Portillo's Inc. Q2 FY2025 earnings call

• Addressed the tragic car accident at the Oswego, IL restaurant and expressed support for the community.
• Highlighted Q2 results: adjusted EBITDA of $44.5 million with a margin of 23.6%, transactions down 1.4% but 170-basis-point sequential improvement over Q1.
• Key initiatives: Multichannel marketing with sales lifts in Phoenix and Dallas; continuous operational improvement including AI-powered drive-thru technology expansion; kiosk adoption with over 33% in-restaurant usage; evolving Portillo's Perks loyalty program with over 1.9 million members.
• Restaurant development: On track to open 12 restaurants in the back half of 2025, with build costs tracking in the range of $5.2 million to $5.5 million per restaurant, representing over $1 million in savings per restaurant vs. 2024 openings.

Revenues for the second quarter were $188.5 million, an increase of $6.6 million or 3.6% compared to the prior year. Restaurants not in the comp restaurant base contributed $6.1 million in revenue during the quarter. Same-restaurant sales increased 0.7%, driven by a 2.1% increase in average check, partially offset by a 1.4% decrease in transactions. Food, beverage, and packaging costs as a percentage of revenues decreased to 33.8% in Q2 2025 from 33.9% in the prior year. Labor as a percentage of revenues increased to 25.7% in Q2 2025 from 25.5% in the prior year. Other operating expenses increased $2 million or 9.8% in Q2 2025 compared to the prior year. Restaurant-level adjusted EBITDA margins decreased 90 basis points to 23.6% in Q2 2025 versus 24.5% in the prior year.

• Total revenue growth now expected in the range of 5% to 7%.
• Comp sales forecasted at the low end of the 1% to 3% range.
• Adjusted EBITDA growth flat to low-single digits.
• G&A expenses estimated in the range of $78 million to $80 million.
• Restaurant-level adjusted EBITDA margins estimated to be in the range of 22.5% to 23% in 2025.

• Challenges with noncomp restaurants in Texas, which have had a slower start and pressured top-line revenue.
• Industry traffic pressures impacting overall performance.
• Commodity inflation, particularly for beef, with forecasted 3% to 5% inflation in 2025.
• Labor inflation, with an estimated 3% to 4% increase for the full year.
• Intense competition in Texas, where multiple restaurant companies are opening units, potentially affecting market penetration.

Q: On the mix in the quarter and the path to mid-teens revenue growth.

A: Michael Osanloo stated confidence in mid-teens revenue growth, noting Texas restaurants have started slow but have potential, with ongoing marketing and loyalty efforts. Michelle Hook discussed mix pressures related to trade downs despite kiosk usage.

Q: On new store openings and borrowings.

A: Michael Osanloo mentioned a thoughtful approach to new store openings, focusing on cash-on-cash returns, and Michelle Hook noted planned spend for 2026 with borrowings to fund growth.

Q: On Texas performance vs. other Sunbelt markets.

A: Michael Osanloo noted Texas faces competition with other restaurant companies, while Arizona and Florida have performed well, with confidence Texas will mature similarly.

Q: On breakfast testing in Chicago and limited menu in Houston.

A: Michael Osanloo said breakfast testing in Chicago is going well but needs to be sustainable, and the limited menu in Houston had learnings with simplification and adding back elements.