Investor Presentation March

Transcription

1 1 Investor Presentation March 2016

2 Presenters 2 Tim Taft President & Chief Executive Officer President & Chief Executive Officer Lynn Schweinfurth Chief Financial Officer

3 Forward-looking Statements 3 This document and our presentation contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended and are intended to be covered by the safe harbor created by those sections. All statements, other than statements of historical facts included herein, including, without limitation, statements regarding our future financial position and results of operations, business strategy, budgets, projected costs and plans and objectives of management for future operations, are forward-looking statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as may, will, expect, anticipate, intend, plan, believe, seek, estimate or continue or the negative of such words or variations of such words and similar expressions. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements and we can give no assurance that such forward-looking statements will prove to be correct. Important factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements, or cautionary statements, include, but are not limited to: increases in food and other commodity costs; risks associated with the expansion of our business; our ability to manage our growth and successfully implement our business strategy; general economic conditions, particularly in the retail sector; competitive conditions; weather conditions; fuel prices; significant disruptions in service or supply by any of our suppliers or distributors; changes in consumer perception of dietary health and food safety; labor and employment benefit costs; regulatory factors; the outcome of pending or future legal claims or proceedings; environmental conditions and regulations; our borrowing costs; the availability and terms of necessary or desirable financing or refinancing and other related risks and uncertainties; the risk of an act of terrorism or escalation of any insurrection or armed conflict involving the United States or any other national or international calamity; factors that affect the restaurant industry generally, including product recalls, liability if our products cause injury, ingredient disclosure and labeling laws and regulations, reports of cases of food-borne illnesses such as mad cow disease and avian flu, and the possibility that consumers could lose confidence in the safety and quality of certain food products, as well as negative publicity regarding food quality, illness, injury or other health concerns.

4 4 Strategic & Operational Overview

5 Investment Considerations 5 What you want to know Compelling Business Model Two Leading, Differentiated Brands Accelerating Development Given Significant Potential Well Positioned Within the Growing Fast-Casual Segment Proven Financial Results

6 Recent Development 6 Announced Intention to Separate Pollo Tropical and Taco Cabana Businesses Two Standalone Companies with Dedicated Strategy and Execution Eventually Build Two Fully Independent Management Teams Tax-efficient Distribution of 100% of TC s Stock to Fiesta s Shareholder Expected Completion in 2017 or 2018

7 Long-term Business Model 7 8%-10% Company Restaurant Growth Meaningful EPS Growth 2%-3% SSS Growth Margin Expansion 10%-12% Revenue Growth

8 Industry-leading AUVs 8 FY 2015, Average Annual Sales at Company-owned Restaurants $2.6 $2.6 $2.4 $1.9 $1.6 $1.2 $1.1 $1.0 $s in millions. Sources: company filings.

9 Industry-leading AUVs 9 AUV Growth CAGR = 4.7% AUV Growth CAGR = 3.5% $2.3 $2.5 $2.7 $2.7 $2.6 $1.7 $1.8 $1.8 $1.8 $1.9 $2.1 $

10 Compelling Restaurant-level EBITDA % 24.8% FY 2015, % of Restaurant Sales 21.1% 19.4% 19.0% 16.6% 16.3% 16.2% Restaurant-level EBITDA is defined as restaurant sales minus cost of sales, labor, occupancy, other operating and advertising expenses. Pre-opening cost is excluded from the calculation. Sources: company filings

11 Restaurant Growth Potential 11 1,972 1, FY 2015, Number of System-wide Restaurants in U.S Unit 3,200 4,500 2,000 N/A 2,500 N/A N/A N/A N/A 1,600 Potential % of Unit 62% 44% 32% N/A 20% N/A N/A N/A N/A 10% Potential Sources: Domestic system wide unit counts for competitors as of the most recent filings.

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13 A Unique and Extraordinary Brand 13 Freshly prepared Caribbean-inspired food you feel good about eating. A 28 year old brand originating in South Florida Truly differentiated restaurant concept with no direct competitor Signature offerings: fresh, grilled bone-in chicken marinated with tropical fruit juices and spices, rice and beans Additional proteins, side dishes, salads and wraps further broaden target audience Rum punch and Caribbean beer Self service Saucing Island includes made from scratch salsas and sauces Significant restaurant growth potential Best-in-class restaurant economics Attractive value proposition - great quality food with an average check of ~ $10 Convenience with dine-in, take out and drive-thru Catering growth is a meaningful opportunity

14 Restaurant Sales Growth and Margin Trends 14 SSS Growth Restaurant-level EBITDA Margin (% of Restaurant Sales) 8.1% 26.3% 6.6% 5.9% 25.6% 25.9% 24.8% 3.8%

15 Freshly Prepared, Caribbean-inspired Menu 15

16 Our Differentiated Restaurant Growth Vehicle 16 New Prototype Introduced in Texas in March 2014

17 Our Differentiated Restaurant Growth Vehicle 17

18 Accelerating Growth and National Potential Company New Short-term Non-traditional Market Share & 35 Franchise Company Southern Focus; U.S. Licensing Growth with Restaurants Restaurants in Long-term Opportunities Planned 2016, or 23% National Cannibalization Brand Potential Restaurant Growth

19 Accelerating Growth and National Potential 19 Current U.S. Footprint New Company-Owned Restaurants Opened 23/ 0 11 / / E Where two numbers appear on the map, the first represents company-owned restaurants and the second represents franchised and licensed restaurants.

20 Development Strategy 20 CORE SOUTH FLORIDA MARKETS SUPERIOR BRAND AWARENESS Miami-Dade, Broward, & Palm Beach Counties Exceptional financial performance OTHER FLORIDA MARKETS DRIVING TRAFFIC GROWTH WITH MEDIA Orlando, Naples/Fort Myers, Tampa, Jacksonville & Nashville Driving higher brand awareness through new development and media strategies At scale to drive meaningful sales growth with media EMERGING MARKETS LOW BRAND AWARENESS, NOT ON BROADCAST MEDIA Dallas, Houston, San Antonio & Atlanta Robust development pipeline in Texas; build out Atlanta over time as trade areas develop Atlanta to begin broadcast media by 4Q 2016, San Antonio started media in mid- February

21 Reimaging Program Initiated in Former Reimaged

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23 Broad Menu Offerings with Mexican Authenticity 23 Fresh, contemporary food prepared with authentic flavors of Mexico A 38 year old brand originating in San Antonio 24-hour format Broad, authentic Mexican product offerings including sizzling fajitas, enchiladas, quesadillas, burritos and salads Margaritas and beer Fresh tortillas made daily Self service salsa bar includes made from scratch salsas and sauces Top five AUV in the fast casual segment, operating performance at peak Expansion in Texas Attractive value proposition - great quality food with an average check of ~ $9 Convenience with dine-in, take out and drive-thru Catering growth is a meaningful opportunity

24 Restaurant Sales Growth and Margin Trends 24 SSS Growth Restaurant-level EBITDA Margin (% of Restaurant Sales) 19.0% 4.7% 4.4% 17.9% 3.3% 16.9% 16.7% 0.5% Restaurant-level EBITDA Margin excludes pre-opening costs.

25 Fresh, Authentic Flavors of Mexico 25

26 Renewed Texas Expansion Leveraging Proven Brand Affinity 26 All stores reimaged between 2012 and Prototype New Prototype

27 Renewed Texas Expansion Leveraging Proven Brand Affinity 27

28 2016 sales and traffic drivers 28 Guidance at least low single digit comparable sales growth at both brands 1% pricing Incremental advertising expense at Pollo ~ 50 bps or $4 million+ Increased media weights in mature markets At least 84% of restaurants will be supported by broadcast media Earlier investment in new markets New Real People advertising campaign at Pollo New product news with limited-time-promotions Continuation of the Pollo remodel program Introduction of new loyalty programs Continuation of new focus on off-premise Ongoing operations focus and execution 1.5% to 2.5% of pricing New product news with limited-time-promotions Completed Taco Cabana remodel program Introduction of new loyalty programs Continuation of new focus on off premise Ongoing operations focus and execution

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30 30 The rest of the story. (what you need to know)

31 Not the typical growth story 31 Atlanta Jacksonville THE BIG 3 Tampa Orlando Miami-Dade, Palm Beach and Broward Represents 65 of the 91 restaurants in 2012 Average Unit Volume of $2.8 in 2012 Other five markets Ft. Myers 26 restaurants 5cities $1.9 Million AUV

32 From 2012 to THE BIG 3 65 to 77 units $2.8 to $3.3 AUV

33 Growth of the other five cities 33 Atlanta Jacksonville 26 to 50 units Tampa Orlando $1.9 to $2.0 AUV Ft. Myers Now Media Efficient Media in Atlanta to begin 4Q 2016

34 In 2016, 84% Restaurants in Markets with Broadcast Media 34

35 Case Study Naples / Ft Myers 35 Ft. Myers

36 Case Study Naples / Ft Myers, Building Market Share $1.6 $2.1 $2.4 $ Company-owned Restaurants Total Transactions Annual Unit Volume (in millions)

37 Growth in Texas 37 Dallas Austin Opened Texas in 2014 Increased units in 2015 from 10 to 23 Houston Project 41 total units by the end of 2016 San Antonio San Antonio media turned on Feb 2016

38 The rest of the story 38 Management teams overhauled Recipes & portion sizes made consistent Achieving all-time best customer feedback scores Positive transactions despite sizable price increases Enhanced culinary team System reimage program completed

39 The rest of the story 39 The Big 3 represent 50% of all restaurants Funded emerging Florida markets Maintain highest AUVs in the industry Reworked process, procedures, I.T. infrastructure, HR, development and supply chain all while plane is flying

40 Still many levers to pull to drive SSS 40 MARKETING CATERING OFF PREMISE CONSUMPTION 53% LOYALTY INNOVATION

41 By end of Doubling in size since 2012

42 42 And now you know the rest of the story.

43 43 Financial Summary

44 Accelerating Growth Since 2012 Spin-off % 22.1% 6.4% 9.0% 8.9% 7.3% 8.2% 10.8% 12.5% 20.8% 21.2% $0.60 $0.83 $1.33 $ % Company-owned Restaurant Growth Revenue Growth Restaurant-level EBITDA Margin % of Restaurant Sales 130 bps Margin Expansion Adjusted Diluted EPS CAGR = 36.3% Note: Restaurant-level EBITDA Margin excludes pre-opening costs.

45 Proven Business Model % 19.3% 20.5% 16.5% 16.5% 14.5% 21.6% 25.0% 13.2% 13.3% 12.5% 11.3% 12.1% 9.5% 8.5% 0.0% Company-owned Restaurant Growth Revenue Growth Adjusted EBITDA Growth Restaurant-level EBITDA Growth Note: Restaurant-level EBITDA Margin excludes pre-opening costs.

46 Performance Trends Improved to Current Record Level % 5.6% 5.6% 20.3% 3.1% 4.0% 4.1% 11.4% 12.2% 1.3% 1.2% 1.7% 5.2% 3.1% -3.0% -4.2% Company-owned Restaurant Growth Revenue Growth Adjusted EBITDA Growth Restaurant-level EBITDA Growth Note: Restaurant-level EBITDA Margin excludes pre-opening costs.

47 FY 2015 Financial Results 47 ($s in millions) FY 2014 FY 2015 % Growth Restaurant Sales $608.5 $684.6 Franchise Revenues $2.6 $2.8 Total Revenues $611.1 $ % Restaurant-level EBITDA $133.2 $ % % Restaurant Sales 21.9% 22.1% Adjusted Net Income $35.7 $ % % Revenues 5.8% 5.9% Adjusted Diluted EPS $1.33 $ %

48 Leverage and Liquidity 48 ($s in millions) FY 2012 FY 2013 FY 2014 FY 2015 Senior Secured Second Lien Notes $ Senior Secured Credit Facility - $71.0 $66.0 $71.0 Capital Leases $1.0 $1.4 $1.3 $1.7 Lease Financing Obligations $3.0 $1.7 $1.7 $1.7 Total Debt $204.0 $74.0 $69.0 $74.3 $150M revolving credit facility (currently, LIBOR bps) through 2018 As of the end of FY 2015, available borrowing capacity of $73.5M Repurchased $200M, 8.875% Notes in Q Refinancing including $135M equity offering net proceeds New Capital Structure Contributed ~ 25% EPS Growth in 2014 Less: Cash and Cash Equivalents $15.5 $11.0 $5.1 $5.3 Total Net Debt $188.5 $63.0 $63.9 $69.1 Total Adjusted EBITDA $64.2 $69.8 $85.7 $99.0 Total Net Debt / Total Adjusted EBITDA 2.9x 0.9x 0.7x 0.7x

49 Focused Capital Allocation 49 New Restaurant Development Focused on Pollo Tropical Continued Reimaging Initiative at Pollo Tropical, ~ 15 in 2016 Ongoing Strategic Investments to Optimize Restaurant Management, Guest Experience and Infrastructure

50 2016 Operating Targets 50 SSS At Least Low Single Digit at Both Brands Cost of Sales Improvement, as a % of Sales, Approximately 100 bps at TC and 180 bps at PT Depreciation and Amortization Expense of Approximately $36 million to $38 million Effective Tax Rate of 36% to 37% Company-owned Restaurant Openings of 40 to 44 Capital Expenditures of $95 million to $110 million

51 51 Appendix

52 Commodity Cost Overview 52 Top 5 Food Purchases 2016F The Company Contracts Commodities With Some Suppliers Top 5 Food Purchases 2016F 2016 Projected Consolidate Commodity Decrease ~ Low Single Digits 2016 Commodities Under Fixed Pricing By Year End ~ 70%-80% COGS

53 Franchising 53 Franchise Locations Current focus is U.S. non-traditional franchising (universities and airports) - Currently, 5 Pollo and 2 Taco locations Bahamas... Guatemala International franchise locations are Pollo Tropical restaurants Honduras... 1 We have one traditional Taco franchisee in Albuquerque, NM with 4 restaurants Panama... 5 Franchise revenues are not meaningful today, <1% of total revenues Franchise expansion anticipated to be a growth platform in the future Puerto Rico Trinidad and Tobago 2 United States.. 11 Venezuela... 1

54 Total Adjusted EBITDA Reconciliation 54 ($s in millions) FY2012 FY2013 FY2014 FY2015 Restaurant-level Adjusted EBITDA Excluding Pre-Opening Costs: Pollo Tropical $ 58.2 $ 67.8 $ 79.0 $ 90.4 Taco Cabana Consolidated $ $ $ $ Less: Pre-Opening Costs Restaurant-level Adjusted EBITDA: Pollo Tropical Taco Cabana Consolidated $ $ $ $ Add: Franchise Royalty Revenues and Fees Less: General and Administrative (Excluding Stock-based Compensation) Adjusted EBITDA Pollo Tropical Taco Cabana Consolidated $ 64.2 $ 69.8 $ 85.7 $ 99.0 Less: Depreciation and Amortization Impairment and Other Lease Charges Interest Expense Loss on Extinguishment of Debt Provision for Income Taxes Stock-Based Compensation Other Expense / (Gain) (0.1) (0.6) (0.6) (0.7) Net Income $ 8.3 $ 9.3 $ 36.2 $ 38.5

55 Adjusted EBITDA Reconciliation 55 ($s in millions) FY2012 FY2013 FY2014 FY2015 Restaurant Sales $ $ $ $ Less: Cost of Sales Restaurant Wages and Related Expenses Restaurant Rent Expense Other Restaurant Operating Expenses Advertising Expense Restaurant-Level Adjusted EBITDA Excluding Pre-Opening Costs $ 58.2 $ 67.8 $ 79.0 $ 90.4 Less: Pre-Opening Costs Restaurant-Level Adjusted EBITDA $ 57.1 $ 65.7 $ 75.6 $ 86.1 Add: Franchise Revenue Less: General and Administrative Expenses Adjusted EBITDA $ 38.6 $ 43.7 $ 52.7 $ 59.3

56 Adjusted EBITDA Reconciliation 56 Restaurant Sales $ $ $ $ Less: Cost of Sales Restaurant Wages and Related Expenses Restaurant Rent Expense Other Restaurant Operating Expenses Advertising Expense Restaurant-Level Adjusted EBITDA Excluding Pre-Opening Costs $ 47.2 $ 48.7 $ 54.2 $ 60.8 Less: Pre-Opening Costs Restaurant-Level Adjusted EBITDA $ 46.6 $ 48.0 $ 53.5 $ 60.6 Add: Franchise Revenue Less: General and Administrative Expenses Adjusted EBITDA $ 25.6 $ 26.1 $ 33.0 $ 39.7

57 Adjusted Net Income Reconciliation 57 ($s in millions, except per share amounts) FY2012 FY2013 FY2014 FY2015 $ EPS $ EPS $ EPS $ EPS Net Income $ 8.3 $ 0.35 $ 9.3 $ 0.39 $ 36.2 $ 1.35 $ 38.5 $ 1.44 Add (each net of tax effect): Impairment and other lease charges (a) Qualification for sale leaseback accounting (b) Secondary offering expenses (c) Loss on extinguishment of debt (d) Gain on condemnation (e) (0.3) (0.01) (0.2) (0.01) Legal settlements and related costs (f) (0.3) (0.01) Gain on sale of property (g) (0.1) - (0.3) (0.01) Adjusted net income & EPS $ 14.1 $ 0.60 $ 19.9 $ 0.83 $ 35.7 $ 1.33 $ 40.8 $ 1.52 * Amounts do not add to adjusted total due to rounding (a) Impairment and other lease charges for the twelve months ended December 30, 2012 are primarily related to the closure of five Pollo Tropical restaurants in New Jersey in the first quarter of Impairment and other lease charges for the twelve months ended January 3, 2016 are primarily related to the suspension of our Cabana Grill concept at the end of fiscal Impairment and other lease charges for each period are presented net of taxes of $0.9 million, $0.1 million, $0.1 million and $2.4 million for the twelve months ended January 3, 2016, December 28, 2014, December 29, 2013 and December 30, 2012, respectively. (b) Prior to the spin-off from Carrols Restaurant Group, Inc. ("Carrols"), certain sale-leaseback transactions were classified as lease financing transactions because Carrols guaranteed the related lease payments. Effective upon the spin-off, the provisions that previously precluded sale-leaseback accounting were cured or eliminated. As a result, the real property leases entered into in connection with these transactions are now recorded as operating leases. Additionally, in the second quarter of 2012, we exercised purchase options associated with the leases for five restaurant properties also previously accounted for as lease financing obligations and purchased those properties from the lessor. The amount reported as "qualification for sale leaseback accounting" represents the net increase in rent expense, decrease in depreciation expense and decrease in interest expense, that would have impacted net income had the leases been accounted for as operating leases for all periods presented, based on the deferred gain on sale-leaseback transactions calculated at the time of the spin-off, and had the five properties been owned for the full year ended December 30, Qualification for sale leaseback accounting is shown net of taxes of $0.6 million in the twelve months ended December 30, This amount is included for comparative purposes only, and may not be indicative of what actual results would have been had the qualification for sale-leaseback accounting treatment of these leases (and the treatment of such leases as operating leases) occurred on the dates described above. (c) Secondary offering expenses for the twelve months ended December 29, 2013 include expenses related to the underwritten secondary public equity offering completed during March 2013 totaling $0.4 million. The Company did not receive any proceeds from the sale of shares in the offering. Secondary offering expenses are presented net of taxes of $0.2 million. (d) The Company recognized a loss on extinguishment of debt of $16.4 million in the fourth quarter of 2013 related to the repurchase and redemption of its Notes. The loss on extinguishment of debt for the twelve months ended December 29, 2013 is presented net of taxes of $5.9 million. (e) Gain on condemnation in 2015 primarily includes a previously deferred gain from a sale-leaseback transaction that was recognized upon termination of the lease. Gain on condemnation in 2014 includes a gain from a condemnation award resulting from an eminent domain proceeding. Gain on condemnation for each period is presented net of taxes of $(0.1) million and $(0.2) million for the twelve months ended January 3, 2016 and December 28, 2014, respectively. (f) Legal settlements and related costs in 2015 include legal fees and other costs, including estimated settlement charges, associated with a class action litigation, and in 2014 include the benefit of a payment received as settlement of a litigation matter. Legal settlements and related costs for each period are presented net of taxes of $0.6 million and $(0.2) million for the twelve months ended January 3, 2016 and December 28, 2014, respectively. (g) Gain on sale of property for each period is presented net of taxes of $(0.2) million and $(0.0) million for the twelve months ended December 29, 2013 and December 30, 2012, respectively.

58 Use of Non-GAAP Financial Measures 58 Adjusted EBITDA, restaurant-level adjusted EBITDA, and restaurant-level adjusted EBITDA excluding pre-opening costs are all non-gaap financial measures. Adjusted EBITDA is defined as earnings attributable to the applicable segment before interest, loss on extinguishment of debt, income taxes, depreciation and amortization, impairment and other lease charges, stock-based compensation expense and other income and expense. It includes an allocation of corporate and brand general and administrative expenses (each excluding stock-based compensation). Restaurant-level adjusted EBITDA (excluding pre-opening costs) is defined as Adjusted EBITDA excluding franchise royalty revenues and fees, pre-opening costs and general and administrative expenses. Management believes that such financial measures, when viewed with our results of operations calculated in accordance with GAAP and our reconciliation of restaurant-level adjusted EBITDA and restaurant-level adjusted EBITDA excluding pre-opening costs and adjusted EBITDA to net income (i) provide useful information about our operating performance and period-over-period growth (including at the restaurant level), (ii) provide additional information that is useful for evaluating the operating performance of our business, and (iii) permit investors to gain an understanding of the factors and trends affecting our ongoing earnings, from which capital investments are made and debt is serviced. However, such measures are not measures of financial performance or liquidity under GAAP and, accordingly, should not be considered as alternatives to net income or cash flow from operating activities as indicators of operating performance or liquidity. Also these measures may not be comparable to similarly titled captions of other companies. Adjusted net income and related adjusted earnings per share are non-gaap financial measures. Adjusted net income is defined as net income before impairment and other lease charges, the impact of the qualification for sale-leaseback accounting (primarily upon the spin-off from Carrols) for certain leases previously accounted for as lease financing obligations, secondary offering expenses, loss on extinguishment of debt, gain on condemnation, legal settlements and related costs and gain on sale of property. Management believes that adjusted net income and related adjusted earnings per diluted share, when viewed with our results of operations calculated in accordance with GAAP (i) provide useful information about our operating performance and period-over-period growth, (ii) provide additional information that is useful for evaluating the operating performance of our business, and (iii) permit investors to gain an understanding of the factors and trends affecting our ongoing earnings, from which capital investments are made and debt is serviced. However, such measures are not measures of financial performance or liquidity under GAAP and, accordingly should not be considered as alternatives to net income or net income per share as indicators of operating performance or liquidity. Also these measures may not be comparable to similarly titled captions of other companies.