Del Taco Restaurants, Inc. (NASDAQ:TACO) Q3 2019 Earnings Conference Call - Final Transcript

Oct 21, 2019 • 04:30 pm ET

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Del Taco Restaurants, Inc. (NASDAQ:TACO) Q3 2019 Earnings Conference Call - Final Transcript

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Presentation
Executive
Steven L. Brake

an estimated sublease assets and liabilities.

This adjustment contributed to a third quarter pre-tax loss and also impacted our effective tax rate specifically. Specifically this $14.8 million reclassification of non-deductible goodwill created an unfavorable permanent difference and our resulting third quarter income tax expense was approximately $2.6 million despite a pre-tax book loss as compared to $1.8 million during the third quarter of 2018 for an effective tax rate of 23.3%.

Net loss was $7.7 million or a loss of $0.21 per diluted share compared to net income of $5.9 million or $0.15 per diluted share of last year. In addition, we are reporting adjusted net income, which excludes restaurant closure charges, other income, sublease income for closed restaurants, impairment of long-lived assets, executive transition costs and loss on disposal of assets, and adjustments to assets held for sale. Adjusted net income in the quarter was $3.7 million or $0.10 per diluted share compared to $6.0 million or $0.15 per diluted share last year.

Finally as John referenced, we updated our fiscal 2019 annual guidance, including our current expectation that two refranchising transactions are finalized during the second half of the fiscal fourth quarter. On our Q2 conference call, although we discussed an unexpected traffic driven slowdown, which began in early July, we believed our transaction-driving initiatives will provide momentum as the year progressed.

Although momentum has materialized it's timing and magnitude lag our expectations and our results-to-date and current outlook now warrants revised guidance. These revisions include expectations for fiscal 2019 system-wide comparable restaurant sales of approximately 1% with franchise outperformance, consistent with our results to-date, as well as reduced total revenues in company restaurant sales reflecting comparable restaurant sales trends, new store opening delays and impact from the sale of two refranchised markets currently expected to occur during the second half of Q4. These revenue revisions also necessitated reductions in restaurant contribution margins adjusted diluted earnings per share and adjusted EBITDA.

Looking ahead to next year, we believe we are well-positioned as we expect to enter 2020 with a stronger digital capability, including a full year benefit of three delivery service providers, as well as an exciting pipeline of product innovation to provide transaction in menu mix opportunities. As noted, we currently expect slightly lower food inflation and elevated menu pricing compared to 2019. And we also expect to benefit from a healthier company portfolio as a result of our portfolio optimization program and the pending refranchising transactions.

As always thank you for your interest in Del Taco. And we are now happy to answer any questions you may have.