Conference Call And Webcast Will Be Held At 5:00 P.M. ET Today
LAKE FOREST, Calif. - October 19, 2017 - (BUSINESS WIRE) - Del Taco Restaurants, Inc. (“Del Taco” or the “Company”), (NASDAQ: TACO), 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 2017 financial results. The Company also revised its guidance for fiscal year 2017 on several key metrics.
John D. Cappasola, Jr., President and Chief Executive Officer of Del Taco, commented, “During the third quarter, our company-operated and franchised restaurants both extended their track records of positive comparable restaurant sales, and The Del Taco system as a whole achieved 10.8% growth in comparable restaurant sales on a two-year stacked basis.”
Cappasola continued, “We successfully executed our strategy to lap last year’s accelerated performance by combining comprehensive improvement across the brand with an impactful marketing plan. We raised the bar in operations by focusing on improving our Overall Satisfaction Scores and Lunch and Dinner Speed compared to last year, embedding awareness and usage of The Del Taco and Platos, and reintroducing Carnitas as a limited time offer. We finished the quarter with our launch of Queso, a highly relevant and elevated QSR+ ingredient that is currently mixing at approximately 7% of sales and will enable exciting future product innovation across our menu.”
Cappasola concluded, “Cost pressures during the third quarter, driven particularly by food inflation, led us to revise our annual guidance, however, we still expect to deliver our annual guidance across revenues, diluted earnings per share, Adjusted EBITDA and new system-wide restaurant openings. Our ability to leverage our QSR+ positioning to deliver everyday value and variety to guests builds upon our strong Combined Solutions foundation, and positions us well for continued future success.”
Total revenue was $111.0 million, an increase of 6.3% compared to $104.4 million in the fiscal third quarter 2016. The growth in revenue was driven by a 6.1% increase in Company restaurant sales and a 7.9% increase in franchise revenue.
Comparable restaurant sales increased 4.1% system-wide for the fiscal third quarter 2017, resulting in a 10.8% increase on a two-year basis. The Del Taco system has now generated comparable restaurant sales growth for 16 consecutive quarters. Company-operated comparable restaurant sales increased 3.7%, marking the 21st consecutive quarter of comparable restaurant sales growth. Franchise comparable restaurant sales increased 4.6%.
Net income was $5.1 million, representing $0.13 per diluted share, compared to $4.9 million in the fiscal third quarter 2016, representing $0.13 per diluted share.
Restaurant contribution, a non-GAAP financial measure, decreased 2.5% year-over-year to $20.4 million. As a percentage of Company restaurant sales, restaurant contribution margin fell approximately 170 basis points year-over-year to 19.2%. The decrease in restaurant contribution margin was driven by a 90 basis point increase in labor and related expenses, a 40 basis point increase in food and paper costs, and a 40 basis point increase in other operating expenses. A reconciliation between restaurant contribution and the nearest GAAP financial measure is included in the accompanying financial data.
Adjusted EBITDA, a non-GAAP financial measure, was $16.6 million compared to $17.0 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.
During the fiscal third quarter 2017, we opened two restaurants and our franchise partners opened two restaurants. There was also one company restaurant closure.
Thus far in the fiscal fourth quarter 2017, we opened three company-operated restaurants and there are currently eleven restaurants (two franchised and nine company) under construction, all of which are expected to open this fiscal year.
During the fiscal third quarter 2017, we purchased 96,122 shares of common stock at an average price of $12.35 and 1,186 warrants at an average price of $3.97 per warrant. At the end of the fiscal third quarter approximately $24.1 million remained under our $50 million repurchase authorization.
We are revising our guidance for fiscal year 2017, which is a 52-week period ending January 2, 2018:
We have not reconciled guidance for Adjusted EBITDA to the corresponding GAAP financial measure because we do not provide guidance for the various reconciling items. We are unable to provide guidance for these reconciling items because we cannot determine their probable significance, as certain items are outside of our control and cannot be reasonably predicted due to the fact that these items could vary significantly from period to period. Accordingly, a reconciliation to the corresponding GAAP financial measure is not available without unreasonable effort.
A conference call and webcast to discuss Del Taco’s financial results is scheduled for 5:00 p.m. ET today. Hosting the conference call and webcast will be John D. Cappasola, Jr., President and Chief Executive Officer; and Steven L. Brake, Executive Vice President and Chief Financial Officer.
Interested parties may listen to the conference call via telephone by dialing 1-201-689-8471. A telephone replay will be available shortly after the call has concluded and can be accessed by dialing 1-412-317-6671, the passcode is 13671044.
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.
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 and excludes restaurant closures.
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. Restaurant contribution and restaurant contribution margin are supplemental measures of operating performance of restaurants and the calculations thereof may not be comparable to those reported by other companies. Restaurant contribution and restaurant contribution margin have limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of results as reported under U.S. GAAP. Management believes that restaurant contribution and restaurant contribution margin are important tools for investors because they are widely-used metrics within the restaurant industry to evaluate restaurant-level productivity, efficiency and performance. Management uses restaurant contribution and restaurant contribution margin as key performance indicators to evaluate the profitability of incremental sales at Del Taco restaurants, to evaluate restaurant performance across periods and to evaluate restaurant financial performance compared with competitors. A reconciliation between restaurant contribution and the nearest GAAP financial measure is included in the accompanying financial data.
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. We believe Adjusted EBITDA facilitates operating performance comparisons from period to period by isolating the effects of some items that vary from period to period without any correlation to core operating performance or that vary widely among similar companies. These potential differences may be caused by variations in capital structures (affecting interest expense), tax positions (such as the impact on periods or changes in effective tax rates or net operating losses) and the age and book depreciation of facilities and equipment (affecting relative depreciation expense). We also present Adjusted EBITDA because (i) we believe this measure is frequently used by securities analysts, investors and other interested parties to evaluate companies in our industry and (ii) we use Adjusted EBITDA internally as a benchmark to compare performance to that of competitors. A reconciliation between Adjusted EBITDA and the nearest GAAP financial measure is included in the accompanying financial data.
Del Taco (NASDAQ: TACO) offers a unique variety of both Mexican and American favorites such as burritos and fries, prepared fresh in every restaurant’s working kitchen with the value and convenience of a drive thru. Del Taco’s menu items taste better because they are made with quality ingredients like freshly grated cheddar, hand-chopped pico de gallo, sliced avocado, slow-cooked beans made from scratch, and fresh-grilled marinated chicken and carne asada. The brand’s UnFreshing Believable® campaign further communicates Del Taco’s commitment to provide guests with the best quality and value for their money. Founded in 1964, today Del Taco serves more than three million guests each week at its more than 550 restaurants across 15 states. For more information, 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,” “target,” “may,” “will,” “should,” “future,” “propose,” “preliminary,” “guidance,” “on track” 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, changes in, or the discontinuation of, the Company’s repurchase program, 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, including under Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended January 3, 2017, 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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Julia Young
For Del Taco Restaurants, Inc.
Media Relations
646-277-1280
julia.young@icrinc.com
Raphael Gross
Del Taco Restaurants, Inc.
Investor Relations
203-682-8253
investor@deltaco.com
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SOURCE Del Taco Restaurants, Inc.
At Del Taco, all menu items taste better because they are made to order with fresh ingredients.