1.9% 1.7% 1.7% 5.5%
Slide 5: Q1 Sales Bridge ($M)
Q1 Sales Bridge ($M) First quarter revenue driven by strong increase in delivery sales and the Easter calendar shift; while January dine-in traffic was negatively impacted by weather, it turned positive in March $2.0 $0.5 $0.5 $0.4 $0.5 $40.6 $39.5 $39.0 Q1 2018 Sarasota Closure Q1 2018 Adj Weather
Slide 6: Q1 Adjusted EBITDA Bridge ($M)
Q1 Adjusted EBITDA Bridge ($M) Labor, cost of sales and delivery fees were drags on EBITDA in the quarter – exacerbated by one-time costs related to the new menu, plate ware and product launches in March $0.2 $0.3 $0.2 $0.3 $0.4 $0.2 $0.1 $0.1 $5.1 $4.0 $4.5 $4.5 $4.1 $3.9 $3.9 Q1 2018 Labor Cost De
Slide 7: Delivery Expense Headwinds are Abating
Delivery Expense Headwinds are Abating Net delivery expense is on a downward trajectory, and we expect further meaningful improvements in the coming months as price and contract negotiations are working in our favor as volumes increase $3.00 25.0% 22.8% 22.7% 21.4% 20.3% $2.50 19.7% 19.0% 20.0% 18.2
Slide 8: Quarterly Restaurant EBITDA Trend
Quarterly Restaurant EBITDA Trend AUV Trend Line AUV ($M) $2.7 $2.6 $2.6 $2.6 $2.8 $2.5 $2.4 $2.4 $2.4 $2.3 $2.3 $2.5 $2.5 $2.6 $2.5 $2.4 100.0% 3.00 90.0% 29.9% 29.4% 29.4% 29.2% 29.3% 28.2% 28.5% 28.5% 29.2% 28.8% 28.6% COS 28.0% 28.1% 2.50 27.9% 27.4% 29.2% 80.0% 70.0% 2.00 60.0% 24.4% 25.2% 24.7
Slide 9: Q1 Cost of Sales Bridge (% of Net Sales)
Q1 Cost of Sales Bridge (% of Net Sales) Higher traditional wing costs/mix and expenses associated with the new menu roll out were partially offset by lower costs for boneless wings and other products 0.2% 0.1% 0.5% 0.8% 28.2% 29.2% 28.8% 28.8% Q1 2018 Traditional Wings Alcohol New Menu Roll-Out Bon
Slide 10: COS Trends and Wing Impact
COS Trends and Wing Impact Traditional wing costs were high in Q1 2019 relative to all of 2018 – impact exacerbated by mix shift to more traditional wings, driving wing cost as percent of total cost of sales to nearly 24%, same as Q1 2017 $2.14 $2.13 29.9% 29.5% 29.2% 29.4%$2.03 29.3% 29.2% 29.4% 28
Slide 11: Historical Wing Prices
Historical Wing Prices Volatile fresh wing spot prices have remained relatively high coming into the spring season – forecasts suggest possible wing cost headwinds again in 2019 – though the market has softened some more recently $ / lb. Fresh Jumbo Northeast Chicken Wing Spot Prices Source: Urner B
Slide 12: Q1 Labor Bridge (% of Net Sales)
Q1 Labor Bridge (% of Net Sales) Labor cost headwinds and training had a 120 bp negative impact on margins in Q1 as hourly wages have increased 6%, partially offset by efficiency gains 0.5% 0.4% 0.3% 25.7% 26.9% Q1 2018 Labor % Hourly Labor Management Labor Training for Q1 2019 Labor % New Rollouts
Slide 13: Lower G&A Run Rate ($M)
Lower G&A Run Rate ($M) G&A expenses are projected below 5.0% of net sales after run rate cost savings initiatives nearing $1M are executed in Q2 2019 $9.0 5.6% 5.4% $8.5 5.4% 5.2% $8.0 5.2% $7.5 $8.9 5.0% 5.0% $8.4 $7.5 $7.0 $7.9 4.8% $6.5 4.6% $6.0 4.4% FY2016 FY 2017 FY 2018 2019 Fcst G&A $ Total
Slide 14: Free Cash Flow and Net Debt ($M)
Free Cash Flow and Net Debt ($M) Unlevered free cash flow improved to $14.9M LTM Q1 2019; net debt reduced to $93 million ($ millions) 2015 2016 2017 2018 Q1 2019 LTM Total net sales $ 144.8 $ 166.5 $ 1 65.5 $ 1 53.1 $ 154.2 Restaurant level EBITDA 29.7 32.3 2 8.3 2 3.3 22.8 Adjusted EBITDA 21.6 23.
Slide 15: Value Creation – Going Forward
Value Creation – Going Forward > Franchisor under new ownership – demonstrated track record Current > Renewed energy and excitement behind the brand Environment > Traffic turned positive in Q4 2018 behind new media bridge campaign > Significant brand activity rolled out in March 2019 > Traction from
Slide 16: Loyalty Attachment Rates
Loyalty Attachment Rates Blazin’ Rewards Loyalty Attachment Rates 27.6% 27.7% 26.6% 25.4% 24.6% 24.4% 23.9% 23.9% 24.1% 23.7% 22.8% 21.9% 22.1% 21.1% 19.8% 19.4% 18.9% Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 • Our goal is
Slide 17: DRH Continues to Improve its Operations (Q1 2019 vs Q1 2018)
DRH Continues to Improve its Operations (Q1 2019 vs Q1 2018) Guest Loyalty Likely to Loyalty Index Recommend Attachment 2019-89.2% 2019-90.9% 2019-26.6% 2018-86.6% +2.6 pts 2018-88.7% +2.2 pts 2018-21.1% +5.5 pts Review COS Takeout Tracker¹ Waste Variance Execution 2019-4.2 stars 2019-0.4% 2019-92.4
Slide 18: Buffalo Wild Wings
BUFFALO WILD 7 WINGS
Slide 19: EBITDA Reconciliation
EBITDA Reconciliation liversified holdingsinc. DIVERSIFIED RESTAURANT HOLDINGS, INC. AND SUBSIDIARIES Reconciliation between Net Income and Adjusted EBITDA and Adjusted Restaurant-Level EBITDA Three Months Ended (Unaudited) March 31, 2019 April 1, 2018 Net Income $ 55,441 ¢ 159,870 + Income tax (ben
Slide 20: EBITDA Reconciliation cont.
EBITDA Reconciliation cont. Restaurant-Level EBITDA represents net income plus the sum of non-restaurant specific general and administrative expenses, loss on property and equipment disposals, depreciation and amortization, other income and expenses, interest, taxes, and non-recurring expenses relat
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