Portillo's Inc. (PTLO): history, ownership, mission, how it works & makes money

A Brief History of Portillo's Inc.

Portillo's Inc., known for its Chicago-style food, has seen significant growth and development since its inception. As of 2024, the company operates 88 restaurants across ten states, including one restaurant owned by C&O Chicago, L.L.C., in which Portillo's holds a 50% equity stake.

Financial Performance Overview

In the third quarter of 2024, Portillo's reported total revenue of $178.3 million, representing a 6.9% increase from $166.8 million in the same quarter of 2023. For the three quarters ended September 29, 2024, total revenue reached $525.9 million, up from $492.0 million in the previous year, marking a year-over-year increase of $33.9 million or 6.9%.

Expansion and Development

During the three quarters ended September 29, 2024, Portillo's opened four new restaurants, contributing to a total of 10 new openings planned for the fiscal year. The company is also focusing on its "Restaurant of the Future" concept, which aims to enhance operational efficiency and customer experience.

Debt and Financing

As of September 29, 2024, Portillo's had outstanding borrowings totaling $304.6 million under its 2023 Credit Agreement, which includes $290.6 million from the Term Loan and $14.0 million from the Revolver Facility. The effective interest rate on the Term Loan was 8.32%.

Operational Highlights

For the three quarters ended September 29, 2024, Portillo's reported a same-restaurant sales decline of 0.9%, attributed to a decrease in transactions. The company has implemented price increases to address inflation, with menu prices raised by approximately 4.6%.

Equity and Compensation

During the three quarters ended September 29, 2024, Portillo's granted 311,042 stock options and 322,443 performance stock units to its executive officers.

Cash Flow Summary

Net cash provided by operating activities increased by 34.3% due to a favorable change in operating assets and liabilities.

A Who Owns Portillo's Inc. (PTLO)

Ownership Structure

As of September 29, 2024, Portillo's Inc. has a dual-class stock structure consisting of Class A and Class B common stock.

The total shares outstanding amount to 73,797,081, reflecting the combined ownership of both classes of stock.

Non-Controlling Interests

Portillo's Inc. has a non-controlling interest in Portillo's OpCo, which represents the pre-IPO LLC Members. The weighted average ownership percentage for the quarter ended September 29, 2024 was 15.8%, down from 24.1% for the quarter ended September 24, 2023.

Financial Performance

For the quarter ended September 29, 2024, Portillo's Inc. reported the following financial highlights:

Comparatively, for the three quarters ended September 29, 2024, the company reported:

Debt Obligations

As of September 29, 2024, Portillo's Inc. had outstanding borrowings under the 2023 Credit Agreement totaling $304.6 million, which included:

The effective interest rate on the 2023 Term Loan was 8.32%.

Recent Developments

Portillo's Inc. opened four new restaurants during the three quarters ended September 29, 2024, contributing to a total of 88 restaurants operational across ten states.

As of the filing of the Quarterly Report, Portillo's plans to open five additional restaurants by December 2024, aiming for further expansion in Texas.

Portillo's Inc. (PTLO) Mission Statement

Overview of Portillo's Mission

Portillo's Inc. aims to deliver a distinctive dining experience through its iconic Chicago-style food offerings, combining a fun atmosphere with high-quality service. The company is committed to operational excellence, innovative restaurant concepts, and a culture that values its team members.

Financial Performance and Strategic Goals

As of September 29, 2024, Portillo's reported total revenue of $525.9 million, a 6.9% increase from $492.0 million in the prior year. The company aims to continue its growth trajectory through strategic restaurant openings and enhancements to the customer experience.

Growth and Expansion

Portillo's continues to expand its footprint, having opened four new restaurants in 2024, with plans for additional openings. As of September 29, 2024, the total number of restaurants stands at 89.

Operational Excellence and Team Commitment

Portillo's emphasizes a strong operational focus, aiming to enhance guest experiences through training and service improvements. The company hosted its annual General Manager Summit in 2024 to motivate team members and recognize their contributions.

Market Trends and Challenges

As of 2024, Portillo's faces challenges such as commodity inflation, which was reported at 3.6% for the quarter ending September 29, 2024. The company anticipates a negative comparable sales growth of approximately 1.0% for the full year, influenced by external economic factors.

Conclusion of Mission Statement Insights

Portillo's mission is centered on delivering exceptional food and service while fostering a positive environment for both customers and employees. The company aims to navigate market challenges and capitalize on growth opportunities through strategic initiatives and operational improvements.

How Portillo's Inc. (PTLO) Works

Company Overview

As of September 29, 2024, Portillo's Inc. operates 88 restaurants across ten states, including a 50% equity ownership in a restaurant operated by C&O Chicago, L.L.C.

Financial Performance

For the quarter ended September 29, 2024, Portillo's reported:

• Total revenue: $178.3 million, an increase of 6.9% or $11.4 million from the previous year.
• Same restaurant sales: Decreased by 0.9%.
• Operating income: Increased by $0.9 million to $16.0 million.
• Net income: Increased by $2.2 million to $8.8 million.
• Restaurant-Level Adjusted EBITDA: Increased by $0.1 million to $41.9 million.
• Adjusted EBITDA: Increased by $0.6 million to $27.9 million.

For the three quarters ended September 29, 2024:

• Total revenue: $525.9 million, an increase of 6.9% or $33.9 million.
• Same restaurant sales: Decreased by 0.9%.
• Operating income: Increased by $3.2 million to $44.2 million.
• Net income: Increased by $7.5 million to $22.6 million.
• Restaurant-Level Adjusted EBITDA: Increased by $3.5 million to $122.9 million.
• Adjusted EBITDA: Increased by $3.4 million to $79.6 million.

Operational Highlights

Commodity inflation for the quarter was 3.6% and 5.1% for the three quarters. Labor costs increased by 0.3% in the quarter and 0.2% for the three quarters, largely due to lower transactions and incremental wage rate increases. The company expects negative comparable sales of approximately 1.0% for the full year 2024.

Restaurant Development

During the three quarters ended September 29, 2024, Portillo's opened four new restaurants. An additional restaurant opened in October 2024, bringing the total to 89, with plans for five more openings in December 2024.

Cost Structure

For the quarter ended September 29, 2024:

• Food, beverage, and packaging costs: $60.1 million, up from $55.6 million, a 8.3% increase.
• Labor expenses: Increased due to wage inflation and staffing needs.
• Occupancy expenses: $9.2 million, an increase of 11.7% from the previous year.
• Other operating expenses: $21.1 million, up 13.4% from the previous year.

Cash Flow Summary

Debt and Liquidity

As of September 29, 2024, Portillo’s had outstanding borrowings under the 2023 Credit Agreement totaling $304.6 million, with $290.6 million under the 2023 Term Loan and $14.0 million under the 2023 Revolver Facility. The company had $80.7 million available under the 2023 Revolver Facility.

Tax Receivable Agreement

As of September 29, 2024, the estimated obligation for future payments under the Tax Receivable Agreement totaled $326.7 million. The company made TRA payments of $4.4 million for tax year 2022 and expects a payment of $7.7 million for tax year 2023 within the next 12 months.

Earnings Per Share

How Portillo's Inc. (PTLO) Makes Money

Revenue Generation

Portillo's generates revenue primarily through the sale of food and beverages across its restaurant locations. As of September 29, 2024, the company operated 88 restaurants, contributing significantly to its revenue streams. For the quarter ended September 29, 2024, Portillo's reported total revenue of $178.3 million, representing an increase of 6.9% or $11.4 million compared to the same period in 2023. For the three quarters ended September 29, 2024, total revenue reached $525.9 million, an increase of 6.9% or $33.9 million from $492.0 million during the same period in the previous year.

Same-Restaurant Sales

Same-restaurant sales, a key performance indicator, decreased by 0.9% during the quarter ended September 29, 2024. This decline was attributed to a 3.5% decrease in transactions, partially offset by a 2.6% increase in average check. For the three quarters ended September 29, 2024, same-restaurant sales similarly decreased by 0.9%, reflecting a broader challenge in maintaining customer traffic across existing locations.

Cost Structure

Portillo's cost of goods sold includes food, beverage, and packaging costs, which amounted to $60.1 million for the quarter ended September 29, 2024, a rise of 8.3% from $55.6 million in the prior year's quarter. These costs represented 33.7% of total revenues for that quarter. For the three quarters ended September 29, 2024, total food, beverage, and packaging costs were $178.8 million, up from $165.4 million in the same period of 2023.

Labor Expenses

Labor expenses for the quarter ended September 29, 2024, totaled $45.9 million, accounting for 25.8% of total revenue. This was an increase from $42.6 million in the same quarter of 2023. For the three quarters ended September 29, 2024, labor costs reached $135.7 million, maintaining a similar percentage of total revenues.

Operating Income and EBITDA

Operating income for the quarter ended September 29, 2024, was reported at $16.0 million, a modest increase of $0.9 million from $15.1 million in the prior year. For the three quarters ended September 29, 2024, operating income was $44.2 million, up from $41.0 million. Adjusted EBITDA for the quarter was $27.9 million, and for the three quarters, it reached $79.6 million.

Restaurant-Level Adjusted EBITDA

Restaurant-Level Adjusted EBITDA, which excludes corporate-level expenses, increased to $41.9 million for the quarter ended September 29, 2024, compared to $41.9 million in the previous year. The corresponding margin was 23.5% for the quarter. For the three quarters ended September 29, 2024, Restaurant-Level Adjusted EBITDA was $122.9 million.

Expansion and New Locations

Portillo's continued its expansion efforts, opening four new restaurants during the three quarters ended September 29, 2024. The company plans to open a total of ten new restaurants by the end of the fiscal year, with locations in Texas and other markets.

Financial Performance Summary

Debt and Interest Expenses

As of September 29, 2024, Portillo's had outstanding borrowings totaling $304.6 million, with interest expenses for the quarter at $6.5 million. For the three quarters ended September 29, 2024, interest expenses were $19.6 million.

Tax Obligations

Income tax expense for the three quarters ended September 29, 2024, was $4.9 million, with an effective tax rate of 17.8%. The company anticipates future payments related to its Tax Receivable Agreement liability totaling $326.7 million.

Updated on 16 Nov 2024

Resources:

1. 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.
2. 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.