Diversified Royalty Corp. · TSX:DIV
Diversified Royalty — Merger or Acquisition (October 2023)
18 slides from Diversified Royalty's merger presentation, Oct 4, 2023
Slide 1: BarBurrito Restaurants Inc. Trademark Acquisition and Royalty
BarBurrito Restaurants Inc. Trademark Acquisition and Royalty October 4, 2023
Slide 2: Legal Disclaimer
Legal Disclaimer Notice The contents of this presentation are for information purposes only. This presentation does not constitute an offer to sell securities of Diversified Royalty Corp. ("DIV“ or the “Corporation”) or any other entity and it is not soliciting an offer to buy any such securities. T
Slide 3: Non-IFRS Measures
Non-IFRS Measures Management believes that disclosing certain non-IFRS financial measures, non-IFRS ratios and supplementary financial measures provides readers with important information regarding the Corporation’s financial performance and its ability to pay dividends and the performance of its ro
Slide 4: Transaction Overview
Transaction Overview Diversified Royalty Corp. (“DIV”) has acquired the trademarks and certain other intellectual property used by BarBurrito Restaurants Inc (“BarBurrito”) in Canada, adding an 8th royalty stream to DIV’s portfolio for $72M cash at closing and certain additional consideration • Foun
Slide 5: Attractive Royalty Transaction
Attractive Royalty Transaction DIV believes BarBurrito is an excellent royalty acquisition for the following reasons: Business Model. 18-year operating history – performed well through COVID – strong store level economics (4-5 year paybacks), low churn (only 4 stores closed (3 in malls) in its o
Slide 6: BarBurrito – Overview
BarBurrito – Overview Founded in 2005 – head office in North York, Ontario BarBurrito is a quick-service Mexican franchise business featuring grilled burritos, quesadillas, tacos, nachos, salads and other food products BarBurrito has over 260 locations across Canada – currently there is a conc
Slide 7: Mexican QSR Market
Mexican QSR Market Canadian restaurant sales are forecast* to grow as follows over the next few years: Full Service QSR $83.9 $86.8 $80.7 $74.3 $68.0 $66.2 $59.7 $50.4 $41.9 $43.3 $40.3 $37.5 $33.7 $35.0 $33.4 $28.9 $36.8 $40.4 $42.0 $43.5 $34.3 $31.2 $21.5 $26.3 2019A 2020A 2021E 2022E 2023E 2024
Slide 8: Business Model
Business Model BarBurrito operates a standard franchise model with initial franchise fees, royalties on sales and an advertisement fund A typical store costs $350,000 to $450,000, generates $650,000 of revenues and has a 4-5 year payback 46% of new stores opened in FY2023 were opened by existi
Slide 9: Financial Performance
Financial Performance BarBurrito generated system sales1 of $135M for FY2023 and has grown system sales1 at an annual CAGR of ~38% since FY2019 System Sales $160 Millions $140 $120 $100 $80 $60 $40 $20 $- FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 BarBurrito has added 156 locations over the past th
Slide 10: Royalty Transaction Terms
Royalty Transaction Terms The BarBurrito royalty transaction has the following terms: Transaction Multiple DIV will receive $8.4M1 in the next 12 months, representing an 8.6x royalty acquisition multiple2 Promissory Note DIV will acquire an additional $4.3M of royalty for $36M, subject to
Slide 11: Acquisition Financing
Acquisition Financing DIV funded the $72M cash portion of purchase price as follows: $10M term debt, BARB LP $10M term debt, DIV $50M Acquisition Facility, DIV $2M cash on hand, DIV The $50M drawn on the Acquisition Facility is interest-only for six months and thereafter amortizes over a
Slide 12: Diversification
Diversification Pro-Forma Adjusted 6% 6% 43% 7% 8% 6% 12% 12% Revenue1 Expanding across diverse and attractive industries 12 1) The percentages of adjusted revenues as presented is based on pro-forma adjusted revenue. Pro-forma adjusted revenue is a non-IFRS measure. See “Non-IFRS Measures”.
Slide 13: Impact to DIV
Impact to DIV Current Run-Rate Pro-Forma $61.7M $70.1M Adjusted Revenue1 Adjusted Revenue1 $57.3M $65.4M Normalized EBITDA1 Normalized EBITDA1 $39.1M $41.4M Distributable Cash1 Distributable Cash1 $0.24 $0.245 Dividend per Share2 Dividend per Share2 87.8% (76.8% net of DRIP) ~84.7% (74.1% net of DRI
Slide 14: The Opportunity
The Opportunity With the rapid increase in interest rates, DIV believes private equity’s model of high leverage with low-cost debt has become less competitive, creating an opportunity for DIV’s unique royalty transactions, particularly in the US market, where there is less awareness In January 2
Slide 15: Summary
Summary DIV believes BarBurrito is an excellent royalty acquisition for the following reasons: Business Model. 18-year operating history – performed well through COVID – strong store level economics (4-5 year paybacks), low churn (only 4 stores closed (3 in malls) in its operating history, inclu
Slide 16: Appendix A
Appendix A The following table reconciles net income for the three months ended June 30, 2023 to run-rate normalized EBITDA and pro-forma normalized EBITDA: (Cdn$000's) Q2 2023 Annualized Revenues 14,149 56,596 Operating expenses (1,426) (5,704) Interest expense on credit facilities (2,958) (11,832)
Slide 17: Appendix B
Appendix B The following table reconciles net income for the three months ended June 30, 2023 to run-rate distributable cash and pro-forma distributable cash: (Cdn$000's) Q2 2023 Annualized Net income 9,094 36,376 Interest expense on credit facilities 2,958 11,832 Income tax expense 3,467 13,868 Dep
Slide 18: Appendix C
Appendix C The following table reconciles revenue for the three months ended June 30, 2023 to run-rate adjusted revenue and pro-forma adjusted revenue: (Cdn$000's) Q2 2023 Annualized Revenues 14,149 56,596 DIV Royalty Entitlement net of NND Royalties LP expenses (1) 1,277 5,108 Adjusted revenue / ru
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