Portillo’s(PTLO) - 2024 Q2 - Quarterly Results

Financial Highlights and Business Overview This section provides an overview of Portillo's Q2 2024 financial performance, highlighting key results and recent market trends Second Quarter 2024 Financial Highlights Portillo's reported a 7.5% increase in total revenue to $181.9 million for Q2 2024, primarily driven by new restaurant openings, though same-restaurant sales saw a slight decline of 0.6% Q2 2024 Financial Highlights vs. Q2 2023 | Financial Metric | Q2 2024 | Q2 2023 | Change | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $181.9M | $169.2M | +$12.7M | +7.5% | | Same-Restaurant Sales | -0.6% | +5.9% | - | - | | Operating Income | $18.1M | $17.4M | +$0.7M | +4.0% | | Net Income | $8.5M | $9.9M | -$1.4M | -14.1% | | Restaurant-Level Adjusted EBITDA | $44.6M | $42.7M | +$1.8M | +4.2% | | Adjusted EBITDA | $29.9M | $29.2M | +$0.6M | +2.1% | - The CEO expressed confidence in the company's strategic plan to navigate challenges and confirmed plans to open at least 10 restaurants in 2024, with a focus on lowering build costs to support returns on investment[1] Recent Developments and Trends Revenue growth in the quarter was primarily fueled by new restaurant openings, as same-restaurant sales declined by 0.6%, a sharp contrast to the 5.9% growth seen in the same quarter of 2023 - The 7.5% growth in total revenue was mainly attributed to new restaurants opened in 2023 and 2024[3] - Same-restaurant sales declined by 0.6% in Q2 2024, compared to a 5.9% growth in Q2 2023[3] - In June, the company re-tiered some restaurants in higher-cost areas, resulting in an effective price increase of about 1%[3] - Commodity inflation was 6.9% in Q2 2024, an increase from 5.5% in the same quarter of the previous year[4] Detailed Financial Performance Review This section provides a detailed analysis of Portillo's Q2 2024 financial results, examining revenue drivers, expense trends, and overall profitability metrics Revenues Q2 2024 revenue rose to $181.9 million, an increase of $12.7 million year-over-year, primarily driven by new restaurant contributions, partially offset by a 0.6% decrease in same-restaurant sales due to lower transactions - Revenues increased by $12.7 million (7.5%) to $181.9 million, with new restaurants contributing $12.6 million of this increase[5] - The 0.6% decline in same-restaurant sales was attributable to a 2.3% decrease in transactions, which was partially offset by a 1.7% increase in average check[5] - The higher average check was driven by an approximate 4.3% increase in menu prices implemented to address inflationary pressures[5] Operating Expenses Total restaurant operating expenses increased by 8.6% to $137.3 million, primarily due to new restaurant openings and a 6.9% rise in commodity prices, while general and administrative expenses fell by 8.5% to $17.9 million - Total restaurant operating expenses rose by $10.8 million (8.6%), driven by new restaurant operations and a 6.9% increase in commodity prices[6] - General and administrative expenses decreased by $1.7 million (8.5%) to $17.9 million, primarily due to lower equity and variable-based compensation[7] Profitability Operating income for Q2 2024 increased slightly by $0.7 million to $18.1 million, but net income decreased by $1.4 million to $8.5 million due to higher income tax expense, while non-GAAP measures showed modest growth - Operating income increased by $0.7 million to $18.1 million, benefiting from higher revenues and lower G&A expenses, which offset higher restaurant operating costs[7] - Net income decreased to $8.5 million from $9.9 million in the prior year, primarily due to a $2.0 million increase in income tax expense[8] Q2 2024 Non-GAAP Profitability vs. Q2 2023 | Metric | Q2 2024 | Q2 2023 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Restaurant-Level Adjusted EBITDA | $44.6M | $42.7M | +$1.8M | +4.3% | | Adjusted EBITDA | $29.9M | $29.2M | +$0.6M | +2.2% | Development and Outlook This section outlines Portillo's restaurant expansion strategy and provides updated fiscal year 2024 and long-term financial targets Restaurant Development The company expanded its footprint by opening two new restaurants during the first half of 2024 and two more after the quarter's end, bringing the total count to 88, and is on track to open at least 10 new restaurants in fiscal 2024 - Two restaurants were opened in the first half of 2024 in Texas and Arizona, with two more opening after June 30 in Michigan and Texas, bringing the total restaurant count to 88[9][10] - The company plans to open at least six more restaurants in the second half of 2024, aiming for a total of at least 10 new openings for the fiscal year[9] Fiscal 2024 Financial Targets Portillo's has updated its 2024 financial targets, raising its unit growth forecast to 10+ new units and lowering its same-restaurant sales expectation to 'Flat to slightly positive', while revising G&A and capital expenditure guidance downwards Updated Fiscal 2024 Financial Targets | Metric | Prior Target | Current Target | | :--- | :--- | :--- | | Unit growth | 9+ new units | 10+ new units | | Same-restaurant sales | low-single digits | Flat to slightly positive | | 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 | Long-Term Financial Targets The company reaffirmed its long-term financial goals, which include achieving 12-15% annual unit growth, low single-digit same-restaurant sales growth, mid-teens revenue growth, and low teens growth in Adjusted EBITDA Long-Term Financial Targets | Metric | Target | | :--- | :--- | | Unit growth | 12% - 15% | | Same-restaurant sales | Low single digits | | Revenue growth | Mid teens | | Adjusted EBITDA growth | Low teens | Consolidated Financial Statements This section presents Portillo's consolidated financial statements, including the statements of operations, balance sheets, and cash flows for the reported periods Consolidated Statements of Operations For the second quarter ended June 30, 2024, Portillo's generated $181.9 million in revenue, an increase from $169.2 million in the prior-year period, though net income decreased to $8.5 million, resulting in a diluted earnings per share of $0.10 Q2 2024 vs Q2 2023 Income Statement Highlights (in thousands) | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | REVENUES, NET | $181,862 | $169,182 | | Total restaurant operating expenses | $137,293 | $126,451 | | OPERATING INCOME | $18,115 | $17,384 | | NET INCOME | $8,530 | $9,898 | | Diluted Income per common share | $0.10 | $0.12 | Consolidated Balance Sheets As of June 30, 2024, the company's total assets stood at $1.439 billion, compared to $1.386 billion at year-end 2023, with total liabilities increasing to $974.8 million and cash and cash equivalents at $12.4 million Balance Sheet Highlights (in thousands) | Metric | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $12,357 | $10,438 | | Total current assets | $41,945 | $41,919 | | TOTAL ASSETS | $1,438,918 | $1,385,541 | | Total current liabilities | $109,265 | $104,913 | | Total liabilities | $974,796 | $925,431 | | TOTAL STOCKHOLDERS' EQUITY | $464,122 | $460,110 | Consolidated Statements of Cash Flows For the first six months of 2024, net cash provided by operating activities was $41.6 million, an increase from $31.3 million in the same period of 2023, while net cash used in investing activities was $33.8 million and in financing activities was $5.9 million Cash Flow Summary for Two Quarters Ended (in thousands) | Metric | June 30, 2024 | June 25, 2023 | | :--- | :--- | :--- | | NET CASH PROVIDED BY OPERATING ACTIVITIES | $41,628 | $31,309 | | NET CASH USED IN INVESTING ACTIVITIES | ($33,828) | ($37,326) | | NET CASH USED IN FINANCING ACTIVITIES | ($5,881) | ($15,953) | | NET INCREASE (DECREASE) IN CASH | $1,919 | ($21,970) | Non-GAAP Financial Measures and Reconciliations This section details Portillo's non-GAAP financial measures, including definitions of key performance indicators and reconciliations to their most directly comparable GAAP financial measures Key Performance Indicators and Non-GAAP Definitions The company utilizes non-GAAP measures such as Adjusted EBITDA and Restaurant-Level Adjusted EBITDA to assess core operating performance, with Q2 2024 margins at 16.4% and 24.5% respectively, excluding non-core expenses - The company uses key non-GAAP measures including Adjusted EBITDA and Restaurant-Level Adjusted EBITDA to evaluate performance, which it believes are important as they eliminate the impact of expenses not related to core operating performance[29][30][32] Q2 2024 Non-GAAP Margins | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Adjusted EBITDA Margin | 16.4% | 17.3% | | Restaurant-Level Adjusted EBITDA Margin | 24.5% | 25.3% | Reconciliation of Net Income to Adjusted EBITDA For Q2 2024, the company reconciled a Net Income of $8.5 million to an Adjusted EBITDA of $29.9 million, primarily by adding back depreciation, interest, income tax, and equity-based compensation Reconciliation of Net Income to Adjusted EBITDA for Q2 2024 (in thousands) | Description | Amount | | :--- | :--- | | Net income | $8,530 | | Depreciation and amortization | $7,106 | | Interest expense | $6,603 | | Income tax expense | $3,496 | | EBITDA | $25,660 | | Equity-based compensation | $2,890 | | Other Adjustments | $1,316 | | Adjusted EBITDA | $29,866 | Reconciliation of Operating Income to Restaurant-Level Adjusted EBITDA In Q2 2024, Operating Income of $18.1 million was reconciled to Restaurant-Level Adjusted EBITDA of $44.6 million, primarily by adding back corporate-level expenses, including general and administrative costs, pre-opening expenses, and depreciation Reconciliation of Operating Income to Restaurant-Level Adjusted EBITDA for Q2 2024 (in thousands) | Description | Amount | | :--- | :--- | | Operating income | $18,115 | | General and administrative expenses | $17,941 | | Pre-opening expenses | $2,100 | | Depreciation and amortization | $7,106 | | Other Adjustments | ($693) | | Restaurant-Level Adjusted EBITDA | $44,569 |