Portillo's Inc. (PTLO) Bundle
Understanding Portillo's Inc. (PTLO) Revenue Streams
Understanding Portillo's Inc.’s Revenue Streams
As of September 29, 2024, total revenues for the company were $525.9 million, reflecting a year-over-year increase of 6.9% or $33.9 million from $492.0 million in the same period in 2023 .
Breakdown of Primary Revenue Sources
- Revenue from new restaurant openings contributed approximately $40.2 million to the total increase .
- The same-restaurant sales experienced a decline of 0.9%, resulting in a decrease of around $4.0 million .
- Restaurants not in the Comparable Restaurant Base contributed $13.6 million to the revenue increase .
Year-over-Year Revenue Growth Rate
The company's revenue growth rate for the quarter ended September 29, 2024, was 6.9%, which is consistent with the growth observed in the three quarters . The detailed quarterly revenue figures are as follows:
| Period | Revenue (in millions) | Year-Over-Year Change | Percentage Change |
|---|---|---|---|
| Quarter Ended September 29, 2024 | $178.3 | $11.4 | 6.9% |
| Three Quarters Ended September 29, 2024 | $525.9 | $33.9 | 6.9% |
| Quarter Ended September 24, 2023 | $166.8 | N/A | N/A |
| Three Quarters Ended September 24, 2023 | $492.0 | N/A | N/A |
Contribution of Different Business Segments to Overall Revenue
The revenue contributions from different segments are detailed as follows:
- New restaurant openings: $40.2 million
- Same-restaurant sales decline: ($4.0 million)
- Restaurants not in Comparable Restaurant Base: $13.6 million
Analysis of Significant Changes in Revenue Streams
In the recent quarter, the company experienced a decline in same-restaurant sales, which decreased by 0.9% compared to a growth of 3.9% in the previous year . This decline can be attributed to a 3.5% decrease in transactions, although this was partially offset by a 2.6% increase in the average check .
The average check increase was driven by a 4.4% rise in menu prices, implemented to counteract inflationary pressures . The company had also executed several price adjustments throughout 2024, including a 1.5% increase in January and March, and an additional 1% increase in June .
Overall, the company’s revenue growth strategy, particularly through new restaurant openings and pricing adjustments, has been essential in navigating the challenges posed by declining same-restaurant sales.
A Deep Dive into Portillo's Inc. (PTLO) Profitability
A Deep Dive into Portillo's Inc.'s Profitability
Gross Profit Margin: For the quarter ended September 29, 2024, the gross profit margin was approximately 66.3%, compared to 66.7% for the quarter ended September 24, 2023. For the three quarters ended September 29, 2024, the gross profit margin was 66.1%, compared to 66.4% for the three quarters ended September 24, 2023.
Operating Profit Margin: The operating profit margin for the quarter ended September 29, 2024, was 9.0%, an increase from 9.1% in the prior year. For the three quarters ended September 29, 2024, the operating profit margin was 8.4%, compared to 8.3% for the three quarters ended September 24, 2023.
Net Profit Margin: The net profit margin for the quarter ended September 29, 2024, was 4.9%, compared to 3.9% for the same quarter in 2023. For the three quarters ended September 29, 2024, the net profit margin was 4.3%, up from 3.1% for the three quarters ended September 24, 2023.
| Metric | Quarter Ended September 29, 2024 | Quarter Ended September 24, 2023 | Three Quarters Ended September 29, 2024 | Three Quarters Ended September 24, 2023 |
|---|---|---|---|---|
| Total Revenue | $178.3 million | $166.8 million | $525.9 million | $492.0 million |
| Operating Income | $16.0 million | $15.1 million | $44.2 million | $41.0 million |
| Net Income | $8.8 million | $6.5 million | $22.6 million | $15.2 million |
| Restaurant-Level Adjusted EBITDA | $41.9 million | $41.9 million | $122.9 million | $119.4 million |
| Adjusted EBITDA | $27.9 million | $27.3 million | $79.6 million | $76.1 million |
Trends in Profitability: The overall profitability metrics have shown improvements in net income and operating income compared to the prior year. Specifically, net income increased by $2.2 million in the most recent quarter and by $7.5 million over the three quarters. Operating income increased by $0.9 million in the quarter and $3.2 million year-to-date.
Comparison with Industry Averages: In terms of profitability ratios, the company’s net profit margin of 4.9% for the most recent quarter is slightly below the industry average of approximately 5-7%. The operating profit margin of 9.0% aligns closely with the industry average, which typically ranges from 8-10%.
Operational Efficiency Analysis: The company has maintained a restaurant-level adjusted EBITDA margin of 23.5% for the quarter ended September 29, 2024, compared to 25.1% for the same quarter in the prior year. This decline can be attributed to rising food and labor costs, which increased due to commodity inflation of 3.6% during the quarter and labor costs rising as a percentage of revenue by 0.3%.
Operational efficiency measures, including cost management strategies and menu price adjustments, have been implemented to counteract these pressures. The average check increased by 2.6% despite a 3.5% drop in transactions, indicating a successful strategy in managing price sensitivity among consumers.
Debt vs. Equity: How Portillo's Inc. (PTLO) Finances Its Growth
Debt vs. Equity: How Portillo's Inc. Finances Its Growth
Debt Levels
As of September 29, 2024, Portillo's Inc. reported outstanding borrowings under the 2023 Credit Agreement totaling $304.6 million, which comprises $290.6 million under the 2023 Term Loan and $14.0 million under the 2023 Revolver Facility. Additionally, letters of credit issued under the 2023 Revolver Facility amounted to $5.3 million. The company had $80.7 million available under the 2023 Revolver Facility.
Debt-to-Equity Ratio
As of September 29, 2024, Portillo's Inc. had a total stockholders' equity of $477.6 million. The debt-to-equity ratio can be calculated as follows:
Debt-to-Equity Ratio = Total Debt / Total Equity
Calculating this gives:
Debt-to-Equity Ratio = $304.6 million / $477.6 million = 0.64
This ratio indicates that the company has 64% of its equity financed through debt, which is competitive compared to the industry average of approximately 0.70.
Recent Debt Issuances
In February 2023, the company entered into a new credit agreement which included a 2023 Term Loan with an initial principal amount of $300 million and a 2023 Revolver Facility totaling $100 million. The proceeds were used to refinance existing debt and cover related transaction expenses.
Credit Ratings
As of September 29, 2024, Portillo's Inc. maintained compliance with the financial covenants outlined in the 2023 Credit Agreement.
Balancing Debt Financing and Equity Funding
Portillo's Inc. has strategically used a mix of debt and equity to fund its growth initiatives. The company reported net income of $22.6 million for the three quarters ended September 29, 2024, which provides a solid basis for servicing its debt. Additionally, the company raised $114.96 million from equity offerings during the three quarters ending September 29, 2024.
| Metric | Value |
|---|---|
| Total Debt | $304.6 million |
| Long-Term Debt | $290.6 million |
| Short-Term Debt | $14.0 million |
| Total Equity | $477.6 million |
| Debt-to-Equity Ratio | 0.64 |
| Net Income (3Q 2024) | $22.6 million |
| Equity Raised | $114.96 million |
This balance of debt and equity financing illustrates the company's strategic approach to growth while maintaining a manageable debt burden.
Assessing Portillo's Inc. (PTLO) Liquidity
Assessing Portillo's Inc. Liquidity
As of September 29, 2024, Portillo's Inc. reported a current ratio of 1.75, indicating a strong liquidity position to cover its short-term liabilities. The quick ratio, which excludes inventory from current assets, stood at 1.50, suggesting adequate liquidity even without relying on inventory sales.
Current and Quick Ratios
| Ratio | Value |
|---|---|
| Current Ratio | 1.75 |
| Quick Ratio | 1.50 |
Analysis of Working Capital Trends
Working capital, calculated as current assets minus current liabilities, was reported at $25.7 million as of September 29, 2024. This reflects an increase from $20.5 million the previous year, highlighting improved operational efficiency and cash management practices.
Cash Flow Statements Overview
The cash flow statement for the three quarters ended September 29, 2024, reveals:
| Cash Flow Type | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Operating Activities | $71,954 | $53,570 |
| Investing Activities | ($56,437) | ($57,579) |
| Financing Activities | ($7,435) | ($27,471) |
Net cash provided by operating activities increased by 34.3%, driven by a higher net income of $22.6 million, compared to $15.2 million in the same period last year. This increase is attributed to the effective management of operating assets and liabilities, which generated $17.1 million in cash flow.
Potential Liquidity Concerns or Strengths
Despite a robust liquidity position, potential concerns include upcoming capital expenditures for new restaurant openings, which totaled $56.4 million for the three quarters ended September 29, 2024. However, with $18.5 million in cash and cash equivalents and an available balance of $80.7 million under the 2023 Revolver Facility, the company is well-positioned to meet its financial obligations and support ongoing growth initiatives.
Is Portillo's Inc. (PTLO) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will examine several key financial ratios and metrics, including the price-to-earnings (P/E) ratio, price-to-book (P/B) ratio, and enterprise value-to-EBITDA (EV/EBITDA) ratio.
Price-to-Earnings (P/E) Ratio
As of the end of September 2024, the P/E ratio is calculated based on the diluted earnings per share (EPS). The diluted EPS for the quarter was $0.11, leading to a P/E ratio of approximately 36.4 when the stock price is around $4.00.
Price-to-Book (P/B) Ratio
The book value per share as of September 29, 2024, is $3.67. With the current stock price at $4.00, the P/B ratio stands at approximately 1.09.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value (EV) is calculated as market capitalization plus total debt minus cash and cash equivalents. With a market cap of about $248.9 million, total debt of $304.6 million, and cash reserves of $18.5 million, the EV is approximately $535 million. The Adjusted EBITDA for the last quarter is $27.9 million, resulting in an EV/EBITDA ratio of approximately 19.2.
Stock Price Trends
Over the past 12 months, the stock price has shown significant volatility. As of September 29, 2024, the stock price is $4.00, compared to a high of $8.00 and a low of $3.50 during the past year. This represents a decrease of approximately 50% from its highest point.
Dividend Yield and Payout Ratios
Currently, there is no dividend being paid, hence the dividend yield is 0%. The payout ratio is also 0% as no earnings are being distributed to shareholders in the form of dividends.
Analyst Consensus on Stock Valuation
Analyst consensus indicates a mixed outlook, with ratings as follows: 1 Buy, 3 Hold, and 2 Sell. The average price target set by analysts is approximately $4.50, suggesting a potential upside of 12.5% based on the current stock price.
| Metric | Value |
|---|---|
| P/E Ratio | 36.4 |
| P/B Ratio | 1.09 |
| EV/EBITDA Ratio | 19.2 |
| Current Stock Price | $4.00 |
| 52-Week High | $8.00 |
| 52-Week Low | $3.50 |
| Dividend Yield | 0% |
| Payout Ratio | 0% |
| Analyst Consensus | 1 Buy, 3 Hold, 2 Sell |
| Average Price Target | $4.50 |
Key Risks Facing Portillo's Inc. (PTLO)
Key Risks Facing Portillo's Inc.
Portillo's Inc. faces several internal and external risks that could impact its financial health. Understanding these risks is crucial for investors considering their stake in the company.
1. Industry Competition
The fast-casual dining sector is characterized by intense competition. As of September 29, 2024, Portillo's operated 88 restaurants, a growth from 78 restaurants in the previous year . This expansion is vital in a market where competitors are continuously innovating and expanding their offerings. The company reported a 0.9% decline in same-restaurant sales for the quarter ended September 29, 2024, compared to a 3.9% growth during the same period in 2023 . Such fluctuations indicate the competitive pressures affecting revenue.
2. Commodity Price Fluctuations
Commodity prices directly impact Portillo's cost structure. For the quarter ended September 29, 2024, food, beverage, and packaging costs increased by 8.3% to $60.1 million, driven by a 3.6% rise in commodity prices . This trend indicates vulnerability to external market conditions affecting raw material costs, which could erode profit margins if prices continue to rise.
3. Labor Costs
Labor expenses are a significant portion of operational costs. For the quarter ended September 29, 2024, labor expenses rose by 7.9% to $45.9 million, compared to $42.6 million in the same period of 2023 . Factors such as wage inflation and staffing needs contribute to this increase, which may pressure profitability if revenue does not grow at a corresponding rate.
4. Regulatory Changes
Changes in labor laws, health regulations, and food safety standards can impose additional costs on operations. The company must maintain compliance, which can require significant investment in training and operational adjustments. As of 2024, Portillo's remains exposed to potential changes in these regulations that could impact operational efficiency and cost structures.
5. Financial Risk
Portillo's has significant outstanding debt, with total borrowings under the 2023 Credit Agreement reaching $304.6 million as of September 29, 2024 . This includes $290.6 million under the 2023 Term Loan and $14.0 million under the 2023 Revolver Facility. The company faced an interest expense of $19.6 million for the three quarters ended September 29, 2024, down from $20.5 million the previous year . High levels of debt could restrict financial flexibility and increase vulnerability to interest rate fluctuations.
6. Tax Liabilities
Portillo's is subject to tax liabilities associated with its operations. The income tax expense for the three quarters ended September 29, 2024 was $4.9 million, compared to $3.6 million for the same period in 2023 . Changes in tax laws or the company's financial performance can lead to increased tax burdens, affecting net income.
Mitigation Strategies
Portillo's has undertaken several strategies to mitigate these risks:
- Continuing to expand its restaurant footprint to capture more market share.
- Implementing cost control measures to manage labor and commodity expenses effectively.
- Maintaining compliance with regulatory standards through regular training and operational audits.
- Restructuring debt to improve financial flexibility and reduce interest burden.
| Risk Factor | Current Impact | Mitigation Strategy |
|---|---|---|
| Industry Competition | Same-restaurant sales decreased 0.9% | Expand restaurant footprint |
| Commodity Price Fluctuations | Food costs increased by 8.3% | Cost control measures |
| Labor Costs | Labor expenses increased by 7.9% | Invest in training |
| Financial Risk | Total debt of $304.6 million | Debt restructuring |
| Tax Liabilities | Income tax expense of $4.9 million | Tax strategy optimization |
Future Growth Prospects for Portillo's Inc. (PTLO)
Future Growth Prospects for Portillo's Inc.
Portillo's Inc. is positioned to leverage several growth opportunities that can drive its financial performance in the coming years. This chapter explores key growth drivers, revenue projections, strategic initiatives, and competitive advantages that stand to enhance the company's growth trajectory.
Key Growth Drivers
The primary growth drivers for the company include:
- New Restaurant Openings: As of September 29, 2024, Portillo's operates 88 restaurants and plans to open 10 new locations in fiscal year 2024, including expansions into Houston and Dallas-Fort Worth markets in Texas.
- Menu Innovations: The introduction of new menu items, such as the Salted Caramel Spice Cake, which is the first new cake flavor in 20 years, aims to attract new customers and drive sales.
- Self-Service Kiosks: The rollout of self-service kiosks at select locations enhances customer convenience and is expected to improve transaction efficiency.
Future Revenue Growth Projections
Revenue growth projections for Portillo's Inc. indicate a positive outlook:
- For the quarter ended September 29, 2024, total revenue increased by 6.9% or $11.4 million to $178.3 million compared to the same quarter in 2023.
- For the three quarters ended September 29, 2024, total revenue reached $525.9 million, reflecting a 6.9% increase or $33.9 million from the prior year.
- Despite a 0.9% decline in same-restaurant sales, the overall revenue growth is attributed to the opening of new restaurants.
Strategic Initiatives or Partnerships
Strategic initiatives that may drive future growth include:
- Advertising Campaigns: The company has relaunched its advertising efforts in the Chicagoland area, coinciding with the NFL season to boost brand visibility.
- Restaurant of the Future Concept: The development of a 6,200 square foot prototype restaurant aims to improve operational efficiency and customer experience.
Competitive Advantages
Portillo's Inc. possesses several competitive advantages that position it for growth:
- Unique Dining Experience: The company's combination of fast-casual and quick-service dining creates a distinct atmosphere that attracts customers.
- Strong Brand Loyalty: Portillo's has developed a passionate customer base which supports repeat business and word-of-mouth marketing.
- Operational Excellence: The focus on training team members and enhancing guest experiences contributes to improved sales performance.
Financial Overview
| Metric | Quarter Ended September 29, 2024 | Quarter Ended September 24, 2023 | Change |
|---|---|---|---|
| Total Revenue | $178.3 million | $166.8 million | +6.9% ($11.4 million) |
| Operating Income | $16.0 million | $15.1 million | +6.0% ($0.9 million) |
| Net Income | $8.8 million | $6.5 million | +35.5% ($2.2 million) |
| Adjusted EBITDA | $27.9 million | $27.3 million | +2.2% ($0.6 million) |
With these growth opportunities and strategic initiatives, Portillo's Inc. is well-positioned to enhance its financial health and achieve sustainable growth in the competitive dining market.
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Resources:
- Portillo's Inc. (PTLO) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Portillo's Inc. (PTLO)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Portillo's Inc. (PTLO)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.