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

Financial Performance Overview First Quarter 2025 Financial Highlights Portillo's Q1 2025 results were mixed, with slight revenue and operating income increases, but declining net income and Adjusted EBITDA | Financial Metric | Q1 2025 | Change vs. Q1 2024 | | :--- | :--- | :--- | | Total Revenue | $176.4 million | +6.4% | | Same-Restaurant Sales | +1.8% | N/A | | Operating Income | $10.4 million | +$0.3 million | | Net Income | $4.0 million | -$1.4 million | | Restaurant-Level Adjusted EBITDA | $36.7 million | +$0.3 million | | Adjusted EBITDA | $21.2 million | -$0.6 million | - CEO Michael Osanloo stated the team performed well through challenging macro conditions, driven by the launch of Portillo's Perks and marketing. The company is carrying momentum into Q2 and remains confident in driving traffic and sales[3] First Quarter 2025 Detailed Financial Results Total revenue grew 6.4% to $176.4 million, driven by new restaurants and same-restaurant sales, but rising expenses and taxes led to a net income decrease - Total revenue increased by $10.6 million (6.4%), with $7.9 million from new restaurants and $2.6 million from a 1.8% increase in same-restaurant sales[6] - The 1.8% same-restaurant sales growth was driven by a 4.9% increase in average check (from menu price hikes and product mix), which was partially offset by a 3.1% decrease in transactions[6][9] - Total restaurant operating expenses increased by 8.0% to $139.8 million, driven by new restaurant openings, a 3.4% increase in commodity prices, and higher labor expenses[10] - Net income decreased by $1.4 million (25.3%) to $4.0 million, primarily due to a $2.5 million increase in income tax expense, which was partially offset by higher operating income and lower interest expense[13] - Adjusted EBITDA decreased by 2.6% to $21.2 million, while Restaurant-Level Adjusted EBITDA increased slightly by 0.8% to $36.7 million[14] Business Operations and Strategy Recent Developments and Strategic Initiatives Strategic initiatives include loyalty program launch, expanded advertising, operational improvements, and menu price adjustments, alongside breakfast menu testing - Key traffic-driving strategies for 2025 include: - Launch of the 'Portillo's Perks' loyalty program - Advertising beyond the Chicagoland area - Operational improvements in speed, accuracy, and hospitality - Driving kiosk usage[6] - The company is testing a breakfast menu at five locations in Chicagoland, an initiative that began early in the second quarter[6] - To address cost pressures, menu prices were increased by approximately 1.5% in January 2025 and an additional 1.0% in April 2025[4][9] Restaurant Development No new restaurants opened in Q1 2025, but 12 new units are planned for the year, focusing on Sunbelt expansion, new markets, and a walk-up format - No new restaurants were opened during the first quarter ended March 30, 2025[16] - The company plans to open 12 new restaurants in fiscal 2025, with a focus on the Sunbelt (primarily Texas) and new market entries in Atlanta and San Antonio in the second half of the year[17] - The first walk-up restaurant format is planned to open later in 2025[17] Outlook and Guidance Fiscal 2025 Financial Targets Portillo's updated fiscal 2025 targets, raising same-restaurant sales growth, narrowing revenue growth, and lowering G&A expenses, with other targets unchanged | Metric | Prior Target | Updated Target | | :--- | :--- | :--- | | Same-restaurant sales | Flat to +2% | 1% to 3% | | Revenue growth | 11% to 12% | 10% to 12% | | General and administrative expenses | $82 - $84 million | $80 - $82 million | | Adjusted EBITDA growth* | 6% to 8% | 5% to 8% | | Unit growth | 12 new units | 12 new units (Unchanged) | | Restaurant-level adjusted EBITDA margin* | 22.5% to 23% | 22.5% to 23% (Unchanged) | Long-Term Financial Targets Long-term targets include 12-15% annual unit growth, low single-digit same-restaurant sales, mid-teens revenue growth, and low-teens Adjusted EBITDA growth | Metric | Long-Term Target | | :--- | :--- | | Annual unit growth | 12% - 15% | | Same-restaurant sales | Low single digits | | Revenue growth | Mid teens | | Adjusted EBITDA growth* | Low teens | Consolidated Financial Statements Consolidated Statements of Operations Q1 2025 revenues increased to $176.4 million with stable operating income, but net income attributable to Portillo's Inc. decreased to $3.3 million, resulting in diluted EPS of $0.05 | (in thousands, except per share data) | Q1 2025 | Q1 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 | Consolidated Balance Sheets As of March 30, 2025, total assets remained stable at $1.50 billion, liabilities slightly decreased, cash and equivalents decreased to $12.9 million, and stockholders' equity increased | (in thousands) | March 30, 2025 | December 29, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $12,936 | $22,876 | | Total Assets | $1,499,296 | $1,500,086 | | Total Liabilities | $1,003,890 | $1,009,983 | | Total Stockholders' Equity | $495,406 | $490,103 | Consolidated Statements of Cash Flows Net cash from operating activities increased slightly to $9.5 million in Q1 2025, while investing activities used $19.0 million, resulting in a net cash decrease of $9.9 million and an ending cash balance of $12.9 million | (in thousands) | Q1 2025 | Q1 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 | | Cash at End of Period | $12,936 | $13,184 | Non-GAAP Financial Measures and Key Metrics Selected Operating Data Q1 2025 key operating metrics showed a 1.8% increase in same-restaurant sales, but Average Unit Volume (AUV) decreased to $8.7 million, and both Adjusted EBITDA Margin and Restaurant-Level Adjusted EBITDA Margin contracted | Metric | Q1 2025 | Q1 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% | Reconciliation of Non-GAAP Measures For Q1 2025, Net Income of $4.0 million was reconciled to Adjusted EBITDA of $21.2 million, and Operating Income of $10.4 million was reconciled to Restaurant-Level Adjusted EBITDA of $36.7 million, by adjusting for non-cash and corporate expenses Reconciliation of Net Income to Adjusted EBITDA (Q1 2025, in thousands) | Line Item | Amount | | :--- | :--- | | Net income | $3,990 | | Depreciation and amortization | $7,040 | | Interest expense | $5,749 | | Income tax expense | $1,360 | | Equity-based compensation | $1,950 | | Other adjustments | $514 | | Adjusted EBITDA | $21,209 | Reconciliation of Operating Income to Restaurant-Level Adjusted EBITDA (Q1 2025, in thousands) | Line Item | Amount | | :--- | :--- | | Operating income | $10,381 | | General and administrative expenses | $18,903 | | Pre-opening expenses | $508 | | Depreciation and amortization | $7,040 | | Other adjustments | ($176) | | Restaurant-Level Adjusted EBITDA | $36,656 | Definitions of Key Metrics The report defines key performance indicators including 'Change in Same-Restaurant Sales' for comparable restaurants, and non-GAAP measures 'Adjusted EBITDA' and 'Restaurant-Level Adjusted EBITDA' for evaluating core operating performance - Change in Same-Restaurant Sales is the percentage change in year-over-year revenue for the Comparable Restaurant Base, defined as restaurants open for at least 24 full fiscal periods. For Q1 2025, this base included 74 restaurants[20] - Adjusted EBITDA is defined as net income adjusted for depreciation, amortization, interest, taxes, and other non-cash or non-core items to evaluate ongoing operating performance[24][41] - Restaurant-Level Adjusted EBITDA is defined as revenue less restaurant-level operating expenses (food, labor, occupancy, other), excluding corporate overhead and depreciation. It is used to evaluate the performance and profitability of individual restaurants[24][45]