Investor Presentation January 2017
Forward-Looking Statements Forward-Looking Statements This presentation contains forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical fact or relating to present facts or current conditions included in this presentation are forward-looking statements. Forward-looking statements give El Pollo Loco Holdings, Inc. s (the Company ), current expectations and projections relating to its financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as anticipate, estimate, expect, project, plan, intend, believe, may, should, can have, likely and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. The forward-looking statements contained in this presentation are based on assumptions that the Company has made in light of its industry experience and perceptions of historical trends, current conditions, expected future developments and other factors it believes are appropriate under the circumstances. As you read and consider this presentation, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties (many of which are beyond our control), and assumptions. Although the Company believes that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect its actual operating and financial performance and cause its performance to differ materially from the performance anticipated in the forward-looking statements. The Company believes these factors include, but are not limited to, those described under the sections Forward- Looking Statements, Risk Factors, and Management s Discussion and Analysis of Financial Condition and Results of Operations in its prospectuses and periodic reports, including in its most recent annual report on Form 10-K as it may be updated from time to time by quarterly reports on Form 10-Q. Should one or more of these risks or uncertainties materialize, or should any of these assumptions prove incorrect, the Company s actual operating and financial performance may vary in material respects from the performance projected in these forward-looking statements. Any forward-looking statement made by the Company in this presentation speaks only as of the date on which it is made. Factors or events that could cause the Company s actual operating and financial performance to differ may emerge from time to time, and it is not possible for the Company to predict all of them. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law. Non-GAAP Financial Measures This presentation contains certain non-gaap financial measures. A non-gaap financial measure is defined as a numerical measure of a company s financial performance that excludes or includes amounts so as to be different than the most directly comparable measure calculated and presented in accordance with GAAP in the statements of income, balance sheets or statements of cash flow of the company. The Company has provided a reconciliation of Adjusted EBITDA, a non-gaap financial measure, to net income in the Appendix to this presentation. Adjusted EBITDA is presented because management believes that such financial measure, when viewed with the Company s results of operations in accordance with GAAP and the reconciliation of Adjusted EBITDA to net income (or loss), provides additional information to investors about certain material non-cash items and about unusual items that the Company does not expect to continue at the same level in the future. Adjusted EBITDA is used by investors as a supplemental measure to evaluate the overall operating performance of companies in the Company s industry, and you should not consider it in isolation, or as a substitute for analysis of results as reported under GAAP. Our calculation of Adjusted EBITDA may not be comparable to that reported by other companies. For additional information about our non-gaap financial measures, see our filings with the Securities and Exchange Commission. JOBS Act The Company is an emerging growth company within the meaning of the Jumpstart Our Business Startups Act. As a result, the Company is subject to reduced public company reporting requirements.
We Are Unlike Anyone Else Differentiated restaurant concept specializing in fire-grilled, citrus-marinated chicken Our Concept Citrus-marinated, fire-grilled chicken QSR+ Prepared fresh daily in each restaurant Healthier alternatives on the go Our Brand Pillars High quality food Great value Emphasis on service Warm and inviting atmosphere
Company Snapshot 460 restaurants (1) System-wide sales of $785 million (2) 373 27 Our Restaurant Footprint (1) 4 21 straight quarters of positive comp restaurant sales $1.9 million AUV; ~21.3% restaurant contribution margin (2) 22 Company-Operated / Franchised 201 259 34 51% lunch / 49% dinner daypart mix Comparable Restaurant Sales Growth 46% bone-in chicken / 54% Mexicaninspired entrées 9.9% 7.0% 7.0% 2.2% 0.7% 2.4% 1.6% 2012 2013 2014 2015 Q1 2016 Q2 2016 Q3 2016 El Pollo Loco (1) As of Q4 2016, ended December 28, 2016 (2) LTM ending September 28, 2016
What Makes Us El Pollo Loco? Our Food It all starts with our fire-grilled chicken Commitment to fresh, delicious ingredients and flavors Our Talent Our Grill Masters are experts in the art of chicken Our Environment Warm & inviting customer experience ~75% of the system new or remodeled
A Value-Oriented, Faster Fast Casual Concept QSR: Speed of Service and Value Proposition Fast Casual: High Quality Food and Dining Experience QSR+
Providing Great Food at Great Value $8.00 EPL Prices Between Taco Bell and Chipotle $7.50 $7.00 $6.70 $6.70 $6.70 $6.50 $6.00 $5.99 $5.99 $5.99 $5.99 Chicken Avocado Burrito $5.99 $5.50 $5.00 $4.99 $5.29 $4.50 Chicken Tostada Salad $5.99 $4.00 $3.50 $3.00 Chicken Cantina Burrito Chicken Fiesta Taco Salad Cantina Bowl Chicken Avocado Burrito Chicken Tostada Grande Avocado Bowl Chicken Burrito Chicken Salad Chicken Bowl Grande Avocado Bowl $5.99 Source: El Pollo Loco Tier 2 Company Prices; Competitive Prices per Fishbowl Q3 2016 LA Competitive Pricing Report.
Growth At The Top and Bottom Lines Company-Operated Restaurant Revenue ($Millions) Revenue CAGR of 6.8% $255.4 $274.9 $294.3 $318.0 $332.0 $349.7 Restaurant Contribution (1) Margin 260 bps of margin improvement 2011 2012 2013 2014 (52 wk basis) 2015 2016 Q3 LTM 21.9% 21.7% 21.0% 21.3% 19.8% 18.7% Franchise Revenue Franchise revenue CAGR of 6.6% 2011 2012 2013 2014 (52 wk basis) 2015 2016 Q3 LTM $17.9 $18.7 $20.4 $22.2 $23.0 $24.2 Adjusted EBITDA (1) and Margin 11.6% Adjusted EBITDA CAGR and 330 bps margin expansion 2011 2012 2013 2014 (52 wk basis) 2015 2016 Q3 LTM $39.5 14.5% $46.8 16.0% $61.9 $65.5 $66.5 $54.6 18.2% 18.4% 17.4% 17.8% 2011 2012 2013 2014 (52 wk basis) 2015 2016 Q3 LTM (1) Restaurant contribution, restaurant contribution margin, Adjusted EBITDA and Adjusted EBITDA margin are neither required by, nor presented in accordance with, United States generally accepted accounting principles ("GAAP"). Restaurant contribution is defined as company-operated restaurant revenue less company restaurant expenses. Restaurant contribution margin is defined as restaurant contribution as a percentage of net company-operated restaurant revenue. Adjusted EBITDA is defined as net income (loss) before interest expense, provision for income taxes, depreciation, amortization and items that we do not consider representative of our ongoing operating performance. Adjusted EBITDA margin is defined as Adjusted EBITDA as a percentage of total revenue. Please refer to the Appendixfor reconciliation schedules.
Our Growth Strategies Increase Comparable Restaurant Sales Menu Innovation Marketing Initiatives Enhance Operations Asset Design Expand Our Restaurant Base
Growing Our Comps Through Our Consumers General Market Time-Pressured, Value-Conscious Main Street Foodies Need States Authenticity / Variety Healthy Eating Value Compelling Value Proposition Brand Pillars Food Service Environment
Growth Through Menu Innovation Heather Gardea, EPL Executive Chef New Product Launches Under 500 Lettuce Tacos Overstuffed Chicken Quesadillas Beef Barbacoa
Road to Authenticity Advertising Campaign Pays homage to authentic Los Angeles roots Celebrates the influence of Los Angeles vibrant personality and character Highlights a proud and enduring heritage in the Latino heart of LA
Road to Authenticity Advertising Campaign
Leverage Mobile Technology Online Order/Mobile App launched in Q4 2016 3 rd party Delivery launch in Q1 2017 Loyalty Program in Q2 2017 Self Service Kiosks by YE 2017
Growth Through Enhanced Operations Continuing to Build Operations Excellence 2017 Learning Structure Labor Optimization E Learning Customer focus Simplified POS Pagers User friendly POS system Inside speed of service Prep Guide Deployment Prep Efficiency Labor allocation 2014 Line Layout Simplified Builds Improve line efficiency
Vision Design
Vision Design
Vision Design
Our Growth Strategies Expand Our Restaurant Base
Growth Through New Units Potential For An Additional 1,900 Restaurants Nationwide Dallas Houston Unit Growth Strategy Focus on Southwest w/emphasis on Texas Balance openings between existing and new markets Continue to grow franchisee base through existing and new franchisees Improve performance in non-core markets Existing Market New Market Long-term system unit growth of 8-10% annually Note: Unit potential based on management estimates and 2014 Buxton study.
Unit Economic Model Year 3 Target ($Thousands) Average Unit Volume $1,800 Restaurant Contribution Margin (1) ~20% Investment Cost ~$1,650 Currently value engineering Vision to reduce investment cost Cash-on-Cash Return 20%+ (1) Restaurant contribution and restaurant contribution margin are neither required by, nor presented in accordance with, United States generally accepted accounting principles ("GAAP"). Restaurant contribution is defined as company-operated restaurant revenue less company restaurant expenses. Restaurant contribution margin is defined as restaurant contribution as a percentage of net company-operated restaurant revenue. Please refer to the Appendix for the reconciliation schedule.
Financial Review
Historical Financial Summary Total Revenue ($Millions) Company 273.2 17.9 255.4 293.6 18.7 274.9 314.7 20.4 294.3 Franchise 355.1 340.2 23.0 22.2 332.0 318.0 373.9 24.2 349.7 Restaurant Contribution (1) and Margin ($Millions) 47.6 18.7% 54.5 19.8% 61.9 21.0% 69.5 21.9% 71.9 21.7% 74.4 21.3% Margin +260 bps 2011 2012 2013 2014 (52 wk basis) Adjusted EBITDA (1) and Margin ($Millions) 39.5 14.5% 46.8 16.0% 54.6 17.4% 61.9 18.2% 18.4% 2015 2016 Q3 LTM 65.5 66.5 17.8% 2011 2012 2013 2014 2015 2016 Q3 52 Week Basis LTM Margin +330bps 2011 2012 2013 2014 2015 2016 Q3 52 Week Basis LTM Margin declines in 2015 and 2016 driven by accelerated development Base restaurant margins +80 bp through Q3 2016 (1) Restaurant contribution, restaurant contribution margin, Adjusted EBITDA and Adjusted EBITDA margin are neither required by, nor presented in accordance with, United States generally accepted accounting principles ("GAAP"). Restaurant contribution is defined as company-operated restaurant revenue less company restaurant expenses. Restaurant contribution margin is defined as restaurant contribution as a percentage of net company-operated restaurant revenue. Adjusted EBITDA is defined as net income (loss) before interest expense, provision for income taxes, depreciation, amortization and items that we do not consider representative of our ongoing operating performance. Adjusted EBITDA margin is defined as Adjusted EBITDA as a percentage of total revenue. Please refer to the Appendixfor reconciliation schedules.
Balance Sheet Optimized for Growth ($Millions) September 28, 2016 Cash & Cash Equivalents $6.5 Total Debt (1) $107.5 Net Debt (1) $101.0 Total Debt / LTM Adjusted EBITDA 1.6x Net Debt / LTM Adjusted EBITDA 1.5x LTM Adjusted EBITDA (52 weeks) $66.5 Interest costs reduced by over $35MM since October 2013 to approximately $3.2MM annualized. (1) Excludes approximately $7.2 million of outstanding letters of credit as of September 28, 2016, which will not be reflected on the balance sheet unless drawn upon.
Long-Term Financial Goals Accelerating to 8 10% Annual System-wide New Unit Growth 2.0 3.0% Annual Comparable Restaurant Sales Growth 10 15% Annual EBITDA Growth 10 15% Annual EPS Growth Note: These targets are forward-looking, are subject to significant business, economic, regulatory and competitive uncertainties and contingencies, many of which are beyond the control of the Company and its management, and are based upon assumptions with respect to future decisions, which are subject to change. Actual results may vary and these variations may be material. For discussion of some of the important factors that could cause these variations, please consult the Forward-Looking Statements, Risk Factors, and Management s Discussion and Analysis of Financial Condition and Results of Operations sections of the Company s most recent annual report on Form 10-K, as it may be updated from time to time by quarterly reports on Form 10-Q. Nothing in this presentation should be regarded as a representation by any person that these goals will be achieved and the Company undertakes no duty to update its goals.
Investment Highlights Differentiated Restaurant Concept with Broad Appeal Authentic Fire-Grilled Chicken and Mexican Inspired Entrees Compelling Value Proposition High AUVs, SSS and Attractive Restaurant-Level Economics New Initiatives In Place for Growth in 2017 Stable and Recurring Cash Flows from Franchise Revenue Significant Unit Growth Opportunity
Appendix
Restaurant Contribution Reconciliation ($Thousands) Thirty-Nine Weeks Ended Thirteen Weeks Ended Fiscal Year Ended September 28, 2016 December 30, 2015 2015 2014 2013 2012 2011 Company-operated restaurant revenue $268,984 $80,745 $332,040 $322,516 $294,327 $274,928 $255,361 Company restaurant expenses (211,982) (63,351) (260,125) (251,795) (232,408) (220,470) (207,726) Restaurant contribution $57,002 $17,394 $71,915 $70,721 $61,919 $54,458 $47,635 Restaurant contribution margin (%) 21.2% 21.5% 21.7% 21.9% 21.0% 19.8% 18.7%
Adjusted EBITDA Reconciliation ($Thousands) Thirty-Nine Weeks Ended Thirteen Weeks Ended Fiscal Year Ended September 28, 2016 December 30, 2015 2015 2014 2013 2012 2011 Net Income (loss) $17,921 $5,366 $24,054 $42,463 ($16,873) ($7,865) ($32,471) Non-GAAP adjustments: (Benefit) provision for income taxes 11,930 4,576 20,857 (63,008) 1,401 2,027 1,579 Interest expense, net 2,441 672 3,707 18,062 36,334 38,890 37,715 Depreciation and amortization 11,796 3,468 13,092 11,538 10,213 9,530 9,615 EBITDA $44,088 $14,082 $61,710 $9,055 $31,075 $42,582 $16,438 Stock based compensation expense (1) 244 (69) 539 1,093 822 860 40 Management fees (2) -- -- -- 343 624 612 674 Loss on disposal of assets (3) 524 44 471 646 868 966 197 Expenses related to fire loss (4) 48 -- -- -- -- -- -- (Gain) on recovery of insurance proceeds (4) (741) -- -- -- -- -- -- Impairment and closures (5) 2,624 65 89 1,033 (101) 1,494 2,014 Debt extinguishment expense (6) -- -- -- 9,718 21,530 -- 20,173 Gain on sale of restaurants (7) (28) -- -- (2,658) (400) Expense related to selling shareholders (8) -- -- 50 667 -- -- Income tax receivable expense (9) 411 (866) 156 41,382 -- -- -- Tax credit expense (10) -- -- -- 415 -- -- -- Securities class action legal expense (11) 2,327 993 993 -- -- -- -- Pre-opening costs (12) 1,775 985 1,456 1,215 201 320 -- Adjusted EBITDA $51,272 $15,234 $65,464 $62,909 $54,619 $46,834 $39,536 Pro-rata Adjustment to 52 Weeks (13) (1,005) Adjusted EBITDA (52 Weeks) $51,272 $15,234 $65,464 $61,904 $54,619 $46,834 $39,536 Footnotes on next page