Q3 FY 2017 Earnings Conference Call June 22, 2017

Transcription

1 Q3 FY 2017 Earnings Conference Call June 22, 2017

2 Cautionary Statement Certain information in this presentation may constitute forward-looking statements under the Private Securities Litigation Reform Act of These statements involve risks and uncertainties, and actual results may differ materially from current expectations. These risks are more fully described in the company s SEC filings. This presentation also includes certain non-gaap information, including system-wide restaurant count and sales information, which include data for both company and franchise drive-ins. Management believes that system-wide information is useful in analyzing the growth of the Sonic brand as well as the company's revenues, since franchisees pay royalties based on a percentage of sales. Other non-gaap measures, such as Free Cash Flow, are defined elsewhere and, in management s view, provide additional insight into the company's performance. 2

3 Cliff Hudson Chief Executive Officer

4 Q3 FY 2017 Highlights EPS* unchanged year-over-year 1.2% system same-store sales decline Company drive-in margins increased 40 bpts Development pipeline 5% higher than Q Repurchased 1.2 million shares for $30.1 million *Excludes certain adjustments outlined in company s earnings release filed June 22, 2017 which contains most directly comparable GAAP measure. 4

5 Management Update Lori Abou Habib- Chief Marketing Officer Darin Dugan- Vice President of National Marketing Kim Lewis- Vice President of Digital Strategies 5

6 A More Balanced Promotional Strategy Relevant Value Premium Innovation 6

7 Strong Daypart Mix and Premium Product Strategies Help Drive Growth % of Sales (1) Product News and Relevant Value (1) Represents % of system sales for the 12 months ended May 31,

8 Nearing Completion of POPS Installations Percentage of System with POPS Installed at Quarter End* POPS: Point of Personalized Service Customer Connection Targeted Message Personalized Transaction *Estimated as of May 31,

9 Successful Release of Redesigned App Evolving Capabilities Order confirmation added to the application Customer mobile profile linked to POPS screens allowing for higher degree of personalization Increased number of mobile offers and rewards Mobile payment Coming soon: Mobile ordering / order ahead Direct payment with credit card or Apple Pay 9

10 POPS Screen Linked to Customer 10

11 The ICE Journey CUSTOMER ENGAGEMENT Personalized one-to-one messaging via POPS and mobile Smart suggestive selling by store segment Launch of customer acquisition effort Targeted marketing by store segment Credit card & Apple Pay in mobile app Order-ahead capabilities through mobile app Increased number of mobile offers Text and marketing Customer profiles linked to POPS and mobile pay Order confirmation added to mobile application Launch of ICE New mobile application released POPS infrastructure installed INTEGRATED TECHNOLOGY 11

12 Development Activity Remains Strong Development Activity New Stores Relocations and Rebuilds E 12

13 Franchisee Investment Continues Types of Franchisee Investment ($ in millions) New Stores Relocations Rebuilds POPS/POS/Refresh $348 $283 $49 $106 $164 FY13 FY14 FY15 FY16 FY17E 13

14 Net Unit Growth on Track New System Drive-Ins Opened Net of Closings 14

15 Claudia San Pedro Chief Financial Officer

16 Third Quarter Financial Results Operating Income Margin* EPS* 23.5% 27.9% $0.43 $0.43 Q3 FY2016 Q3 FY2017 Q3 FY2016 Q3 FY2017 *Excludes certain adjustments outlined in company s earnings release filed June 22, 2017 which contains most directly comparable GAAP measure. 16

17 Free Cash Flow Deployment Uses of Cash ($ in millions) Share Repurchase Dividends $24 $21 $19 $31 $35 $80 $124 $148 $ E 17

18 Capital Structure Strong Free Cash Flow $52.1 million unrestricted cash balance Approximately $55 to $60 million of free cash flow (1) expected in FY 2017 Uses of Cash to Enhance Value Quarterly cash dividend of $0.14 per share of common stock As of May 31, 2017, $45 million remaining on outstanding authorization for fiscal 2017 Purchased $128 million in stock through fiscal Q Financial Objectives Grow EBITDA with improved sales Maintain long-term capital flexibility Targeting x net debt to EBITDA (2) (1) Free cash flow is defined as net income plus depreciation, amortization and stock compensation expenses, less capital expenditures and spending on build-to-suit drive-in development. (2) Net Debt defined as total debt less unrestricted cash on balance sheet, EBITDA is defined as earnings before interest, tax, depreciation and amortization and stock compensation expense 18

19 Q Outlook Adjusted EPS of $0.43 to $0.45 (1.5%) to flat same-store sales 30 to 35 new franchise drive-in openings Drive-in margins of approximately 18.0% depending on same-store sales growth SG&A expense of approximately $22 million Depreciation expense of $9.5 million to $10.0 million Net interest expense of $6.8 million to $7.2 million Capex of $9 million to $11 million, or $7 million to $9 million excluding build-to-suit drive-in development Tax rate of 35.0% to 35.5% 19

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