Potbelly Corporation

Good morning, everyone, and welcome to Pot Valley Corporation's second quarter 2021 earnings conference call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. At that time, if you have a question, please press the 1 followed by the 4 on your telephone. If at any time during the conference you need to reach an operator, please press star and 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 morning, everyone, and welcome to our second quarter 2021 earnings call. Our presenters today are Bob Wright, our president and chief executive officer, and Steve Surilis, 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 period, could 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 Management's Discussion and Analysis of Financial Condition and Results of Operations. And in our subsequent filings with the Securities and Exchange Commission, which are available at sbc.gov. During the call, there will also be a discussion of financial metrics 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. Good morning, everyone, and thank you for joining us today. I hope you and your families have remained safe and healthy since our last update. First and foremost, I want to thank our dedicated associates for their ongoing hard work, team spirit, and flexibility throughout this ever-changing environment. Our teams have continued to provide our customers with a great, safe experience as we further execute our growth plan. So far, 2021 has exceeded our expectations on a number of levels. and we expect this positive momentum to continue as we go through the second half of the year. Beginning on slide three, I will walk you through the second quarter 2021 key highlights. Starting with the top line, revenues totaled $97.5 million, an increase of 24.9% compared to the first quarter 2021, with same-store sales increasing by 70% as compared to the pandemic-impacted Q2 2020. Same-store sales on a two-year comparison basis gained momentum through the quarter as well, ending negative only 0.7%, with June same-store sales turning positive versus 2019. All of our shop types gained sales growth momentum through the quarter. Suburban and drive-thru locations continued to exhibit significant and increasing strength, while CBD and airport locations have not yet fully recovered. As I said, though, these currently lagging shop types are trending in the right direction and offer an opportunity for further overall growth moving forward. We experienced improved volume across all sales channels with a notable positive shift in our on-premise or dine-in business during the quarter, with sales up 5% sequentially due to lifting of dine-in restrictions and pent-up demand. Our digital business remained very strong again this quarter, even as the other on-premise channels continued to recover. The acceleration in sales momentum during the quarter was driven by the ongoing recovery in the operating environment combined with the impact from our strategic initiatives. We are very excited to report that a critical operational metric, average unit volume, or AUV, is also rebounding nicely. up 23.8% compared to the first quarter, 2021. Our top line strength led us to significant positive momentum in shop profitability for the second consecutive quarter. Importantly, we also achieved positive EBITDA and adjusted EBITDA. These enterprise profit achievements are well ahead of previous expectations where we hadn't expected profitability until the second half of 2021. Our balance sheet continues to strengthen as well. We expanded our net cash position by $2 million. This strengthening of our balance sheet supports our remaining deferred cash expenses and also allows us to continue to invest in the business. We added another key leadership position with the appointment of Larry Strain as our Chief Development Officer in May. Larry brings over 25 years of experience in real estate and franchise development to Potbelly. which is critical as we pivot to our next phase of growth. We're very excited that Larry is now a part of the team. We have only one outstanding leadership role to fill, the Chief Marketing Officer. I expect to have some good news to share on that front in the near future. I want to be clear that we aren't simply riding the wave of recovery in our business, though. Rather, we are taking very calculated and proactive actions to accelerate our near and long-term growth. through our traffic driven profitability strategy. We made significant progress on these initiatives throughout the first half of the year, but I'd like to highlight two of the more substantial ones that we completed over the last few months. First, we've completed the testing phase of the new simplified menu with very successful results. We're happy to report that we will be rolling out the new menu to the rest of our company owned and franchise locations in the coming weeks. Second, Turning to slide four, subsequent to the end of Q2, we launched our refreshed tech stack, which includes a new mobile app, website, digital ordering integration, and Perks loyalty program integration. The pictures on the slide provide a visual of the new website, app, and Perks program. And importantly, the platform's new design is better aligned to our branding, more authentic, as well as more user-friendly for our loyal customers. We'll get into a little more detail on the tech stack later in the presentation when we discuss our strategic pillars. Now I'll turn the call over to Steve to provide more details on the financials and the sales trends. Steve?