Potbelly(US:PBPB)2024-11-09 20:30Financial Data and Key Metrics Changes - System-wide sales were approximately $139.2 million, an increase of 1%, driven by system-wide unit growth [29] - Revenues in the third quarter were $115.1 million, with company-operated shop revenue of $110.8 million, lower year-over-year due to last year's refranchising efforts [29] - Franchise revenue was $4.4 million, up 79% relative to the third quarter last year, driven by a 30% increase in franchised units [29] - Adjusted EBITDA was $8.7 million or 7.5% of total revenue, a 19% growth year-over-year [34] - Net income for the quarter was $3.7 million, with adjusted net income of $2.5 million, a $1.4 million increase versus the prior year [34] Business Line Data and Key Metrics Changes - Company-operated same-store sales were down 1.8%, with a 3.8% decrease in traffic and a 2% increase in average check [42] - Food, beverage, and packaging costs were 26.6% of shop sales, a 120 basis point improvement versus the prior year [31] - Labor expenses were 29.1% of sales, a 20 basis point increase due to employee group insurance costs [31] - General and administrative expenses were 7.6%, a decrease of 100 basis points versus the prior year [33] Market Data and Key Metrics Changes - Digital business represented over 38% of total shop sales, an increase of approximately 100 basis points versus last year [21] - The Potbelly Perks loyalty program saw increased frequency across all customer cohorts, indicating strong engagement [23] Company Strategy and Development Direction - The company is focused on a 5-pillar strategic plan emphasizing craveable quality food, digital-driven awareness, and franchise-focused development [7][10] - The company opened 8 new shops in the third quarter, with expectations to open 9 to 11 additional shops in Q4, totaling 24 to 26 shops for the year [26][27] - The company aims to reach 2,000 units in the U.S. and anticipates continued growth through 2025 [28] Management's Comments on Operating Environment and Future Outlook - Management noted a challenging consumer environment but emphasized a focus on controllable factors for long-term sustainable growth [8] - The company expects Q4 same-store sales growth to range from negative 2.5% to negative 0.5% and adjusted EBITDA between $7 million and $8 million [36] - Management expressed confidence in the growth trajectory due to signed leases and ongoing franchise recruitment efforts [65] Other Important Information - The company has completed the system-wide rollout of Potbelly Craft Refreshers, which are organic and non-GMO beverages [20] - The company purchased approximately 29,000 shares of common stock for about $230,000 as part of its long-term capital allocation strategy [35] Q&A Session Summary Question: Can you provide more detail on same-store sales trends and traffic? - Management noted that the quarter improved, with early challenges from holidays and weather impacting performance, but momentum has carried into Q4 [41] Question: What is the outlook for unit development in 2025? - Management indicated that they have signed leases for more locations than they will open this year, suggesting strong growth momentum for 2025 [46][65] Question: How is the Perks program performing since its reconfiguration? - Management reported that the revamped program continues to perform well, with increased membership and frequency across all cohorts [67] Question: What are the expectations for marketing spend heading into 2025? - Management plans to continue escalating marketing spend, currently around 3%, while ensuring effective testing of marketing initiatives [75]