Press Release

CHICAGO, May 6, 2014 (GLOBE NEWSWIRE) -- Potbelly Corporation (Nasdaq:PBPB) today reported financial results for the first fiscal quarter ended March 30, 2014.

Key highlights for the thirteen weeks ended March 30, 2014 compared to the thirteen weeks ended March 31, 2013 include:

• Eleven new shops opened, including nine company-operated shops and two franchised shops.
   
• Total revenues increased 7.5% to $73.9 million from $68.7 million.
   
• Company-operated comparable store sales decreased 2.2%.
   
• Adjusted net income attributable to Potbelly Corporation increased 128% to $0.2 million, or $0.01 per diluted share, from adjusted net income of $89 thousand, or $0.00 per diluted share.
   
• GAAP net loss attributable to Potbelly Corporation was $0.3 million, compared to net income of $18 thousand during the same fiscal period of 2013.
   
• Adjusted EBITDA increased 9.2% to $6.3 million from $5.8 million.

Aylwin Lewis, Chairman and Chief Executive Officer of Potbelly Corporation, commented, "Our performance was satisfactory in the first quarter given the significant weather that negatively impacted our comps roughly 375 basis points. We remain confident in the fundamentals of our business and remain on track to achieve our previously disclosed guidance of low single-digit comps, 25-35% adjusted net income growth and 40-48 total new shop openings for the fiscal year."

Lewis continued, "We believe 2014 will be an exciting year for Potbelly. We are expanding our geographical footprint by entering the Denver market, introducing our new Flats sandwich platform and continuing to provide convenience to our customers through the launch of our mobile application. We believe these investments in new unit growth, menu innovation and technology, along with a continued focus on operational execution, are additional enablers to set the business up for long-term sustainable growth. We remain confident in our ability to achieve our long-term financial goals of low single-digit comps, at least 25% return on capital investments, at least 20% annual adjusted net income growth, and at least 10% annual new unit growth for the foreseeable future."

2014 Outlook

For the full fiscal year of 2014, management currently expects annual adjusted net income growth to range between 25% and 35%. This guidance is based, in part, on the following assumptions for fiscal year 2014:

• 40 - 48 total new shop openings, including 35 - 40 company-operated shop openings and 5 - 8 franchise openings;
• Low single-digit company-operated comparable store sales growth;
• An effective tax rate that is not expected to exceed approximately 39.5%; and
• Comparable adjustments to net income as discussed in the "Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures."

Conference Call

A conference call and audio webcast has been scheduled for 5:00 p.m. ET today to discuss these results. Details of the conference call are as follows:

Alternatively, the conference call will be available via webcast at www.potbelly.com on the "Investor Relations" webpage. For those unable to participate, an audio replay will be available from 8:00 p.m. ET on Tuesday, May 6, 2014 through midnight Tuesday, May 20, 2014. To access the replay, please call 855-859-2056 (U.S. & Canada) or 404-537-3406 (International) and enter confirmation code 29314567. A web-based archive of the conference call will also be available at the above website.

About Potbelly

Potbelly Corporation is a fast-growing neighborhood sandwich concept offering toasty warm sandwiches, signature salads and other fresh menu items served by engaging people in an environment that reflects the Potbelly brand. Our Vision is for our customers to feel that we are their "Neighborhood Sandwich Shop" and to tell others about their great experience. Our Mission is to make people really happy and to improve every day. Our Passion is to be "The Best Place for Lunch." The Company owns and operates over 300 shops in the United States and the District of Columbia and our franchisees operate over twenty shops domestically and in the Middle East. For more information, please visit our website at www.potbelly.com.

Definitions

The following definitions apply to these terms as used throughout this press release:

• Revenues - represent net company-operated sandwich shop sales and our franchise operations. Net company-operated shop sales consist of food and beverage sales, net of promotional allowances and employee meals. Franchise royalties and fees consist of royalty income from the franchisee and a one-time shop opening fee.
• Company-operated comparable store salesgrowth - represents the change in year-over-year sales for the comparable company-operated store base open for 15 months or longer.
• Adjusted EBITDA - represents net income (loss) before depreciation and amortization expense, interest expense, provision for income taxes and pre-opening costs, adjusted to eliminate the impact of other items, including certain non-cash as well as certain other items that we do not consider representative of our on-going operating performance.
• Adjusted net income - represents net income (loss), excluding one-time costs related to the initial public offering ("IPO") as well as impairment, gain or loss on disposal of property and equipment and store closure expense.
• Shop-level profit - represents income (loss) from operations less franchise royalties and fees, general and administrative expenses, depreciation expense, pre-opening costs and impairment and loss on disposal of property and equipment.
• Shop-level profit margin - represents shop-level profit expressed as a percentage of net company-operated sandwich shop sales.

Non-GAAP Financial Measures

We prepare our financial statements in accordance with Generally Accepted Accounting Principles ("GAAP"). Within this press release, we make reference to adjusted EBITDA, adjusted net income, shop-level profit and shop-level profit margin, which are non-GAAP financial measures. The Company includes these non-GAAP financial measures because management believes they are useful to investors in that they provide for greater transparency with respect to supplemental information used by management in its financial and operational decision making.

Management uses adjusted EBITDA and adjusted net income to convey supplemental information to investors regarding the Company's performance excluding the impact of certain non-cash charges, costs associated with our IPO and other special items that affect the comparability of results in past quarters, are expected in future quarters and in order to have comparable financial results to analyze changes in our underlying business from quarter to quarter. Management uses shop-level profit and shop-level profit margin as key metrics to evaluate the profitability of incremental sales at our shops, to evaluate our shop performance across periods and to evaluate our shop financial performance against our competitors.

Accordingly, the Company believes the presentation of these non-GAAP financial measures, when used in conjunction with GAAP financial measures, is a useful financial analysis tool that can assist investors in assessing the Company's operating performance and underlying prospects. This analysis should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. This analysis, as well as the other information in this press release, should be read in conjunction with the Company's financial statements and footnotes contained in the documents that the Company files with the U.S. Securities and Exchange Commission ("SEC"). The non-GAAP financial measures used by the Company in this press release may be different from the methods used by other companies. For more information on the non-GAAP financial measures, please refer to the table, "Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures," accompanying this press release.

Forward-Looking Statements

Except for the historical information contained in this press release, the matters addressed are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements, written, oral or otherwise made, represent the Company's expectation or belief concerning future events. Without limiting the foregoing, the words "believes," "expects," "may," "will," "should," "seeks," "intends," "plans," "strives," "goal," "estimates," "forecasts," "projects" or "anticipates" and similar expressions are intended to identify forward-looking statements. By nature, forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected or implied by the forward-looking statement. Forward-looking statements are based on current expectations and assumptions and currently available data and are neither predictions nor guarantees of future events or performance. You should not place undue reliance on forward-looking statements, which speak only as of the date hereof. See "Risk Factors" and "Cautionary Statement on Forward-Looking Statements" included in our most recent annual report on Form 10-K and other risk factors described from time to time in subsequent quarterly reports on Form 10-Q, all of which are available on our website at www.potbelly.com.

CONTACT: Investor Relations

         Investors@Potbelly.com

         312-428-2950