News

Del Taco updates fiscal guidance after Q3 results

October 17, 2018

Del Taco Q3 financial results indicated that system-wide sales grew 1.4 percent, marking 20 consecutive quarters of sales growth, a news release said. But the company said due to some expectations that fell short, it is updating its fiscal guidance for 2018.

Company-operated comparable restaurant sales grew 0.3 percent for 25 quarters of gains, and the company said that sales growth came from a 2.9 percent average check growth, partially offset by a 2.6 percent transaction drop. Meanwhile, comp sales grew 3 percent at franchised locations.

Other Q3 results include: 

• 6.2 percent total revenue growth to $117.8 million.
• 3.1 percent company restaurant to $109.6 million compared to $106.3 million last year's quarter. 
• $4.9 million net income, or $0.15 per diluted share from $5.1 million last year or $0.13 per diluted share. 
• $6 million in adjusted net income, compared to $5.1 million last year's quarter. 
• 70 basis point growth in restaurant contribution margin to 19.9% compared from 19.2 percent last year. 
• 6.4 percent adjusted EBITDA growth to $17.7 million compared to $16.6 million last year.

"During the quarter we made strategic progress, led by the launch of Elevated Combined Solutions which furthers our mission to be the leader in the value oriented QSR-plus segment," Sonic President and CEO John D. Cappasola, Jr., said in the release.

"We again experienced strong franchise comparable restaurant sales trends demonstrating our strengthening franchise system which supports brand portability. ... And, despite soft company-operated comparable restaurant sales, our effective margin management strategy helped us deliver an improved restaurant contribution margin after adjusting for the favorable timing of advertising expenses."

Cappasola said that the brand's $1 chicken quesadilla snacker fell short off expectations, but with a transition to the brand's so-called "flexible barbell menu strategy," it quickly refocused on mid-tier and premium products to improve overall menu mix. 
Upcoming initiatives include the launch of a shredded beef LTO and a triple meat Epic burrito. 

"Still, we have opted to take a more cautious approach to our fiscal year outlook and have therefore updated our annual guidance," Cappasola added. 

Updated guidance for the fiscal year 2018, ending Jan. 1, 2019 includes:

• System-wide same-store sales growth of approximately 3 percent (previously 2-4 percent).
• Total revenue between $504 million and $507 million (previously $506-$516 million).
• Restaurant contribution margin of 19.3-19.5 percent (previously 19.3-19.8 percent).
• General and administrative expenses of 8.5-8.7 percent of total revenue (previously 8.2-8.5 percent). including the expense side of the other franchise revenue that will now be reported on a gross basis;
• Effective tax rate of approximately 26-27.0 percent (previously 26.5-27.5 percent).
• Adjusted diluted earnings per share of approximately $0.53-$0.56 (previously $0.59-$0.63).
• Adjusted EBITDA of $70.5 million-$71.5 million (previously $71.5-$74.0 million).
• Net capital expenditures of $39.0 million-$42.0 million (previously $35 million to $38 million).