Del Taco Restaurants — Levy Acquisition — SPAC Merger (May 2015)
36 slides from Del Taco Restaurants's SPAC merger presentation, May 11, 2015
Slide 1: Investor Presentation May 2015
Investor Presentation May 2015
Slide 2: Disclaimer
i Disclaimer This Investor Presentation (the “Investor Presentation”) is for informational purposes only and does not constitute an offer to sell, a solicitation of an offer to buy, or a recommendation to purchase any equity, debt or other financial instruments of Del Taco Holdings, Inc . (“Del Taco
Slide 3: Non-GAAP measures and additional information
ii Del Taco believes that these non - GAAP measures of financial results provide useful information to management and investors regarding certain financial and business trends relating to Del Taco’s financial condition and results of operations . Del Taco’s management uses these non - GAAP measures
Slide 4: Management Attendees
Management Attendees Management Background Paul J.B. Murphy , III President & CEO ▪ Joined Del Taco in 2009 ▪ Former CEO & President of Einstein Noah Restaurant Group ▪ More than 30 years of restaurant experience with a focus on limited service chains and a proven track record for brand growth, stra
Slide 5: Larry Levy: Proven Leader & Experienced Restaurateur
Larry Levy: Proven Leader & Experienced Restaurateur Larry Levy Co - Founded Levy Restaurants in 1978 and Grew It from a Single Chicago Delicatessen into an International Food Service Company that Generates over $ 1 Billion in Revenue Operational and Investing Experience ; Deep restaurant and real e
Slide 6: Agenda
▪ Investment Highlights ▪ Growth Strategies ▪ Financial Overview ▪ Transaction Overview Agenda 3
Slide 7: Investment Highlights
Investment Highlights ▪ Leading Mexican QSR Chain with Loyal Following ▪ Successful New Brand Strategy: “Combined Solutions” in Early Stages ▪ Our Position: We Start with Fresh & Serve with Value ▪ Our Food: Un Freshing Believable® ▪ Our Menu: Diverse Menu Targets Broad Consumer Base ▪ Our Price: Hi
Slide 8: Del Taco at a Glance
Del Taco at a Glance (1) Based on unit count. (2) Represents FY2014 data. ▪ #2 Mexican QSR concept in the U.S. (1) ▪ Regional icon on West Coast ▪ Differentiated menu showcases a mix of Mexican - inspired cuisine and American classics Our Concept Positioned for Growth ▪ Attractive balance of traffic
Slide 9: Brand Positioning: We Start with Fresh & Serve with Value
Brand Positioning: We Start with Fresh & Serve with Value Del Taco Combines the Best Attributes from both QSR and Fast Casual. We call this QSR+ Quick Service: Speed of Service and Value Proposition Fast Casual High Quality Food and Dining Experience Strong Value Proposition Convenience & Speed Driv
Slide 10: Attractive Positioning in the Growing Mexican Category
Attractive Positioning in the Growing Mexican Category Mexican QSR 2014 System - wide Units System wide 2014 Sales ($millions) $8,200 $656 $730 $329 $316 $303 $81 $78 5,921 545 415 393 174 173 150 125 Source : Industry data provided by Technomic Top 500 report . (1) Represents Del Taco’s U.S. footpr
Slide 11: Accelerating Financial Performance Across the System
Accelerating Financial Performance Across the System 1.5% 0.9% 0.4% 2.0% 0.4% 3.8% 4.6% 4.9% 5.6% 5.9% 7.9% 0.8% (0.2%) (1.7%) (0.1%) (1.3%) 2.7% 3.9% 4.6% 5.6% 5.6% 7.5% Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Company-operated Franchised Weighted QSR
Slide 12: Our Food: Fresh and High Quality
; Real working kitchens ; High quality food made - to - order ─ Marinated chicken freshly grilled in restaurant ─ 100% real cheddar cheese grated fresh daily ─ Whole pinto beans slow cooked in our kitchens ─ Salsa made from scratch with fresh tomatoes and cilantro ; Working kitchens and made - to -
Slide 13: Our Price: Compelling Value Proposition
Our Price: Compelling Value Proposition Priced at a Discount to Both QSR and Fast Casual Competitors $10.93 $10.17 $7.20 $6.83 $6.49 Average Check Sources: Average check data is from public company filings (JACK) and NPD (CMG and Taco Bell). 10
Slide 14: High Quality Food at a Tremendous Value
High Quality Food at a Tremendous Value Source: Company internal price survey as well as self - conducted survey of Los Angeles restaurant prices as of February 2015 and are subject to change. Freshly grilled chicken, seasoned black beans, diced onions, fresh cilantro, and handmade pico de gallo, se
Slide 15: Foundation of Our Model: Combined Solutions
Foundation of Our Model: Combined Solutions Accelerating Operations Improvements Best Practice Improvement Fresh Value Pricing Platform New Engagement Platform & Advertising Campaign Guest Experience Measurement Menu and New Product Development Ambience Shake - Up Reimaged Stores with New Fresh Imag
Slide 16: Growth Strategies
Increase Same Store Sales Expand our Restaurant Base Enhance Restaurant Operations and Leverage Infrastructure Growth Strategies 13
Slide 17: Increasing SSS through Our Tiered Menu Strategy
Increasing SSS through Our Tiered Menu Strategy Buck & Under® Leverages Price Variety to Drive Traffic and Build Check Profit Growth Mid - Tier Leverages Variety and Targets Occasions to Grow Check Premium Leverages Freshness and Quality to Drive New Growth 14 Tiered Menu Strategy Provides Something
Slide 18: Increasing SSS through Menu Innovation
Increasing SSS through Menu Innovation Innovative Food Platforms Track Record of Strong New Product Development State - Of - The - Art R&D Capabilities and Test Kitchen BUCK & UNDER MENU ® EPIC BURRITOS ® FRESCA BOWLS BUCK & UNDER MENU ® CARNITAS LIMITED TIME OFFER BEER BATTERED FISH TACOS TURKEY TA
Slide 19: Increasing SSS through Day-Part and Occasion Expansion
Increasing SSS through Day - Part and Occasion Expansion Late - Night Day - Part ; Aligned day - part with brand position combined with leveraging value and new product platforms ; Expanded breakfast menu with Mid - Tier and Premium offerings Epic Scrambler Burrito Bacon & Egg Quesadilla Breakfast D
Slide 20: Increasing SSS through Guest Engagement
Increasing SSS through Guest Engagement High Quality Food Fresh Ingredients Working Kitchen Value Affordability Speed & Convenience Changing the Conversation Surrounding Del Taco from Price Value to Quality… We Start with Fresh… …And Serve with Value “I’ve been going to Del Taco for years and I didn
Slide 21: Increasing and Sustaining SSS through Our Ambiance Shake-Up
Increasing and Sustaining SSS through Our Ambiance Shake - Up ; Ambience Shake - Up: High impact restaurant reimage program focused on critical guest - facing elements ─ Exterior refresh and interior upgrades signaled change and communicated Fresh, Quality and Value ; 100% of Company - owned restaur
Slide 22: Operations Improvements Creating a Better Guest Experience
Operations Improvements Creating a Better Guest Experience ; We significantly improved overall guest satisfaction and generated higher “likelihood to return” and “recommend” scores among targeted guest segments through operations - focused Combined Solutions elements Best Practice Improvement Accele
Slide 23: Accelerating Our Unit Growth
Accelerating Our Unit Growth ; 50-year heritage in core Southern California market with strong brand presence and meaningful new unit in-fill upside ─ Success in multiple markets beyond Southern California, including Sacramento , Las Vegas, Denver, Salt Lake City and Phoenix ; Near - term growth wil
Slide 24: Significant Unit Growth Opportunity
Significant Unit Growth Opportunity Source: Public company filings. (1) Based on internal analysis and a study prepared by a leading national consulting firm . (2) Excludes 1 franchised restaurant in Guam. Percentage of Domestic Potential Unit Growth Remaining 82% 73% 68% 56% 26% 0% 25% 50% 75% 100%
Slide 25: Our New Restaurant Prototype
Our New Restaurant Prototype ; Design aligns brand Identity and QSR+ positioning ; Provides restaurant design needed to execute growth strategy ; New restaurant incorporates: ─ Modern exterior with attractive interior features ─ Quality cues evolved to include freshness cooler ─ More open view of ou
Slide 26: Attractive Company-Operated Unit Economic Model
Year 3 Target ($Thousands) Average Unit Volume ~$1,350 Restaurant Contribution Margin (1) ~17% Net Investment Cost ~$900 Cash - on - Cash Return ~25% Attractive Company - Operated Unit Economic Model 23 (1) Restaurant contribution is defined as company restaurant sales less company restaurant expens
Slide 27: Financial Overview
Financial Overview DEfico
Slide 28: Financial Summary
Financial Summary Total Revenue (millions) Franchise Revenue and Sublease Income Company Restaurant Sales sa183 $3960 $160 2o1se Det] Restaurant Contribution® and Margin (millions) s772 2012 2013 2014 20156 Adjusted EBITDA® Less Capex and % Conversion® (millions) daa:
Slide 29: Strong Momentum Continues in Q1 2015
Strong Momentum Continues in Q1 2015 Baio Same Store Sales Total Revenue Two Year Stack ($millions) mgn20i4 2015 Franchise Revenue and Sublease Income_s Company Restaurant Sales 125% 114% oe 19% Franchise . Company : Qi 2014 Qi 2015, Restaurant Contribution and Margin Adjusted EBITDA® and Margin (mi
Slide 30: Industry Leading Food Cost Management
Industry Leading Food Cost Management 27 29.7% 29.6% 29.1% 28.6% 2012 2013 2014 Q1 2015 Historical Food Costs as a Percentage of Company Restaurant Sales 2014 Food Costs as a Percentage of Company Restaurant Sales 28.7% 29.1% 29.7% 30.3% 30.3% 31.8% 32.6% 32.7% 33.7% 34.6% This image cannot currentl
Slide 31: Optimized Balance Sheet for Future Growth
Post Step 1 Closing As Adjusted Post Step 2 Close (1) ($millions) 2014A As of 3/20/2015 As of 3/20/2015 - Assuming No Redemptions Cash & Cash Equivalents $8.6 $8.4 $8.4 Revolving Credit Facility (2) -- 10.0 -- Term Loan Facility (Including Accrued / Unpaid Interest) 203.8 228.5 173.5 Capital Leases
Slide 32: Transaction Overview
Transaction Overview 29
Slide 33: Transaction Overview: Designed to De-Risk Merger
Transaction Overview: Designed to De - Risk Merger Transaction Summary ; Step 1 closed on March 20, 2015 ; Preliminary proxy statement filed with the SEC on April 2, 2015 and amendment filed May 11, 2015 ; Shareholder Vote and Completion of Step 2 expected in late June or early July 2015 Timing ; De
Slide 34: Illustrative Transaction Terms
Illustrative Transaction Terms Step 1 - Sources and Uses Capitalization ( Estimated ) Pro Forma Ownership (1) (Estimated) 8.4% 12.0% 30.7% 9.2% 39.6% Levy Family Entities Legacy Del Taco Shareholders Non-Levy Family Step 1 Investors Step 2 Co-Investors LAC Public Shareholders (1) Assumes a share pri
Slide 35: Appendix
Appendix 32
Slide 36: Adjusted EBITDA Reconciliation
Adjusted EBITDA Reconciliation ($Thousands) Twelve Weeks Ended Fiscal Year Ended March 24, 2015 March 25, 2014 2014 2013 2012 Net Loss $(4,940) $(1,887) $(9,255) $(6,539) $(8,222) Non - GAAP adjustments: Provision for income taxes 458 440 1,098 80 1,939 Interest expense, net 6,811 7,993 30,895 35,61