Q4 and Year End 2013 Financial Results - …s2.q4cdn.com/667477022/files/doc_presentations/... · Adjusted EBITDA represents net income plus the sum of restaurant preopening costs,

Q4 and Year End 2013 Financial

Results March 14, 2014

Michael Ansley President, CEO & Board Chairman

David G. Burke Chief Financial Officer & Treasurer

© 2014 by Diversified Restaurant Holdings, Inc.

© 2014 by Diversified Restaurant Holdings, Inc. 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 1934. 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, developments or changed circumstances or for any other reason.

NASDAQ: BAGR


Executing our Growth Strategy

$26.1

$28.5

Q4 2012 Q4 2013

Quarterly Revenue ($ in millions)

Q4 2013 revenue up $2.4 mm, or 9.0%

Consolidated comparable store growth of 1.1% in Q4 2013 Comparable with exceptionally strong 9.2%, same

period last year

Two years comparable sales growth of 10.3%

Opened 10 restaurants in 2013 Seven Bagger Dave’s

Three Buffalo Wild Wings and one relocation

$77.4

$108.9

2012 2013

Year End Revenue

NASDAQ: BAGR


Executing our Growth Strategy 4Q and 2013 revenue dampened by extreme weather Traffic, which was slightly lighter than the prior-year period, was also affected by sports

schedules and the performance of Detroit’s professional baseball and football franchises.

EBITDA* strong Strict cost controls

Benefits from Scale

Expect to achieve target restaurant-level EBITDA margins of 20%+ over long term

Leverage BWW to drive Bagger Dave’s success Operational experience Cash Flows

Human Capital

Our customers remain our top focus and the key to our ongoing success as we continue to expand brand awareness and market penetration.

* See supplemental information for EBITDA reconciliation

NASDAQ: BAGR


Restaurant Operating Costs

$8.2 $8.2

Q4 2012 Q4 2013

$6.6

$7.2

Q4 2012 Q4 2013

Improved 200 basis points primarily due to lower wing costs

Increased staffing consistent with new restaurant locations

Expect to improve as a percentage of revenue over time as we continue to grow

Food, Beverage and Packaging Compensation

31.4% 29.4% 25.3% 25.3%

($ in millions, % of revenue)

NASDAQ: BAGR


Operating Expenses

General & Administrative Pre-Opening Costs


$2.3 $2.2

Q4 2012 Q4 2013

$1.2 $1.2

Q4 2012 Q4 2013 80 basis point improvement from cost

control and operating leverage

Expect improvement to continue as number of units grow

Average expected to be $200,000 -$250,000 per restaurant going forward

8.8% 7.7%

NASDAQ: BAGR


Adjusted EBITDA & Margin* Adjusted EBITDA Restaurant-Level EBITDA


$5.0

$14.6

$5.7

$20.2

Fourth quarter increased 25.8% to $3.4 million

Margin improved 160 basis points to 12.1%

Increased 62.7% 2013 over 2012

Fourth quarter increased 13.2% over Q4 2012

Increased 38.2% 2013 over 2012

* See supplemental information for EBITDA reconciliation

19.1% 19.9% 18.8% 18.5%

$2.7

$8.0

$3.4

$13.0

10.5% 12.1% 10.3% 12.0%

Q4 12 Q4 13 2012 2013 Q4 12 Q4 13 2012 2013

NASDAQ: BAGR


Flexibility for Growth ($ in millions)

$2.7

$18.2

12/30/2012 12/29/2013

Cash, Cash Equivalents and Investments

$15.7 $25.3

12/30/12 12/29/13

Capital Expenditures

Cash balance reflects April 2013 follow-on offering

CapEx focused on new restaurant development, re-freshenings and technology

Total Debt to Equity was 1.4x at year-end 2013 compared with 30.0x at year-end 2012

NASDAQ: BAGR


2014 Outlook

Fiscal 2014 Guidance* Revenue $125.0 million to $130.0 million

Restaurant-Level EBITDA $22.0 million to $23.5 million

Adjusted EBITDA $13.5 million to $14.5 million

Capital Expenditures $33.0 million to $36.0 million

* Guidance provided on 3/14/2014

NASDAQ: BAGR


How is Bagger Dave’s Different?


Prime Rib Message


Fry Message


Beef Burger Message


Turkey Burger Billboard

NASDAQ: BAGR


New Menu Design & Offerings New Grilled Chicken Offering

7oz marinated farm-raised breast

New protein for sandwiches

All-New Chopped Salads

Salad entrees with chicken

Greatly enhanced presentation/size

New Spicy Artichoke Dip Appetizer

Jalapeno and smoked gouda blend

Used on No Joke Artichoke Burger

At Bagger Dave’s, our guests have the option to completely customize their dining experience through Create Your Own

table-side sheets and al-la-carte menu offerings

NASDAQ: BAGR


Bagger Dave’s Craft Soda

Premium Craft Soda sold on draft Eight favors available Includes mystery rotator flavor

Launching retail sales in bottles In-store only; brings customers in

Ability to add proprietary flavors Unique differentiator Flexibility to add / promote new flavors Exceedingly better margins than Coca-Cola

or Pepsi 50-year supply agreement

NASDAQ: BAGR


Technology Bagger Dave’s invests in technology to improve guest experience and

productivity – driving sales and increasing margins.

Allows servers to spend more time with guests Increases order

accuracy Improves ticket

times

Tableside Ordering

Online ordering allows guests to order from their computer or mobile device – anytime, anywhere Integrated with

POS www.baggerdaves.com

Online Ordering

Guests can pay using their phone Credit card never

has to leave guest’s wallet Fully integrated

with POS

Mobile Payment

Integrated with POS Fully integrated

with online ordering Critical to allowing

customization options Working with

NCR to further advance this technology for BD

Kitchen Display Units

Host manages seating with iPad Guest receives

text when table is ready

Table Management

NASDAQ: BAGR


Fresh Rewards Loyalty Program

Bagger Dave’s new Fresh Rewards Loyalty Program has gone mobile!

Phase I - Live today Mobile Payment

Guest Comment

Guest Survey

Social Media Integration:

Facebook Like/Share

Twitter Tweets

Four Square Check-In

Instant Win Game

Phase II – Q3/Q4 2014 POS Integration

CRM – Targeted Offers

Tiered Rewards

Interactive Gaming

Newly-developed apps for iOS and Android platforms will enhance the success of this program.

www.baggerdaves.com/freshrewards

Q4 and Year End 2013 Financial

Results March 14, 2014


Supplemental Information


NASDAQ: BAGR


EBITDA Reconciliation

* See slide 23 for footnotes and references regarding EBITDA

For the quarter ended, Dec. 30, 2012 Dec. 29, 2013

Net loss attributable to DRH $(623,008) $(177,539)

+ Income Tax Provision (Benefit) (333,554) (313,637)

+ Change in Fair Value of Derivative Instruments - -

+ Interest Expense 439,428 377,024

+ Other Income (Expense), net 342,079 (92,294)

+ Loss on Disposal of Property and Equipment 6,856 14,451

+ Depreciation and Amortization 1,656,704 2,434,607

+ (Loss) Income attributable to noncontrolling interest - -

EBITDA $1,488,505 $2,242.612

+ Pre-opening Expense 1,244,292 1,194,100

+ Non recurring Expense - -

Adjusted EBITDA $2,732,797 $3,436,712

Adjusted EBITDA Margin (%) 10.5% 12.1%

+ Adjusted General and Administrative 2,257,353 2,234,582

Restaurant-Level EBITDA $4,990,150 $5,671,294

Restaurant-Level EBITDA Margin (%) 19.1% 19.9%

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NASDAQ: BAGR


EBITDA Reconciliation

* See next slide for footnotes and references regarding EBITDA

For the fiscal year ended, 2012 2013

Net Income attributable to DRH $180,099 $134,308

+ Income Tax Provision (Benefit) (167) (261,450)

+ Change in Fair Value of Derivative Instruments 43,361 -

+ Interest Expense 1,282,991 1,718,711

+ Other Income (Expense), net (20,081) (151,292)

+ Loss on Disposal of Property and Equipment 36,833 98,162

+ Depreciation and Amortization 4,587,310 7,974,481

+ (Loss) Income attributable to noncontrolling interest 95,040 -

EBITDA $6,205,386 $9,512,920

+ Pre-opening Expense 1,792,168 3,230,122

+ Non recurring Expense - 271,000

Adjusted EBITDA $7,997,554 $13,014,042

Adjusted EBITDA Margin (%) 10.3% 12.0%

+ Adjusted General and Administrative 6,585,908 7,139,597

Restaurant-Level EBITDA $14,583,462 $20,153,639

Restaurant-Level EBITDA Margin (%) 18.8% 18.5%

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NASDAQ: BAGR


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. 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. 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 pre-opening 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 EBITDA and Adjusted 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.

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Documents

Q4 and Year End 2013 Financial Results - …s2.q4cdn.com/667477022/files/doc_presentations/... · Adjusted EBITDA represents net income plus the sum of restaurant preopening costs,