Potbelly Corporation (PBPB) Bundle
Understanding Potbelly Corporation (PBPB) Revenue Streams
Understanding Potbelly Corporation’s Revenue Streams
Potbelly Corporation generates revenue primarily through its sandwich shop sales and franchise royalties. Below is a detailed breakdown of these revenue sources, along with historical trends and significant changes.
Breakdown of Primary Revenue Sources
- Sandwich Shop Sales: The net sandwich shop sales decreased to $333.9 million for the year to date ended September 29, 2024, down 7.3% from $360.0 million for the year to date ended September 24, 2023.
- Franchise Royalties, Fees, and Rental Income: Revenue from these sources increased to $12.1 million, a rise of 113.4% from $5.7 million during the same period last year.
Year-over-Year Revenue Growth Rate
The total revenue for the year to date ended September 29, 2024, was $345.97 million, reflecting a decrease of 5.4% compared to $365.66 million for the year to date ended September 24, 2023.
| Period | Sandwich Shop Sales (Net) | Franchise Revenue | Total Revenue |
|---|---|---|---|
| Year to Date September 29, 2024 | $333.9 million | $12.1 million | $345.97 million |
| Year to Date September 24, 2023 | $360.0 million | $5.7 million | $365.66 million |
| Change | -7.3% | +113.4% | -5.4% |
Contribution of Different Business Segments to Overall Revenue
For the year to date ended September 29, 2024, sandwich shop sales accounted for 96.5% of total revenue, while franchise royalties, fees, and rental income contributed 3.5%.
Analysis of Significant Changes in Revenue Streams
The notable decrease in sandwich shop sales can be attributed to the refranchising of 34 company-operated shops since the beginning of 2023. This strategic move aimed to enhance franchise operations has led to a significant increase in franchise-related revenues.
During the quarter ended September 29, 2024, the sandwich shop sales decreased by 6.4% to $110.8 million from $118.3 million in the previous year. In contrast, franchise royalties and fees surged by 79.2% to $4.4 million from $2.4 million.
| Quarter | Sandwich Shop Sales (Net) | Franchise Revenue | Total Revenue |
|---|---|---|---|
| Quarter Ended September 29, 2024 | $110.8 million | $4.4 million | $115.12 million |
| Quarter Ended September 24, 2023 | $118.3 million | $2.4 million | $120.77 million |
| Change | -6.4% | +79.2% | -4.7% |
Overall, the revenue dynamics indicate a shift towards a more franchise-driven model, which could provide stability and growth opportunities moving forward.
A Deep Dive into Potbelly Corporation (PBPB) Profitability
A Deep Dive into Potbelly Corporation's Profitability
Gross Profit Margin: For the quarter ended September 29, 2024, the gross profit margin was 43.4%, compared to 42.2% for the quarter ended September 24, 2023. For the year to date ended September 29, 2024, the gross profit margin was 43.5%, up from 41.8% for the year to date ended September 24, 2023.
Operating Profit Margin: The operating profit margin for the quarter ended September 29, 2024, was 3.7%, compared to 2.2% for the quarter ended September 24, 2023. For the year to date ended September 29, 2024, the operating profit margin was 2.5%, up from 1.6% for the year to date ended September 24, 2023.
Net Profit Margin: The net profit margin for the quarter ended September 29, 2024, was 3.5%, compared to 1.4% for the quarter ended September 24, 2023. For the year to date ended September 29, 2024, the net profit margin was 10.5%, significantly higher than the 0.8% recorded for the year to date ended September 24, 2023.
Trends in Profitability Over Time
The following table illustrates the trends in profitability metrics over the recent quarters:
| Metric | Q3 2024 | Q3 2023 | YTD 2024 | YTD 2023 |
|---|---|---|---|---|
| Gross Profit Margin | 43.4% | 42.2% | 43.5% | 41.8% |
| Operating Profit Margin | 3.7% | 2.2% | 2.5% | 1.6% |
| Net Profit Margin | 3.5% | 1.4% | 10.5% | 0.8% |
Comparison of Profitability Ratios with Industry Averages
As of 2024, the industry average gross profit margin for restaurant chains is approximately 35%. The operating profit margin average stands around 10%, while the net profit margin for the industry is about 5%. Potbelly Corporation's profitability metrics exceed these averages, indicating a strong competitive position in its market segment.
Analysis of Operational Efficiency
Operational efficiency can be assessed through various metrics:
- Shop-level Profit Margin: For Q3 2024, the shop-level profit margin was 15.3%, up from 14.6% in Q3 2023.
- Food, Beverage, and Packaging Costs: Decreased to 26.6% of sandwich shop sales in Q3 2024 from 27.8% in Q3 2023.
- Labor and Related Expenses: Decreased to 29.1% of sandwich shop sales in Q3 2024 from 28.9% in Q3 2023.
The improved shop-level profit margin indicates enhanced productivity and cost management initiatives. Furthermore, the reduction in food costs as a percentage of sales reflects effective supply chain management and pricing strategies.
The following table summarizes key operational efficiency metrics:
| Metric | Q3 2024 | Q3 2023 |
|---|---|---|
| Shop-level Profit Margin | 15.3% | 14.6% |
| Food, Beverage, and Packaging Costs (% of Sales) | 26.6% | 27.8% |
| Labor and Related Expenses (% of Sales) | 29.1% | 28.9% |
Debt vs. Equity: How Potbelly Corporation (PBPB) Finances Its Growth
Debt vs. Equity: How Potbelly Corporation Finances Its Growth
Overview of Debt Levels
As of September 29, 2024, Potbelly Corporation reported total long-term debt of $3 million, a significant decrease from $19.2 million at the end of 2023. The company has transitioned from a term loan to a revolving credit facility, reflecting a strategic shift in financing.
Debt Composition
| Type of Debt | Amount ($ thousands) |
|---|---|
| Revolving Facility | 3,000 |
| Term Loan | 0 |
| Unamortized Debt Issuance Costs | 0 |
| Less: Current Portion of Long-Term Debt | 0 |
| Total Long-Term Debt | 3,000 |
Debt-to-Equity Ratio
As of September 29, 2024, the debt-to-equity ratio stood at 0.06, calculated as follows:
Debt-to-Equity Ratio = Total Debt / Total Equity
With total equity of $52.5 million, this ratio is significantly lower than the industry average of approximately 1.0, indicating a conservative approach to leveraging.
Recent Debt Issuances and Refinancing Activity
In February 2024, Potbelly entered into a new credit agreement with Wintrust Bank, establishing a $30 million revolving loan facility. This replaced the previous term loan, which was fully repaid. The new facility will bear interest rates ranging from 1.25% to 3.75% based on the company's leverage ratio.
Credit Ratings
As of the latest reports, the company has not publicly disclosed a formal credit rating from major agencies. However, the transition to a revolving facility and the reduction in total debt suggest a strengthening financial position.
Balancing Debt and Equity Funding
Potbelly Corporation maintains a balanced approach to financing through a combination of debt and equity. The company has utilized equity financing, evidenced by the increase in total equity from $47.7 million in June 2024 to $52.5 million in September 2024, reflecting improved operational cash flows and net income of $36.3 million for the year.
The company has also seen a reduction in interest expenses, which dropped to $0.2 million in Q3 2024 from $0.9 million in Q3 2023, illustrating the benefits of lower debt levels.
This strategic shift allows Potbelly to invest in growth opportunities while minimizing financial risk associated with high leverage.
Assessing Potbelly Corporation (PBPB) Liquidity
Assessing Potbelly Corporation's Liquidity
The liquidity position of a company is crucial for understanding its ability to meet short-term obligations. This section examines the liquidity metrics, working capital trends, and cash flow statements of Potbelly Corporation as of 2024.
Current and Quick Ratios
As of September 29, 2024, Potbelly Corporation reported a current ratio of 1.08, indicating that for every dollar of liability, the company has $1.08 in current assets. The quick ratio, which excludes inventory from current assets, was 0.88. This suggests that the company is slightly less able to meet its short-term obligations without relying on the sale of inventory.
Analysis of Working Capital Trends
Working capital, calculated as current assets minus current liabilities, was $4.3 million as of September 29, 2024. This reflects a decrease from $13.2 million at the end of the previous fiscal year. The decline in working capital is primarily attributed to increased current liabilities, driven by rising operational costs and debt repayments.
Cash Flow Statements Overview
The cash flow trends for the year to date ended September 29, 2024, are summarized in the table below:
| Cash Flow Category | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Net cash provided by operating activities | $13,060 | $14,501 |
| Net cash used in investing activities | ($13,000) | ($10,890) |
| Net cash provided (used) in financing activities | ($22,648) | $12,458 |
| Net change in cash | ($22,588) | $16,069 |
In 2024, net cash provided by operating activities was $13.1 million, a decrease from $14.5 million in 2023. The decline was primarily due to higher incentive payments and changes in working capital. Cash used in investing activities increased to $13.0 million from $10.9 million, driven by capital expenditures related to shop investments and digital platforms.
Potential Liquidity Concerns or Strengths
Despite the positive cash flow from operations, the significant cash outflows in financing activities totaling ($22.6 million) in 2024 compared to net cash inflow of $12.5 million in 2023 raises concerns. The primary driver was the repayment of the Term Loan, which could impact future liquidity if operational cash flows do not improve. However, the company ended the quarter with a cash balance of $11.9 million and total liquidity of $38.2 million, providing a safety net for upcoming financial obligations.
Is Potbelly Corporation (PBPB) Overvalued or Undervalued?
Valuation Analysis
The valuation analysis of Potbelly Corporation (PBPB) examines various financial ratios and metrics to assess whether the company is overvalued or undervalued. Key ratios include price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA), alongside stock price trends, dividend yield, and analyst consensus.
Price-to-Earnings (P/E) Ratio
As of September 29, 2024, the company's earnings per share (EPS) was reported at $1.20. Given the current stock price of approximately $14.40, the P/E ratio stands at:
P/E Ratio = Stock Price / EPS = $14.40 / $1.20 = 12.00
Price-to-Book (P/B) Ratio
The book value per share calculated from the total equity of $14,093,000 and total shares outstanding of 29,944,000 is:
Book Value per Share = Total Equity / Total Shares = $14,093,000 / 29,944,000 = $0.47
With the current stock price of $14.40, the P/B ratio is:
P/B Ratio = Stock Price / Book Value per Share = $14.40 / $0.47 = 30.64
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value (EV) is calculated as market capitalization plus total debt minus cash. With a market cap of $431.1 million, total debt of $3 million, and cash of $11.9 million, the EV is:
EV = Market Cap + Total Debt - Cash = $431.1 million + $3 million - $11.9 million = $422.2 million
With an EBITDA of $22.9 million for the year to date, the EV/EBITDA ratio is:
EV/EBITDA = EV / EBITDA = $422.2 million / $22.9 million = 18.42
Stock Price Trends
Over the last 12 months, the stock price has fluctuated between a low of $9.00 and a high of $17.50. As of the latest report, the stock price is approximately $14.40.
Dividend Yield and Payout Ratios
The company has not declared any dividends in the past fiscal year, resulting in a dividend yield of 0%. The payout ratio is also not applicable due to the absence of dividend payments.
Analyst Consensus
As of the latest analysis, the consensus rating from analysts is Hold, with a target price of $15.00, indicating a slight potential upside from the current price levels.
| Metric | Value |
|---|---|
| P/E Ratio | 12.00 |
| P/B Ratio | 30.64 |
| EV/EBITDA Ratio | 18.42 |
| Stock Price (Current) | $14.40 |
| Stock Price (12-Month Low) | $9.00 |
| Stock Price (12-Month High) | $17.50 |
| Dividend Yield | 0% |
| Analyst Consensus | Hold |
| Analyst Target Price | $15.00 |
Key Risks Facing Potbelly Corporation (PBPB)
Key Risks Facing Potbelly Corporation
Potbelly Corporation faces a variety of internal and external risks that could impact its financial health. These risks can be categorized into operational, financial, and strategic risks, as outlined in recent earnings reports and filings.
Industry Competition
The competitive landscape for the fast-casual dining segment remains intense. For the quarter ended September 29, 2024, comparable store sales decreased by (1.8%), significantly down from a prior increase of 8.0% . This decline can be attributed to increased competition, which has pressured pricing and market share.
Regulatory Changes
Changes in food safety regulations and labor laws can pose risks to operational efficiency. The company has incurred costs related to compliance, including a $2.4 million loss on extinguishment of debt due to regulatory changes . Additionally, the company has had to navigate rising minimum wage laws, which increased labor-related expenses to $32.3 million for the quarter .
Market Conditions
Economic fluctuations can impact consumer spending behavior. For the year to date ended September 29, 2024, net sandwich shop sales decreased by 7.3% to $333.9 million . This decline reflects broader market challenges, including inflation and changing consumer preferences.
Operational Risks
Operational risks include supply chain disruptions and the ability to maintain quality across locations. The company reported $1.3 million in impairment losses related to property and equipment . Additionally, the company refranchised 34 company-operated shops, which can disrupt operational continuity .
Financial Risks
Financial risks include liquidity concerns, particularly after the company ended the quarter with a cash balance of $11.9 million and total liquidity of $38.2 million . The company’s net cash used in financing activities reached $22.6 million for the year to date , highlighting the potential strain on cash flow.
Strategic Risks
Strategic risks arise from the company's growth initiatives, including the Franchise Growth Acceleration Initiative, which incurred costs of $161,000 . The success of these initiatives is critical for future revenue growth but carries inherent risks associated with execution and market acceptance.
Mitigation Strategies
To mitigate these risks, the company is focusing on improving operational efficiencies and maintaining strong relationships with suppliers. The management has highlighted plans to optimize labor costs, which decreased by 10.8% year-over-year . Additionally, the company has access to a Revolving Facility of $30 million to support liquidity needs .
| Risk Factor | Description | Impact |
|---|---|---|
| Industry Competition | Intense competition in fast-casual dining. | Comparable store sales down (1.8%). |
| Regulatory Changes | Increased compliance costs and labor laws. | Labor-related expenses at $32.3 million. |
| Market Conditions | Economic fluctuations impact consumer spending. | Sales decreased by 7.3%. |
| Operational Risks | Supply chain and quality maintenance challenges. | Impairment losses of $1.3 million. |
| Financial Risks | Liquidity concerns and cash flow strain. | Cash balance at $11.9 million. |
| Strategic Risks | Execution of growth initiatives. | Costs of $161,000 for growth initiatives. |
Future Growth Prospects for Potbelly Corporation (PBPB)
Future Growth Prospects for Potbelly Corporation
Analysis of Key Growth Drivers
The company is focusing on several growth drivers to enhance its market presence and revenue. Key initiatives include:
- Product Innovations: Introduction of new menu items is anticipated to attract a broader customer base and drive sales growth.
- Market Expansions: The company plans to open additional franchise locations, with a target of increasing the number of franchise-operated shops significantly.
- Acquisitions: Strategic acquisitions are being considered to enhance operational efficiency and market share.
Future Revenue Growth Projections and Earnings Estimates
Revenue projections indicate a potential recovery and growth trajectory, with anticipated revenues of $345.9 million for the year ending September 29, 2024, compared to $365.7 million in 2023, representing a decrease of 5.4%. The earnings estimates for 2024 show a net income attributable to the corporation at $35.7 million, reflecting an increase of 1397.3% from the previous year.
Strategic Initiatives or Partnerships That May Drive Future Growth
The company has entered a credit agreement for a revolving loan facility of $30 million to support general corporate needs and working capital. This financial flexibility is expected to facilitate further investments in marketing and operational improvements.
Competitive Advantages That Position the Company for Growth
Several competitive advantages are poised to enhance the company's growth potential:
- Brand Recognition: A strong brand presence helps in retaining customer loyalty and attracting new customers.
- Franchising Model: The franchising strategy allows for rapid expansion with lower capital expenditure compared to company-operated shops.
- Operational Efficiency: Recent refranchising efforts have streamlined operations, reducing labor and occupancy expenses, which have decreased by 10.8% and 7.6% respectively.
Financial Performance Overview
The following table summarizes key financial metrics relevant to growth prospects:
| Metric | 2024 | 2023 | Change (%) |
|---|---|---|---|
| Total Revenues | $345.9 million | $365.7 million | -5.4% |
| Net Income | $35.7 million | $2.4 million | 1397.3% |
| Franchise Royalties | $12.1 million | $5.7 million | 113.4% |
| Shop-Level Profit Margin | 14.9% | 13.7% | 1.2% |
| Adjusted EBITDA | $22.9 million | $20.9 million | 9.6% |
These figures illustrate the company’s commitment to enhancing its growth trajectory through strategic initiatives and operational efficiencies.
Potbelly Corporation (PBPB) DCF Excel Template
5-Year Financial Model
40+ Charts & Metrics
DCF & Multiple Valuation
Free Email Support
Updated on 16 Nov 2024
Resources:
- Potbelly Corporation (PBPB) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Potbelly Corporation (PBPB)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Potbelly Corporation (PBPB)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.