Kona Grill — ICR Conference 2016
39 slides from Kona Grill's conference presentation, Jan 12, 2016
Slide 1: Investor Presentation – ICR Conference, January 2016
Kona Gritt kitchen « sushi « cocktails INVESTOR PRESENTATION ICR CONFERENCE — JANUARY 2016
Slide 2: Important Cautions Regarding Forward-Looking Statements
IMPORTANT CAUTIONS REGARDING FORWARD-LOOKING STATEMENTS This presentation contains forward-looking statements. These statements relate to future events or expectations regarding our future financial performance. These statements are only predictions and involve known and unknown risks, uncertainties
Slide 3: Who We Are
WHO WE ARE... + Emerging upscale casual growth concept + Contemporary American favorites, award- winning sushi, and specialty cocktails + Moderately priced $26 avg. check with $4.5M avg. unit volumes and $625 sales per square foot * 37 locations across 19 states and Puerto Rico + Industry-leading un
Slide 4: What Sets Us Apart?
WHAT SETS US APART? Main dining area, full-service bar, = Broad menu offering appeals to a wide range indoor/outdoor patio and sushi bar providea of tastes, preferences and price points choice of atmospheres anda variety of environments American Grill 46% Appetizers 9% * 30% Alcohol mix has remained
Slide 5: What Sets Us Apart? (Continued)
WHAT SETS US APART? (CONTINUED) = Multitude of dining and social experiences for our guests leads to successful execution across4 day-parts Lunch: Open - 3PM Happy Hour: 3PM - 5PM A Dinner: 5PM - 9PM Boise, Idaho Late Night: 9PM - Close Kona Grit kitchen « sushi « cocktails
Slide 6: Sophisticated Upscale Casual Dining Experience
SOPHISTICATED UPSCALE CASUAL DINING EXPERIENCE Scratch kitchen delivers exceptional flavors 40+ signature sauces & dressings Awarded “Best Sushi” in multiple markets Voted “Best Happy Hour” in several cities Multiple menu choices for health-conscious guests Exhibition-style kitchen & sushi bar Indoo
Slide 7: Fresh Food Made from Scratch
FRESH FOOD MADE FROM SCRATCH Our sophisticated and diverse menu boasts a wide array of options for guests - Freshly prepared, critically acclaimed sushi = Innovative contemporary American favorites = Comprehensive selection of specialty cocktails Offers a great value proposition with a $26 average c
Slide 8: Affordable Dining Experience
AFFORDABLE DINING EXPERIENCE Average check without alcohol compares favorably to competition $51.00 == Average check with and without alcohol 6 | 00 Le Kona Gritt kitchen « sushi « cocktails $24.00 $24.93 pecs Ol $21.30 $20.20 $20.43
Slide 9: Loyal User Base
LOYAL USER BASE Multiple Dayparts and Dining Choices Drives Frequency = Frequency driven by multiple dining areas = Sushi bar = Dining room =__ Indoor bar = Lounge = Outdoor patio = Usage opportunities = Everyday dining Business meetings Special occasions Large parties Happy hour with co-workers Fam
Slide 10: Focused Marketing
FOCUSED MARKETING Loyalty Club + 245,000+ members + Drive traffic by keeping Kona top of mind Promoting Our Brand Kona Grit kitchen + sushi « cocktais Local Market Engagement “PR + Direct marketing + Charity sponsorship * Concierge program Kona Gritt kitchen « sushi « cocktails 10
Slide 11: National Footprint with Significant Room to Grow
NATIONAL FOOTPRINT WITH SIGNIFICANT ROOM TO GROW I Boise Eden Prairie % a aaa = Troy ® 3 Stamford Lincolnshire PeeAn K Woodbridge eer -olumbus a Omaha 4k Oak Brook cae es oo a Denver airfax( ‘Arlington (June 2015) — Ye Heonsas Ciy Cincinnati Richmond ekcLas Vegas EI Segundo’ m ‘ Irvine@ @ Nashville
Slide 12: Significant Growth Opportunity
SIGNIFICANT GROWTH OPPORTUNITY Substantial Runway vs. Leading Polished Casual Incumbents Kona Grit kitchen « sushi « cocktails 42
Slide 13: Compelling Unit Level Economics
COMPELLING UNIT LEVEL ECONOMICS Quality site selection & effective execution can lead to superior returns... ($ in thousands) Comparable Units’ Restaurant sales $4,500 Net cash investment? $2,600 Restaurant cash flow % margin 18% - 19% Sales to Cash Investment . 1.7x Ratio Cash Return on Cash ° o In
Slide 14: Flexible Real Estate Options
FLEXIBLE REAL ESTATE OPTIONS Real Estate Type: Current Units _ Lifestyle/entertainment centers 15 Upscale retail center/shopping malls 11 «Mixed use commercial/retail centers 8 Freestanding 3 Significant commercial, residential and daytime population Rigorous ROI review — target > 30% Prototype: ~ 7
Slide 15: Flexible Real Estate Options
FLEXIBLE REAL ESTATE OPTIONS ARETTA, GA LIFESTYLE CENTER: ALPH $600 million mixed use development with 570,000 sq. ft. of shopping/dining and 750,000 sq. ft. of Class A office space Strong retail co-tenants (Whole Foods, Arhaus, Crate & Barrel, Regal Cinemas) Attractive, affluent demographics — 63%
Slide 16: Flexible Real Estate Options
FLEXIBLE REAL ESTATE OPTIONS OUTDOOR MALL: IRVINE SPECTRUM Leading retail center with 15 million annual visitors, half the visits include dining 500,000 average daily traffic 41,000 homes and 14,000 apartments planned ey Within’ 3-mile radius Household income 2.1x the national avg. Kona Grint kitche
Slide 17: Flexible Real Estate Options
FLEXIBLE REAL ESTATE OPTIONS FREESTANDING: PLANO, TX wa Headquarters for several Fortune 1000 companies and more than 10,000 businesses 9" largest city in Texas, 4" largest in DFW metroplex Restaurant visible from Dallas North Tollway (120,000 vehicles per day) Highly educated, young and diverse dem
Slide 18: New Design Panoramic Tour
NEW DESIGN PANORAMIC TOUR ALPHARETTA — EXTERIOR VIEW
Slide 19: New Design Panoramic Tour
—* NEW DESIGN PANORAMIC TOUR COLUMBUS — ENTRANCE
Slide 20: New Design Panoramic Tour
NEW DESIGN PANORAMIC TOUR ALPHARETTA — BAR he, ide FITC? Cate EREL $i aba St Be gery = = = iisigi Lb 8 ee ts] iat _ a i \. wine Dh e FY epee
Slide 21: New Design Panoramic Tour
NEW DESIGN PANORAMIC TOUR ALPHARETTA — OUTDOOR PATIO Kona Grit ithe aE
Slide 22: New Design Panoramic Tour
NEW DESIGN PANORAMIC TOUR ARLINGTON - DINING ROOM
Slide 23: New Design Panoramic Tour
NEW DESIGN PANORAMIC TOUR ARLINGTON - PRIVATE DINING ROOM | 2) = = 1% 9! "6 og ap SUNS = | eax - ¥ = = Kona Gritt kitchen + sushi « cocktails 23
Slide 24: New Design Panoramic Tour
NEW DESIGN PANORAMIC TOUR PLANO — SUSHI BAR = "a
Slide 25: International Franchising Initiative
INTERNATIONAL FRANCHISING INITIATIVE Growth initiative a result of: — Significant unsolicited interest from well-capitalized and experienced hospitality franchise operators — Opportunity to leverage a proven and portable Kona Grill brand — Opportunity to put minimal capital at risk relative to U.S u
Slide 26: Experienced Senior Leadership Team
EXPERIENCED SENIOR LEADERSHIP TEAM Name and Posi jography = Largest shareholder (12% of company) Berke Bakay President & Chief Executive Officer = President & CEO since 2012, Board member since 2009 Christi Hing = 10+ years with Kona Chief Financial Officer = 20 years of finance and accounting exper
Slide 27: Key Takeaways
KEY TAKEAWAYS Unique growth concept; differentiated upscale casual + 50%+ of sales from sushi and bar * Successful execution in 4 dayparts & 3 distinct businesses * National portability, flexible real estate options, international opportunity « Industry-leading unit economics « Strong cash-on-cash r
Slide 28: Financial Overview
FINANCIAL OVERVIEW Kona Gritt iaehes en gE
Slide 29: Restaurant Sales
RESTAURANT SALES $ in millions $143.0 si $96.0 $98.3 2011 2012 2013 2014 2015" (1) Preliminary, unaudited for FY 2015 Kona Gritt kitchen « sushi « cocktails 29
Slide 30: Strong New Unit Sales Performance
STRONG NEW UNIT SALES PERFORMANCE AWS Differential -Comp Units =-=Non-Comp Units of Non-Comp $105,000 Relative to Comp ita Base: ee 4Q13 128% 1Q14 94% $70,000 2Q14 92% geeone 3Q14 111% ‘$80,000 4Q14 104% $75,000 1Q15 93% 2Q15 98% $70,000 3Q15 98% ‘$65,000 Expectation: $60,000 Initial AWS at 90% 4Q13
Slide 31: Two-Year Same-Store Sales Stack vs. Casual Dining Industry
TWO-YEAR SAME-STORE SALES STACK VS. CASUAL DINING INDUSTRY 9 1 0:0%6 r Kona Grill 8.0% [Bh Knapp-track Casual Dining Index 6.0% 4.0% 2.0% 0.0% -2.0% 4.0% Q1-14 Q2-14 Q3-14 Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 Kona Grit iat: sushi « cocktails an
Slide 32: Restaurant Operating Profit Margin
RESTAURANT OPERATING PROFIT MARGIN 17.8% Denver landlord construction and 5 new units had ~100 bps impact 2011 2012 2013 2014 L™" (1) LTM for 12 months ended 9/30/2015 Kona Gritt kitchen « sushi « cocktails 32
Slide 33: LTM Restaurant Operating Profit Margin vs. Peers
LTM RESTAURANT OPERATING PROFIT MARGIN VS. PEERS 14.4% remodel and 6 new units had ~150 bps impact Kona Gant coma EE Note: Restaurant Operating Profit Margin is defined as Restaurant Sales less COGS, Labor, Operating Expenses and Occupancy and excludes Pre-Opening Expenses (1) Represents estimate of
Slide 34: Adjusted G&A Expenses as % of Restaurant Sales
ADJUSTED G&A EXPENSESAS % OF RESTAURANT SALES Primary headcount in place; leverage expected in 2016 8.4% 1 8.5% 7.8% 7.4% 7.0% (2) (12) 2011 2012 2013 2014 LT™ (1) LTM for 12 months ended 9/30/2015 (2) Includes additions to headcount to support growth initiatives Note: Adjusted G&A excludes stock-ba
Slide 35: Adjusted EBITDA
ADJUSTED EBITDA Well-positioned for adjusted EBITDA growth $ in millions ! ! $11.4 $11.5 $11.5 $10.8 $8.8 H ! ! ! ! 4 7 ! ! i ! ; ! (2) (12) 2011 2012 2013 2014 LT™ (1) LTM for 12 months ended 9/30/2015 (2) Includes additions to headcount to support growth initiatives Note: Adjusted EBITDA excludes
Slide 36: Unit Growth Rate vs. SSS
UNIT GROWTH RATE VS. SSS 2016E Unit Growth 25% : 20% | KonaGant 15% | 10% 4 WY esecake 5% | Pes: 0% -6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 2015 YTD SSS Sources: Company filings, Company investor presentations, equity research estimates Kona Gritt kitchen « sushi « cocktails 36
Slide 37: Capitalization
CAPITALIZATION Select Balance Sheet Items December 31, September 30, 2014 2015 Cash & cash equivalents $36.6 $15.8 Long-term debt $0.0 $0.0 = $35.0M credit facility with interest rates at LIBOR + 1.5%-2.5% Kona Gritt kitchen « sushi « cocktails 7
Slide 38: Focused on Growth
FOCUSED ON GROWTH - Build a premier polished casual concept - Take brand to the next phase of growth + 2units opened in 2013; 5 opened in 2014; 7 opened in 2015 - 8 units planned for 2016 (21% growth); 20% planned growth for next several years - Top quartile restaurant operating margins - Strong SSS
Slide 39: Investment Highlights
INVESTMENT HIGHLIGHTS Substantial White Space for Domestic and we International Atmosphere and Growth Strong Unit Diverse Menu Economics Mix Exceptional Seasoned Restaurant Menu Selections OperationsTeam Experienced Management Team with Significant Insider ‘Ownership Sophisticated Kona Gritt kitchen