Diversified Restaurant Holdings, Inc. Wedbush Securities 2013 CA Dreamin Consumer Conference December 10, 2013

Transcription

1 Diversified Restaurant Holdings, Inc. Wedbush Securities 2013 CA Dreamin Consumer Conference December 10, 2013 Michael Ansley President, CEO & Board Chairman David G. Burke Chief Financial Officer & Treasurer NASDAQ: BAGR

2 Safe Harbor Statement The information made available in this presentation contains forward-looking statements which reflect the Company s current view of future events, results of operations, cash flows, performance, business prospects and opportunities. Wherever used, the words "anticipate," "believe," "expect," "intend," "plan," "project," "will continue," "will likely result," "may," and similar expressions identify forward-looking statements as such term is defined in the Securities Exchange Act of Any such forward-looking statements are subject to risks and uncertainties and the Company's actual growth, results of operations, financial condition, cash flows, performance, business prospects and opportunities could differ materially from historical results or current expectations. Some of these risks include, without limitation, the impact of economic and industry conditions, competition, food and drug safety issues, store expansion and remodeling, labor relations issues, costs of providing employee benefits, regulatory matters, legal and administrative proceedings, information technology, security, severe weather, natural disasters, accounting matters, other risk factors relating to our business or industry and other risks detailed from time to time in the Securities and Exchange Commission filings of DRH. Forward-looking statements contained herein speak only as of the date made and, thus, DRH undertakes no obligation to update or publicly announce the revision of any of the forward-looking statements contained herein to reflect new information, future events, 2012 by Columbus developments McKinnon Corp. or changed circumstances or for any other reason. 2 NASDAQ: BAGR

3 Premier Restaurant Concepts The creator, developer and operator of the unique, full-service, ultra-casual restaurant and bar Bagger Dave's Freshly-Crafted Burger Tavern and one of the largest franchisees for Buffalo Wild Wings Founded: 2006 NASDAQ: BAGR Total Restaurants* 53 Additional Planned Openings Market Capitalization (millions) $147.5 TTM Q3 13 Revenue (millions) $106.5 Recent Price $5.66 Avg. Vol. (3 months, thousands) wk. Price Range $ $8.58 Shares Outstanding (millions) by Columbus McKinnon Corp. Insider Ownership 52% Institutional Ownership 24% Market Data as of November 29, 2013 [Source: Bloomberg LP]; Ownership as of most recent filing; Year End is Last Sunday in December *Total restaurant count includes one franchised location 3 NASDAQ: BAGR

4 Our Mission and Vision MISSION To delight guests by providing experiences that create loyalty 2012 by Columbus McKinnon Corp. VISION To be the preferred, ultra-casual dining destination in our market 4 NASDAQ: BAGR

5 Market Segmentation: Industry Constituents Hybrids of the Fast Casual and Casual Dining Segments FAST CASUAL ULTRA CASUAL CASUAL DINING Price Point Focused Menu Bridging the gap as the newly defined Ultra-Casual concept Full Service Bar Experience Casual, Entertaining Atmosphere 5 NASDAQ: BAGR

6 Innovative New Concept: Bagger Dave s Freshly-Crafted Burger Tavern Fresh Ingredients, Unique Experience Brand Differentiators 17 corporate-owned stores in two states; focused on businessfriendly Midwest states Full-service, ultra-casual restaurant and bar Freshly-made, customizable burgers More than 30 topping choices and 7 house-made sauces Differentiated casual menu includes fresh-cut sweet potato chips, Sloppy Dave s BBQ, Artisan Mac n Cheese and Turkey Black Bean Chili Full bar featuring craft beer and sommelier wine pairings Custom craft sodas offering large variety of flavors Expect to open one additional location by the end of fiscal 2013 Eight new locations planned for NASDAQ: BAGR

7 Established Growth Concept: Buffalo Wild Wings Wings. Beer. Sports. History of Operational Excellence Innovative, award-winning franchisee since 1999 Highest single store annual restaurant sales in the Buffalo Wild Wings system for 2004, 2005 and 2006 International Franchise Association: Franchisee of the year in 2007 One of the first in the Buffalo Wild Wings system to offer full-service dining One of the largest franchisees in North America with 35 company-owned stores in four states Largest (by square footage) Buffalo Wild Wings store opened in Detroit, Michigan in December 2012 Rights with Buffalo Wild Wings corporate to develop 13 additional restaurants by NASDAQ: BAGR

8 Strong Leadership Team Michael Ansley, President, CEO and Chairman of the Board More than 17 years of restaurant and hospitality industry experience Member of Board of Directors and Michigan Restaurant Association Board Member since April 2011 David G. Burke, CFO, Treasurer and Director Former Federal-Mogul Corporation Director of Finance MBA, University of Michigan Jason Curtis, Chief Operating Officer Certified Foodservice Management Professional (FMP) Member of BWW Inc. Leadership Council Ioana Ben-Ezra, Chief Compliance Officer & Controller Former Senior Accountant at Deloitte & Touche LLP BS in Accounting, Walsh College Rebecca Raver, Vice President of Marketing Over 13 years experience in marketing and advertising MS in Business Administration, Madonna University 2012 by Columbus McKinnon Corp. Lupita Distaso, Vice President of Purchasing Former Purchasing Director of Little Caesar Enterprises and International Strategic Department at Tequila Cuervo 18 years Procurement and Supply Chain experience; MBA, Universidad Panamericana, Mexico 8 NASDAQ: BAGR

9 Proven Track Record of Growth 9 Corporate-Owned Locations Current Locations Corporate-Owned Franchised 35 Buffalo Wild Wings 1 Bagger Dave s E 2014E 17 Bagger Dave s BWW Bagger Dave's 2012 by Columbus McKinnon Corp NASDAQ: BAGR

10 Flexible Business Model: Compelling Unit Economics and Strong ROI Disciplined Site Selection Target locations Well-anchored shopping or lifestyle entertainment centers; in close proximity to high-traffic venues Preference for strong end-cap position or free-standing Retailers seek out locations occupied with our concepts Low occupancy costs, averaging less than 6% of sales Proven history with strong new-restaurant sales performance BAGGER DAVE S BUFFALO WILD WINGS TARGET STORE FOOTPRINT (SQUARE FEET) 4,000-5,000 5,500-7,500 TOTAL CASH INVESTMENT* (EX REAL ESTATE) $950,000 - $1,200,000 $1,300,000 - $1,600, by Columbus McKinnon Corp. TARGET ANNUAL REVENUE PER STORE (1 3 YEARS) $1,600,000 $2,600,000 TARGET RESTAURANT-LEVEL EBITDA MARGIN 20%+ 20%+ * Includes pre-opening expenses 10 NASDAQ: BAGR

11 Guest Driven Culture Focused on Quality Guest Service Seven essential business drivers: people, quality, hospitality, speed, accuracy, cleanliness and value Invest in employee retention and training to enhance guest experience Low turnover; develop management from within Qualitative Metrics Guest Experience Management (GEM) scores Secret shopper scores Favorable Consumer Trends Fresh ingredients, unique flavor choices, gluten-free options and high degree of order customization Broad Appeal Customers from the casual, fast casual, quick service and fine dining segments 2012 Draws by Columbus customers McKinnon Corp. for lunch, happy hour, dinner and late night dining Diverse customer demographics 11 NASDAQ: BAGR

12 Diversified Concepts: Complementary Concepts that Generate Operational Synergies Leverage experienced managing partners of BWW Provides a new career path for restaurant-level managers through Bagger Dave s Reduces turnover in restaurant-level management Standardized systems and processes to facilitate restaurant-level management Reduces time to train new restaurant-level management Facilitates training of personnel and improves level of customer service 2012 by Columbus McKinnon Corp. Shared infrastructure Locations featuring both Bagger Dave s and Buffalo Wild Wings concepts can share real estate and other fixed costs Leverage existing infrastructure to help launch Bagger Dave s concept 12 NASDAQ: BAGR

13 Building Unit Volume: Bagger Dave s Brand Strategy Building customer loyalty: High quality, consistent food and service Roll-out loyalty program app with mobile payment Enhanced menu options: Premium Mac n Cheese Artisan buns Premium beef blend with cuts of prime rib, cooked to desired temp (Feb 2014) Hormone & antibiotic free chicken (Feb 2014) Extended late night hours Improving décor Enhancing bar experience 2012 by Columbus McKinnon Corp. Cost-neutral activity 13 NASDAQ: BAGR

14 Financial Performance 14 NASDAQ: BAGR

15 Expanding Revenue: Track Record of Growth ($ in millions) * Guidance provided on 11/13/13 $106.5 ~$110* $127 - $133* $45.2 $60.7 $ Q3 13 TTM 2013E 2014E 20 new restaurants over the twelve month period ended Sep 29, by Columbus McKinnon Corp. Revenue on track when adjusted for timing of openings Two years comparable sales growth of 11.2% 15 NASDAQ: BAGR

16 Superior Value Proposition BAGGER DAVE S BUFFALO WILD WINGS Q TTM DAY PART MIX Late Night Late 3.5% Lunch Night Lunch 29.1% 14.5% 18.9% Dinner 42.2% Happy Hour 25.2% Dinner 40.4% Happy Hour 26.2% Q TTM SALES MIX Alcohol 13.2% Alcohol 20.1% 2012 by Columbus McKinnon Corp. Food & Beverage 86.8% Food & Beverage 79.9% 16 NASDAQ: BAGR

17 Adjusted EBITDA* and Margin ($ in millions, % of revenue) Adjusted EBITDA Restaurant-Level EBITDA $ $20.5** $ $13.5** $12.8 $15.0 $7.8 $8.5 $8.4 $ % 12.9% 11.0% 12.0% 18.6% 21.2% 19.3% 18.4% 2012 by Columbus McKinnon Corp. 9.1% 12.3% 17.8% 19.1% E E * See supplemental slides for EBITDA reconciliation and other important disclaimers regarding EBITDA ** Guidance provided on 11/13/13 (Percentage calculated with midpoint of EBITDA guidance divided by revenue guidance) 17 NASDAQ: BAGR

18 Flexibility for Growth ($ in millions) * Guidance provided on 11/13/13 Cash, Cash Equivalents and Investments Capital Expenditures $27.0* $1.4 $1.5 $2.7 $20.5 $5.8 $8.2 $15.7 $17.3 YTD 12/26/ /25/ /30/2012 9/29/ /26/ /25/ /30/ E Shareholders' Equity CapEx focused on new restaurant development, refreshenings and $1.9 $ % 12.9% 11.0% technology 18.6% 21.2% 19.3% $(0.1) 9.1% 12.3% Total Debt 17.8% to Equity was 1.2x 19.1% compared with 30.0x at year-end 2012 by Columbus McKinnon Corp. $ /26/ /25/ /30/2012 9/29/2013 Cash balance reflects April follow-on offering 18 NASDAQ: BAGR

19 Investment Highlights GROWTH STORY MULTI-BRAND COMPANY WITH COMPLEMENTARY INFRASTRUCTURE LEADERSHIP TEAM WITH PROVEN TRACK RECORD BROAD APPEAL WITH ATTRACTIVE CUSTOMER BASE AND SUPERIOR VALUE PROPOSITION 2012 by Columbus McKinnon Corp. FLEXIBLE BUSINESS MODEL WITH COMPELLING UNIT ECONOMICS AND STRONG ROI 19 NASDAQ: BAGR

20 Diversified Restaurant Holdings, Inc. Wedbush Securities 2013 CA Dreamin Consumer Conference December 10, 2013 NASDAQ: BAGR

21 Supplemental Information 21 NASDAQ: BAGR

22 EBITDA Reconciliation For the fiscal year ended, Net Income attributable to DRH $167,854 $1,842,186 $180,099 + Income Tax Provision (Benefit) (125,826) 586,086 (167) + Change in Fair Value of Derivative Instruments 367, ,818 43,361 + Interest Expense 1,322,502 1,137,725 1,282,991 + Other Income (Expense), net (74,456) (366,497) (20,081) + Loss on Disposal of Property and Equipment 20,965 31,465 36,833 + Depreciation and Amortization 2,689,584 3,479,360 4,587,310 + (Loss) Income attributable to noncontrolling interest (50,892) 153,845 95,040 EBITDA $4,316,912 $7,110,988 $6,205,386 + Pre-opening Expense 654, ,330 1,792,168 + Non recurring Expense ,500 Adjusted EBITDA $4,971,676 $7,825,318 $8,511,054 Adjusted EBITDA Margin (%) 11.0% 12.9% 11.0% + Adjusted 2012 by General Columbus and McKinnon Administrative Corp. 3,463,831 5,023,212 6,472,408 Restaurant-Level EBITDA $8,435,507 $12,848,530 $14,983,462 Restaurant-Level EBITDA Margin (%) 18.6% 21.2% 19.3% * See next slide for footnotes and references regarding EBITDA 22 NASDAQ: BAGR

23 EBITDA Reconciliation Restaurant-Level EBITDA represents net income plus the sum of non-restaurant specific general and administrative expenses, restaurant pre-opening costs, loss on property and equipment disposals, the change in fair value of derivative instruments, depreciation and amortization, other income and expenses, interest, taxes and non-recurring acquisition related costs expenses in Q Adjusted EBITDA represents net income plus the sum of restaurant pre-opening costs, loss on property and equipment disposals, the change in fair value of derivative instruments, depreciation and amortization, other income and expenses, interest, taxes and non-recurring acquisition related costs expenses in Q We are presenting Restaurant- Level EBITDA and Adjusted EBITDA, which are not prepared in accordance with GAAP, because we believe that they provide an additional metric by which to evaluate our operations and, when considered together with our GAAP results and the reconciliation to our net income, we believe they provide a more complete understanding of our business than could be obtained absent this disclosure. We use Restaurant-Level EBITDA and Adjusted EBITDA, together with financial measures prepared in accordance with GAAP, such as revenue, income from operations, net income and cash flows from operations, to assess our historical and prospective operating performance and to enhance our understanding of our core operating performance. Restaurant-Level EBITDA and Adjusted EBITDA are presented because: (i) we believe they are useful measures for investors to assess the operating performance of our business without the effect of non-cash depreciation and amortization expenses; (ii) we believe that investors will find these measures useful in assessing our ability to service or incur indebtedness; and (iii) we use Restaurant-Level EBITDA and Adjusted EBITDA internally as benchmarks to evaluate our operating performance or compare our performance to that of our competitors. Additionally, we present Restaurant-Level EBITDA because it excludes the impact of general and administrative expenses, which are not incurred at the restaurant level, and restaurant preopening costs, which are non-recurring at the restaurant level. The use of Restaurant-Level EBITDA thereby enables us and our investors to compare our operating performance between periods and to compare our operating performance to the performance of our competitors. The measure is also widely used within the restaurant industry to evaluate restaurant level productivity, efficiency and performance. The use of Restaurant-Level EBITDA and Adjusted EBITDA as performance measures permits a comparative assessment of our operating performance relative to our performance based on our GAAP results, while isolating the effects of some items that vary from period to period without any correlation to core operating performance or that vary widely among similar companies. Companies within our industry exhibit significant variations with respect to capital structures and cost of capital (which affect interest expense and tax rates) and differences in book depreciation of facilities and equipment (which affect relative depreciation expense), including significant differences in the depreciable lives of similar assets among various companies. Our management believes that Restaurant-Level EBITDA and Adjusted EBITDA facilitate company-to-company comparisons within our industry by eliminating some of the foregoing variations. Restaurant-Level EBITDA and Adjusted EBITDA are not determined in accordance with GAAP and should not be considered in isolation or as an alternative to net income, income from operations, net cash provided by operating, investing or financing activities or other financial statement data presented as indicators of financial performance or liquidity, each as presented in accordance with GAAP. Neither Restaurant-Level EBITDA nor Adjusted EBITDA should be considered as a measure of discretionary cash available to us to invest in the growth of our business. Restaurant-Level EBITDA and Adjusted EBITDA as presented may not be comparable to other similarly titled measures of other companies and our presentation of Restaurant- Level EBITDA and Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual items. Our management recognizes that Restaurant-Level EBITDA and Adjusted EBITDA have limitations as analytical financial measures, including the following: Restaurant-Level EBITDA and Adjusted EBITDA do not reflect our current capital expenditures or future requirements for capital expenditures; Restaurant-Level EBITDA and Adjusted EBITDA do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, associated with our indebtedness; Restaurant-Level EBITDA and Adjusted EBITDA do not reflect depreciation and amortization, which are non-cash charges, although the assets being depreciated and amortized will likely have to be replaced in the future, nor do Restaurant-Level EBITDA and Adjusted EBITDA reflect any cash requirements for such replacements; Restaurant-Level 2012 by Columbus EBITDA McKinnon and Adjusted Corp. EBITDA do not reflect changes in, or cash requirements for, our working capital needs; Restaurant-Level EBITDA and Adjusted EBITDA do not reflect disposals or other non-recurring income and expenses; Restaurant-Level EBITDA and Adjusted EBITDA do not reflect changes in fair value of derivative instruments; Restaurant-Level EBITDA and Adjusted EBITDA do not reflect restaurant pre-opening costs; and Restaurant-Level EBITDA does not reflect general and administrative expenses. Adjusted EBITDA margin and Restaurant-Level EBITDA margin is defined as the ratio of Adjusted EBITDA and Restaurant-Level EBITDA to revenue. We present Adjusted EBITDA margin and Restaurant-Level EBITDA margin because it is used by management as a performance measurement to judge the level of Adjusted EBITDA and Restaurant-Level EBITDA generated from revenue and we believe its inclusion is appropriate to provide additional information to investors. 23 NASDAQ: BAGR

24 For additional information, contact: Investor Contact: Deborah Pawlowski Kei Advisors LLC Company Contact: David G. Burke Chief Financial Officer Or visit us at: NASDAQ: BAGR