POTBELLY CORP (PBPB)·Q1 2025 Earnings Summary

Executive Summary

• Q1 2025 delivered modest top-line growth and profitability: revenue rose 2.3% to $113.7M, GAAP diluted EPS was $0.00, same-store sales +0.9%, and shop-level margin expanded 20 bps YoY to 13.7%; adjusted EBITDA was $5.5M, above the prior quarter’s Q1 guidance high end, with YoY compares impacted by a $1.1M settlement benefit in Q1 2024 .
• Versus Wall Street, the quarter was a clean beat on revenue and EPS, with a slight EBITDA miss against S&P Global consensus; management cited commodity deflation and disciplined G&A, offset by lapping the prior-year settlement .
• Guidance tightened constructively: 2Q’25 same-store sales +1.5% to +2.5% and adjusted EBITDA $8.25M–$9.75M; full-year 2025 guidance reiterated (same-store sales +1.5%–+2.5%, ≥38 new units, adjusted EBITDA $33M–$34M) .
• Development and capital allocation remain catalysts: four openings in Q1, 40 new franchise commitments (open + committed shops = 766), and ~$1.1M of buybacks in Q1 with $17.5M remaining under the 3-year authorization .

What Went Well and What Went Wrong

• What Went Well

  • Positive comp and margin execution despite early-quarter weather: same-store sales +0.9% and shop-level margin 13.7% (+20 bps YoY); CFO highlighted food cost deflation and strong franchise performance with disciplined G&A .
  • Digital engagement sustained strength with 42%+ digital mix (+~200 bps YoY), supported by loyalty and targeted marketing; management is investing in consumer-facing assets and data/analytics to deepen personalization .
  • Franchise growth pipeline accelerated: 40 new commitments in Q1 (best Q1 ever), clear line of sight to ≥38 openings in 2025, and a Large Area Developer 50/50 incentive to bring shops online faster .

• What Went Wrong

  • Adjusted EBITDA down 2.8% YoY to $5.5M due to lapping a $1.1M settlement benefit in Q1 2024; labor, occupancy, and other opex percentages modestly higher YoY on that compare .
  • Transactions slightly negative (-0.2%) despite average check up 1.1% (gross price +2.8%, effective +0.6% in-quarter); comp benefited ~40 bps from Easter calendar shift .
  • Sequential margin compression from Q4: shop-level margin fell from 16.0% to 13.7% (seasonality and lapping benefit), and income-from-operations margin declined from 2.1% to 0.2% .

Financial Results

Results vs S&P Global consensus (Q1 2025):

Values retrieved from S&P Global.*

Revenue composition (Q1 2025):

KPIs and operating metrics (Q1 2025):

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• CEO: “We delivered system-wide sales growth, positive same-store sales… and posted another quarter of strong profitability… I am proud to call Potbelly a growth company again… we expect our efforts across comp growth and unit growth… to deliver strong EBITDA growth for many years” .
• CFO: “Shop level margins were 13.7%, an increase of 20 basis points… We reported a slight net loss of $62,000… Adjusted net income was $43,000… We purchased ~117,000 shares for ~$1.1M… We anticipate repurchases throughout the 3-year program” .
• CEO on digital: “Our digital business represented over 42% of total shop sales… incremental investments in consumer-facing digital assets and data and analytics” .
• CEO on development: “Clear line of sight to open at least 38 new shops in 2025… opened 4 shops in Q1 and added 40 new commitments; best Q1 we’ve ever had” .

Q&A Highlights

• Comp drivers and outlook: Q2 comps guided positive despite Easter drag (-40 bps), citing menu innovation, value tiers, and targeted digital promotions; transactions -0.2% with average check +1.1% in Q1 .
• Franchising incentives: 50/50 program (discounted IFF and partial royalty relief for early/on-time openings) resonating with multi-unit developers; expected to impact medium-term build cadence .
• Digital mix and owned-channel migration: Continued investment in app/web and Perks to enable automated journeys and more discrete promotions, improving efficiency and frequency .
• Tariffs and inflation: Slight commodity deflation in Q1; FY food inflation still modeled ~2–3%; labor inflation ~2%–2.2% .
• Technology and CapEx: PDCX roll-out targets half of company shops in 2025, with ~5 hours labor savings per location; FY25 CapEx near $30M across tech, facilities, remodel tests, and selective company densification .

Estimates Context

• Q1 2025 beat on revenue and EPS vs consensus: revenue $113.681M vs $111.738M*, EPS $0.00 vs -$0.0225*; EBITDA slightly below consensus at $3.824M vs $4.103M* (note: adjusted EBITDA was $5.522M) .
• Q2 2025 (post-quarter context): company guided adjusted EBITDA $8.25M–$9.75M and same-store sales +1.5%–+2.5%; actual came in above revenue and EPS estimates per S&P Global; consensus revisions likely to reflect sustained comp/digital strength and development cadence .
  Values retrieved from S&P Global.*

Key Takeaways for Investors

• Execution improving: Q1 revenue and EPS beat consensus; adjusted EBITDA exceeded prior guidance high end, with margin tailwinds from commodity deflation and disciplined G&A, offset by lapping one-time settlement .
• Near-term trading setup: Positive Q2 comp/EBITDA guidance and continued digital momentum could support estimate revisions and sentiment; watch for follow-through on Q2 comps despite Easter headwind .
• Medium-term growth flywheel: ≥38 2025 openings, 40 new Q1 commitments, and Large Area Developer incentives expand pipeline quality/pace; development visibility is strengthening .
• Unit economics/ops: PDCX rollout and remodel tests target labor efficiency and throughput gains; monitor realized labor savings and service speeds through 2H’25/2026 .
• Pricing discipline: Gross price “just north of 3%” for 2025, aligned to input costs while protecting traffic; look for loyalty-driven personalization to lift frequency without heavy discounting .
• Capital allocation: Active buybacks with $17.5M remaining and selective company densification aimed at outsized EBITDA contribution; track cash generation and leverage under the credit facility .
• Risks: Weather/macro/tariff variability, labor and rent pressure in certain markets; management’s commentary suggests monitoring commodity trajectories and consumer behavior closely .

Additional Press Releases Relevant to Q1 2025

• Potbelly launches 50/50 Large Area Developer Incentive Program to reward accelerated multi-unit development timelines, supporting faster scale with financially savvy franchisees .

Appendix: Reconciliations and Operating Data References

• Consolidated statements, non-GAAP reconciliations, shop-level margin, and selected operating data for Q1 2025 are provided in the press release and 8-K exhibits .
• Prior quarters’ financials and operating data (Q4 2024, Q3 2024) for trend analysis and context .