Q1 2013 - Noble Roman`s Inc.

Noble Roman’s Inc.
OTC BB: NROM
November 2013
11/29/2013
1
Safe Harbor
The statements contained in this presentation concerning the Company's future
revenues, profitability, financial resources, market demand and product
development are forward-looking statements (as such term is defined in the Private
Securities Litigation Reform Act of 1995) relating to the Company that are based on
the beliefs of the management of the Company, as well as assumptions and
estimates made by and information currently available to the Company's
management. The Company's actual results in the future may differ materially from
those projected in the forward-looking statements due to risks and uncertainties
that exist in the Company’s operations and business environment, including, but not
limited to, competitive factors and pricing pressures, non-renewal of franchise
agreements, shifts in market demand, general economic conditions, changes in
purchases of, or demand for, the Company's products, licenses or franchises, the
success or failure of individual franchisees and licensees, changes in prices or
supplies of food ingredients and labor, and the success or failure of its recently
developed stand-alone take-n-bake operation. Should one or more of these risks
or uncertainties materialize, or should underlying assumptions or estimates prove
incorrect, actual results may differ materially from those described herein as
“anticipated,” “believed,” “estimated,” “expected” or “intended.” The Company
undertakes no obligation to update the information in this presentation for
subsequent events.
11/29/2013
2
Investor Highlights
Sustainable Profitability, Accelerating Growth
Strong Financial
Results
• Operating margins of 40% YTD (through
nine months) 2013 vs. 35% in FY 2012
and 30% in FY 2011
• Net income from continuing operations
before taxes of $2.2M YTD (through
nine months) 2013, vs. $2.0M for FY
2012 vs. $1.5M for FY 2011
• Net income after taxes from continuing
operations: margin of 22.4% YTD
(through nine months) 2013 vs. 17.5%
for FY 2012 and 14.4% for FY 2011*
Powerful
Business Model
Licensing-franchising business model
Superior financial performance while
alleviating the risk of owning and
operating restaurants
Positioned in Fastest-Growing Pizza
Industry Segment
Take-N-Bake (TNB) is a growth segment
of the pizza industry
• Debt reduced to $3.1M from $5.0M in
last 17 months (but recently increased
to $3.9M to redeem preferred shares to
avoid 12% return & the future dilution
of 366,666 shares)
Diversified Platform
For Growth
Stand-Alone Take-n-Bake
• Ramped from zero to 16 franchised
units as of 11/7/13 in 12 months
• 29 additional locations under
development
• $164K in ongoing royalties and fees
YTD (through nine months) 2013 vs.
$0 in 2012
Two Stable and Profitable Segments
(with modest growth rates)
• Non-traditional locations
• Grocery store TNB
*Throughout this presentation, all results are shown excluding all adjustments for the reserve for collectability
against the former Heyser case Plaintiffs in 2010, 2011 and 2012.
11/29/2013
3
Who We Are
Well-Known Brand; Positioned in Industry Growth Area
11/29/2013
4
Historical Revenue Sources
Two Stable and Profitable Segments
(with Modest Growth Rates)
Non-Traditional Franchises
11/29/2013
Grocery Take-N-Bake
5
Revenue Sources
Take-N-Bake: Stand Alone
YTD
(9 Mos) 2013
2012
Revenue
0
0.16
% of
Revenue
0
3%
Take-N-Bake: Stand Alone
Total of 16 stores opened and
29 more in development as of 11/7/13
Non-Traditional Franchise
2010
2012
2010
Revenue
4.4
4.0
4.4
Revenue
% of Total
Revenue
73
63
63
% of Total
Revenue
(in Millions)
11/29/2013
2011
Take-N-Bake: Grocery
(in Millions)
2011
2012
0.463
1.167
1.370
8
18
20
6
Industry
• 2012 U.S. pizza sales: $36.8 billion
Top 5 U.S. Pizzeria’s by 2012 Sales
– 7% increase from 2010
• 53.3% of pizza outlets
independently owned and control
39.6% of total pizza industry sales
• Store unit count
– 71,856 as of September 2012, up 6,573
units from September 2011
• Take-N-Bake is one of the fastest
growing segments of the industry
• TNB can accept food stamps/EBT
Pizza Hut
$5.40
Domino's
$3.40
Papa John's
Little Caesars
Papa Murphy's Take-'N'-Bake
$2.20
$1.50
$0.702
$ in billions
– 1 of every 6.5 people in the U.S. using
food stamps/EBT
All data: October 2013 PMQ Magazine
11/29/2013
7
Market Share
Americans Enjoy Home-cooked Pizza
By Type
By Company
25%
45%
34%
30%
Carry out
11/29/2013
40%
26%
Delivery
Dine-in
"Big 4"
Independents
Other Chains
8
Stand-Alone TNB Franchises
• Signed agreements for 45 as of
11/7/13; accelerating
– 16 total opened
– 29 in development
• Competition:
– Currently only one national company
competing in this space: Papa Murphy’s®
– A few smaller, regional players
• EBT: Advantage vs. other pizza chains
– Able to accept EBT (food stamp) payments in
all locations
– 1 in 6.5 Americans on food stamps
• Low-cost:
– Only $80-150k estimated total investment
after landlord allotments (approximately ½ of
the investment for Papa Murphy’s)
– Food cost: 30%-31% of sales
– Very low labor requirements
– Minimal equipment requirement
– Only ~ 1,000 sq. ft of space required
11/29/2013
9
Stand-Alone Progress to Date
Q1 2013
(3/31/13)
Q2 2013
(6/30/13)
Q3 2013
(9/30/13)
Q4 2013 E
(12/31/13)
Q1 2014 E
(3/31/14)
2.3
5.3
7.9
15.2
26.0
Ongoing Royalties & Fees
$24,000
$53,000
$87,000
$185,000
$320,000
Average Ongoing Royalties
& Fees Per Store
$10,435
$10,076
$11,058
$12,171
$12,307
Average Units Open During
Quarter
11/29/2013
10
Stand-Alone TNB: Growth / Quarter
45
Locations
50
Royalties & Fees
45
40
35
29
25
21
11
11
8
7
3
4
3/1/2013
5/6/13
Locations Open
11/29/2013
20
16
8
Locations To Open
320
15
13
8/7/13
30
11/7/13
10
185
5
0
Total Locations
24
53
87
3/31/13 6/30/13 9/30/13 12/31/13 3/31/14
Est
Est
11
Stand-Alone TNB Franchises
Business Model
UpfrontFee
Ongoing Fees
Annual Total
Per Unit
11/29/2013
$18K upfront fees
Approximately 11% royalty and fees in the aggregate
Expected gross revenues of $400-600K per unit per year.
Results in $44-66K in royalties to Noble Roman’s per location
per year
12
Competition
• Papa Murphy’s Take ‘n Bake is market
leader with more than $700 million in FY
2012 sales
• 1,202 traditional locations operated for a
full 12 months for year ending 1/1/2012
– Average per store sales: $559,495
Papa Murphy Franchises*
1283
1239
1171
1119
• Highest 401 stores averaged $828,296
• Next highest 400 stores averaged $511,241
• Lowest 401 stores averaged $338,829
• “Big 4” unlikely to enter TNB:
– Formulations not conducive to TNB
– Would compete with delivery franchises
11/29/2013
1/1/09
1/1/10
1/1/11
1/1/12
* Does not include non-traditional
locations (inside some other facility)
13
Marketing
Revenue
Expansion
Focus on revenue
expansion through
franchising
11/29/2013
R&D
Leverage the results of
extensive research and
development , i.e., our unique,
proprietary dough, our tasty
menu items, etc.
Outreach
Aggressively communicate the
Company's competitive advantages
to its target market of potential
franchisees. Expand franchising by
promoting our concepts, by
attending trade shows, direct mail
and by advertising on various webbased lead generation
14
Non-Traditional Franchises & Licenses
(Including Grocery Store Take-N-Bake)
• Current focus on:
–
–
–
–
Entertainment centers (including bowling)
Travel plazas
Convenience stores
Grocery stores with emphasis on partnerships
with grocery distributors across the country
Non-Traditional
Franchise/License Locations
1992
1112
2010
11/29/2013
2011
2012
YTD
9/30/13
All Concepts
From Non-Traditional Franchise/License
$4.9
$5.2
736
$5.8
$4.4
$ in millions
1583
1847
Up-Front Fees
Ongoing Royalties & Fees
377
374
255
2010
2011
2012
YTD
9/30/13
2010
2011
2012
2013 YTD
(9/30/13)
15
Expenses
$4.8
$4.8
$4.9
Interest Expense
$3.7
G&A
Depreciation
Restaurant Expenses
Other Op Expenses
$ in millions
Sales Commissions
Travel
Trade Shows
Salaries & Wages
2010
11/29/2013
2011
2012
YTD 9/30/13
16
$ in millions
Historical EBITDA
$1.83
2010
11/29/2013
$2.53
(Nine Months)
$2.39
2012
YTD 9/30/13
$2.02
2011
17
Historical Net Income
from Continuing Operations Before Income Taxes
Due to deferred tax credits, the Company will not pay any income taxes on
approximately the next $25 million in net income before taxes
$ in millions
$2.00
$1.51
2011
11/29/2013
(Nine Months)
$2.15
2012
YTD 9/30/13
18
Balance Sheet Summary
9/30/13
12/31/12
12/31/11
122
1,665
473
2,002
4,262
144
1,080
461
2,040
3,725
233
885
339
1,931
3,388
483
273
308
8,388
4,209
17,342
9,239
3,924
17,161
9,613
3,915
17,224
Accounts Payable & Accrued Expenses
Notes Payable
Total Stockholders' Equity
297
3,333
13,712
511
4,271
12,379
665
4,831
11,728
Total Liabilities & Stockholder's Equity
17,342
17,161
17,224
Assets
Cash
Accounts & Notes Receivable - Net
Inventories
Other
Total Current Assets
Net Property & Equipment
Deferred Tax Asset (net of current portion)
Other Assets
Total Assets
Liabilities & Stockholders' Equity
11/29/2013
19
Capital Structure
9/30/2013
Weighted Average Common Stock
Options
Total
11/29/2013
19,519,287
739,555
20,258,842
20
Management
Paul W. Mobley - Chairman of the Board and Chief Executive Officer
1991 – present: Chairman of the Board, CEO, CFO
1974 – present: Director
1981 – 1997: President, CEO and CFO of the Company
A. Scott Mobley - Chief Operating Officer and President
1997 – present: President and Chief Operating Officer
1992 – present: Director
1986-1997 Vice President Marketing
Troy Branson - Executive Vice President of Franchising
1997 – present: EVP of Franchising
1992 – 1997: Director of Business Development
1987 – 1992: Owner of Branson-Yoder Marketing Group
Mitchell Grunat - Vice President of Franchise Services
2002– present: VP of Franchise Services
2001– 2002: Chief Operating Officer of Lanter Eye Care
2000-2001: Business Development Officer for Midwest Bankers
James D. Bales - Vice President of Operations
2008– present: VP of Operations
2004– 2008: Various positions at Noble Roman’s with increasing responsibility
1989 – 2004: Management roles in marketing and operations with TCBY Yogurt
Michael Lauren – National Director, Franchise Sales
2012- present: National Director, Franchise Sales
11/29/2013
21
Investor Summary
Business model that
delivers solid
financial
performance while
mitigating risk
11/29/2013
Sustainable
profitability;
accelerating growth
Positioned in the
fastest growing
segment of the
pizza industry –
Take ’N Bake
Experienced
management
team
22