--- title: "Potbelly Corporation Reports Results For Third Fiscal Quarter 2022" url: https://burnaze.com/article/a4e094b0-db74-4672-8e42-ac541504eda3 source: "Franchising.com" original_url: https://www.franchising.com/news/20221109_potbelly_corporation_reports_results_for_third_fiscal_quarter_2022.html category: "Sandwich & sub" industry: "Restaurants" segment: "Sandwich & sub" topics: ["Finance & M&A"] published: 2022-11-09T12:00:00.000Z modified: 2026-11-01T01:08:09.927Z image: https://images.unsplash.com/photo-1611974789855-9c2a0a7236a3?w=1600&q=80&auto=format&fit=crop --- # Potbelly Corporation Reports Results For Third Fiscal Quarter 2022 **TL;DR:** Potbelly Corporation reported strong results for the third fiscal quarter of 2022, driven by the continued success of its Five-Pillar Strategy and strategic initiatives. The company achieved record AUVs and substantial top-line growth, with same-store sales improving by 15% and total revenues increasing by 15.7% to $117.6 million. *originally published in Franchising.com on 2022-11-09. [Read the original](https://www.franchising.com/news/20221109_potbelly_corporation_reports_results_for_third_fiscal_quarter_2022.html).* ## Key facts - Same-store-sales improved +15% - Adjusted EBITDA up 75% year-over-year - 25 new shops to be opened in Tampa, Central Orlando, Florida and Central Illinois regions ## Story ## Financial Results - ***Same-store-sales improved +15%, leading to record AUVs of $23,383 for the quarter*** - ***Positive net income of $9.0 million, adjusted net income of $0.3 million, Adjusted EBITDA up 75% year-over-year*** - ***Recently signed franchising agreements for 25 shops within the Tampa, Central Orlando, Florida and Central Illinois regions, mark acceleration of franchise development growth*** CHICAGO, Nov. 03, 2022 // GLOBE NEWSWIRE // - Potbelly Corporation (NASDAQ: PBPB), (“Potbelly” or the “Company”) the iconic neighborhood sandwich shop concept, today reported financial results for the third fiscal quarter ended September 25, 2022. - Positive same-store sales (SSS) for the sixth consecutive quarter, ending the third quarter at +15.0% driven by continued strengthening from Central Business District (CBD) and Airport shops. - Income from operations improved by approximately $2 million year-over-year driven by shop-level margins expanding to 10.6% from 8.7% in Q3 2021 with notable strength in the final weeks of the quarter. - Enjoyed continued marketing success, driving customer engagement with limited time only menu offerings (LTOs) including the Gyro Sandwich, Pumpkin Shake and S’mores Cookie, increased engagement through targeted Perks promotions driving increased transactions and record sales. - Refreshed the Company’s corporate branding, reflecting its rich heritage as Potbelly Sandwich Works. - Expanded Potbelly Digital Kitchen (PDK) testing across both franchised and Company-owned shops. ## Franchise Growth - Signed two new franchise development agreements in the quarter, and a third agreement subsequent to the end of the quarter, marking an important step towards achieving the Company’s Franchise Growth Acceleration Initiative targets. - Total revenues increased by 15.7% to $117.6 million compared to $101.7 million. - GAAP net income attributable to Potbelly Corporation was $9.0 million, inclusive of PPP loan forgiveness of $10.2 million, compared to a GAAP net loss of ($2.9) million. GAAP diluted income per share was $0.31 compared to a GAAP diluted loss per share of ($0.10). - Adjusted net income1; attributable to Potbelly Corporation was $0.3 million compared to an adjusted net loss of ($1.5) million. Adjusted diluted EPS1 was $0.01 compared to an adjusted diluted EPS loss of ($0.05). - EBITDA1; improved to $12.3 million from $0.9 million, inclusive of PPP loan forgiveness. - Adjusted EBITDA1; improved to $4.7 million compared to $2.7 million. ## Executive Commentary Bob Wright, President and Chief Executive Officer of Potbelly Corporation, said, “We are pleased to report another quarter of strong results, driven by the continued success of our Five-Pillar Strategy and the strategic initiatives that support it. Once again, we achieved record AUVs and substantial top-line growth, driven by successful marketing campaigns including our new branding and digital marketing efforts. These initiatives included Perks and digital promotional activity, LTO product launches including the Gyro Sandwich, Pumpkin Shake, and S’mores Cookie and the benefit of strategic price increases which were implemented earlier in the quarter. Additionally, we expanded shop-level margins year-over-year despite additional inflationary pressures related to commodity costs we faced earlier in the quarter. The margin expansion we achieved was also due to the team’s ongoing focus on disciplined cost management, strategic price increases, and demand generation across shop types.” Mr. Wright continued, “Recently, we shared the exciting news that we signed three multi-unit development deals, bringing 25 new Potbelly shops to the Tampa, Central Orlando, Florida and Central Illinois regions over the next seven to eight years. These development agreements mark the beginning of a new era for us, as we shift to a more franchise-focused organization and look to accelerate our next phase of growth by expanding the unique Potbelly brand across the country. We continue to be pleased with the pipeline of interest and activity from highly qualified franchise candidates and we look forward to announcing additional deals as they are signed.” Steve Cirulis, Chief Financial Officer, added, “We are happy with Potbelly’s ability to produce substantial top-line growth, which was at the high end of our expectations, and shop-level margin expansion which was within our guidance range. Additionally, we are pleased by the Company’s resiliency throughout the period and our ability to exit the third quarter with momentum which has continued into the fourth quarter. Potbelly continues to enjoy strength in its digital business, as well as continued recovery in our CBD and airport shop types, giving us confidence as we approach the end of the year. We believe our strong performance will continue and expect fourth quarter revenue of between $114 to $119 million and shop-level margins of between 10% to 13%. This performance trajectory allows us to share our 2022 fiscal year goals of achieving record AUVs of between $1.14 to $1. 16 million, same-store sales of between 16% to 18% and shop level margins of approximately 10%.” A conference call and audio webcast has been scheduled for 5:00 p.m. Eastern Time today to discuss these results. Investors, analysts, and members of the media interested in listening to the live presentation are encouraged to join a webcast of the call with accompanying presentation slides, available on the investor relations portion of the Company's website at www.potbelly.com. For those that cannot join the webcast, you can participate by dialing 1-833-630-1088 in the U.S. & Canada, or 1-412-317-1817 internationally. For those unable to participate, an audio replay will be available from 8:00 p.m. Eastern Time on Thursday, November 3, 2022, through midnight November 10, 2022. To access the replay, please call 1-877-344-7529 (U.S.), 855-669-9658 (Canada), or 1-412-317-0088 (International) and enter confirmation code 2581610. A web-based archive of the conference call will also be available at the above website. Potbelly Corporation is a neighborhood sandwich concept that has been feeding customers’ smiles with warm, toasty sandwiches, signature salads, hand-dipped shakes and other fresh menu items, customized just the way customers want them, for more than 40 years. Potbelly promises Fresh, Fast & Friendly service in an environment that reflects the local neighborhood. Since opening its first shop in Chicago in 1977, Potbelly has expanded to neighborhoods across the country - with approximately 400 company-owned shops in the United States. - **Revenues** – represents net company-operated sandwich shop sales and our franchise royalties and fees. Net company-operated shop sales consist of food and beverage sales, net of promotional allowances and employee meals. Franchise royalties and fees consist of an initial franchise fee, a franchise development agreement fee and royalty income from the franchisee. - **Company-operated comparable store sales or same-store traffic** – represents the change in year-over-year sales or transactions for the comparable company-operated store base open for 15 months or longer. - **Average Unit Volumes (AUV)** – represents the average sales of all company-operated shops which reported sales during the associated time period. - **EBITDA** – represents income before depreciation and amortization expense, interest expense and the provision for income taxes. - **Adjusted EBITDA** – represents income before depreciation and amortization expense, interest expense and the provision for income taxes, adjusted to eliminate the impact of other items, including certain non-cash and other items that we do not consider reflective of underlying business performance. - **Shop-level profit (loss)** – represents income (loss) from operations excluding franchise royalties and fees, franchise marketing expenses, general and administrative expenses, depreciation expense, pre-opening costs, restructuring costs and impairment, loss on the disposal of property and equipment and shop closures. - **Shop-level profit (loss) margin** – represents shop-level profit expressed as a percentage of net company-operated sandwich shop sales. - **Adjusted net income (loss)** – represents net income (loss), adjusted to eliminate the impact of restructuring costs, impairment, loss on the disposal of property and equipment, shop closures, and other items we do not consider representative of our ongoing operating performance, including the income tax effects of those adjustments and the change in our income tax valuation allowance. - **Adjusted diluted EPS** – represents adjusted net income (loss) divided by the weighted average number of fully dilutive common shares outstanding. We prepare our financial statements in accordance with Generally Accepted Accounting Principles (“GAAP”). Within this press release, we make reference to EBITDA, adjusted EBITDA, adjusted diluted EPS, 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, adjusted net income and adjusted diluted EPS to evaluate the Company’s performance and in order to have comparable financial results to analyze changes in our underlying business from quarter to quarter. Adjusted EBITDA, adjusted net income and adjusted diluted EPS exclude the impact of certain non-cash charges and other items that affect the comparability of results in past quarters and which we do not believe are reflective of underlying business performance. 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. The non-GAAP financial measures used by the Company in this press release may be different from the methods used by other companies. In addition to historical information, this press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended and the Private Securities Litigation Reform Act of 1995. 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,” “might,” “will,” “should,” “seeks,” “intends,” “plans,” “strives,” “goal,” “estimates,” “forecasts,” “projects” or “anticipates” or the negative of these terms and similar expressions are intended to identify forward-looking statements. Forward-looking statements included in this press release may include, among others, statements relating to our future financial position and results of operations, revenue, business strategy, budgets, shop-level margins, our intention to build further on our growth momentum in the coming quarters, our expectation that we will announce our first franchising deals with candidates as well as new signed Shop Development Area Agreements, our expectation that we will make meaningful progress in Potbelly’s next phase of growth, our expectation that we will achieve record AUV’s and double-digit growth in same-store sales for full year 2022 and our expectation that our shop-level margins will be in the low double-digit range for full year 2022. 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, due to reasons including, but not limited to, risks related to the COVID-19 outbreak; compliance with our Credit Agreement covenants; competition; general economic conditions; our ability to successfully implement our business strategy; the success of our initiatives to increase sales and traffic; changes in commodity, energy and other costs; our ability to attract and retain management and employees; consumer reaction to industry-related public health issues and perceptions of food safety; our ability to manage our growth; reputational and brand issues; price and availability of commodities; consumer confidence and spending patterns; and weather conditions. In addition, there may be other factors of which we are presently unaware or that we currently deem immaterial that could cause our actual results to be materially different from the results referenced in the forward-looking statements. All forward-looking statements contained in this press release are qualified in their entirety by this cautionary statement. Although we believe that our plans, intentions and expectations are reasonable, we may not achieve our plans, intentions or expectations. 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 or other subsequent filings, all of which are available on our website at www.potbelly. com. The Company undertakes no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law. ## Entities - Franchising.com (publication) - Restaurants (sector) - franchise growth (topic) - revenue growth (topic) - same store sales (topic) - Potbelly (company) - financial results (topic) - Bob Wright (person) - Steve Cirulis (person) --- Originally reported by Franchising.com (https://www.franchising.com/news/20221109_potbelly_corporation_reports_results_for_third_fiscal_quarter_2022.html). Summarized by Burnaze (https://burnaze.com/article/a4e094b0-db74-4672-8e42-ac541504eda3).