Potbelly(US:PBPB)2021-08-08 04:59Financial Data and Key Metrics Changes - Revenues totaled $97.5 million, an increase of 24.9% compared to Q1 2021, with same-store sales increasing by 70% compared to Q2 2020 [10][25] - EBITDA improved significantly to positive $1.0 million from a loss of negative $10.0 million in Q1 2021, and adjusted EBITDA was $1.9 million for Q2 2021, a substantial improvement compared to negative $6.6 million in Q1 2021 [27] - The balance sheet strengthened with a net cash increase of $2 million, ending the quarter with $11.8 million of cash on hand [15][32] Business Line Data and Key Metrics Changes - All shop types gained sales growth momentum, with suburban and drive-thru locations showing significant strength, while CBD and airport locations lagged but are trending positively [11][33] - Average Unit Volume (AUV) rebounded nicely, up 23.8% compared to Q1 2021, and same-store sales continued to trend positively at 34.4% in July [13][22] Market Data and Key Metrics Changes - The recovery across all shop types is evident, with drive-thru, suburban, urban, and university locations trending above pre-pandemic levels [33] - Catering sales nearly doubled in the quarter, indicating a rebound in the catering business [35] Company Strategy and Development Direction - The company is focused on a Traffic-Driven Profitability strategy, with significant progress on initiatives such as a new simplified menu and a refreshed tech stack [17][38] - The priorities for the second half of the year include strengthening unit-level economics and accelerating shop-level profitability [39] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's future, expecting continued positive cash flow and profitability in the second half of 2021 [40][92] - The company aims to open 3 to 5 new franchise shops in 2021, with new locations already opened in Tampa, Florida, and Cary, North Carolina [41][54] Other Important Information - The company appointed Larry Strain as Chief Development Officer, bringing over 25 years of experience in real estate and franchise development [16] - The new Tech Stack launched in July includes a mobile app, website, and loyalty program integration, enhancing customer experience [19][48] Q&A Session Summary Question: Update on human capital initiatives supporting the Simplified Menu and Tech Stack - Management highlighted the importance of human capital and reported success in staffing locations, with new training materials developed for the new menu [56][58] Question: Thoughts on the appointment of Larry Strain and franchising process - Management expressed excitement about Larry's experience and emphasized the importance of unit-level economics for successful franchising [61][63] Question: Context on underlying cost inflation and visibility for the back half of the year - Management indicated that 90% of the cost basket is locked, mitigating the impact of inflation, and emphasized effective labor management strategies [66][69] Question: Real estate optimization plan and temporarily closed stores - Management confirmed that the bulk of the optimization work was completed last year, with only a few temporary closures remaining [70][72] Question: Expectations for G&A run rate in the second half - Management aims to manage G&A to a sub 9% of sales level, with costs expected to move with business growth [74] Question: Menu pricing strategy heading into the second half - Management discussed a careful approach to pricing, focusing on check growth rather than traditional price increases, aligning with customer expectations [78][82] Question: Marketing plans for the upcoming menu launch - Management outlined an integrated marketing plan leveraging digital channels and the Perks program to promote the new menu [84][88]