piper jaffray on bravo brio

8/12/2019 Piper Jaffray on Bravo Brio

1/5

C O M P A N Y N O T E

J u l y 3 1 , 2 0 1 4

Bravo Brio Restaurant (BBRG) Neutral

Updating Model & Maintaining PT Following 2Q14 Results

PRICE: US$14.90

Note: Price as of the close July 31, 2014.

TARGET: US$13.00

16x FY15E EPS

Nicole Miller Regan

Sr Research Analyst, Piper Jaffray & Co.

612 303-6637, [email protected]

Joshua C. Long, CFA

Research Analyst, Piper Jaffray & Co.

612 303-6928, [email protected]

Changes Previous CurrentRating Neutral

Price Tgt US$13.00

FY14E Rev (mil) US$417.9 US$407.3

FY15E Rev (mil) US$438.3 US$409.7FY14E EPS US$0.78 US$0.71

FY15E EPS US$0.84 US$0.78

52-Week High / Low US$17.13 / US$13.92Shares Out (mil) 20.4Market Cap. (mil) US$304.0Avg Daily Vol (000) 113Book Value/Share US$5.25Net Cash Per Share NADebt to Total Capital 5%Div (ann) 0.00Fiscal Year End Dec

Price Performance - 1 Year

A ug -1 3 O ct -1 3 D ec -1 3 F eb -1 4 A pr -1 4 J un-1 4

17.5

17

16.5

16

15.5

15

14.5

14

13.5

USD

Source: Bloomberg

CONCLUSION

The company delivered 2Q14 operating earnings of $0.20 per share, which was in-linewith our $0.20 estimate and below consensus of $0.22. Results were driven by same-store

sales of (6.0%) at Bravo and (4.5%) at Brio. During the third quarter we understand

trends are running in a range similar to that of 2Q. We are maintaining our Neutral

rating and price target on BBRG shares based on 16x (unchanged vs. prior) our updated

FY15E EPS, which takes into account recent results, current trends, and the company's

updated guidance.

Second-quarter operating results below consensus expectations & in-line with PJCestimate: Second-quarter operating earnings were $0.20 per share, in-line with our

estimate and below the street at $0.22. Total revenues were down approximately

(1.1%) y/y to $104.5M, based partially on same-store sales of (6.0%) at Bravo

(versus our (5.0%) projection) and (4.5%) at Brio (versus our (5.0%) projection). The

company opened one new Bravo during the quarter, in line with our expectation. Webelieve Brio and Bravo same-store sales reflect approximately (0.8%) price/mix and

(3.7%) traffic at Brio and +3.0% price/mix and (9.0%) traffic at Bravo. See page two

for a chart comparing the variance of actual results to our estimates.

Ongoing focus on shareholder returns in place; FY14 unit growth maintained at 6units:The company's previously announced priorities of slowing FY14 unit growth

were maintained with updated guidance calling for 6 new units unchanged vs. prior.

The company repurchased approximately $2.4M in shares during the quarter and

thus has approximately $8.5M remaining on its authorization. Although not reflected

in our current estimates, for perspective we note the remaining authorization could

potentially equate to approximately $0.01 in incremental EPS on our current FY14

estimates and approximately $0.02 on FY15 EPS estimates (assuming even execution

across FY14 and at today's closing price of $14.90).

Updating FY14 & FY15 estimates:We are updating our FY14 and FY15 estimates. ForFY14, we expect total revenues of $407.3M (vs. $417.9M prior), reflecting our (4.0%)

Brio same-store sales projection (vs. (2.4%) prior) and our (5.1%) Bravo same-store

sales projection (unchanged vs. (2.6%) prior). Our FY14 EPS estimate ticks down to

$0.71 (from $0.78 prior) on the company's updated expectations for FY14. We expect 2

new unit openings at Brio (unchanged vs. prior) and 4 new Bravo in FY14 (unchanged

vs. prior). For FY15, we are updating our EPS estimate to $0.78 (from $0.84 prior),

which is based partially on our expectation for same-store sales of (3.0%) at Brio and

(4.0%) at Bravo (vs. our prior expectations of flat).

RISKS TO ACHIEVEMENT OF PRI CE TARGET

Risks include attractive valuation (buyout perspective), comp improvement and leverage.

COMPANY DESCRIPTION

The company owns and operates two upscale Italian restaurant concepts.

YEAR

2013A

2014E

2015E

REVENUE (US$ m)

Mar Jun Sep Dec FY FY RM

103.1 105.6 96.3 106.1 411.1 0.7x

102.6A 104.5A 94.3 105.8 407.3 0.7x

100.8 104.8 96.5 107.6 409.7 0.7x

EARNINGS PER SHARE (US$)

Mar Jun Sep Dec FY FY P/E

0.17 0.22 0.11 0.30 0.80 18.6x

0.14A 0.20A 0.07 0.30 0.71 21.0x

0.17 0.19 0.10 0.32 0.78 19.1x

Page 1 of 5Bravo Brio Restaurant Group, Inc.

Piper Jaffray does and seeks to do business with companies covered in its research reports. As a result, investors should be awarethat the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as

only a single factor in making their investment decisions. This report should be read in conjunction with important disclosureinformation, including an attestation under Regulation Analyst certification, found on pages 4 - 5 of this report or at the followingsite: http://www.piperjaffray.com/researchdisclosures.
http://www.piperjaffray.com/researchdisclosureshttp://www.piperjaffray.com/researchdisclosureshttp://www.piperjaffray.com/researchdisclosureshttp://www.piperjaffray.com/researchdisclosureshttp://www.piperjaffray.com/researchdisclosureshttp://www.piperjaffray.com/researchdisclosureshttp://www.piperjaffray.com/researchdisclosuresmailto:[email protected]:[email protected]


2/5


J u l y 3 1 , 2 0 1 4

Reported Results vs. Estimates: The following chart provides greater detail around the most recent quarter's results versus our

estimates, consensus expectations, and prior year results.

Bravo Brio Restaurant Group, Inc.Quarter Comparison

sca ear n e ecem er ctua vs. vs. treet st. vs. r or r.

Revised 07/31/14 2Q14 2Q14 Impact 2Q14 2Q13Same Store Sales: Brio (4.5%) (5.0%) 50 bps (1.2%) (4.0%) (50.0) bps

Same Store Sales: Bravo (6.0%) (5.0%) (100) bps (3.0%) (1.6%) (440.0) bpsSystem SSS: (5.1%) (5.0%) (10) bps (2.3%) (3.0%) (210.0) bpsINCOME STATEMENT

Net Revenues 104.5$ 103.8$ 0.7 0.030 107.9$ 105.6$ (1.2)$Cost of Sales 27.3 26.8 (0.4) (0.019) - 27.1 0.2Labor 36.7 36.6 (0.1) (0.003) - 36.9 (0.2)

Operating 16.3 16.3 0.0 0.002 - 16.6 (0.3)Occupancy 7.1 7.0 (0.0) (0.000) - 7.2 (0.1)

Restaurant Profit 17.2 17.0 0.2 0.010 - 17.9 (0.7)

G&A 5.9 5.7 (0.2) (0.009) - 5.8 0.1Pre-Opening Expenses 0.7 0.7 0.0 0.002 - 0.6 0.1D&A 5.0 4.7 (0.4) (0.016) - 5.0 0.1

Other Expense/(Income) - - - - - - -Operating Profit 5.6 5.9 (0.3) (0.014) - 6.6 (1.0)

Interest Expense/(Income), net 0.2 0.3 0.1 0.003 - 0.3 (0.0)

Pre-Tax Income 5.3 5.6 (0.2) (0.010) - 6.3 (1.0)Income Tax 1.4 1.6 0.2 0.010 - 1.7 (0.4)

Operating Net Income 4.0 4.0 (0.0) (0.002) - 4.5 (0.6)

Non-Operating Income/(Expense) - - - - - - -Reported Net Income 4.0 4.0 (0.0) (0.002) - 4.5 (0.6)

Shares Outstanding 20.0 20.4 (0.4) (0.039) - 20.5 (0.5)

EBITDA 10.6 10.5 0.1 - 11.5 (0.9)EPS--Operating 0.20$ 0.20$ 0.00$ (0.00)$ 0.22$ 0.22$ (0.02)$

EPS--Extraordinary -$ -$ -$ -$ -$ -$EPS--Reported 0.20$ 0.20$ 0.00$ (0.00)$ 0.22$ 0.22$ (0.02)$

MARGIN ANALYSISCost of Sales 26.1% 25.9% 24 bps 25.8% 25.6% 48 bpsLabor 35.1% 35.3% (17) bps - 34.9% 21 bps

Operating 15.6% 15.7% (13) bps - 15.7% (13) bpsOccupancy 6.8% 6.8% (4) bps - 6.8% (4) bps

Restaurant Profit 16.5% 16.4% 10 bps 16.5% 17.0% (52) bps

G&A 5.7% 5.5% 16 bps - 5.5% 13 bpsPre-Opening Expenses 0.6% 0.7% (5) bps - 0.5% 12 bpsD&A 4.8% 4.5% 32 bps - 4.7% 12 bps

Other Expense/(Income) 0.0% 0.0% - bps - 0.0% - bpsOperating Profit 5.3% 5.7% (33) bps 6.0% 6.2% (89) bps

Interest Expense/(Income), net 0.2% 0.3% (7) bps - 0.3% (4) bps

Pre-Tax Income 5.1% 5.4% (25) bps - 6.0% (85) bps

Income Tax 25.5% 28.0% (251) bps - 27.8% (230) bpsOperating Net Income 3.8% 3.9% (5) bps - 4.3% (50) bps

EBITDA 10.1% 10.2% (1) bps - 10.9% (77) bpsUNITSBrio Tuscan Grille 60 60 - - 56 4

Bravo Cucina Italiana 47 47 - - 46 1Total Units 107 107 - - 102 5

Source: Company reports and Piper Jaffray & Co. estimates. Nicole Miller Regan (612) 303-6637

Current disclosure information for this company is located at: http://www.piperjaffray.com/researchdisclosures



3/5

ravo Brio Restaurant Group, Inc.arnings Model 2013 Actual 2014 Estimate 2015 Estimate Fiscal Year Ended December

scal Year Ended December 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14E 4Q14E 1Q15E 2Q15E 3Q15E 4Q15E 2012 2013 2014E 2015evised 07/31/14 ($ millions) 03/30/13 06/30/13 09/30/13 12/31/13 03/30/14 06/30/14 09/30/14 12/31/14 03/30/15 06/30/15 09/30/15 12/31/15 53-wks 52-wks 52-wks 52-wame Store Sales: Brio (3.2%) (4.0%) (5.1%) (1.5%) (4.4%) (4.5%) (4.0%) (3.0%) (3.0%) (3.0%) (3.0%) (3.0%) (0.3%) (3.5%) (4.0%) (3ame Store Sales: Bravo (1.6%) (1.6%) (3.7%) (1.3%) (5.5%) (6.0%) (5.0%) (4.0%) (4.0%) (4.0%) (4.0%) (4.0%) +0.3% (2.1%) (5.1%) (4

System SSS: (2.5%) (3.0%) (4.5%) (1.4%) (4.8%) (5.1%) (4.4%) (3.5%) (3.5%) (3.5%) (3.5%) (3.5%) (0.0%) (2.9%) (4.4%) (3INCOME STATEMENTNet Revenues 103.1$ 105.6$ 96.3$ 106.1$ 102.6$ 104.5$ 94.3$ 105.8$ 100.8$ 104.8$ 96.5$ 107.6$ 409.1$ 411.1$ 407.3$ 4$

ost of Sales 27.0 27.1 24.6 27.0 26.5 27.3 24.4 26.5 26.2 26.7 24.8 28.0 106.7 105.6 104.6 1abor 36.6 36.9 34.0 35.6 36.6 36.7 33.5 35.3 35.3 36.7 34.2 35.5 139.9 143.1 142.1 1perating 16.1 16.6 15.8 16.5 16.8 16.3 15.5 16.2 16.1 16.8 15.6 16.1 62.0 65.0 64.7 ccupancy 6.8 7.2 7.0 7.5 7.4 7.1 6.8 7.4 7.1 7.3 6.8 7.0 26.1 28.5 28.7 Restaurant Profit 16.6 17.9 14.9 19.5 15.3 17.2 14.2 20.4 16.1 17.3 15.1 21.0 74.3 68.9 67.1

&A 5.9 5.8 5.5 5.5 5.7 5.9 5.8 5.8 5.7 6.0 5.9 5.7 23.7 22.7 23.2 re-Opening Expenses 0.7 0.6 1.2 1.1 0.3 0.7 1.2 1.2 0.4 0.7 1.1 1.2 4.5 3.6 3.4 &A 4.9 5.0 5.0 5.2 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.1 18.9 20.0 20.0 ther Expense/(Income) - - - - - - - - - - - - - - -

Operating Profit 5.1 6.6 3.1 7.8 4.3 5.6 2.2 8.5 5.0 5.6 3.1 9.0 27.2 22.6 20.5 terest Expense/(Income), net 0.3 0.3 0.3 0.3 0.3 0.2 0.2 0.2 0.3 0.3 0.3 0.3 1.4 1.1 0.9 Pre-Tax Income 4.8 6.3 2.9 7.5 4.0 5.3 2.0 8.2 4.7 5.3 2.8 8.7 25.9 21.5 19.5

come Tax 1.4 1.7 0.6 1.4 1.1 1.4 0.5 2.2 1.3 1.4 0.8 2.3 6.9 5.1 5.2 Operating Net Income 3.4 4.5 2.2 6.1 2.9 4.0 1.4 6.0 3.4 3.9 2.1 6.3 19.0 16.3 14.3

on-Operating Income/(Expense) - - - (8.9) - - - - - - - - (2.8) (8.9) - Reported Net Income 3.4$ 4.5$ 2.2$ (2.8)$ 2.9$ 4.0$ 1.4$ 6.0$ 3.4$ 3.9$ 2.1$ 6.3$ 16.1$ 7.5$ 14.3$ $

hares Outstanding 20.5 20.5 20.4 20.3 20.2 20.0 20.0 20.0 20.0 20.0 20.0 20.0 20.6 20.4 20.0

BITDA 10.0 11.5 8.2 12.9 9.3 10.6 7.2 13.4 10.0 10.6 8.2 14.0 46.2 42.6 40.5 PS--Operating 0.17$ 0.22$ 0.11$ 0.30$ 0.14$ 0.20$ 0.07$ 0.30$ 0.17$ 0.19$ 0.10$ 0.32$ 0.92$ 0.80$ 0.71$ $

PS--Extraordinary -$ -$ -$ (0.44)$ -$ -$ -$ -$ -$ -$ -$ -$ (0.14)$ (0.44)$ -$ $PS--Reported 0.17$ 0.22$ 0.11$ (0.14)$ 0.14$ 0.20$ 0.07$ 0.30$ 0.17$ 0.19$ 0.10$ 0.32$ 0.78$ 0.36$ 0.71$ $

MARGIN ANALYSISost of Sales 26.2% 25.6% 25.6% 25.4% 25.8% 26.1% 25.9% 25.0% 26.0% 25.5% 25.7% 26.0% 26.1% 25.7% 25.7% 2abor 35.5% 34.9% 35.3% 33.6% 35.6% 35.1% 35.5% 33.4% 35.0% 35.0% 35.4% 33.0% 34.2% 34.8% 34.9% 3perating 15.6% 15.7% 16.4% 15.5% 16.4% 15.6% 16.4% 15.3% 16.0% 16.0% 16.2% 15.0% 15.2% 15.8% 15.9% 1ccupancy 6.6% 6.8% 7.2% 7.1% 7.2% 6.8% 7.2% 7.0% 7.0% 7.0% 7.0% 6.5% 6.4% 6.9% 7.0%Restaurant Profit 16.1% 17.0% 15.4% 18.4% 15.0% 16.5% 15.0% 19.3% 16.0% 16.5% 15.7% 19.5% 18.2% 16.8% 16.5% 1

&A 5.7% 5.5% 5.7% 5.2% 5.6% 5.7% 6.1% 5.5% 5.7% 5.7% 6.1% 5.3% 5.8% 5.5% 5.7%re-Opening Expenses 0.7% 0.5% 1.3% 1.0% 0.3% 0.6% 1.3% 1.1% 0.4% 0.7% 1.2% 1.2% 1.1% 0.9% 0.8%&A 4.7% 4.7% 5.2% 4.9% 4.9% 4.8% 5.3% 4.7% 5.0% 4.8% 5.2% 4.7% 4.6% 4.9% 4.9%ther Expense/(Income) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%Operating Profit 5.0% 6.2% 3.2% 7.3% 4.1% 5.3% 2.3% 8.0% 5.0% 5.4% 3.3% 8.3% 6.7% 5.5% 5.0%

terest Expense/(Income), net 0.3% 0.3% 0.3% 0.3% 0.2% 0.2% 0.2% 0.2% 0.3% 0.3% 0.3% 0.3% 0.3% 0.3% 0.2%

Pre-Tax Income 4.7% 6.0% 3.0% 7.1% 3.9% 5.1% 2.1% 7.8% 4.7% 5.0% 3.0% 8.1% 6.3% 5.2% 4.8%come Tax 29.0% 27.8% 21.2% 18.3% 28.0% 25.5% 27.0% 27.0% 27.0% 27.0% 27.0% 27.0% 26.6% 23.9% 26.8% 2Operating Net Income 3.3% 4.3% 2.3% 5.8% 2.8% 3.8% 1.5% 5.7% 3.4% 3.7% 2.2% 5.9% 4.6% 4.0% 3.5%

BITDA 9.7% 10.9% 8.5% 12.2% 9.0% 10.1% 7.6% 12.7% 10.0% 10.2% 8.5% 13.1% 11.3% 10.4% 9.9% 1YEAR-OVER-YEAR % CHANGE

otal Sales 4.8% 2.7% 0.4% (5.2%) (0.4%) (1.1%) (2.0%) (0.3%) (1.8%) 0.3% 2.3% 1.7% 10.8% 0.5% (0.9%)

&A 2.8% 2.6% (4.0%) (16.2%) (2.1%) 1.3% 5.2% 5.2% 0.2% 1.0% 2.3% (2.0%) 14.8% (4.2%) 2.3%re-Tax Income (10.3%) (11.1%) (26.4%) (21.3%) (17.0%) (15.2%) (31.4%) 9.5% 17.4% (0.8%) 45.4% 5.3% 14.5% (17.0%) (9.1%) 1et Income from Operations (9.0%) (11.3%) (20.4%) (15.7%) (15.9%) (12.5%) (36.5%) (2.2%) 19.0% (2.8%) 45.4% 5.3% 20.1% (13.9%) (12.6%)PS from Operations (8.6%) (10.7%) (19.6%) (14.6%) (14.6%) (10.4%) (35.1%) (0.7%) 19.8% (3.0%) 45.3% 5.3% 19.8% (13.2%) (11.0%)

BITDA (1.3%) (4.4%) (8.3%) (14.0%) (7.4%) (8.1%) (12.0%) 3.8% 8.3% 0.3% 13.7% 4.5% 11.8% (7.6%) (5.1%)nit Growth: Brio 12.2% 12.0% 7.7% 11.1% 9.1% 3.6% 5.4% 0.0% 0.0% 5.2% 5.1% 5.0% 17.4% 11.1% 0.0%nit Growth: Bravo 0.0% (2.1%) (2.1%) (2.1%) (2.1%) 2.2% 0.0% 6.4% 8.7% 8.5% 10.6% 6.0% 2.1% (2.1%) 6.4%

Unit Growth: System 6.3% 5.2% 3.0% 4.9% 3.9% 2.9% 2.9% 2.8% 3.8% 6.7% 7.5% 5.5% 9.7% 4.9% 2.8%

UNIT DATArio Tuscan Grille 55 56 56 60 60 58 59 60 60 61 62 63 54 60 60 ravo Cucina Italiana 47 46 47 47 46 47 47 50 50 51 52 53 48 47 50 otal Units 102 102 103 107 106 105 106 110 110 112 114 116 102 107 110

ource: Company reports and Piper Jaffray & Co. estimates.urrent disclosure information for this company is located at: http://www.piperjaffray.com/researchdisclosures Nicole Miller Regan (612) 303-6

Page 3 of Bravo Brio Restaurant Group, Inc.
http://www.piperjaffray.com/researchdisclosureshttp://www.piperjaffray.com/researchdisclosures


4/5


J u l y 3 1 , 2 0 1 4

IMPORTANT RESEARCH DISCLOSURES

Notes: The boxes on the Rating and Price Target History chart above indicate the date of the Research Note, the rating, and the price target. Each

box represents a date on which an analyst made a change to a rating or price target, except for the first box, which may only represent the first Note

written during the past three years.

Legend:

I: Initiating Coverage

R: Resuming Coverage

T: Transferring Coverage

D: Discontinuing Coverage

S: Suspending Coverage

OW: Overweight

N: Neutral

UW: Underweight

NA: Not Available

UR: Under Review

Distribution of Ratings/IB Services

Piper Jaffray

IB Serv./Past 12 Mos.

Rating Count Percent Count Percent

BUY [OW] 361 62.35 94 26.04

HOLD [N] 206 35.58 21 10.19

SELL [UW] 12 2.07 0 0.00

Note: Distribution of Ratings/IB Services shows the number of companies currently in each rating category from which Piper Jaffray and its affiliates

received compensation for investment banking services within the past 12 months. FINRA rules require disclosure of which ratings most closely

correspond with "buy," "hold," and "sell" recommendations. Piper Jaffray ratings are not the equivalent of buy, hold or sell, but instead represent

recommended relative weightings. Nevertheless, Overweight corresponds most closely with buy, Neutral with hold and Underweight with sell. See

Stock Rating definitions below.

Analyst Certification Nicole Miller Regan, Sr Research Analyst

Analyst Certification Joshua C. Long, CFA, Research AnalystThe views expressed in this report accurately reflect my personal views about the subject company and the subject security. In addition, no part of

my compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in this report.



5/5


J u l y 3 1 , 2 0 1 4

Research Disclosures

Piper Jaffray was making a market in the securities of Bravo Brio Restaurant Group, Inc. at the time this research report was published. Piper Jaffray

will buy and sell Bravo Brio Restaurant Group, Inc. securities on a principal basis.

Piper Jaffray research analysts receive compensation that is based, in part, on overall firm revenues, which include investment banking revenues.

Rating DefinitionsStock Ratings:Piper Jaffray ratings are indicators of expected total return (price appreciation plus dividend) within the next 12 months. At times

analysts may specify a different investment horizon or may include additional investment time horizons for specific stocks. Stock performance

is measured relative to the group of stocks covered by each analyst. Lists of the stocks covered by each are available at www.piperjaffray.com/

researchdisclosures. Stock ratings and/or stock coverage may be suspended from time to time in the event that there is no active analyst opinion

or analyst coverage, but the opinion or coverage is expected to resume. Research reports and ratings should not be relied upon as individual

investment advice. As always, an investors decision to buy or sell a security must depend on individual circumstances, including existing holdings

time horizons and risk tolerance. Piper Jaffray sales and trading personnel may provide written or oral commentary, trade ideas, or other

information about a particular stock to clients or internal trading desks reflecting different opinions than those expressed by the research

analyst. In addition, Piper Jaffray technical research products are based on different methodologies and may contradict the opinions contained

in fundamental research reports.

Overweight (OW):Anticipated to outperform relative to the median of the group of stocks covered by the analyst. Neutral (N):Anticipated to perform in line relative to the median of the group of stocks covered by the analyst.

Underweight (UW):Anticipated to underperform relative to the median of the group of stocks covered by the analyst.Other Important Information

The material regarding the subject company is based on data obtained from sources we deem to be reliable; it is not guaranteed as to accuracy and

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