Diversified Restaurant Holdings, Inc. (NASDAQ:SAUC) ("DRH" or
the "Company"), the largest franchisee for Buffalo Wild Wings®
("BWW") with 64 stores across five states, today announced results
for its first quarter ended March 26, 2017.
First Quarter Highlights (from continuing operations)
- Revenue increased 2.8% to $44.3
million
- Same-store sales were (0.3%)
- Achieved net income of $0.8 million, or
$0.03 per diluted share
- Restaurant-level EBITDA of $8.4
million, or 19.0% of sales(1)
- Adjusted EBITDA was $6.2 million, or
13.9% of sales(1)
- Total debt, net of cash, reduced $3.0
million in the first quarter
(1) See attached table for a reconciliation
of GAAP net income to Restaurant-level EBITDA and Adjusted
EBITDA
“Our first quarter results were encouraging and not only
validate our decision to focus solely on the BWW business, but
demonstrate the strength of the franchise in the face of continued
market headwinds,” commented David G. Burke, President and CEO.
“Our promotional efforts, such as Half-Price Wing Tuesdays® helped
to improve traffic while our delivery service continues to provide
incremental sales. The Blazin' Rewards® loyalty program, which
has now been rolled out to all 64 locations, continues to attract
customers and drive higher tickets for those customers that
actively participate in the program.”
There were two favorable calendar shifts in the quarter,
Christmas and Easter, which positively impacted same-store sales
170 basis points.
Mr. Burke added, “Our core Midwest markets are performing quite
well, while our Florida market remains challenged, particularly in
the southern end of our franchise area. And, while restaurant-level
margins were pressured during the period as a result of all-time
high wing costs and promotional activity, we maintained our
disciplined approach to managing costs, produced high operating
margins and continue to achieve industry-leading restaurant
performance.”
First Quarter Results (Unaudited) ($ in thousands)
Q1
2017 Q1 2016 Change % Change Revenue $
44,338.0 $ 43,143.3 $ 1,194.7 2.8 % Operating income $ 2,366.6 $
3,116.0 $ (749.4 ) (24.0 )% Operating margin 5.3 % 7.2 % Net income
from continuing operations $ 795.6 $ 1,292.4 $ (496.8
) (38.4 )% Diluted net income per share (cont. ops.) $ 0.03
$ 0.05 $ (0.02 ) (40.0 )% Same-store sales (0.3 )%
(2.2 )% Restaurant-level EBITDA(1) $ 8,424.6 $ 9,294.2 $
(869.6 ) (9.4 )% Restaurant-level EBITDA margin 19.0 % 21.5 %
Adjusted EBITDA(1) $ 6,157.7 $ 7,183.9 $ (1,026.2 ) (14.3 )%
Adjusted EBITDA margin 13.9 % 16.7 %
(1)Please see attached table for a
reconciliation of GAAP net income to Restaurant-level EBITDA and
Adjusted EBITDA
Balance Sheet Highlights - Continuing Operations
Cash and cash equivalents were $5.4 million at March 26, 2017,
compared with $4.0 million at 2016 year-end. Total debt decreased
$1.6 million to $119.6 million at the end of the first quarter.
Capital expenditures were $1.4 million and were primarily for one
restaurant under construction and restaurant refreshes and
remodels. Capital expenditures were $6.4 million in the first
quarter of 2016.
Fiscal 2017 Guidance
The Company expects the following in 2017:
- Revenue of $173 million to $178
million
- Restaurant-level EBITDA of $33 million
to $36 million
- Adjusted EBITDA between $23.5 million
to $26.5 million
- Capital expenditures of approximately
$4 million to $6 million
- One new restaurant: currently in
development and expected to open in the second quarter
- Two to four remodels: planned at
approximately $0.6 million each
Webcast, Conference Call and Presentation
DRH will host a conference call and live webcast on Friday, May
5, 2017 at 10:00 A.M. Eastern Time, during which management will
review the financial and operating results for the first quarter,
and discuss its corporate strategies and outlook. A
question-and-answer session will follow.
The teleconference can be accessed by calling (201) 389-0879.
The webcast can be monitored at www.diversifiedrestaurantholdings.com. A
presentation that will be referenced during the conference call is
also available on the website.
A telephonic replay will be available from 1:00 P.M. ET on the
day of the call through Friday, May 12, 2017. To listen to the
archived call, dial (412) 317-6671 and enter replay pin number
13659679, or access the webcast replay at www.diversifiedrestaurantholdings.com, where a
transcript will also be posted once available.
About Diversified Restaurant Holdings, Inc.
Diversified Restaurant Holdings, Inc. is the largest franchisee
for Buffalo Wild Wings Grill & Bar with
64 BWW franchised restaurants in key markets in Florida,
Illinois, Indiana, Michigan and Missouri. The Company routinely
posts news and other important information on its website at
www.diversifiedrestaurantholdings.com.
Safe Harbor Statement
The information made available in this news release and the
Company’s May 5, 2017 earnings conference call contain
forward-looking statements which reflect DRH's current view of
future events, results of operations, cash flows, performance,
business prospects and opportunities. Wherever used, the words
"anticipate," "believe," "expect," "intend," "plan," "project,"
"will continue," "will likely result," "may," and similar
expressions identify forward-looking statements as such term is
defined in the Securities Exchange Act of 1934. Any such
forward-looking statements are subject to risks and uncertainties,
actual growth, results of operations, financial condition, cash
flows, performance, business prospects and opportunities could
differ materially from historical results or current expectations.
Some of these risks include, without limitation, the impact of
economic and industry conditions, competition, food and drug safety
issues, store expansion and remodeling, labor relations issues,
costs of providing employee benefits, regulatory matters, legal and
administrative proceedings, information technology, security,
severe weather, natural disasters, accounting matters, other risk
factors relating to business or industry and other risks detailed
from time to time in the Securities and Exchange Commission filings
of DRH. Forward-looking statements contained herein speak only as
of the date made and, thus, DRH undertakes no obligation to update
or publicly announce the revision of any of the forward-looking
statements contained herein to reflect new information, future
events, developments or changed circumstances or for any other
reason.
FINANCIAL TABLES FOLLOW
DIVERSIFIED RESTAURANT HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS (Unaudited)
Three Months Ended March 26, 2017
March 27, 2016 Revenue $ 44,337,964 $ 43,143,252
Operating expenses
Restaurant operating costs (exclusive of
depreciation and amortization shownseparately below):
Food, beverage, and packaging costs 13,038,426 12,059,759
Compensation costs 10,965,530 10,520,246 Occupancy costs 2,893,852
2,766,459 Other operating costs 9,029,876 8,573,747 General and
administrative expenses 2,356,966 2,174,291 Pre-opening costs
31,370 123,443 Depreciation and amortization 3,633,254 3,762,102
Loss on asset disposal 22,059 47,224 Total operating
expenses
41,971,333 40,027,271 Operating
profit 2,366,631 3,115,981 Interest
expense (1,575,954 ) (1,444,940 ) Other income, net 27,167
39,742 Income from continuing operations before
income taxes 817,844 1,710,783 Income tax expense (22,264 )
(418,354 )
Income from continuing operations 795,580
1,292,429 Discontinued operations Income (loss) from
discontinued operations before income taxes 36,535 (1,423,704 )
Income tax (expense) benefit of discontinued operations (995 )
561,679
Income (loss) from discontinued operations
35,540 (862,025 ) Net Income
$ 831,120 $ 430,404
Basic earnings (loss) per share from: Continuing operations
$ 0.03 $ 0.05 Discontinued operations $ — $ (0.03 ) Basic net
earnings per share $ 0.03 $ 0.02 Diluted earnings (loss) per share
from: Continuing operations $ 0.03 $ 0.05 Discontinued operations $
— $ (0.03 )
Diluted net earnings per share $ 0.03 $ 0.02
Weighted average number of common shares outstanding Basic
26,629,974 26,298,034 Diluted 26,629,974 26,298,034
DIVERSIFIED RESTAURANT HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 26, December 25, ASSETS 2017
(UNAUDITED) 2016 Current assets Cash and cash
equivalents $ 5,382,263 $ 4,021,126 Accounts receivable 88,456
276,238 Inventory 1,631,565 1,700,604 Prepaid and other assets
992,732 1,305,936 Total current assets
8,095,016 7,303,904 Deferred income taxes
16,410,956 16,250,928 Property and equipment, net 54,817,201
56,630,031 Intangible assets, net 2,586,563 2,666,364 Goodwill
50,097,081 50,097,081 Other long-term assets 231,455 233,539
Total assets
$ 132,238,272 $
133,181,847 LIABILITIES AND STOCKHOLDERS'
DEFICIT Current liabilities Accounts payable $ 4,121,332 $
3,995,846 Accrued compensation 1,980,366 2,803,549 Other accrued
liabilities 2,893,239 2,642,269 Current portion of long-term debt
11,313,759 11,307,819 Current portion of deferred rent 194,206
194,206 Total current liabilities
20,502,902
20,943,689 Deferred rent, less current portion
2,043,552 2,020,199 Unfavorable operating leases 571,171 591,247
Other long-term liabilities 3,570,054 3,859,231 Long-term debt,
less current portion 108,263,169 109,878,201 Total
liabilities
134,950,848 137,292,567
Commitments and contingencies (Notes 3, 11 and 12)
Stockholders' deficit
Common stock - $0.0001 par value;
100,000,000 shares authorized; 26,636,346 and
26,632,222,respectively, issued and outstanding
2,611 2,610 Additional paid-in capital 21,489,849 21,355,270
Accumulated other comprehensive loss (769,778 ) (934,222 )
Accumulated deficit (23,435,258 ) (24,534,378 )
Total
stockholders' deficit (2,712,576 )
(4,110,720 ) Total liabilities and
stockholders' deficit $ 132,238,272
$ 133,181,847
DIVERSIFIED RESTAURANT HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended March 26, 2017
March 27, 2016 Cash flows from operating activities
Net income $ 831,120 $ 430,404 Net income (loss) from discontinued
operations 35,540 (862,025 ) Net income from continuing
operations 795,580 1,292,429 Adjustments to reconcile net income to
net cash provided by operating activities Depreciation and
amortization 3,633,254 3,762,102 Amortization of debt discount and
loan fees 52,443 50,880 Amortization of gain on sale-leaseback
(34,794 ) (39,302 ) Impairment and loss on asset disposals 22,059
47,225 Share-based compensation 123,082 97,426 Deferred income
taxes 23,259 317,225 Changes in operating assets and liabilities
that provided (used) cash Accounts receivable 187,782 (309,327 )
Inventory 69,039 (13,670 ) Prepaid and other assets 313,204 240,947
Intangible assets (18,915 ) 46,107 Other long-term assets 2,084
(8,792 ) Accounts payable (208,157 ) (289,041 ) Accrued liabilities
(577,438 ) (942,775 ) Deferred rent 23,353 24,124
Net cash provided by operating activities of continuing
operations 4,405,835 4,275,558
Net cash provided by (used in) operating activities of
discontinued operations 35,540 (1,163,832
) Net cash provided by operating activities
4,441,375 3,111,726 Cash flows
from investing activities Purchases of property and equipment
(1,430,201 ) (6,405,269 )
Net cash used in investing activities
of continuing operations (1,430,201 )
(6,405,269 ) Net cash used in investing activities
of discontinued operations — (1,101,142
) Net cash used in investing activities
(1,430,201 ) (7,506,411 ) Cash
flows from financing activities Proceeds from issuance of long-term
debt 1,217,621 3,311,231 Repayments of long-term debt (2,879,156 )
(7,500,000 ) Proceeds from employee stock purchase plan 11,498
10,707
Net cash used in financing activities
(1,650,037 ) (4,178,062 ) Net
increase (decrease) in cash and cash equivalents
1,361,137 (8,572,747 ) Cash and
cash equivalents, beginning of period 4,021,126 13,499,890
Cash and cash equivalents, end of period
$ 5,382,263 $ 4,927,143
DIVERSIFIED RESTAURANT HOLDINGS, INC. AND
SUBSIDIARIES Reconciliation between Net Income and Adjusted
EBITDA and Adjusted Restaurant-Level EBITDA
Three Months Ended (Unaudited)
March 26, 2017 March
27, 2016 Net lncome $
831,120 $ 430,404
+ (Income) loss from discontinued operations (35,540 ) 862,025 +
Income tax expense 22,264 418,355 + Interest expense 1,575,954
1,444,940 + Other income, net (27,167 ) (39,743 ) + Loss on asset
disposal 22,059 47,224 + Depreciation and amortization
3,633,254 3,762,102
EBITDA $ 6,021,944
$ 6,925,307 + Pre-opening costs
31,370 123,443 + Non-recurring expenses (Restaurant-level) 14,300
71,184 + Non-recurring expenses (Corporate-level)
90,097 63,954
Adjusted
EBITDA $ 6,157,711
$ 7,183,888 Adjusted EBITDA
margin (%) 13.9 % 16.7 % + General and administrative 2,356,966
2,174,291 + Non-recurring expenses (Corporate-level)
(90,097 ) (63,954 )
Restaurant–Level
EBITDA $ 8,424,580
$ 9,294,225 Restaurant–Level
EBITDA margin (%) 19.0 % 21.5 %
Restaurant-Level EBITDA represents net income (loss) plus the
sum of non-restaurant specific general and administrative expenses,
restaurant pre-opening costs, loss on property and equipment
disposals, depreciation and amortization, other income and
expenses, interest, taxes, and non-recurring expenses related to
acquisitions, equity offerings or other non-recurring expenses.
Adjusted EBITDA represents net income (loss) plus the sum of
restaurant pre-opening costs, loss on property and equipment
disposals, depreciation and amortization, other income and
expenses, interest, taxes, and non-recurring expenses. We are
presenting Restaurant-Level EBITDA and Adjusted EBITDA, which are
not presented in accordance with GAAP, because we believe they
provide an additional metric by which to evaluate our operations.
When considered together with our GAAP results and the
reconciliation to our net income, we believe they provide a more
complete understanding of our business than could be obtained
absent this disclosure. We use Restaurant-Level EBITDA and Adjusted
EBITDA together with financial measures prepared in accordance with
GAAP, such as revenue, income from operations, net income, and cash
flows from operations, to assess our historical and prospective
operating performance and to enhance the understanding of our core
operating performance. Restaurant-Level EBITDA and Adjusted EBITDA
are presented because: (i) we believe they are useful measures for
investors to assess the operating performance of our business
without the effect of non-cash depreciation and amortization
expenses; (ii) we believe investors will find these measures useful
in assessing our ability to service or incur indebtedness; and
(iii) they are used internally as benchmarks to evaluate our
operating performance or compare our performance to that of our
competitors.
Additionally, we present Restaurant-Level EBITDA because it
excludes the impact of general and administrative expenses and
restaurant pre-opening costs, which is non-recurring. The use of
Restaurant-Level EBITDA thereby enables us and our investors to
compare our operating performance between periods and to compare
our operating performance to the performance of our competitors.
The measure is also widely used within the restaurant industry to
evaluate restaurant level productivity, efficiency, and
performance. The use of Restaurant-Level EBITDA and Adjusted EBITDA
as performance measures permits a comparative assessment of our
operating performance relative to our performance based on GAAP
results, while isolating the effects of some items that vary from
period to period without any correlation to core operating
performance or that vary widely among similar companies. Companies
within our industry exhibit significant variations with respect to
capital structure and cost of capital (which affect interest
expense and tax rates) and differences in book depreciation of
property and equipment (which affect relative depreciation
expense), including significant differences in the depreciable
lives of similar assets among various companies. Our management
team believes that Restaurant-Level EBITDA and Adjusted EBITDA
facilitate company-to-company comparisons within our industry by
eliminating some of the foregoing variations.
Restaurant-Level EBITDA and Adjusted EBITDA are not determined
in accordance with GAAP and should not be considered in isolation
or as an alternative to net income, income from operations, net
cash provided by operating, investing, or financing activities, or
other financial statement data presented as indicators of financial
performance or liquidity, each as presented in accordance with
GAAP. Neither Restaurant-Level EBITDA nor Adjusted EBITDA should be
considered as a measure of discretionary cash available to us to
invest in the growth of our business. Restaurant-Level EBITDA and
Adjusted EBITDA as presented may not be comparable to other
similarly titled measures of other companies and our presentation
of Restaurant-Level EBITDA and Adjusted EBITDA should not be
construed as an inference that our future results will be
unaffected by unusual items. Our management recognizes that
Restaurant-Level EBITDA and Adjusted EBITDA have limitations as
analytical financial measures.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170504006675/en/
Investors and Media:Kei Advisors LLCDeborah K. Pawlowski,
716-843-3908dpawlowski@keiadvisors.com
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