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El Pollo Loco Wraps Up Women's History Month with a Special Event Recognizing Women Who Lead, Inspire, and Empower
Newsfilter· 2024-04-09 14:00
LOS ANGELES, April 09, 2024 (GLOBE NEWSWIRE) -- El Pollo Loco, Inc. ("El Pollo Loco" or "Company") (NASDAQ:LOCO), the nation's leading restaurant chain specializing in fire-grilled chicken, joined forces with creative visionary and entrepreneur LaLa Romero to host an exclusive event on April 4th in honor of Women's History Month. The event celebrated the achievements of a select group of women within the organization and its broader communities who have relentlessly pursued their passions. The honorees incl ...
El Pollo Loco (LOCO) Q4 Earnings Match Estimates, Revenues Top
Zacks Investment Research· 2024-03-08 15:26
El Pollo Loco Holdings, Inc. (LOCO) reported fourth-quarter fiscal 2023 results, with earnings meeting the Zacks Consensus Estimate and revenues beating the same. The top declined from the prior-year quarter’s levels, while the bottom line remained flat year over year.Earnings & Revenue DiscussionDuring the fiscal fourth quarter, the company’s adjusted earnings per share (EPS) were in line with the Zacks Consensus Estimate of 16 cents. The figure matched the prior-year quarter’s levels.Quarterly revenues of ...
El Pollo Loco(LOCO) - 2023 Q4 - Earnings Call Transcript
2024-03-08 03:16
Financial Data and Key Metrics Changes - Total revenue for Q4 2023 decreased by 3.2% to $112.2 million compared to $115.9 million in Q4 2022 [16] - Company-operated restaurant revenue decreased by 5.7% to $94 million from $99.6 million in the same period last year [16] - GAAP net income for Q4 was $4.4 million or $0.14 per diluted share, down from $6.5 million or $0.18 per diluted share in the prior year [20] - Adjusted net income for Q4 was $5.2 million or $0.16 per diluted share, compared to $6 million or $0.16 per diluted share in the same quarter last year [20] Business Line Data and Key Metrics Changes - Franchise revenue increased by 17% to $11 million during Q4, driven by a 1.6% increase in franchise comparable restaurant sales and five new franchise openings [17] - The decrease in comparable restaurant sales included a 0.4% decrease in average check size, offset by a 0.2% increase in transactions [16] Market Data and Key Metrics Changes - For Q1 2024, system-wide comparable store sales increased by 3.8%, consisting of a 2.2% increase in company-operated restaurants and a 4.7% increase in franchise restaurants [17] Company Strategy and Development Direction - The company aims to focus on five operational pillars, including attracting and retaining talent, emphasizing their fire-grilled chicken, enhancing digital services, ensuring operational consistency, and improving economic fundamentals with franchisees [7][8][10][14] - The company plans to remodel 15 to 20 company-owned restaurants and 40 to 50 franchise restaurants in 2024 to enhance customer experience [14][21] Management's Comments on Operating Environment and Future Outlook - Management noted that they are working to offset wage increases in California through operational efficiencies and price adjustments, expecting to offset one-third to half of the wage increase impact [30][31] - The company is seeing pressure on consumer spending, with customers managing their check sizes and trading down, but they are also focusing on providing value [33][34] Other Important Information - The company has a new share repurchase program authorized for up to $20 million through March 31, 2025, with $7.4 million remaining under the authorization [22] - The company expects capital spending between $25 million and $28 million for 2024 [23] Q&A Session Summary Question: Development guidance and remodel expectations - Management indicated that they are seeing good sales momentum from remodels and are actively recruiting more franchisees to accelerate development [26][27] Question: Strategy to offset wage increases - Management discussed their operational initiatives to offset wage increases and shared insights on the efficiency of kiosks and salsa processing equipment [28][30] Question: Consumer environment and value strategy - Management noted that while consumers are under pressure, they are testing ways to offer more value across the menu to meet consumer demand [32][35] Question: P&L and commodity costs - Management explained that there was no specific item driving higher food and packaging costs, and they are pleased with the performance of their new locations in Colorado [36][37] Question: Cadence of limited-time offers (LTOs) - Management stated that they will reduce LTOs from six to five in 2024 due to positive consumer reception of certain items [38][39]
El Pollo Loco (LOCO) Q4 Earnings: Taking a Look at Key Metrics Versus Estimates
Zacks Investment Research· 2024-03-08 01:30
Core Insights - El Pollo Loco Holdings reported revenue of $112.25 million for Q4 2023, reflecting a year-over-year decline of 3.2% and an EPS of $0.16, unchanged from the previous year [1] - The revenue exceeded the Zacks Consensus Estimate of $108.85 million by 3.12%, while the EPS met the consensus estimate [1] Financial Performance Metrics - Franchise restaurants at the end of the period totaled 323, slightly above the average estimate of 322 [2] - System-wide same-store sales increased by 0.9%, below the average estimate of 1.2% [2] - Total restaurants at the end of the period reached 495, surpassing the average estimate of 493 [2] - Company-owned restaurants remained at 172, matching the average estimate [2] - Franchise advertising fee revenue was reported at $7.33 million, slightly below the average estimate of $7.39 million, but showed a year-over-year increase of 5.9% [2] - Franchise revenue was $10.96 million, exceeding the estimated $10.20 million, representing a 17% year-over-year increase [2] - Company-operated restaurant revenue was $93.96 million, above the average estimate of $91.26 million, but showed a year-over-year decline of 5.7% [2] Stock Performance - El Pollo Loco shares have returned -0.3% over the past month, contrasting with the Zacks S&P 500 composite's increase of 3.2% [3] - The stock currently holds a Zacks Rank 4 (Sell), indicating potential underperformance relative to the broader market in the near term [3]
El Pollo Loco Holdings (LOCO) Q4 Earnings Match Estimates
Zacks Investment Research· 2024-03-07 23:46
Core Viewpoint - El Pollo Loco Holdings reported quarterly earnings of $0.16 per share, matching the Zacks Consensus Estimate, with revenues of $112.25 million, exceeding expectations by 3.12% [1][2] Financial Performance - Earnings per share (EPS) for the quarter were $0.16, unchanged from the previous year [1] - The company had previously expected earnings of $0.18 per share but reported $0.19, resulting in a surprise of 5.56% [1] - Revenues for the quarter were $112.25 million, compared to $115.92 million a year ago [1] - Over the last four quarters, the company has surpassed consensus EPS estimates three times and revenue estimates two times [1] Market Performance - El Pollo Loco shares have increased by approximately 2% since the beginning of the year, while the S&P 500 has gained 7% [2] - The stock currently holds a Zacks Rank 4 (Sell), indicating expected underperformance in the near future [3] Future Outlook - The current consensus EPS estimate for the upcoming quarter is $0.18 on revenues of $111.06 million, and for the current fiscal year, it is $0.72 on revenues of $465.32 million [4] - The Retail - Restaurants industry is ranked in the bottom 45% of over 250 Zacks industries, which may impact stock performance [4] - Kura Sushi, another company in the same industry, is expected to report a quarterly loss of $0.03 per share, with revenues projected to be $56.25 million, reflecting a 28% year-over-year increase [5]
El Pollo Loco(LOCO) - 2023 Q4 - Annual Report
2024-03-07 16:00
PART I [Business Overview](index=4&type=section&id=Item%201.%20Business) El Pollo Loco Holdings, Inc. operates 495 fire-grilling citrus-marinated chicken restaurants across seven states, focusing on a differentiated limited-service concept - As of December 27, 2023, the company operates **495 restaurants**, comprising **172 company-operated** and **323 franchised locations**, primarily in California, Arizona, Nevada, Texas, Utah, Colorado, and Louisiana[10](index=10&type=chunk)[208](index=208&type=chunk) - The company specializes in fire-grilling citrus-marinated chicken and Mexican/LA-inspired entrees, positioning itself in the limited service restaurant (LSR) segment with a focus on healthier, affordable options[11](index=11&type=chunk)[18](index=18&type=chunk)[19](index=19&type=chunk) - AB 1228, effective January 1, 2024, will increase the minimum wage at fast food restaurants to **$20 an hour** on April 1, 2024, in California, leading to expected increases in labor and regulatory compliance costs[13](index=13&type=chunk)[229](index=229&type=chunk) - The company's growth strategy includes attracting top talent, enhancing hospitality, emphasizing its signature fire-grilled chicken, investing in digital customer experience, and expanding as an asset-light company primarily through franchising[25](index=25&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk)[34](index=34&type=chunk)[37](index=37&type=chunk)[231](index=231&type=chunk)[232](index=232&type=chunk)[233](index=233&type=chunk) Company-Operated Restaurant Sales Mix (2021-2023) | Category | 2023 | 2022 | 2021 | | :------------------------ | :---- | :---- | :---- | | Bone-in chicken meals | 43% | 44% | 46% | | Mexican-inspired entrees | 50% | 50% | 48% | | Family-sized meals (of total sales) | 26% | 28% | 31% | - Digital and delivery orders constituted **12.0% of total sales mix** in fiscal 2023, with partnerships including DoorDash, Postmates, Uber Eats, and Grub Hub[35](index=35&type=chunk) - Poultry is the largest product cost item, representing approximately **36% of total food and paper costs** for 2023, with more than half of poultry purchases having a fixed price through the end of 2024[61](index=61&type=chunk) [Risk Factors](index=22&type=section&id=Item%201A.%20Risk%20Factors) The company faces a broad range of risks, including challenges in new restaurant development, intense competition, and vulnerability to economic downturns and shifts in consumer preferences - The ability to open new restaurants is dependent on identifying suitable sites, securing financing, hiring and training staff, and obtaining timely regulatory approvals, with failures potentially leading to increased costs and lower sales[90](index=90&type=chunk)[91](index=91&type=chunk) - The restaurant industry is intensely competitive, with competition based on price, convenience, service quality, brand recognition, and food quality, particularly in the QSR and fast-casual segments[66](index=66&type=chunk)[94](index=94&type=chunk) - Changes in food, supply, labor, construction, and utility costs, especially for chicken (**36% of food and paper costs** in 2023), could adversely affect profitability, and the company may not be able to offset these increases through menu price adjustments[110](index=110&type=chunk)[111](index=111&type=chunk)[114](index=114&type=chunk) - The company's operations are highly concentrated in the greater Los Angeles area, generating approximately **71.3% of revenue** in fiscal 2023, making it vulnerable to adverse regional conditions[100](index=100&type=chunk)[407](index=407&type=chunk) - Compliance with AB 1228, which raises the minimum wage for fast food workers in California to **$20/hour**, is expected to increase labor and regulatory compliance costs starting in fiscal 2024, potentially impacting profitability[164](index=164&type=chunk)[166](index=166&type=chunk) - The company's level of indebtedness and restrictions under its credit facility could limit its ability to fund operations, capital expenditures, and growth strategies, and expose it to interest rate fluctuations[130](index=130&type=chunk)[131](index=131&type=chunk) [Unresolved Staff Comments](index=52&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reported no unresolved staff comments from the SEC - There are no unresolved staff comments[200](index=200&type=chunk) [Cybersecurity](index=52&type=section&id=Item%201C.%20Cybersecurity) The company has a multi-layer cybersecurity risk management framework integrated into its enterprise risk management, overseen by the Audit Committee - The company employs a multi-layer cybersecurity risk management process, including **24/7 threat monitoring**, firewall and antivirus protections, vulnerability scans, and regular employee training[200](index=200&type=chunk)[202](index=202&type=chunk) - External third parties are engaged for advice on emerging threats and to conduct bi-annual audits of cybersecurity systems and processes, with results shared with senior leadership and the Audit Committee[202](index=202&type=chunk)[203](index=203&type=chunk) - The Audit Committee of the Board of Directors is responsible for overseeing cyber threats and reviewing the company's mitigation protocols, receiving quarterly updates from the Chief Privacy Officer[206](index=206&type=chunk) - To date, the company has not experienced any cybersecurity threats or incidents that have materially affected its business strategy, results of operations, or financial condition[207](index=207&type=chunk) [Properties](index=54&type=section&id=Item%202.%20Properties) As of December 27, 2023, El Pollo Loco operates 495 restaurants across seven states, primarily leasing free-standing properties with drive-thru service - As of December 27, 2023, the company's system includes **495 restaurants** (**172 company-operated**, **323 franchised**) across California, Nevada, Arizona, Texas, Utah, Louisiana, and Colorado[208](index=208&type=chunk)[209](index=209&type=chunk) - The majority of restaurants are free-standing with drive-thru service, typically **2,200 to 3,000 square feet**, seating **50-70 people**[10](index=10&type=chunk)[208](index=208&type=chunk) - The company leases the land for most of its company-operated restaurants, with lease terms generally **20 years** and renewal options. It owns **15 properties**, operating **12** and licensing **three** to franchisees, and subleases **57 leased sites** to franchisees[210](index=210&type=chunk)[212](index=212&type=chunk) Restaurant Locations by State (December 27, 2023) | State | Company-Operated | Franchised | Total | | :---------- | :--------------- | :--------- | :---- | | California | 144 | 246 | 390 | | Nevada | 28 | 5 | 33 | | Arizona | — | 27 | 27 | | Texas | — | 31 | 31 | | Utah | — | 10 | 10 | | Louisiana | — | 2 | 2 | | Colorado | — | 2 | 2 | | **Total** | **172** | **323** | **495** | [Legal Proceedings](index=56&type=section&id=Item%203.%20Legal%20Proceedings) The company refers to Note 13, 'Commitments and Contingencies—Legal Matters,' in the accompanying financial statements for information regarding its material legal proceedings - Information on material legal proceedings is incorporated by reference from Note 13 'Commitments and Contingencies—Legal Matters' in the consolidated financial statements[214](index=214&type=chunk) [Mine Safety Disclosures](index=56&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company has no disclosures regarding mine safety - There are no mine safety disclosures[214](index=214&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=56&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock is listed on Nasdaq under 'LOCO', with 31.3 million shares outstanding as of March 1, 2024, and a $20.0 million share repurchase program approved in October 2023 - The company's common stock (**LOCO**) is listed on The Nasdaq Stock Market LLC since July 25, 2014[3](index=3&type=chunk)[215](index=215&type=chunk) - As of March 1, 2024, there were **31,282,820 shares** of common stock outstanding[3](index=3&type=chunk) - A special cash dividend of **$1.50 per share** was paid on November 9, 2022, but the company does not anticipate paying any such dividends for the foreseeable future[216](index=216&type=chunk) Issuer Purchases of Equity Securities (Q4 2023) | Period | Total Shares Purchased | Average Price Per Share | Shares Purchased Under Publicly Announced Plans | Approximate Dollar Value Remaining Under Plans | | :----------------------------------- | :--------------------- | :---------------------- | :---------------------------------------------- | :--------------------------------------------- | | Oct 26, 2023 - Nov 22, 2023 | 3,215 | $8.37 | — | $20,000,000 | | Nov 23, 2023 - Dec 27, 2023 | 1,500,000 | $8.40 | 1,500,000 | $7,400,000 | | **Total** | **1,503,215** | | **1,500,000** | | - On October 31, 2023, the Board approved a share repurchase program authorizing up to **$20.0 million** in repurchases, terminating March 31, 2025. As of December 27, 2023, **$7.4 million** remained available[219](index=219&type=chunk)[333](index=333&type=chunk)[334](index=334&type=chunk) Stock Performance (December 26, 2018 - December 27, 2023) | Date | LOCO ($) | Nasdaq Composite Index ($) | S&P Composite 1500 Restaurants ($) | | :--------------- | :------- | :------------------------- | :--------------------------------- | | December 26, 2018| 100.00 | 100.00 | 100.00 | | December 24, 2019| 99.67 | 136.69 | 122.86 | | December 30, 2020| 120.60 | 198.10 | 146.90 | | December 29, 2021| 92.78 | 242.03 | 179.28 | | December 28, 2022| 65.96 | 163.28 | 163.44 | | December 27, 2023| 59.93 | 236.17 | 189.14 | [RESERVED](index=30&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved and contains no information [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=59&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides an in-depth analysis of the company's financial performance, condition, and operational results for fiscal years 2023, 2022, and 2021, highlighting key trends, growth strategies, and market impacts [Basis of Presentation](index=61&type=section&id=Basis%20of%20Presentation) The company operates on a 52- or 53-week fiscal year, ending on the last Wednesday of each calendar year, with fiscal years 2023, 2022, and 2021 all being 52-week periods - The company uses a 52- or 53-week fiscal year, ending on the last Wednesday of each calendar year. Fiscal years 2023, 2022, and 2021 were 52-week fiscal years[227](index=227&type=chunk) [Overview](index=61&type=section&id=Overview) El Pollo Loco is a differentiated and growing limited-service restaurant concept specializing in fire-grilled citrus-marinated chicken and Mexican/LA-inspired entrees, offering healthier, affordable options - El Pollo Loco is a differentiated and growing restaurant concept specializing in fire-grilling citrus-marinated chicken and Mexican/LA-inspired entrees, operating in the limited service restaurant (LSR) segment[228](index=228&type=chunk) - The menu offers 'better for you' and affordable alternatives, appealing to a wide variety of socio-economic backgrounds and ensuring balanced sales across lunch and dinner day-parts[228](index=228&type=chunk) [Market Trends and Uncertainties](index=61&type=section&id=Market%20Trends%20and%20Uncertainties) The company anticipates increased labor and regulatory compliance costs starting in fiscal 2024 due to California's AB 1228, alongside continued inflationary pressures on operating costs - California's AB 1228, effective January 1, 2024, will increase the minimum wage at fast food restaurants to **$20 an hour** on April 1, 2024, leading to higher labor and regulatory compliance costs for the company in fiscal 2024[229](index=229&type=chunk) - The company expects inflationary pressures on food, labor, construction, and other operating costs to continue into fiscal year 2024, and may not be able to fully offset these increases[230](index=230&type=chunk) [Growth Strategies and Outlook](index=61&type=section&id=Growth%20Strategies%20and%20Outlook) The company's Strategic Plan focuses on five key strategies: talent, hospitality, brand reinforcement, digital-centricity, and asset-light expansion, with plans for new company-operated and franchised restaurants in 2024 - The company's five key growth strategies are: attract, hire, and retain top talent; EPL hospitality; be known for its famous fire-grilled chicken; digital-centric in service of improving the customer experience; and expand as an asset-light company[231](index=231&type=chunk)[232](index=232&type=chunk)[233](index=233&type=chunk) - As of December 27, 2023, the company had **495 locations**. In fiscal 2023, **two company-operated** and **three franchised restaurants** were opened. For 2024, plans include **two new company-operated restaurants** in California and **five to seven new franchised restaurants**[234](index=234&type=chunk) [Highlights and Trends](index=63&type=section&id=Highlights%20and%20Trends) In fiscal 2023, system-wide comparable restaurant sales decreased by 0.3%, while the company opened five new restaurants and completed 48 remodels, growing its loyalty program to 3.7 million members Comparable Restaurant Sales Growth (2021-2023) | Metric | 2023 | 2022 | 2021 | | :----------------------------------- | :---- | :---- | :---- | | System-wide comparable restaurant sales | -0.3% | 5.9% | 12.1% | | Company-operated comparable restaurant sales | 0.3% | 3.7% | 7.6% | | Franchised comparable restaurant sales | -0.7% | 7.4% | 15.3% | - In 2023, company-operated comparable restaurant sales increased by **0.3%**, driven by a **2.3% increase in average check size** (due to menu price increases) partially offset by a **2.0% decrease in transactions**[235](index=235&type=chunk) Restaurant Activity (2021-2023) | Category | 2023 | 2022 | 2021 | | :------------------------------ | :--- | :--- | :--- | | Company-operated restaurants: | | | | | Beginning of period | 188 | 189 | 196 | | Openings | 2 | 4 | 2 | | Restaurant sale to franchisee | (18) | (3) | (8) | | Closures | — | (2) | (1) | | Restaurants at end of period | 172 | 188 | 189 | | Franchised restaurants: | | | | | Beginning of period | 302 | 291 | 283 | | Openings | 3 | 9 | 2 | | Restaurant sale to franchisee | 18 | 3 | 8 | | Closures | — | (1) | (2) | | Restaurants at end of period | 323 | 302 | 291 | | System-wide restaurants: | | | | | Beginning of period | 490 | 480 | 479 | | Openings | 5 | 13 | 4 | | Closures | — | (3) | (3) | | Restaurants at end of period | 495 | 490 | 480 | - In 2023, **15 company-operated** and **33 franchised restaurants** underwent remodels, with plans for **15-20 company** and **40-50 franchised remodels** in 2024, costing **$0.3 million to $0.4 million** per restaurant[239](index=239&type=chunk) - The Loco Rewards loyalty program had over **3.7 million members** as of December 27, 2023, with **$0.7 million in deferred revenue** related to earned points[241](index=241&type=chunk) [Key Financial Definitions](index=65&type=section&id=Key%20Financial%20Definitions) This section defines key financial terms used in the report, including revenue sources, cost categories, and other financial metrics, providing context for understanding the company's financial statements [Results of Operations](index=67&type=section&id=Results%20of%20Operations) In fiscal 2023, total revenue slightly decreased by 0.3% to $468.7 million, while net income increased by 22.8% to $25.6 million, driven by lower food and paper costs and improved labor efficiency Statements of Income Data (2023 vs 2022) | Metric | 2023 ($,000) | 2023 (%) | 2022 ($,000) | 2022 (%) | Change ($,000) | Change (%) | | :----------------------------------------- | :----------- | :------- | :----------- | :------- | :------------- | :--------- | | Company-operated restaurant revenue | $398,437 | 85.0 | $403,218 | 85.8 | $(4,781) | (1.2) | | Franchise revenue | 41,002 | 8.7 | 38,225 | 8.1 | 2,777 | 7.3 | | Franchise advertising fee revenue | 29,225 | 6.3 | 28,516 | 6.1 | 709 | 2.5 | | **Total revenue** | **468,664** | **100.0**| **469,959** | **100.0**| **(1,295)** | **(0.3)** | | Food and paper costs (as % of co-op rev) | 108,250 | 27.2 | 117,774 | 29.2 | (9,524) | (8.1) | | Labor and related expenses (as % of co-op rev) | 127,244 | 31.9 | 130,773 | 32.4 | (3,529) | (2.7) | | Occupancy and other operating expenses (as % of co-op rev) | 101,398 | 25.4 | 101,543 | 25.2 | (145) | (0.1) | | General and administrative expenses | 42,025 | 9.0 | 39,093 | 8.3 | 2,932 | 7.5 | | Franchise expenses | 38,404 | 8.2 | 36,169 | 7.7 | 2,235 | 6.2 | | Income from operations | 39,792 | 8.5 | 30,120 | 6.4 | 9,672 | 32.1 | | Interest expense, net | 4,811 | 1.1 | 1,677 | 0.4 | 3,134 | 186.9 | | Provision for income taxes | 9,324 | 1.9 | 8,078 | 1.7 | 1,246 | 15.4 | | **Net income** | **$25,554** | **5.5** | **$20,801** | **4.4** | **$4,753** | **22.8** | - Company-operated restaurant revenue decreased by **$4.8 million (1.2%)** in fiscal 2023, primarily due to the sale of **21 restaurants** to franchisees, partially offset by a **0.3% increase** in comparable restaurant revenue[260](index=260&type=chunk) - Franchise revenue increased by **$2.8 million (7.3%)** in fiscal 2023, mainly from the conversion of **21 company-operated restaurants** to franchised locations and new openings, despite a **0.7% decrease** in comparable franchised restaurant sales[262](index=262&type=chunk) - Food and paper costs decreased by **$9.5 million (8.1%)** in fiscal 2023, and as a percentage of company-operated revenue, decreased from **29.2% in 2022 to 27.2% in 2023**, primarily due to pricing increases partially offset by commodity inflation[263](index=263&type=chunk) - Labor and related expenses decreased by **$3.5 million (2.7%)** in fiscal 2023, and as a percentage of company-operated revenue, decreased from **32.4% in 2022 to 31.9% in 2023**, driven by lower transactions, reduced overtime, and decreased COVID-19 sick pay, partially offset by higher wage rates[264](index=264&type=chunk) - The company recorded a net gain of **$5.0 million** on the disposition of **18 restaurants** to existing franchisees in fiscal 2023, generating **$7.7 million in cash proceeds**[271](index=271&type=chunk) - Interest expense, net, increased by **$3.1 million (186.9%)** in fiscal 2023, primarily due to higher outstanding balances on the 2022 Revolver and increased interest rates[273](index=273&type=chunk) - The provision for income taxes was **$9.4 million** in fiscal 2023, reflecting an effective tax rate of **26.7%**, compared to **28.0%** in fiscal 2022[277](index=277&type=chunk) [Key Performance Indicators](index=74&type=section&id=Key%20Performance%20Indicators) In fiscal 2023, company-operated restaurant revenue was $398.4 million, system-wide sales were $1,050.2 million, and Adjusted EBITDA was $57.4 million, reflecting brand scale and restaurant-level profitability - In fiscal 2023, company-operated restaurant revenue was **$398.4 million**, system-wide sales were **$1,050.2 million**, and system comparable sales declined by **0.3%**[279](index=279&type=chunk) - Company-operated average unit volumes (AUVs) were **$2.2 million** in fiscal 2023, with a restaurant contribution margin of **15.5%**[279](index=279&type=chunk) System-Wide Sales Reconciliation (2021-2023) | (Dollar amounts in thousands) | 2023 (52-Weeks) | 2022 (52-Weeks) | 2021 (52-Weeks) | | :-------------------------------- | :-------------- | :-------------- | :-------------- | | Company-operated restaurant revenue | $398,437 | $403,218 | $394,733 | | Franchise revenue | 41,002 | 38,225 | 33,729 | | Franchise advertising fee revenue | 29,225 | 28,516 | 25,901 | | Total Revenue | 468,664 | 469,959 | 454,363 | | Less: Franchise revenue | (41,002) | (38,225) | (33,729) | | Less: Franchise advertising fee revenue | (29,225) | (28,516) | (25,901) | | Sales from franchised restaurants | 651,777 | 635,819 | 578,497 | | **System-wide sales** | **$1,050,214** | **$1,039,037** | **$973,230** | Restaurant Contribution and Margin Reconciliation (2021-2023) | (Dollar amounts in thousands) | 2023 (52-Weeks) | 2022 (52-Weeks) | 2021 (52-Weeks) | | :-------------------------------- | :-------------- | :-------------- | :-------------- | | Income from operations | $39,792 | $30,120 | $41,335 | | Add (less) adjustments | | | | | General and administrative expenses | 42,025 | 39,093 | 39,852 | | Franchise expenses | 38,404 | 36,169 | 32,831 | | Depreciation and amortization | 15,235 | 14,418 | 15,176 | | Loss on disposal of assets | 192 | 165 | 289 | | Gain on recovery of insurance proceeds | (247) | — | — | | Franchise revenue | (41,002) | (38,225) | (33,729) | | Franchise advertising fee revenue | (29,225) | (28,516) | (25,901) | | Impairment and closed-store reserves | 1,732 | 752 | 1,087 | | (Gain) loss on disposition of restaurants | (5,034) | (848) | 1,534 | | **Restaurant contribution** | **$61,872** | **$53,128** | **$72,474** | | Company-operated restaurant revenue | $398,437 | $403,218 | $394,733 | | **Restaurant contribution margin (%)** | **15.5%** | **13.2%** | **18.4%** | EBITDA and Adjusted EBITDA Reconciliation (2021-2023) | (Amounts in thousands) | 2023 (52-Weeks) | 2022 (52-Weeks) | 2021 (52-Weeks) | | :--------------------------------------- | :-------------- | :-------------- | :-------------- | | Net income | $25,554 | $20,801 | $29,121 | | Provision for income taxes | 9,324 | 8,078 | 10,332 | | Interest expense, net | 4,811 | 1,677 | 1,824 | | Depreciation and amortization | 15,235 | 14,418 | 15,176 | | **EBITDA** | **$54,924** | **$44,974** | **$56,453** | | Stock-based compensation expense | 3,337 | 3,491 | 3,220 | | Loss on disposal of assets | 192 | 165 | 289 | | Impairment and closed-store reserves | 1,732 | 752 | 1087 | | (Gain) loss on disposition of restaurants | (5,034) | (848) | 1,534 | | Income tax receivable agreement expense (income) | 103 | (436) | 58 | | Securities class action legal expense | — | 443 | 495 | | Special dividend | 129 | 350 | — | | Legal settlements | — | (541) | — | | Special legal expenses | 137 | — | — | | Shareholder advisory fees | 293 | — | — | | Gain on recovery of insurance proceeds | (399) | — | — | | Executive transition costs | 618 | — | — | | Severance | 1,055 | — | — | | Pre-opening costs | 269 | 326 | 259 | | **Adjusted EBITDA** | **$57,356** | **$48,676** | **$63,395** | [Liquidity and Capital Resources](index=83&type=section&id=Liquidity%20and%20Capital%20Resources) The company's primary liquidity sources are cash from operations, cash and cash equivalents, and its $150.0 million 2022 Revolver, which are believed sufficient for the next 12 months - Primary liquidity sources are cash from operations, cash and cash equivalents, and the **$150.0 million 2022 Revolver**[312](index=312&type=chunk) - Key capital requirements include new restaurant openings, existing restaurant capital investments (remodels and maintenance), legal defense costs, lease obligations, interest payments on debt, working capital, and general corporate needs[312](index=312&type=chunk) - The company believes its liquidity sources are sufficient for at least the next **12 months**, but macroeconomic conditions could impact its ability to meet financial covenants under the 2022 Credit Agreement[314](index=314&type=chunk)[315](index=315&type=chunk) [Cash Flows](index=85&type=section&id=Cash%20Flows) In fiscal 2023, net cash provided by operating activities increased by $2.1 million, while net cash used in investing activities decreased by $5.5 million, and net cash used in financing activities increased by $11.3 million due to stock repurchases Summary Cash Flow Information (2021-2023) | (Amounts in thousands) | 2023 (52-Weeks) | 2022 (52-Weeks) | 2021 (52-Weeks) | | :--------------------------------- | :-------------- | :-------------- | :-------------- | | Net cash provided by operating activities | $40,688 | $38,549 | $52,099 | | Net cash used in investing activities | (13,447) | (18,915) | (12,485) | | Net cash used in financing activities | (40,446) | (29,187) | (22,787) | | **Net (decrease) increase in cash** | **$(13,205)** | **$(9,553)** | **$16,827** | - Net cash provided by operating activities increased by **$2.1 million** in fiscal 2023 compared to 2022, driven by increased profitability and favorable working capital[317](index=317&type=chunk) - Net cash used in investing activities decreased by **$5.5 million** in fiscal 2023, primarily due to **$7.7 million** in cash proceeds from the sale of **18 company-operated restaurants**[318](index=318&type=chunk) - Net cash used in financing activities increased by **$11.3 million** in fiscal 2023, mainly due to **$59.2 million** in common stock repurchases, partially offset by **$18.0 million** in net borrowings on the 2022 Revolver[320](index=320&type=chunk) [Debt and Other Obligations](index=86&type=section&id=Debt%20and%20Other%20Obligations) The company's debt includes a $150.0 million five-year senior secured revolving credit facility maturing in July 2027, with $84.0 million outstanding as of December 27, 2023, and compliance with all financial covenants - The company has a **$150.0 million five-year senior secured revolving credit facility** (2022 Revolver) maturing on July 27, 2027[324](index=324&type=chunk) - As of December 27, 2023, **$84.0 million** was outstanding under the 2022 Revolver, with **$56.2 million available**. The interest rate range for borrowings in fiscal 2023 was **5.7% to 7.0%**[326](index=326&type=chunk)[327](index=327&type=chunk) - The 2022 Credit Agreement contains financial covenants, with which the company was in compliance as of December 27, 2023[327](index=327&type=chunk) [Material Cash Requirements](index=88&type=section&id=Material%20Cash%20Requirements) Total capital expenditures for 2023 were $21.3 million, with projected 2024 expenditures of $25.0 million to $28.0 million, alongside significant future obligations for operating leases, long-term debt, and chicken purchasing commitments - Total capital expenditures for 2023 were **$21.3 million**, including **$5.1 million** for new restaurants and **$16.2 million** for existing restaurant investments[328](index=328&type=chunk) - Expected capital expenditures for 2024 are **$25.0 million to $28.0 million**, with **$4.0 million to $6.0 million** for new restaurants and **$19.0 million to $21.0 million** for existing restaurant investments, primarily funded by operating cash flows[328](index=328&type=chunk)[330](index=330&type=chunk) Material Cash Requirements (as of December 27, 2023) | (Amounts in thousands) | Total | 2024 | 2025 - 2026 | 2027 - 2028 | 2029 and thereafter | | :-------------------------------- | :--------- | :--------- | :---------- | :---------- | :------------------ | | Operating leases | $243,888 | $28,328 | $52,169 | $44,965 | $118,426 | | Finance leases | 2,155 | 191 | 341 | 247 | 1,376 | | Long-term debt | 101,245 | 5,682 | 11,275 | 84,288 | — | | Income tax receivable agreement | 422 | 422 | — | — | — | | Purchasing commitments—chicken | 31,298 | 31,298 | — | — | — | | **Total** | **$379,008** | **$65,921**| **$63,785** | **$129,500**| **$119,802** | [Share Repurchase Programs](index=89&type=section&id=Share%20Repurchase%20Programs) The company completed its 2022 Stock Repurchase Plan and approved a new $20.0 million program in October 2023, under which 1.5 million shares were repurchased from related parties in November 2023 - The 2022 Stock Repurchase Plan, authorizing up to **$20.0 million**, was completed by July 12, 2023, with **2,030,850 shares** repurchased[333](index=333&type=chunk)[558](index=558&type=chunk) - A new **$20.0 million** share repurchase program was approved on October 31, 2023, set to terminate on March 31, 2025[333](index=333&type=chunk)[334](index=334&type=chunk)[560](index=560&type=chunk) - In November 2023, the company repurchased **1,500,000 shares** for **$12.6 million** from FS Equity Partners V, L.P. and FS Affiliates V, L.P., leaving approximately **$7.4 million** available under the new repurchase program as of December 27, 2023[219](index=219&type=chunk)[337](index=337&type=chunk)[561](index=561&type=chunk)[564](index=564&type=chunk) [Critical Accounting Policies and Estimates](index=91&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) The company's critical accounting policies involve significant management judgment in revenue recognition, impairment assessments of assets, insurance reserves, lease obligations, and income taxes, with potential material effects from changes in estimates - Critical accounting policies and estimates include revenue recognition (especially for gift cards and loyalty programs), impairment of goodwill, intangible assets, property and equipment, and ROU assets[338](index=338&type=chunk)[340](index=340&type=chunk)[341](index=341&type=chunk)[346](index=346&type=chunk)[347](index=347&type=chunk) - Significant judgment is applied in estimating insurance reserves, accounting for lease obligations (determining lease terms and discount rates), and income taxes (deferred tax assets/liabilities, valuation allowances, and uncertain tax positions)[348](index=348&type=chunk)[349](index=349&type=chunk)[350](index=350&type=chunk)[353](index=353&type=chunk)[354](index=354&type=chunk)[355](index=355&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=52&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to market risks from interest rate fluctuations on its variable-rate debt, inflation impacting operating costs, and commodity price volatility, particularly for food products like chicken - The company is exposed to interest rate risk on its variable-rate 2022 Revolver, with outstanding borrowings of **$84.0 million** as of December 27, 2023. A **1.0% increase** in the effective interest rate would increase pre-tax interest expense by **$0.8 million annually**[360](index=360&type=chunk) - Inflation impacts food, paper, construction, utility, labor, and benefits costs. The company generally offsets these through menu price increases, menu mix management, and productivity improvements, but future offsets are not guaranteed[363](index=363&type=chunk) - The company faces commodity price risk, particularly for chicken, grains, produce, dairy, and cooking oil. While purchasing commitments exist, price fluctuations due to supply/demand factors (e.g., disease, weather) can materially impact food and beverage costs. The company does not use financial instruments to hedge commodity risk[364](index=364&type=chunk) [Financial Statements and Supplementary Data](index=53&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the audited consolidated financial statements for El Pollo Loco Holdings, Inc. and its subsidiaries, including balance sheets, income statements, comprehensive income, stockholders' equity, cash flows, and detailed notes [Report of Independent Registered Public Accounting Firm](index=100&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) BDO USA, P.C. issued unqualified opinions on the consolidated financial statements and internal control over financial reporting, noting the estimation of future cash flows for restaurant property impairment as a critical audit matter - BDO USA, P.C. provided an unqualified opinion on the consolidated financial statements for the period ended December 27, 2023, and on the effectiveness of internal control over financial reporting[368](index=368&type=chunk)[369](index=369&type=chunk) - A critical audit matter involved the company's estimation of undiscounted future cash flows for restaurant property and equipment impairment, requiring challenging judgments on future revenue transaction growth rates, menu pricing changes, and restaurant operating margins due to inflationary pressures[372](index=372&type=chunk)[376](index=376&type=chunk) [Consolidated Balance Sheets](index=103&type=section&id=Consolidated%20Balance%20Sheets) As of December 27, 2023, total assets slightly decreased to $592.3 million, while total liabilities increased to $341.6 million, and stockholders' equity decreased to $250.7 million, primarily due to share repurchases Consolidated Balance Sheets (Amounts in thousands) | Metric | December 27, 2023 | December 28, 2022 | | :----------------------------------------- | :---------------- | :---------------- | | **Assets** | | | | Cash and cash equivalents | $7,288 | $20,493 | | Total current assets | 25,134 | 37,449 | | Property and equipment, net | 84,027 | 78,644 | | ROU asset | 168,007 | 165,584 | | Goodwill | 248,674 | 248,674 | | Trademarks | 61,888 | 61,888 | | Total assets | **$592,301** | **$597,218** | | **Liabilities** | | | | Total current liabilities | 72,581 | 68,513 | | Revolver loan | 84,000 | 66,000 | | Obligations under operating leases, net | 168,084 | 165,149 | | Total liabilities | **341,605** | **316,070** | | **Stockholders' Equity** | | | | Common stock | 313 | 370 | | Additional paid-in-capital | 236,421 | 292,244 | | Retained earnings (accumulated deficit) | 13,962 | (11,592) | | Total stockholders' equity | **250,696** | **281,148** | - Cash and cash equivalents decreased from **$20.5 million** in 2022 to **$7.3 million** in 2023[380](index=380&type=chunk) - Retained earnings shifted from an accumulated deficit of **$(11.6) million** in 2022 to positive retained earnings of **$14.0 million** in 2023[380](index=380&type=chunk) [Consolidated Statements of Income](index=105&type=section&id=Consolidated%20Statements%20of%20Income) For fiscal year 2023, total revenue was $468.7 million, a slight decrease from 2022, while net income increased to $25.6 million, driven by lower food and paper costs and improved labor efficiency Consolidated Statements of Income (Amounts in thousands, except share data) | Metric | December 27, 2023 | December 28, 2022 | December 29, 2021 | | :----------------------------------------- | :---------------- | :---------------- | :---------------- | | Company-operated restaurant revenue | $398,437 | $403,218 | $394,733 | | Franchise revenue | 41,002 | 38,225 | 33,729 | | Franchise advertising fee revenue | 29,225 | 28,516 | 25,901 | | **Total revenue** | **468,664** | **469,959** | **454,363** | | Food and paper cost | 108,250 | 117,774 | 104,394 | | Labor and related expenses | 127,244 | 130,773 | 120,308 | | Occupancy and other operating expenses | 101,398 | 101,543 | 97,557 | | Company restaurant expenses | 336,565 | 350,090 | 322,259 | | General and administrative expenses | 42,025 | 39,093 | 39,852 | | Franchise expenses | 38,404 | 36,169 | 32,831 | | Depreciation and amortization | 15,235 | 14,418 | 15,176 | | (Gain) loss on disposition of restaurants | (5,034) | (848) | 1,534 | | Impairment and closed-store reserves | 1,732 | 752 | 1,087 | | **Total expenses** | **428,872** | **439,839** | **413,028** | | **Income from operations** | **39,792** | **30,120** | **41,335** | | Interest expense, net | 4,811 | 1,677 | 1,824 | | Provision for income taxes | 9,324 | 8,078 | 10,332 | | **Net income** | **$25,554** | **$20,801** | **$29,121** | | Net income per share - Basic | $0.75 | $0.57 | $0.81 | | Net income per share - Diluted | $0.74 | $0.57 | $0.80 | - Net income increased by **$4.75 million (22.8%)** from **$20.8 million** in 2022 to **$25.6 million** in 2023[259](index=259&type=chunk)[382](index=382&type=chunk) - Basic earnings per share increased to **$0.75** in 2023 from **$0.57** in 2022[382](index=382&type=chunk) [Consolidated Statements of Comprehensive Income](index=106&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) For fiscal year 2023, comprehensive income was $25.4 million, a slight increase from $21.2 million in 2022, including net income and other comprehensive loss related to derivative instrument reclassifications Consolidated Statements of Comprehensive Income (Amounts in thousands) | Metric | December 27, 2023 | December 28, 2022 | December 29, 2021 | | :----------------------------------------- | :---------------- | :---------------- | :---------------- | | Net income | $25,554 | $20,801 | $29,121 | | Other comprehensive (loss) income, net of taxes | (126) | 416 | 543 | | **Comprehensive income** | **$25,428** | **$21,217** | **$29,664** | - Other comprehensive income (loss), net of taxes, was **$(126) thousand** in 2023, compared to **$416 thousand** in 2022, primarily due to reclassifications of derivative instrument gains[384](index=384&type=chunk) [Consolidated Statements of Changes in Stockholders' Equity](index=107&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) Total stockholders' equity decreased from $281.1 million in 2022 to $250.7 million in 2023, primarily due to $59.2 million in common stock repurchases, partially offset by net income and stock-based compensation Consolidated Statements of Changes in Stockholders' Equity (Amounts in thousands, except share data) | Metric | December 27, 2023 | December 28, 2022 | December 29, 2021 | | :----------------------------------------- | :---------------- | :---------------- | :---------------- | | Balance, beginning of period | $281,148 | $310,623 | $277,578 | | Stock-based compensation | 2,964 | 3,491 | 3,220 | | Issuance of common stock (net) | 1,171 | 1,713 | 866 | | Shares repurchased for employee tax withholdings | (243) | (322) | (705) | | Common stock cash dividends paid | — | (55,574) | — | | Repurchase of common stock | (59,216) | — | — | | Net income | 25,554 | 20,801 | 29,121 | | Other comprehensive income (loss), net of tax | (126) | 416 | 543 | | **Balance, end of period** | **$250,696** | **$281,148** | **$310,623** | - The company repurchased **$59.2 million** of common stock in fiscal 2023, contributing to the decrease in stockholders' equity[388](index=388&type=chunk) [Consolidated Statements of Cash Flows](index=109&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities increased to $40.7 million in 2023, while net cash used in investing activities decreased to $13.4 million, and net cash used in financing activities increased to $40.4 million Consolidated Statements of Cash Flows (Amounts in thousands) | Metric | December 27, 2023 | December 28, 2022 | December 29, 2021 | | :----------------------------------------- | :---------------- | :---------------- | :---------------- | | Net cash flows provided by operating activities | $40,688 | $38,549 | $52,099 | | Net cash flows used in investing activities | (13,447) | (18,915) | (12,485) | | Net cash flows used in financing activities | (40,446) | (29,187) | (22,787) | | **Net (decrease) increase in cash and cash equivalents** | **$(13,205)** | **$(9,553)** | **$16,827** | | Cash and cash equivalents, end of period | $7,288 | $20,493 | $30,046 | - Cash paid for interest increased to **$4.8 million** in 2023 from **$1.5 million** in 2022[392](index=392&type=chunk) - Unpaid purchases of property and equipment increased to **$5.1 million** in 2023 from **$1.3 million** in 2022[392](index=392&type=chunk) [Notes to Consolidated Financial Statements](index=110&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed information on the company's business, significant accounting policies, and financial statement line items, offering crucial context for the financial figures [1. Description of Business](index=110&type=section&id=1.%20Description%20of%20Business) El Pollo Loco Holdings, Inc. operates and franchises quick-service restaurants specializing in fire-grilled citrus-marinated chicken and Mexican/LA-inspired entrees, primarily in California - The company operates **172 company-owned** and **323 franchised** El Pollo Loco restaurants as of December 27, 2023, primarily in California[394](index=394&type=chunk) - The company operates in one segment, with all significant revenues derived from retail sales of food and beverages through company or franchised restaurants[395](index=395&type=chunk) [2. Summary of Significant Accounting Policies](index=110&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the company's critical accounting policies, including its fiscal year, consolidation principles, and estimates for impairment, insurance, and leases, while also detailing revenue recognition and market trends - The company's significant estimates include impairment of goodwill, intangible assets, property and equipment, insurance reserves, lease accounting matters, contingent liabilities, and income tax valuation allowances[400](index=400&type=chunk) - AB 1228 in California is expected to increase labor and regulatory compliance costs in fiscal 2024, potentially impacting profitability[401](index=401&type=chunk) - The company expects inflationary pressures on food, labor, construction, and other operating costs to continue throughout fiscal year 2024[402](index=402&type=chunk) - One supplier accounted for **15.14% of accounts payable** at December 27, 2023, and **26.6% of total purchases** for fiscal 2023, indicating a concentration of risk[405](index=405&type=chunk) - Company-operated and franchised restaurants in the greater Los Angeles area generated approximately **71.3% of total revenue** in fiscal 2023[407](index=407&type=chunk) - Revenue from the loyalty rewards program is deferred and recognized when points are redeemed or expire. As of December 27, 2023, **$0.7 million** was deferred[430](index=430&type=chunk) - Initial franchise and development fees are recognized over the typical **20-year franchise term**, as they are considered a single performance obligation with continuing rights and services[433](index=433&type=chunk)[434](index=434&type=chunk) - The company terminated its interest rate swap on July 28, 2022, receiving approximately **$0.6 million** in settlement[454](index=454&type=chunk) - As of December 27, 2023, the company had no federal and less than **$0.1 million** state NOL carryforwards, with state NOLs expiring beginning 2029[531](index=531&type=chunk) [3. Property and Equipment](index=132&type=section&id=3.%20Property%20and%20Equipment) As of December 27, 2023, net property and equipment totaled $84.0 million, with $15.2 million in depreciation and amortization expense for 2023, and $1.5 million in non-cash impairment charges Property and Equipment (Amounts in thousands) | Category | December 27, 2023 | December 28, 2022 | | :------------------------------ | :---------------- | :---------------- | | Land | $12,323 | $12,323 | | Buildings and improvements | 148,259 | 153,377 | | Other property and equipment | 86,423 | 83,035 | | Construction in progress | 7,270 | 3,196 | | Less: accumulated depreciation and amortization | (170,248) | (173,287) | | **Net property and equipment** | **$84,027** | **$78,644** | - Depreciation and amortization expense was **$15.2 million** in 2023, **$14.4 million** in 2022, and **$15.2 million** in 2021[479](index=479&type=chunk) - Non-cash impairment charges of **$1.5 million** were recorded in 2023, primarily for one restaurant in Nevada and one in California[480](index=480&type=chunk) [4. Trademarks and Other Intangible Assets](index=132&type=section&id=4.%20Trademarks%20and%20Other%20Intangible%20Assets) The company's indefinite-lived intangible assets, primarily domestic trademarks, were valued at $61.9 million net of impairment as of December 27, 2023, with no impairment recorded for goodwill or trademarks in fiscal 2023, 2022, or 2021 Domestic Trademarks (Amounts in thousands) | Category | December 27, 2023 | December 28, 2022 | | :------------------------------ | :---------------- | :---------------- | | Cost | $120,700 | $120,700 | | Accumulated impairment charges | (58,812) | (58,812) | | **Trademarks, net** | **$61,888** | **$61,888** | - Goodwill and indefinite-lived intangible assets (trademarks) are not amortized but are subject to annual impairment tests. No impairment was recorded for these assets in fiscal 2023, 2022, or 2021[420](index=420&type=chunk)[423](index=423&type=chunk) [5. Leases](index=133&type=section&id=5.%20Leases) The company primarily uses operating leases for its properties, recognizing ROU assets and lease liabilities, with $42.8 million in ROU assets for closed/subleased locations and $21.5 million in additional ROU assets from lease term reassessments in 2023 - As of December 27, 2023, ROU assets related to closed or subleased restaurant locations totaled **$42.8 million**[414](index=414&type=chunk) - In 2023, the company reassessed lease terms for **36 restaurants**, resulting in an additional **$21.5 million** of ROU assets and lease liabilities[487](index=487&type=chunk) Total Lease Cost (Amounts in thousands) | Category | December 27, 2023 | December 28, 2022 | December 29, 2021 | | :---------------------------------------- | :---------------- | :---------------- | :---------------- | | Lease cost – Occupancy and other operating expenses | $23,736 | $23,730 | $24,020 | | Lease cost – General & administrative | 492 | 465 | 413 | | Lease cost – Depreciation and amortization | 75 | 73 | 78 | | Lease cost – Interest expense | 45 | 45 | 59 | | Lease cost – Closed-store reserve | 19 | 86 | 283 | | **Total lease cost** | **$24,367** | **$24,399** | **$24,853** | Future Minimum Lease Obligations (as of December 27, 2023, Amounts in thousands) | For the Years Ending | Finance Leases Minimum Lease Payments | Operating Minimum Lease Payments | Sublease Income | | :------------------- | :------------------------------------ | :------------------------------- | :-------------- | | December 25, 2024 | $191 | $28,328 | $5,886 | | December 31, 2025 | 187 | 27,126 | 5,518 | | December 30, 2026 | 154 | 25,043 | 5,034 | | December 29, 2027 | 144 | 23,581 | 4,858 | | December 27, 2028 | 103 | 21,384 | 4,484 | | Thereafter | 1,376 | 118,426 | 27,854 | | **Total** | **$2,155** | **$243,888** | **$53,634** | [6. Long-Term Debt](index=139&type=section&id=6.%20Long-Term%20Debt) The company refinanced its credit facility in July 2022, establishing a $150.0 million five-year senior secured revolving credit facility maturing in July 2027, with $84.0 million outstanding and 7.0% interest as of December 27, 2023 - The company refinanced its credit facility in July 2022, establishing a **$150.0 million five-year senior secured revolving credit facility** (2022 Revolver) maturing on July 27, 2027[509](index=509&type=chunk)[510](index=510&type=chunk) - As of December 27, 2023, **$84.0 million** was outstanding under the 2022 Revolver, with an interest rate of **7.0%**. The company was in compliance with all financial covenants[515](index=515&type=chunk)[516](index=516&type=chunk) - The interest rate swap, previously designated as a cash flow hedge, was terminated on July 28, 2022, resulting in a settlement receipt of approximately **$0.6 million**[518](index=518&type=chunk) [7. Other Accrued Expenses and Current Liabilities](index=143&type=section&id=7.%20Other%20Accrued%20Expenses%20and%20Current%20Liabilities) Other accrued expenses and current liabilities totaled $18.4 million as of December 27, 2023, primarily comprising accrued sales and property taxes, gift card liability, loyalty rewards program liability, and accrued advertising Other Accrued Expenses and Current Liabilities (Amounts in thousands) | Category | December 27, 2023 | December 28, 2022 | | :---------------------------------------- | :---------------- | :---------------- | | Accrued sales and property taxes | $5,229 | $5,270 | | Gift card liability | 4,877 | 4,667 | | Loyalty rewards program liability | 687 | 526 | | Accrued advertising | 3,010 | 831 | | Accrued legal settlements and professional fees | 720 | 1,303 | | Deferred franchise and development fees | 586 | 610 | | Other | 3,252 | 1,913 | | **Total** | **$18,361** | **$15,120** | [8. Other Noncurrent Liabilities](index=143&type=section&id=8.%20Other%20Noncurrent%20Liabilities) Other noncurrent liabilities amounted to $6.4 million as of December 27, 2023, primarily consisting of deferred franchise and development fees Other Noncurrent Liabilities (Amounts in thousands) | Category | December 27, 2023 | December 28, 2022 | | :---------------------------------------- | :---------------- | :---------------- | | Deferred franchise and development fees | $6,411 | $5,767 | | Other | 34 | 89 | | **Total** | **$6,445** | **$5,856** | [9. Income Taxes](index=143&type=section&id=9.%20Income%20Taxes) The company recorded an income tax expense of $9.3 million in fiscal 2023, with an effective tax rate of 26.7%, and recognized $0.1 million in Income Tax Receivable Agreement (TRA) expense Provision for Income Taxes (Amounts in thousands) | Category | December 27, 2023 | December 28, 2022 | December 29, 2021 | | :------------------- | :---------------- | :---------------- | :---------------- | | Current income taxes: | | | | | Federal | $6,572 | $2,366 | $7,163 | | State | 1,846 | 1,112 | 2,158 | | Total current | 8,418 | 3,478 | 9,321 | | Deferred income taxes: | | | | | Federal | (29) | 2,958 | 93 | | State | 935 | 1,642 | 918 | | Total deferred | 906 | 4,600 | 1,011 | | **Tax provision for income taxes** | **$9,324** | **$8,078** | **$10,332** | Effective Tax Rate Reconciliation | Factor | December 27, 2023 | December 28, 2022 | December 29, 2021 | | :----------------------------------------- | :---------------- | :---------------- | :---------------- | | Statutory federal income tax rate | 21.0% | 21.0% | 21.0% | | State income tax expense (net of federal benefit) | 6.4% | 7.7% | 5.9% | | Change in valuation allowance | (19.3)% | — | 0.1% | | State credit expiration | 19.1% | — | — | | TRA expense (income) | 0.1% | (0.3)% | — | | 162(m) | 0.6% | 0.5% | 0.8% | | WOTC Credit | (0.7)% | (0.9)% | (0.5)% | | Stock option exercises | 0.1% | 0.3% | (1.4)% | | Deferred tax liability true up | (1.1)% | — | — | | Other | 0.5% | (0.3)% | 0.3% | | **Total Effective Tax Rate** | **26.7%** | **28.0%** | **26.2%** | - As of December 27, 2023, the company released the valuation allowance related to California Enterprise Zone credits, which expired at the end of fiscal 2023[532](index=532&type=chunk) - The Income Tax Receivable Agreement (TRA) resulted in **$0.1 million** of expense in fiscal 2023, and the company paid **$0.3 million** to pre-IPO stockholders under the TRA[533](index=533&type=chunk) [10. Employee Benefit Plans](index=145&type=section&id=10.%20Employee%20Benefit%20Plans) The company sponsors a defined contribution employee benefit plan, matching 100% of employee contributions up to 3% of qualified compensation and 50% of the next 2%, with contributions of $0.8 million for each of the fiscal years 2023, 2022, and 2021 - The company matches **100% of employee contributions up to 3%** of qualified compensation and **50% of the next 2%** in its defined contribution plan[539](index=539&type=chunk) - Company contributions to the plan were **$0.8 million** for each of the fiscal years 2023, 2022, and 2021[539](index=539&type=chunk) [11. Stock-Based Compensation](index=151&type=section&id=11.%20Stock-Based%20Compensation) The company recognized $3.0 million in stock-based compensation expense in fiscal 2023, with 843,320 stock options outstanding and 537,461 restricted share awards unvested as of December 27, 2023 - Stock-based compensation expense was **$3.0 million** in fiscal 2023, **$3.5 million** in 2022, and **$3.2 million** in 2021[541](index=541&type=chunk) Stock Options Activity (2021-2023) | Metric | Shares | Weighted-Average Exercise Price | | :----------------------------------- | :-------- | :------------------------------ | | Outstanding - December 29, 2021 | 978,078 | $11.45 | | Grants | 372,958 | $10.54 | | Exercised | (185,798) | $9.22 | | Forfeited, cancelled or expired | (97,059) | $12.06 | | Outstanding – December 28, 2022 | 1,068,179 | $9.92 | | Grants | 562,344 | $9.15 | | Exercised | (219,960) | $5.32 | | Forfeited, cancelled or expired | (567,243) | $10.63 | | **Outstanding – December 27, 2023** | **843,320** | **$10.13** | | Vested and expected to vest at Dec 27, 2023 | 835,581 | $10.14 | | Exercisable at December 27, 2023 | 380,896 | $11.09 | - The weighted-average estimated fair value of employee stock options granted in fiscal 2023 was **$4.41 per share**[548](index=548&type=chunk) - As of December 27, 2023, total unrecognized compensation expense for unvested stock options was **$1.8 million** (weighted average period of **2.9 years**) and for unvested restricted share awards was **$3.5 million** (weighted average period of **2.48 years**)[549](index=549&type=chunk)[556](index=556&type=chunk) [12. Earnings Per Share](index=151&type=section&id=12.%20Earnings%20Per%20Share) Basic EPS for fiscal 2023 was $0.75, and diluted EPS was $0.74, following the completion of a $20.0 million stock repurchase plan and the initiation of a new $20.0 million program Earnings Per Share Data (Amounts in thousands, except per share data) | Metric | December 27, 2023 | December 28, 2022 | December 29, 2021 | | :----------------------------------------- | :---------------- | :---------------- | :---------------- | | Net income | $25,554 | $20,801 | $29,121 | | Weighted-average shares outstanding—basic | 34,253,542 | 36,350,579 | 35,973,892 | | Weighted-average shares outstanding—diluted | 34,374,706 | 36,575,904 | 36,446,756 | | Net income per share—basic | $0.75 | $0.57 | $0.81 | | Net income per share—diluted | $0.74 | $0.57 | $0.80 | - The company repurchased **2,030,850 shares** of common stock for **$20.0 million** under the 2022 Stock Repurchase Plan, which was completed on July 12, 2023[558](index=558&type=chunk) - In November 2023, **1,500,000 shares** were repurchased for **$12.6 million** from FS Equity Partners V, L.P. and FS Affiliates V, L.P. under a new **$20.0 million** share repurchase program, leaving **$7.4 million** available[560](index=560&type=chunk)[561](index=561&type=chunk)[564](index=564&type=chunk) [13. Commitments and Contingencies](index=153&ty
El Pollo Loco(LOCO) - 2023 Q4 - Annual Results
2024-03-06 16:00
Exhibit 99.1 El Pollo Loco Holdings, Inc. Announces Fourth Quarter 2023 Financial Results COSTA MESA, CA – March 7, 2024 – El Pollo Loco Holdings, Inc. (Nasdaq: LOCO) today announced financial results for the 13-week period ended December 27, 2023. Highlights for the fourth quarter ended December 27, 2023 compared to the fourth quarter ended December 28, 2022 were as follows: ● Total revenue was $112.2 million compared to $115.9 million. ● System-wide comparable restaurant sales (1) increased 0.9%. ● Income ...
What Awaits El Pollo Loco Holdings (LOCO) in Q4 Earnings?
Zacks Investment Research· 2024-03-06 15:16
El Pollo Loco Holdings, Inc. (LOCO) is scheduled to report fourth-quarter 2023 results on Mar 7. In the last reported quarter, the company’s earnings beat the Zacks Consensus Estimate by 5.6%.Q4 ExpectationsThe Zacks Consensus Estimate for fourth-quarter earnings is pegged at 16 cents, remaining flat from a year ago. Over the past 60 days, estimates for the company’s earnings have been stable. For quarterly revenues, the consensus mark is pegged at $108.9 million, indicating a decline of 6.1% from the prior ...
Gear Up for El Pollo Loco (LOCO) Q4 Earnings: Wall Street Estimates for Key Metrics
Zacks Investment Research· 2024-03-04 15:16
Group 1 - Analysts project El Pollo Loco Holdings (LOCO) will announce quarterly earnings of $0.16 per share, with revenues expected to reach $108.85 million, a decline of 6.1% year over year [1] - The consensus EPS estimate has not changed over the past 30 days, indicating analysts have not revised their initial projections [1] - Revisions to earnings projections are critical for predicting investor behavior and are linked to short-term stock price performance [1] Group 2 - Revenue from franchise advertising fees is estimated at $7.39 million, reflecting a year-over-year increase of 6.8% [2] - Franchise revenue is projected to reach $10.20 million, indicating an 8.9% increase from the prior-year quarter [2] - Company-operated restaurant revenue is expected to be $91.26 million, showing a decline of 8.4% year over year [2] Group 3 - The consensus estimate for same-store sales system-wide is 1.2%, down from 4.7% a year ago [3] - Total restaurants at the end of the period are expected to reach 493, compared to 485 a year ago [3] - El Pollo Loco shares have decreased by 1.8% in the past month, underperforming the Zacks S&P 500 composite, which increased by 4.8% [3]
El Pollo Loco(LOCO) - 2023 Q3 - Earnings Call Transcript
2023-11-03 02:03
Financial Data and Key Metrics Changes - Total revenue for Q3 2023 increased by 0.4% to $120.4 million compared to $119.9 million in Q3 2022 [19] - Company-operated restaurant revenue decreased by 0.5% to $102.7 million from $103.2 million in the same period last year [19] - GAAP net income for Q3 2023 was $9.2 million or $0.28 per diluted share, compared to $5 million or $0.14 per diluted share in the prior year [23] - Adjusted net income for the quarter was $6.4 million or $0.19 per diluted share, compared to $5 million or $0.14 per diluted share in Q3 2022 [23] Business Line Data and Key Metrics Changes - Franchise revenue increased by 7.5% to $10.3 million during Q3, driven by a 1.1% increase in franchise comparable restaurant sales and 7 new franchise restaurant openings [19] - Company-operated comparable restaurant sales increased by 0.3%, with a 1.3% increase in average check size offset by a 0.9% decrease in transactions [19] Market Data and Key Metrics Changes - System-wide comparable store sales increased by 3.2% in Q4 to date through October 25, consisting of a 2.1% increase in company-operated restaurants and a 3.9% increase in franchise restaurants [20] Company Strategy and Development Direction - The company aims to accelerate unit growth and expand into new markets to realize the potential of the El Pollo Loco brand [9] - The Board believes in focusing on the unique flame-grilled chicken offering while improving profitability through technology implementation [8] - The company is rolling out new technology such as kiosks and enhanced salsa processing equipment to improve efficiency and consistency [15][16] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges in the restaurant industry and emphasized the need to leverage technology to offset expected cost increases from legislation changes [14] - The company is optimistic about the catering program, which has the potential to grow from approximately 1% to 5% of sales [13] Other Important Information - The company completed the sale of 17 company-operated restaurants to existing franchisees, resulting in cash proceeds of $7.5 million and a net gain of $4.9 million [23] - The company has a new share repurchase program authorized to purchase up to $20 million of common stock through March 28, 2025 [25] Q&A Session Summary Question: What needs to change for the company to grow? - The Board is focusing on accelerating growth and becoming a national brand, identifying untapped opportunities [28] - Management aims to strengthen relationships with franchisees and build infrastructure to support franchise growth [29] Question: What factors have held back growth? - The company is committing more resources to franchise growth and enhancing marketing efforts to attract new franchisees [31] Question: What contributed to the improvement in October? - The improvement was attributed to the introduction of new promotions and a timing mismatch in promotions during Q3 [35] Question: Can you provide details on the kiosk rollout? - The rollout is dependent on procuring cash machines, with an accelerated rollout expected to begin in January [39] Question: Is there traction in the catering program? - The catering program is seeing traction across various sectors, with significant orders fulfilled by multiple restaurants [41]