Del Taco Restaurants (TACO) Tops Q4 EPS by 6c

Del Taco Restaurants (NASDAQ: TACO) reported Q4 EPS of $0.20, $0.06 better than the analyst estimate of $0.14. Revenue for the quarter came in at $156.7 million versus the consensus estimate of $156.1 million.

Fiscal Fourth Quarter 2020 Highlights

• System-wide comparable restaurant sales increased 3.8%;
  • Company-operated comparable restaurant sales increased 0.6%;
  • Franchised comparable restaurant sales increased 7.5%;
• Total revenue of $156.7 million, representing a 0.2% decline from the fiscal fourth quarter 2019;
• Company-operated restaurant sales of $141.7 million, representing a 2.2% decline from the fiscal fourth quarter 2019 primarily due to fewer company-operated restaurants open during 2020 compared to 2019 due to our refranchising activity;
  • Company-operated comparable restaurant sales within Los Angeles, Orange and Clark (Las Vegas) counties representing approximately half of company-operated restaurants were notably negative, while all other company-operated counties had positive comparable restaurant sales;
• Net income of $7.5 million, or $0.20 per diluted share, compared to net loss of $114.1 million, or $3.08 per diluted share, in the fiscal fourth quarter 2019;
• Adjusted net income* of $7.5 million, or $0.20 per diluted share, compared to adjusted net income* of $6.7 million, or $0.18 per diluted share, in the fiscal fourth quarter 2019;
• Restaurant contribution* margin of 17.0% compared to 17.4% in the fiscal fourth quarter 2019;
• Adjusted EBITDA* of $18.4 million compared to $20.5 million in the fiscal fourth quarter 2019; and
• Two franchise-operated restaurants opened and two franchise-operated restaurants closed.

Management Commentary

John D. Cappasola, Jr., President and Chief Executive Officer of Del Taco, commented, “We delivered a solid fourth quarter performance in terms of comparable restaurant sales growth, restaurant contribution margin and adjusted EBITDA performance. Our great food, great value, and great experiences drove overall satisfaction scores to record levels, while the success of our Crispy Chicken menu and seasonal Tamale promotion enabled us to grow system-wide comparable restaurant sales while navigating through the clear headwinds affecting our industry. The hard work of our restaurant teams and support center staff helped us manage our margins and profitability despite the many challenges presented by the ongoing pandemic. In doing so, during the second half of 2020 we demonstrated not only the resilience of our business, but also accelerated performance which sets us up for success in 2021.”

Cappasola continued, “Both company-operated and franchise restaurants continue to generate positive comparable restaurant sales to date in the first quarter and have demonstrated sequential improvement compared to the fourth quarter last year. We further expect accelerated performance for the remainder of the first quarter and through the second quarter as we lap the initial COVID-19 impact. In addition, we believe our five drivers of acceleration, coupled with ongoing margin management strategies, will help drive our results in the second half of the year and facilitate modest restaurant contribution margin expansion on an annual basis.”

Fiscal Year 2021 Guidelines

Due to the continued uncertainty surrounding COVID-19 and its impact on the business, the Company is not able to provide a full outlook with respect to the 2021 fiscal year. However, the Company is able to provide the following guidelines:

• Commodity inflation of approximately 1%, excluding any adverse impacts from COVID-19 on the supply chain;
• Labor and related inflation of approximately 6%, due to California regulations including a minimum wage increase from $13 to $14 per hour that began on January 1, 2021 and a mandated minimum salary of twice the minimum wage, which impacts slightly over half of our General Managers;
• Menu price increase of approximately 4%;
• Modest restaurant contribution margin* expansion compared to the 16.1% achieved during fiscal 2020;
• General and administrative expenses, inclusive of stock-based compensation, at approximately 9.0% of total revenue;
• Effective tax rate of approximately 27%;
• Capital expenditures in the low $30 million range, including expenditures to maintain or enhance our existing restaurants, company-operated restaurant openings, our test remodel program and various discretionary technology and restaurant level investments;
• Four company-operated restaurant openings, of which one has already opened; and
• Eight franchised restaurant openings, of which one has already opened, for a dozen system-wide openings.

For earnings history and earnings-related data on Del Taco Restaurants (TACO) click here.

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