Potbelly Corporation
May 3, 2016

Potbelly Corporation Reports Results for First Fiscal Quarter 2016

CHICAGO, May 03, 2016 (GLOBE NEWSWIRE) -- Potbelly Corporation (NASDAQ:PBPB) today reported financial results for the first fiscal quarter ended March 27, 2016.

Key highlights for the thirteen weeks ended March 27, 2016 compared to the thirteen weeks ended March 29, 2015 include:

Aylwin Lewis, Chairman and Chief Executive Officer of Potbelly Corporation commented, "We had a good start to the year, as the positive momentum we experienced throughout 2015 continued into the first quarter. We delivered revenue growth of 11.9% and adjusted net income of $1.1 million, driven by company-operated comparable sales increase of 3.7% and new corporate shop development." 

Lewis continued, "Our strong business fundamentals are reflected in the results. The results trajectory is excellent over the long term. We will continue to leverage our culture to drive sales, increase our flow-through and improve shareholder value."

2016 Outlook

For the full fiscal year of 2016, management currently expects:

Conference Call

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

   
Date: Tuesday, May 3, 2016
Time: 5:00 p.m. Eastern time
Dial-In #: 877-407-0784 U.S. & Canada
  201-689-8560 International
Confirmation code: 13634634
   

Alternatively, the conference call will be 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. Eastern time on Tuesday, May 3, 2016 through midnight Tuesday, May 10, 2016. To access the replay, please call 877-870-5176 (U.S. & Canada) or 858-384-5517 (International) and enter confirmation code 13634634. 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 350 shops in the United States and our franchisees operate over 30 shops domestically, in the Middle East and in the United Kingdom. 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:

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 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."

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.

 
Potbelly Corporation
Consolidated Statements of Operations and Margin Analysis — Unaudited
(Amounts in thousands, except share and per share data)
       
  For the 13 Weeks Ended
 
  March 27, March 29,
 
   2016   2015 
Revenues              
Sandwich shop sales, net $95,426   99.4% $85,397   99.6%
Franchise royalties and fees  529   0.6   371   0.4 
Total revenues  95,955   100.0   85,768   100.0 
Expenses                
Sandwich shop operating expenses        
Cost of goods sold, excluding depreciation  26,246   27.4   24,345   28.4 
Labor and related expenses  28,162   29.3   24,600   28.7 
Occupancy expenses  12,757   13.3   11,347   13.2 
Other operating expenses  10,545   11.0   9,657   11.3 
General and administrative expenses  10,523   11.0   8,831   10.3 
Depreciation expense  5,664   5.9   5,151   6.0 
Pre-opening costs  152   0.2   541   0.6 
Impairment and loss on disposal of property and equipment  17   0.0   348   0.4 
Total expenses  94,066   98.0   84,820   98.9 
Income from operations  1,889   2.0   948   1.1 
Interest expense, net  28   0.0   61   0.1 
Income before income taxes  1,861   1.9   887   1.0 
Income tax expense  733   0.8   351   0.4 
Net income  1,128   1.2   536   0.6 
Net income attributable to non-controlling interests  40   0.0   5   0.0 
Net income attributable to Potbelly Corporation $1,088   1.1% $531   0.6%
                 
         
Net income per common share attributable to common shareholders:        
Basic $0.04    $0.02   
Diluted $0.04    $0.02   
Weighted average common shares outstanding:        
Basic  26,259,593     28,905,084   
Diluted  26,733,055     29,675,032   
         

 

Potbelly Corporation
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
 
  March 27,
  March 29,
 
   2016   2015 
Net income attributable to Potbelly Corporation, as reported $1,088  $531 
Impairment and closures(1)  17   480 
Tax benefit of impairment and closures(2)  (7)  (190)
Adjusted net income attributable to Potbelly Corporation $1,098  $821 
         
Net income attributable to Potbelly Corporation per share, basic $0.04  $0.02 
Net income attributable to Potbelly Corporation per share, diluted $0.04  $0.02 
     
Adjusted net income attributable to Potbelly Corporation per share, basic $0.04  $0.03 
Adjusted net income attributable to Potbelly Corporation per share, diluted $0.04  $0.03 
     
Shares used in computing adjusted net income attributable to Potbelly Corporation:    
Basic  26,259,593   28,905,084 
Diluted  26,733,055   29,675,032 
     
     
  For the 13 Weeks Ended
 
  March 27,
  March 29,
 
   2016   2015 
         
Net income attributable to Potbelly Corporation, as reported $1,088  $531 
Depreciation expense  5,664   5,151 
Interest expense, net  28   61 
Income tax expense  733   351 
Impairment and closures(3)  17   400 
Pre-opening costs(4)  152   541 
Stock-based compensation  677   538 
Public company costs(5)  635   661 
Adjusted EBITDA $8,994  $8,234 
         
 
Potbelly Corporation
Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures — Unaudited
(Amounts in thousands, except selected operating data)
         
  For the 13 Weeks Ended
 
  March 27,
  March 29,
 
   2016   2015 
         
Income from operations $1,889  $948 
Less: Franchise royalties and fees  529   371 
General and administrative expenses  10,523   8,831 
Depreciation expense  5,664   5,151 
Pre-opening costs  152   541 
Impairment and loss on disposal of property and equipment  17   348 
Shop-level profit [Y] $17,716  $15,448 
Total revenues $95,955  $85,768 
Less: Franchise royalties and fees  529   371 
Sandwich shop sales, net [X] $95,426  $85,397 
Shop-level profit margin [Y÷X]  18.6%  18.1%
     
         
  For the 13 Weeks Ended
 
  March 27,
  March 29,
 
   2016   2015 
         
Selected Operating Data    
Shop Activity:    
Company-operated shops, end of period  377   339 
Franchise shops, end of period  38   29 
Revenue Data:    
Company-operated comparable store sales  3.7%  5.4%
         


Footnotes to the Press Release, Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures 
& Selected Operating Data
 
(1) This adjustment includes costs related to impairment of long-lived assets, gain or loss on disposal of property and equipment and shop closure expenses. Shop closure expenses are recorded in general and administrative expenses in the consolidated statement of operations. Additionally, the thirteen weeks ended March 29, 2015 include costs associated with the Company moving its corporate headquarters, which are recorded in the consolidated statement of operations in general and administrative expenses, as well as pre-opening for the occupancy-related costs.
(2) The tax benefit associated with impairment and closures is based on the Company's annual pro-forma effective tax rate of 39.4% for the thirteen weeks ended March 27, 2016 and an annual pro-forma effective tax rate of 39.6% for the thirteen weeks ended March 29, 2015.
(3) This adjustment includes costs related to impairment of long-lived assets, gain or loss on disposal of property and equipment and shop closure expenses. Shop closure expenses are recorded in general and administrative expenses in the consolidated statement of operations.
(4) Pre-opening costs are expensed as incurred and primarily consist of travel, employee payroll and 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. Additionally, the thirteen weeks ended March 29, 2015 includes pre-opening rent for the new corporate office location of $0.1 million.
(5) This adjustment includes on-going public company costs, which primarily consist of legal and accounting fees.
 
Contact: Investor Relations 
Investors@Potbelly.com
312-428-2950