Potbelly(US:PBPB)2024-03-08 02:33Financial Data and Key Metrics Changes - Revenues in Q4 2023 increased approximately 4.7% to $125.7 million, partially offset by the short-term revenue impact of recent refranchising transactions and benefiting from the 53rd week [16][19] - Fourth quarter adjusted EBITDA was $7.5 million, or 5.9% of total revenue, approximately flat year-over-year [19] - Net income for the quarter was $2.7 million, with adjusted net income decreasing by $1.9 million compared to the prior year [19][20] - Average unit volumes reached $1.3 million, with a target of achieving 16% shop level margins [11][19] Business Line Data and Key Metrics Changes - Same-store sales growth was 6.3% in Q4, driven primarily through traffic growth [32][39] - Digital business represented approximately 40% of total shop sales, an increase of 150 basis points year-over-year [6][39] - Shop level margins improved by 150 basis points year-over-year to 15.7% for the quarter [12][19] Market Data and Key Metrics Changes - System-wide sales grew by approximately 11.4% to $147.5 million [39] - Labor expenses were 28.8% of sales, a 200 basis point improvement versus the prior year [40] - General and administrative expenses were approximately 10.1% of system-wide sales for Q4 [41] Company Strategy and Development Direction - The company is focused on a five-pillar strategy aimed at enhancing customer experience and driving profitability [4][21] - Long-term growth targets include same-store sales growth in the low to mid-single digits, unit growth in the low double digits, and adjusted EBITDA growth in the low to mid-double digits [5][20] - The company plans to achieve approximately 10% unit growth in 2024, with a goal of reaching 2,000 units in the U.S. [11][15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving high single to low double-digit adjusted EBITDA growth despite headwinds from refranchising [42][43] - The company anticipates a stabilization in wage inflation and low single-digit increases in commodity costs for the upcoming year [76] - Management highlighted the importance of the Potbelly Perks loyalty program, which saw an 87% increase in member acquisition during Q4 [33][107] Other Important Information - The company signed a new three-year $30 million revolving credit facility, providing significant financial flexibility [42] - The 53rd week contributed approximately $7.5 million in sales, although it had a slight negative impact on average weekly sales [98][100] Q&A Session Summary Question: Clarification on FY 2024 guidance for adjusted EBITDA - Management confirmed that the guidance for adjusted EBITDA growth is in the high single-digit to low double-digit range [47][48] Question: Pipeline for new franchise units and potential headwinds - Management indicated strong growth in the pipeline for new franchise units and no significant slowdowns reported [54] Question: Recent price increases and their impact on guidance - Management noted a gross price increase of 3.8% in Q4 and anticipated low single-digit price increases for the upcoming year [79] Question: Outlook for commodity prices and labor costs - Management expects low single-digit increases in commodity costs and stabilization in wage inflation [76] Question: Impact of the 53rd week on sales and margins - Management explained that the 53rd week added approximately $7.5 million in sales but had a slight negative impact on margins due to lower volume [98][100]