Portillo’s(PTLO) - 2025 Q1 - Quarterly Report

Part I: Financial Information Item 1. Financial Statements (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 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 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 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 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][42] - 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][59] - 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] - 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] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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] Consolidated Results of Operations 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] - 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] - 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] - 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] Selected Operating Data and Non-GAAP Financial Measures 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 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] - The company estimates its future payment obligation under the Tax Receivable Agreement (TRA) to be $316.2 million as of March 30, 2025[168] - 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] Item 3. Quantitative and Qualitative Disclosures About Market Risk 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] Item 4. Controls and Procedures 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] - No material changes to internal control over financial reporting were identified during the quarter[186] Part II: Other Information Item 1. Legal Proceedings 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] Item 1A. Risk Factors 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] Item 5. Other Information 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]