Portillo's Inc.

Welcome to Portillo's fourth quarter and fiscal year 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 need 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, Portillo's Director of Investor Relations, please go ahead.

Thank you, Operator. Good morning, everyone, and welcome to our fiscal fourth quarter 2022 earnings call. With me on the call today is Michael Osanlu, President and Chief Executive Officer, and Michelle Hook, the company's Chief Financial Officer. Let me also 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. Now let me turn the call over to Michael Osanlou, President and Chief Executive Officer.

Thank you, Barb, and good morning, everyone. We appreciate you joining us for our year-end earnings call. Portillo's had a great first full year as a publicly traded company. Our brand is synonymous with quality and value, and true to form, we closed 2022 with solid financial results. And we're off to a great start for 23. I'm excited to share more about what's on the horizon for us, give you a preview of this year, but before I do, let me recap our fourth quarter financial results. In the fourth quarter of 2022, Total sales increased 8.6% to $150.9 million. Same restaurant sales grew 6%. For the fiscal year of 2022, total sales increased 9.7% to $587.1 million. Same restaurant sales grew 5.4%. We ended the year with an average unit volume of $8.5 million per restaurant. Restaurant-level adjusted EBITDA margin was 21.2% for the quarter and 22.6% for the fiscal year. Now, Michelle will go over financial results in more detail, but let me discuss the underlying drivers of our performance as we closed out the year. People love Portillo's. Many fans bring us into their homes for holiday gatherings and celebrations, and we certainly lost a little bit of momentum during winter storm Elliott that week of December 23rd. But weather never keeps Portillo's fans away for very long. As you'll see in a graph provided in our earnings supplement, sales bounced right back the following week and we've maintained strong sales since. Our entrees sold and transaction metrics are both up year to date in 2023. Now that includes some pent up demand from the storm, but it also gives us confidence that our price laggard strategy is working well. Again, Michelle's gonna give you more detail in a moment, but we feel really good about where we're priced compared to competitors and the value proposition that creates for our guests. Let's pivot to where it's a little warmer and talk about what's been happening in the Sun Belt. Recent openings of Kissimmee, Florida, the Colony in Texas, and Tucson, Arizona get us nearly through the class of 22 with Gilbert, Arizona on deck to open. And let me express how good that little bit of sunshine feels. In particular, we're thrilled with the reception we've received at our first restaurant in Texas. Since our grand opening on January 18, The Colony has been the number one restaurant across the entire system. This means it's been matching the volumes of restaurants in Chicago that have been open for decades. Specifically, the colony has averaged $48,000 in sales per day since the grand opening. Now, that annualizes to $17 million per year, and that's a crazy number, so please don't model that. It's definitely coming down. But we feel really good that this restaurant will significantly exceed our underwriting expectations and sets us up for further success in Texas as we continue to expand our We took the time we needed to make sure that this restaurant opened well, with everything and everyone in place to be successful. In its first 30 days, guest satisfaction scores at the Colony have outperformed the 30-day average of all the restaurants we've opened since 2021. This early outcome validates what we've learned along the way, that disciplined openings set up our new restaurants for success. We're also getting a really good read on our other restaurants in the class of 22. Our Portillo's pickup location in Joliet, Illinois has just over a year of operating history now. St. Pete is about to reach its first anniversary, and Cherville, Indiana has been operating for over a quarter. All these restaurants are performing well, and all are exceeding our underwriting expectations. We expect that to continue for the full class of 22. Looking ahead, we're committed to opening nine new restaurants in 2023 with a heavy emphasis on the Sun Belt. We're already out of the gate in Texas. We recently announced our next locations in Allen and Arlington, and we've started work on both sites. As we continue to navigate the new normal in the restaurant development lifecycle, our 23 openings will still be back half-loaded. However, we're already planning to better balance our 24 restaurant openings across the four quarters. As we continue to bring Portillo's to both new and long-time fans across the nation, we remain focused on creating value for our three core constituents. We're taking care of our guests by delivering delicious food at an unbeatable value. We're providing unrivaled work and personal growth experiences for our team members and And for our shareholders, we're committed to improving our already healthy restaurant-level margins despite the flurry of restaurant openings in 23. With that, let me hand it over to Michelle.