Lake Forest / CA. (dtr) Del Taco Restaurants Inc., the second largest Mexican-American quick service restaurant chain by units in the United States, today reported fiscal third quarter 2020 financial results for the 12-week period ending September 8, 2020 and provided a business update.
John D. Cappasola, Jr., President and Chief Executive Officer of Del Taco, commented, «As we continue to navigate the challenges and opportunities related to COVID-19, I am proud of our actions to stabilize our business as demonstrated by our strong third quarter performance. Positive third quarter comparable restaurant sales for company-operated and franchised restaurants reflects our value-oriented QSR+ positioning, expanding off-premise convenience and use of innovation with the very successful launch of new fresh Guacamole and our Crispy Chicken menu. We also drove operational efficiencies and maintained our cost discipline to help slightly expand our restaurant contribution margin after adjusting for the timing of advertising expense which will normalize during our fourth quarter.»
Cappasola concluded, «We are delivering great experiences and driving high overall guest satisfaction scores due to the exceptional work and dedication of our restaurant teams, franchisees and support center employees. Their efforts have established a solid foundation that we plan to leverage with continued innovation including the recent introduction of a new flavor to our Crispy Chicken menu through our partnership with Cholula. Looking ahead to 2021, we plan to elevate our brand engagement and transform our digital capability through a holistic CRM platform to incentivize and reward our fans, and launch our ‘Ultimate Convenience’ initiative to expand our access and convenience through new technology.»
Fiscal Third Quarter 2020 Highlights
- System-wide comparable restaurant sales increased 4.1 percent;
- Company-operated comparable restaurant sales increased 2.0 percent;
- Franchised comparable restaurant sales increased 6.5 percent;
- Total revenue of USD 120.8 million, representing a 0.5 percent increase from the fiscal third quarter 2019;
- Company-operated restaurant sales of USD 109.5 million, representing a 1.4 percent decrease from the fiscal third quarter 2019 primarily due to fewer company-operated restaurants open during 2020 compared to 2019 due to our refranchising activity;
- Net income of USD 5.8 million, or USD 0.15 per diluted share, compared to net loss of USD 7.7 million, or USD 0.21 per diluted share, in the fiscal third quarter 2019;
- Adjusted net income of USD 6.0 million, or USD 0.16 per diluted share, compared to adjusted net income of USD 3.7 million, or USD 0.10 per diluted share, in the fiscal third quarter 2019;
- Restaurant contribution margin of 18.0 percent compared to 16.8 percent in the fiscal third quarter 2019;
- Adjusted Ebitda of USD 15.3 million compared to USD 14.5 million in the fiscal third quarter 2019; and
- One company-operated and four franchise-operated restaurants opened and two franchise-operated restaurants closed.
During the fiscal third quarter, the Company reduced its outstanding revolving credit facility borrowing by USD 21 million to USD 124 million from USD 145 million at the end of both the fiscal second quarter and last year’s fiscal fourth quarter. The Company currently has USD 108.7 million available under its revolving credit facility.
Review of Fiscal Third Quarter 2020 Financial Results
Total revenue increased 0.5 percent to USD 120.8 million compared to USD 120.2 million in the fiscal third quarter 2019. Comparable restaurant sales increased 4.1 percent system-wide, increased 2.0 percent at company-operated restaurants, and increased 6.5 percent at franchised restaurants.
Net income was USD 5.8 million, or USD 0.15 per diluted share, compared to net loss of USD 7.7 million, or USD 0.21 per diluted share, last year.
Adjusted net income, which excludes sublease income for closed restaurants, impairment of long-lived assets, restaurant closure charges, loss on disposal of assets and adjustments to assets held for sale, and executive transition costs, was USD 6.0 million or USD 0.16 per diluted share compared to adjusted net income of USD 3.7 million or USD 0.10 per diluted share last year.
Restaurant contribution was USD 19.7 million compared to USD 18.6 million in the fiscal third quarter 2019. As a percentage of company-operated restaurant sales, restaurant contribution margin increased 120 basis points year-over-year to 18.0 percent. The increase was the result of an approximate 120 basis point decrease in food and paper costs and an approximate 30 basis point decrease in labor and related expenses, partially offset by an approximate 20 basis point increase in occupancy and other operating expenses.
Adjusted Ebitda was USD 15.3 million compared to USD 14.5 million in the fiscal third quarter 2019.
During the fiscal third quarter 2020, one company-operated restaurant and four franchise-operated restaurants opened and two franchise-operated restaurants closed. There are two planned franchise restaurant openings in the fiscal fourth quarter 2020, including the first Del Taco restaurant opening in Ohio.
Fiscal Year 2020 Guidance Withdrawn
As a reminder, Del Taco previously withdrew guidance for the 52-week fiscal year 2020 ending December 29, 2020.