Executive Summary

Q2 2025 delivered modest top-line and EPS beats versus consensus, with total revenue $123.7M (+3.4% y/y) and GAAP diluted EPS $0.08; adjusted diluted EPS was $0.09, shop-level margin expanded to 16.7% and adjusted EBITDA reached $9.6M, near the high end of company guidance .
Guidance raised: FY25 same-store sales to 2.0%-3.0% (from 1.5%-2.5%) and adjusted EBITDA to $34-$35M (from $33-$34M); 3Q25 introduced with same-store sales of 3.25%-4.25% and adjusted EBITDA $9.0-$10.0M .
Operating drivers: positive traffic (+1.1%) and pricing (+2.7% gross price) supported comps; commodity deflation (~40bps) aided food cost, while occupancy efficiency and disciplined G&A helped margin expansion .
Strategic catalysts: eight openings and 54 franchise commitments in Q2 (open+committed now 816), new website/app launch, and continued digital penetration (~41% of shop sales) position the brand for accelerated growth and investor re-rating .

What Went Well and What Went Wrong

What Went Well

Shop-level margin expanded to 16.7% (+100bps y/y), driven by commodity deflation and sales leverage; adjusted EBITDA rose 13% y/y to $9.6M, near the high end of guidance .
Unit growth and pipeline: eight openings in Q2 and 54 franchise commitments, lifting open+committed shops to 816; CEO: “growth engine…leveraging our Five-Pillar Operating Strategy” .
Digital and product innovation: ~41% of shop sales were digital; new website/app launched in late June, plus menu additions (prime rib steak sandwich) sustaining momentum .

Management quote: “Our results truly reflect the growth engine we’ve been building… The future is bright for Potbelly” .

What Went Wrong

GAAP net income down y/y to $2.5M from $34.7M due to prior-year $31.3M valuation allowance release; diluted EPS fell to $0.08 from $1.13 on the same tax comp .
G&A grew to 10.8% of revenue (up 90bps y/y) on payroll, bonus accruals, and consulting/legal costs; labor held at 28.0% of sales, indicating limited labor relief .
Mix headwind: despite 2.7% gross price, average check +2.1% and mix -0.6%; EBITDA consensus comparisons are less informative given non-GAAP usage, but highlight potential investor confusion around adjusted vs. unadjusted EBITDA .

Financial Results

Headline P&L and Key Metrics

Metric	Q2 2024	Q1 2025	Q2 2025
Total Revenues ($USD Millions)	$119.7	$113.7	$123.7
GAAP Diluted EPS ($USD)	$1.13	$(0.00)	$0.08
Adjusted Diluted EPS ($USD)	$0.08	$0.00	$0.09
Company-Operated Same-Store Sales (%)	0.4%	0.9%	3.2%
Shop-Level Profit Margin (%)	15.7%	13.7%	16.7%
Adjusted EBITDA ($USD Millions)	$8.5	$5.5	$9.6
Average Weekly Sales (AWS) ($USD)	$26,110	$24,550	$27,040

Actual vs Wall Street Consensus (S&P Global)

Metric	Q2 2025 Consensus	Q2 2025 Actual
Revenue ($USD Millions)	$122.6*	$123.7
GAAP Diluted EPS ($USD)	$0.088*	$0.08

Values marked with * are from S&P Global. Values retrieved from S&P Global.

Note: The company emphasizes adjusted EBITDA; S&P “EBITDA Consensus Mean” may reflect unadjusted EBITDA and is not directly comparable to “Adjusted EBITDA” disclosed .

Revenue Breakdown

Revenue Component	Q2 2024	Q1 2025	Q2 2025
Sandwich Shop Sales, Net ($USD Thousands)	$115,536	$109,002	$118,396
Franchise Royalties, Fees & Rent ($USD Thousands)	$4,161	$4,679	$5,313
Total Revenues ($USD Thousands)	$119,697	$113,681	$123,709

KPIs and Operating Drivers

KPI	Q2 2024	Q1 2025	Q2 2025
System-Wide Sales ($USD Thousands)	$144,470	$140,661	$154,170
Transactions (y/y contribution to comp)	—	-0.2 pts	+1.1 pts
Average Check (y/y contribution to comp)	—	+1.1 pts	+2.1 pts
Gross Price (y/y)	—	+2.8%	+2.7%
Food Cost (% of shop sales)	27.1%	26.1%	26.3%
Labor (% of shop sales)	28.0%	30.4%	28.0%
Occupancy (% of shop sales)	10.9%	11.0%	10.6%
Other Operating (% of shop sales)	18.4%	18.8%	18.4%

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Same-Store Sales % Growth	FY 2025	1.5%–2.5%	2.0%–3.0%	Raised
Adjusted EBITDA ($USD Millions)	FY 2025	$33–$34	$34–$35	Raised
New Unit Growth (shops)	FY 2025	At least 38	At least 38	Maintained
Same-Store Sales % Growth	Q3 2025	—	3.25%–4.25%	Introduced
Adjusted EBITDA ($USD Millions)	Q3 2025	—	$9.0–$10.0	Introduced

Context: Q2 actual adjusted EBITDA was $9.6M, near the high end of Q2 guidance ($8.25–$9.75M) set in May .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4’24, Q1’25)	Current Period (Q2’25)	Trend
Digital & Loyalty	Digital sales >42% in Q1; Perks enhancements driving engagement; planned investments in app/web and data/analytics	~41% digital sales; launched rebuilt website/app with faster ordering, one-click reorders; more personalization planned	Strong, ongoing investment
Menu Innovation	Q4: meaningful innovation cadence; Q1: prime rib steak sandwich, Chili Mac, Banana Pudding Shake	Continued focus on permanent menu quality upgrades and LTOs; additional items in test	Sustained momentum
Franchise Growth	Q4: +29 commitments; FY24 +115; FY25 pipeline stronger; at least 38 openings in 2025	Q2: 8 openings, +54 commitments; open+committed at 816; visibility to double-digit unit growth over time	Accelerating
Tariffs/Commodities	Q1: slight commodity deflation; FY inflation outlook 2%-3% food; low-2% labor	Food cost inflation forecast ~<2% in Q3, “north of two” in Q4; limited tariff exposure; baskets largely locked	Inflation benign near term
In-Shop Tech (PDCX)	Plan to retrofit half company shops in 2025, remainder in 2026; labor savings and throughput upside	Ongoing rollouts; handhelds to aid peak dayparts; all shops to get new POS by end of next year	Execution in progress
Capital Allocation	FY24 buybacks commenced; Q1 repurchased 117k shares	Q2 repurchased ~113k shares ($1.0M); debt eliminated; invest in tech, remodels, selective company units	Balanced returns/ growth

Management Commentary

CEO: “Adjusted EBITDA near the high-end of our quarterly guidance range… focus remains on… menu innovation, investments in… digital assets, growing and modernizing our shop footprint, and exercising prudent cost controls” .
CFO: “Same store sales… 3.2%, attributable to a 1.1% increase in transactions and a 2.1% increase in average check… food costs 26.3%… commodity deflation of 40bps… shop-level margins 16.7%” .
CEO on digital relaunch: “We launched our new website and mobile app… one click ordering… quick add… streamlined navigation… further personalize and streamline the customer experience” .

Q&A Highlights

Franchise pipeline realization and incentives: Visibility to 50+ franchise openings next year; “50/50” incentive encourages early openings; multi-year developers model benefits across later sites .
Company-owned densification: Targeted 10–20 per year where economics and construction costs align; will not crowd out franchise growth .
Comps decomposition and cadence: Q2 comps broke down to +1.1% transactions and +2.1% average check (gross price +2.7%, mix -0.6%); momentum strengthened through the quarter despite holiday shifts .
Commodities/tariffs: Limited tariff exposure; forecast food inflation ~<2% Q3 and just over 2% Q4; baskets largely locked (99% Q3; ~85% for year) .
Balance sheet & buybacks: Debt eliminated; capital prioritized to tech stack, PDCX, remodels, and opportunistic repurchases .

Estimates Context

Q2 2025: Revenue $123.7M vs $122.6M consensus (modest beat); GAAP diluted EPS $0.08 vs $0.088 consensus (slight miss) .
Coverage depth: 4 estimates each for EPS and revenue*.
Prior periods: Q1 2025 revenue $113.7M vs $111.7M consensus (beat); EPS $(0.00) vs $(0.02) consensus (beat)* .
Values marked with * are from S&P Global. Values retrieved from S&P Global.

Implications: Street models likely to lift FY revenue and SSS assumptions on raised guidance; EPS revisions should reflect margin expansion and unit pacing, with attention to differentiated adjusted vs GAAP frameworks.

Key Takeaways for Investors

Guidance raise and Q3 outlook are incremental positives; momentum in transactions, pricing discipline, and benign commodities underpin margin trajectory .
Accelerating franchise commitments (54 in Q2) and eight openings highlight a durable growth algorithm and long runway to ~2,000 shops; track conversion cadence and early-opening incentives .
Digital platform rebuild and high digital mix (~41%) support frequency and check growth; watch for personalization features to enhance promo efficiency and loyalty monetization .
Operational leverage visible: 100bps y/y shop-level margin expansion; occupancy efficiency; continued cost control can support adjusted EBITDA delivery near updated FY guide .
Capital allocation: debt removal improves flexibility; disciplined investments in PDCX and remodels should drive throughput and returns; buybacks provide opportunistic support .
Near-term trading set-up: modest top-line beat and FY guide raise are supportive; monitor franchise opening cadence and Q3 SSS delivery (3.25%–4.25%) as potential catalysts .
Medium-term thesis: A franchise-focused, digitally enabled, menu-innovating brand with expanding unit base and improving shop-level economics; execution on pipeline conversion and ROI from tech/remodels remains key .

POTBELLY CORP (PBPB)·Q2 2025 Earnings Summary