Diversified Restaurant Holdings Inc
Diversified Restaurant — Oppenheimer Consumer Growth & E-Commerce Conference 2019
20 slides from Diversified Restaurant's conference presentation, Jun 19, 2019
Slide 1: Oppenheimer Consumer Growth & E-Commerce Conference
Oppenheimer Consumer Growth & E-Commerce Conference June 19, 2019 David Burke, President & CEO Phyllis Knight, Chief Financial Officer
Slide 2: Safe Harbor
Safe Harbor Some of the statements contained in this presentation 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 senior management team with respect to future events, in
Slide 3: Who We Are
Who We Are Nasdaq: SAUC IPO: 2008 One of the Largest Franchisees for Buffalo Wild Wings › Leading operator › Strong cash generator › 64 BWW locations (~10% of franchised locations) › Franchisor under new ownership (Roark Capital acquired in February 2018) Market capitalization $27M › Recent share pr
Slide 4: Positive Sales Trends Are Gaining Momentum
Positive Sales Trends Are Gaining Momentum Three consecutive quarters of SSS growth; average check turned positive in April with reduced promotional activity coupled with menu price increases 11.7% 7.7% 8.0% 7.2% 5.9% 5.5% 5.5% 4.2% 4.1% 4.3% 2.9% 3.1% 3.0% 2.6% 2.2% 1.3% 0.8% (0.3%) 1 (1.8%) (2.2%)
Slide 5: Operational Excellence is a Leading Indicator
Operational Excellence is a Leading Indicator (Current vs. Q2 2018) Guest Loyalty Likely to Loyalty Index Recommend Attachment 90.3% vs 89.0% 92.2% vs 90.7% 27.9% vs 22.8% +1.3 pts +1.5 pts +5.1 pts Review COS Takeout Tracker¹ Waste Variance Execution 4.1 stars vs 3.9 0.2% vs 0.7% 94.9% vs 91.0% +0.
Slide 6: Improving Loyalty Attachment Rate Drives Visits
Improving Loyalty Attachment Rate Drives Visits Blazin’ Rewards Loyalty Attachment Rates 27.6% 27.7% 27.9% 26.6% 25.4% 24.6% 24.4% 23.9% 23.9% 24.1% 23.7% 22.8% 21.9% 22.1% 21.1% 19.8% 19.4% 18.9% Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-1
Slide 7: BWW Rolling w/ Important Initiatives
BWW Rolling w/ Important Initiatives Q4 2019 Full brand re-launch with new media, ramp of new store layout (“Center Stage”), new boneless wing Q2/Q3 2019 New food and beverage offerings, new national Happy Hour promotion, focus on Women’s World Cup with special promotions › Hand-breaded tenders and
Slide 8: Quarterly Restaurant EBITDA Trend
Quarterly Restaurant EBITDA Trend Q1 ‘19 margin headwinds: cost of sales (wing prices), labor (wage rates, new rollouts) and delivery fees AUV ($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% COS 29.9% 29.4% 29.2% 29.3% 28.2% 28.5% 28.5% 29.2% 28
Slide 9: Historical Wing Prices
Historical Wing Prices Volatile fresh wing spot prices have remained stubbornly high through the spring season – forecasts suggest ongoing wing cost headwinds throughout 2019 $ / lb. Fresh Jumbo Northeast Chicken Wing Spot Prices Source: Urner Barry Comtell™ UB Chicken – Northeast Jumbo Wings as of
Slide 10: COS Trends and Wing Impact
COS Trends and Wing Impact Traditional wing costs remain high 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 record high 25.6% Q2 (forecast); we implemented an off-cycle price increase of approx. 100 bps to
Slide 11: Labor % to Sales
Labor % to Sales Despite labor headwinds early in the year, labor expense for the remainder of 2019 is expected to show improvement vs. 2018 as a result of better sales performance, fewer corporate initiatives requiring training investment, and careful labor management 27.5% 27.4% 26.9% 27.0%* 26.9%
Slide 12: Delivery Sales are Growing and Expense Headwinds are Abating
Delivery Sales are Growing and Expense Headwinds are Abating Net delivery expense is on a downward trajectory and we expect ongoing improvements in the coming months; price and contract negotiations are working in our favor as volumes increase › DRH has 52 locations now offering delivery service wit
Slide 13: Lower G&A Run Rate
Lower G&A Run Rate ($M) G&A expenses are projected below 5.0% of net sales after execution of run rate cost savings initiatives nearing $1 million 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 $7.0 $7.5 $7.9 4.8% $6.5 4.6% $6.0 4.4% FY2016 FY 2017 FY 2018 2019 Fcst G&A
Slide 14: Free Cash Flow and Net Debt
Free Cash Flow and Net Debt ($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: Refinancing our Debt
Refinancing our Debt Current debt maturity: June 2020 Mandatory debt amortization: ~$1M/month Interest rate: LIBOR + 3.50% Engaged Stephens, Inc. to lead the process Evaluating variety of alternatives and term sheets Targeting transaction between now and the end of Q3 Expect new terms will: STRENGTH
Slide 16: 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 17: Oppenheimer Consumer Growth & E-Commerce Conference
Oppenheimer Consumer Growth & E-Commerce Conference June 19, 2019
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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