El Pollo Loco(US:LOCO)2023-11-02 16:00Sales Performance - For the thirteen weeks ended September 27, 2023, system-wide comparable restaurant sales increased by 0.8%, while for the thirty-nine weeks, they decreased by 0.7% compared to the prior year [169]. - Franchise revenue increased by $712,000, or 7.5%, from $9.543 million to $10.255 million [191]. - Total revenue for the thirteen weeks ended September 27, 2023, was $120.399 million, a 0.4% increase from $119.878 million in the same period last year [191]. - System-wide sales reached $268,755 for the week ended September 27, 2023, compared to $262,916 for the same week in 2022, indicating a growth of 2.9% [223]. - Comparable restaurant sales showed a year-over-year increase, with 470 comparable restaurants as of September 27, 2023, compared to 466 a year earlier [225]. Restaurant Operations - As of September 27, 2023, the company operated 171 restaurants, down from 188 at the beginning of the period, while franchised restaurants increased to 321 from 302 [170]. - The company completed 12 company-operated and 21 franchise remodels during the thirty-nine weeks ended September 27, 2023, with plans for 14-15 company and 28-32 franchise remodels in fiscal 2023 [172]. - The company opened one new company-operated restaurant and one new franchised restaurant during the thirty-nine weeks ended September 27, 2023 [168]. - The average check size increased by 1.3% in the most recent quarter, while transactions decreased by 0.9% [169]. - Company-operated restaurant revenue for the week ended September 27, 2023, was $102,703, compared to $103,174 for the same week in 2022, reflecting a slight decrease of 0.5% [223]. Financial Performance - Net income for the quarter was $9.229 million, an increase of $4.220 million, or 84.2%, from $5.009 million in the prior year [191]. - Income from operations increased by $6.828 million, or 99.5%, from $6.864 million to $13.692 million [191]. - EBITDA for the period was reported at $13,692, significantly higher than $6,864 for the same week in the previous year, reflecting a growth of 99.5% [230]. - Adjusted EBITDA for the thirty-nine weeks ended September 27, 2023, was $43,788,000, up from $35,423,000 in the prior year, reflecting a growth of 23.4% [239]. - Year-to-date, company-operated restaurant revenue increased by $0.9 million, or 0.3%, primarily due to $3.8 million in additional sales from new restaurants opened since Q1 2022 [196]. Cost Management - Inflationary pressures have affected food, labor, construction, and utility costs, but the company has managed to offset some of these through menu price increases and productivity improvements [167]. - Food and paper costs decreased by $2.611 million, or 8.7%, from $30.163 million to $27.552 million [191]. - Labor and related expenses decreased by $187,000, or 0.6%, from $33.279 million to $33.092 million [191]. - Year-to-date, food and paper costs decreased by $6.7 million, or 7.4%, with food and paper costs as a percentage of company-operated restaurant revenue at 27.2%, down from 29.5% in the prior year [201]. - Labor and related expenses decreased by $2.1 million, or 2.1%, year-to-date, with labor costs as a percentage of company-operated restaurant revenue at 31.8%, down from 32.6% in the prior year [203]. Debt and Financing - As of September 27, 2023, the company had $80.0 million in outstanding borrowings under the 2022 Revolver, with $60.2 million available for borrowing after accounting for letters of credit [252]. - The company refinanced its credit agreement, entering into a new 2022 Credit Agreement for a $150 million five-year senior secured revolving credit facility [253]. - Interest expense increased significantly by $1.274 million, or 1,179.6%, from $108,000 to $1.382 million [191]. - A 1% increase in the effective interest rate would lead to a pre-tax interest expense increase of $0.8 million annually [258]. - The company recorded non-cash impairment charges of $1.0 million related to long-lived assets during the thirteen and thirty-nine weeks ended September 27, 2023 [239]. Strategic Initiatives - The company plans to continue expanding its business and enhancing competitive positioning through strategies such as increasing customer frequency and improving per-person spend [168]. - The Loco Rewards loyalty program had over 3.6 million members as of September 27, 2023, with $0.6 million in revenue allocated to unredeemed loyalty points [174]. - Management emphasized the importance of EBITDA and Adjusted EBITDA as key performance metrics, which are not required by GAAP but provide insight into operational performance [232]. - The company is exposed to commodity price fluctuations, particularly in food product prices, which can materially affect food and beverage costs [261]. - The company does not currently use financial instruments to hedge against commodity price risks [261].