Potbelly Corporation

Good afternoon, everyone, and welcome to the Potbelly Corporation's first quarter 2021 earnings conference call. During the presentation, all participants will be in a listen-only mode. Afterwards, we'll conduct a question and answer session, and at that time, if you have a question, you can press the one followed by the four on your telephone. If at any time during the conference you need to reach an operator, you can press star zero. As a reminder, this conference is being recorded. I would now like to turn the call over to Ms. Adia Dixon, Potbelly's Chief Legal Officer. Please go ahead.

Good afternoon, everyone, and welcome to our first quarter 2021 earnings call. Our presenters today are Bob Wright, our President and Chief Executive Officer, and Steve Surlis, our Senior Vice President and Chief Financial Officer. Please note that we have provided a set of PowerPoint slides that will accompany our prepared remarks. You may access these slides on the Investor Relations section of our website. After our prepared remarks, we'll open the call for your questions. I'd like to call your attention to our cautionary statements on slide two and note that certain comments made in this call will contain forward-looking statements regarding future events or the future financial performance of the company. Any such statements, including our outlook for 2021 or any other future periods, should be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not guarantees of future performance, nor should they be relied upon as representing management's views as of any subsequent date. Forward-looking statements involve significant risks and uncertainties, and events or results could differ materially from those presented due to a number of risks and uncertainties. Additional detailed information concerning these risks regarding our business and the factors that could cause actual results to differ materially from the forward-looking statements and other information that will be given today can be found in our most recent annual report on Form 10-K under the headings Risk Factors and MD&A, and in our subsequent filings with the Securities and Exchange Commission, which are available at sec.gov. During the call, there will also be a discussion of some items that do not conform to U.S. Generally Accepted Accounting Principles, or GAAP. Reconciliations of these non-GAAP measures to their most directly comparable GAAP measures are included in the appendix to the investor presentation and press release issued this morning, both of which are available in the Investors tab of our website. I'll now turn the call over to Bob.

Thank you, Adia, and good afternoon, everyone. Thank you for joining us today. I hope you and your families have remained safe and healthy since our last update. As always, I want to thank our dedicated employees for their ongoing hard work and positive energy. I continue to be so very proud of the team's contributions as we focus on future growth of Potbelly. When we reported our full year 2020 results back in March, we provided a glimpse into the quarter, and I can tell you that the rate of acceleration continued in a very positive direction during the final weeks of the quarter and throughout April. But first things first. Let's look on slide three where I'll provide a quick overview of the first quarter 2021. Revenues of $78.1 million increased by 4.3% compared to the fourth quarter 2020. And same store sales decreased by 3.1% as compared to Q1 2020. This is a noticeable improvement when compared to the decrease of nearly 20% in the fourth quarter of 2020. Suburban, University, And drive-thru locations remain strong, while CBD and airport locations continue to lag. However, we're beginning to see modest improvements in those shop types recently as well. We've also started to see encouraging incremental improvements in our on-premise or dine-in business across most of our shops as vaccinations increase and economic activity accelerates. The positive momentum we experienced in the quarter was driven by a combination of early returns of our traffic-driven profitability strategic initiatives, operating efficiencies, particularly within labor, which is resulting in better performing shops and improved customer experiences, as well as the healthier macro environment. We continue to see lifting or easing of dine-in restrictions in many of the core geographies where we do business. Importantly, we have seen resiliency in our digital business as it continues to perform well alongside the ongoing recovery of in-shop sales. Also, as we noted last quarter, we expect there to be a blending of sales as customers dine out while at the same time they've grown to appreciate the flexibility that digital options provide. We leveraged our sales recovery and turned to shop-level profitability during the quarter, which is ahead of our previously forecasted timeline of the first half of 2021. I'll get into the details a little bit later in the presentation on the progress we've made on several of our strategic initiatives as part of the traffic-driven profitability plan. But I can tell you that we are in various stages of testing, development, and even implementation for most of these initiatives, and we are impressed with the early results. Our work here will continue to be refined as each initiative readies for national rollout. Subsequent to the quarter end, our leadership team was further strengthened by the addition of Scott Swain as our chief people officer. Scott has 25 years of experience in human resources and results-oriented leadership, and we are thrilled that he's a part of the team. This is a critical role for Potbelly and is essential to ensure that we attract and retain top talent and the top talent necessary for our brand's return to growth. Steve will cover the balance sheet in his comments in a few moments, but it's extremely important that I highlight the fact that our balance sheet remains strong due to our recent capital raise and the credit facility amendment we successfully executed during the quarter. We fully expect the balance sheet and liquidity to strengthen throughout 2021, which will be driven by improving cash flow dynamics through each quarter of 2021. This financial flexibility is crucial for us to be able to deliver on our commitments to return to growth. Furthermore, based on the progress made during the first quarter, the company expects to be cash flow positive by the end of the third quarter, which is ahead of expectations that we have previously presented. I'll now turn the call over to Steve to provide a deeper dive into the financials and the sales trends. We'll close with an update on our traffic-driven profitability strategic focus, and importantly, the progress we have made on these initiatives before we take your questions. Steve?