Potbelly Corporation Reports Results for Third Fiscal Quarter 2014
Key highlights for the thirteen weeks ended
- Eight new shops opened, including seven company-operated shops and one franchised shop.
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Total revenues increased 8.5% to
$84.7 million from$78.0 million . - Company-operated comparable store sales increased 0.5%.
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Adjusted net income attributable to
Potbelly Corporation was$2.8 million , or$0.09 per diluted share, compared to adjusted net income of$3.2 million , or$0.15 per diluted share, during the same fiscal period of 2013. (1) -
GAAP net income attributable to
Potbelly Corporation was$1.9 million , compared to net income of$2.2 million during the same fiscal period of 2013. -
Adjusted EBITDA increased 10.1% to
$11.0 million from$10.0 million .
Key highlights for the thirty-nine weeks ended
- Twenty-seven new shops opened, including twenty-three company-operated shops and four franchised shops.
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Total revenues increased 7.7% to
$242.2 million from$225.0 million . - Company-operated comparable store sales decreased 1.1%.
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Adjusted net income attributable to
Potbelly Corporation was$5.0 million , or$0.16 per diluted share, compared to adjusted net income of$6.2 million , or$0.29 per diluted share, during the same fiscal period of 2013. (1) -
GAAP net income attributable to
Potbelly Corporation was$3.7 million , compared to net income of$4.9 million during the same fiscal period of 2013. -
Adjusted EBITDA increased 4.7% to
$27.4 million from$26.2 million .
Lewis continued, "We continue to bring Potbelly to new neighborhoods. In the third quarter, we opened seven company-operated shops, including our second shop in our newest hub city,
Fiscal 2014 Outlook
For fiscal 2014, management expects the following:
- 40-48 total new shop openings;
- Flat to negative low single-digit comparable store sales;
- An effective tax rate that is estimated to be approximately 41.0%; and
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Adjusted net income attributable to
Potbelly Corporation per diluted share of approximately$0.18 to$0.21 .
Conference Call
A conference call and audio webcast has been scheduled for
Date: |
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Time: |
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Dial-In #: |
855-599-4644 U.S. & |
678-304-6836 International | |
Confirmation code: | 10475002 |
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
About Potbelly
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 sales - 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 as well as costs associated with our plans to move our corporate headquarters.
- 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 evaluate 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
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.
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Consolidated Statements of Operations and Margin Analysis - Unaudited | ||||||||
(Amounts in thousands, except share and per share data) | ||||||||
For the 13 Weeks Ended | For the 39 Weeks Ended | |||||||
2014 |
2013 |
2014 |
2013 |
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Revenues | ||||||||
Sandwich shop sales, net | $ 84,340 | 99.6% | $ 77,747 | 99.6% | $ 241,131 | 99.6% | $ 224,214 | 99.7% |
Franchise royalties and fees | 335 | 0.4% | 274 | 0.4% | 1,045 | 0.4% | 737 | 0.3% |
Total Revenues | 84,675 | 100.0% | 78,021 | 100.0% | 242,176 | 100.0% | 224,951 | 100.0% |
Expenses | ||||||||
Sandwich shop operating expenses | ||||||||
Cost of goods sold, excluding depreciation | 24,044 | 28.4% | 23,014 | 29.5% | 69,066 | 28.5% | 65,767 | 29.2% |
Labor and related expenses | 23,772 | 28.1% | 21,223 | 27.2% | 68,637 | 28.3% | 62,217 | 27.7% |
Occupancy expenses | 10,467 | 12.4% | 9,295 | 11.9% | 30,629 | 12.6% | 26,826 | 11.9% |
Other operating expenses | 8,847 | 10.4% | 7,946 | 10.2% | 25,696 | 10.6% | 23,058 | 10.3% |
General and administrative expenses | 7,623 | 9.0% | 8,293 | 10.6% | 24,310 | 10.0% | 24,298 | 10.8% |
Depreciation expense | 5,039 | 6.0% | 4,460 | 5.7% | 14,540 | 6.0% | 13,284 | 5.9% |
Pre-opening costs | 314 | 0.4% | 364 | 0.5% | 839 | 0.3% | 1,083 | 0.5% |
Impairment and loss on disposal of property and equipment | 1,315 | 1.6% | 250 | 0.3% | 2,192 | 0.9% | 329 | 0.1% |
Total Expenses | 81,421 | 96.2% | 74,845 | 95.9% | 235,909 | 97.4% | 216,862 | 96.4% |
Income from operations | 3,254 | 3.8% | 3,176 | 4.1% | 6,267 | 2.6% | 8,089 | 3.6% |
Interest expense | 42 | 0.0% | 97 | 0.1% | 124 | 0.1% | 330 | 0.1% |
Other expense | -- | 0.0% | -- | 0.0% | -- | 0.0% | 2 | 0.0% |
Income before income taxes | 3,212 | 3.8% | 3,079 | 3.9% | 6,143 | 2.5% | 7,757 | 3.4% |
Income tax expense | 1,260 | 1.5% | 905 | 1.2% | 2,476 | 1.0% | 2,792 | 1.2% |
Net income | 1,952 | 2.3% | 2,174 | 2.8% | 3,667 | 1.5% | 4,965 | 2.2% |
Net income attributable to non-controlling interest | 5 | 0.0% | 9 | 0.0% | 11 | 0.0% | 24 | 0.0% |
Net income attributable to |
1,947 | 2.3% | 2,165 | 2.8% | 3,656 | 1.5% | 4,941 | 2.2% |
Dividend declared to common and preferred stockholders | -- | 0.0% | (49,854) | -63.9% | -- | 0.0% | (49,854) | -22.2% |
Accretion of redeemable convertible preferred stock to maximum redemption value | -- | 0.0% | (4,796) | -6.1% | -- | 0.0% | (15,097) | -6.7% |
Net income (loss) attributable to common stockholders | $ 1,947 | 2.3% | $ (52,485) | -67.3% | $ 3,656 | 1.5% | $ (60,010) | -26.7% |
Net income (loss) per common share attributable to common stockholders: | ||||||||
Basic | $ 0.07 | $ (12.29) | $ 0.12 | $ (14.12) | ||||
Diluted | $ 0.06 | $ (12.29) | $ 0.12 | $ (14.12) | ||||
Weighted average common shares outstanding: | ||||||||
Basic | 29,358,822 | 4,268,953 | 29,284,058 | 4,250,819 | ||||
Diluted | 30,044,456 | 4,268,953 | 30,463,093 | 4,250,819 |
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Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures - Unaudited | ||||
(Amounts in thousands, except share and per share data) | ||||
For the 13 Weeks Ended | For the 39 Weeks Ended | |||
2014 |
2013 |
2014 |
2013 |
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Net income attributable to |
$ 1,947 | $ 2,165 | $ 3,656 | $ 4,941 |
One-time costs associated with IPO (2) | -- | 1,473 | -- | 1,697 |
Tax benefit of one-time costs associated with IPO (3) | -- | (564) | -- | (650) |
Impairment and closures (4) | 1,421 | 250 | 2,284 | 337 |
Tax benefit of impairment and closures (3) | (584) | (96) | (939) | (129) |
Adjusted net income attributable to |
$ 2,784 | $ 3,228 | $ 5,001 | $ 6,196 |
Net income attributable to |
$ 0.07 | $ 0.51 | $ 0.12 | $ 1.16 |
Net income attributable to |
$ 0.06 | $ 0.10 | $ 0.12 | $ 0.23 |
Adjusted net income attributable to |
$ 0.09 | $ 0.76 | $ 0.17 | $ 1.46 |
Adjusted net income attributable to |
$ 0.09 | $ 0.15 | $ 0.16 | $ 0.29 |
Shares used in computing adjusted net income attributable to |
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Basic | 29,358,822 | 4,268,953 | 29,284,058 | 4,250,819 |
Diluted | 30,044,456 | 21,131,412 | 30,463,093 | 21,059,983 |
For the 13 Weeks Ended | For the 39 Weeks Ended | |||
2014 |
2013 |
2014 |
2013 |
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Net income attributable to |
$ 1,947 | $ 2,165 | $ 3,656 | $ 4,941 |
Depreciation expense | 5,039 | 4,460 | 14,540 | 13,284 |
Interest expense | 42 | 97 | 124 | 330 |
Income tax expense | 1,260 | 905 | 2,476 | 2,792 |
Impairment and closures (4) | 1,421 | 250 | 2,284 | 337 |
Pre-opening costs (5) | 314 | 364 | 839 | 1,083 |
Stock-based compensation (6) | 581 | 1,228 | 2,022 | 2,370 |
Public company costs (7) | 442 | 566 | 1,487 | 1,061 |
Adjusted EBITDA | $ 11,046 | $ 10,035 | $ 27,428 | $ 26,198 |
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Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures - Unaudited | ||||
(Amounts in thousands) | ||||
For the 13 Weeks Ended | For the 39 Weeks Ended | |||
2014 |
2013 |
2014 |
2013 |
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Income from operations | $ 3,254 | $ 3,176 | $ 6,267 | $ 8,089 |
Less: Franchise royalties and fees | 335 | 274 | 1,045 | 737 |
General and administrative expenses | 7,623 | 8,293 | 24,310 | 24,298 |
Depreciation expense | 5,039 | 4,460 | 14,540 | 13,284 |
Pre-opening costs | 314 | 364 | 839 | 1,083 |
Impairment and loss on disposal of property and equipment | 1,315 | 250 | 2,192 | 329 |
Shop - level profit [Y] | $ 17,210 | $ 16,269 | $ 47,103 | $ 46,346 |
Total Revenues | $ 84,675 | $ 78,021 | $ 242,176 | $ 224,951 |
Less: Franchise royalties and fees | 335 | 274 | 1,045 | 737 |
Sandwich shop sales, net [X] | $ 84,340 | $ 77,747 | $ 241,131 | $ 224,214 |
Shop - level profit margin [Y÷X] | 20.4% | 20.9% | 19.5% | 20.7% |
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Consolidated Selected Operating Data - Unaudited | ||||
For the 13 Weeks Ended | For the 39 Weeks Ended | |||
2014 |
2013 |
2014 |
2013 |
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Selected Operating Data | ||||
Shop Activity: | ||||
Company-operated shops, end of period | 319 | 288 | 319 | 288 |
Franchise shops, end of period | 26 | 19 | 26 | 19 |
Revenue Data: | ||||
Company-operated comparable store sales (8) | 0.5% | 2.5% | -1.1% | 1.8% |
Footnotes to the Press Release, Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures & Selected Operating Data |
(1) On |
(2) This adjustment includes one-time costs associated with our IPO, which closed on |
(3) The tax benefit is based on the Company's annual pro-forma effective tax rate of 41.1% for the 13 and 39 weeks ended |
(4) This adjustment includes costs related to impairment of long-lived assets, gain or loss on disposal of property and equipment and shop closure expenses. Additionally, the 13 and 39 weeks ended |
(5) Pre-opening costs are expensed as incurred and primarily consist of manager salaries and training, travel, employee payroll, and related training costs incurred prior to the opening of a shop, as well as occupancy costs incurred from the date the Company takes site possession to shop opening. |
(6) The Company accounts for its stock-based employee compensation in accordance with ASC 718, Stock Based Compensation. Stock options granted without performance conditions are recorded in stock-based compensation expense on a straight-line basis over the vesting period based on the grant-date fair value of the option, determined using the Black-Scholes option pricing valuation model. |
(7) This adjustment includes one-time costs associated with our public offering as well as on-going public company costs. Both these costs primarily consist of legal and accounting fees. |
(8) Company-operated comparable store sales for the 13 and 39 weeks ended |
CONTACT: | Investor Relations |
Investors@Potbelly.com | |
312-428-2950 |
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