Potbelly(PBPB) - 2025 Q2 - Quarterly Results

Executive Summary & Business Highlights This section provides an overview of Potbelly Corporation's strong second fiscal quarter 2025 performance, strategic highlights, and updated financial guidance Second Fiscal Quarter 2025 Performance Overview Potbelly Corporation reported strong second fiscal quarter 2025 results, with system-wide sales growing by 6.7% and company-operated same-store sales increasing by 3.2%, accompanied by positive traffic growth. The company also expanded its footprint with eight new shop openings and secured 54 additional franchise shop commitments Metric Comparison (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change (YoY) | | :-------------------------------- | :------ | :------ | :----------- | | System-wide sales growth | 6.7% | N/A | +6.7% | | Company-operated same-store sales growth | 3.2% | N/A | +3.2% | | Total revenues | $123.7 million | $119.7 million | +3.4% | | GAAP net income attributable to Potbelly Corporation | $2.5 million | $34.7 million | -92.8% | | GAAP diluted EPS | $0.08 | $1.13 | -92.9% | | Adjusted net income attributable to Potbelly Corporation | $2.9 million | $2.5 million | +16.0% | | Adjusted diluted EPS | $0.09 | $0.08 | +12.5% | | Adjusted EBITDA | $9.6 million | $8.5 million | +13.0% | - Eight new Potbelly shops were opened during the second quarter, alongside 54 new franchise shop commitments, bringing the total open and committed shop count to 816 as of June 29, 2025[1][6] CEO Commentary CEO Bob Wright expressed satisfaction with the strong Q2 performance, highlighting top-line momentum, positive traffic, new unit growth exceeding expectations, shop-level margin expansion, and adjusted EBITDA near the high end of guidance. The results are attributed to the Five-Pillar Operating Strategy, with future focus on menu innovation, digital asset investments, shop footprint modernization, and prudent cost controls for balanced growth - The company's strong Q2 performance is a result of the Five-Pillar Operating Strategy, driving top-line momentum, positive traffic, and new unit growth[3] - Future strategic focus areas include menu innovation, investments in consumer-facing digital assets, growing and modernizing the shop footprint, and exercising prudent cost controls to achieve balanced growth and incremental flow-through to corporate earnings[3] Financial Outlook and Guidance Potbelly Corporation introduced its guidance for the third fiscal quarter of 2025 and raised its full-year 2025 guidance, reflecting confidence in continued positive same-store sales growth and Adjusted EBITDA performance 3Q'25 Guidance | Metric | Guidance Range | | :---------------------- | :------------- | | Same Store Sales % Growth | 3.25% to 4.25% | | Adjusted EBITDA | $9.0M to $10.0M | Full Year 2025 Guidance | Metric | Guidance Range | | :---------------------- | :------------- | | Same Store Sales % Growth | 2.0% to 3.0% | | New Unit Growth | At least 38 shops | | Adjusted EBITDA | $34M to $35M | Operational Updates This section details Potbelly's expansion efforts through new shop openings and franchise commitments, alongside its share repurchase activities Development Update During the second quarter, Potbelly continued its expansion with new shop openings and significant franchise commitments, contributing to a growing system-wide footprint - Eight new Potbelly shops were opened during the second quarter[6] - The Company signed 54 new franchise shop commitments in Q2, bringing the total number of open and committed shops to 816 as of June 29, 2025[6] Share Repurchase Program Potbelly actively repurchased shares under its authorized program during the second quarter, demonstrating a commitment to returning value to shareholders - Approximately 113,000 shares of common stock were repurchased for a total of approximately $1.0 million during the second quarter[7] - As of June 29, 2025, $16.5 million remained available under the three-year share repurchase program authorized on May 7, 2024[7] Corporate Information This section provides essential corporate details, including investor communication, company background, definitions of key financial terms, and forward-looking statement disclaimers Conference Call Details Details for the conference call and audio webcast to discuss the second fiscal quarter 2025 results were provided, along with information for accessing the replay - A conference call and audio webcast was scheduled for August 6, 2025, at 5:00 p.m. Eastern Time to discuss the results[9] - An audio replay will be available through Wednesday, August 13, 2025, via phone and a web-based archive on the company's investor relations website[10] About Potbelly Corporation Potbelly Corporation is an iconic neighborhood sandwich shop concept known for its warm, toasty sandwiches and friendly service, operating for over 40 years with a significant presence across the United States - Potbelly Corporation is a neighborhood sandwich concept established in Chicago in 1977, offering warm sandwiches, salads, and shakes[11] - The company operates more than 440 shops in the United States, including over 90 franchised locations[11] Definitions of Key Terms This section provides clear definitions for various financial and operational terms used throughout the press release, including revenue components, sales metrics, and non-GAAP measures, to ensure consistent understanding - Revenues are defined as net company-operated sandwich shop sales and franchise royalties and fees[12] - Company-operated same-store sales represent the year-over-year change in sales for comparable company-operated stores open for 15 months or longer[15] - System-wide sales include sales from both company-operated and franchised shops, net of promotional allowances, discounts, and employee meals[15] Non-GAAP Financial Measures The company utilizes several non-GAAP financial measures, such as Adjusted EBITDA, Adjusted Net Income, and Shop-Level Profit, to provide investors with greater transparency and a clearer view of underlying business performance, excluding certain non-cash and non-recurring items - Non-GAAP measures like Adjusted EBITDA, Adjusted Net Income, and Adjusted Diluted EPS are used by management to evaluate performance and ensure comparability of financial results by excluding certain non-cash charges and other items not reflective of underlying business performance[13][14] - Shop-level profit and shop-level profit margin are key metrics for evaluating the profitability of incremental sales and overall shop performance[15][16] - The presentation of these non-GAAP measures is intended to assist investors in assessing operating performance but should not be considered in isolation or as a substitute for GAAP results[17] Forward-Looking Statements This section provides a standard disclaimer regarding forward-looking statements, outlining the inherent risks and uncertainties that could cause actual results to differ materially from projections, and advises against undue reliance on such statements - Forward-looking statements represent the Company's expectations or beliefs concerning future events and include statements related to future financial position, results of operations, growth, profitability, and guidance[18] - These statements involve risks and uncertainties, such as competition, economic conditions, labor costs, consumer preferences, and the success of business strategies, which could cause actual results to differ materially[19] - The Company undertakes no obligation to publicly update or revise any forward-looking statement, except as required by law[19] Consolidated Financial Statements This section presents Potbelly's detailed consolidated financial statements, including statements of operations, balance sheets, cash flows, and reconciliations of non-GAAP measures Consolidated Statements of Operations and Margin Analysis The consolidated statements of operations show a 3.4% increase in total revenues for Q2 2025 compared to Q2 2024, driven by higher sandwich shop sales and franchise income. However, GAAP net income attributable to Potbelly Corporation significantly decreased due to a prior-year income tax benefit Q2 2025 vs Q2 2024 Consolidated Statements of Operations (amounts in thousands) | Metric | Q2 2025 | % of Revenues | Q2 2024 | % of Revenues | YoY Change | | :------------------------------------------ | :------ | :------------ | :------ | :------------ | :--------- | | Sandwich shop sales, net | $118,396 | 95.7% | $115,536 | 96.5% | +2.5% | | Franchise royalties, fees and rent income | $5,313 | 4.3% | $4,161 | 3.5% | +27.7% | | Total revenues | $123,709 | 100.0% | $119,697 | 100.0% | +3.4% | | Food, beverage and packaging costs | $31,110 | 26.3% (of shop sales) | $31,306 | 27.1% (of shop sales) | -0.6% | | Labor and related expenses | $33,210 | 28.0% (of shop sales) | $32,313 | 28.0% (of shop sales) | +2.8% | | General and administrative expenses | $13,362 | 10.8% (of total revenues) | $11,866 | 9.9% (of total revenues) | +12.6% | | Income from operations | $3,702 | 3.0% | $4,119 | 3.4% | -10.2% | | Income tax expense (benefit) | $665 | 0.5% | $(30,982) | (25.9%) | N/A | | Net income attributable to Potbelly Corporation | $2,488 | 2.1% | $34,712 | 29.0% | -92.8% | | Diluted EPS | $0.08 | N/A | $1.13 | N/A | -92.9% | Consolidated Balance Sheets The balance sheet as of June 29, 2025, shows an increase in total assets and stockholders' equity compared to December 29, 2024, with notable changes in cash and cash equivalents and a reduction in long-term debt Consolidated Balance Sheet Highlights (amounts in thousands) | Asset/Liability/Equity | Jun 29, 2025 | Dec 29, 2024 | Change | | :-------------------------------- | :----------- | :----------- | :----- | | Cash and cash equivalents | $16,187 | $11,663 | +$4,524 | | Total current assets | $36,994 | $33,201 | +$3,793 | | Property and equipment, net | $54,391 | $50,533 | +$3,858 | | Total assets | $265,241 | $263,146 | +$2,095 | | Total current liabilities | $73,392 | $65,233 | +$8,159 | | Long-term debt, net of current portion | $0 | $4,000 | -$4,000 | | Total liabilities | $204,144 | $205,198 | -$1,054 | | Total stockholders' equity | $61,355 | $58,387 | +$2,968 | Consolidated Statements of Cash Flows For the year-to-date ended June 29, 2025, Potbelly generated significantly more cash from operating activities compared to the prior year, while cash used in investing and financing activities also saw changes, resulting in a positive net change in cash YTD Cash Flow Summary (amounts in thousands) | Cash Flow Activity | YTD Jun 29, 2025 | YTD Jun 30, 2024 | Change | | :----------------------------------- | :--------------- | :--------------- | :----- | | Net cash provided by operating activities | $22,366 | $3,850 | +$18,516 | | Net cash used in investing activities | $(10,755) | $(8,460) | -$2,295 | | Net cash used in financing activities | $(7,087) | $(20,856) | +$13,769 | | Net change in cash and cash equivalents and restricted cash | $4,524 | $(25,466) | +$29,990 | | Cash and cash equivalents and restricted cash at end of period | $17,002 | $9,071 | +$7,931 | Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures This section provides detailed reconciliations of non-GAAP financial measures, including Adjusted Net Income, Adjusted EBITDA, and Shop-Level Profit, to their most directly comparable GAAP measures, highlighting adjustments for items like impairment, debt extinguishment, and legal settlements Adjusted Net Income Attributable to Potbelly Corporation (amounts in thousands) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :------------------------------------------ | :------ | :------ | :------- | :------- | | Net income attributable to Potbelly Corporation, as reported | $2,488 | $34,712 | $2,426 | $31,945 | | Total adjustments after income tax | $435 | $(32,188) | $540 | $(29,192) | | Adjusted net income attributable to Potbelly Corporation | $2,923 | $2,524 | $2,966 | $2,753 | | Adjusted diluted EPS | $0.09 | $0.08 | $0.10 | $0.09 | Adjusted EBITDA (amounts in thousands) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :------------------------------------------ | :------ | :------ | :------- | :------- | | Net income attributable to Potbelly Corporation, as reported | $2,488 | $34,712 | $2,426 | $31,945 | | EBITDA | $7,204 | $6,927 | $11,028 | $7,586 | | Total adjustments to EBITDA | $2,428 | $1,594 | $4,126 | $6,615 | | Adjusted EBITDA | $9,632 | $8,521 | $15,154 | $14,201 | Shop-level Profit and Margin (amounts in thousands) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :------------------------------------------ | :------ | :------ | :------- | :------- | | Shop-level profit | $19,746 | $18,110 | $34,682 | $32,621 | | Shop-level profit margin | 16.7% | 15.7% | 15.3% | 14.6% | Selected Operating Data The selected operating data provides key performance indicators for Potbelly's operations, including company-operated same-store sales growth, system-wide sales, and detailed shop count changes for both company-operated and franchised locations Selected Operating Data Highlights | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :-------------------------------- | :------ | :------ | :------- | :------- | | Company-operated same store sales | 3.2% | 0.4% | 2.1% | 0.1% | | Sales from company-operated shops, net (in thousands) | $118,396 | $115,536 | $227,398 | $223,113 | | Sales from franchise shops, net (in thousands) | $35,774 | $28,934 | $67,433 | $55,545 | | System-wide sales (in thousands) | $154,170 | $144,470 | $294,831 | $278,658 | Shop Count Changes | Shop Type | Beginning of Q2 2025 | Openings (Q2) | Closures (Q2) | End of Q2 2025 | | :-------------------- | :------------------- | :------------ | :------------ | :------------- | | Company-operated shops | 341 | 2 | (3) | 340 | | Franchised shops | 103 | 6 | (2) | 107 | | System-wide shops | 444 | 8 | (5) | 447 | Footnotes to Financial Statements This section provides explanatory footnotes detailing the nature of adjustments made in the reconciliation of non-GAAP financial measures, clarifying specific costs and their impact on reported figures - Adjustment (1) includes costs related to impairment of long-lived assets, loss on disposal of property and equipment, and shop closure expenses[34] - Adjustment (3) covers costs associated with the Franchise Growth Acceleration Initiative, aimed at growing franchise units through multi-unit development agreements, potentially including refranchising company-operated shops[34] - Adjustment (5) accounts for the income tax impacts of the other listed adjustments based on the Company's effective tax rate[34]