Portillo's Inc.

Hello, and thank you for standing by. Welcome to the Fiscal Fourth Quarter 2024 Conference Call and Webcast. I would now like to turn the call over to Kyle Nelson, Vice President of Investor Relations at Portillo's to begin. Thank you.

Thank you, Operator.

Good morning, everyone, and welcome to our Fiscal Fourth Quarter 2024 Earnings Call. You can find our 10-K earnings press release and supplemental presentation on investors.portillos.com. With me on the call today is Michael Osanlu, President and Chief Executive Officer, and Michelle Hook, Chief Financial Officer. Any comments made here about our future results and business conditions are forward-looking statements, which are based on management's current expectations and are not guarantees of future performance. We do not update these forward-looking statements unless required by law. Our 10-K identifies risk factors that may cause our actual results to vary materially from these forward-looking statements. Today's earnings call will make reference to non-GAAP financial measures, which are not an alternative to GAAP measures. Reconciliations of these non-GAAP measures to their most comparable GAAP counterparts are included in this morning's posted materials. 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 of Portillo's. Thank you, Kyle. Good morning, everyone. Thank you for joining us for our year-end call. Now, before I dive into our results, I do want to take a moment to recognize and thank our incredible restaurant team members. Their hard work, dedication, and passion are what makes Portillo's special. Every day, they bring energy to our guests, delivering the unrivaled experience that keeps people coming back. Their commitment to excellence has been instrumental in elevating our brand, and I'm very grateful for everything they do to drive our success. Now for the fourth quarter, our same restaurant sales were up 0.4% and our full year comp was a negative 0.6%. Total revenue for the quarter was 184.6 million and full year revenue was 710.6 million. Restaurant level adjusted EBITDA for the fourth quarter was 45.2 million and 168.1 million for the full year with a margin of 23.7%. We saw good top line momentum in Q4, especially with the addition of kiosks at all of our restaurants. They are driving a comp lift of more than 1% through Mix. We believe there's still a lot of untapped potential with kiosks, and we're excited to continue exploring their role in our business. Our team has also done a nice job of controlling costs, particularly in labor and G&A. This has enabled us to drive strong cash flow in the business. We carried solid traction into January, but industry headwinds, including weather in February, muted some of our early momentum, similar to what you've heard from others in the restaurant industry. Looking ahead to the rest of the year, we're really excited about the plans we're executing. Our four key traffic driving strategies are number one, expansion of kiosk usage and functionality, Number two, advertising beyond Chicagoland to increase brand awareness. Number three, the launch of our Portillo's Perks loyalty program. And number four, simply better operations, including further improving speed in the drive-thru. This is how we'll drive traffic, improve margins, and deliver industry-leading unit economics for our shareholders. Now, of course, opening new restaurants remains critical to our growth. with a focus on building efficient restaurants that deliver strong returns. In 2024, we opened 10 new restaurants, two of which are our new, more compact Restaurant of the Future format. This smaller footprint reduces our restaurant size from approximately 7,700 square feet to 6,250, and importantly, lowers the average build cost by over a million dollars. We expect these to come in at 5.2 to 5.5 million. In 2025, we plan to open 12 new restaurants, all of which will be restaurant of the future. This includes our first restaurant in Georgia, located in the Atlanta suburb of Kennesaw. The majority of the other new restaurants in 2025 will be in Texas, where we'll continue to build scale and awareness. Openings in 2025 will still be more concentrated in the back half of the year, with the majority opening towards the end of the year, but we're optimistic that our strong pipeline will lead to 2026 being more balanced. Looking ahead, we continue to develop additional restaurant formats with an eye toward further improving new restaurant economics, including a more efficient operating model for our restaurant teams. These include an even smaller Restaurant of the Future 2.0 that will roll out in 2026, as well as airport and walk-up locations. On the advertising front, we're working to build brand awareness in Texas to capitalize on the untapped potential of large audiences who don't know us yet. In late January, we launched our first market-wide ad campaign in Dallas-Fort Worth. The ads focus on introducing Portillo's to new guests. We're telling them who we are, what makes us iconic, and where to find us. We're bringing the buzz and energy of a Portillo's experience to encourage people to visit. Our past experience marketing outside Chicago gives us great optimism that this campaign will drive a meaningful lift. Additionally, we're launching the Portillo's Perks loyalty program next month. This program is intended to drive traffic and engagement across Portillo's. We're initially focused on driving enrollment with the goal to hit 1.5 to 1.7 million members by July. Portillo's Perks is not a typical punch card program. It lives in your digital wallet and uses a targeted one-to-one marketing approach to drive specific behaviors based on guest habits and buying patterns. For example, in Chicagoland, where we're well-known, we might focus on encouraging visit frequency, whereas in new markets, we can focus on building brand awareness and excitement. We can gamify frequency through badging. We can elicit trial of new menu items, or we can offer discounts to drive incremental visits. Because this is not a points-based program, we can customize the richness of the offer to suit the needs of the business and our guests. To keep our guests coming back, we know we need to continue delivering an unrivaled experience across our restaurants. That's why our new COO, Tony Darden, has a three-pronged approach to strengthen operational excellence further. First is improving our drive-through efficiency. With a target of reducing drive-through time an additional 45 seconds, we've expanded our AI-powered drive-through camera pilot to more locations. This tool is showing promise by providing better real-time insights for restaurant leaders to optimize speed. Second, Tony is focused on training and elevating accountability and engagement within our teams to deliver a more consistent Portillo's experience across the chain. That means restaurant and market leaders getting more shoulder-to-shoulder time with team members, coaching in the moment, reinforcing fundamentals, Being attentive, hustling, and responding to guests with urgency and energy. All the things that make our experience uniquely great. Third, he's identified off-premise order accuracy as an opportunity. Ensuring guests receive exactly what they ordered is critical. Tony's already implementing processes to strengthen accuracy, ensuring we uphold the same high standards across all our channels. We're excited by the plans we have in place and remain focused on driving sales and transactions. With continued innovation and an unwavering focus on operational excellence, we're confident these efforts will drive the results we're aiming for and set us up for even greater success in 2025. With that, let me hand it over to Michelle.