fogo investor presentation _june 2015
TRANSCRIPT
-
8/20/2019 Fogo Investor Presentation _June 2015
1/29
Investor PresentationJune 2015
-
8/20/2019 Fogo Investor Presentation _June 2015
2/29
Forward-Looking Statements
Some of the statements contained in this presentation constitute forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar
expressions concerning matters that are not historical facts, such as statements regarding the Company’s future financial con dition or results of operations, its prospects and strategies for future growth, the development and introduction of
new products, and the implementation of its marketing and branding strategies. In many cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,”
“predicts,” “potential,” “seeks,” “intends,” “targets” or the negative of these terms or other comparable terminology.
The forward-looking statements contained in this presentation reflect the Company’s current views about future events and are subject to risks, uncertainties, ass umptions and changes in circumstances that may cause events or its actualactivities or results to differ significantly from those expressed in any forward-looking statement. Although the Company believes that its assumptions are reasonable, it cannot guarantee future events, results, actions, levels of activity,
performance or achievements. You are accordingly cautioned not to place undue reliance on these forward-looking statements. A number of important factors could cause actual results to differ materially from those indicated by the forward-
looking statements, including, but not limited to, those factors described in “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in its prospectus. These factors include without limitation:
changes in general economic or market conditions, both in the United States and Brazil; increased competition in the Company’s industry; risk associated with its Brazilian operations and any other future international operations; its ability to
manage operations at its current size or manage growth effectively; its ability to successfully expand in the United States and other new markets; its ability to locate suitable locations to open new restaurants and to attract guests to its
restaurants; the fact that it will rely on its operating subsidiaries to provide it with distributions to fund its operating activities, which could be limited by law, regulation or otherwise; its ability to continually innovate and provide its consumers
with innovative dining experiences; its ability to maintain recent levels of comparable revenue or average revenue per square foot; the ability of its suppliers to deliver beef in a timely or cost-effective manner; its lack of long-term supplier
contracts, its concentration of suppliers and distributors and potential increases in the price of beef; its ability to raise money and maintain sufficient levels of cash flow; conflicts of interest with the THL Funds; the fact that upon listing of its
common stock, the Company will be considered a “controlled company” and exempt from certain corporate governance rules primar ily relating to board independence, and its intention to use some or all of these exemptions; its ability to
effectively market and maintain a positive brand image; changes in government regulation; the Co mpany’s ability to attract an d maintain the services of its senior management and key employees; the availability and effective operation of
management information systems and other technology; changes in consumer preferences or changes in demand for upscale dining experiences; the Company’s ability to accurately anticipate and respond to seasonal or quarterly fluctuations
in its operating results; its ability to maintain effective internal controls or the identification of additional material weaknesses; the Company’s expectations regarding the time during which it will be an emerging growth company under the
JOBS Act; changes in accounting standards; and other risks described in the “Risk Factors” section of the prospectus.
Although the Company believes that the assumptions inherent in the forward-looking statements contained in this presentation are reasonable, undue reliance should not be placed on these statements, which only apply as of the date hereof.Except as required by applicable securities law, the Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of
unanticipated events.
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 s tatements 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 o perations in accordance with
GAAP and the reconciliation of Adjusted EBITDA to net income (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 o f 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.
Availability of Prospectus
The Company has filed a registration statement (including a prospectus) with the SEC for the offering to which this communication relates. Before you invest, you should read the prospectus in that registration statement and other documents
the Company has filed with the SEC for more complete information about the Company and this offering. You may get these documents for free by visiting EDGAR on the SEC website at www.sec.gov . Alternatively, the Company, anyunderwriter, or any dealer participating in the offering will arrange to send you the prospectus if you request it by contacting: (1) Jefferies LLC, by calling toll-free (877) 547-6340 or by email to [email protected], or (2) J. P.
Morgan Securities LLC, c/o Broadridge Financial Solutions, 1155 Long Island Avenue, Edgewood, NY 11717, or by calling toll-free at 1-866-803-9204.
The registration statement relating to the Company’s securities has not yet become effective and the securities may not be so ld nor may offers to buy be accepted prior to the time the registration statement becomes effective. This
presentation shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of thes e securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such jurisdiction.
JOBS Act
The Company is an “emerging growth company” within the meaning of the Jumpstart Our Business Startups Act. As a result, the Company will be subject to reduced public company reporting requirements. No securities will be offered or sold
and no offers to buy will be accepted prior to the time the Company’s registration statement becomes effective.
1
Forward-Looking Statements
-
8/20/2019 Fogo Investor Presentation _June 2015
3/29
2
Larry Johnson
Chief Executive Officer
Years at Fogo: 8 yrs
Experience: 35+ yrs
Associated with Fogo: 19 yrs
Barry McGowan
President
Years at Fogo: 2 yrs
Experience: 30+ yrs
Tony Laday
Chief Financial Officer
Years at Fogo: 1 yr
Experience: 20+ yrs
Selma Oliveira
Chief Operating Officer
Years at Fogo: 17 yrs
Experience: 25+ yrs
Michael Prentiss
Chief Accounting Officer
Years at Fogo: 7 yrs
Experience: 15+ yrs
Gerry McGrath
General Counsel
Years at Fogo: < 1 yr
Experience: 30+ yrs
Associated with Fogo: 10 yrs
Andrew Feldmann
Senior Vice President of
Marketing and Sales
Years at Fogo: 12 yrs
Experience: 15+ yrs
Jandir Dalberto
President, Brazil
Years at Fogo: 28 yrs
Experience: 28+ yrs
Average of Over 25 Years of Industry Experience
Senior Leadership with Extensive Industry Experience
Note: Shading indicates members of management in attendance.
-
8/20/2019 Fogo Investor Presentation _June 2015
4/29
Brazilian Born Churrascaria with Authenticity at Our Core
5
• Founded in Porto Alegre, Brazil in 1979
– 37 restaurants including one JV in MexicoCity
• Fire-roasted Brazilian cuisine
• Utilize churrasco, a traditional Southern
Brazilian cooking method
• Differentiated dining experience
– Approachable fine-dining
• Highly-trained gaucho chefs
– Drives ~2/3 the labor costs of full-servicepeers
Our Concept
-
8/20/2019 Fogo Investor Presentation _June 2015
5/29
4
Our Gaucho Chefs Are a Key Point of Differentiation
• Trained in the cooking technique of
churrasco
• 12-15 gauchos per restaurant
• Butcher, prepare, cook and serve
•
Provide a tailored and interactivedining experience
– Guests control variety, quantityand pace
• Import talent to ensure brand
consistency and authenticity
• Drives financial benefits for our
model
Skilled Artisans
-
8/20/2019 Fogo Investor Presentation _June 2015
6/29
A High-Energy, Differentiated Dining Experience
Continuous
Service
5
Customization
Control
High-Quality
Authentic Interactive
-
8/20/2019 Fogo Investor Presentation _June 2015
7/29
Award Winning Concept
Best Steakhouse in São PauloBest Steakhouse
Americas Best Restaurants
Best Churrascaria
Silver Spoon Award
Five Skewers
Nation’s Restaurant News
Best Service
Fogo de Chão is the recipient of numerous awards and accolades from critics and
reviewers in Brazil and the United States
6
Multiple “Best Of” Awards
-
8/20/2019 Fogo Investor Presentation _June 2015
8/29
9
Delivering Leading Financial Results
Average Unit Volume
Labor Costs(2)
Restaurant Contribution Margin
Advantage
$8.0M $3.6M higher
20.8% 1,150bps lower
32.5% 1,230bps higher
Cash-on-Cash Returns 57.7% 2,520bps higher
Net Income Margin 9.9%
(3)
520bps higher
Note: Represents FY 2014.
(1) Includes BBRG, BJRI, BLMN, CAKE, CHUY, DFRG, DRI, RUTH and TXRH.
(2) Excludes DFRG and RUTH labor costs as they are not reported separately.(3) Pro forma for the IPO and concurrent refinancing of the existing Senior Credit Facilities.
Full-
Service
(1)
Average
$4.4M
32.3%
20.2%
32.5%
4.7%
-
8/20/2019 Fogo Investor Presentation _June 2015
9/29
52
A Brand Poised for Global Growth
10
Significant U.S. Opportunity with 100+ Additional Units IdentifiedFocus on Top 50 DMAs
26 Restaurants
in the U.S.
10 Restaurants
in Brazil
Joint venture restaurant (Mexico City)
Company-owned restaurant
2
2
-
8/20/2019 Fogo Investor Presentation _June 2015
10/29
9
Investment Highlights
• Differentiated, Award Winning
Concept with Broad Appeal
• Unique Model Drives Long-TermOperating Advantages
• Industry-Leading Restaurant-Level
Financials
•
Proven Portability with SignificantWhitespace
-
8/20/2019 Fogo Investor Presentation _June 2015
11/29
Our Menu
• Streamlined prix-fixe menu
– Up to 20 cuts of meat
Our Kitchen
• Simple, space efficient cooking technique
Our Service Model
• Self-service Market Table
• Dual role gaucho chefs
• Continuous table-side service
10
Unique Operating Model Drives Long-Term Advantages
-
8/20/2019 Fogo Investor Presentation _June 2015
12/29
20.8%
32.3%
15.0%
25.0%
35.0%
29.9%29.4%
15.0%
25.0%
35.0%
Labor as % of RevenueFood & Beverage Costs as % of Revenue
13
Driving Significant Labor Efficiency and Allowing Us To…
Source: Company filings and Wall Street research.
Note: Represents FY 2014 results.(1) Includes BBRG, BJRI, BLMN, CAKE, CHUY, DFRG, DRI, RUTH and TXRH.
(2) Includes BBRG, BJRI, BLMN, CAKE, CHUY, DRI and TXRH. Excludes DFRG and RUTH as they do not report labor costs separately.
Full-Service Average (2)Full-Service Average (1)
• Dual role of gauchos – both chef and server
• Simple cooking technique and food offering
• Self-service Market Table
1,150 bps
• Food costs in-line with peers
• Flexible food sourcing model
-
8/20/2019 Fogo Investor Presentation _June 2015
13/29
$59
$110
$90
$76$72 $71
$62
$0
$20
$40
$60
$80
$100
$120
Median: $74
Average Check
Source: Company filings and Wall Street research.
Note: Represents FY 2014.
12
Deliver a Compelling Value Proposition
• Average check of fine-dining peers is approximately 25% more
-
8/20/2019 Fogo Investor Presentation _June 2015
14/29
16%
26%
33%
23%
2%
0%
5%
10%
15%
20%
25%
30%
35%
33%
45%
16%
7%
0%
10%
20%
30%
40%
50%
Less than $75k $75k - $150k $150k - $250k $250k+
A Dining Experience With Broad Guest Appeal
13
Purpose of Visit
Household Income
Source: Company commissioned email survey and credit card data.
Notes: Represents U.S. data. Gender mix represents average of commissioned email survey data and credit card data.
Businessmeal
Familymeal
OtherFriendsSignificantOther/
Date
• Guests come to Fogo for awide array of occasions
• Demonstrated appeal to
both men and women
– Over 40% of our guests are
female
• A majority of our guests visit
two or more times per year
-
8/20/2019 Fogo Investor Presentation _June 2015
15/29
Industry-Leading Financial Metrics
A U V
F o o d a n d L a b o r
C o s t s ( 2 )
R e s t a u r a n t
C o n t r i b u t i o n %
$8.0
(1)
$12.1$5.7$4.3 $10.5$7.1$4.4$3.1 $5.7$5.2$4.9$4.4 $4.7$3.4 $4.2$3.3$3.1$2.9
32.5%20.3%20.2%18.6%18.0%17.9%16.1% 20.5%
50.7%
Note: $ in millions. Represents FY 2014.
(1) Excludes NY Location.
(2) Excludes DFRG and RUTH as they do not report labor costs separately.
(3) Excludes BLMN and DRI as they do not report financial results by concept.
(4) Pro forma for the IPO and concurrent refinancing of the existing Senior Credit Facilities.
60.5% 57.5%61.9%64.5% 61.7% 60.1%62.2%
20.6%
C - o - C R e t u r n ( 3 )
(1)
50.4%33.0%26.7% 30.7% 32.0% 35.1% 44.2%24.4% 36.6%27.0% 57.7%
24.2%
N e t I n c o m e %
2.9% 4.7% 4.8% 5.5%2.1% 9.9%(4)5.5%5.1%4.6%3.2%
16
-
8/20/2019 Fogo Investor Presentation _June 2015
16/29
15
Our Growth Strategies
• Expand Our Restaurant Base
•
Increase Our ComparableRestaurant Sales
• Improve Margins by Leveraging
Our Infrastructure and
Investments in Human Capital
to Support Growth
-
8/20/2019 Fogo Investor Presentation _June 2015
17/29
18
Our Global Growth Plan
U.S. Development
• Primary market for new restaurant growth
• Potential for 100+ new restaurants
– Mix of large and mid-size markets across urban and suburban locations
• Focus on the top 50 DMAs
– Over 25 markets we believe are multi-unit markets
• Plan to open 3-4 U.S. restaurants in 2015 including San Juan (opened in Q1)
Brazil Development
• Continue to opportunistically open restaurants in Brazil
• Maintains authentic and distinctive heritage and supports global growth
• Opened one restaurant in 2015 (Rio De Janeiro)
Other International
Development
•
Targeting growth in large “Capital Cities” • Grow utilizing a combination of asset-light joint ventures and company-
owned development
• First JV restaurant opened in Mexico City in May 2015
At Least 10% Annual Company-owned Restaurant Growth plus Accelerating JV Development
-
8/20/2019 Fogo Investor Presentation _June 2015
18/29
19
Demonstrated Track Record of Successful New Restaurant Growth
3
4
3
5 - 6
27
31
34
39 - 40
0
15
30
45
2012 2013 2014 2015E
2014 Openings
• San Jose, CA (Q1)
• Portland, OR (Q2)
• Los Angeles, CA (Q4)
2013 Openings
• San Diego, CA (Q3)
• Rosemont, IL (Q3)
• Jardins, BR (Q4)
• New York, NY (Q4)
2012 Openings
• Orlando, FL (Q1)
•
Center Norte, BR (Q4)
• Boston, MA (Q4)
Annual Restaurant Growth
% Unit Growth 13% 15% 10% 15% - 18%
(Including 1 JV)
2015 Openings YTD
• San Juan, PR (Q1)
• Rio De Janeiro, BR (Q2)
• Mexico City, MX (JV – Q2)
Restaurant OpeningsRestaurants – Beginning of Year
2016 sites leased; working on 2017 pipeline
Under Construction
• Houston, TX (Woodlands)
• 2nd Houston Location
• San Francisco, CA
• Chicago, IL (Naperville)
• 3rd Chicago Location
• Las Vegas, NV (Summerlin)
• 2nd Las Vegas Location
-
8/20/2019 Fogo Investor Presentation _June 2015
19/29
Highly Attractive New Unit Economic Model
18
Average Unit Volume $7.0
Restaurant Contribution Margin 27.0%
Net investment Cost(2) $4.5
Cash-on-Cash Return 40.0%+
Payback Period ~2.5 years
Year 3 Target
Note: $ in millions.
(1) Calculated as of FYE 2014 and includes only restaurants open for at least three years.
(2) Includes cash impact of tenant allowance and excludes pre-opening costs.
New restaurants opened since 2007 have generated
cash-on-cash returns of greater than 50%(1)
Recent Openings Outperforming Target
-
8/20/2019 Fogo Investor Presentation _June 2015
20/29
137
112 110
8769 69 68
59
19
Highly Attractive Concept For Real Estate Developers
Annual Traffic Per Restaurant(1)
Median: 69K(in 000s)
Source: Company filings and Wall Street research.
(1) Calculated by dividing AUV by average check.
(2) Excludes New York location.
Smaller Format Drives Flexible Real Estate Model
(2)
Free-Standing In-Line Lifestyle Mall
San Jose, CA San Juan, PRWashington, D.C.Addison, TX
-
8/20/2019 Fogo Investor Presentation _June 2015
21/29
• Development process is led by our CEO
• Internal real estate team has over 93 years of combined experience
• Sites are identified and prioritized by internal real estate team
– Tour and evaluate potential sites for construction criteria, visibility,and accessibility to primary customers
– Utilize a national real estate broker to assist with search
• Deploy third party site selection tools to validate internally generated
analysis
• Development committee recommends new locations to our board of
directors for approval
20
Disciplined Approach to Site Selection
-
8/20/2019 Fogo Investor Presentation _June 2015
22/29
21
Increase Comparable Restaurant Sales
• Comparable restaurant sales initiatives are designed to drive trial and frequency while increasing average check
Grow Group DiningIncrease Customer EngagementSeafood EntréeShrimp Cocktail Appetizer
Menu Strategy and Innovation
Small Plates
Bar Design
Beverage Innovation
Enhanced Bar Experience – Bar Fogo
-
8/20/2019 Fogo Investor Presentation _June 2015
23/29
Financials
Financials
22
-
8/20/2019 Fogo Investor Presentation _June 2015
24/29
Note: $ in millions.
(1) Figures shown on a constant currency basis of R$2.84 per USD, which represents the derived exchange rate for the first quarter of Fiscal 2015.
$49 $50
$63
$30
$40
$50
$60
$70
2012 2013 2014
$202$219
$262
$100
$150
$200
$250
$300
2012 2013 2014
27
31 34
10
20
30
40
2012 2013 2014
$61
$69
$85
$50
$60
$70
$80
$90
2012 2013 2014
Proven Track Record of Growth
SSS: (1.3%) 1.3% 5.0%
23
Restaurant Growth Revenue
Restaurant Contribution Adjusted EBITDA
Margin %: 30.4% 31.3% 32.5% Margin %: 24.3% 23.0% 24.1%
-
8/20/2019 Fogo Investor Presentation _June 2015
25/29
• Substantially completed investment in
corporate and restaurant key functions to
support future growth
• Invested approximately $5.5M in incremental
annualized fixed personnel costs since the
beginning of 2012
–18 corporate positions, 16 local salesmanagers and five assistant managers
Investing to Support Our Growth
24
Functional Areas Supplemented By Investment
Incremental Personnel Costs
6.4%
8.3% 8.2%
0.0%
4.0%
8.0%
12.0%
2012 2013 2014
G&A % of Sales
(1)
Note: $ in millions
(1) Excludes $5.5 million in equity compensation related to the 2012 acquisition.
•Executive Team
• New Store Development
• Marketing
•Finance/Accounting
• Operations
$0.4
$5.5
$1.5
$2.3
$1.3
$0.0
$2.0
$4.0
$6.0
2012 2013 2014 Full Year
Impact of
2014
Investment
Annualized
-
8/20/2019 Fogo Investor Presentation _June 2015
26/29
Note: $ in millions.
(1) Figures shown on a constant currency basis of R$2.84 per USD, which represents the derived exchange rate for the first quarter of Fiscal 2015.
$13$15
$5
$10
$15
$20
Q1'14 Q1'15
$61
$65
$50
$55
$60
$65
$70
$75
Q1'14 Q1'15
32
35
20
30
40
Q1'14 Q1'15
$18
$21
$15
$20
$25
Q1`14 Q1'15
Momentum Continues in Q1’15
25
Restaurant Growth Revenue
Restaurant Contribution Adjusted EBITDA (0.1%) 0.6%SSS
29.5% 31.6% 20.6% 23.0%Margin: Margin:
-
8/20/2019 Fogo Investor Presentation _June 2015
27/29
469.3
493.7
560.1
350.0
450.0
550.0
650.0
2012 2013 2014
USDA Beef Index(1)
26
Flexible Platform and Disciplined Food Cost Management
(1) Data sources: USDA Economic Research Service calculations based on Bureau of Labor Statistics and USDA Agricultural Marketing Service Data; represents all fresh beef retail value,
cents/lb.
COGS % of Sales
31.6%
30.6%
29.9%
29.0%
29.5%
30.0%
30.5%
31.0%
31.5%
32.0%
32.5%
33.0%
2012 2013 2014
Despite increasing beef costs, COGS margin has decreased as a percent of sales driven by
innovative, margin accretive product launches, mix shift and waste reduction initiatives
-
8/20/2019 Fogo Investor Presentation _June 2015
28/29
29
Note: $ in millions.
(1) Reflects $20 IPO price and full exercise of the over-allotment option.
As of March 29, 2015
Actual
As
Adjusted(1)
Cash & Cash Equivalents $17.3 $17.3
Total Debt $247.9 $164.9
Net Debt $230.6 $147.6
Net Debt / LTM 3/29/15 Adjusted EBITDA 3.5x 2.3x
LTM 3/29/15 Adjusted EBITDA $65.4 $65.4
Capitalization
-
8/20/2019 Fogo Investor Presentation _June 2015
29/29
Long-Term Financial Goals
28
10%+ Company-owned Restaurant Unit Growth plus Joint Venture Development
Low Single Digit Annual Consolidated Comparable Restaurant Sales Growth
G&A and Operating Leverage
13-15%+ Annual EBITDA Growth
18-20% 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 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 “Risk Fact ors” section of the preliminary prospectus. Nothing in thispresentation 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.