News

In 2016 Del Taco showed QSR sector how it's done

March 13, 2017

Just about 1½ years into life as a publicly traded company Del Taco has reported a strong 2016 fiscal year with a healthy comparable sales growth of 5.5 percent in the fourth quarter, according to a news release. 

The growth is substantially greater than that reported across the restaurant sector as a whole, which likely has helped the brand grow its location count to a total of 551 currently, up from 544 the previous year. Average check totals grew 3.3 percent at company-owned locations and restaurant contribution improved 30 bps to 21.5 percent of sales.

Other 2016 Q4 highlights include: 

• Total revenue of $150.2 million, representing 12.6 percent growth from the same period last year. 
• Company restaurant sales of $144.4 million, representing 12.8 percent growth from last year's same period. 
• $8 million increase in net income for a diluted EPS of 20 cents, compared to $4.8 million in the fiscal fourth quarter 2015, and a 12-cent diluted EPS. 
• Adjusted EBITDA increased to $25.3 million from $21.2 million in the fiscal fourth quarter 2015 or a comparable 16-week adjusted EBITDA increase of 14.1 percent. 

Fiscal Year 2016 highlights include: 

• The fourth straight year of gains in system-wide comparable restaurant sales, which showed 4.8 percent growth, while company-operated comparable restaurant sales grew 4.7 percent. 
• Company-operated comparable restaurant sales growth comprised average check growth of 4.5 percent, including approximately 1 percent of menu mix growth, and a transaction increase of 0.2 percent. 
• Total revenue grew 6.6 percent over the previous year to $452.1 million, or an increase of 4.7 percent. 
• Restaurant sales grew 6.5 percent over the previous year to $434.1 million.
• Net income grew to $20.9 million, representing diluted earnings per share of 53 cents, compared to $4.8 million in fiscal year 2015. Fiscal year 2016 results included an estimated one-cent benefit to diluted earnings per share from the additional operating week.
• Restaurant contribution margin of 20.6 percent is an improvement of approximately 60 basis points from fiscal year 2015.
• Adjusted EBITDA increased to $71.4 million from $65.0 million in fiscal year 2015, representing 9.9 percent growth. 

"Our solid fourth quarter results capped another successful year at Del Taco as we exceeded our annual guidance for comparable restaurant sales, total revenue, restaurant contribution margin and adjusted EBITDA, and delivered on our expectations for diluted earnings per share," CEO Paul J.B. Murphy III, said in a news release. "Our improving restaurant execution and progress on strategic objectives underpins our journey to cement Del Taco’s QSR+ value oriented positioning through Fresh Combined Solutions."

For 2017, Murphy said Del Taco has established four key catalysts for both sales and brand growth, including improved operational consistency and ease of execution, increased brand awareness and trial, as well as growth of a new premium occasion with Platos, and a focus on new product news to freshen the brand. 

"We are optimistic that these initiatives will enable us to take share from QSR, grow share among fast casual occasions, and move closer to our goal of $1.5 million in average unit volume by 2018," Murphy said. 

Going forward
The company repurchased 212,510 shares at an average price per share of $11.16 and 222,201 warrants at an average price per warrant of $3.45 for an aggregate of $3.1 million, during Q4 2016.  For fiscal year 2016, the company repurchased 1,347,300 shares at an average price per share of $10.00 and 699,007 warrants at an average price per warrant of $2.54 for an aggregate of $15.2 million. 
As of the end of fiscal 2016, here was about $34.8 million remaining under the $50 million repurchase authorization.

Fiscal Year 2017 guidance:

Between now and Jan. 2,  2018, the company expects: 

• System-wide same-store sales growth of approximately 2 to 4 percent.
• Total revenue between $466 million and $476 million;
• Total company-operated restaurant sales between $448 million and $458 million;
• Restaurant contribution margin between 19.8 and 20.3 percent.
• Diluted earnings per share of approximately 52 to 55 cents. 
• Adjusted  EBITDA between $71  million and $73.5 million.