Portillo's Inc.

Good day, ladies and gentlemen, and thank you for standing by. Welcome to Portillo's third quarter 2021 earnings conference call. At this time, all participants have been placed in a listen-only mode. Please note that this conference is being recorded today, November 18th, 2021. I would now like to turn the call over to your host, Mr. Fitzhugh Taylor, Managing Director at ICR. Thank you. You may begin.

Thank you, Rob, and good morning, everyone. With me on the call today is Michael Osanlu, President and Chief Executive Officer of Portillo's, and Michelle Hook, the company's Chief Financial Officer. Before we begin our formal remarks, let me remind everyone that part of our discussion today will include forward-looking statements. These statements are not guarantees of future performance and should not be unduly relied upon. We do not undertake to update these forward-looking statements unless required by law, And we refer you to today's earnings release in our SEC filings for more detailed discussion of the risks that could impact Portillo's future operating results and financial condition. Our remarks also include non-GAAP financial measures such as adjusted EBITDA and restaurant level adjusted EBITDA. We direct you to our earnings release issued this morning, which is available on our website for reconciliations of these non-GAAP measures to their most comparable GAAP measures. Any non-GAAP financial measure should not be considered as an alternative to GAAP measure, such as net income or operating income, or any other GAAP measure of our liquidity or financial position. Finally, after we deliver our prepared remarks, we will open the lines for your questions. Let me now turn the call over to Michael Osanlu. Michael?

Thank you, Fitiu, and good morning, everyone. We appreciate you all joining us for what is our inaugural quarterly earnings call as a public company. It's an incredibly exciting time for Portillo's. We are so proud of the successful completion of our IPO and we're pleased with our performance so far this year, which has reflected continuing improvement in guest traffic as our business is evolving into a new normal. Our teams continue to pivot in a smart, efficient way to serve our loyal guests in a safe environment. I couldn't be more pleased with our performance led by our amazing teams and their ability to successfully adjust and continue to improve. And importantly, they're doing all this while living our values of family, greatness, energy, and fun. Before I let Michelle review the quarter results in more detail, since this is our first earnings call since our IPO, I want to take a few minutes to talk about Portillo's and just share what makes our brand so special. Our story began in 1963. when Dick Portillo invested $1,100 in a trailer in Villa Park, Illinois. The doghouse, as he called it, sold hot dogs, fries, and tamales. A few years later, Dick opened his first freestanding restaurant and named it Portillo's. And that was just the beginning of this great American success story. After gradual expansion over multiple decades, Berkshire Partners acquired Portillo's in 2014 and has since accelerated our growth. adding 29 restaurants across six additional states. Most people think of Portillo's as a Chicago institution, but the reality is we've burst our seams to become a national brand with 68 restaurants today, soon to be 69 across nine states. Even as we've grown, we've maintained that iconic status with our fans who are truly obsessed. We do this with our unique menu of unrivaled Chicago street food and all American favorites that has something craveable for everyone. We've got Italian beef sandwiches, Chicago style hot dogs, char grilled third pound burgers, fresh made salads, and much more, all at a remarkable price point. In addition to this amazing menu, I also want to stress Portillo's operational excellence across numerous order channels. We've been multi-channel since before it was even a thing. While other brands have been chasing this, especially since the outset of the pandemic, this is what Portillo's has done from early on in our history. Just to give you an idea of our business, both pre-pandemic and now, our annual drive-through sales represented $3.4 million per restaurant in 2019 and $4.9 million in the 12 months ending Q3 2021. That's just our drive-through. Our dine-in sales represented 4.4 million per restaurant in 2019 and 2.1 million in the 12 months ending Q3 2021. Although dine-in has decreased because of the pandemic, traffic remains healthy. That's in part because our restaurants are beautiful and they're engaging. They're thoughtfully designed to handle incredible volume while still providing a memorable and differentiated experience with each having its own locally inspired decor. And then there's delivery. We started delivery in 2017 and it accounted for about $500,000 per restaurant in 2019 and nearly $900,000 in the 12 months ending Q3 2021. Our other channels are also growing. We cater literally tons and tons of food in convenient formats that fit any occasion. I already mentioned that our fans are obsessed. People love catering Portillo's for their gatherings and events. We also have a really strong direct shipping business that not only gives us sales, but provides key insights into where there's latent demand for our business. This multi-channel approach allows us to achieve best in class unit economics including the highest average unit volumes in the fast casual space and adjusted EBITDA margins that put us in an elite class of restaurants. We are committed to continuing to be a world-class multi-channel restaurant brand with incredible sales from all of our channels. Switching to development, by the end of Q4, we will have added two new restaurants to the portfolio. opening location number 68 in the Indianapolis market in the city of Westfield, and location number 69 opening in about two weeks in Madison, Wisconsin. Both new locations demonstrate our strategy to open new restaurants outside of our core Chicago land market. The Westfield location on the north side of Indy adds to an already strong presence as our fourth restaurant in Indianapolis and the seventh in the state. And the new Madison location will be a second entry to Madison and the fourth in the state. Each of these serves a separate and distinct trade area. With these two, we will have added five new restaurants in 2021, including two new markets having opened our first, which includes Orlando, Florida and Sterling Heights, Michigan. As we move into next year and beyond, we're excited about our massive white space opportunity. As we've previously stated in our IPO filings with the SEC, there's potential for over 600 Portillo's restaurants throughout the country. This is obviously a long-term growth number, and we plan to expand at about 10% growth annually. Our current plan is to open seven restaurants in 2022. And we're targeting to expand our presence in Florida, Arizona, Indiana, and Michigan, as well as an initial expansion into Texas. Strategy allows us to tap into our two-pronged approach to expansion. First, continuing to expand our presence in our core market across the Midwest, and second, targeting national markets across the Sun Belt for opportunistic growth. One specific new location planned for 22 that I want to highlight is what we're calling a Portillo's pickup, which will be located in Joliet, Illinois. Unlike our other restaurants, this off-premise only spot features a smaller footprint than the traditional Portillo's, and it will not have a dining room. Instead, it'll feature three drive-through lanes, as well as a pickup area, catering, and delivery. This is the first prototype, and if successful, gives us a great option to fill in mature markets. Finally, as we grow our unit count, we continue to be focused on our talent pipeline. We will continue to invest in our training programs, develop leaders, and live our values of family, greatness, energy, and fun each and every day. All of these efforts are reflected and drive our financial performance. With that, I'm going to turn it over to Michelle to cover more details about our financial results.