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Ignite Restaurant Group, Inc. (IRG)
Acquisition of Romano’s Macaroni Grill Conference Call
February 6, 2013 5:00 PM ET
Michael Dixon SVP and CFO
Ray Blanchette – President and CEO
Nicole Miller Regan – Piper Jaffray
Keith Siegner – Credit Suisse
Chris O’Cull – KeyBanc
Jonathan Komp – Robert W Baird
Brian Vaccaro – Raymond James
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Before I turn this call over to management, I would like to note for you that portions of this call deal with forward-looking information. These statements reflect management’s expectations for the future. The company’s actual results may differ materially from these expectations. Management refers all of you to today’s press release and the company’s recent filings with the SEC for a more detailed discussion of the risks that could impact future operating results and financial condition.
On the call today we have Ray Blanchette, President and Chief Executive Officer of the company and Michael Dixon, Senior Vice President and Chief Financial Officer.
At this time, for opening remarks, I would like to turn the call over to Michael Dixon, Senior Vice President and Chief Financial Officer of Ignite Restaurant Group. Please go ahead, sir.
Thank you, operator. Good afternoon, and thank you for joining us today. Before we get started, I just wanted to remind everyone there is a brief presentation available on the Investors section of our website at igniterestaurant.com that we’ll use for a part of our discussion today. So please access our website and download the presentation as Ray will be walking through those slides in just a minute.
With that said, our agenda for the call will be as follows. Ray will provide an overview of our announced transaction. And then I will discuss the financial impact and provide some additional guidance. We should have plenty of time at the end for questions. But we’d like to finish up in about an hour. So with that, I’d like to turn the call over to Ray, our President and Chief Executive Officer.
Great. Thanks, Mike. And thanks to everyone on the phone for joining us today on such short notice. Obviously, we’re very excited to talk with you today about our purchase of Romano’s Macaroni Grill and share with you our vision for this brand.
We’re thrilled to welcome the Mac Grill team into the Ignite family, and we’re looking forward to tackling the opportunities that this acquisition presents for us. Mike and I were in Daytona this week for our annual General Managers conference, so after the release went out, we announced this deal to our entire Ignite team. And I wish everyone could have seen their excitement over this deal. Like me, they understand the opportunities that a great brand like Macaroni Grill can provide Ignite and all of its employees.
Due to the scheduling of our GM conference, Mike and I will be traveling most of the day tomorrow, but we’ll have some time available tonight after the call for follow-up. We can also make time available on Friday. But we appreciate everyone’s flexibility on that. It’s just inconvenient timing.
I think that the discussion around our vision for Romano’s Macaroni Grill is best served by walking through some visuals. As Mike mentioned, we posted the presentation on our website. So with that, I’ll start with slide one.
And slide one deals directly with the strategic rationale for this acquisition. As noted in the release, we’ve agreed to purchase Romano’s Macaroni Grill for $55 million in an all-cash deal. This brand operates in the high growth, polished casual segment. And, quite frankly, from my perspective, Macaroni Grill is a pioneer in this segment. But it’s the same place that we compete with Joe’s Crab Shack and Brick House Tavern + Tap. It takes Ignite to nearly $1 billion in revenue overnight. And while we aren’t making the purchase just to be a larger company, there are definitely economies of scale that we fully expect to realize.
The thing that gives us the greatest confidence is that we’ve done this before. In many ways, Mac Grill feels a lot like Joe’s Crab Shack four years ago. We built this playbook. We executed the strategy in the past. And we’re extremely confident that we can do this again. A very nice side benefit is the incredible real estate that comes along with this deal. And as you would expect, there are significant opportunities for G&A leverage. And I’ll talk more about each of these topics in the next few pages.
So if you turn to page two, you see some nice imagery of interior shots and exterior shots of a couple of Mac Grills and one of their signature items in the centerpiece. Mac Grill’s brand, and I’m sure all of you are familiar with, it’s been around since 1988, generated nearly $500 million in system-wide sales in 2012. So these are currently about $2.1 million. But nearly all of them are generating positive restaurant level cash flows. Approximately 70% of the sales come from dinner, and north of 80% of the revenues are generated from food sales. So, sort of a traditional dinner house kind of model, if you will.
So if you turn to page three, I want to share with you really some visual imagery of how we’re thinking about Macaroni Grill. And to be candid, I love this brand. I’m very excited to have an opportunity to work with it. I’ve got with some of our marketing folks, and we crafted sort of a positioning statement, if you will. I’ll just read it to you, the way we envision it.