El Pollo LoCo Holdings Inc (NASDAQ:LOCO) announced financial results for the 13-week period and 52-week period ended December 30, 2015.

Highlights for the 13-week fourth quarter ended December 30, 2015, compared to the 14-week fourth quarter ended December 31, 2014 were as follows:

  • Total revenue was $86.3 million compared to $90.0 million. Fourth quarter 2014 results included approximately $4.6 million in revenue attributed to the extra operating week.
  • System-wide comparable restaurant sales grew 1.8%, including a 1.0% increase for company-operated restaurants, and a 2.4% increase for franchised restaurants.
  • Net income was $5.4 million, or $0.14 per diluted share, compared to $4.6 million, or $0.12 per diluted share in the prior year.
  • Pro forma net income(1) increased 8.7% to $6.0 million, or $0.15 per diluted share, compared to $5.5 million, or $0.14 per diluted share.  Pro forma net income in the fourth quarter of 2014 included an estimated $0.01 per diluted share benefit from the extra week.
  • Adjusted EBITDA(1) was $15.2 million compared to $16.3 million in the prior year.  Adjusted EBITDA in the fourth quarter of 2014 included an estimated $1.0 million benefit from the extra week.

(1) Pro forma net income and adjusted EBITDA are non-GAAP measures. A reconciliation of GAAP net income to each of these measures is included in the accompanying financial data. See also “Non-GAAP Financial Measures.”

Highlights for the 52-week fiscal year ended December 30, 2015, compared to the 53-week fiscal year ended December 31, 2014 were as follows:

  • Total revenue was $355.1 million compared to $344.9 million. Fiscal year 2014 results included approximately $4.6 million in revenue attributed to the extra operating week.
  • System-wide comparable restaurant sales grew 2.2%, including a 1.0% increase for company-operated restaurants, and a 3.1% increase for franchised restaurants.
  • Net income was $24.1 million, or $0.62 per diluted share, compared to $42.5 million, or $1.24 per diluted share in the prior year.
  • Pro forma net income(1) increased 28.0% to $27.5 million, or $0.71 per diluted share, compared to $21.5 million, or $0.55 per diluted share. Fiscal year 2014 results included an estimated $0.01 per share positive impact due to the extra week in the fourth quarter.
  • Adjusted EBITDA(1) increased 4.1% to $65.5 million. Fiscal year 2014 adjusted EBITDA included an estimated $1.0 million benefit from the extra week in the year.

Steve Sather, President and Chief Executive Officer of El Pollo Loco Holdings, Inc., stated, “We are confident we are taking the necessary steps to reengage our value customer, while continuing to improve the guest experience in our restaurants, thus enhancing our ‘QSR+’ positioning.  While the full impact of our 2015 sales driving and operations enhancing initiatives will take time, we believe they are beginning to gain traction.”

Sather continued, “Development in the fourth quarter was robust, as we opened 11 company-operated and 3 franchised restaurants.  We expect to open 18-22 company-operated restaurants and 10-15 franchised restaurants in 2016.  The runway for growth is long, and we remain excited about the long term opportunity to bring our flame-grilled, citrus marinated chicken to customers across the country.”

Fourth Quarter 2015 Financial Results

Company-operated restaurant revenue in the fourth quarter of 2015 was $80.7 million, compared to $84.1 million in the same period last year. The Company’s fourth quarter of 2015 included 13 weeks compared to 14 weeks in the fourth quarter of 2014. Company-operated restaurant revenue in the fourth quarter of 2014 included approximately $4.6 million attributed to the extra week.

Comparable company-operated restaurant sales in the fourth quarter increased 1.0%, driven by a 2.7% increase in average check and a 1.6% decrease in traffic.

Franchise revenue in the fourth quarter of 2015 was $5.6 million, compared to $5.9 million in the fourth quarter of 2014.  Franchised comparable restaurant sales increased 2.4% during the quarter.

Restaurant contribution was $17.4 million, compared to $18.8 million in the fourth quarter of 2014. As a percent of company-operated restaurant revenue, restaurant contribution margin decreased 80 basis points to 21.5%. The decrease in restaurant contribution margin was primarily the result of higher labor costs in addition to 40 basis points from operating leverage loss from the extra operating week in the fourth quarter of 2014.

Net income for the fourth quarter of 2015 was $5.4 million, or $0.14 per diluted share, compared to net income of $4.6 million, or $0.12 per diluted share in the fourth quarter of 2014. Pro forma net income increased 8.7% to $6.0 million, or $0.15 per diluted share during the fourth quarter of 2015, compared to $5.5 million, or $0.14 per diluted share during the fourth quarter of 2014.  Fiscal year 2014 results included an estimated $0.01 per share positive impact due to the extra week in the fourth quarter.  A reconciliation between GAAP net income and pro forma net income is included in the accompanying financial data.

2016 Outlook

The Company expects 2016 pro forma diluted net income per share ranging from $0.70 to $0.74.  This compares to pro forma diluted net income per share of $0.71 in 2015. Pro forma net income guidance for fiscal year 2016 is based, in part, on the following updated annual assumptions:

  • System-wide comparable restaurant sales growth in the low single digits;
  • The opening of 18-22 new company-owned restaurants and 10-15 new franchised restaurants;
  • Restaurant contribution margin of 21.2% to 21.6%;
  • G&A expenses of between 8.4% and 8.6% of total revenue;
  • Pro forma income tax rate of 40.0%; and
  • Adjusted EBITDA of between $69.0 and $71.5 million.

The following definitions apply to these terms as used in this release:

Comparable restaurant sales reflect the change in year-over-year sales for the comparable company, franchised and total system restaurant base.  The comparable restaurant base is defined to include those restaurants open for 15 months or longer.  At December 30, 2015, there were 160 restaurants in our comparable company-operated restaurant base and 397 restaurants in our comparable system restaurant base.

Restaurant contribution and restaurant contribution margin are neither required by, nor presented in accordance with, GAAP.  Restaurant contribution is defined as company-operated restaurant revenue less company restaurant expenses, which are food and paper costs, labor and related expenses and occupancy and other operating expenses. Restaurant contribution margin is defined as restaurant contribution as a percentage of net company-operated restaurant revenue. See also “Non-GAAP Financial Measures.”

EBITDA and adjusted EBITDA are neither required by, nor presented in accordance with, GAAP. EBITDA represents net income before interest expense, provision for income taxes, depreciation, and amortization, and adjusted EBITDA represents EBITDA before items that we do not consider representative of our ongoing operating performance, as identified in the GAAP reconciliation in the accompanying financial data. See also “Non-GAAP Financial Measures.”

Pro forma net income is neither required by, nor presented in accordance with, GAAP. Pro forma net income reflects (i) the net decrease in interest expense resulting from the repayment of our second lien term loan facility with the proceeds from our IPO, (ii) the elimination of fees payable under the management agreement between us and affiliates of our sponsors, less sponsor expenses that were replaced with board of director costs after our IPO, (iii) providing for an estimate of recurring incremental legal, accounting, insurance and other compliance costs we incur as a public company for those periods where they had not yet been incurred, (iv) costs related to loss on disposal of assets and asset impairment and closed store costs, (v) amortization expense and other estimate adjustments incurred on the Tax Receivable Agreement (“TRA”) completed at the time of the IPO, (vi) professional fees incurred as a result of the block trade of 5.96 million common shares in the second quarter of 2015, (vii) legal costs associated with a securities class action lawsuit, and (viii) provision for income taxes at a normalized tax rate of 41.0%, which reflects our estimated long-term effective tax rate, including both federal and state income taxes. See the GAAP reconciliation in the accompanying financial data and “Non-GAAP Financial Measures.”

Pro forma weighted-average share and per share data reflect the 8,214,286 additional shares of common stock issued in the IPO as if they had been issued on December 26, 2013. See also “Non-GAAP Financial Measures.”(Original Source)

Shares of El Pollo LoCo are falling nearly 6% in after-hours trading. LOCO has a 1-year high of $29.20 and a 1-year low of $9.58. The stock’s 50-day moving average is $12.34 and its 200-day moving average is $12.10.

On the ratings front, El Pollo LoCo has been the subject of a number of recent research reports. In a report issued on November 13, Robert W. Baird analyst David Tarantino downgraded LOCO to Hold, with a price target of $12, which implies a downside of 19.8% from current levels. Separately, on the same day, Jefferies Co.’s Andy Barish maintained a Buy rating on the stock and has a price target of $19.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, David Tarantino and Andy Barish have a total average return of 8.9% and 8.9% respectively. Tarantino has a success rate of 61.5% and is ranked #531 out of 3694 analysts, while Barish has a success rate of 58.1% and is ranked #358.

El Pollo Loco Holdings Inc operates limited service restaurant. The Company through its indirect subsidiary, El Pollo Loco, Inc. , which develops, franchises, licenses and operates quick-service restaurants under the name El Pollo Loco.