Executive Summary

Q3 delivered margin expansion and EPS upside on modest revenue growth: total revenue $121.5M (+0.9% YoY) and Adjusted EPS $0.27 vs Wall Street $0.214; GAAP diluted EPS $0.25 . Revenue missed consensus ($123.4M*) while EPS meaningfully beat, driven by labor efficiencies and lower commodity costs * .
Traffic turned positive system-wide despite comps down 0.8%; company-operated comps -1.1% from lower average check (-1.3%) offset by slightly higher transactions (+0.1%), aided by targeted value (e.g., $9.99 quesadilla combo) and digital promotions .
Guidance tightened/lowered: FY25 capex cut to $28–$30M (from $31–$34M in Q2) and G&A to $47.5–$49.5M; Q4 restaurant-level margin guided to 16.75–17.25% and FY25 to 17.5–17.75% .
Unit-growth momentum continues: 500th U.S. restaurant opened (Colorado Springs); pipeline positioned to almost double 2026 openings; ~75% of 2025 openings outside CA; remodeled units show mid‑single‑digit sales lift .

What Went Well and What Went Wrong

What Went Well

Positive traffic with improved margins: restaurant contribution margin rose to 18.3% (+160 bps YoY) on operating efficiencies and pricing; labor % down ~200 bps YoY; food/paper % down ~40 bps YoY on ~100 bps commodity deflation .
Digital and loyalty momentum: digital (incl. kiosks) reached 27% of system sales vs 20% last year; loyalty transactions +28% and frequency +15% YoY .
Strategic menu innovation supported value and check protection: permanent premium quesadillas at entry price points ($7.49 à la carte; $9.99 combo), followed by higher‑priced double chicken burrito bowls to protect check .
CEO quote: “Our ongoing focus on operational excellence allowed us to deliver margin expansion at both the restaurant and corporate level.”

What Went Wrong

Comparable sales softness: system-wide comps −0.8%; company-operated comps −1.1% on lower average check (−1.3%) despite a slight transactions uptick (+0.1%) .
Sequential margin pressure expected into Q4 due to lower seasonal sales volumes; Q4 restaurant-level margin guided below Q3 (16.75–17.25% vs 18.3% in Q3) .
Higher occupancy/other operating costs: +70 bps YoY tied to third‑party delivery costs, kiosk/POS software maintenance, and higher rent/CAM .

Financial Results

Income Statement and EPS vs Prior Periods and Estimates

Metric	Q3 2024	Q2 2025	Q3 2025
Total Revenue ($USD Millions)	$120.4	$125.8	$121.5
GAAP Diluted EPS ($)	$0.21	$0.24	$0.25
Adjusted Diluted EPS ($)	$0.21	$0.28	$0.27
Income from Operations ($USD Millions)	$10.1	$11.3	$11.5
Net Income ($USD Millions)	$6.2	$7.1	$7.4
Net Income Margin (%)	5.1%	5.6%	6.0%
Restaurant Contribution Margin (%)	16.7%	19.1%	18.3%

Segment Revenue Breakdown

Revenue Detail ($USD Millions)	Q3 2024	Q2 2025	Q3 2025
Company-Operated Restaurant Revenue	$101.2	$104.3	$100.7
Franchise Revenue	$11.3	$13.4	$12.9
Franchise Advertising Fee Revenue	$7.9	$8.1	$7.9
Total Revenue	$120.4	$125.8	$121.5

KPIs and Operating Metrics

KPI	Q3 2024	Q2 2025	Q3 2025
System-wide Comparable Sales Growth (%)	—	−0.3%	−0.8%
Company-Operated Comparable Sales Growth (%)	—	+1.2% (quarter narrative)	−1.1%
Company-Operated: Avg Check Change (%)	—	+1.5%	−1.3%
Company-Operated: Transactions Change (%)	—	−0.3%	+0.1%
Franchise Comparable Sales Growth (%)	—	−1.1%	−0.6%
Digital Mix of System Sales (%)	20% (YoY ref)	—	27%
Restaurants at End of Period (Company / Franchise)	173 / 325	174 / 325	174 / 324
System-Wide Restaurants End of Period	498	499	498

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
System-wide openings	FY 2025	10–11 (Q2)	At least 10 (Q3)	Maintained/Narrowed down
Capital Expenditure ($M)	FY 2025	$31–$34 (Q2)	$28–$30 (Q3)	Lowered
G&A Expense ($M, ex one-time)	FY 2025	$48–$51 (Q2)	$47.5–$49.5 (Q3)	Lowered
Effective Tax Rate (%)	FY 2025	29.0–29.5 (Q2)	29.0–29.25 (Q3)	Tightened down
Restaurant-Level Margin (%)	Q4 2025	—	16.75–17.25 (Q3 call)	New
Restaurant-Level Margin (%)	FY 2025	—	17.5–17.75 (Q3 call)	New

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 & Q2)	Current Period (Q3)	Trend
Menu innovation & value	Q1: Mango Habanero launch; need to improve ops . Q2: Fresca Wraps/Salads; premium quesadillas; building long-term foundation .	Permanent premium quesadillas at entry price; double chicken burrito bowls for check protection .	Expanding portable/value offerings; balanced check protection.
Digital & loyalty	Not quantified in Q1; brand relaunch initiatives . Q2: kiosk rollout (narrative), innovation momentum .	Digital + loyalty accelerating: 27% of system sales; loyalty transactions +28%, frequency +15% YoY .	Strengthening engagement, higher mix.
Margins & cost	Q1 margins pressured by CA $20 minimum wage . Q2 margin improvement to 19.1% .	Restaurant margin 18.3%; labor % down ~200 bps; food/paper down ~40 bps; Q4 margin to seasonally dip .	Continuous efficiency gains; seasonal pressure in Q4.
Unit growth	Q1/Q2: pipeline building; 2025 openings planned .	500th restaurant; ~75% openings outside CA; plan to almost double 2026 pace .	Accelerating expansion, diversified geography.
Brand campaign	Q1: brand opportunity noted . Q2: brand relaunch “Let’s Get Loco” .	“Let’s Get Loco” amplified via AI Chicken Challenge; social buzz; remodeling image .	Growing brand relevance.
Operations & kiosks	Q1 ops improvement focus . Q2 ongoing improvements .	Company kiosk rollout complete; ~50% system with kiosks; improved service consistency .	Execution improving; tech adoption.
Macro/regulatory	Q1 wage increase impact .	Immigration policy headwind persists at lunch; cautious consumer; October easier lap .	Monitored; targeted offers to offset.

Management Commentary

CEO: “Our ongoing focus on operational excellence allowed us to deliver margin expansion at both the restaurant and corporate level.”
CEO on strategy: focus on five pillars—brand/innovation, hospitality operations, digital-first, winning unit economics, and new unit growth .
CFO: Q4-to-date comps positive (+2.2% system; +1.5% company; +2.5% franchise through Oct 22) with transactions strength, while acknowledging easier laps and challenged consumer backdrop .
CFO on costs: commodity inflation expected flat for FY25; wage inflation 3–3.5% FY25; labor efficiencies and scheduling enhancements supporting margins .

Q&A Highlights

Relative performance: In California, LOCO is outperforming peers on sales and transactions, suggesting share gains driven by value, innovation, and improved service .
Efficiency runway: Further labor and COGS efficiencies expected into 2026 toward 18–20% restaurant margin targets .
Menu pipeline: Testing Loco Tenders and a fire‑fried chicken sandwich; broader market tests underway; potential 2026 launch cadence (Q2–Q4) .
Supply chain: Chicken contracts for next year in good shape; marinade and prep process innovations aimed at consistency, quality, and labor savings (some benefits as early as Q1) .
Margin seasonality: Sequential Q3→Q4 margin dip driven primarily by lower Q4 sales volumes; YoY Q4 margin improvement expected .
Marketing & pricing: Value (quesadilla) drove transactions but pressured check; bowls, beverages, desserts support check protection; flan introduced .
Macro headwind: Immigration-related traffic impact persists, more at lunch; difficult to quantify .

Estimates Context

Q3 2025: Revenue $121.5M vs consensus $123.4M* → bold miss; Primary EPS $0.27 vs consensus $0.214* → bold beat *.
Q2 2025: Revenue $125.8M vs $124.2M* → beat; Primary EPS $0.28 vs $0.24* → beat *.
Q1 2025: Revenue $119.2M vs $118.2M* → beat; Primary EPS $0.19 vs $0.188* → in-line/beat *.

Period	Revenue Actual ($M)	Revenue Consensus ($M)*	EPS Actual ($)	EPS Consensus ($)*
Q1 2025	$119.2	$118.204*	$0.19	$0.188*
Q2 2025	$125.8	$124.238*	$0.28	$0.24*
Q3 2025	$121.5	$123.406*	$0.27	$0.214*

Values retrieved from S&P Global.*

Implications: EPS upgrades likely given sustained margin execution and Q4-to-date positive comps, while revenue expectations may temper due to ongoing value mix and cautious consumer. Margin guidance supports stable FY25 profitability trajectory .

Key Takeaways for Investors

EPS beat with revenue miss reflects strategy to drive traffic via value while maintaining margins through labor and supply-chain efficiencies; expect further estimate revisions skewed to EPS rather than sales *.
Digital and loyalty growth (27% mix; +28% loyalty transactions) provide structurally improving engagement and pricing tactility; kiosks at ~50% of system .
FY25 margin guide (17.5–17.75%) and lowered capex/G&A de‑risk near-term cash flow; debt reduced to $55M post-quarter; cash $10.9M at Q3 end .
Unit growth accelerators: 500th opening; second‑gen sites reduce build cost; strong new unit volumes (~$2M annualized) point to attractive returns .
Watch Q4 comps trajectory and check dynamics; bowls/beverages/desserts are intended check protectors amid continued value promotions .
Monitor occupancy and delivery-related costs and software maintenance fees; these pressured other op expenses and could cap margin upside near-term .
2026 pipeline (tenders, fire‑fried sandwich, beverages) and marinade/equipment initiatives may extend efficiency and broaden addressable demand .

El Pollo Loco Holdings, Inc. (LOCO)·Q3 2025 Earnings Summary