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Del Taco 2nd Quarter 2016 Fiscal Financial Results

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 second quarter 2016 financial results. The Company also reiterated its fiscal year 2016 guidance.

Del Taco became a public company when it completed a business combination with Levy Acquisition Corp. on June 30, 2015. This resulted in a fiscal second quarter financial statement presentation that includes a predecessor period for the twelve-weeks ended June 16, 2015 compared to a successor period for the twelve-weeks ended June 14, 2016.

Fiscal Second Quarter 2016 Highlights
•System-wide comparable restaurant sales growth of 3.3% and company-owned comparable restaurant sales growth of 3.1%, marking the eleventh and sixteenth consecutive quarter of gains, respectively; ◦Company-owned comparable restaurant sales growth comprised average check growth of 4.9%, including nearly 1% of menu mix growth, and a transaction decrease of (1.8%);

•Total revenue of $100.0 million, representing 2.5% growth from the fiscal second quarter of 2015;
•Restaurant sales of $95.9 million, representing 2.1% growth from the fiscal second quarter of 2015;
•Restaurant contribution margin, a non-GAAP financial measure, of 20.6%, an improvement of approximately 80 basis points from the fiscal second quarter of 2015;
•Net income increased to $4.9 million, representing diluted earnings per share of $0.13, from $4.6 million in the fiscal second quarter of 2015;
•Adjusted EBITDA, a non-GAAP financial measure, increased to $16.0 million from $15.3 million in the fiscal second quarter of 2015, representing 4.5% growth; and
•The opening of one company-owned restaurant.

Paul J.B. Murphy, III, President and Chief Executive Officer of Del Taco, commented, “Effective execution resulted in solid second quarter performance that was in line with our expectations and characterized by system-wide comparable restaurant sales growth, restaurant contribution margin expansion, and increases in both adjusted EBITDA and net income.”

Murphy added, “Del Taco’s brand equity and unique barbell menu strategy supported favorable menu mix shifts driven by premium category use while our expanded Buck & Under platform provided guests compelling every day value without discounting. At company restaurants, effective menu price increases and favorable menu mix combined with modest commodity deflation helped offset the California minimum wage increase to $10/hour and led to meaningful restaurant contribution margin expansion.”

Murphy continued, “In late June, we launched Fresh Combined Solutions, the next phase of our Combined Solutions strategy. The goal is to build upon our successful repositioning by putting a finer point on our brand positioning to further differentiate Del Taco. In addition to a number of operational enhancement initiatives designed to drive quality, speed, and service, we launched several brand catalysts to drive demand. We are delighted with how 2016 is shaping up for our business, confident that we can achieve our annual guidance, and are excited by what we have yet to accomplish this fiscal year.”

Review of Fiscal Second Quarter 2016 Financial Results


Total revenue was $100.0 million, an increase of 2.5% compared to $97.6 million in the fiscal second quarter of 2015. The growth in revenue was driven by a 2.1% increase in Company restaurant sales and a 13.6% increase in franchise revenue.


Comparable restaurant sales increased 3.3% system-wide for the fiscal second quarter ended June 14, 2016, resulting in an impressive 9.3% two year growth rate cycling over the second strongest quarter of 2015. The Del Taco system has now generated comparable restaurant sales growth for eleven consecutive quarters. Company-owned comparable restaurant sales increased 3.1%, marking the sixteenth consecutive quarter of comparable restaurant sales growth. Franchise comparable restaurant sales increased 3.6%.

Restaurant contribution, a non-GAAP financial measure, increased 6.2% year-over-year to $19.8 million. As a percentage of Company restaurant sales, restaurant contribution increased approximately 80 basis points year-over-year to 20.6%. The increase was driven by an approximately 110 basis point improvement in food and paper costs and an approximately 80 basis point improvement in occupancy and other operating expenses, partially offset by an approximately 120 basis point increase in labor and related expenses. A reconciliation between restaurant contribution and the nearest GAAP financial measure is included in the accompanying financial data.

Net income was $4.9 million, compared to $4.6 million in the fiscal second quarter of 2015. Earnings per diluted share were $0.13 compared to $0.69 in the fiscal second quarter of 2015. The prior year period included $0.9 million of transaction-related costs that consisted of direct costs incurred in connection with our two-step business combination transaction.

Adjusted EBITDA, a non-GAAP financial measure, increased 4.5% to $16.0 million compared to $15.3 million in the previous year’s fiscal second quarter. A reconciliation between adjusted EBITDA and the nearest GAAP financial measure is included in the accompanying financial data.


Share Repurchase Program


Under the $25 million share repurchase authorization announced in March 2016, during the fiscal second quarter of 2016 the Company repurchased 542,303 shares of common stock at an average price of $9.92 per share and also repurchased 241,806 warrants at an average price of $2.36 per warrant for an aggregate cost of approximately $6.0 million.

Since the inception of the program in March 2016 through June 14, 2016, Del Taco has repurchased 628,982 shares at an average price per share of $10.04 and 241,806 warrants for an aggregate of $6.9 million with approximately $18.1 million remaining under this authorization.

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