Portillo’s Inc. (“Portillo’s” or the “Company”) (NASDAQ: PTLO), the
fast-casual restaurant concept known for its menu of Chicago-style
favorites, today reported financial results for the second quarter
ended June 30, 2024.
Michael Osanloo, President and Chief Executive Officer of
Portillo’s, said, “We delivered sequential improvement in both
revenue and margin this quarter as we continued to prioritize sales
and transaction growth. We are confident that our strategic plan is
focused on the right factors, allowing us to navigate near-term
challenges and seize opportunities for continuous improvement.
We're now on track to open at least 10 restaurants in 2024,
including three full-service locations with an optimized footprint.
We continue to successfully lower our build costs as we bring these
restaurants online, which will support industry-leading returns on
investment.”
Financial Highlights for the Second Quarter
2024 vs. Second Quarter 2023:
- Total revenue increased 7.5% or $12.7 million to $181.9
million;
- Same-restaurant sales* decreased 0.6%;
- Operating income increased $0.7 million to $18.1 million;
- Net income decreased $1.4 million to $8.5 million;
- Restaurant-Level Adjusted EBITDA** increased $1.8 million to
$44.6 million; and
- Adjusted EBITDA** increased $0.6 million to $29.9 million.
*For the quarter ended June 30, 2024,
same-restaurant sales compares the 13 weeks from April 1, 2024
through June 30, 2024 to the 13 weeks from April 3, 2023 through
July 2, 2023. **Adjusted EBITDA and Restaurant-Level Adjusted
EBITDA are non-GAAP measures. Please see definitions and the
reconciliations of these non-GAAP measures accompanying this
release.
Recent Developments and Trends
In the quarter, total revenue grew 7.5% or $12.7 million,
primarily due to new restaurant openings in 2023 and 2024.
Same-restaurant sales declined 0.6% during the quarter ended June
30, 2024, compared to 5.9% same-restaurant sales growth during the
same quarter in 2023. Same-restaurant sales defined below.
In June, we re-tiered some of our restaurants in higher-cost
areas, contributing to an effective price increase of approximately
1%. We will keep a close eye on cost pressures, market competition,
and consumer sentiment to guide our pricing decisions in the coming
quarters.
In the quarter ended June 30, 2024, commodity inflation was
6.9%, compared to 5.5% for the quarter ended June 25, 2023.
Labor, as a percentage of revenue, net was flat during the quarter
ended June 30, 2024 compared to the quarter ended June 25,
2023 primarily due to an increase in our average check and lower
variable-based compensation, offset by lower transactions and
incremental wage rate increases to support our team members.
In the quarter ended June 30, 2024, total revenue, operating
income, Restaurant-Level Adjusted EBITDA, and Adjusted EBITDA all
improved, while net income decreased, versus the prior year. We
believe this improvement stemmed from concentrating on the four
strategic pillars we unveiled in our Q1 2024 earnings call.
Review of Second Quarter 2024 Financial
Results
Revenues for the quarter ended June 30, 2024 were $181.9 million
compared to $169.2 million for the quarter ended June 25, 2023, an
increase of $12.7 million or 7.5%. The increase in revenues was
primarily attributed to the opening of nine restaurants in 2023 and
two restaurants during the two quarters ended June 30, 2024,
partially offset by a decrease in our same-restaurant sales.
Restaurants not in our comparable restaurant base contributed $12.6
million of the total year-over-year increase. This increase in
revenues was offset by a same-restaurant sales decrease of 0.6%, or
$1.0 million in the quarter. The same-restaurant sales decline was
attributable to a 2.3% decrease in transactions, partially offset
by an increase in average check of 1.7%. The higher average check
was driven by an approximate 4.3% increase in certain menu prices
partially offset by product mix. To address inflationary cost
pressures, we increased select menu prices by approximately 1.5% in
January 2024 and again at the end of March 2024. In June 2024, we
implemented a 1% price increase primarily by re-tiering some of our
restaurants in higher-cost areas. Revenue also benefited $1.2
million in the second quarter due to the shifting of comparable
weeks. For the purpose of calculating same-restaurant sales for the
quarter ended June 30, 2024, sales for 70 restaurants that were
open for at least 24 full fiscal periods were included in the
Comparable Restaurant Base (as defined below).
Total restaurant operating expenses for the second quarter ended
June 30, 2024 were $137.3 million compared to $126.5 million for
the second quarter ended June 25, 2023, an increase of $10.8
million or 8.6%. The increase in restaurant operating expenses was
primarily driven by the opening of nine restaurants in 2023 and two
restaurants during the two quarters ended June 30, 2024.
Additionally, food, beverage and packaging costs were negatively
impacted by a 6.9% increase in commodity prices. Labor expense
increases were also driven by incremental investments to support
our team members, partially offset by lower variable-based
compensation. Lastly, the increase in operating expenses due to the
aforementioned restaurant openings was partially offset by a
decrease in utilities, travel and other miscellaneous expenses.
General and administrative expenses for the second quarter ended
June 30, 2024 were $17.9 million compared to $19.6 million for the
second quarter ended June 25, 2023, a decrease of $1.7 million or
8.5%. This decrease was primarily driven by lower equity and
variable-based compensation, partially offset by an increase in
professional fees related to our ERP implementation, and
advertising expenses.
Operating income for the second quarter ended June 30, 2024 was
$18.1 million compared to $17.4 million for the second quarter
ended June 25, 2023, an increase of $0.7 million due to an increase
in revenues and decrease in general and administrative expenses,
partially offset by increases in total restaurant operating
expenses, pre-opening expenses, and depreciation and
amortization.
Net income for the second quarter ended June 30, 2024 was $8.5
million compared to a net income of $9.9 million for the second
quarter ended June 25, 2023, a decrease of $1.4 million. The
decrease in net income was primarily due to an increase in income
tax expense of $2.0 million, partially offset by an increase in
operating income of $0.7 million due to the aforementioned
factors.
Restaurant-Level Adjusted EBITDA* for the second quarter ended
June 30, 2024 was $44.6 million compared to $42.7 million for the
quarter ended June 25, 2023, an increase of $1.8 million or
4.3%.
Adjusted EBITDA* for the second quarter ended June 30, 2024 was
$29.9 million compared to $29.2 million for the quarter ended June
25, 2023, an increase of $0.6 million or 2.2%.
*A reconciliation of Restaurant-Level Adjusted EBITDA and
Adjusted EBITDA and the nearest GAAP financial measure is included
under “Non-GAAP Measures” in the accompanying financial data
below.
Development Highlights
During the two quarters ended June 30, 2024, we opened two
restaurants in the Texas and Arizona markets. Subsequent to June
30, 2024, we opened two new restaurants in Livonia, Michigan and in
Mansfield, Texas, bringing our total restaurant count to 88,
including a restaurant owned by C&O of which Portillo’s owns
50% of the equity. In the second half of 2024 we aim to open at
least six more restaurants for a total of at least 10 new
restaurants opened in the fiscal year 2024, including further
expansion into the Houston and Dallas-Fort Worth markets in
Texas.
Below are the restaurants opened since the beginning of fiscal
2024:
Location |
Opening Date |
Fiscal Quarter Opened |
Denton, Texas |
March 2024 |
Q1 2024 |
Surprise, Arizona |
May 2024 |
Q2 2024 |
Livonia, Michigan |
July 2024 |
Q3 2024 |
Mansfield, Texas |
August 2024 |
Q3 2024 |
Fiscal 2024 Financial Targets
Based on current expectations, we are providing updated
financial targets for 2024 as follows:
|
Prior Target |
|
Current Target |
Unit growth |
9+ new units |
→ |
10+ new units |
Same-restaurant sales* |
low-single digits |
→ |
Flat to slightly positive |
Commodity inflation* |
mid-single digits |
→ |
mid-single digits |
Labor inflation* |
mid-single digits |
→ |
mid-single digits |
Restaurant-level adjusted
EBITDA margin** |
23% - 24% |
→ |
23% - 24% |
General and administrative
expenses |
$85 - $87 million |
→ |
$82 - $84 million |
Pre-opening expenses |
$8.0 - $9.0 million |
→ |
$10.0 - $10.5 million |
Capital expenditures |
$90 - $93 million |
→ |
$85 - $88 million |
*Prior target communicated during earnings call.**We are unable
to reconcile the long-term outlook for restaurant-level adjusted
EBITDA margin to operating income/loss margin, the corresponding
U.S. GAAP measure, due to variability and difficulty in making
accurate forecasts and projections and because not all information
necessary to prepare the reconciliation is available to us without
unreasonable efforts. For the same reasons, we are unable to
address the probable significance of the unavailable information
because we cannot accurately predict all of the components of the
adjusted calculations and the non-GAAP measure may be materially
different than the GAAP measure.
Long-Term Financial Targets
Unit growth |
12% - 15% |
Same-restaurant sales |
Low single digits |
Revenue growth |
Mid teens |
Adjusted EBITDA growth* |
Low teens |
*We are unable to reconcile the long-term outlook for adjusted
EBITDA growth to net income/loss, the corresponding U.S. GAAP
measure, due to variability and difficulty in making accurate
forecasts and projections and because not all information necessary
to prepare the reconciliation is available to us without
unreasonable efforts. For the same reasons, we are unable to
address the probable significance of the unavailable information
because we cannot accurately predict all of the components of the
adjusted calculations and the non-GAAP measure may be materially
different than the GAAP measure.
The following definitions apply to these terms as used
in this release:
Change in Same-Restaurant Sales - The change in
same-restaurant sales is the percentage change in year-over-year
revenue (excluding gift card breakage) for the Comparable
Restaurant Base, which is defined as the number of restaurants open
for at least 24 full fiscal periods. For the quarters ended June
30, 2024 and June 25, 2023, there were 70 and 66 restaurants in our
Comparable Restaurant Base, respectively.
A change in same-restaurant sales is the result of a change in
restaurant transactions, average guest check, or a combination of
the two. We gather daily sales data and regularly analyze the guest
transaction counts and the mix of menu items sold to strategically
evaluate menu pricing and demand. Measuring our change in
same-restaurant sales allows management to evaluate the performance
of our existing restaurant base. We believe this measure provides a
consistent comparison of restaurant sales results and trends across
periods within our core, established restaurant base, unaffected by
results of restaurant openings and enables investors to better
understand and evaluate the Company’s historical and prospective
operating performance.
Average Unit Volume - AUV is the total revenue
(excluding gift card breakage) recognized in the Comparable
Restaurant Base, including C&O, divided by the number of
restaurants in the Comparable Restaurant Base, including C&O,
by period.
This key performance indicator allows management to assess
changes in consumer spending patterns at our restaurants and the
overall performance of our restaurant base.
Adjusted EBITDA and Adjusted EBITDA Margin -
Adjusted EBITDA represents net income (loss) before depreciation
and amortization, interest expense, interest income, and income
taxes, adjusted for the impact of certain non-cash and other items
that we do not consider in our evaluation of ongoing core operating
performance as identified in the reconciliation of net income
(loss), the most directly comparable GAAP measure to Adjusted
EBITDA. Adjusted EBITDA Margin represents Adjusted EBITDA as a
percentage of revenues, net. See also “Non-GAAP Financial
Measures.”
Restaurant-Level Adjusted EBITDA and Restaurant-Level
Adjusted EBITDA Margin - Restaurant-Level Adjusted EBITDA
is defined as revenue, less restaurant operating expenses, which
include food, beverage and packaging costs, labor expenses,
occupancy expenses and other operating expenses. Restaurant-Level
Adjusted EBITDA excludes corporate level expenses and depreciation
and amortization on restaurant property and equipment.
Restaurant-Level Adjusted EBITDA Margin represents Restaurant-Level
Adjusted EBITDA as a percentage of revenues, net. See also
“Non-GAAP Financial Measures”.
For more information about the Company’s Non-GAAP measures, how
they are calculated and reconciled and why management believes that
they are useful, see “Non-GAAP Financial Measures” below.
Earnings Conference Call
The Company will host a conference call to discuss its financial
results for the second quarter ended June 30, 2024 on Tuesday,
August 6, 2024, at 10:00 AM ET. The conference call can be accessed
live over the phone by dialing 201-493-6780. A telephone replay
will be available shortly after the call has concluded and can be
accessed by dialing 412-317-6671; the passcode is 13741635. The
webcast will be available at www.portillos.com under the investors
section and will be archived on the site shortly after the call has
concluded.
About Portillo’s
In 1963, Dick Portillo invested $1,100 into a
small trailer to open the first Portillo’s hot dog stand in Villa
Park, IL, which he called “The Dog House.” Years later, Portillo’s
(NASDAQ: PTLO) has grown to more than 80 restaurants across 10
states. Portillo’s is best known for its Chicago-style hot dogs,
Italian beef sandwiches, char-grilled burgers, fresh salads and
famous chocolate cake.
Cautionary Note Regarding Forward-Looking
Statements
This press release contains forward-looking statements, within
the meaning of the Private Securities Litigation Reform Act of 1995
("PSLRA"). All statements other than statements of historical fact
are forward-looking statements. Forward-looking statements discuss
our current expectations and projections relating to our financial
position, results of operations, plans, objectives, future
performance and business, and are based on currently available
operating, financial and competitive information which are subject
to various risks and uncertainties, so you should not place undue
reliance on forward-looking statements. You can identify
forward-looking statements by the fact that they do not relate
strictly to historical or current facts. These statements may
include words such as "aim," "anticipate," "believe," "commit,"
"estimate," "expect," "forecast," "outlook," "potential,"
"project," "projection," "plan," "intend," "seek," "may," "could,"
"would," "will," "should," "can," "can have," "likely," the
negatives thereof and other similar expressions.
Forward-looking statements are based on our current expectations
and assumptions regarding our business, the economy and other
future conditions. Because forward-looking statements relate to the
future, by their nature, they are subject to inherent
uncertainties, risks and changes in circumstances that are
difficult to predict. As a result, our actual results may differ
materially from those contemplated by the forward-looking
statements. Important factors that could cause actual results to
differ materially from those in the forward-looking statements
include regional, national or global political, economic, business,
competitive, market and regulatory conditions and the
following:
- risks related to or arising from our organizational
structure;
- risks of food-borne illness and food safety and other health
concerns about our food;
- risks relating to the economy and financial markets, including
inflation, fluctuating interest rates, stock market activity, or
other factors;
- the impact of unionization activities of our Team Members on
our reputation, operations and profitability;
- risks associated with our reliance on certain information
technology systems, including our new enterprise resource planning
system, and potential failures or interruptions;
- privacy and cyber security risks related to our digital
ordering and payment platforms for our delivery business;
- the impact of competition, including from our competitors in
the restaurant industry or our own restaurants;
- the increasingly competitive labor market and our ability to
attract and retain the best talent and qualified employees;
- the impact of federal, state or local government regulations
relating to privacy, data protection, advertising and consumer
protection, building and zoning requirements, costs or ability to
open new restaurants, or sale of food and alcoholic beverage
control regulations;
- inability to achieve our growth strategy, such as the
availability of suitable new restaurant sites in existing and new
markets and opening of new restaurants at the anticipated rate and
on the anticipated timeline;
- the impact of consumer sentiment and other economic factors on
our sales;
- increases in food and other operating costs, tariffs and import
taxes, and supply shortages; and
- other risks identified in our filings with the Securities and
Exchange Commission (the “SEC’).
All forward-looking statements are expressly qualified in their
entirety by these cautionary statements. You should evaluate all
forward-looking statements made in this press release in the
context of the risks and uncertainties disclosed in the Company’s
most recent Annual Report on Form 10-K, filed with the SEC. All of
the Company’s SEC filings are available on the SEC’s website at
www.sec.gov. The forward-looking statements included in this press
release are made only as of the date hereof. The Company undertakes
no obligation to publicly update or revise any forward-looking
statement as a result of new information, future events or
otherwise, except as otherwise required by law.
Investor Contact:Barbara Noverini, CFA
investors@portillos.com
Media Contact:ICR,
Inc.portillosPR@icrinc.com
PORTILLO’S INCCONSOLIDATED STATEMENTS OF
OPERATIONS(in thousands, except common share and per
common share data) |
|
Quarter Ended |
|
Two Quarters Ended |
|
June 30, 2024 |
|
June 25, 2023 |
|
June 30, 2024 |
|
June 25, 2023 |
REVENUES,
NET |
$ |
181,862 |
|
|
100.0 |
% |
|
$ |
169,182 |
|
|
100.0 |
% |
|
$ |
347,693 |
|
|
100.0 |
% |
|
$ |
325,242 |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST AND
EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restaurant operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Food, beverage and packaging costs |
|
61,712 |
|
|
33.9 |
% |
|
|
56,229 |
|
|
33.2 |
% |
|
|
118,673 |
|
|
34.1 |
% |
|
|
109,856 |
|
|
33.8 |
% |
Labor |
|
46,412 |
|
|
25.5 |
% |
|
|
43,153 |
|
|
25.5 |
% |
|
|
89,714 |
|
|
25.8 |
% |
|
|
83,612 |
|
|
25.7 |
% |
Occupancy |
|
9,211 |
|
|
5.1 |
% |
|
|
8,237 |
|
|
4.9 |
% |
|
|
18,551 |
|
|
5.3 |
% |
|
|
16,688 |
|
|
5.1 |
% |
Other operating expenses |
|
19,958 |
|
|
11.0 |
% |
|
|
18,832 |
|
|
11.1 |
% |
|
|
39,815 |
|
|
11.5 |
% |
|
|
37,536 |
|
|
11.5 |
% |
Total restaurant operating expenses |
|
137,293 |
|
|
75.5 |
% |
|
|
126,451 |
|
|
74.7 |
% |
|
|
266,753 |
|
|
76.7 |
% |
|
|
247,692 |
|
|
76.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses |
|
17,941 |
|
|
9.9 |
% |
|
|
19,609 |
|
|
11.6 |
% |
|
|
36,481 |
|
|
10.5 |
% |
|
|
38,387 |
|
|
11.8 |
% |
Pre-opening expenses |
|
2,100 |
|
|
1.2 |
% |
|
|
275 |
|
|
0.2 |
% |
|
|
3,523 |
|
|
1.0 |
% |
|
|
2,619 |
|
|
0.8 |
% |
Depreciation and amortization |
|
7,106 |
|
|
3.9 |
% |
|
|
5,941 |
|
|
3.5 |
% |
|
|
14,050 |
|
|
4.0 |
% |
|
|
11,610 |
|
|
3.6 |
% |
Net income attributable to equity method investment |
|
(335 |
) |
|
(0.2)% |
|
|
(381 |
) |
|
(0.2)% |
|
|
(540 |
) |
|
(0.2)% |
|
|
(588 |
) |
|
(0.2)% |
Other income, net |
|
(358 |
) |
|
(0.2)% |
|
|
(97 |
) |
|
(0.1)% |
|
|
(786 |
) |
|
(0.2)% |
|
|
(354 |
) |
|
(0.1)% |
OPERATING INCOME |
|
18,115 |
|
|
10.0 |
% |
|
|
17,384 |
|
|
10.3 |
% |
|
|
28,212 |
|
|
8.1 |
% |
|
|
25,876 |
|
|
8.0 |
% |
Interest expense |
|
6,603 |
|
|
3.6 |
% |
|
|
6,523 |
|
|
3.9 |
% |
|
|
13,133 |
|
|
3.8 |
% |
|
|
13,966 |
|
|
4.3 |
% |
Interest income |
|
(75 |
) |
|
— |
% |
|
|
— |
|
|
— |
% |
|
|
(154 |
) |
|
— |
% |
|
|
— |
|
|
— |
% |
Tax Receivable Agreement liability adjustment |
|
(439 |
) |
|
(0.2)% |
|
|
(579 |
) |
|
(0.3)% |
|
|
(1,000 |
) |
|
(0.3)% |
|
|
(1,163 |
) |
|
(0.4)% |
Loss on debt extinguishment |
|
— |
|
|
— |
% |
|
|
— |
|
|
— |
% |
|
|
— |
|
|
— |
% |
|
|
3,465 |
|
|
1.1 |
% |
INCOME BEFORE INCOME TAXES |
|
12,026 |
|
|
6.6 |
% |
|
|
11,440 |
|
|
6.8 |
% |
|
|
16,233 |
|
|
4.7 |
% |
|
|
9,608 |
|
|
3.0 |
% |
Income tax expense |
|
3,496 |
|
|
1.9 |
% |
|
|
1,542 |
|
|
0.9 |
% |
|
|
2,359 |
|
|
0.7 |
% |
|
|
983 |
|
|
0.3 |
% |
NET INCOME |
|
8,530 |
|
|
4.7 |
% |
|
|
9,898 |
|
|
5.9 |
% |
|
|
13,874 |
|
|
4.0 |
% |
|
|
8,625 |
|
|
2.7 |
% |
Net
income attributable to non-controlling interests |
|
2,060 |
|
|
1.1 |
% |
|
|
3,110 |
|
|
1.8 |
% |
|
|
2,842 |
|
|
0.8 |
% |
|
|
2,351 |
|
|
0.7 |
% |
NET INCOME ATTRIBUTABLE TO PORTILLO'S INC. |
$ |
6,470 |
|
|
3.6 |
% |
|
$ |
6,788 |
|
|
4.0 |
% |
|
$ |
11,032 |
|
|
3.2 |
% |
|
$ |
6,274 |
|
|
1.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income per common share
attributable to Portillo’s Inc.: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
0.10 |
|
|
|
|
$ |
0.12 |
|
|
|
|
$ |
0.19 |
|
|
|
|
$ |
0.12 |
|
|
|
Diluted |
$ |
0.10 |
|
|
|
|
$ |
0.12 |
|
|
|
|
$ |
0.18 |
|
|
|
|
$ |
0.11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares
outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
61,650,118 |
|
|
|
|
|
54,964,649 |
|
|
|
|
|
59,543,950 |
|
|
|
|
|
52,252,053 |
|
|
|
Diluted |
|
64,608,698 |
|
|
|
|
|
58,550,057 |
|
|
|
|
|
62,577,748 |
|
|
|
|
|
55,806,455 |
|
|
|
PORTILLO’S INC.CONSOLIDATED BALANCE
SHEETS(in thousands, except common share and per common
share data) |
|
June 30, 2024 |
|
December 31, 2023 |
ASSETS |
|
|
|
CURRENT ASSETS: |
|
|
|
Cash and cash equivalents and restricted cash |
$ |
12,357 |
|
$ |
10,438 |
Accounts and tenant improvement receivables |
|
15,326 |
|
|
14,183 |
Inventory |
|
8,755 |
|
|
8,733 |
Prepaid expenses |
|
5,507 |
|
|
8,565 |
Total current assets |
|
41,945 |
|
|
41,919 |
Property and equipment, net |
|
314,617 |
|
|
295,793 |
Operating lease assets |
|
213,757 |
|
|
193,825 |
Goodwill |
|
394,298 |
|
|
394,298 |
Trade names |
|
223,925 |
|
|
223,925 |
Other intangible assets, net |
|
27,467 |
|
|
28,911 |
Equity method investment |
|
15,940 |
|
|
16,684 |
Deferred tax assets |
|
200,119 |
|
|
184,701 |
Other assets |
|
6,850 |
|
|
5,485 |
Total other assets |
|
868,599 |
|
|
854,004 |
TOTAL ASSETS |
$ |
1,438,918 |
|
$ |
1,385,541 |
|
|
|
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
CURRENT LIABILITIES: |
|
|
|
Accounts payable |
$ |
37,584 |
|
$ |
33,189 |
Current portion of long-term debt |
|
9,375 |
|
|
7,500 |
Short-term debt |
|
17,000 |
|
|
15,000 |
Current portion of Tax Receivable Agreement liability |
|
7,230 |
|
|
4,428 |
Deferred revenue |
|
4,712 |
|
|
7,180 |
Short-term lease liability |
|
5,791 |
|
|
5,577 |
Accrued expenses |
|
27,573 |
|
|
32,039 |
Total current liabilities |
|
109,265 |
|
|
104,913 |
LONG-TERM LIABILITIES: |
|
|
|
Long-term debt, net of current portion |
|
278,679 |
|
|
283,923 |
Tax Receivable Agreement liability |
|
320,849 |
|
|
295,390 |
Long-term lease liability |
|
263,229 |
|
|
238,414 |
Other long-term liabilities |
|
2,774 |
|
|
2,791 |
Total long-term liabilities |
|
865,531 |
|
|
820,518 |
Total liabilities |
|
974,796 |
|
|
925,431 |
|
|
|
|
COMMITMENTS AND
CONTINGENCIES |
|
|
|
STOCKHOLDER’S EQUITY: |
|
|
|
Preferred stock, $0.01 par value per share, 10,000,000 shares
authorized, none issued and outstanding |
|
— |
|
|
— |
Class A common stock, $0.01 par value per share, 380,000,000 shares
authorized, and 61,739,874 and 55,502,375 shares issued and
outstanding as of June 30, 2024 and December 31, 2023,
respectively |
|
617 |
|
|
555 |
Class B common stock, $0.00001 par value per share, 50,000,000
shares authorized, and 11,640,555 and 17,472,926 shares issued and
outstanding as of June 30, 2024 and December 31, 2023,
respectively |
|
— |
|
|
— |
Additional paid-in-capital |
|
344,937 |
|
|
308,212 |
Retained earnings |
|
24,644 |
|
|
13,612 |
Total stockholders' equity attributable to Portillo's Inc. |
|
370,198 |
|
|
322,379 |
Non-controlling interest |
|
93,924 |
|
|
137,731 |
Total stockholders' equity |
|
464,122 |
|
|
460,110 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
$ |
1,438,918 |
|
$ |
1,385,541 |
PORTILLO’S INCCONSOLIDATED STATEMENTS OF
CASH FLOWS(in thousands) |
|
Two Quarters Ended |
|
June 30, 2024 |
|
June 25, 2023 |
CASH FLOWS FROM
OPERATING ACTIVITIES: |
|
|
|
Net income |
$ |
13,874 |
|
|
$ |
8,625 |
|
Adjustments to reconcile net
income to net cash provided by operating activities: |
|
|
|
Depreciation and amortization |
|
14,050 |
|
|
|
11,610 |
|
Amortization of debt issuance costs and discount |
|
380 |
|
|
|
620 |
|
Loss on sales of assets |
|
66 |
|
|
|
496 |
|
Equity-based compensation |
|
5,717 |
|
|
|
7,720 |
|
Deferred income tax expense |
|
2,359 |
|
|
|
983 |
|
Tax Receivable Agreement liability adjustment |
|
(1,000 |
) |
|
|
(1,163 |
) |
Gift card breakage |
|
(502 |
) |
|
|
(528 |
) |
Loss on debt extinguishment |
|
— |
|
|
|
3,465 |
|
Changes in operating assets and liabilities: |
|
|
|
Accounts receivables |
|
(681 |
) |
|
|
(906 |
) |
Receivables from related parties |
|
(158 |
) |
|
|
(141 |
) |
Inventory |
|
(22 |
) |
|
|
894 |
|
Other current assets |
|
1,916 |
|
|
|
(218 |
) |
Operating lease asset |
|
4,461 |
|
|
|
3,880 |
|
Accounts payable |
|
6,833 |
|
|
|
(2,779 |
) |
Accrued expenses and other liabilities |
|
(6,365 |
) |
|
|
(559 |
) |
Operating lease liabilities |
|
(1,908 |
) |
|
|
(1,359 |
) |
Deferred lease incentives |
|
2,101 |
|
|
|
850 |
|
Other assets and liabilities |
|
507 |
|
|
|
(181 |
) |
NET CASH PROVIDED BY OPERATING ACTIVITIES |
|
41,628 |
|
|
|
31,309 |
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
Purchase of property and equipment |
|
(33,905 |
) |
|
|
(37,359 |
) |
Proceeds from the sale of property and equipment |
|
77 |
|
|
|
33 |
|
NET CASH USED IN INVESTING ACTIVITIES |
|
(33,828 |
) |
|
|
(37,326 |
) |
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
Proceeds from short-term debt, net |
|
2,000 |
|
|
|
10,000 |
|
Proceeds from long-term debt |
|
— |
|
|
|
300,000 |
|
Payments of long-term debt |
|
(3,750 |
) |
|
|
(322,428 |
) |
Proceeds from equity offering, net of underwriting discounts |
|
114,960 |
|
|
|
179,306 |
|
Repurchase of outstanding equity / Portillo's OpCo units |
|
(114,960 |
) |
|
|
(179,306 |
) |
Distributions paid to non-controlling interest holders |
|
(838 |
) |
|
|
(399 |
) |
Proceeds from stock option exercises |
|
1,109 |
|
|
|
1,015 |
|
Employee withholding taxes related to net settled equity
awards |
|
(279 |
) |
|
|
(56 |
) |
Proceeds from Employee Stock Purchase Plan purchases |
|
306 |
|
|
|
297 |
|
Payments of Tax Receivable Agreement liability |
|
(4,429 |
) |
|
|
(813 |
) |
Payment of deferred financing costs |
|
— |
|
|
|
(3,569 |
) |
NET CASH USED IN FINANCING ACTIVITIES |
|
(5,881 |
) |
|
|
(15,953 |
) |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND
RESTRICTED CASH |
|
1,919 |
|
|
|
(21,970 |
) |
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING
OF THE PERIOD |
|
10,438 |
|
|
|
44,427 |
|
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF THE
PERIOD |
$ |
12,357 |
|
|
$ |
22,457 |
|
PORTILLO’S INCSELECTED OPERATING DATA AND
NON-GAAP FINANCIAL MEASURES |
|
Quarter Ended |
|
Two Quarters Ended |
|
June 30, 2024 |
|
June 25, 2023 |
|
June 30, 2024 |
|
June 25, 2023 |
Total Restaurants (a) |
|
86 |
|
|
|
76 |
|
|
|
86 |
|
|
|
76 |
|
AUV (in millions) (a) |
N/A |
|
|
N/A |
|
|
$ |
9.0 |
|
|
$ |
8.8 |
|
Change in same-restaurant
sales (b)(c) |
(0.6) |
% |
|
|
5.9 |
% |
|
|
(0.9 |
)% |
|
|
7.4 |
% |
Adjusted EBITDA (in thousands)
(b) |
$ |
29,866 |
|
|
$ |
29,223 |
|
|
$ |
51,643 |
|
|
$ |
48,856 |
|
Adjusted EBITDA Margin
(b) |
|
16.4 |
% |
|
|
17.3 |
% |
|
|
14.9 |
% |
|
|
15.0 |
% |
Restaurant-Level Adjusted
EBITDA (in thousands) (b) |
$ |
44,569 |
|
|
$ |
42,731 |
|
|
$ |
80,940 |
|
|
$ |
77,550 |
|
Restaurant-Level Adjusted
EBITDA Margin (b) |
|
24.5 |
% |
|
|
25.3 |
% |
|
|
23.3 |
% |
|
|
23.8 |
% |
(a) Includes a restaurant that is owned by C&O of which
Portillo’s owns 50% of the equity. Total restaurants indicated are
as of June 30, 2024. AUVs for the quarters ended June 30, 2024 and
June 25, 2023 represent AUVs for the twelve months ended June 30,
2024 and June 25, 2023, respectively. (b) Excludes a restaurant
that is owned by C&O of which Portillo’s owns 50% of the
equity. (c) For the quarter ended June 30, 2024, same-restaurant
sales compares the 13 weeks from April 1, 2024 through June 30,
2024 to the 13 weeks from April 3, 2023 through July 2, 2023. For
the two quarters ended June 30, 2024, same-restaurant sales
compares the 26 weeks from January 1, 2024 through June 30, 2024 to
the 26 weeks from January 2, 2023 through July 2, 2023.
PORTILLO’S INC.NON-GAAP
FINANCIAL MEASURES
To supplement the consolidated financial statements, which are
prepared and presented in accordance with GAAP, we use the
following non-GAAP financial measures: Adjusted EBITDA and Adjusted
EBITDA Margin, and Restaurant-Level Adjusted EBITDA and
Restaurant-Level Adjusted EBITDA Margin. Accordingly,
Restaurant-Level Adjusted EBITDA and Restaurant-Level Adjusted
EBITDA Margin are not required by, nor presented in accordance with
GAAP, but rather are supplemental measures of operating performance
of our restaurants. You should be aware that these measures are not
indicative of overall results for the Company and that
Restaurant-Level Adjusted EBITDA and Restaurant-Level Adjusted
EBITDA Margin do not accrue directly to the benefit of stockholders
because of corporate-level expenses excluded from such measures.
These measures are supplemental measures of operating performance
and our calculations thereof may not be comparable to similar
measures reported by other companies. These measures are important
measures to evaluate the performance and profitability of our
restaurants, individually and in the aggregate, but also have
important limitations as analytical tools and should not be
considered in isolation as substitutes for analysis of our results
as reported under GAAP.
Adjusted EBITDA and Adjusted EBITDA Margin
Adjusted EBITDA represents net income (loss) before depreciation
and amortization, interest expense, interest income, and income
taxes, adjusted for the impact of certain non-cash and other items
that we do not consider in our evaluation of ongoing core operating
performance as identified in the reconciliation of net income
(loss), the most directly comparable GAAP measure to Adjusted
EBITDA. Adjusted EBITDA Margin represents Adjusted EBITDA as a
percentage of total revenues.
We use Adjusted EBITDA and Adjusted EBITDA Margin (i) to
evaluate our operating results and the effectiveness of our
business strategies, (ii) internally as benchmarks to compare our
performance to that of our competitors and (iii) as factors in
evaluating management’s performance when determining incentive
compensation.
We believe that Adjusted EBITDA and Adjusted EBITDA Margin are
important measures of operating performance because they eliminate
the impact of expenses that do not relate to our core operating
performance.
We are unable to reconcile the long-term outlook for Adjusted
EBITDA to net income (loss), the corresponding U.S. GAAP measure,
due to variability and difficulty in making accurate forecasts and
projections and because not all information necessary to prepare
the reconciliation is available to us without unreasonable efforts.
For the same reasons, we are unable to address the probable
significance of the unavailable information because we cannot
accurately predict all of the components of the adjusted
calculations and the non-GAAP measure may be materially different
than the GAAP measure.
Restaurant-Level Adjusted EBITDA and Restaurant-Level
Adjusted EBITDA Margin
Restaurant-Level Adjusted EBITDA is defined as revenue, less
restaurant operating expenses, which include cost of goods sold
(excluding depreciation and amortization), labor expenses,
occupancy expenses and other operating expenses. Restaurant-Level
Adjusted EBITDA excludes corporate level expenses and depreciation
and amortization on restaurant property and equipment.
Restaurant-Level Adjusted EBITDA Margin represents Restaurant-Level
Adjusted EBITDA as a percentage of revenue.
We believe that Restaurant-Level Adjusted EBITDA and
Restaurant-Level Adjusted EBITDA Margin are important measures to
evaluate the performance and profitability of our restaurants,
individually and in the aggregate.
See below for a reconciliation of net income, the most directly
comparable GAAP measure, to Adjusted EBITDA and Adjusted EBITDA
Margin (in thousands):
|
Quarter Ended |
|
Two Quarters Ended |
|
June 30, 2024 |
|
June 25, 2023 |
|
June 30, 2024 |
|
June 25, 2023 |
Net income |
$ |
8,530 |
|
|
$ |
9,898 |
|
|
$ |
13,874 |
|
|
$ |
8,625 |
|
Net income margin |
|
4.7 |
% |
|
|
5.9 |
% |
|
|
4.0 |
% |
|
|
2.7 |
% |
Depreciation and
amortization |
|
7,106 |
|
|
|
5,941 |
|
|
|
14,050 |
|
|
|
11,610 |
|
Interest expense |
|
6,603 |
|
|
|
6,523 |
|
|
|
13,133 |
|
|
|
13,966 |
|
Interest income |
|
(75 |
) |
|
|
— |
|
|
|
(154 |
) |
|
|
— |
|
Loss on debt
extinguishment |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,465 |
|
Income tax expense |
|
3,496 |
|
|
|
1,542 |
|
|
|
2,359 |
|
|
|
983 |
|
EBITDA |
|
25,660 |
|
|
|
23,904 |
|
|
|
43,262 |
|
|
|
38,649 |
|
Deferred rent (1) |
|
1,296 |
|
|
|
1,169 |
|
|
|
2,466 |
|
|
|
2,393 |
|
Equity-based compensation |
|
2,890 |
|
|
|
4,184 |
|
|
|
5,717 |
|
|
|
7,720 |
|
ERP implementation costs
(2) |
|
325 |
|
|
|
— |
|
|
|
450 |
|
|
|
— |
|
Amortization of cloud-based
software implementation costs (3) |
|
146 |
|
|
|
— |
|
|
|
146 |
|
|
|
— |
|
Other (income) loss (4) |
|
(9 |
) |
|
|
377 |
|
|
|
66 |
|
|
|
496 |
|
Transaction-related fees and
expenses (5) |
|
(3 |
) |
|
|
168 |
|
|
|
536 |
|
|
|
761 |
|
Tax Receivable Agreement
liability adjustment (6) |
|
(439 |
) |
|
|
(579 |
) |
|
|
(1,000 |
) |
|
|
(1,163 |
) |
Adjusted EBITDA |
$ |
29,866 |
|
|
$ |
29,223 |
|
|
$ |
51,643 |
|
|
$ |
48,856 |
|
Adjusted EBITDA Margin
(7) |
|
16.4 |
% |
|
|
17.3 |
% |
|
|
14.9 |
% |
|
|
15.0 |
% |
(1) Represents the difference between cash rent payments and the
recognition of straight-line rent expense recognized over the lease
term. (2) Represents non-capitalized third-party consulting and
software licensing costs incurred in connection with the
implementation of a new ERP system.(3) Represents amortization of
capitalized cloud-based ERP system implementation costs that are
included within general and administrative expenses.(4) Represents
(gain) loss on disposal of property and equipment. (5) Represents
certain expenses that management believes are not indicative of
ongoing operations, consisting primarily of certain professional
fees.(6) Represents remeasurement of the Tax Receivable Agreement
liability.(7) Adjusted EBITDA Margin is defined as Adjusted EBITDA
divided by Revenues, net.
See below for a reconciliation of operating
income, the most directly comparable GAAP measure, to
Restaurant-Level Adjusted EBITDA and Restaurant-Level Adjusted
EBITDA Margin (in thousands):
|
Quarter Ended |
|
Two Quarters Ended |
|
June 30, 2024 |
|
June 25, 2023 |
|
June 30, 2024 |
|
June 25, 2023 |
Operating income |
$ |
18,115 |
|
|
$ |
17,384 |
|
|
$ |
28,212 |
|
|
$ |
25,876 |
|
Operating income margin |
|
10.0 |
% |
|
|
10.3 |
% |
|
|
8.1 |
% |
|
|
8.0 |
% |
Plus: |
|
|
|
|
|
|
|
General and administrative expenses |
|
17,941 |
|
|
|
19,609 |
|
|
|
36,481 |
|
|
|
38,387 |
|
Pre-opening expenses |
|
2,100 |
|
|
|
275 |
|
|
|
3,523 |
|
|
|
2,619 |
|
Depreciation and amortization |
|
7,106 |
|
|
|
5,941 |
|
|
|
14,050 |
|
|
|
11,610 |
|
Net income attributable to equity method investment |
|
(335 |
) |
|
|
(381 |
) |
|
|
(540 |
) |
|
|
(588 |
) |
Other income, net |
|
(358 |
) |
|
|
(97 |
) |
|
|
(786 |
) |
|
|
(354 |
) |
Restaurant-Level Adjusted
EBITDA |
$ |
44,569 |
|
|
$ |
42,731 |
|
|
$ |
80,940 |
|
|
$ |
77,550 |
|
Restaurant-Level Adjusted
EBITDA Margin (1) |
|
24.5 |
% |
|
|
25.3 |
% |
|
|
23.3 |
% |
|
|
23.8 |
% |
(1) Restaurant-Level Adjusted EBITDA Margin is defined as
Restaurant-Level Adjusted EBITDA divided by Revenues, net
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