Company Overview - Portillo's, Inc. (NASDAQ: PTLO) has expanded from a small hot dog trailer in Chicago to over 90 restaurants across 10 states [2] - The brand is recognized for its unique menu, which includes Italian beef sandwiches, Chicago-style hot dogs, char-grilled burgers, fresh salads, and chocolate cake [2] - Portillo's operates a company-owned model that focuses on creating experience-oriented destinations, offering dine-in, drive-thru, takeout, and delivery services [2] Upcoming Events - Portillo's will host a Q2 2025 Earnings Webcast on August 5, 2025, at 10 a.m. EST [1] - The earnings release for Q2 2025 will be available before the market opens on the same day [1] - The webcast will be accessible for replay on the Portillo's Investor Relations website [1]

Core Insights - Portillo's has appointed Eugene I. Lee, Jr. to its Board of Directors, bringing extensive experience from the restaurant industry [1][2] - Mr. Lee previously served as CEO of Darden Restaurants, where he oversaw a revenue increase of over $2 billion and nearly tripled the company's market capitalization to $20 billion [2] - The appointment aligns with Portillo's growth strategy and is supported by Engaged Capital, LLC [4][5] Company Overview - Portillo's, founded in 1963, has expanded to over 90 restaurants across 10 states, specializing in Chicago-style food [6] - The company is known for its hot dogs, Italian beef sandwiches, char-grilled burgers, fresh salads, and chocolate cake [6] - Portillo's offers a loyalty program called Portillo's Perks and provides options for online ordering and delivery [7] Leadership and Strategy - Mr. Lee's leadership is expected to enhance Portillo's operational efficiency and growth potential [3][5] - His background includes a focus on team members and customer experience, which aligns with Portillo's values [2][3] - The company aims to create lasting value for guests, team members, and shareholders under Mr. Lee's guidance [3]

Company Overview - Portillo's Inc. is a fast-casual restaurant chain known for its American classics with a Chicago twist, operating over 90 restaurants across 10 states [1] - The company was founded in 1963 by Dick Portillo, who started with a $1,100 investment in a hot dog stand called "The Dog House" [1] Investor Engagement - CFO Michelle Hook will present at William Blair's 45th Annual Growth Stock Conference on June 3, 2025, at 12:20 p.m. Eastern Time, with a presentation available at investors.portillos.com [3] - On June 4, 2025, CFO Michelle Hook will host a fireside chat at Baird's 2025 Global Consumer, Technology & Services Conference at 3:45 p.m. Eastern Time, along with in-person investor meetings [3] - CEO Michael Osanloo and CFO Michelle Hook will conduct in-person investor meetings at the Jefferies Consumer Conference on June 17 and 18, 2025 [3] Customer Engagement - Portillo's offers a loyalty program called Portillo's Perks, allowing fans to earn and redeem rewards [2] - Customers can order ahead for pickup or delivery through the Portillo's App or website, with food shipping available to all 50 states [2]

Core Insights - The annual Berkshire Hathaway meeting attracted 20,000 attendees, highlighting the interest in Warren Buffett's investment strategies [1] - A question regarding Portillo's, a Chicago-based hot dog company, was mistakenly directed at Buffett, as Berkshire Hathaway does not own the company [2][5] - Portillo's stock experienced a 10% increase following the meeting, possibly due to newfound interest from attendees [6] Company Overview - Portillo's is currently valued at a market capitalization of $721 million, with 94 restaurant locations generating $58 million in operating income over the past year [10] - The company trades at 12 times its operating income, indicating it is considered a value stock [10] Growth Potential - Portillo's plans to open 12 new restaurant locations this year, aiming for an annual growth rate of 12% to 15% in its restaurant base [12] - If successful, Portillo's could potentially triple or quadruple in size over the next decade, significantly increasing its profits [13] Investment Appeal - The restaurant industry has historically provided strong investment returns, particularly for companies that grow from regional to national chains [14] - The current valuation of Portillo's presents an attractive opportunity for investors looking for value stocks [14][15]

Core Insights - The article discusses the expertise of a specialized equity analyst in the restaurant sector, focusing on various dining segments in the U.S. market [1] Company Analysis - The company, Goulart's Restaurant Stocks, is dedicated to analyzing restaurant stocks across multiple segments, including QSR, fast casual, casual dining, fine dining, and family dining [1] - Advanced analytical models and specialized valuation techniques are employed to provide detailed insights and actionable strategies for investors [1] Industry Engagement - The analyst actively participates in academic and journalistic initiatives, contributing to institutions that promote individual and economic freedom [1] - Previous contributions include columns on monetary policy, financial education, and financial modeling aimed at making these topics accessible to a broader audience [1]

Financial Data and Key Metrics Changes - Total revenue for Q1 reached $176.4 million, reflecting an increase of $10.6 million or 6.4% compared to the previous year [18][19] - Same restaurant sales increased by 1.8%, contributing approximately $2.6 million to revenue growth [20] - Restaurant level adjusted EBITDA was $36.7 million with a margin of 20.8%, a decrease of 110 basis points from the previous year [27] - Adjusted EBITDA for Q1 was $21.2 million, down 2.6% from the previous year [29] - General and administrative expenses increased to $18.9 million, representing 10.7% of revenue [28] Business Line Data and Key Metrics Changes - New restaurants not in the comparable base contributed $7.9 million in revenue growth [19] - The average check increased by 4.9%, partially offset by a 3.1% decrease in transactions [20] - The company plans to open 12 new restaurants this year, with 10 in the new Restaurant of the Future format [16] Market Data and Key Metrics Changes - The advertising campaign in Dallas Fort Worth increased brand awareness by about 10% and drove high single-digit sales increases [10] - The company is running a similar campaign in Phoenix to boost brand awareness [10] Company Strategy and Development Direction - The company is focusing on four key tactics: advertising beyond Chicagoland, launching the Portillo's Perks loyalty program, continuous operational improvements, and optimizing kiosks [9] - The loyalty program aims for a personalized, data-driven approach based on guest behavior, with a goal of 1.6 million sign-ups by mid-year [56] - The company is testing breakfast offerings in five Chicagoland restaurants, with positive early feedback [15] Management's Comments on Operating Environment and Future Outlook - Management acknowledged macro pressures but expressed confidence in the brand's resilience and strategies to drive traffic [17] - The company expects comp sales growth in the range of 1% to 3% and total revenue growth of 10% to 12% for the year [22][23] - Management noted that newer restaurants are experiencing slower starts but are optimistic about their long-term performance [23][54] Other Important Information - Food, beverage, and packaging costs as a percentage of revenues increased to 34.6% due to commodity price increases [24] - Labor costs as a percentage of revenues increased to 26.6%, driven by lower transactions and increased wage rates [25] - The company ended the quarter with $12.9 million in cash and plans to use cash generated from operations to fund new restaurant growth [32] Q&A Session Summary Question: Concerns about new restaurant performance in Houston - Management indicated that the slower performance is due to brand awareness and not operational issues, emphasizing a focus on field marketing to build awareness [38][39] Question: Impact of recent openings on revenue guidance - The widening of the revenue range is primarily related to the class of '24 openings rather than expectations for '25 [40][41] Question: Testing breakfast offerings - The breakfast test is being conducted quietly to ensure operational execution, with plans for broader marketing if successful [90] Question: Performance of new units and marketing strategies - Management noted that marketing efforts in Houston were less aggressive compared to Dallas, which contributed to slower starts [54][98] Question: Insights on the Portillo's Perks program - Initial metrics indicate strong guest responsiveness to offers, exceeding internal expectations [56][108]

Q1 2025 Performance - Total revenue reached $1764 million, a 64% increase compared to Q1 2024[7, 29] - Same-restaurant sales (SRS) grew by 18% in Q1 2025[7] - Net income attributable to Portillo's Inc was $3313 million, compared to $4562 million in the same quarter last year[28] - Restaurant-Level Adjusted EBITDA was $36656 million with a margin of 208%[7, 32] Fiscal 2025 Financial Targets - The company plans to open 12 new units[9, 12] - Same-restaurant sales are projected to grow by 1% to 3%[12] - Revenue growth is targeted at 10% to 12%[12] - Adjusted EBITDA growth is expected to be 5% to 8%[12] Long-Term Growth Algorithm - The company aims for low single-digit growth in same-restaurant sales[16] - Annual unit growth is targeted at 12% to 15%[16] - Revenue growth is projected in the low teens[16] - Adjusted EBITDA growth is expected in the mid-teens[16]

Financial Performance - Portillo's Inc. reported quarterly earnings of $0.05 per share, exceeding the Zacks Consensus Estimate of $0.04 per share, but down from $0.08 per share a year ago, representing an earnings surprise of 25% [1] - The company posted revenues of $176.44 million for the quarter ended March 2025, missing the Zacks Consensus Estimate by 2.57%, compared to $165.83 million in the same quarter last year [2] - Over the last four quarters, Portillo's has surpassed consensus EPS estimates three times and topped revenue estimates only once [2] Stock Performance - Portillo's shares have increased approximately 10.6% since the beginning of the year, while the S&P 500 has declined by 3.9% [3] - The current consensus EPS estimate for the upcoming quarter is $0.12 on revenues of $199.89 million, and for the current fiscal year, it is $0.35 on revenues of $791.92 million [7] Industry Outlook - The Retail - Restaurants industry, to which Portillo's belongs, is currently ranked in the bottom 23% of over 250 Zacks industries, indicating potential challenges ahead [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact Portillo's stock performance [5][6]

Financial Data and Key Metrics Changes - Total revenue for Q1 2025 reached $176.4 million, reflecting an increase of $10.6 million or 6.4% compared to the previous year [16] - Same restaurant sales increased by 1.8%, contributing approximately $2.6 million to revenue growth [17] - Restaurant level adjusted EBITDA was $36.7 million with a margin of 20.8%, a decrease of 110 basis points from the previous year [24] - Adjusted EBITDA decreased by 2.6% to $21.2 million compared to Q1 2024 [25] - General and administrative expenses increased to $18.9 million, representing 10.7% of revenue [25] Business Line Data and Key Metrics Changes - New restaurants not in the comparable base contributed $7.9 million to revenue growth [16] - The average check increased by 4.9%, driven by a 4.4% increase in menu prices [17] - Labor costs as a percentage of revenues increased to 26.6% due to lower transactions and increased wage rates [22] Market Data and Key Metrics Changes - The Dallas Fort Worth advertising campaign increased brand awareness by about 10% and drove high single-digit sales increases in that region [8] - Newer markets remain vulnerable until brand awareness is established, as seen in Houston [36] Company Strategy and Development Direction - The company plans to open 12 new restaurants in 2025, with 10 in the new Restaurant of the Future format [14] - The Portillo's Perks loyalty program aims to enhance customer engagement through personalized offers [9] - The company is focusing on operational excellence, including hospitality, speed, and accuracy [11] Management's Comments on Operating Environment and Future Outlook - Management acknowledged macroeconomic pressures but expressed confidence in the brand's resilience and strategies [15] - The company expects comp sales growth to be in the range of 1% to 3% for the remainder of the year [19] - Commodity inflation is forecasted at 3% to 5% for 2025, with significant pressures from beef prices [21] Other Important Information - Cash from operations increased by 4.1% year over year to $9.5 million [28] - The effective interest rate decreased to 7% from 8.4% in 2024 [26] Q&A Session Summary Question: Concerns about new restaurant performance in Houston - Management indicated that the slower performance is due to brand awareness issues rather than operational problems, and they are increasing marketing efforts to build awareness [36] Question: Impact of recent openings on revenue guidance - The widening of the revenue range is primarily related to the class of '24 openings rather than expectations for '25 [38] Question: Update on breakfast test in Chicago - The breakfast test is being conducted quietly to ensure operational execution, with plans for broader marketing if successful [42][86] Question: Performance of new units and marketing strategies - Management noted that marketing efforts were less aggressive in Houston compared to Dallas, which contributed to slower initial performance [94] Question: Insights on the Portillo's Perks program - Initial metrics indicate strong guest responsiveness to offers, exceeding internal expectations [104]

[Part I: Financial Information](index=6&type=section&id=Part%20I%20Financial%20Information) [Item 1. Financial Statements (Unaudited)](index=6&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) The unaudited condensed consolidated financial statements for the quarter ended March 30, 2025, reflect revenue growth, a decline in net income, stable total assets, and increased cash utilization for investing activities [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 30, 2025, total assets remained stable at approximately **$1.50 billion**, with a decrease in cash and a slight reduction in total liabilities, while stockholders' equity increased Balance Sheet Summary (As of March 30, 2025 vs. Dec 29, 2024) | (In thousands) | March 30, 2025 | December 29, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $12,936 | $22,876 | | Total current assets | $41,857 | $52,651 | | **Total Assets** | **$1,499,296** | **$1,500,086** | | Total current liabilities | $165,910 | $135,569 | | Total long-term liabilities | $837,980 | $874,414 | | **Total Liabilities** | **$1,003,890** | **$1,009,983** | | **Total Stockholders' Equity** | **$495,406** | **$490,103** | [Condensed Consolidated Statements of Operations](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the quarter ended March 30, 2025, revenues increased by **6.4%** to **$176.4 million**, but net income and diluted EPS declined despite a slight rise in operating income Condensed Consolidated Statement of Operations (Q1 2025 vs Q1 2024) | (In thousands) | Quarter Ended March 30, 2025 | Quarter Ended March 31, 2024 | | :--- | :--- | :--- | | **REVENUES, NET** | **$176,437** | **$165,831** | | Total restaurant operating expenses | $139,781 | $129,460 | | OPERATING INCOME | $10,381 | $10,097 | | INCOME BEFORE INCOME TAXES | $5,350 | $4,207 | | **NET INCOME** | **$3,990** | **$5,344** | | NET INCOME ATTRIBUTABLE TO PORTILLO'S INC. | $3,313 | $4,562 | | **Diluted EPS** | **$0.05** | **$0.08** | [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) In Q1 2025, net cash from operating activities slightly increased, while cash used in investing activities grew, and financing activities shifted from providing to using cash Cash Flow Summary (Q1 2025 vs Q1 2024) | (In thousands) | Quarter Ended March 30, 2025 | Quarter Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $9,450 | $9,077 | | Net cash used in investing activities | $(19,040) | $(16,939) | | Net cash (used in) provided by financing activities | $(350) | $10,608 | | **Net (decrease) increase in cash** | **$(9,940)** | **$2,746** | [Notes to Condensed Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Key notes detail business operations, revenue recognition, debt structure, and subsequent events, including a new loyalty program, credit agreement amendment, and a cooperation agreement with an activist investor - The company launched a new app-less loyalty program, **Portillo's Perks™**, on March 3, 2025, with the liability for this program being **immaterial** as of March 30, 2025[41](index=41&type=chunk)[42](index=42&type=chunk) - On January 27, 2025, the company amended its credit agreement, resulting in a new **$250 million term loan** and an increased **$150 million revolving credit facility**, both maturing in 2030[58](index=58&type=chunk)[59](index=59&type=chunk) - The effective income tax rate was **25.4%** for Q1 2025, a significant increase from **(27.0)%** in Q1 2024, primarily due to lapping a prior year reduction in the valuation allowance[78](index=78&type=chunk) - On April 28, 2025, the company entered into a **cooperation agreement** with Engaged Capital, LLC, agreeing to reimburse Engaged Group's expenses up to **$300,000**[95](index=95&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes Q1 2025 revenue growth to new restaurants and same-restaurant sales, despite inflationary pressures, and plans to drive traffic, improve efficiency, and open 12 new restaurants in 2025 Financial Highlights (Q1 2025 vs Q1 2024) | Metric | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | $176.4M | $165.8M | +6.4% | | Same-Restaurant Sales | +1.8% | -1.2% | N/A | | Operating Income | $10.4M | $10.1M | +2.9% | | Net Income | $4.0M | $5.3M | -24.5% | | Adjusted EBITDA* | $21.2M | $21.8M | -2.7% | - The company plans to open **12 new restaurants** in fiscal 2025, with a focus on the **Sunbelt region**, including entering the Atlanta, GA and San Antonio, TX markets[109](index=109&type=chunk) [Consolidated Results of Operations](index=34&type=section&id=Consolidated%20Results%20of%20Operations) Q1 2025 saw a **6.4%** increase in total revenue driven by new restaurants and same-restaurant sales, but profitability was pressured by rising operating expenses, leading to a decline in net income - Revenue for Q1 2025 increased **6.4%** to **$176.4 million**, driven by **ten new restaurants** opened in 2024 and a **1.8%** increase in same-restaurant sales[113](index=113&type=chunk) - The **1.8%** same-restaurant sales increase was composed of a **4.9%** increase in average check (driven by a **4.4%** price increase and **0.5%** mix shift), partially offset by a **3.1%** decrease in transactions[113](index=113&type=chunk) - Food, beverage and packaging costs increased **7.3%** to **$61.1 million**, representing **34.6%** of revenue, up from **34.3%** YoY, due to a **3.4%** increase in commodity prices[116](index=116&type=chunk) - Labor expenses increased **8.2%** to **$46.9 million**, representing **26.6%** of revenue, up from **26.1%** YoY, due to lower transactions, higher benefit expenses, and wage rate increases[118](index=118&type=chunk) [Selected Operating Data and Non-GAAP Financial Measures](index=41&type=section&id=Selected%20Operating%20Data%20and%20Non-GAAP%20Financial%20Measures) Q1 2025 key performance indicators showed mixed results, with same-restaurant sales growth, but a decrease in AUV and a slight decline in Adjusted EBITDA and Restaurant-Level Adjusted EBITDA margins Key Performance Indicators (Q1 2025 vs Q1 2024) | | Quarter Ended March 30, 2025 | Quarter Ended March 31, 2024 | | :--- | :--- | :--- | | Total Restaurants | 94 | 85 | | AUV (in millions) | $8.7 | $9.0 | | Change in same-restaurant sales | 1.8% | (1.2)% | | Adjusted EBITDA Margin | 12.0% | 13.1% | | Restaurant-Level Adjusted EBITDA Margin | 20.8% | 21.9% | Adjusted EBITDA Reconciliation (in thousands) | | Quarter Ended March 30, 2025 | Quarter Ended March 31, 2024 | | :--- | :--- | :--- | | Net income | $3,990 | $5,344 | | Depreciation and amortization | $7,040 | $6,944 | | Interest expense | $5,749 | $6,530 | | Income tax expense (benefit) | $1,360 | $(1,137) | | Other adjustments | $3,129 | $4,173 | | **Adjusted EBITDA** | **$21,209** | **$21,777** | Restaurant-Level Adjusted EBITDA Reconciliation (in thousands) | | Quarter Ended March 30, 2025 | Quarter Ended March 31, 2024 | | :--- | :--- | :--- | | Operating income | $10,381 | $10,097 | | General and administrative expenses | $18,903 | $18,540 | | Pre-opening expenses | $508 | $1,423 | | Depreciation and amortization | $7,040 | $6,944 | | Other adjustments | $(176) | $(633) | | **Restaurant-Level Adjusted EBITDA** | **$36,656** | **$36,371** | [Liquidity and Capital Resources](index=44&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 30, 2025, the company's liquidity includes **$12.9 million** in cash and **$71.7 million** from its revolver facility, following a debt refinancing, with a significant Tax Receivable Agreement obligation - Primary liquidity sources as of March 30, 2025, include **$12.9 million** in cash and **$71.7 million** available under the 2025 Revolver Facility[161](index=161&type=chunk) - The company estimates its future payment obligation under the Tax Receivable Agreement (TRA) to be **$316.2 million** as of March 30, 2025[168](index=168&type=chunk) - A TRA payment of **$7.7 million** was made in Q1 2025 for tax year 2023, and a payment of **$9.0 million** for tax year 2024 is expected within the next 12 months[168](index=168&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=49&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company reports no material changes to its market risk exposure since the disclosures in its most recent Annual Report on Form 10-K - There have been **no material changes** to the company's market risk exposure as described in the most recent Annual Report on Form 10-K[184](index=184&type=chunk) [Item 4. Controls and Procedures](index=49&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 30, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that disclosure controls and procedures were **effective** as of the end of the reporting period[185](index=185&type=chunk) - **No material changes** to internal control over financial reporting were identified during the quarter[186](index=186&type=chunk) [Part II: Other Information](index=50&type=section&id=Part%20II%20Other%20Information) [Item 1. Legal Proceedings](index=50&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings, but management believes their ultimate outcome will not materially affect the financial statements - Information regarding legal proceedings is **incorporated by reference** from Note 13. Contingencies[188](index=188&type=chunk) [Item 1A. Risk Factors](index=50&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the company's risk factors have been reported since the latest Annual Report on Form 10-K - **No material changes** to the risk factors from the latest Form 10-K are reported[189](index=189&type=chunk) [Item 5. Other Information](index=50&type=section&id=Item%205.%20Other%20Information) Director Gerard J. Hart adopted a Rule 10b5-1 trading plan on March 14, 2025, allowing for the potential sale of up to **29,821 shares** of common stock - Director Gerard J. Hart adopted a **Rule 10b5-1 trading plan** on March 14, 2025, for the potential sale of up to **29,821 shares**[193](index=193&type=chunk)