Potbelly Corporation

Good afternoon, everyone, and welcome to Potbelly Corporation's first quarter 2022 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing star, then zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, press star, then one on a just-shown phone. To withdraw yourself from the question queue, press star, then two. Please also note this event is being recorded. And I would now like to turn the conference over to Ms. Adia Dixon, Potbelly's Senior Vice President and Chief Legal Officer. Please go ahead.

Adia Dixon Good afternoon, everyone, and welcome to our first quarter 2022 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 2022, 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 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 afternoon, 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, all. Thank you for joining us today. As always, I would like to begin today's call by thanking our employees for their continuous hard work and positive energy. Our people are the heartbeat of our brand, and it is with their dedication that we continue to deliver our craveable quality food and good vibe service to our loyal customers. In a word, we trust them, and we know our customers do as well. I'm so proud of our associates, and I'm grateful they choose Potbelly as the place to grow their careers. Now, let's begin on slide three, where I'll provide a brief overview of the first quarter 2022. Revenues of $98.2 million increased by 25.8% compared to the first quarter of 2021. And same-store sales increased by 24.4% as compared to Q1 of 2021. Following Omicron and weather-related headwinds early in the quarter, same-store sales gained momentum at an accelerated pace. And we're extremely excited to have achieved record AUV performance in the month of March. This momentum was supported by notable success in our digital channels, as well as significant recovery in our airport and CBD shop types. In March, CBD shops delivered their strongest volume in AUV performance since the onset of the pandemic. We're particularly encouraged by the recovery of these shop types. Our expectation is that they will serve as a tailwind supporting our broader portfolio as we continue along our path to growth. Our adjusted EBITDA for the quarter was a loss of $2.3 million, which, although negative, still represents a significant improvement compared to a loss of $6.6 million for the first quarter 2021. Turning to slide four, I would like to highlight our strategic successes in the quarter. During the period, we renewed our focus on food innovation and food-focused promotional initiatives, including the rollout of our seasonal red velvet cookie for Valentine's Day and buy-one-get-one free promotions celebrating our 45th anniversary and National Meatball Day. We've also seen strong improvements in our catering business following successful promotional activity, including a focus on social catering for occasions such as the Super Bowl and March Madness. Additionally, we have further invested in our digital marketing and paid social advertising campaigns, which have yielded sizable increases to sales dollars and daily transactions. Following the rollout of our upgraded tech stack, we also enjoyed continued positive response from our customers, as well as increased enrollment and engagement in our perks loyalty program. Not only have our digital platform investments enhanced customer value, but they've also driven top-line performance through increased check, traffic and accessibility to our shops with the various order and service channels that meet our customers' needs. We are diligently aware of and focused on the macro environmental headwinds in our business today, especially the cost, availability and quality of talent necessary to continue growing our brand. We've implemented a number of new initiatives to strengthen the workplace environment for our dedicated associates, thus driving stronger employee satisfaction and retention. which have resulted in continued improvements in our overall customer satisfaction. For example, we've successfully rolled out our digital tipping in all of our shops. Our customers now have the ability to demonstrate their appreciation directly to our associates for delivering our special good vibe service. We've seen extremely encouraging results from this initiative, including better service for our customers and better pay for our associates. We will continue to make enhancements in our workplace with balanced goals of driving a positive employee environment and enhanced customer satisfaction. Lastly, we've been very active in executing against our franchise growth acceleration initiative announced last quarter. We're building our pipeline of multi-unit franchise candidates. We've enhanced our franchising and re-franchising market planning, as well as sales and marketing tactics. We also continue to develop an implement internal control systems, processes, and tools that will strengthen Potbelly as a franchisor of choice. We look forward to building further relationships with potential franchisees as we move toward our goal of re-franchising approximately 25% of our company units over the next three years, and sign deals for new shop development area agreements. I'd also like to briefly highlight that we have aligned the company's internal controls and expenses with certain digital and marketing expenses now carried at the shop level as we shift to a more franchise-focused organization. Later in today's presentation, as we discuss shop-level margins, Steve will provide a more detailed explanation of this presentation change. Franchisees and franchise candidates are happy to see us align our shop P&Ls to reflect their business model. I will now turn the call over to Steve to detail our financial performance in the first quarter. Steve?