The Cheesecake Factory Incorporated · NASDAQ:CAKE
The Cheesecake Factory — Cheesecake Factory — Investor Presentation (July 2019)
43 slides from The Cheesecake Factory's investor presentation, Jul 31, 2019
Slide 1: Forward-Looking Statements
This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as codified in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. This includes, without limitatio
Slide 2: A Compelling Investment Opportunity
Highly differentiated concepts delivering a unique guest experience Accelerated and diversified growth drivers Sustained track record of consistent financial performance Robust cash flow to support growth and maximize shareholder value A Compelling Investment Opportunity 3
Slide 3: Current Environment – Consumer & Industry Trends
Current Environment – Consumer Trends Current Environment – Consumer & Industry Trends 4
Slide 4: What Always Remains the Same
What Always Remains the Same “Consumers don't just want to eat, they want to experience something memorable.” – NPD Group “Food quality is the most important factor in selecting a restaurant to visit.” – Alix Partners 2018 Survey 5 “Superior service and ambiance grow guest counts for top performing
Slide 5: What's Evolving
What’s Evolving More Discerning Guests Desire for Value – “Deal Economy” Need for Convenience Labor Force Trends & Availability Retail Trends Power of Social Media 6
Slide 6: What's Evolving
What’s Evolving ABicuOUS Vis ECONOMY ate Power of Social Media Labor Force Trends & Availability Desire for Value - “Deal Economy”
Slide 7: The Cheesecake Factory - Global Footprint
The Cheesecake Factory - Global Footprint 8 High quality, high profile locations worldwide Company-Owned: 202 Toronto International - Licensed Middle East: 15 China, Including Hong Kong: 3 Mexico: 4 Mexico City (2) Guadalajara Saudi Arabia (3) UAE (5) Kuwait (3) Qatar (3) Bahrain (1) Shanghai Hong K
Slide 8: The Cheesecake Factory - A Highly Differentiated Concept
Breadth of Menu & Innovation Ambiance, Service and Hospitality The Cheesecake Factory - A Highly Differentiated Concept Best-in-Class Operational Execution Integrated Bakery 9
Slide 9: Breadth of Menu & Innovation are Key Competitive Advantages
Breadth of Menu & Innovation are Key Competitive Advantages 250 Menu Items - Made Fresh, From Scratch 10
Slide 10: Dining With Us Is an Experience
Dining With Us Is an Experience Ambiance, Service and Hospitality Drive Sales 11
Slide 11: Integrated Bakery – The "Cheesecake" Magic
Integrated Bakery – The “Cheesecake” Magic Produces over 70 cheesecakes and other baked desserts Enables creativity, quality control and supply chain efficiencies Industry-Leading Dessert Sales 16% 12
Slide 12: Cult Status & Strong Consumer Engagement
Cult Status & Strong Consumer Engagement 750K followers 5M+ fans 370K followers Millions of Viewers A division of Vice Media LLC 13
Slide 13: Broad Consumer Demographic and Appeal With a Moderate Average Check
Broad Consumer Demographic and Appeal With a Moderate Average Check Highest Unit Volumes ($ in millions) Source: Latest SEC filings and company presentations #2 Top Large Chain #1 Food Quality 14 $10.7 $8.3 $8.3 $5.5 $5.2 $4.8 $3.6 $3.4 $3.0 $2.9 Maggianos Yard House BJ's Texas Roadhouse Olive Garde
Slide 14: Leveraging This Differentiation in the Off-Premise Channel
To Go Sales (% of Total Revenue) Leveraging This Differentiation in the Off-Premise Channel ~$1.5 million per restaurant New Takeout Packaging 15 9% 12% 14% 5% 7% 9% 11% 13% 15% 2013 2017 2018
Slide 15: Increasing Unaided Awareness to Drive Comparable Sales Growth
Increasing Unaided Awareness to Drive Comparable Sales Growth 16 Attain Top of Mind Status
Slide 16: Capitalizing on the Power of the Brand
Capitalizing on the Power of the Brand The Cheesecake Factory At Home® 17
Slide 17: Best-in-Class Operational Execution Has Driven Our Success
Best-in-Class Operational Execution Has Driven Our Success Guest Experience Efficiencies Labor Productivity Retention Cost Management Forecasting 18
Slide 18: Supported by Our Tenured Teams
Supported by Our Tenured Teams Who Execute Our Complex Concept Everyday Average Tenure by Position 30 years 21 years 19 years 17 years 12 years 13 years Senior VP of Operations Regional Vice Presidents Area Directors of Operations Area Kitchen Operations Managers General Managers Executive Kitchen M
Slide 19: Being A Great Place to Work
Being A Great Place to Work 20 From FORTUNE. ©2019 Fortune Media IP Limited. FORTUNE 100 Best Companies to Work For is a trademark of Fortune Media IP Limited and is used under license. FORTUNE and Fortune Media IP Limited are not affiliated with, and do not endorse products or services of, Licensee
Slide 20: We Raise the Bar
We Raise the Bar 21 Best-in-class training Culture of fun Industry-leading benefits Drives Industry-Leading Retention Recognition Commitment to our communities, charitable giving and a sustainable future 21
Slide 21: Looking Ahead - Diversified Growth Drivers
Looking Ahead - Diversified Growth Drivers 22 22
Slide 22: An Experiential Dining Category Leader
An Experiential Dining Category Leader 23 Culinary forward. First class hospitality. Concepts like no other.
Slide 23: Returns-Focused Growth Opportunity for The Cheesecake Factory
The Cheesecake Factory – Returns-Focused Growth Opportunity for 300 Domestic & 8 - 10 Canadian Locations Over Time Average Unit Economics* ($ millions) Sales $10.7 Restaurant-Level Margin % ~18% Cash Capex Investment $8+ Cash-on-Cash Return 20% - 25% * Illustrative example of target returns for new
Slide 24: Expanding International Licensed Presence
The Cheesecake Factory – Expanding International Licensed Presence Continued expansion within current geographies Potential for additional geographies with current licensees Opportunity to add licensees and territories +1¢ Per Restaurant in EPS, on Average $0 Capital Expenditure Shanghai 25
Slide 25: North Italia: Modern Lens on Italian Cooking
Turning a Modern Lens on Italian Cooking in the Upscale Casual Segment 26 All dishes handmade from scratch daily Team of passionate and dedicated people who deliver the perfect handcrafted experience Serving lunch, dinner, weekend brunch & weekday happy hour 30%+ alcohol mix Strong private dining bu
Slide 26: Significant Accretive Growth Opportunity
Significant Accretive Growth Opportunity Potential for 200 Domestic Locations Over Time 27 Run-Rate Revenues ~$150 million FY18 Comparable Sales +5% # of Restaurants 20 Average Check $25 - $30 Preopening $/unit ~$0.8 - $0.9 million Maintenance capex (% of Total North Sales) ~1% Note: Run-rate revenu
Slide 27: Fox Restaurant Concepts Will Serve as an Incubation Engine
Fox Restaurant Concepts Will Serve as an Incubation Engine Innovating Concepts of the Future 28
Slide 28: Fox Restaurant Concepts At a Glance
Run-Rate Revenues ~$250 million # of Restaurants 45 Square Footage 3,500 – 15,000 Geographies 7 states & Washington D.C. Segments Fast Casual, Upscale Casual & Eatertainment Preopening % of AUV 12% Maintenance Capex (% of Total FRC Sales) 1% 29 Fox Restaurant Concepts At a Glance Note: Run-rate reve
Slide 29: Attractive Unit Economics
30 New Unit Targets Sales ~$7 million ~$1,000/sq. ft. Restaurant-Level Margin % ~18% - 20% ~16% - 18% Cash Capex Investment $3 - $3.5 million $500/sq. ft. Cash-on-Cash Return 35%+ 25% - 30% Sales/Investment Ratio 2:1 2:1 Attractive Unit Economics Note: Steady-state restaurant-level margin typically
Slide 30: The Future CAKE: Anticipated Unit Growth Roadmap
The Future CAKE Multi-concept with segment, price point, occasion, real estate and labor model diversification Leveraging brand power, operational excellence, scale, supply chain and real estate development expertise Target Size (sq. ft.) 7,500 – 10,000 5,000 - 6,500 3,500 – 15,000 Average Unit Volu
Slide 31: 13% - 14% Total Return to Shareholders, on Average
13% - 14% Total Return to Shareholders, on Average (EPS + Dividend) 32 All Supports Our Long-Term Financial Objective Targeted Total Return to Shareholders Revenue Growth ~8% Capital Return ~5.5% Dividend ~2.5% Share Repurchases ~1.5% Debt Repayment ~1.5%
Slide 32: Track Record of Consistent Financial Performance
Track Record of Consistent Financial Performance 33
Slide 33: Continuing to Outperform the Industry
Continuing to Outperform the Industry 2011 2012 2013 2014 2015 2016 2017 2018 2019 YTD Knapp-Track Index Comparable Sales - Historical 2-year Stack 34 4.0% 4.2% 3.3% 2.6% 4.1% 3.8% 0.4% 0.9% 2.9% 1.0% 2.0% (0.9)% (1.6)% 0.8% (0.4)% (2.2)% 0.5% 1.2%
Slide 34: Leveraged Sales and Managed Costs to Support Profitability
Leveraged Sales and Managed Costs to Support Profitability Adjusted Earnings Per Share* *Please see Appendix for GAAP to non-GAAP reconciliations. 35 $1.42 $1.64 $1.88 $2.10 $1.97 $2.37 $2.83 $2.60 $2.43 2010 2011 2012 2013 2014 2015 2016 2017 2018
Slide 35: Our Restaurants Generate Significant Cash Flow
Our Restaurants Generate Significant Cash Flow Free Cash Flow and Strong Balance Sheet Provide Significant Financial Flexibility Free cash flow defined as cash flow from operations less capital expenditures/investments. Please see Appendix for GAAP to non-GAAP reconciliations and for an explanation
Slide 36: Effective Capital Allocation Supports Our Financial Objectives
Effective Capital Allocation Supports Our Financial Objectives $1+ Billion in Share Repurchases Reducing WASO 3% Per Year Committed to Supporting the Dividend ($ millions) 37 $42 $77 $86 $106 $114 $154 $158 $139 $128 $52 $172 $101 $184 $141 $109 $146 $123 $109 $13 $27 $30 $36 $42 $50 $56 60,446 46,2
Slide 37: Disciplined, Returns-Focused Growth Has Paid Off
Disciplined, Returns-Focused Growth Has Paid Off Return on Invested Capital (ROIC) ROIC = NOPAT / Average invested capital NOPAT = Income from operations excluding non-recurring expenses (-) income tax provision Invested Capital = Total assets (-) current liabilities (-) cash and cash equivalents 38
Slide 38: A Compelling Investment Opportunity
Highly differentiated concepts delivering a unique guest experience Accelerated and diversified growth drivers Sustained track record of consistent financial performance Robust cash flow to support growth and maximize shareholder value A Compelling Investment Opportunity 39
Slide 39: A Compelling Investment Opportunity
A Compelling Investment Opportunity Highly differentiated concepts delivering a unique guest experience Accelerated and diversified growth drivers Sustained track record of consistent financial performance Robust cash flow to support growth and maximize shareholder value @WsecakéFactory. 39
Slide 40: Non-GAAP Reconciliations
Non-GAAP Reconciliations In addition to the results provided in accordance with the Generally Accepted Accounting Principles (“GAAP”) in this presentation, the Company is providing non-GAAP measurements which present diluted net income per share excluding the impact of certain items and free cash fl
Slide 41: Non-GAAP Reconciliation
Non-GAAP Reconciliation (1) The pre-tax amounts associated with these items in fiscal 2011, 2012, 2013, 2014, 2015, 2016, 2017 and 2018 were $1,547, $9,536, $(561), $696, $6,011, $114, $10,343 and $17,861, respectively, and were recorded in impairment of assets and lease terminations. (2) The pre-ta
Slide 42: Non-GAAP Reconciliation
Non-GAAP Reconciliation (1) The excess tax benefit related to stock options exercised is no longer reclassified from cash flows from operating activities to cash flows from financing activities in the consolidated statements of cash flows. The consolidated statements of cash flows for fiscal 2016, 2
Slide 43: Non-GAAP Reconciliation
Non-GAAP Reconciliation ‘The Cheesecake Factory Incorporated Reconeiliation of Non-GAAP Financial Measures. {8 in millions) Fiscal Year 2009 2010 2011 2012 201320420121. 2017 2018 Operating incorre S 77 $ 1282 $ 1335 $ 1387 $ 1610 $ 1447 $ 1652 $ 2010 $ 1528 $ 1189 Impairment 265 - 15 98 (0.6) 07 60
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