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01/11 11:29
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call indicates positive momentum with a 2% increase in company-operated revenue and a 14.8% rise in franchise revenue. The restaurant contribution margin improved, and the digital business contribution increased significantly. Despite some challenges in the macro environment, the company is confident in achieving accelerated unit growth by 2026, supported by new menu items and brand relaunch efforts. The Q&A highlighted management's optimism about maintaining traffic growth and margin improvement, although there were some unclear responses. Overall, the sentiment is positive, suggesting a stock price increase of 2% to 8%.
Total Revenue $125.8 million, a 2.9% increase year-over-year from $122.2 million in Q2 2024, driven by a 1.2% increase in company-operated comparable restaurant sales and additional sales from two new restaurant openings.
Company-operated Restaurant Revenue $104.3 million, a 2% increase year-over-year from $102.3 million in Q2 2024, attributed to a 1.2% increase in comparable restaurant sales and new restaurant openings.
Franchise Revenue $13.4 million, a 14.8% increase year-over-year, driven by $1.6 million in IT pass-through revenue and five new franchise-operated restaurant openings, partially offset by a 1.1% decrease in comparable restaurant sales.
Restaurant Contribution Margin 19.1%, an improvement from 18.6% in Q2 2024, due to higher menu pricing, commodity deflation, and operational efficiencies.
Food and Paper Costs 24.4% of company restaurant sales, a 70 basis point decrease year-over-year, driven by higher menu pricing and commodity deflation.
Labor and Related Expenses 30.8% of company restaurant sales, a 130 basis point decrease year-over-year, due to operational efficiencies and menu price increases.
Net Income (GAAP) $7.1 million or $0.24 per diluted share, compared to $7.6 million or $0.25 per diluted share in Q2 2024, reflecting higher expenses in stock compensation, legal fees, and restructuring costs.
Adjusted Net Income $8.2 million or $0.28 per diluted share, compared to $7.8 million or $0.26 per diluted share in Q2 2024, reflecting operational improvements.
Digital Business Contribution 25.5% of sales, up from 17.1% in Q2 2024, driven by app, web, and kiosk upgrades.
Debt Outstanding $69 million as of June 25, 2025, reduced to $68 million by July 31, 2025, reflecting debt repayment efforts.
New Fresca Wrap and Salads: Introduced during Q2, featuring fire-grilled chicken, leafy greens, avocados, queso fresco, and citrus vinaigrette. Designed for quality and portability.
Premium Chicken Quesadillas: Launched in two flavors: Creamy Chipotle and Salsa Verde. Priced at $9.99 combo, targeting younger consumers and busy families.
Future Product Pipeline: Upcoming launches include street corn and queso Crunch Burrito Bowls, Mexican Caesar and Street Corn Salads, cold beverages, seasoned chicken tenders, and innovative chicken sandwiches.
Geographic Expansion: Opened a new franchise in Arizona and plans to open the 500th restaurant in Colorado Springs. Targeting 10 new restaurants in 2025, with most outside California.
Remodeling Strategy: 20 restaurants remodeled in 2025 so far, aiming for 55-65 by year-end. Remodels show mid-single-digit sales uplift.
Digital Growth: Digital sales grew to 25.5% of total sales, up from 17.1% last year. Enhanced app experience and loyalty program contributed to a 5.6% increase in member frequency.
Operational Efficiencies: Achieved 19.1% restaurant contribution margin through labor productivity and cost-saving measures. Full-year margin guidance remains at 17.25%-17.75%.
Brand Relaunch: Launched 'Let's get Loco' campaign emphasizing fire-grilled chicken and fresh ingredients. Collaborated with athletes for marketing.
Customer Service Improvements: Implemented Service Management Group data to track and improve service quality. Focused on consistency and quality across all locations.
Macroeconomic Environment: The company acknowledges that the macroeconomic environment is not ideal, with headwinds from consumer dynamics that are out of their control. This could impact sales and overall performance.
Consumer Behavior: Value-conscious consumer behaviors are driving the need for targeted discounting and promotions, which could pressure margins if not managed effectively.
Franchise Sales Performance: Franchise comparable restaurant sales decreased by 1.1%, and system-wide comparable store sales decreased by 0.7% in July, indicating challenges in maintaining consistent sales growth.
Operational Consistency: The company identified opportunities to improve consistency and quality of service across specific dayparts, which could impact customer satisfaction and repeat business.
Remodeling Delays: Local permitting processes have caused delays in remodeling projects, potentially impacting the timeline for achieving modernization goals and associated sales uplifts.
Commodity and Wage Inflation: While commodity inflation is expected to be minimal, wage inflation of 3% to 4% for the year could pressure margins.
Third-Party Delivery Costs: Higher third-party delivery-related expenses are increasing operating costs, which could impact profitability.
Legal and Professional Fees: Special legal and professional fees related to shareholder activism and related matters increased G&A expenses, which could divert resources from other strategic initiatives.
Revenue Expectations: The company expects a modest improvement in comparable sales trends through the remainder of the third and into the fourth quarter of 2025, driven by brand relaunch momentum, menu innovations, and easier prior year quarterly comparisons.
Margin Projections: For the full year 2025, restaurant contribution margins are expected to be in the range of 17.25% to 17.75%. Wage inflation is projected to be between 3% and 4%, while commodity inflation is expected to range from 0.5% to 1.5%.
Capital Expenditures: Capital spending for 2025 is projected to be between $31 million and $34 million.
Unit Growth: The company plans to open 10 to 11 system-wide restaurants in 2025, including 9 to 10 franchise restaurants and up to 1 company-owned restaurant. Additionally, the company aims to double the pace of new openings in 2026.
Remodeling Plans: The company expects to remodel between 55 to 65 system-wide restaurants in 2025, with approximately half of the total system to be updated over the next four years.
Digital Growth: The company plans to continue improving its digital platforms with a robust roadmap for the back half of 2025 and through 2026, aiming to enhance customer experience and optimize business performance.
Menu Innovation: The company plans to introduce new products such as street corn and queso Crunch Burrito Bowls, Mexican Caesar and Street Corn Salads, cold fun cooler beverages, seasoned chicken tenders with dipping sauces, and innovative chicken sandwiches in the remainder of 2025.
Share Repurchase: During the second quarter, we repurchased 3,479 shares for approximately $0.1 million.
The earnings call reveals strong financial performance with year-over-year improvements in revenue, net income, and margins. The company is outperforming peers in the California market and has a positive outlook on cost efficiencies and menu innovations. Although Q4 margins are expected to be lower than Q3, they will still improve year-over-year. The Q&A section supports the company's strategic initiatives and market gains. Overall, the sentiment is positive, with potential for stock price appreciation in the short term.
The earnings call indicates positive momentum with a 2% increase in company-operated revenue and a 14.8% rise in franchise revenue. The restaurant contribution margin improved, and the digital business contribution increased significantly. Despite some challenges in the macro environment, the company is confident in achieving accelerated unit growth by 2026, supported by new menu items and brand relaunch efforts. The Q&A highlighted management's optimism about maintaining traffic growth and margin improvement, although there were some unclear responses. Overall, the sentiment is positive, suggesting a stock price increase of 2% to 8%.
The earnings call presents mixed signals. Financial performance shows modest revenue growth but declining margins and net income. Product development is promising with new launches, but consumer pullback poses a risk. Market strategy highlights brand transformation but lacks immediate impact. Expenses are rising due to labor inflation, affecting margins. Share repurchase is positive but not substantial enough to sway sentiment. Q&A reveals cautious optimism but ongoing headwinds. Overall, the stock is likely to remain neutral in the short term, with no significant catalysts to drive a strong price movement.
The earnings call presents a balanced picture with positive elements outweighing negatives. Revenue growth and improved margins suggest strong financial performance. The optimistic guidance, especially with margin expansion plans, is a positive indicator. The share repurchase program adds to shareholder value, while the new restaurant prototype and remodel plans suggest strategic growth. Despite supply chain challenges and tariff impacts, the company's efforts in cost management and innovation are promising. The Q&A reveals cautious optimism, with management focusing on efficiency and expansion. Overall, the sentiment is positive, likely resulting in a 2% to 8% stock price increase.
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