Portillo's Inc. Q4 FY2024 earnings call

• Recognized and thanked restaurant team members for their hard work. - Fourth quarter saw good top-line momentum with kiosks driving a comp lift of over 1%. - 2024 opened ten new restaurants, two of which were the new more compact future format, reducing size and build cost. - 2025 plans to open twelve new future format restaurants, including first in Georgia and concentrated in back half. - Developing additional formats like future 2.0, airport, and walk-up locations. - Launched first market-wide ad campaign in Dallas-Fort Worth. - Next month launching Portillo's Perks loyalty program, initially focused on driving enrollment to 1.5 million by July. - New COO Tony Darden's three-pronged operational approach: improving drive-through efficiency, training and elevating team accountability/engagement, and focusing on off-premise order accuracy.

For the fourth quarter, total revenue was $184.6 million, and full-year revenue was $710.6 million. Restaurant-level adjusted EBITDA for the fourth quarter was $45.2 million and $168.1 million for the full year, with a margin of 23.7%. Same restaurant sales in the fourth quarter were up 0.4% and full-year comp was a negative 0.6%. Restaurants not in the comparable restaurant base contributed $8.6 million in revenue growth during the fourth quarter. Same restaurant sales increased 0.4%, attributable to an increase in average check of 4.1% partially offset by a 3.7% decrease in transactions. The higher average check was driven by a 4.7% increase in certain menu prices, partially offset by product mix. Comp on a two-year stack basis was 4.8%.

• 2025 revenue growth expected to be driven by new restaurants and modest comp sales growth (flat to 2%). - Restaurant-level adjusted EBITDA margins estimated to be in the range of 22.5% to 23% in 2025. - G&A expenses estimated between $82 million to $84 million in 2025. - Pre-opening expenses estimated in the range of $11 million to $12 million in 2025. - 2025 plans to open twelve new future format restaurants, concentrated in back half of the year. - 2026 to roll out even smaller Restaurant of the Future 2.0 and airport/walk-up locations.

• Industry headwinds including weather in February muted early momentum. - Commodity inflation 3% to 5% with significant pressure from beef. - Third-party delivery and off-premise channels have lower customer satisfaction scores and challenges in correcting mistakes. - Weather and other uncertain factors may impact performance.

Q: Sharon Zackfia asked about quantifying weather impact on first quarter and if first quarter would be below full-year guidance.

A: Michelle Hook said they haven't quantified weather impact, but are confident full-year will be in zero to two percent range.

Q: David Tarantino asked about sales and margin of future restaurant prototype.

A: Michael Osanloo said they're thrilled with performance, no difference in revenue/traffic feel from traditional prototype, and expect incremental efficiencies from smaller size.

Q: Andy Barish asked about beef lock-up and commodity inflation shape.

A: Michelle Hook said about fifty percent of beef is locked up for full year, and inflation is pretty even with more pressure in Q3 and easing in Q4.

Q: Brian Mullan asked about non-traditional formats and loyalty program.

A: Michael Osanloo said non-traditional formats are being fine-tuned and loyalty program sits in digital wallet for one-on-one marketing.

Q: Ray Pekion asked about drive-through improvements.

A: Michael Osanloo said they're working to get back forty-five seconds lost since pre-COVID and have initiatives to improve drive-through efficiency.