Del Taco Restaurants, Inc. (NASDAQ:TACO) Q2 2020 Earnings Conference Call - Final Transcript
Jul 23, 2020 • 04:30 pm ET
Thank you for standing by, and welcome to the Fiscal Second Quarter 2020 Conference Call and Webcast for Del Taco Restaurants.
I would now like to turn the call over to Mr. Raphael Gross, Managing Director at ICR.
Thank you, operator, and thank you all for joining us today. On the call with me is John Cappasola, President and Chief Executive Officer; and Steve Brake, Chief Financial Officer. After we deliver our prepared remarks, we will open the lines for your questions.
But first, let me remind everyone that part of our discussion today will include some forward-looking statements. These statements are not guarantees of future performance and therefore undue reliance should not be placed upon them. We do not undertake to update these forward-looking statements at a later date and refer you to today's earnings press release and our SEC filings for a more detailed discussion of the risks that could impact Del Taco's future operating results and financial condition.
Today's earnings press release also includes non-GAAP financial measures such as adjusted net income, adjusted EBITDA and restaurant contribution, along with reconciliations of these non-GAAP measures to the nearest GAAP measures. However, non-GAAP financial measures should not be considered as alternatives to GAAP measures, such as net income, operating income, net cash flows provided by operating activities or any other GAAP measure of liquidity or financial performance.
I would now like to turn the call over to John Cappasola, Chief Executive Officer.
John D. Cappasola
Thank you, Raphael, and we appreciate everyone joining us today. Let me begin by reiterating what I said on our previous call. Our restaurant teams, our franchise partners and our support staff are doing an exceptional job supporting our people, serving our guests and strengthening our brand. I couldn't be more proud or thankful for their efforts and dedication and I am very pleased that this focus is driving business results.
Specifically, system-wide same-store sales are slightly positive so far in Q3, led by our franchise base, who is sustaining positive same-store sales trends across a broad 14-state geographic footprint. This trend, coupled with funding for all franchisees who sought PPP loans, strengthened our franchise financial health. To date, 70% of franchised restaurants have voluntarily repaid all of the royalty and sublease rents that we deferred earlier this year and all remaining restaurants are on repayment programs to enable full repayment before the end of 2020.
Despite 100% of company-operated dining rooms remaining close since the start of COVID and challenged trends in the breakfast day part, company same-store sales trends continued to improve sequentially and are negative approximately 2% during the first five weeks of Q3, despite over 90% of our company restaurants residing in California and Las Vegas, where COVID-19 exposure is currently substantial.
Although we're very pleased with the company's same-store sales recovery during and since the second quarter, we are even more proud of the restaurant level cost controls and flow through achieved during fiscal Q2. Specifically, the food cost reduction, very modest labor