Portillo's Inc.

Hello, and thank you for standing by. Welcome to the Portillo's fourth quarter 2025 conference call and webcast. I would now like to turn the call over to Chris Brandon, Vice President of Investor Relations at Portillo's to begin.

Thanks, Operator, and good morning, everyone. Welcome to the Portillo's fourth quarter and full year 2025 earnings call. With me today are Mike Miles, Chairman of the Board and Principal Executive Officer, and Michelle Hook, Chief Financial Officer. You can find our 10K earnings press release and supplemental presentation on investors.portillos.com. Any commentary 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 be happy to take questions from our covering sell-side analysts. And with that, I will turn the call over to Mike.

Thanks, Chris, and good morning. The fourth quarter reflected the strengths and challenges facing Portillo's in 2025. While our core markets continued to have outstanding AUVs and profitability, our Texas market expansion continued to be a headwind for our business. As we announced last fall, we have reset our development strategy, slowing new store openings and focusing on healthy unit economics. While it will take time for our new approach to bear fruit, and a number of restaurants opening in 2026 reflect prior strategy, our entry into the Atlanta market in the fourth quarter confirms the potential in our future growth strategy. Our restaurant in Kennesaw opened in November and through its first eight weeks registered over $2 million in sales. Portillo's fans drove from all over Metro Atlanta, indeed from all over the southeast, to get a taste of their Portillo's favorites. In addition to the outstanding top line, Kennesaw is the latest example of our reduced cost Restaurant of the Future 1.0 format, a 6,200 square foot building that is about 20% smaller than most of the restaurants opened over the prior five years. For our new philosophy of separating new unit openings with more time and distance, the next restaurant in Atlanta will not open until 2027 and will be about 50 miles from Kennesaw. We are gratified and frankly not really surprised by the results at Kennesaw. Each time we have entered a new market over the last 10 years, we've seen a similar response, with seven of those restaurants also exceeding $2 million over their first eight weeks. Our approach over the next several years will consist of more of these types of entries, tapping into the pent-up demand from Portillo's fans to support our first in-market openings, then letting awareness and demand build before opening subsequent restaurants. We will continue to iterate on our prototypes as we look to develop the best possible offering for customers and shareholders with four-wall profit potential driving each decision. Our perks program continues to show promise. We now have more than 2 million members enrolled and have seen strong results for promotions delivered through the program. We are just scratching the surface and have a lot of opportunity to more precisely target offers. I am confident that perks will play a valuable role in driving traffic improvements in 2026. And while traffic and sales continue to be our primary focus, we also took steps to improve labor management and profitability of the lower volume restaurants in Texas during the fourth quarter. I'm also pleased to report, as you likely saw in our announcement two weeks ago, that Brett Patterson has joined Portillo's as our new Chief Executive Officer. Brett has had a stellar career in the restaurant industry, working his way up from the front lines, He has all the qualities that the board was looking for to lead Portillo's next phase of growth, operations experience, a strategic mindset, and a people-first leadership style. Most importantly, he's a great cultural fit with Portillo's. The board and I look forward to working with Brett to provide our customers with the best restaurant experience, our people with a great place to work, and our shareholders with a profitable, growing business. Before I hand it to Michelle, I would like to take a moment to hear to personally thank the board, our executive team, and all of the people at Fortillo's for their support and commitment over these last several months. My time as interim CEO has only strengthened my conviction that this brand has a very bright future.