Investor Presentation. Wells Fargo Conference October 2012

Transcription

1 Investor Presentation Wells Fargo Conference October 2012

2 Disclaimer This presentation contains forward-looking statements, as defined by federal and state securities laws. Forwardlooking statements include statements concerning plans, objectives, goals, strategies, expectations, intentions, projections, developments, future events, performance or products, underlying assumptions and other statements which are other than statements of historical facts. In some cases, you can identify forward-looking statements by terminology such as may, will, should, hope, expects, intends, plans, anticipates, contemplates, believes, estimates, predicts, projects, potential, continue, and other similar terminology or the negative of these terms. Forward-looking statements are only predictions that relate to future events or our future performance and are subject to known and unknown risks, uncertainties, assumptions, and other factors, including those described under Risk Factors in our prospectus, many of which are beyond our control, that may cause actual results, outcomes, levels of activity, performance, developments, or achievements expressed, anticipated or implied by these forward-looking statements. As a result, we cannot guarantee future results, outcomes, restaurant activity, performance, developments, or achievements, and there can be no assurance that our expectations, intentions, anticipations, beliefs, or projections will result or be achieved or accomplished. These forward-looking statements are made as of the date hereof and are based on current expectations, estimates, forecasts and projections as well as the beliefs and assumptions of management. Our actual results could differ materially from those stated or implied in forward-looking statements. Further, we encourage you to review the risks that we face and other information about us discussed in the Prospectus, which is available at Throughout this presentation, we reference Adjusted EBITDA and restaurant-level profit margin, which are both non-gaap financial measures. Please refer to the Appendix to this presentation as well as the Registration Statement for a discussion of Adjusted EBITDA and restaurant-level profit margin, as well as a reconciliation of those measures to the most directly comparable financial measure required by, or presented in accordance with, generally accepted accounting principles in the United States, or U.S. GAAP. 2

3 Del Frisco s Restaurant Group One of the premier fine dining steakhouse concepts in the U.S. Features prime beef and award-winning wine selection Vibrant energetic steakhouse Features fine handselected, aged steaks and broad offering of seafood Classic American Grille Features same steaks as Del Frisco s along with wide assortment of relatively less expensive entrees 32 restaurants 19 states LTM Revenue of $219.7 million LTM Adj. EBITDA of $42.7 million Del Frisco s Sullivan s Del Frisco s Grille 3

4 Investment Highlights Differentiated, yet highly complementary concepts Demonstrated, unique operating model Highly attractive new unit economics Significant growth opportunity for all concepts Proven management team 4

5 The Next Generation Full-Service Dining Company Food Service Bar Décor Atmosphere Limited menu Predictable flavor profile Slower, low-energy service Food brought to tables on carts Smaller, less focused bar Little emphasis on social bar scene Dark wood Dim lighting Staid Classic Traditional competitors The Del Frisco s difference Diverse menu offering for broad appeal Bolder flavor profile Swarming, upbeat service Teamwork-focused service approach Large, central bar Lively bar with signature cocktails Contemporary designs Appealing to both genders and broader age demographic Music and high energy 5

6 2-Year cumulative comparable restaurant sales growth DFRG has Delivered Impressive Results 2011 comparable restaurant sales growth of over 11% 2011 revenue growth of 22% 2011 Adj. EBITDA growth of 22.5% 20.0% 2-Year cumulative comparable restaurant sales growth (a) 15.0% 11.8% 12.2% 15.5% 10.0% 6.7% 5.0% 0.0% 1.0% Knapp Track 2.9% a) Based on stacked comparable restaurant sales growth. Source: Company information, public filings, and Knapp Track 6

7 Differentiated, Yet Highly Complementary Concepts Average check AUV of $6.7 million across all concepts AUV $12.5m $4.4m $4.5m - $6.0m (target) $120 $100 $100 $80 $60 $40 $20 $0 $59 $53 No. of restaurants Geography Premier locations in major metro areas Mix of urban and affluent suburban locations Mix of urban and affluent suburban locations with strong lunch presence Building size 11k 24k sq. ft. 7k 11k sq. ft. 6.5k 8.5k sq. ft. Target age group

8 Del Frisco s Double Eagle Steakhouse Big and bold One of the premier steakhouse concepts in the U.S. Extensive, award-winning wine list Contemporary and classic designs Nine locations in seven states Food vs. beverage split: 66% / 34% 2011 AUV of $12.5m ($9.1m excl. NYC) 8

9 Sullivan s Steakhouse Designed as a complementary concept to Del Frisco s Fine hand-selected aged steak, fresh seafood & custom cocktails Brand resonates with a broad demographic Comfortable fine dining in a high energy atmosphere 19 locations in 15 states Food vs. beverage split: 64%/ 36% 2011 AUV of $4.4m 9

10 Del Frisco s Grille Leverages premier positioning of the Del Frisco s brand Del Frisco s prime steaks and signature menu items at comparable prices Assortment of upscale, relatively less expensive entrees Broad appeal for everyday dining Food vs. beverage split: 65% / 35% Lunch vs. dinner split: 29% / 71% Opened first 4 locations Target AUV of $4.5m - $6.0m 10

11 Our Food A Bold Flavor Profile 11

12 Our Beverages A Differentiated Approach 12

13 Our Accolades Hot new concept of the year and Fine Dining Hall of Fame Restaurant News Top 1,000 restaurants in America Zagat Ivy Award of Distinction Restaurants & Institutions Best of Award of Excellence Wine Spectator DiRoNA Award Winning Restaurant Distinguished Restaurants of North America 13

14 Demonstrated Operating Model Comparable restaurant sales growth outperformance AUV of $6.7 million across all concepts Industry-leading operating margins Successful new unit openings with multiple concepts 14

15 Growth Strategy 2011 Openings 2012 Openings Chicago, IL (d) Washington, DC (b) Boston, MA Open Date: Apr Size: 13,700 sq. ft. Phoenix, AZ (a) Atlanta, GA (c) a) Opened June b) Opened July c) Will open October d) Will open December New York, NY Open Date: Aug Size: 10,300 sq. ft. Dallas, TX Open Date: Nov Size: 7,800 sq. ft. Complementary concepts Ability to co-exist in the same markets Flexible unit models Large Universe of Opportunities 15

16 Number of units Number of units Significant Growth Opportunity Clear path forward 3 units opened in units planned for 2012 Opening units in both current and new markets Targeting 3-5 new unit openings per year Del Frisco s Sullivan s Del Frisco s Grille 2012 planned openings Fine dining steakhouse concepts Publicly traded restaurants Source: Company information and public filings 16

17 Targeted Unit Economics Target at least 25% cash-on-cash return at each concept Current AUV $12.5m $4.4m n/a Targeted new unit AUV Cash investment cost Targeted sales / cash investment $8.5 $9.5m $4.5 $5.0m $4.5 $6.0m $7.0 $9.0m $3.0 $4.5m $3.0 $4.5m 1.1x 1.2x 1.1x 1.5x 1.2x 1.7x Note: Cash-on-cash returns are calculated including pre-opening costs. 17

18 Comprehensive New Site Strategy Target new and existing markets Prioritize DMAs (a) based on Brand Awareness data Brand-specific customer profiling Site evaluation 50 DMAs ( trade areas) 20 Priority markets ( priority trade areas) Rolling inventory of sites in priority trade areas Financial modeling 3-5 Openings per year a) DMAs refers to Designated Market Areas. 18

19 Organic Growth Drivers Focus on increasing sales and average check through: Increasing guest counts through effective marketing and delivering outstanding experience New focus on private dining Tableside up-selling of food items Continued focus on wine selection and cocktails Selective remodels expected to enhance comparable restaurant sales growth Strong 2-year cumulative comparable restaurant sales growth 25.0% 20.0% 20.3% 23.4% 20.5% 15.0% 10.0% 10.2% 13.6% 11.5% 5.0% 0.0% Comparable y-o-y restaurant sales: FY2011 Q Q % 8.8% 7.9% 5.3% 7.3% 0.3% 19

20 Experienced Management Team Name Position Previous experience Mark Mednansky CEO Tom Pennison CFO Bill Martens VP, Development & Construction Jim Kirkpatrick VP, Real Estate Thomas Dritsas April Scopa VP, Culinary & Executive Chef VP, People & Education 20

21 Comparable restaurant sales growth Proven Unit Growth and Comparable Restaurant Sales Growth is Driving Strong Revenue Growth ($m) Number of units Comparable restaurant sales growth Unit growth 15.0% 10.0% 5.0% 0.0% (5.0%) 5.1% 8.8% 3.0% (1.2%) 0.8% 0.8% 12.1% 12.3% 11.8% 9.5% 6.7% 1.3% 2.1% 1.3% 1.4% 1.9% 4.0% 0.2% Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 0 DFRG Knapp Track Q Q 2012 Revenues ($m) $300.0 $250.0 $200.0 $150.0 $100.0 $160.2 $165.6 $201.6 $86.8 $105.0 $50.0 $ H H 2012 Source: Knapp Track 21

22 Cost Structure Food and beverage costs as a % of sales 2011 cost of sales composition Other Food 8.5% Produce/Cheese 9.4% Wine & Other Beverages 33.1% Restaurant operating costs as a % of sales Seafood 16.5% Meat 32.5% 22

23 ($ in millions) Strong Adjusted EBITDA Performance $45.0 $40.0 $36.8 $35.0 $30.0 $30.4 $30.0 $25.0 $20.0 $20.7 $15.0 $14.8 $10.0 $5.0 $ H H 2012 Adj. EBITDA margin 18.9% 18.1% 18.2% 17.1% 19.7% 23

24 Industry Leading Operating Margins 2011 Operating margin % for U.S. based, publicly traded, full service dining concepts 14.0% DFRG adjustments $ Amount % margin 12.0% 10.0% 8.0% 6.0% 4.0% 11.7% 9.3% 9.0% 8.6% 7.8% 7.6% 7.6% 6.8% 6.5% 6.5% 6.4% 6.0% 5.8% 4.8% Operating income $ % Lone Star Fund fees % Est public company expenses (1.7) (0.8%) PF operating income $ % 3.7% 3.3% 3.1% 2.6% 2.5% 2.3% 2.1% 2.0% 1.7% 0.0% (2.0%) (0.8%) Note: Peer Group operating margins represent calendar year 2011 margins. Peers shown include: Buffalo Wild Wings, Darden Restaurants, Texas Roadhouse, Brinker International, Cheesecake Factory, Biglari Holdings, BJ s Restaurants, Cracker Barrel Old Country Store, Ruth s Hospitality Group, Bob Evans Farms, Famous Dave s of America, Bravo Brio Restaurant Group, Ignite Restaurant Group, Ruby Tuesday, P.F. Chang s China Bistro, Red Robin Gourmet Burgers, Frisch s Restaurants, Kona Grill, Luby s, Benihana, J. Alexander s and Granite City Food & Brewery. Source: Company information and public filings 24

25 Industry Benchmarking Best-in-Class Results 2011 Sales growth 2011 Systemwide unit growth 25% 20% 15% 10% 5% 0% (5%) 22% 21% 15% 8% 6% 5% 5% (0%) (3%) 14% 12% 10% 8% 6% 4% 2% 0% (2%) 13% 11% 8% 7% 4% 4% 2% 2% (1%) 2011 Comparable restaurant sales growth (a) 2011 Adj. EBITDA growth (b) 12% 10% 8% 6% 4% 2% 0% 11% 7% 7% 5% 2% 2% 1% 40% 30% 20% 10% 0% (10%) 31% 23% 13% 11% 7% 5% 5% 5% (2%) (4%) (2%) (2%) (20%) (14%) a) PFCB, EAT & RUTH reflect Bistro, Chili s & Ruth s Chris concepts only. b) Adj. EBITDA is calculated before pre-opening, stock based compensation and publicly disclosed non-recurring items; DRI and EAT do not publicly disclose pre-opening. Source: Company information and public filings 25

26 Post-IPO Capital Structure Positioned For Growth Historically funded new restaurant growth from operating cash flow Strong liquidity supported by cash flow from operations and credit facility Limited working capital requirements Company IPO proceeds were used to reduce existing debt, pay a one-time asset advisory termination fee to Lone Star Fund, as well as for working capital needs and general corporate purposes ($m) As of June 12, 2012 Actual Pro-Forma Cash & Cash Equivalents $5.8 $10.9 Total Debt Outstanding $61.5 $0.5 Debt/Adjusted EBITDA 1.4x 0.01x LTM Adjusted EBITDA $42.7 $

27 Outlook Fiscal Year 2012 Guidance Comparable restaurant sales 3% to 4% Restaurant development Cost of sales (as % of consolidated revenue) Restaurant-level EBITDA (as % of consolidated revenue) One Del Frisco s Three Del Frisco s Grilles One Sullivan s closing 30.6% to 31.0% 23.3% to 23.8% Effective tax rate 31% to 32% Gross capital expenditures (before tenant allowances) Annual weighted avg. diluted common shares outstanding $30 to $31 million Approximately 20.6 million 27

28 Long-Term Growth Model 3 5 New units per year 3 % 4% Comparable restaurant sales growth Maintain strong restaurant level margins Modest G&A and interest expense leverage Target long-term EPS growth 18% - 20% 28

29 Investment Highlights Differentiated, yet highly complementary concepts Demonstrated, unique operating model Highly attractive new unit economics Significant growth opportunity for all concepts Proven management team 29

30 EBITDA Adjustments Adjustments Description of adjustments ($ thousands) FY 2009 FY 2010 FY H H 2012 Operating income $21,823 $20,531 $22,092 $9,000 $14,935 Depreciation and amortization 6,422 6,624 7,146 3,096 3,703 Pre-opening costs ,018 1, Management fees and expenses 1,635 2,070 3,129 1,389 1,196 Impairment charge - - 1, Adjusted EBITDA per SEC Filings $30,373 $30,023 $36,785 $14,791 $20,736 Pre-opening costs are costs incurred prior to opening a restaurant Primarily consist of manager salaries, relocation costs, recruiting expenses, employee payroll and related training costs for new employees, including rehearsal of service activities, as well as lease costs incurred prior to opening Also include marketing costs incurred prior to opening as well as meal expenses for entertaining local dignitaries, families and friends Currently target pre-opening costs per restaurant of $800,000 for a Del Frisco s restaurant, $550,000 for a Sullivan s restaurant and $750,000 for a Grille restaurant Management fees and expenses consist of fees and expenses paid to Lone Star Fund and affiliate companies Recognized a non-cash impairment charge of longlived assets of $1.4 million in 2011 Related to the determination that the carrying amount of long-lived assets at one Sullivan s exceeded their estimated fair market value 30

31 Investor Presentation Wells Fargo Conference October 2012