Potbelly Corporation
Feb 16, 2016

Potbelly Corporation Reports Results for Fourth Fiscal Quarter and Full Fiscal Year 2015; Full Year Company-Operated Same Store Sales Increased 4.4%; Adjusted Diluted EPS Growth of 32% to $0.29; and Diluted EPS Growth of 43% to $0.20

CHICAGO, Feb. 16, 2016 (GLOBE NEWSWIRE) -- Potbelly Corporation (NASDAQ:PBPB) today reported financial results for the fourth quarter and full fiscal year ended December 27, 2015.

Key highlights for the thirteen weeks ended December 27, 2015 compared to the thirteen weeks ended December 28, 2014 include:


Key highlights for the fifty-two weeks ended December 27, 2015 compared to the fifty-two weeks ended December 28, 2014 include:


Aylwin Lewis, Chairman and Chief Executive Officer of Potbelly Corporation commented, "We are very pleased with our results in the fourth quarter and for the full year 2015.  For the fourth quarter, we delivered 12% revenue growth and 36% adjusted net income growth.  For the full year, we achieved 14% revenue growth and 22% adjusted net income growth.  Comparable store sales were strong throughout the year, at 3.7% for the quarter and 4.4% for the year."

Lewis continued, "We continue to execute on our new unit development plan and bring Potbelly to new neighborhoods.  For the year, we opened 53 shops, with 43 company-operated and 10 franchised, which is approximately 12% net unit growth.  The men and women across the Potbelly Nation continue to do great work and were the driving force behind our strong results in 2015.  The underlying fundamentals of the business remain strong. The 2015 results reinforce our ability to achieve our long-term financial goals of at least 10% annual new unit growth for the foreseeable future, low single-digit comps, at least 20% annual adjusted net income growth and at least 25% return on shop investments."

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, February 16, 2016
Time: 5:00 p.m. Eastern time
Dial-In #: 877-407-0784 U.S. & Canada
  201-689-8560 International
Confirmation code: 13628055


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, February 16, 2016 through midnight Tuesday, February 23, 2016. To access the replay, please call 877-870-5176 (U.S. & Canada) or 858-384-5517 (International) and enter confirmation code 13628055. 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  For the 52 Weeks Ended 
  December 27,  December 28,  December 27,  December 28, 
  2015  2014  2015  2014 
Revenues                                
Sandwich shop sales, net $94,427   99.3% $84,333   99.4% $370,954   99.5% $325,464   99.5%
Franchise royalties and fees  666   0.7   470   0.6   1,895   0.5   1,515   0.5 
Total revenues  95,093   100.0   84,803   100.0   372,849   100.0   326,979   100.0 
Expenses                                
Sandwich shop operating expenses                                
Cost of goods sold, excluding depreciation  26,760   28.1   24,622   29.0   105,614   28.3   93,688   28.7 
Labor and related expenses  27,213   28.6   24,528   28.9   106,628   28.6   93,165   28.5 
Occupancy expenses  12,021   12.6   10,760   12.7   46,762   12.5   41,389   12.7 
Other operating expenses  9,741   10.2   8,973   10.6   39,869   10.7   34,669   10.6 
General and administrative expenses  9,616   10.1   8,110   9.6   37,322   10.0   32,420   9.9 
Depreciation expense  5,527   5.8   5,075   6.0   21,476   5.8   19,615   6.0 
Pre-opening costs  573   0.6   795   0.9   2,160   0.6   1,634   0.5 
Impairment and loss on disposal of property and equipment  1,624   1.7   936   1.1   3,589   1.0   3,128   1.0 
Total expenses  93,075   97.9   83,799   98.8   363,420   97.5   319,708   97.8 
Income from operations  2,018   2.1   1,004   1.2   9,429   2.5   7,271   2.2 
Interest expense, net  41   0.0   55   0.1   221   0.1   179   0.1 
Income before income taxes  1,977   2.1   949   1.1   9,208   2.5   7,092   2.2 
Income tax expense  686   0.7   272   0.3   3,466   0.9   2,748   0.8 
Net income  1,291   1.4   677   0.8   5,742   1.5   4,344   1.3 
Net income (loss) attributable to non-controlling interests  56   0.1   (25)  0.0   114   0.0   (14)  0.0 
Net income attributable to Potbelly Corporation $1,235   1.3% $702   0.8% $5,628   1.5% $4,358   1.3%
                                 
                                 
Net income per common share attributable to common shareholders:                                
Basic $0.05      $0.02      $0.20      $0.15     
Diluted $0.05      $0.02      $0.20      $0.14     
Weighted average common shares outstanding:                                
Basic  26,657,828       28,985,019       28,002,005       29,209,298     
Diluted  27,121,492       29,703,231       28,634,396       30,275,061     



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 For the 52 Weeks Ended 
  December 27, December 28, December 27, December 28, 
   2015   2014   2015   2014  
Net income attributable to Potbelly Corporation, as reported $1,235  $702  $5,628  $4,358  
Impairment and closures(1)  1,659   1,601   4,176   3,885  
Tax benefit of impairment and closures(2)  (603)  (616)  (1,570)  (1,496) 
Adjusted net income attributable to Potbelly Corporation $2,291  $1,687  $8,234  $6,747  
          
Net income attributable to Potbelly Corporation per share, basic $0.05  $0.02  $0.20  $0.15  
Net income attributable to Potbelly Corporation per share, diluted $0.05  $0.02  $0.20  $0.14  
          
Adjusted net income attributable to Potbelly Corporation per share, basic $0.09  $0.06  $0.29  $0.23  
Adjusted net income attributable to Potbelly Corporation per share, diluted $0.08  $0.06  $0.29  $0.22  
          
Shares used in computing adjusted net income attributable to Potbelly Corporation:         
Basic  26,657,828   28,985,019   28,002,005   29,209,298  
Diluted  27,121,492   29,703,231   28,634,396   30,275,061  
          
         
         
  For the 13 Weeks Ended For the 52 Weeks Ended 
  December 27, December 28, December 27, December 28, 
   2015   2014   2015   2014  
          
Net income attributable to Potbelly Corporation, as reported $1,235  $702  $5,628  $4,358  
Depreciation expense  5,527   5,075   21,476   19,615  
Interest expense, net  41   55   221   179  
Income tax expense  686   272   3,466   2,748  
Impairment and closures(3)  1,659   1,601   4,006   3,885  
Pre-opening costs(4)  573   795   2,160   1,634  
Stock-based compensation  604   520   2,399   2,542  
Public company costs(5)  489   401   2,281   1,888  
Adjusted EBITDA $10,814  $9,421  $41,637  $36,849  
         
  
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 For the 52 Weeks Ended 
  December 27, December 28, December 27, December 28, 
   2015   2014   2015   2014  
          
Income from operations $2,018  $1,004  $9,429  $7,271  
Less: Franchise royalties and fees  666   470   1,895   1,515  
General and administrative expenses  9,616   8,110   37,322   32,420  
Depreciation expense  5,527   5,075   21,476   19,615  
Pre-opening costs  573   795   2,160   1,634  
Impairment and loss on disposal of property and equipment  1,624   936   3,589   3,128  
Shop-level profit [Y] $18,692  $15,450  $72,081  $62,553  
Total revenues $95,093  $84,803  $372,849  $326,979  
Less: Franchise royalties and fees  666   470   1,895   1,515  
Sandwich shop sales, net [X] $94,427  $84,333  $370,954  $325,464  
Shop-level profit margin [Y÷X]  19.8%  18.3%  19.4%  19.2% 
         
         
         
  For the 13 Weeks Ended For the 52 Weeks Ended 
  December 27, December 28, December 27, December 28, 
   2015   2014   2015   2014  
          
Selected Operating Data         
Shop Activity:         
Company-operated shops, end of period  372   334   372   334  
Franchise shops, end of period  36   29   36   29  
Revenue Data:         
Company-operated comparable store sales  3.7%  3.7%  4.4%  0.1% 

 

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 fifty-two weeks ended December 27, 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) For the thirteen and fifty-two weeks ended December 27, 2015, the tax benefit associated with impairment and closures is based on effective tax rates of 36.3% and 37.6%, respectively. For the thirteen and fifty-two weeks ended December 28, 2014, the tax benefit associated with impairment and closures is based on an effective tax rate of 38.5%.
(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. Additionally, the fifty-two weeks ended December 27, 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.
(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 fifty-two weeks ended December 27, 2015 includes pre-opening rent for the new corporate office location of $0.2 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