frsh jan 2016 investor presentation
TRANSCRIPT
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INVESTOR
PRESENTATIONJanuary, 2016
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Forward-Looking StatementsThis 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 the Company’s 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 “Risk Factors”
and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in its Annual Report on Form 10-K and its Quarterly Report on Form 10-Q for the quarter ended September
28, 2015, both of which are incorporated by reference in the Company’s preliminary prospectus supplement. Should one or more of these risks or uncertainties materialize, or should any of theseassumptions 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 on the company’s corporate web-site at investors.papamurphys.com.
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, 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, 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.
Legal Stuff
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Award-Winning Fresh High Quality Pizza at a Good Value
Foundational Investments in Operations and Technology
National Brand with Significant Room to Grow
Attractive Franchise Model; Store-Level Economics
System-Leading Company Store Division
Experienced Restaurant/Franchise Industry Leadership Team
Attractive Long-Range Growth Model
InvestmentThesis
http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=hDlscuXi4D_slM&tbnid=4QvyEuQfZ9qR3M:&ved=0CAUQjRw&url=http://pro.baldorfood.com/Artichoke-Large-Loose-3622-prod.htm&ei=xbYDU6rVH5S-sQSSuIHIBA&psig=AFQjCNHeUvQAJUgF1flwjWWQX3jlrsOtDQ&ust=1392838706814128http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=hDlscuXi4D_slM&tbnid=4QvyEuQfZ9qR3M:&ved=0CAUQjRw&url=http://pro.baldorfood.com/Artichoke-Large-Loose-3622-prod.htm&ei=xbYDU6rVH5S-sQSSuIHIBA&psig=AFQjCNHeUvQAJUgF1flwjWWQX3jlrsOtDQ&ust=1392838706814128http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=hDlscuXi4D_slM&tbnid=4QvyEuQfZ9qR3M:&ved=0CAUQjRw&url=http://pro.baldorfood.com/Artichoke-Large-Loose-3622-prod.htm&ei=xbYDU6rVH5S-sQSSuIHIBA&psig=AFQjCNHeUvQAJUgF1flwjWWQX3jlrsOtDQ&ust=1392838706814128http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=hDlscuXi4D_slM&tbnid=4QvyEuQfZ9qR3M:&ved=0CAUQjRw&url=http://pro.baldorfood.com/Artichoke-Large-Loose-3622-prod.htm&ei=xbYDU6rVH5S-sQSSuIHIBA&psig=AFQjCNHeUvQAJUgF1flwjWWQX3jlrsOtDQ&ust=1392838706814128
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Gaining Dollar Share of $
40B+ Pizza
Category
5
Q3 ‘15
-6pts
56%
+6pts
44%Big 5
+25%growthdollarshare
2.0% 2.5%
2010
Big 5
Mom & Pop/ Regional
62% 38%
Mom & Pop/ Regional
Big 5
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3.7%
5.6%
6.6% 6.7%
5.1%
3.4%
1.2%1.6%
0.6%
3.6%3.0%
4.0%
3.3%
1.5%
4.6%
8.4%
5.6%
4.5%
1.4%
Strong Same Store Sales & Unit Growth
19 Straight Quarters of Comparable Store Sales Growth
201320122011 2014
18.1% increase in total store count
3.9%
avg.
2015
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1ST
CUSTOMERS PARTNERS COMMUNITYTEAM
SERVE WITH PURPOSE
OPERATIONALEXCELLENCE
FOCUSEDDEVELOPMENT
CUSTOMERS1ST CHOICECUSTOMER’S1ST CHOICE
CHOICEaspiration
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A Fresh Approach to Pizza
fresh, handmade dough
fresh cut vegetables
real meat, no fillers
unique high qualityingredients
fresh grated mozzarella
fresh-baked...hot out of your oven!
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http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=B6WTM4KDCnQdYM&tbnid=VoxOhP4NRWKiZM:&ved=0CAUQjRw&url=http://www.papamurphys.com/m/&ei=61BYUuKCDrG34APF8IDIBw&bvm=bv.53899372,d.dmg&psig=AFQjCNEAGMgflpFuU25aNWSYuYzTjpXyCA&ust=1381605993218486http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=B6WTM4KDCnQdYM&tbnid=VoxOhP4NRWKiZM:&ved=0CAUQjRw&url=http://www.papamurphys.com/m/&ei=61BYUuKCDrG34APF8IDIBw&bvm=bv.53899372,d.dmg&psig=AFQjCNEAGMgflpFuU25aNWSYuYzTjpXyCA&ust=1381605993218486
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CREST®
Survey
1
#
Multi Award-Winning!
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1#
Latest #1 from Consumer Picks
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Source: NRN Consumer PicsApril 2015
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#1 in Brand Loyalty
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July 8, 2014
#2
#1
#1#1
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Pizza/QSR/Fast CasualAverage Per Person Spend
$7.91$8.27
$7.58
$4.01
$6.09$6.46
$5.54$5.11
$7.84
$7.24
Strong Customer Value
Source: NPD / CREST Decision Key Report: Restaurant Scorecard - MM.Note: Represents per person spend for the January 2015 to June 2015 time period.(1) Average party size for Pizza Hut is 2.2. (4) Average party size for Little Caesars is 2.6.(2) Average party size for Papa John’s is 2.4. (5) Average party size for Papa Murphy’s is 3.3.(3) Average party size for Domino’s is 2.3.
(1)(2)
(3)
(4)
(5)
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1ST
CUSTOMERS PARTNERS COMMUNITYTEAM
CUSTOMERS1ST CHOICE
SERVE WITH PURPOSE
PARTNERING FORPROFITABILITY
FOCUSEDDEVELOPMENT
CUSTOMER’S1ST CHOICE
OPERATIONALEXCELLENCE
CHOICEaspiration
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customers• min. 30 surveys per month & 85 + KDS
Operational Excellence
14
QSC• AAA
sales & transactions• Positive Transactions & plus Comp%
profit• COGS Var. 0-1.0% of Net sales
speed of service• avg. for year 3 min. or less
5 Star Program:
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2013 Q3 2015 Stars
2.3 3.9 5
9.7 15.1 426.2 27.7 3
31.9 30.0 2
23.5 17.1 1
6.4 6.2 0
1.2 2.3 Avg.
% Stores
Operations Performance Drives Sales
15
Note: Based on 1305 eligible stores for 5 Star YTD through Q2 2015Source: PMI
0.3%
1.8%
3.2%
6.0%
8.6%
9.8%
Comp Sales/Star Level
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Growth
viaTechnology
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1. drives sales and profitability
2. unlocks online/mobile ordering
3. pathway to precision marketing
POS is Foundational for Digital Strategy
- sales lift and gross margin improvement
- increased guest-check for orders placed on-line
- targeted digital promotions based on uniquebehaviors
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POS/On-Line Ordering Reaching Critical Mass
Q2 2016 *20142013
77%74%
57%
56%13%
2%
% Stores
with POS
% Stores
with On-Line
Ordering
18
100%
Q3 2015
May 2014 mandated installation within 12 months
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Accelerating Digital with Deloitte Digital
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http://www.deloittedigital.com/
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1ST
CUSTOMERS PARTNERS COMMUNITYTEAM
CUSTOMERS1ST CHOICE
SERVE WITH PURPOSE
OPERATIONALEXCELLENCE
CUSTOMER’S1ST CHOICE
FOCUSEDDEVELOPMENT
CHOICEaspiration
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Fast Growing National Brand
21
3,000
NSOs
~2,400
1,500
Source: Indicia and PMI.Note: Based on U.S. Census Bureau data; 2012 Population Estimate.
# of Stores
Existing Store Density(stores per million people)
New Store Opportunity
4,500
4,500 Store Opportunity in U.S.
Existing TotalU.S.
Higher Density
Lower Density
ExistingMarkets
FutureMarkets
~600
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$9.7 $10.0
$10.9 $11.1$11.7
Performance Improves as Density Increases
22
Store Average Weekly Sales (“AWS”) Performance Improvements (select markets)
$7.2 $8.1
$8.7 $8.9$9.1
$-
$4
$8
$12
Phoenix
21 26 30
AWS
(000)
39
Denver
41 42 46 51 54
2010 2011 2012 2013 2014
Stores
2010 2011 2012 2013 2014
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new
CREATEstores
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Attractive Operating Model for Franchisees
Efficient Franchise Operating Model
• No ovens
• No delivery
• No dining areas
• One day-part/limited operating hours
• Lower labor costs
• Customer controls the experience
• Accepts EBT (Food Stamps)
• Access to financing sources including SBA
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Company Stores (CSD): Leading by Example
#1 Lead franchisees from the front
#2
#3
Provide financial scale to the business
Develop Operations team
#4 Accelerate market density
#5 Develop future franchisee pipeline
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CSD Leading from the Front
CSD presence
new in 2014/15
CSD presence
pre-2014
100% Franchised
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Growth Strategies
Leverage Infrastructure to Improve Profitability
Grow Store Base to Scale Existing Markets
Increase System-wide Comparable Store Sales
Improve Operational Excellence
fresh made by us fresh baked by you
Execute Digital Strategy
High Quality Award-Winning Pizza
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Post-IPO Performance & Capital Structure
2014 2015
29
US Comp Sales (%)
Pro Form EPS (cents)
Adjusted EBITDA (millions) Pro Forma Net Income (millions)
Q1 Q2 Q3 Q4
Q1 Q2 Q3 Q4
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
3.3
5.6
1.5
4.54.6
8.47.5
8.0
5.76.4
5.6
8.8
2.0
2.6
1.3
2.8
1.6
1.1
1215
97
8
17Q2 2014 IPO proceeds reduced bank debt to $112 million
- leverage reduced to ~ 4.3X Adjusted EBITDA
Q3 2014 Refinancing lowered current rate by ~200bps- revolver capacity doubled to $20 million
Current bank term loan balance of $109.9 million- leverage at ~ 3.3X Adjusted EBITDA
Capital Structure
1.5
6.1
1.1
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(1) Includes net sales by all system-wide stores.
Strong Performance Continues in Q3, 2015
System-wide Sales(1)Total Stores
$194.0 $203.11,437
1,500
($ millions)
US SystemComparableStore SalesGrowth
+4.6% +1.4%
Total Revenues
$22.2
$28.1
Adjusted EBITDA
$5.6$6.1
$10,487 $10,568Domestic
AWS
($ millions)($ millions)
2014 2015
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Attractive Long-Term Growth Model
Attractive Business Model
EPS Growth
Comparable Store Sales
Adjusted EBITDA Growth
+20%
+2% to +4%
Ramping to +10%
Annual Growth Targets
Estimated Annual Tax Rate 38.5%
Unit Growth Opportunity +6% to +8% Net
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Award-Winning Fresh High Quality Pizza at a Good Value
Foundational Investments in Operations and TechnologyNational Brand with Significant Room to Grow
Attractive Franchise Model; Store-Level Economics
System-Leading Company Store Division
Experienced Restaurant/Franchise Industry Leadership Team
Attractive Long-Range Growth Model
InvestmentThesis
http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=hDlscuXi4D_slM&tbnid=4QvyEuQfZ9qR3M:&ved=0CAUQjRw&url=http://pro.baldorfood.com/Artichoke-Large-Loose-3622-prod.htm&ei=xbYDU6rVH5S-sQSSuIHIBA&psig=AFQjCNHeUvQAJUgF1flwjWWQX3jlrsOtDQ&ust=1392838706814128http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=hDlscuXi4D_slM&tbnid=4QvyEuQfZ9qR3M:&ved=0CAUQjRw&url=http://pro.baldorfood.com/Artichoke-Large-Loose-3622-prod.htm&ei=xbYDU6rVH5S-sQSSuIHIBA&psig=AFQjCNHeUvQAJUgF1flwjWWQX3jlrsOtDQ&ust=1392838706814128http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=hDlscuXi4D_slM&tbnid=4QvyEuQfZ9qR3M:&ved=0CAUQjRw&url=http://pro.baldorfood.com/Artichoke-Large-Loose-3622-prod.htm&ei=xbYDU6rVH5S-sQSSuIHIBA&psig=AFQjCNHeUvQAJUgF1flwjWWQX3jlrsOtDQ&ust=1392838706814128http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=hDlscuXi4D_slM&tbnid=4QvyEuQfZ9qR3M:&ved=0CAUQjRw&url=http://pro.baldorfood.com/Artichoke-Large-Loose-3622-prod.htm&ei=xbYDU6rVH5S-sQSSuIHIBA&psig=AFQjCNHeUvQAJUgF1flwjWWQX3jlrsOtDQ&ust=1392838706814128