wing wingstop jan 2016 investor presentation
TRANSCRIPT
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JANUARY 2016
Investor Presentation
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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 factor relating to present facts or current conditions included in this presentation are forward-looking statements. Forward-looking statements giveWingstop Inc.s (the “Company”) current expectations and projections relating to its financial condition, results of operations, plans, objectives, futureperformance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. Thesestatements may include words such as “anticipates,” “believes,” “continues,” “estimates,” “expects,” “goal,” “objectives” “intends,” “may,” “opportunity,”“plans,” “potential,” “near-term,” “long-term,” “projections,” “assumptions,” “projects,” “guidance,” “forecasts,” “outlook,” “target,” “trends,” “should,”“could,” “would,” “will” and similar expressions and terms of similar meaning in connection with any discussion of the timing or nature of future operatingor 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 experienceand perceptions of historical trends, current condit ions, expected future developments and other factors it believes are appropriate under thecircumstances. 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-lookingstatements are based on reasonable assumptions, you should be aware that many factors could affect its actual operating and financial performanceand cause its performance to differ materially from the performance anticipated in the forward-looking statements. The Company believes these factorsinclude, but are not limited to, those described under the sections “Risk Factors” in the prospectus for the Companys initial public offering and in itsother filings with the SEC, which can be found at the SECs website www.sec.gov. Further, the Company has not yet completed closing procedures for fiscal fourth quarter or full year 2015, and our independent registered public accounting firm has not yet reviewed or audited the results. Accordingly,these preliminary results are subject to change pending finalization, and actual results could differ materially as we finalize such results. Should one or more of these risks or uncertainties materialize, or should any of these assumptions prove incorrect, the Companys actual operating and financialperformance 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 couldcause the Companys actual operating and financial performance to differ may emerge from time to time, and it is not possible for the Company topredict 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 MeasuresThis presentation contains certain non-GAAP financial measures. A “non-GAAP financial measure” is defined as a numerical measure of a companysfinancial performance that excludes or includes amounts so as to be different than the most directly comparable measure calculated and presented inaccordance with GAAP in the statements of income, balance sheets or statements of cash flow of the company. The Company has providedreconciliations of each non-GAAP financial measure presented to the most directly comparable GAAP measure in the Appendix to this presentation.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 theSecurities and Exchange Commission.
FORWARD-LOOKING STATEMENTS
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A CATEGORY OF ONE A CATEGORY OF ONE
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WHAT MAKES WINGSTOP UNIQUE?
• Pioneered Wings as center of the plate• Fast Casual; 98% franchised• 11 Flavors spanning spicy, savory, sweet
• 49% of guests are Millennials (1)
• 53% female skew; strong family appeal (2)
• Best in class social sentiment
• 15% of sales from online in Q4 2015• Social at the core; engagement over 30% (3)
• Digital-first advertising strategy with high ROI
• $1.1M Average Unit Volume• 35-40% Year 2 Cash-on-cash return• 75% Take-Out
SIMPLE CONCEPT EFFICIENT OPERATING MODEL
TECH FORWARDCOVETED CONSUMER
(1) MRI Data(2) Burke Research(3) Forbes, November 2014
Sources:
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Bar Centric Pizza Delivery
QSR Chicken Small Regional
Fast Casual, National Footprint & Focused Menu Sets Wingstop Apart
NO DIRECT NATIONAL COMPETITORS
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2015 – ANOTHER TERRIFIC YEAR!
845 Locations
39 states
7 countries
133 New Openings (Net)
19% Unit Growth Rate
7.9% DomesticSSS Growth
12 Consecutive Years of SSS Growth
INSERT NEW PIC
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Source: Company filings
2014
2013
2012
Cumulative SSS
%
2012 – 2015 Q3 YTD Stacked Same Store Sales
INDUSTRY LEADING SSS
Notes:
(1) (2) (3) (2) (6)(1) (3)(3) (1) (3) (4) (5)
2015 Q3 YTD
(1)
(1) Domestic system-wide(2) Global company-owned(3) Domestic company-owned(4) Franchised(5) Dunkin U.S. segment only(6) System-wide
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77Confidential Information - Do Not Distribute
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To
Serve
The
World
Flavor
We strive to deliver onour commitments to our
guests, team members,
franchisees &
shareholders.
• Intensely loyal fan base
• Best in class franchisee returns
• High growth, asset light model;best of both worlds for investors
Our brand knows no
boundaries due to our
unique product,
complex flavors and
commitment to
quality.
•59 intl locations in 6 countries,and we’re just getting started
• Portable concept;
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COVETED GUEST BASE
MILLENNIALS• 18-24 year old Millennial
males
• African American and
Hispanic skew
• Group-centered
occasions
• 24-34 year old Millennial
females
• Hispanic mom skew
• Orders for the whole
family
• Broad, loyal and diverse
guest base attracted by
unique flavor experience,
product quality, brand
personality and convivial
nature of eating wings
FAMILIES
FLAVOR CRAVERS
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PASSIONATE & ENGAGED FANS
Engagement Ratio – %
Followers—MM
Source: Forbes, November 2014
Engagement Ratio: A weightedcomposite of the total number of engagements (likes, comments,favorites, retweets) that followers havewith a brand relative to totalengagements
McDonalds
Starbucks Coffee
7-Eleven
OutbackSteakhouse
Hooters
Applebees
Wendys
Dairy Queen
Baskin-Robbins
Whataburger
Burger King
Dunkin Donuts
Olive Garden
Chick-fil-A
Hard Rock
KFC
Subway
Krispy Kreme
Red Lobster
BuffaloWild Wings
Pizza Hut
Dominos
Taco Bell
Wingstop
MortonsSteakhouse
69% of positive social mediacomments are about theCRAVE!
(1)
(1) Infegy
Source:
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FUELING DEMAND THROUGH TECHNOLOGY
23 24
Online % of Sales
QSR Fast Casual Wingstop
~ 1-3%
~ 3-6%
~ 15%
Average Ticket
~ $16
~ $20
In-Restaurant Online Ordering
Conversion Rate (2)
10%
29%
Food & BeverageIndustry
Wingstop
4.5
4.54.5
App Ratings (3)
4.53.0
Poised for
Continued Growth
• Doubled Sales Mixin 2015
• Millennialcustomer base
• Simple menu
• 75% Take-Out
• 60% of orders still
come in over thephone
• Createsefficiencies atstore level
All Orders Online(1)(1)
(1) Olo(2) MarketingSherpa Ecommerce Benchmark Study 2014(3) App Store Current Versions Jan 5, 2016
Sources:
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Scaling to National Media Current Potential for the Future
AMPLIFIED BY HIGH ROI DIGITAL-FIRSTMARKETING APPROACH
Illustrative Ad Spend Growth (1)
23 24
Local National
• 13 advertising cooperativesand growing
• Future potential to expandinto traditional media andnational sponsorships
• 1000 restaurants in US istarget for converting tonational
• Transitioning first throughnational digital buys I
l l u s t r a t i v e
N a t i o n a l A d B
u d g e t
Note:
(1) Current reflects markets that have shared comprehensive media plans with Wingstop
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In $000s
Franchisee
Year 2Target
Unit Economics
AUV (1) 890
Investment Cost (2) 370
Unlevered Year 2 COC Return 35% - 40%
Notes:
(1) AUV based on 2013 vintage year 1 performance of approximately $820,000 and year 2 growth rate for all new stores since 2006 of approximately 8.5%(2) Investment cost based on last 2 fiscal years actual costs; excludes pre-opening and working capital
RESULT: COMPELLING UNIT ECONOMICS
• 78% of current commitments from existing
franchisees
• Whitespace opportunity to grow
“2015 Golden
Chain Winner”
Franchise Awards
“Top 40, Best
Franchises for
Afr ican Amer icans”
“The Best
Franchis e Deal
in North Amer ica”
“#24, Top Mo vers
and Shakers List”
“#1 in System
Sales Growth ”
“Most Effect ive Use of
Social Media”
“2015 Franch isee
Sat i s fac ti on - Best
Franchise”
“Top 10 Fastest
Growing Chains”
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4.7
5.9
7.8 7.9
2012 2013 2014 LTM Sep.
2015
$MM $MM
Margin ∆ ‘12–’14
+881 bps
Same Store Sales(1) Average Unit Volume(2) Restaurant Profit(2)(3)
VALIDATED BY STRONG COMPANY STOREPERFORMANCE
%
Margin:
19 Company-Owned Restaurants in Dallas (12), Houston (2), and Las Vegas (5)
%
Notes:(1) For 19 company-owned restaurants as of 9/26/15; excludes re-franchised restaurants(2) Includes all company-owned restaurants. 1 was re-franchised in October of 2012 and 5 were re-franchised in February 2014(3) Sales less Cost of Goods Sold, Labor and Other Operating Expenses
Total
Units: 23 24 19 19 17.6% 20.4% 26.4% 25.8%
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PROVEN CONCEPT ACROSS A VARIETY OFMARKETS
39 State Footprint with Room to Grow in All Markets (1)
Note:(1) Restaurant count as of 09/26/15
Total Domestic Store Count – Q3: 756 Averaging 3 Domestic Closures Per Year Since 2013
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1
2012 2013 2014 2015
29
53
64
82
118
6
4
10
20
24
35
57
74
102
2011 2012 2013 2014 2015
Gross New Unit Openings by Year
Domestic International
Domestic Restaurant Opening Commitments
• 78% of current domestic pipeline is from existing
franchisees as of 12/26/15
• Mix of small and large franchisees
Healthy Franchisee Base
Development Commitments
ACCELERATING PACE OF DEVELOPMENT
Rapid Unit Development
142
274
363
503530
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786
1,645334
196
855
566
618
2014 (actual) Existing Market Potential New Market Potential Long-Term Domestic Potential
786
2,500
Domestic Bridge to Long-Term Goal
Existing Markets
New Markets
Remaining Opportunity
Domestic Commitments
900
814
(1)
Note:(1) Includes 745 restaurants in existing markets and 41 restaurants in new markets as of 12/26/15.
LONG-TERM STORE POTENTIAL ROADMAP
2015 (actual) (1)
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Asia
A
North
America
Middle
East
South
America
Current Units and Per Capita Poultry Consumption (1)
INTERNATIONAL POTENTIAL
U.S. Consumption: 44kg
EuropeMarket Consumption
European Union 21kg
AfricaMarket Consumption
South Africa 31kgAmericas
Market Consumption
Latin America andCaribbean
30kg
Brazil 39kg
Canada 32kg
Mexico 25kg
Middle EastMarket Consumption
Saudi Arabia 44kg
AsiaMarket Consumption
Asia and Pacific 8kg
Malaysia 41kg
Australia 39kg
New Zealand 35kg
China 12kg
Indonesia 6kg
India 2kg
Note:(1) Unit data as of Q315; Poultry consumption in estimated average kilograms per capita from 2012 to 2014
Europe
Africa
Asia
Source: OECD-FAO Agricultural Outlook 2015
Existing Footprint (1)
Market Units
Mexico 30
Philippines 8
Indonesia 7
Russia 3
Singapore 2
UAE 1
Total 51
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546614
712
845
2012 2013 2014 2015
LONG TRACK RECORD OF DELIVERINGOUTSTANDING RESULTS
Total Revenue
$MM
Total Units
Growth %: 9.4% 12.5% 16.0%
$MM
457
550
679
821
2012 2013 2014 2015
$MM
System-Wide Sales
High Growth + Franchisor Cash Flow
Adjusted EBITDA(1)
Notes:(1) Refer to Appendix for reconciliation(2) 2015 estimates represent updated guidance issued on 01/11/16.
18.7%
77.6 – 77.9
2015 est (2)
~ 821
2015 est(2)
2015 est (2)
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Robust Cash ConversionRapid Expansion
% FY 2014 Cash Conversion and Unit Growth (1)LTM Q3 Gross Unit Openings
Notes:1. Defined as (EBITDA – CapEx) / EBITDA2. Calculations use Adj. EBITDA
Source: Public company filings
THE BEST OF BOTH WORLDS
(2)
(2) (2)
15
3.9% 6.8% 3.0% 6.9%2.4% 16.0%Unit Growth:
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($MM) Capitalizationas of Q1 2015
(Inclusive of Recap)
Capitalizationas of Q2 2015
(Post-IPO)
Capitalizationas of Q3 2015
Cash 2.9 4.9 5.7
RevolvingCreditFacility
0.0 0.0 0.0
Term Loan 132.5 100.5 95.5
Total Debt 132.5 100.5 95.5
Total Debt /LTMAdjustedEBITDA
5.3x 3.9x 3.6x
Balance Sheet
SIMPLE AND STRONG BALANCE SHEET
(2)
Notes:(1) Leverage = Gross Debt / LTM Adjusted EBITDA(2) Primary proceeds at IPO used to achieve leverage of ~3.9x LTM Adj. EBITDA
EBITDA Growth and Cash Generation SupportDeleveraging(1)
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LONG-TERM FINANCIAL TARGETS*
• 10%+ annual unit growth
• ~2,500 domestic unit potentialDisciplined Unit Growth
Attractive Business Model Long-Term Growth Targets
*These are not projections; they are goals and are forward-looking, 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 tochange. Actual results will vary and those variations may be material. For discussion of some of the important factors that could cause these variations, please consult the
“Risk Factors” section in the prospectus for the Companys initial public offering and in its other filings with the SEC. Nothing in this presentation should be regarded as arepresentation by any person that these goals will be achieved and the Company undertakes no duty to update its goals.
Strong Same Store Sales Growth
Steady, Reliable Profit Growth
• Low single digit annual growth
• Consistent new store ramp
+
=• 13% - 15% Adjusted EBITDA growth
• 18% - 20% Net Income / EPS growth
• Strong free cash flow and conversion
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#Appendix #Appendix
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YTD HISTORICAL ADJUSTED EBITDARECONCILIATION
In $000s
Year EndedDecember 29, 2012
Year EndedDecember 28, 2013
Year EndedDecember 27, 2014
YTDSeptember 27, 2014
YTDSeptember 26, 2015
Net income 3,580 7,530 8,986 7,485 6,311
Interest expense, net 2,431 2,863 3,684 2,871 2,764
Income tax expense 3,000 4,493 5,312 4,426 3,753
Depreciation andamortization
2,930 3,030 2,904 2,232 1,944
EBITDA 11,941 17,916 20,886 17,014 14,772Adjustments
Management agreementtermination fee(2)
– – – – 3,297
Management fees(3) 422 436 449 338 237
Transaction costs(4) 308 395 2,169 976 2,186
Gains and losses ondisposal of assets(5)
(20) – (86) (86) –
Stock-basedcompensation expense(6)
464 748 960 322 492
Earn-out obligation(7) 2,500 – – – –
Adjusted EBITDA 15,615 19,495 24,378 18,564 20,984
Notes:1. LTM Adjusted EBITDA calculated as “YTD September 26, 2015” + “Year Ended December 27, 2014” – “YTD September 27, 2014”2. One-time fee of approx. $3.3 million paid in consideration of termination of management agreement with Roark Capital Management, LLC3. Includes management fees and other out-of-pocket expenses paid to Roark Capital Management, LLC4. Represents costs and expenses related to refinancings of our credit agreement and our initial public offering5. Represents non-cash gains and losses resulting from the sale of company-owned restaurants to a franchisee and associated goodwill impairment
6. Includes non-cash, stock-based compensation7. Represents an earn-out payment made to our prior owner based on us achieving revenue benchmarks specified in the acquisition agreement governing our purchase.
There are no further obligations related to the earn-out remaining under the acquisition agreement
(1) (1)
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QUARTERLY HISTORICAL ADJUSTEDEBITDA RECONCILIATION
In $000s
Year EndedDecember 29, 2012
Year EndedDecember 28, 2013
Year EndedDecember 27, 2014
Quarter EndedSeptember 27, 2014
Quarter EndedSeptember 26, 2015
Net income 3,580 7,530 8,986 1,993 3,173
Interest expense, net 2,431 2,863 3,684 876 800
Income tax expense 3,000 4,493 5,312 1,178 1,784
Depreciation andamortization
2,930 3,030 2,904 690 636
EBITDA 11,941 17,916 20,886 4,737 6,393Adjustments
Management agreementtermination fee(1)
– – – – –
Management fees(2) 422 436 449 111 –
Transaction costs(3) 308 395 2,169 776 –
Gains and losses ondisposal of assets(4)
(20) – (86) – –
Stock-basedcompensation expense(5)
464 748 960 112 150
Earn-out obligation(6) 2,500 – – – –
Adjusted EBITDA 15,615 19,495 24,378 5,736 6,543
Notes:1. One-time fee of approx. $3.3 million paid in consideration of termination of management agreement with Roark Capital Management, LLC2. Includes management fees and other out-of-pocket expenses paid to Roark Capital Management, LLC3. Represents costs and expenses related to refinancings of our credit agreement and our initial public offering4. Represents non-cash gains and losses resulting from the sale of company-owned restaurants to a franchisee and associated goodwill impairment
5. Includes non-cash, stock-based compensation6. Represents an earn-out payment made to our prior owner based on us achieving revenue benchmarks specified in the acquisition agreement governing our purchase.
There are no further obligations related to the earn-out remaining under the acquisition agreement