Q2 FY 2018 Earnings Conference Call March 27, 2018

Transcription

1 Q2 FY 2018 Earnings Conference Call March 27, 2018

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 Claudia San Pedro President

4 Q2 FY 2018 Highlights Q2 EPS* of $0.17, or $0.13 excluding the impact of tax reform Q2 same-store sales declined 2.9% but were flat excluding weather impact Q2 company drive-in margins were 11.4% 8 new store openings Repurchased 1.2 million shares for $30.7 million *Excludes certain adjustments outlined in company s earnings release filed March 27, 2018 which contains most directly comparable GAAP measure. 4

5 Largest Weather Impact in the Central US Impact of Weather on Traffic by Region Source: Planalytics Business Weather Intelligence; weather figures indicate Weather Driven Demand as provided by Planalytics which is based on temperature and precipitation changes versus prior year 5

6 Largest Weather Impact in the Central US Impact of Weather on Traffic by Region Source: Planalytics Business Weather Intelligence; weather figures indicate Weather Driven Demand as provided by Planalytics which is based on temperature and precipitation changes versus prior year 6

7 Refreshing Strategic Pillars Focus on our Core Guest and Play to Our Strengths Competitive Value Advertising Refresh New Products Menu Simplification ICE 7

8 A Streamlined Approach to Competitive Value STRATEGIC USE OF SINGLE EVENT DAYS REINVIGORATE DAYPART & STRATEGIC VALUE MORE PROFITABLE EVERYDAY VALUE 8

9 New Creative 9

10 Higher Scores with Key Customer Segments Sonic Summer Nights Spot Versus Competitive Norm* Male/16-20 Male/21-35 Male/36-49 Female/16-20 Female/21-35 Female/36-49 *All data reported is from Ace Metrix and is based on Sonic performance vs. Sonic Norm competitive set performance within the same 90 day period Source: Ace Metrix 10

11 New Products Reinforce Quality & Value All of the Flavor, None of the Guilt Starting under 350 calories Signature Snacking Perfect with Happy Hour drink $1.99 Classic $2.49 Bacon Melt Great Taste Better-for-You 2 New SKUs $1.99 including Cheese Sauce Crave-Worthy Snack 3 New SKUs 11

12 Simplifying Operations Fall 2017 Removed 17 Items Removed 9 SKUs Spring 2018 Removed 14 items from Stall and additional 21 items from Drive Thru Removed 7 SKUs 12

13 Integrated Consumer Engagement (ICE) 13

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15 First in Line, Every Time Our differentiated drive-in concept is optimal for Order Ahead Allows guests to choose their experience Pick up and go Enjoy a more leisurely drive-in experience Marketing plans and incentives that acquire, engage and retain a core customer set Full market test underway with marketing support 15

16 Test Market Success Metrics Ensure that the technology is scaling as expected Delivery to the vehicle in <90 seconds after arriving at stall Drive incremental sales versus control markets Assess customer acquisition strategies Move to secondary test market this Spring 16

17 Development Activity Development Activity New Stores Relocations and Rebuilds E 17

18 Net New Unit Growth New System Drive-Ins Opened Net of Closings (5) (34) (4) E 18

19 Corey Horsch Chief Financial Officer

20 Second Quarter Financial Results Operating Income Margin* EPS* 15.8% 17.2% $0.15 $0.17 Q2 FY2017 Q2 FY 2018 Q2 FY2017 Q2 FY 2018 *Excludes certain adjustments outlined in company s earnings release filed March 27, 2018 which contains most directly comparable GAAP measure. 20

21 Free Cash Deployment Uses of Cash ($ in millions) Share Repurchase Dividends $19 $21 $24 $24 $31 $35 $80 $124 $148 $173 $ E 21

22 Capital Structure Strong Free Cash Flow Uses of Cash to Enhance Value Financial Objectives $64.2 million unrestricted cash balance $60 to $63 million of free cash flow (1) expected in FY 2018 Quarterly cash dividend of $0.16 per share of common stock As of February 28, 2018, $89 million remained on outstanding authorization for fiscal 2018 Repurchased $71 million in stock through fiscal Q Grow EBITDA with improved sales Maintain long-term capital flexibility Return cash to shareholders 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 net of 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 22

23 Fiscal Year 2018 Outlook Adjusted EPS of $1.43 to $1.50 inclusive of tax reform, or 2% to 7% growth excluding the benefit of tax reform Same-store sales of down 1% to up 1%, or flat to up 2% in the second half of the fiscal year 55 to 65 new franchise drive-in openings Drive-in-level margins of 15.0% to 15.5%, depending upon the degree of same-store sales growth at company drive-ins SG&A expenses of $76 million to $78 million Depreciation and amortization expense of $39 million to $41 million Capex of approximately $40 million Free cash flow (1) of $60 million to $63 million An income tax rate of approximately 25% to 26% (1) Free cash flow is defined as net income plus depreciation, amortization and stock compensation expenses, less capital expenditures net of spending on build-to-suit drive-in development. 23

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