LOCO - Earnings call 3 2023 | El Pollo Loco Holdings, Inc.

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Operator

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the El Pollo Loco Third Quarter 2023 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded today, November 2, 2023.And now I would like to turn the conference over to Ira Fils, the company's Chief Financial Officer. Please go ahead.

Ira Fils

Thank you, operator, and good afternoon. have our should earnings quarter everyone release. now, access third to XXXX By expectations can www.elpolloloco.com opportunities, need found Relations not, related will be If it including statements, to at rollouts, operational that discussions expectations regarding begin statements initiatives, to formal regarding regarding include capital kiosk the forward-looking expenditure remodel everyone plans of platforms, our section.Before and our in and and remarks, drive remind sales and I guidance, and growth commodity growth, our to margins, inflation, wage our to plans, our today product strategic we potential among franchisees Investor the ability changes our expansion expectations others. XXXX put undue on are are numerous and currently subject materially statements statements risks reliance to guarantees also we what forward-looking differ that expect. results performance, to not actual not could and from cause uncertainties future them.These These should of therefore, you to a operating our financial our our including future recent results filings, discussion We that impact risks detailed refer the condition. more you could SEC for and XX-K Form of

are and our for measures this Relations section additional GAAP Investor in for non-GAAP prepared that results on accordance to please is substitute forward-looking believe we GAAP in isolation contribution provided from to be that to third earliest The our company-operated in useful the we to a available are forward-looking efforts, with are today's Bill our timing margin release, to a the to to reasonable comparable your which with will basis.Now of evaluating unable financial non-GAAP adjustments Floyd, the presentation note document restaurant or like XX-Q will be to income respect and the comparable to today's providing have encourage and outlook, the I certainty we expect the We because measure on tomorrow, as at of unreasonable calculate of directly quarter reconciliation information a should considered over our of that would With review operations we call, our Chairman performance. convenience.During used without measures, we amount of not it revenue of would which file predict or not discuss in most turn GAAP restaurant reconciliations earnings XXXX you call, in Board. be can we available website.

William Floyd

Thank you, Ira.

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Maria Hollandsworth

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the progress of also is driving salsa and equipment, labor our products on use quarter.We drive which easier easier are our to out you new equipment processing efficiency will new consistency update will as to clean. We while both next rolling also

restaurants to of by this company complete with end new complete expect the equipment to of XXXX. by rollout We mid-XXXX, franchisees

by X. simplifying from and we our salsa introducing reducing our to count fresca lineup addition, are In salsa offering our salsa X

market. development end among of test as the franchisee second innovative dishwasher, in automated additional new quarter, coming and touch to substantial me to technologies second our the Subsequent also We our more continue the become in with opportunity provide opened to summarize, equipment such on and we with and Denver in To the restaurant quarters strategy. others. us let our efficient year.Finally, initiatives

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their XX represent pleased in company-operated in our change Utah.While we're current franchise this in restaurants a strategy, in to X X not X restaurants and We California partners, Texas, also restaurants refranchised Houston, restaurant including does leverage to market hands of El local will units growth the strong be able in the into further partners to opportunistically Loco franchise of transfer Pollo each these knowledge to market. our who drive

closing, every third restaurants and Loco Loco.With support of and investment significant Our franchisees' showing quarter of in to members special. company discussion franchise to for opportunity this turn our results. the detailed the me to over Pollo this what Directors for want would your me the more makes to up of community brand.In El truly acquire a Pollo excitement also our Pollo let lead El like interest thank brand, ahead thank the showcases Bill being for Board entrusting to Loco that, the the day financial I call Ira I continued and for El these unique for belief partners' team

Ira Fils

good and afternoon, Maria, you, everyone. Thank

driven XX, September X.X% decrease last For additional revenue existing million in quarter $XXX.X primarily size, to in a million total to in X.X% increase as compared restaurant The period the ended prior as decrease loyalty from $XXX.X was million revenue the during increase decrease X the year. third quarter decreased company-operated in increase $X.X XXXX. as the third decrease transactions. recognized million company-operated well restaurant revenue by third a for well to refranchising restaurants from or $XXX,XXX to was restaurant points of average the sales million comparable partially Company-operated $XXX.X company-operated of quarter by in XXXX, same quarters check included offset revenue in $XXX.X company-operated from franchisees sales to subsequent increased X.X% X.X% program. of This sales our X.X% a in by offset opened in as a comparable sales.The restaurant in XXXX in restaurants

was During X%. the XXXX increase a versus quarter, price little third effective over our

company franchise sales due consisting by comparable just and sales X.X%, Food refranchise the quarter and increase ahead, restaurant driven XX, earlier.Turning quarters to X.X% restaurant revenue points in date paper commodity million percentage increase fourth Looking of of increased X.X% comparable and October as during restaurants decreased through openings well quarter, as increase as franchise menu X mentioned new a higher I've a X.X% in system-wide to basis in a sales restaurants. in to X.X% a Franchise third and to costs X expenses. store franchise year-over-year XX.X% company-operated prior $XX.X costs. restaurants XXX the lower to prices restaurant increased

During of commodity the deflation quarter, we X%. approximately experienced

XX approximately year increases Labor of as sales the and of primarily a X% year-over-year costs we expect commodity points inflation by expect for XX.X%, XXXX. be little Wage offset full and X%, percentage and expense. for to management third continue We steady improved restaurant basis rent, other a expense. inflation of sales expenses the about to workers' percentage increased compensation company pricing utilities and as higher over and the menu higher labor due rate a wage and to related XXXX.Occupancy Higher quarter inflation was expenses held year XX.X%. to at full company X% restaurant year-over-year was during wage operating insurance

Our margin the restaurant compared third ago contribution XX.X% in year quarter the to period. was for XX.X%

we've far, decrease now of decrease For primarily contribution thus total we X.X% decreased and the experienced XX% to in year-over-year range. on points for to in margin expenses the XX% the General based restaurant be our to was administrative a basis California, completed gain quarter and partially expense, Texas, of towards The revenue. of in $X.X sale full XX due company-operated to the of XX Maria XXXX, existing Utah higher year what million. bonus proceeds the quarter, mentioned third restaurants management of net within sale franchisees million resulted by we estimated to that end earlier, costs.As legal-related a and cash offset expect $X.X the on

X GAAP $X.XX compares quarter, per or Please for diluted During a and compared per earnings quarter income for tax the to to rate share period.We quarter $X our reported the income million quarter $X.XX of of last of compared the effective for third This net income income the reconciliation share the was franchise of net provision $X.XX provision non-GAAP Vegas measures.Turning million share $X.X the million quarter, third for earlier. franchisee year an restaurant million taxes to Adjusted and of XX.X% $X.X end income $X diluted adjusted $X.X the second to or mentioned of or million that prior third unit prior period. we an XX.X%. our net development. or third diluted GAAP for in year company-operated in of in per million $X.XX per net year. a Las restaurant to diluted the refer recorded the Subsequent opened share tax release income $X we Maria rate in to a of one of taxes in in Denver effective of with

to remodels and In XX to XX for addition, restaurants franchise expect we now complete restaurants.Turning liquidity. to XX company-owned XX to

in company million November revolver. $XX.XX Partners $XX.X per at outstanding million total As our $X million stock August there million closing $XX of price which price end total Equity $XX.X million.Separately, X million, shares plan. and quarter, repurchase a the repurchase also a and After approximate of stock during with purchase we the third into of to share and FS a equal XXXX, for X.X paid repurchased million FS quarter stock we debt on XXX,XXX price repurchase August Affiliates XXXX completed the of $X.X on an to the for of XX, down market outstanding. $XX the shares of had aggregate company of we cash And X, agreement XXXX, equivalents. as entered debt the a of was September X, On of cash

to to XX.X%.This spending following of XXXX, X of XXXX prepared purchase $XX concludes X repurchase million authorization remarks. adjusted franchise X $XX capital in between million common Directors provide to and company March During share to has and you our happy restaurants; tax would shares. the XXXX.Finally, today, approved the On million, our we up through now of income date, guidance. you on restaurants us questions of like joining results G&A and of please total X call may repurchased Board and have. We'd quarters the thank to The rate of of that the million; open $XX $XX like stock company-owned first our XX, to any a to our for program are XX.X we October the to to opening to again XXXX, answer Operator, questions. million for with million new $XX on XX, a based update XX.X% line

Operator

Bartlett first with Our from Securities. [Operator question Jake Truth Instructions] comes

Jake Bartlett

strategic one Great. about Maria, the or what X, most part the obviously. to change? I'm X? I not coming if going kind is is, of question And over over this first appreciate versus going of sure be You what the your Bill, you My answer you forward needs can think think what big focus talked really year to we've seen picture. The next it. do do or last different is you year and

William Floyd

Well, certainly on and that, jump in Maria to respond can let me it.

how is a looking for of us We a to remarks been Loco, a at in and been essentially One we El And think be. Southern the becoming there with But national Board a at looking how potential take that growth, that accelerate unlock brand, and strong California. to area to said. have things are continue untapped I there's my change, a growth. it is want you really company opportunity advantage word where will as the huge is intend strategically whether the brand. regionally-based do And that to a is really, intend for has a acceleration. if other growth in Pollo we do take in primarily company quite while was guess, prepared call We reside I that just accelerate just we or our this great currently And we we our and we it's new markets, grow, a in of. think we

Maria Hollandsworth

thanks Jake, for question. the

have I'm growth with relationships. people But life in have sure to and a and we everyone to have franchisees cultivate do behind develop experience growth need makes our newer do and existing in excited relationships to We is a want from past continue really ones we What food kids, about on We appeal this. and addition we it. make my franchise model love families adults and to what great that business our those to have also strong infrastructure the our We is I story. sense.

So I'm to looking our of growth that opportunity forward driving become really a national really to brand.

Jake Bartlett

that No, it. the And all makes quarter, last you development update the sense. think XX was, I had I think commitments. Got

think X that to or you you or think What us the that for? have really the of Your expand X well point of to kind do franchisees. X that XXXX then. or Certainly, you held getting kind you and this new what you markets lot back when to think hoping you in do made the that goal been the And But you're you're were interest of you that back? kind nationally can been have need from newer think fix? and growth change been you to around a trying had that the -- growth the doing of is improve well a lot was fairly improvements. X holding What around and lot ignite has changed of are a stores start you've since at the or I've factors doing things story

William Floyd

other holding Maria you have one going our is to the frankly, a than franchise couple if resources in a in going And we there a to why. have had going will, story a the we not And have have we of again, to committed And as and And the past the as rather to marketing that be -- different area. in past, said, are grow what -- we for we said what base, intend we back, commitment business. We chicken of and And I as have new franchise also perhaps much components think do area things, effectively additional key any that we may to good franchisees, is about is of to are first that's to I of have as to are thinking we that grow concept. Well, very to we product not in be strategy, a have. as us great you, told acceleration, story the we -- of all, it's resources are than unique that exploring grow. changing.

Officer, may we've be looking a us just I is allow place fulfill we going we're happen that to to a Marketing think you and what got to Chief hired aware, team new in As today, at.

the Maria? are about those thinking changes that perspective. a So certainly I'm from Board

Maria Hollandsworth

agree earlier, totally I you, Yes. infrastructure our that we that Bill. building growth. Like will support are Jake, with said franchise I

Jake Bartlett

question, certainly pass Great. on. it Great. October, you question just near-term I'll then that And is I saw had in then a the acceleration encouraging the to near-term But see.

looks explicitly -- didn't doing but quarter, it you what pretty from July. you're materially the like the initial third the cadence that state from of decelerated in You

So hurricane monthly what the trajectory the factors you months? in What had business driven over third in I improvement of quarter weather? were have a be the the amazingly. the to are comps last the attribute you may impacted And -- by that October? was do few know the

Ira Fils

did wasn't We you're a it us. it did It want XX think And hard to see That was through drove -- on I move But too Yes, the the impact I about as don't the was for don't really quarter. the hurricane. what results. deceleration want quarter. only basis absolutely we I lean right. points to say

We finished. the end -- we into finishing on We that the out as as chopped stuffed or with were started I through we the into that's think of our we in salads quesadillas, were which worked got were way we out we were moved quesadillas we September, stuffed as finishing -- out what. -- on. we promotion October, got we the

versus had the of September a new year, we end a promotion promotion. at started were in last we So

as saw of into it October in a of the of saw a what mismatch promotion a QX. from comps new, really saw promotion then moved seen off.And little the We we as was came So had fall opposite. and on helped timing quesadilla we bit we the October, September end stuffed we little towards that accelerate bit

really And excited to off as of that, so falling move about balance obviously. X.X% though, in kind we're we forth, have year, just everybody, of will remind the And November. so want the into about price I we

moderate So balance we very little rolling year. over up this we're X%, see the -- will the of half that a last obviously, bit a as quarter, quarter. end in we the back move through year we rolled of of strong the And

Jake Bartlett

in. pass appreciate back I Great. I'll jump and on it it. maybe

Operator

question Instructions] [Operator Zackfia Our Blair. William next Sharon with from comes

Zachary Riddle

is faster back have details versus bit question the I of you first kiosks. is holding quickly of be what cash the Riddle as kind what's with for little machines labor guess, you without I as know Zackfia. savings And looks as what possible you the would kiosks to possible, guess also, a could then guys that able you're seeing that a said restaurant the the rolling Zach provide on are one? kind Sharon like, like? more out it on, quickly I I looks as rollout. sounds quantify of on I This like guess, and kind that

Ira Fils

we getting the guests, slight increase acceptance good we've obviously, equipment the the happy, machine. seen we're all, first kiosk the very a with been of so check to able getting -- And in -- far. our restaurants, -- and think well. a right. some We're I to for a lot lot exactly you we're cash as reduce so said of have So progress guests. from start the The labor in It's going with -- it it very

all to in very cases, beneficial the us. kiosk So been has

equipment we'll when we'll the get finish we soon -- sometime into the January, and how in -- start rollout, equipment, pace upon midyear-ish how accelerated should the we we restaurants. of we've of this actually as kind it can the the rollout been ordering depending and So get start

Zachary Riddle

Great. one And I I if add just guess could follow-up.

is program, specifically in On with there event seeing of the catering gathering or catering good you're type of the traction traction any you're kind seeing program? that that anywhere

Maria Hollandsworth

So like Auto more the see them it's board. Home Parks. like in Depots across or whether box, or businesses really We

a we do we people. had franchise out be that the challenge to those other the power were franchisee organizations. XX,XXX power get of one great traction However, clients, end, clients we can our And back to have of a to she an That's what keep about. where with the continue catering, know it's example deliver, they And it X And to is. of for that. what those That's relationships very building because all fulfilled our restaurants. is XX reach from come these realized that's would that's and orders goal, in seeing kind And And build we're ordering order out by relationships. us. We're the encouraged.

Zachary Riddle

queue. Great. jump the I'll in back

Operator

have today's to Ladies call remarks. would for closing of turn and the over back the I management question-and-answer to reached end like session. gentlemen, we now

Maria Hollandsworth

making great El continued of joining support for for us entire strategy. the focus thank our everyone, to you, Loco their on Have rest day. a also you Thank time. appreciate today. want Pollo family We and the I

Operator

your for Thanks participation.

at lines this time. your disconnect may You

El Pollo Loco (LOCO) 2 Nov 232023 Q3 Earnings call transcript