Portillo's Inc.

Thanks and welcome to the Portillo second quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Barbara Noverini. Please go ahead.

Thank you, operator. Good morning, everyone, and welcome to our fiscal second quarter 2022 earnings call. With me on the call today is Michael Asanlu, President and Chief Executive Officer, and Michelle Hook, the company's Chief Financial Officer. Before we begin our formal remarks, let me remind everyone that part of today's discussion 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 refer you to today's earnings press release and 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 the reconciliations of these non-GAAP measures to the most comparable GAAP measures. Any non-GAAP financial measures should not be considered as an alternative to GAAP measures, such as net income or operating income, or any other GAAP measure of our liquidity or financial performance. Finally, after we deliver our prepared remarks, we will open the lines for your questions. This morning, we also announced the date of our inaugural Investor Day, which will be held in New York on Tuesday, November 8th. We're excited to share more about our growth story with you, so please stay tuned for more information on how to participate. Now, let me turn the call over to Michael Asanlu, President and Chief Executive Officer.

Thank you, Barb. Let me first start by thanking all of our incredible team members. Our collective focus on the guest experience and operational excellence led to another quarter of revenue growth and strong profitability for Portillo's. In the second quarter of 2022, we grew total sales 7.0% to $150.6 million. Same restaurant sales grew 1.9%, even against a very tough comp of 25.0% from the same quarter last year. Average unit volumes remained strong at $8.3 million. Our ability to handle that kind of volume resulted in 25.5% restaurant-level adjusted EBITDA margin. Our labor savings initiatives early in the quarter helped drive these results. We expect these changes to have a long-term impact and will continue to look for efficiencies within our operating model. Michelle is going to detail our financial results in just a moment. But first, I'd like to go over the major drivers of our success and why I'm so confident in the sustainability of our approach. First, let's talk about our profitability levers. We generated 470 basis points of sequential margin improvement at the restaurant level in a tough environment. There's no question that inflation, commodity prices, and labor volatility remain challenging. So we continue to focus on what we can control, factors that largely fall into the buckets of strategic price management, labor efficiency, and team member engagement. By sticking with our price laggard strategy earlier this year, our value proposition is stronger than ever. Portillo's is known for offering high quality, delicious food at an affordable price. We view the cost of that high quality food as a reinvestment in our guests. Even in a year like this one, when commodity prices have gone wild, We will not gouge our guests or lower our standards on food quality just to manage short-term margins. Across our menu, by carefully pricing at or below inflation, we have preserved the value proposition that we offer our guests. We also saw a benefit from labor efficiencies that we implemented in late Q1, early Q2. And we've shared these stories about moving the salad bowl, trimming sausages, using pre-cut onions, and many more. These ideas start with our team members. We empower them to embrace a spirit of continuous improvement, both for the business and themselves. And those little improvements, in aggregate, improved labor hours, which in turn had an impact on our bottom line in the quarter. But I'd like to stress that these are not one quarter efforts that lead to one quarter results. We know that offering our guests a consistent, efficient experience has long-term benefits. If a guest has a positive experience, they come back and they bring their family and they bring their friends. This is evident from our guest satisfaction scores. Our order accuracy and overall satisfaction scores from Q2 remain the highest we've seen in the past 24 months. We consider these leading sales indicators that bode well for the back half of the year. Our guests have had positive experiences and they will be back. At Portillo's, we prioritize a robust, dynamic culture, which is an important part of the value proposition we offer our team members. Of course, we offer a variety of benefits and above average pay, but we know it's culture that wins. By leaning into our values of family, greatness, energy, and fun, we create an environment that brings people in and keeps them as part of the Portillo's family. We're also developing our next generation of leaders. Over the past year, we filled approximately 80% of our leadership openings internally. We gave them resources to excel and have fun at work. This leads to a culture that attracts and retains some of the best team members in the industry. Our folks are efficient, disciplined, and deliver the Portillo's experience while eager to learn and grow with us. Now, I want to be clear. We will continue to pay at or above market. So while we implemented cost savings initiatives early in the quarter, we did raise wages at the beginning of the third quarter in order to stay competitive. The labor efficiency piece can have a benefit to margins like it did this quarter, but we'll also continue to feel the impact of wage increases over the coming quarters. We're also continuing to execute against our 10% new unit growth commitment for the year. In Q2, we opened St. Petersburg, Florida, a beautiful restaurant that's a testament to the power of strategically great real estate. It has high visibility off the well-trafficked Tyrone Boulevard and a fantastic set of co-tenants. It's the perfect place for your family to stop after they've had a great day at the beach, and we're thrilled by how well it's performing. We're also very excited about our development plans for the rest of the year. We have shovels in the ground in Sherrillville, Indiana, and at the Grand Scape Development in the Colony, the site of our highly anticipated first restaurant in Texas. We're also starting construction on three more sites. Our restaurant in West Kissimmee marks the second in the Orlando, Florida area, and we continue to build scale in Arizona with upcoming restaurants in Gilbert and Tucson. All five of these restaurants will be open by the end of the year. Portillo's is still a relatively new public company, and we've stayed true to the commitments that we've made, and we're doing what we said we're going to do. By focusing on what we can control, we produce consistently strong financial results. This is evident in our margins, which remain best in class, despite the unpredictability of the broader environment. We remain hyper-focused on our value proposition, the guest experiences, and our team members' engagement and efficiency. In doing so, we create an environment that guests want to visit, that team members want to do well in, and that allows us to self-fund the exciting development pipeline that will generate new, obsessed fans. So with that, let me hand it over to Michelle to share some more details of the quarter.