Potbelly(US:PBPB)2024-11-07 21:29Shop Operations - As of September 29, 2024, the total number of shops is 435, comprising 345 company-operated and 90 franchise-operated locations[75]. - Comparable store sales for the quarters ended September 29, 2024, and September 24, 2023, had an average of 341 and 360 shops, respectively, indicating a focus on existing shop performance[77]. - The company experienced a net decrease of 20 company-operated shops due to refranchising, while franchise-operated shops increased by 20[75]. - The average start-up period for new shops is 10 to 13 weeks, during which initial sales volumes are typically higher[78]. - Franchise-operated shop openings are expected to increase as franchisees fulfill development commitments, impacting franchise revenue positively[80]. Financial Performance - Total revenues decreased by $19.7 million, or 5.4%, to $345.97 million for the year to date ended September 29, 2024, compared to $365.66 million for the year to date ended September 24, 2023[102]. - Sandwich shop sales decreased by $7.6 million, or 6.4%, to $110.8 million for the quarter ended September 29, 2024, compared to $118.3 million for the quarter ended September 24, 2023[85]. - Sandwich shop sales decreased by $26.1 million, or 7.3%, to $333.9 million for the year to date ended September 29, 2024, from $360.0 million for the same period in 2023, primarily due to refranchising of 34 company-operated shops[106]. - Net income attributable to Potbelly Corporation increased by $2.2 million, or 149.8%, to $3.7 million during the quarter ended September 29, 2024[99]. - Net income increased significantly by $33.5 million, or 1185.9%, to $36.3 million for the year to date ended September 29, 2024, compared to $2.8 million in the prior year[104]. Cost Management - Food, beverage, and packaging costs decreased by $3.4 million, or 10.4%, to $29.5 million during the quarter ended September 29, 2024[87]. - Labor and related expenses decreased by $1.9 million, or 5.6%, to $32.3 million during the quarter ended September 29, 2024[88]. - Occupancy expenses decreased by $0.9 million, or 6.7%, to $11.8 million during the quarter ended September 29, 2024[89]. - Other operating expenses decreased by $1.0 million, or 4.8%, to $20.3 million during the quarter ended September 29, 2024[90]. - Food, beverage, and packaging costs decreased by $10.4 million, or 10.3%, to $90.0 million, representing 27.0% of sandwich shop sales for the year to date ended September 29, 2024, down from 27.9% in the prior year[108]. - Labor and related expenses decreased by $11.7 million, or 10.8%, to $96.8 million, accounting for 29.0% of sandwich shop sales, down from 30.2%[109]. - Occupancy expenses decreased by $3.0 million, or 7.6%, to $36.1 million, remaining consistent at 10.8% of sandwich shop sales[110]. Strategic Initiatives - The company has implemented a "Traffic-Driven Profitability" Five-Pillar strategic plan to drive growth, including initiatives for quality food, customer experience, and digital engagement[73]. - The Franchise Growth Acceleration Initiative aims to increase franchise units through multi-unit agreements and refranchising, with cash consideration for current shops and development fees[74]. Revenue Streams - Franchise royalties, fees, and rental income increased by $1.9 million, or 79.2%, to $4.4 million during the quarter ended September 29, 2024, from $2.4 million during the quarter ended September 24, 2023[86]. - Revenue from franchise royalties, fees, and rental income increased by $6.4 million, or 113.4%, to $12.1 million during the year to date ended September 29, 2024, driven by an increase in the number of franchised shops[107]. Cash Flow and Financing - Cash balance at the end of the quarter was $11.9 million, with total liquidity of $38.2 million, compared to $31.7 million and $30.9 million, respectively, at the end of the previous year[127]. - Net cash provided by operating activities decreased to $13.06 million for the year to date ended September 29, 2024, from $14.50 million in the prior year[129]. - Net cash used in investing activities increased to $13.00 million for the year to date ended September 29, 2024, from $10.89 million in the previous year, driven by higher capital expenditures[130]. - Net cash used in financing activities decreased to $22.65 million for the year to date ended September 29, 2024, compared to net cash provided of $12.46 million in the prior year, primarily due to repayment of the Term Loan[131]. - The company entered into a new Revolving Facility with an aggregate commitment of $30 million, which expires on February 7, 2027[132]. Stock and Debt Management - The stock repurchase program authorized on May 7, 2024, allows for up to $20 million in repurchases over the next three years, with 29,113 shares repurchased for $0.2 million in the latest quarter[137]. - The company recognized a loss on extinguishment of debt of $2.4 million for the year to date ended September 29, 2024, following the repayment of the Term Loan[136]. - Interest expense decreased to $0.7 million from $2.5 million, reflecting lower interest rates and reduced average borrowings[119]. Accounting and Risk Management - The company's financial statements are prepared in accordance with U.S. GAAP, requiring management to make estimates that could differ from actual results, with no significant changes in critical accounting estimates since the last annual report[140]. - Market risk exposures have not changed materially since December 31, 2023, as noted in the company's Annual Report[142].