LAKE FOREST, Calif. - October 19, 2015 - (BUSINESS WIRE) - Del Taco Restaurants, Inc. (“Del Taco” or the “Company”), (NASDAQ: TACO, TACOW), the second largest Mexican-American QSR chain by units in the United States, operating restaurants under the name Del Taco, today announced fiscal third quarter 2015 financial results. Del Taco also provided guidance for fiscal year 2015 and its outlook for future restaurant development.
Del Taco became a public company when it completed a business combination with Levy Acquisition Corp. on June 30, 2015 which resulted in a fiscal third quarter financial statement presentation that includes a predecessor period for the two-weeks ended June 30, 2015 followed by a successor period for the ten-weeks ended September 8, 2015. The financial results referenced below have been aggregated to reflect, on a pro forma basis, the combined successor and predecessor periods for the twelve weeks ended September 8, 2015 compared to the comparable twelve weeks during fiscal year 2014.
Paul J.B. Murphy, III, President and Chief Executive Officer of Del Taco, commented, “During the third quarter, we extended our record of positive Company-owned comparable restaurant sales to thirteen consecutive quarters and grew our operating income by 17%. We continued our track record of pairing positive traffic growth with increasing check averages. Along with increased menu pricing, our growth in check average was driven by an increasing contribution from menu mix shifts that were the direct result of guests ordering our new premium menu items. We drove nearly 3% of real volume growth, consisting of menu mix and traffic but excluding menu price. We believe that these results demonstrate the strength of our business model and enhance our ability to launch the brand in new and existing markets.”
Murphy continued, “We are working hard to broaden the occasions Del Taco serves through our Combined Solutions model, complemented by a strategic menu and product innovation progression. By enhancing our premium tier offerings while managing value perceptions, we are expanding our customer base and providing our existing guests new reasons to visit Del Taco. These moves coupled with our focus on delivering a better Del Taco experience through consistent operational improvements are improving guest satisfaction and further embedding our QSR+ positioning.”
Murphy concluded, “We expect to open thirteen restaurants system-wide this fiscal year. Looking ahead, we expect to open 14 to 18 restaurants system-wide in fiscal year 2016, followed by mid-single-digit system-wide unit growth on a percentage basis in fiscal year 2017. We will then accelerate towards high-single-digit system-wide unit growth on a percentage basis thereafter. We plan to concentrate the majority of our near-term development in existing markets and we are excited to announce that we plan to bring new company-operated restaurants to the Denver, CO market by early 2017 and join forces with existing franchise stores in Denver to enhance awareness in this high potential market. We are also working now to lay the groundwork for expansion in new geographies with attractive demographics.”
Total revenue was $98.6 million, an increase of 6.7% compared to $92.4 million in the fiscal third quarter of 2014. The growth in revenue was driven by a 6.7% increase in company restaurant sales and a 6.8% increase in franchise revenue.
Comparable restaurant sales increased 5.6% system-wide for the fiscal quarter ended September 8, 2015 compared to the 5.6% gain in the prior year fiscal third quarter, for a two-year growth rate of 11.2%. The Del Taco system has now generated comparable restaurant sales growth for eight consecutive quarters.
Company-owned comparable restaurant sales increased 5.4% and included a 0.6% gain in traffic, marking the thirteenth consecutive quarter of comparable restaurant sales growth. Average check growth contributed meaningfully to the comparable restaurant sales increase as guests responded favorably to the introduction of new premium products that embed Del Taco’s QSR+ positioning. Franchise comparable restaurant sales increased 5.8%.
Restaurant contribution, a non-GAAP financial measure, increased 15.6% year-over-year to $18.7 million. As a percentage of company restaurant sales, restaurant contribution increased approximately 150 basis points year-over-year to 19.7%. The increase was driven by a 100 basis point improvement in labor and related expenses, a 40 basis point improvement in occupancy and other operating expenses, and a 10 basis point improvement in food and paper costs.
Adjusted EBITDA, a non-GAAP financial measure, was $15.3 million, an increase of 9.6% from $13.9 million in the previous year’s fiscal third quarter. A reconciliation between adjusted EBITDA and the nearest GAAP financial measure is included in the accompanying financial data.
Income from operations increased 17.0% to $10.2 million compared to $8.7 million in the prior year fiscal third quarter.
Net income was $2.4 million during the two weeks ended June 30, 2015 (predecessor) and net loss was $2.2 million during the ten weeks ended September 8, 2015 (successor) and included $12.0 million of transaction-related costs, compared to net income of $0.9 million in the fiscal third quarter of 2014 (predecessor).
Del Taco is offering the following guidance for fiscal year 2015, a 52 week period ending December 29, 2015.
Del Taco plans to close twelve of the thirteen underperforming company-operated restaurants previously discussed in its definitive proxy statement by fiscal year-end and expects to record restaurant closure charges totaling approximately $4.2 million to $5.0 million during the fiscal fourth quarter of 2015. Over the past year these 12 restaurants generated negative restaurant contribution of approximately $1.6 million, and their closures are expected to have an accretive impact to restaurant contribution.
Comparable restaurant sales growth reflects the change in year-over-year sales for the comparable company, franchise and total system restaurant base. Restaurants are included in the comparable store base in the accounting period following its 18th full month of operations.
Restaurant contribution is defined as company restaurant sales less restaurant operating expenses, which are food and paper costs, labor and related expenses and occupancy and other operating expenses. Restaurant contribution margin is defined as restaurant contribution as a percentage of company restaurant sales. Restaurant contribution and restaurant contribution margin are neither required by, nor presented in accordance with, GAAP.
Adjusted EBITDA is defined as net income/loss prior to interest expense, income taxes, and depreciation and amortization, as adjusted to add back certain charges, such as stock-based compensation expense and transaction-related costs, as these expenses are not considered an indicator of ongoing company performance. Adjusted EBITDA is a non-GAAP financial measure and should not be considered as an alternative to operating income or net income/loss as a measure of operating performance or cash flows or as measures of liquidity. Non-GAAP financial measures are not necessarily calculated the same way by different companies and should not be considered a substitute for or superior to GAAP results. Adjusted EBITDA is a financial measure that was not calculated in accordance with GAAP. A reconciliation between adjusted EBITDA and the nearest GAAP financial measure is included in the accompanying financial data.
Del Taco will host a conference call and webcast to discuss financial results for the fiscal third quarter 2015 today at 5:00 PM EDT.
Hosting the conference call and webcast will be Larry Levy, Chairman of the Board; Paul J.B. Murphy, III, President and Chief Executive Officer; John D. Cappasola, Jr., Executive Vice President and Chief Brand Officer; and Steven L. Brake, Executive Vice President and Chief Financial Officer.
Interested parties may listen to the conference call via telephone by dialing 1-877-407-0789, or for international callers, 1-201-689-8562. A telephone replay will be available shortly after the call has concluded and can be accessed by dialing 1-877-870-5176, or for international callers, 1-858-384-5517. The passcode is 13619665.
The webcast will be available at www.deltaco.com under the investors section and will be archived on the site shortly after the call has concluded.
At Del Taco (NASDAQ: TACO, TACOW), all menu items taste better because they are made to order with fresh ingredients including cheddar cheese grated from 40-pound blocks, handmade pico de gallo salsa, lard-free beans slow-cooked from scratch, fresh sliced avocado and marinated chicken grilled in the restaurant. The menu, which includes a full line of breakfast, includes classic Mexican dishes such as tacos, burritos, quesadillas and nachos as well as American favorites including hamburgers, crinkle-cut fries and shakes. Del Taco's UnFreshing Believable campaign communicates the lengths the company goes to in order to deliver quality, made-to-order menu items created with freshly-prepared ingredients at unbelievable prices. With nearly 550 restaurants in 16 states, Del Taco serves more than three million guests each week. Guests are invited to "like" Del Taco on Facebook at www.facebook.com/deltaco and join its Raving Fan eClub at www.DelTaco.com/RavingFan. For more information, please visit www.deltaco.com.
In addition to historical information, this release may contain a number of “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, information concerning Del Taco’s possible or assumed future results of operations, business strategies, competitive position, industry environment, potential growth opportunities and the effects of regulation. These statements are based Del Taco’s management’s current expectations and beliefs, as well as a number of assumptions concerning future events. When used in this press release, the words “estimates,” “projected,” “expects,” “anticipates,” “forecasts,” “plans,” “intends,” “believes,” “seeks,” “may,” “will,” “should,” “future,” “propose” and variations of these words or similar expressions (or the negative versions of such words or expressions) are intended to identify forward-looking statements. Such forward-looking statements are subject to known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside Del Taco’s management’s control that could cause actual results to differ materially from the results discussed in the forward-looking statements. These risks included, without limitation, consumer demand, our inability to successfully open company-operated or franchised restaurants or establish new markets, competition in our markets, our inability to grow and manage growth profitably, adverse changes in food and supply costs, our inability to access additional capital, changes in applicable laws or regulations, food safety and foodborne illness concerns, our inability to manage existing and to obtain additional franchisees, our inability to attract and retain qualified personnel, our inability to profitably expand into new markets, and the possibility that we may be adversely affected by other economic, business, and/or competitive factors. Additional risks and uncertainties are identified and discussed in Del Taco’s reports filed with the SEC and available at the SEC’s website at www.sec.gov and the Company’s website at www.deltaco.com.
Forward-looking statements included in this release speak only as of the date of this release. Del Taco undertakes no obligation to update its forward-looking statements to reflect events or circumstances after the date of this release or otherwise.
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SOURCE Del Taco
Julia Young
For Del Taco Restaurants, Inc.
Media Relations
646-277-1280
julia.young@icrinc.com
Raphael Gross
For Del Taco Restaurants, Inc.
Investor Relations
203-682-8253
investor@deltaco.com
At Del Taco, all menu items taste better because they are made to order with fresh ingredients.