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Del Taco Restaurants, Inc. Announces Fiscal Second Quarter 2017 Financial Results

System-wide and Company-operated comparable restaurant sales growth of 7.1% and 6.9%

Raises Fiscal Year 2017 Guidance on Several Key Metrics:

Del Taco Restaurants, Inc. Announces Fiscal Second Quarter 2017 Financial ResultsLake Forest, CA (RestaurantNews.com) 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 second quarter 2017 financial results. The Company also raised its guidance for fiscal year 2017 on several key metrics.

Fiscal Second Quarter 2017 Highlights
◾System-wide comparable restaurant sales growth of 7.1% and company-operated comparable restaurant sales growth of 6.9%, marking the 15th and 20th consecutive quarter of gains, respectively; ◾Company-operated comparable restaurant sales growth was comprised of average check growth of 5.4%, including nearly 3% of menu mix growth, and a transaction increase of 1.5%;

◾Total revenue of $108.6 million, representing 8.6% growth from the fiscal second quarter 2016;
◾Company-operated restaurant sales of $104.0 million, representing 8.4% growth from the fiscal second quarter 2016;
◾Net income increased to $5.3 million, representing diluted earnings per share of $0.13, compared to $4.9 million in the fiscal second quarter 2016, representing diluted earnings per share of $0.13;
◾Adjusted EBITDA, a non-GAAP financial measure, increased to $17.0 million from $16.0 million in the fiscal second quarter 2016, representing 6.4% growth; and
◾The opening of two franchise restaurants and one company-operated restaurant.

John D. Cappasola, Jr., President and Chief Executive Officer of Del Taco, commented, “Strong product promotions during the fiscal second quarter, including our Jumbo Shrimp limited time offer, the refresh of our breakfast menu in March, and dedicated marketing windows for The Del Taco and Platos, resulted in outstanding growth in comparable restaurant sales. Our enviable track record at company-operated restaurants now consists of 20 consecutive quarters of positive comparable restaurant sales, with positive transactions in 14 of the past 17 quarters.”

Cappasola continued, “We are pleased to raise key elements of our 2017 annual guidance on the strength of our Fresh Combined Solutions strategy. With the onset of our fiscal third quarter, we began lapping our most successful product launch in brand history, The Del Taco, and yet our comparable restaurant sales remain strong, trending up double digits on a two-year basis through the first 5 weeks of the fiscal third quarter. Our playbook for this rollover is driven by our holistic combined solutions approach, using a strategic combination of restaurant improvements to drive guest experiences and new product news with compelling value to drive guest trial and frequency. This includes our new Carnitas limited time offer which is driving strong sales mix and guest satisfaction.”

Cappasola concluded, “We believe our lineup of new products and marketing, along with our continued focus on improving operations, will further embed our QSR+ positioning to drive brand momentum as we close in on our $1.5 million average unit volume goal and accelerate system unit growth.”

Review of Fiscal Second Quarter 2017 Financial Results

Total revenue was $108.6 million, an increase of 8.6% compared to $100.0 million in the fiscal second quarter 2016. The growth in revenue was driven by an 8.4% increase in Company restaurant sales and a 9.1% increase in franchise revenue.

Comparable restaurant sales increased 7.1% system-wide for the fiscal second quarter 2017, resulting in a 10.4% increase on a two-year basis. The Del Taco system has now generated comparable restaurant sales growth for 15 consecutive quarters. Company-operated comparable restaurant sales increased 6.9%, marking the 20th consecutive quarter of comparable restaurant sales growth. Franchise comparable restaurant sales increased 7.5%.

Net income was $5.3 million, representing $0.13 per diluted share, compared to $4.9 million in the fiscal second quarter 2016, representing $0.13 per diluted share.

Restaurant contribution, a non-GAAP financial measure, increased 6.9% year-over-year to $21.1 million. As a percentage of Company restaurant sales, restaurant contribution margin fell approximately 30 basis points year-over-year to 20.3%. The decrease in restaurant contribution margin was driven by a 40 basis point increase in labor and related expenses and a 20 basis point increase in food and paper costs, partially offset by improvements 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, increased to $17.0 million compared to $16.0 million in the previous year’s fiscal second quarter, representing 6.4% growth. A reconciliation between adjusted EBITDA and the nearest GAAP financial measure is included in the accompanying financial data.

Restaurant Portfolio

During the fiscal second quarter 2017, we and our franchise partners opened one and two restaurants, respectively. There were also two company restaurant closures.

Thus far in the fiscal third quarter 2017, our franchise partners have opened two restaurants and there are currently 10 restaurants (one franchised and nine company) under construction, all of which are expected to open this fiscal year.

Repurchase Program for Common Stock and Warrants


During the fiscal second quarter 2017, we purchased 400,000 warrants from PW Acquisitions, LP, a related party, for $3.75 per warrant. At the end of the fiscal second quarter approximately $25.3 million remained under our $50 million repurchase authorization.
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