microcapclub invitational: noble roman's (nrom)
DESCRIPTION
Over the years I’ve found that restaurant roll out stories can capture more momentum and trade at higher multiples then even tech stocks. Buffalo Wild Wings (BWLD) and Chipotle (CMG) are prime examples of such companies that have captured the attention of Wall Street over the last few years. Noble Roman’s (NROM) is an undiscovered food franchising-licensing company with 35%+ operating margins at an inflection point of growth. The company is targeting the fastest growing segment of the pizza industry, the take-n-bake arena. Since 2010, the company has signed take-n-bake supply agreements with over 1300 grocery stores. In mid-2012, Noble Roman’s entered the standalone take-n-bake market place with their own franchise concept. In a few short months the company has signed agreements for 9 locations, 3 of which have already been opened. Listen to CEO Paul Mobley as he tells the story.TRANSCRIPT
Noble Roman’s IncNoble Roman s Inc.OTC BB: NROM
January 2013
1/17/2013 1
Safe Harbor
The statements contained in this presentation concerning the Company's future revenues, profitability, financial resources, market demand and product development are forward-looking statements (as such term is defined in the Private development are forward looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) relating to the Company that are based on the beliefs of the management of the Company, as well as assumptions and estimates made by and information currently available to the Company's management. The Company's actual results in the future may differ materially from g p y y ythose projected in the forward-looking statements due to risks and uncertainties that exist in the Company’s operations and business environment, including, but not limited to, competitive factors and pricing pressures, non-renewal of franchise agreements, shifts in market demand, general economic conditions, changes in
h f d d f th C ' d t li f hi th purchases of, or demand for, the Company's products, licenses or franchises, the success or failure of individual franchisees and licensees, changes in prices or supplies of food ingredients and labor, and the success or failure of its recently developed stand-alone take-n-bake operation. Should one or more of these risks or uncertainties materialize or should underlying assumptions or estimates prove or uncertainties materialize, or should underlying assumptions or estimates prove incorrect, actual results may differ materially from those described herein as “anticipated,” “believed,” “estimated,” “expected” or “intended.” The Company undertakes no obligation to update the information in this presentation for subsequent eventssubsequent events.
1/17/2013 2
Investor Highlights
• Net income from continuing operations margin • Accelerating growth
Sustainable Profitability, Accelerating Growth
Li i f hi i b i d l
Strategically Well-Positioned
of 20.6% for 2011• ~40% operating margins
• Management methodically reducing debt
Licensing-franchising business modelSuperior financial performance while alleviating the risk of owning and operating restaurants
Positioned in Fastest-Growing Pizza Industry SegmentTake-N-Bake (TNB) is the growth segment of the pizza industry
TNB Grocery Distribution
p a dust y
Stand-alone TNB franchises
Diversified Platform for Growth Leveraging Take-N-Bake
y• Distribution in 1350 grocery stores and growing• 14 grocery distributors
• First unit opened October 29, 2012• Second unit opened December 3, 2012• Third opened January 14, 2013• Six additional units are currently under development
1/17/2013 3
y p
Who We AreThree Revenue Sources for Future Growth
Stand-Alone Take-N-Bake
Three Revenue Sources for Future Growth
Non-Traditional Franchises Grocery Take-N-Bake
1/17/2013 4
Revenue Sources
Non Traditional Franchise Take N Bake: GroceryNon-Traditional Franchise Take-N-Bake: Grocery2010 2011 YTD 2011 YTD 2012
Revenue 0.463 1.167 0.873 1.045
2010 2011 YTD 2011 YTD 2012
Revenue 4.4 4.0 3.1 3.2
% of Revenue
6 16 16 19
GrowthRate
+1223 +152 +20
% of Revenue
60 54 57 57
GrowthRate
-21 -10 +3
Take-N-Bake: Stand-AloneFirst prototype opened 10/29/12. Second opened 12/3/12. Third opened 1/14/13
Six more in development/constructionSix more in development/construction
1/17/2013 5
Industry
• 2010 U.S. pizza sales: $34.4 billion1 02% increase from 2009
Top 5 U.S. Pizzeria’s by 2010 Sales– 1.02% increase from 2009
• 57% of pizza outlets independently owned and control 48% of total pizza industry sales
$5.31
$3.31
Pizza Hut
Domino'spizza industry sales• Store unit count
– 65,283 as of spring 2011, down774 units from 66,057 in spring 2010
$2.08
$1.25
Papa John's
Little Caesarsfrom 66,057 in spring 2010
• Take-N-Bake is fastest growing segment of the industry
• TNB can accept food stamps
$0.66Papa Murphy's Take-'N'-Bake $ in billions
TNB can accept food stamps– 47 million people using food stamps
1/17/2013 6
All data: October 2011 PMQ Magazine
Market ShareAmericans Enjoy Home cooked PizzaAmericans Enjoy Home-cooked Pizza
By Type By Company
20%
45%
20%31%
52%
36% 17%
Carry out Delivery Dine-in "Big 4" Independents Other Chains
1/17/2013 7
Non-Traditional Franchises• Target locations
– Bowling centers– Military bases
H i l– Hospitals– Schools– Entertainment centers– Truck stops
C i t – Convenience stores
1772
Franchise/license
1112
15831772
834
1/17/2013 8
12/31/09 12/31/2010 12/31/2011 YTD 9/30/12
Non-Traditional FranchisesBusiness Model
$6 000-9 000 upfront feesUpfront Fee $6,000-9,000 upfront feesUpfront Fee
11% ongoing royalties and fees in the aggregateOngoing Royalties
$20-22K expected per year per new franchise in Annual Total $20 22K expected per year per new franchise in total fees to Noble Roman’s
ua o aPer Unit
1/17/2013 9
Grocery Take-N-Bake Distribution• Take-N-Bake licensing in grocery delis
– Emphasis on growth through partnerships with grocery distributors across the country
• Grocery Take-N-Bake revenues expected to be approximately $2.2 million by 2013
$2
$3
ons
Grocery Take-N-Bake Revenues
$0
$1
$2
2009 2010 2011 2012 2013
$Milli
1/17/2013 10
2009 2010 2011 2012 Est.
2013 Est.
Grocery Take-N-Bake DistributionBusiness Model
$2-2.2K expected per year per each new grocery store license in total fees to Noble Roman’s
Annual Total Per
U it
TNB Grocery Locationsby Quarter
14Distributors by Quarter
Unit
9101016
10841206
1350
by Quarter
10 1011 11
12
190292
565630
778910
87 93190
1/17/2013 11
Stand-Alone TNB Franchises• Currently only one national company
competing in this space: Papa Murphy’s®
– Able to accept EBT (food stamp) payments in most locationslocations
– 1 in 7 Americans on food stamps
• A few smaller, regional players • Represents a growing sales opportunity Represents a growing sales opportunity • Nine signed:
– First opened 10/29/12– Second 12/3/12– Third 1/14/13– Six more under development
• Five under developmentL t • Low-cost: – Only $60-90k estimated total investment after
landlord allotments– Food cost: 32% of sales
1/17/2013 12
– Low labor requirements– Minimal equipment requirement
Stand-Alone TNB FranchisesBusiness Model
$18K upfront feesUpfrontFee
10-12% royalty and fees in the aggregateOngoing Fees
Expected gross revenues of $400-600K per unit per year. Results in $48-72K in royalties to Noble Roman’s per location per year
Annual Total Per Unit
1/17/2013 13
Competition
• Papa Murphy’s Take ‘N Bake is market Papa Murphy Franchisesleader with $655 million in 2010 sales
• 1,202 traditional locations operated for a full 12 months for year ending 1/1/2012
1239
1283
y g / /– Average per store net sales: $559,495
• Highest 401 stores averaged $828,296• Next highest 400 stores averaged $511,241
1119
1171
g g ,• Lowest 401 stores averaged $338,829
• “Big 4” unlikely to enter TNB:– Formulations not conducive to TNB 1/1/2009 1/1/2010 1/1/2011 1/1/2012Formulations not conducive to TNB– Would compete with delivery franchises
1/17/2013 14
Marketing
Revenue R&D OutreachRevenue Expansion
Focus on revenue expansion through non-
traditional franchises and licenses
R&DLeverage the results of extensive research and
development
OutreachAggressively communicate the
Company's competitive advantages to its target market
of potential franchisees and licenseeslicenses
1/17/2013 15
Historical Revenue
$1.6
$1.5
$0.03$0.5 $1.2
Through 9 months
ons
$5 0
$1.5$1.4
$0.6
$1.1
$ in
mill
i $5.0$4.4 $4.0
$3.2
2009 2010 2011 YTD 2012
Non-traditional franchises Full service restaurant Grocery store TNB
1/17/2013 16
Non-traditional franchises Full service restaurant Grocery store TNB
Expenses$4.3 $4.3 $4.5
G&ADepreciationRestaurant Expenses
$3.4
Restaurant ExpensesOther Op ExpensesSales CommissionsTravel
mill
ions
Trade ShowsSalaries & Wages$
in
2009 2010 2011 YTD through 9/30/2012
1/17/2013 17
Historical EBITDA
$3.32$3.01 $3.05
$$2.30
in m
illio
ns$
2009 2010 2011 YTD through 9/30/2012
1/17/2013 18
Historical Net Income from Continuing Operationsg
$1.68$1.51 $1.53
$1 11s $1.11
$ in
mill
ions
$
2009 2010 2011 YTD through 9/30/2012
1/17/2013 19
Balance Sheet Summary9/30/12 12/31/11 12/31/10 12/31/09
Assets
Cash 163 233 337 333Accounts & Notes Receivable - Net 1,212 885 920 1,343Inventories 424 338 317 239Other 2,160 1,931 1,882 1,536Total Current Assets 3,959 3,388 3,456 3,451
Net Property & Equipment 281 308 367 440
Deferred Tax Asset (net of current portion) 8,920 9,613 10,151 10,704Other Assets 4.454 3,915 2,921 2,087, , ,Total Assets 17,614 17,224 16,895 16,682
Liabilities & Stockholders' Equity
A t P bl & A d E 170 665 654 435Accounts Payable & Accrued Expenses 170 665 654 435Notes Payable 4,583 4,831 5,356 5,625Total Stockholders' Equity 12,861 11,728 10,885 10,623
Total Liabilities & Stockholder's Equity 17,614 17,224 16,895 16,682
1/17/2013 20
Total Liabilities & Stockholder s Equity 17,614 17,224 16,895 16,682
Capital Structure
9/30/2012
Weighted Average Common Stock 19,506,886
Options 197,438
Convertible Preferred Stock 366,666
Total 20,070,990
1/17/2013 21
ManagementPaul W. Mobley - Chairman of the Board and Chief Executive Officer1991 – present: Chairman of the Board, CEO, CFO 1974 – present: Director1981 – 1997: President of the Company1974 – 1978: VP and COO
Paul W. Mobley - Chairman of the Board and Chief Executive Officer1991 – present: Chairman of the Board, CEO, CFO 1974 – present: Director1981 – 1997: President of the Company1974 – 1978: VP and COO1974 1978: VP and COO1978 – 1981: SVP1975 – 1987: Significant shareholder and president of a Company that owned and
operated 17 Arby's franchise restaurants
1974 1978: VP and COO1978 – 1981: SVP1975 – 1987: Significant shareholder and president of a Company that owned and
operated 17 Arby's franchise restaurants
A. Scott Mobley - Chief Operating Officer and President1997 – present: President1992 – present: Director 1993 – present: Secretary1988 1997: VP
A. Scott Mobley - Chief Operating Officer and President1997 – present: President1992 – present: Director 1993 – present: Secretary1988 1997: VP 1988 – 1997: VP 1987 – 1988: Director of Marketing Prior to Noble Roman’s, strategic planning analyst with a division of Lithonia Lighting Company
1988 – 1997: VP 1987 – 1988: Director of Marketing Prior to Noble Roman’s, strategic planning analyst with a division of Lithonia Lighting Company
Troy Branson - Executive Vice President of Franchising1997 – present: EVP of Franchising 1992 – 1997: Director of Business Development1987 – 1992: Owner of Branson-Yoder Marketing Group
Troy Branson - Executive Vice President of Franchising1997 – present: EVP of Franchising 1992 – 1997: Director of Business Development1987 – 1992: Owner of Branson-Yoder Marketing Group
1/17/2013 22
Investor Summary
B i d l S i bl P i i d i h S f ll Experienced Business model that delivers
solid financial performance
while mitigating
Sustainable profitability; accelerating
growth
Positioned in the fastest growing segment of the pizza industry –
Take ’N Bake
Successfully defended lawsuit;
management can focus on
Experienced management
team
g grisk growth and
profitability
1/17/2013 23