AGM 2021

Jun 8, 2021

Good afternoon, and welcome to the twenty twenty one Annual Meeting of Shareholders for El Pollo Loco Holdings Incorporated. My name is Michael Misselli, and I'm the Chairman of the Board of the company as well as Chairman of this meeting. The company's corporate secretary has indicated to me that notice of this meeting was properly given to shareholders beginning on 04/29/2021 based on a record date of 04/09/2021. It is also my understanding that we have a quorum of shareholders either present or represented by proxy. Accordingly, I now call the meeting to order. As chairman, under our bylaws, I have set both the agenda and the rules of conduct for this meeting. You should see these or links to them on your computer screen. We're holding this meeting as a virtual meeting as permitted by the State of Delaware, our state of incorporation. I'm joined by members of our board, members of our management team, including directors Doug Babb, Sam Borghese, Mark Buller, Bill Floyd, Dean Taylor, Lily Linton and John Roth Director, President and Chief Executive Officer, Bernard Acoca Chief Financial Officer, Larry Roberts Chief Operating Officer, Miguel Lozano and Senior Vice President, Chief Legal Officer and Corporate Secretary, Anne Jolley. Also joining us today is Carrie Chagat, our partner at BDO USA, our auditor and John Commerce, our inspector of elections. John, as inspector of elections, could you please confirm for the record that a quorum exists? Yes, Mike. This meeting has a quorum that is majority of the stock outstanding as of the record date is present in person, including electronically or is represented by proxy. Thank you, John. Now I'd like to take a moment to review our agenda for this afternoon. I've already called the meeting to order. After taking care of some housekeeping matters, my colleagues and I will present the proposals for your consideration. Shareholders can vote on proposals during those presentations and any time until we close the polls. At that time, we'll announce preliminary voting results. We'll then conclude and adjourn the meeting. When we finish the formal portion of our session, senior management will make a few remarks about the state of the company, after which there will be a question and answer session. Let me first go over some procedural points. We're recording this meeting. You'll be able to access a recording of it for one year via the virtual shareholder meeting website. Please wait a day or so to allow the recording to be uploaded. For the question and answer session, you may use the question box on your screen to submit questions at any time during the meeting. We cannot guarantee that we will answer all questions. If we don't get to your question, you are welcome to ask it by using the contact us section at our website, elpuyoloco.com. Additionally, please note that you're able to vote during this meeting from the beginning of the meeting through the presentation of the proposals until we close the polls. However, if you have already voted in advance by using an online ballot or physical proxy card, a vote at this meeting will supersede your earlier vote. If you have already voted, you do not need to vote again. In the event any tech technical difficulties before the formal adjournment of the meeting, we may adjourn temporarily and reconvene in accordance with our bylaws. Some of our discussion today may relate to forward looking statements. Forward looking statements are statements about, among other things, financial projections, managerial plans or objectives or future economic performance. Actual results may differ materially from those projected by any forward looking statements. In our annual report on Form 10 ks for 2020 filed on 03/15/2021, as amended by our first quarter 10 Q filed on 05/07/2021, we include sections on forward looking statements and on risk factors that could materially and adversely affect our business. For additional information, we refer you to both filings, which are available on our website and on the Securities and Exchange Commission website. Shareholders have four issues on the table today for their consideration. The first is to vote to fill three board seats for which Bernard Acoca, Carol Lily Linton, and myself, Michael G. Masselli, are all running for election as class one directors, with terms expiring in 2024. The second is to ratify the audit committee's choice of BDO as our independent registered public accounting firm for 2021. The third is an advisory vote to approve the compensation of our named executive officers, Bernard Acoca, Lawrence Roberts and Miguel Lozano. And the fourth is to vote for approval of the company's equity incentive plan as amended. Under our bylaws, there are certain requirements, particularly relating to advance notice for director nominees and for proposals to be considered at an annual meeting of shareholders so that shareholders can have adequate time to deliberate on them. That being the case, I can say that no additional candidates or proposals have been or at this point can be properly brought before the meeting. Many shareholders have voted in advance, including via their stockbrokers, particularly by either completing an online form or by signing and returning our form of proxy card. By using our form of proxy card, a shareholder appoints either of Lawrence Roberts or Anne Jolley to vote on his or her behalf in the manner that he or she has indicated or if he or she has left a proposal blank in accordance with the board's recommendations. A shareholder who has voted in advance does not need to be present at or vote at the meeting to have his or her vote counted. Instead, Lawrence or Anne, Lawrence and Anne are here on behalf of such shareholders. Lawrence and Anne have indicated to me that they are voting the proxies in accordance with those terms. Now let's move on to the first proposal regarding director elections. Let me give the floor to Sam Berghese, the chairman of our nominating and corporate governance committee. Thank you, Mike. As mentioned, our first proposal is to elect Bernard Acoco, Carol Lily Linton, and Michael G. Masselli to the board. They would continue to be class one directors, meaning that they, barring unforeseen circumstances, their terms would run until the annual meeting of shareholders three years from now in 2024. As you know, the committee reviewed Bernard, Lily, and Mike's background, qualifications, and suitability for continued board service and previously recommended to the board that they be nominated for election. And as you know, the board resolved to advance those nominations for shareholder vote, and that vote is now before the shareholders. And let me add my thanks to the three of you for your continued engagement. It's our pleasure, Sam, and we appreciate the board's and the committee's confidence. It is now time for shareholders to vote on the proposals. Please note that the polls will remain open until the fourth and final proposal has been discussed. While the shareholders are voting, let's move on to the next three proposals. The second order of business before the shareholders is to ratify the decision of our audit committee to appoint BDO as our independent registered public accounting firm for the current fiscal year 2021. The audit committee has already made the appointment, and no further action is necessary by the Board at this meeting. Accordingly, shareholders may now vote regarding BDO's appointment. As I mentioned earlier, Carrie Chaudhat from BDO is with us today and is available to answer shareholder questions during the question and answer session if necessary. She also has the opportunity now to make a statement if she wishes and to field any questions from the board. Carrie, would you like to say anything? No. Thank you, Mike. Okay. Are there any questions to Carrie from the board? Hearing none, let's move on. The next order of business is an advisory vote by the shareholders to approve the fiscal twenty twenty one compensation of the company's named executive officers commonly referred to as a say on pay vote. Due to the company's performance, particularly during the challenging COVID nineteen pandemic, the Board of Directors recommended the shareholders vote for this proposal. The last order of business before the shareholders is the vote for approval of the company's equity incentive plan as amended. The proposed amendment would increase the limit on the aggregate number of shares in the company's common stock by an additional 750,000 shares. So the new aggregate share limit for the equity incentive plan would be 2,000,000 shares, plus the number of shares of common stock reserved but unissued under the prior plan at the time of the equity incentive plan was originally approved. The proposed amendment would also increase the limit on the number of shares that may be delivered pursuant to incentive stock options granted under the equity incentive plan by 750,000 shares for a new limit of 1,820,477 incentive stock options. For purposes of clarity, any shares that are delivered pursuant to incentive stock options also count against and are not in addition to the aggregate equity incentive plan share limit. The equity incentive plan is currently scheduled to expire on 06/05/2028. The proposed amendment would also extend our ability to grant new awards under the equity incentive plan until 06/08/2031. In determination in its determination to approve the request for 750,000 additional shares, an extension of the expiration date of the equity incentive plan, the Board of Directors considered a run rate and dilution analysis prepared by for the company by Semler Brassi, a leading compensation and benefits consulting firm. In light of the factors described in Rand, equity compensation is vital to our ability to continue to attract and retain employees in the competitive labor markets in which we compete. The Board of Directors has determined that the size of proposed share request and other amendments are reasonable and appropriate at this time. The Board of Directors recommended the shareholders vote for approving the equity incentive plan as amended. Let me explain that regarding the first proposal, directors are elected by a plurality of votes cast at the annual meeting. In other words, the three open seats go to the three candidates with highest vote totals, ignoring votes withheld and broker non votes. Auditor ratification is approved if supported by the affirmative vote of the majority of shares represented at the meeting. With respect to proposals two, three, and four, shares voted abstain will have the same effect as a vote against the proposal. But if you do not vote your shares or for shares held in street name, if you do not submit voting instructions and your broker, bank, trust, or other nominee does not or may not vote your shares, this will have no effect on the outcome of the vote. If you've not already voted and wish to do so, please do so now. We will wait just a moment to give you your opportunity to do so. Mister Comers, please close the polls now. Mister Comers, can you comment on the preliminary results? Yes, Mike. Based on the proxies granted in advance of the meeting, it appears that all three nominees and accountant ratification have been approved. Proposal three has been approved for the compensation of named executive officers. Proposal four, approval of the equity incentive plan as amended, has also been approved. My colleagues and I will be checking and updating the vote and finalizing the tabulation in the next day or so. That schedule sounds good. I want to thank the shareholders for their support of our directors and auditor. We will publish the final voting results in the next few days on Form eight ks. That was the last formal order of business. I'll adjourn the formal meeting now. However, for the benefit of shareholders, we'll continue informally with a brief management presentation and a question and answer session. We stand adjourned. Thanks again to everyone who participated or listened in today, especially our shareholders for their time. Now let me turn things over to Bernard for the management presentation. Thank you, Mike. Needless to say, twenty twenty was a very challenging year, but I couldn't be more proud of the tremendous performance of our support center employees, field operators and franchise partners in a highly uncertain environment. Despite California being especially hard hit by COVID-nineteen, we were able to drive relatively strong business results. More importantly, our team was able to complete our three year transformation agenda, which was guided by four key strategies. One, develop a people first culture by investing in and growing our talent. Two, differentiate the brand by accentuating our strengths and building upon them. And three, simplifying operations, thereby making it easier to be both an employee and franchisee. Successfully completing these three initiatives provides the foundation for the fourth strategy, to grow the business responsibly and profitably for the long term. I'm very excited about our next phase of growth, which we are calling our three year acceleration agenda. The acceleration agenda is all about scaling for rapid and successful growth over the next three years by leveraging the operations and brand work we've completed over the past three years and implementing our beautiful new LA Mex restaurant design. There are four strategies that underpin our acceleration agenda. One, expand the brand by growing in new geographies with current and new franchisees. Two, support the brand by building the right organization for asset light growth. Three, evolve the brand by digitizing the business to compete. And four, focus the brand by exaggerating what makes us so special and different. We are very focused on driving these four strategies and we'll provide updates on our progress during our earnings call and investor presentations. Working through the pandemic has made us a stronger company that is now maniacally focused on executing the strategies that will enable long term new unit growth. With the impact of COVID-nineteen in decline and economies reopening, I couldn't be more excited about the prospects for El Pollo Loco. Thank you, Bernard. I share your enthusiasm. Last item on our agenda is the question and answer session. It is important to note that we are unable to answer any questions today about our second quarter performance. We do have time for a few questions provided they are relevant and not related to privileged information. Given our limited time, we'll focus on the most frequently asked questions. Anne, are there any questions? Thank you, Mike. There are no questions submitted by shareholders at this time. Okay. Well then that concludes our question and answer session. That was the last item and the end of the informal portion of the meeting. Again, I want to thank everyone, especially our shareholders, for their time and participation. It's our pleasure and privilege to be involved with El Pollo Loco, and I hope you share my enthusiasm, for Bernard and his team and our agenda for the company. Goodbye until next time, and stay stay well. Thank you.