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美國
證券交易委員會
華盛頓特區20549

表格 10-Q

☒     根據1934年證券交易法第13或15(d)節的季度報告

截至的季度期間 2024年9月29日

☐ 根據1934年證券交易所法第13或第15(d)條，並根據該過渡期間內的過渡報告

snps-20220131_g1.jpg001-40951
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波蒂洛斯公司
(根據其章程規定的註冊人準確名稱)
特拉華州 87-1104304
（設立或組織的其他管轄區域）（納稅人識別號碼）
2001 Spring Road, 400套房, Oak Brook, 伊利諾伊州 60523
，（主要行政辦公地址）
(630) 954-3773
(註冊人電話號碼，包括區號)
無數據
（前名稱、地址及財政年度，如果自上次報告以來有更改）
在法案第12(b)條的規定下注冊的證券：
每一類的名稱交易代碼在其上註冊的交易所的名稱
每股A類普通股的面值爲0.01美元PTLO納斯達克全球精選市場

請勾選表示公司已在過去12個月內（或在公司必須提交這些報告的更短時間段內）按照1934年證券交易所法案第13或第15（d）條的要求提交所有報告，並且公司過去90天內一直受到這些提交要求的約束。 ☒是☐     否

請在以下勾選方框表示註冊人是否已在Regulation S-T Rule 405規定的前12個月(或在註冊人需要提交此類文件的較短期間內)提交了每個互動數據文件。
☒是的 ☐ 沒有

請用複選標記指示註冊人是屬於大型加速申報者、加速申報者、非加速申報者、較小報告公司還是新興增長型公司。（請參閱《交易所法》第120億.2條中"大型加速申報者"、"加速申報者"、"較小報告公司"和"新興增長型公司"的定義）。
大型加速報告人
☒
加速文件提交人
☐
非加速文件提交人☐較小的報告公司☐
新興成長公司
☐
如果是新興成長型公司，在選中複選標記的同時，如果公司已選擇不使用根據證券交易法第13(a)條提供的任何新的或修訂後的財務會計準則的延長過渡期來符合新的或修訂後的財務會計準則，則表明該公司已選擇不使用根據證券交易法第13(a)條提供的任何新的或修訂後的財務會計準則的延長過渡期來符合新的或修訂後的財務會計準則。☐

請打勾表明註冊人是否爲殼公司（根據證券交易法規則12b-2定義）。
☐ 是的 ☒ 沒有
截至2024年10月29日， 62,648,420 註冊人的A類普通股股份數量爲，每股面值0.01美元，以及 11,573,792 註冊人的B類普通股股份數量爲，每股面值0.00001美元，已發行並流通。


目錄
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財務信息
其他信息




目錄
關於前瞻性信息的警示
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本季度10-Q表格（"10-Q表格"）包含前瞻性聲明，根據1995年《私人證券訴訟改革法案》（"PSLRA"）的含義，該聲明受已知和未知的風險、不確定性和其他重要因素的影響，可能導致實際結果與此處所作聲明有重大不同。除歷史事實聲明外，所有其他聲明均爲前瞻性聲明。許多前瞻性聲明位於本10-Q表格第I部分第2項之下，標題爲"管理層對財務狀況和經營業績的討論與分析"。前瞻性聲明討論我們關於財務狀況、經營業績、計劃、目標、未來業績和業務的當前期望和預測。您可以通過它們不嚴格與歷史或當前事實相關來識別前瞻性聲明。這些聲明可能包括"目標"、"預期"、"相信"、"估計"、"預期"、"預測"、"未來"、"展望"、"潛力"、"項目"、"預測"、"計劃"、"打算"、"尋求"、"可能"、"可以"、"可以有"、"可能"，以及其否定形式和其他類似表述。

前瞻性聲明基於我們對業務、經濟和其他未來狀況的當前期望和假設。由於前瞻性聲明涉及未來，根據其性質，它們會受到固有的不確定性、風險和我們無法預測的情況變化的影響。因此，我們的實際結果可能與前瞻性聲明所考慮的情況有很大不同，您不應過度依賴這些聲明。導致實際結果與前瞻性聲明不同的重要因素包括區域型、國家或全球政治、經濟、業務、競爭、市場和監管條件以及以下因素：

•與我們的組織結構相關或由此 arising 的風險;
•與食源性疾病和食品安全以及有關我們食品的其他健康問題有關的風險;
•與經濟和金融市場有關的風險，包括通貨膨脹，浮動利率，股票市場活動或其他因素;
•我們團隊成員公會化活動對我們的聲譽，運營和盈利能力的影響；
•與我們依賴某些信息技術系統有關的風險，包括我們的新企業資源計劃系統，以及潛在的故障或中斷；
•與我們面向配送業務的數字下訂單和支付平台相關的隱私和網絡安全風險;
•競爭所帶來的風險，包括我們在餐飲業中的競爭對手或我們自己的餐廳;
•與市場營銷競爭對手或其他壓力相關的勞動力市場的日益激烈以及吸引和留住最佳人才和合格員工的能力;
•與隱私、數據保護、廣告和消費者保護、建築和區域規劃要求、開設新餐廳的成本或能力，以及食品和酒精飲料管制法規有關的聯邦、州或地方政府法規的影響;
•無法實現我們的增長策略，例如現有和新市場適合的新餐廳場地的可用性，以及按預期速度和預期時間表開設新餐廳；
•消費情緒和其他經濟因素對我們銷售的影響；
•食品和其他營運成本、關稅和進口稅的增加，以及供應短缺；
•本公司在向證券交易委員會（“SEC”）提交的文件中識別出的其他風險。

所有板塊中的前瞻性陳述均已完全受到這些警語陳述的質疑。您應該在我們於2023年12月31日向證券交易委員會提交的年度10-K表格中查閱所有前瞻性陳述的風險和不確定性的內容，以及後續向證券交易委員會提交的申報書，該申報書可在證券交易委員會的網站www.sec.gov上查閱。

本10-Q表格中包含的前瞻性陳述僅截至本日期為止。除非法律另有規定，否則公司不承諾因新信息、未來事件或其他原因公開更新或修訂任何前瞻性陳述。



Portillo's Inc. circle.jpg 表格10-Q | 1

目錄

財務報表第一部分
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項目1.財務報表(未經審計)
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Portillo's Inc. circle.jpg 表格10-Q | 2
波提羅餐廳有限公司。
縮表合併資產負債表
(未經查核)
（在 千位數，除了股份和每股數據外）




2024年9月29日2023年12月31日
資產
流動資產：
現金及現金等價物和限制性現金$18,520 $10,438 
應收帳款及租戶改善款項
14,913 14,183 
存貨8,298 8,733 
預付款項5,201 8,565 
全部流動資產46,932 41,919 
物業及設備，扣除折舊後淨值343,160 295,793 
經營租賃資產214,338 193,825 
商譽394,298 394,298 
商標名稱223,925 223,925 
其他無形資產淨值26,745 28,911 
股權法之投資16,032 16,684 
递延税款贷项197,580 184,701 
其他資產8,409 5,485 
其他總資產866,989 854,004 
總資產$1,471,419 $1,385,541 
負債和股東權益
流動負債：
應付賬款$47,165 $33,189 
長期債務的當期償還9,375 7,500 
稅款收取協議負債之流動部分7,723 4,428 
短期債務14,000 15,000 
逐步認列的收入
4,112 7,180 
短期運營租賃負債5,667 5,577 
應計費用36,246 32,039 
流動負債合計124,288 104,913 
長期負債：
長期負債，除了當期部分淨額278,867 283,923 
稅收賬款負債318,967 295,390 
長期運營租賃負債267,760 238,414 
其他長期負債3,945 2,791 
長期負債總額869,539 820,518 
總負債993,827 925,431 
承諾與應變措施（附註13）
股東權益:
優先股，面額$0.01，授權股數為5,000,000股，發行且流通股數為截至2024年6月30日和2023年12月31日之184,668,188股和181,364,180股。0.01 每股面額為 10,000,000 股份已授權 無 已發行或流通
— — 
A類普通股，$0.01 每股面額為 380,000,000 授權股份數目，以及 62,223,289 和 55,502,375 股份於2024年9月29日及2023年12月31日分別發行及流通。
622 555 
B類普通股，$0.00001 每股面額為 50,000,000 授權股份數目，以及 11,573,792 和 17,472,926 截至2024年9月29日和2023年12月31日，發行並流通股票數分別為。
— — 
資本公積金額外349,955 308,212 
保留收益
31,864 13,612 
歸屬於Portillo's Inc.的股東權益總額。382,441 322,379 
非控制權益95,151 137,731 
股東權益總額477,592 460,110 
負債總額及股東權益$1,471,419 $1,385,541 
請參閱未經審計的簡明合併基本報表所附註釋。

Portillo's Inc. circle.jpg 表格10-Q | 3
PORTILLO'S INC
概述的綜合營運報表
(未經查核)
（以千為單位，除股份及每股數據外）

季度結束三個季度結束
2024年9月29日2023年9月24日2024年9月29日2023年9月24日
凈收入$178,252 $166,805 $525,945 $492,047 
成本和費用：
餐廳營業費用：
食品、飲料及包裝成本60,136 55,551 178,809 165,407 
勞動45,945 42,588 135,659 126,200 
入住率9,172 8,210 27,723 24,898 
其他營業費用21,053 18,571 60,868 56,107 
餐廳營業費用總額136,306 124,920 403,059 372,612 
總部及行政費用18,305 18,898 54,786 57,285 
開業前費用1,747 2,410 5,270 5,029 
折舊與攤提6,679 6,178 20,729 17,788 
歸屬於權益法投資之凈利潤(383)(422)(923)(1,010)
其他收益，淨額
(390)(276)(1,176)(630)
營業收入減去營業費用15,988 15,097 44,200 40,973 
利息費用6,450 6,573 19,583 20,539 
利息收入
(50)(116)(204)(116)
稅收待收協議負債調整(1,724)(528)(2,724)(1,691)
償債槓桿損失— — — 3,465 
稅前收益(損失)
11,312 9,168 27,545 18,776 
所得稅支出
2,539 2,622 4,898 3,605 
凈利潤
8,773 6,546 22,647 15,171 
歸屬於非控制權益的淨利潤
1,553 2,185 4,395 4,536 
歸屬於波蒂洛公司的凈利潤。
$7,220 $4,361 $18,252 $10,635 
每股普通股歸屬於波蒂洛公司的凈利潤：
基礎$0.12 $0.08 $0.30 $0.20 
稀釋$0.11 $0.07 $0.29 $0.19 
加權平均在外流通股數：
基礎61,921,564 55,127,133 60,336,488 53,231,086 
稀釋64,894,558 58,767,812 63,347,715 56,813,653 

請參閱未經審計的簡明合併基本報表所附註釋。


Portillo's Inc. circle.jpg 財報表 10-Q | 4
PORTILLO'S INC
股東權益縮編合併財務報表
(未經查核)
（單位：千元，股份數據除外）


截至2024年9月29日和2023年9月24日的季度
A類普通股普通B類股
股份 金額股份金額資本公積金
保留收益
非控制權益股東權益合計
2023年6月25日的結餘55,073,993 $551 17,472,926 $— $301,622 $1,462 $132,821 $436,456 
凈利潤— — — — — 4,361 2,185 6,546 
股權報酬— — — — 3,275 — 1,049 4,324 
股權報酬計劃下的活動108,148 1 — — 400 — — 401 
非控制權益調整— — — — 218 — (218)— 
2023年9月24日結餘55,182,141 552 17,472,926 — 305,515 5,823 135,837 447,727 
2024年6月30日餘額61,739,874 617 11,640,555 — 344,937 24,644 93,924 464,122 
凈利潤— — — — — 7,220 1,553 8,773 
股權相關補償 — — — — 2,940 — 566 3,506 
股權報酬計劃下的活動416,652 4 — — 1,522 — — 1,526 
贖回LLC權益66,763 1 (66,763)— (1)— — — 
非控制權益調整— — — — 892 — (892)— 
根據稅收回贈協議成立負債及與增加稅基有關的递延所得稅資產變動— — — — (335)— — (335)
2024年9月29日結餘62,223,289 $622 11,573,792 $— $349,955 $31,864 $95,151 $477,592 

請參閱未經審計的簡明合併基本報表所附註釋。




Portillo's Inc. circle.jpg 表格 10-Q | 5
波提羅餐廳有限公司。
股東權益縮編合併財務報表
(未經查核)
（單位：千元，股份數據除外）

2024年9月29日及2023年9月24日結束的三個季度
A類普通股普通B類股
股份 金額股份金額資本公積金
（累積虧損）未分配盈餘
非控制權益股東權益合計
2022年12月25日結餘48,420,723 $484 23,837,162 $— $260,664 $(4,812)$176,565 $432,901 
凈利潤
— — — — — 10,635 4,536 15,171 
股權報酬— — — — 8,846 — 3,198 12,044 
股權報酬計劃下的活動397,182 4 — — 1,688 — — 1,692 
贖回LLC單位
6,364,236 64 (6,364,236)— (64)— — — 
被合資及合營公司業主應分損益之調整— — — — 48,063 — (48,063)— 
支付給非控制權益持有人的分配款項— — — — — — (399)(399)
設定應向稅項應收協議下的負債，以及因稅基礎增加相關推遲所得稅資產之變動— — — — (13,682)— — (13,682)
2023年9月24日結餘55,182,141 552 17,472,926 — 305,515 5,823 135,837 447,727 
2023年12月31日餘額55,502,375 555 17,472,926 — 308,212 13,612 137,731 460,110 
凈利潤— — — — — 18,252 4,395 22,647 
股權相關補償 — — — — 7,590 — 1,633 9,223 
股權激勵計劃下的活動821,780 8 — — 2,690 — — 2,698 
贖回有限責任公司股權5,899,134 59 (5,899,134)— (59)— — — 
非控制權益調整— — — — 47,770 — (47,770)— 
支付給非控制權益持有人的分配款項— — — — — — (838)(838)
建立根據稅收可收回協議承擔負債，以及與稅基增加相關的遞延稅資產變動— — — — (16,248)— — (16,248)
2024年9月29日結餘62,223,289 $622 11,573,792 $— $349,955 $31,864 $95,151 $477,592 

請參閱未經審計的簡明合併基本報表所附註釋。

Portillo's Inc. circle.jpg 第10-Q表格 | 6
波提羅餐廳有限公司。
簡明財務報表現金流量表
(未經查核)
(以千為單位)

三個季度結束
2024年9月29日2023年9月24日
營業活動之現金流量：
凈利潤
$22,647 $15,171 
調整淨利潤以達經營活動所提供之淨現金流量：
折舊與攤提20,729 17,788 
償還債務發行成本和折扣568 814 
資產售出損失130 512 
股權報酬9,223 12,044 
递延所得税費用
4,898 3,605 
稅款應收協議負債調整(2,724)(1,691)
禮品卡過期未使用金額(666)(688)
償債槓桿損失— 3,465 
營運資產和負債的變化：
應收帳款497 (1,293)
向關聯方應收款項 152 (100)
存貨435 969 
其他流動資產2,222 124 
經營租賃資產6,511 5,685 
應付賬款4,538 (2,777)
應計費用及其他負債1,880 1,023 
營業租賃負債(2,591)(1,775)
待付租賃激勵3,476 1,013 
其他資產和負債29 (319)
經營活動提供的凈現金71,954 53,570 
投資活動產生的現金流量:
購買不動產和設備(56,514)(57,660)
資產和設備出售所得77 81 
投資活動中的凈現金支出(56,437)(57,579)
融資活動產生的現金流量:
短期債務支付，淨額
(1,000)— 
長期負債的籌資— 300,000 
償還長期債務款項(3,750)(324,303)
從股本發行中取得的資金，扣除承銷折扣114,960 179,306 
回購未偿还的股权/Portillo's OpCo單位(114,960)(179,306)
支付給非控制權益持有人的分配款項(838)(399)
由股票期權行使中獲得的收益2,576 1,321 
與以股份抵償的股權獎勵相關的員工預扣稅款(395)(112)
員工股票購買計畫購買所得款項401 404 
支付稅收應收協議負債(4,429)(813)
償還延期財務成本的付款— (3,569)
融資活動中使用的淨現金
(7,435)(27,471)
現金及現金等價物及受限現金增加（減少）
8,082 (31,480)
現金及現金等價物及受限現金於期初10,438 44,427 
現金及現金等價物及受限現金於期末$18,520 $12,947 

請參見附註的未經審計的簡明合併財務報表。

Portillo's Inc. circle.jpg 表格 10-Q | 7
波蒂洛斯公司
現金流量表簡明綜合報表
(未經審計)
(以千爲單位)

三季度已結束
2024年9月29日2023 年 9 月 24 日
補充現金流信息
已付利息$13,010 $15,738 
繳納的所得稅— — 
非現金投資和融資活動：
應計資本支出$22,352 $15,915 
應收稅款協議下的負債的設立34,025 51,165 

請參見附註的未經審計的簡明合併財務報表。

Portillo's Inc. circle.jpg 表格10-Q | 8
波蒂洛斯公司
未經審計的摘要合併財務報表註釋

註釋1。業務描述

Portillo’s Inc.（「Inc.」）於2021年6月8日成立並註冊爲特拉華州的一家公司。Inc.的成立是爲了完成首次公開募股（「IPO」）及相關重組交易，從而開展PHD Group Holdings LLC及其子公司（「Portillo's OpCo」）的業務。 Portillo’s Inc.是Portillo's OpCo的唯一管理成員，而作爲唯一的管理成員，Inc.負責和控制Portillo's OpCo的所有業務和事務，並報告其他成員持有的Portillo's OpCo的經濟利益的非控股權益（「上市前的有限責任公司成員」）。除非上下文另有要求，「我們」，「我們」，「我們的」，「Portillo's」和「公司」指的是Portillo’s Inc.及其子公司，包括Portillo's OpCo。Portillo’s Inc.是Portillo's OpCo的唯一管理成員，而作爲唯一的管理成員，Inc.負責和控制Portillo's OpCo的所有業務和事務，並報告其他成員持有的Portillo's OpCo的經濟利益的非控股權益（「上市前的有限責任公司成員」）。除非上下文另有要求，「我們」，「我們」，「我們的」，「Portillo's」和「公司」指的是Portillo’s Inc.及其子公司，包括Portillo's OpCo。

公司在 10 州經營餐廳，提供芝加哥風格的熱狗和香腸、意大利牛肉三明治、炭烤漢堡、切碎沙拉、曲棱切薯條、自制巧克力蛋糕等，還有 二 在伊利諾伊州的食品股生產部。截止到2024年9月29日和2023年12月31日，公司有 87 和 83 家餐廳在營運中，分別爲。公司在2024年9月29日和2023年12月31日也有 二 家非傳統經營場所在營運中。這些非傳統場所包括一輛食品卡車和一個幽靈廚房（沒有門面的小廚房，用於處理在線訂單）。Portillo's 還擁有一個 50%的股份在C&O Chicago, L.L.C. ("C&O")所擁有的單一餐廳中，該餐廳不計入上述公司的餐廳數量。公司的主要辦公室位於伊利諾伊州的奧克布魯克。

註釋2。重要會計政策摘要。

報告前提

公司已根據美國公認會計原則（"GAAP"）和美國證券交易委員會（"SEC"）的規則和規定準備了伴隨的未經審計的簡明合併基本報表。管理層認爲，伴隨的未經審計的簡明合併基本報表反映了爲公平展示我們的財務狀況和經營成果所需的正常例行調整的所有調整。營運的中期結果不一定代表全年可能達到的結果。基本報表及相關附註不包括GAAP對年度報告所要求的所有信息和附註。未經審計的簡明合併基本報表應與我們在財政年度結束的表格10-k年度報告中包含的合併基本報表和附註一併閱讀。 2023年12月31日.

所有公司間餘額和交易已在合併中消除。

公司沒有在其簡明綜合財務報表中記錄任何其他綜合收益（損失）元件，因此不單獨呈現綜合收益（損失）報表。

分部報告

公司的首席運營決策者（「CODM」）是其首席執行官（"CEO"）。 CODM定期審查財務業績並在綜合水平上分配資源。 公司有一個報告的板塊。 所有的公司運營都位於美國。 一份一個經營部門一份 報告的板塊。 所有的公司運營都位於美國。

財政年度

公司使用以週日爲結束日期的52或53周財政年度。在52周財政年度中，每個季度包括13周。在53周財政年度中，額外的一週被添加到第四季度。2024財政年度和2023財政年度分別包括52周和53周。本報告中呈現的財政期爲截至2024年9月29日和2023年9月24日的季度和三季度。


Portillo's Inc. circle.jpg Form 10-Q | 9
PORTILLO'S INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Use of Estimates

The preparation of these condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of sales and expenses during the period. Actual results could differ from those estimates.

Recently Issued Accounting Standards

In October 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative, which amends the disclosure or presentation requirements related to various subtopics in the FASB Accounting Standards Codification (the “Codification”). The effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. If, by June 30, 2027, the SEC has not removed the applicable requirement from Regulation S-X or Regulation S-K, the pending content of the related amendment will be removed from the Codification and will not become effective for any entity. The Company is currently evaluating the effect of adopting this ASU.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) Improvements to Reportable Segment Disclosures, which requires public entities to disclose information about their reportable segments’ significant expenses on an interim and annual basis. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the effect of adopting this ASU.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) Improvements to Income Tax Disclosures, which requires public entities to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold on an annual basis. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the effect of adopting this ASU.

The Company reviewed all other recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a significant impact to its condensed consolidated financial statements.

NOTE 3.    REVENUE RECOGNITION

Revenues from retail restaurants are presented net of discounts and recognized when food and beverage products are sold to the end customer. Sales taxes collected from customers are excluded from revenues and the obligation is included in accrued liabilities on the condensed consolidated balance sheets until the taxes are remitted to the appropriate taxing authorities.

Delivery sales are generally fulfilled by third-party delivery partners whether ordered through the Portillo's app and website ("Dispatch Sales") or through third-party delivery partners ("Marketplace Sales"). Dispatch Sales include delivery and service fees as the Company controls the delivery. Revenue from Dispatch Sales is recognized when food is delivered to the customer. For these sales, the Company receives payment directly from the customer at the time of sale. Revenue for Marketplace Sales is recognized in the amount paid to the delivery partner by the customer for food and excludes delivery and service fees charged by the third-party delivery partner as the Company does not control the delivery. Revenue from Marketplace Sales is recognized when food is delivered to the customer. For these sales, the Company receives payment from the delivery partner subsequent to the transfer of order, which is generally paid one week in arrears. For all delivery sales of food, the Company is considered the principal and recognizes revenue on a gross basis.

The Company sells gift cards which do not have expiration dates. The Company records the sale of the gift card as a contract liability and recognizes revenue from gift cards when: (i) the gift card is redeemed by the customer; or (ii) in the event a gift card is not expected to be redeemed, in proportion to the pattern of rights exercised by the customer (gift card breakage). The Company has determined that 11% of gift card sales will not be redeemed and will be retained by us based on a portfolio assessment of historical data on gift card redemption patterns. Gift card breakage is recorded within revenues, net in the condensed consolidated statements of operations. The Company recognized gift card breakage of $0.2 million and $0.7 million for the quarter and three quarters ended September 29, 2024 and September 24, 2023, respectively.


Portillo's Inc. circle.jpg Form 10-Q | 10
PORTILLO'S INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Company’s revenue related to performance obligations not yet satisfied is revenue from gift cards sold but not yet redeemed. The gift card liability included in deferred revenue on the condensed consolidated balance sheets is as follows (in thousands):

September 29, 2024December 31, 2023
Gift card liability$4,073 $6,981 

Revenue recognized in the condensed consolidated statement of operations for the redemption of gift cards that were included in their respective gift card liability balances at the beginning of the year is as follows (in thousands):
Quarter EndedThree Quarters Ended
September 29, 2024September 24, 2023September 29, 2024September 24, 2023
Revenue recognized from gift card liability balance at the beginning of the year$568 $599 $3,550 $3,436 

NOTE 4.    INVENTORIES

Inventories consisted of the following (in thousands):
September 29, 2024December 31, 2023
Raw materials$5,723 $6,737 
Work in progress126 157 
Finished goods1,878 912 
Consigned inventory571 927 
$8,298 $8,733 

NOTE 5.    PROPERTY & EQUIPMENT, NET

Property and equipment, net consisted of the following (in thousands):
September 29, 2024December 31, 2023
Land and land improvements
$22,311 $19,000 
Furniture, fixtures, and equipment166,419 155,871 
Leasehold improvements255,085 227,080 
Transportation equipment2,880 2,881 
Construction-in-progress40,312 16,808 
487,007 421,640 
Less accumulated depreciation (143,847)(125,847)
$343,160 $295,793 

Depreciation expense was $6.0 million and $18.6 million for the quarter and three quarters ended September 29, 2024, respectively, and $5.5 million and $15.6 million for the quarter and three quarters ended September 24, 2023, respectively, and is included in depreciation and amortization in the condensed consolidated statements of operations.


Portillo's Inc. circle.jpg Form 10-Q | 11
PORTILLO'S INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6.    GOODWILL & INTANGIBLE ASSETS

The Company has one reporting unit for goodwill which is evaluated for impairment annually in the fourth quarter of each fiscal year.

Intangible assets, net consisted of the following (in thousands):
2024年9月29日
總賬面價值累計攤銷淨賬面價值
不定期限無形資產：
商標名稱$223,925 $— $223,925 
無形資產攤銷：
食譜56,117 (29,372)26,745 
$280,042 $(29,372)$250,670 

2023年12月31日
總賬面價值累計攤銷淨賬面價值
不定期限無形資產：
商標名稱$223,925 $— $223,925 
無形資產攤銷：
食譜56,117 (27,206)28,911 
$280,042 $(27,206)$252,836 

分期攤銷費用爲$0.7 百萬美元和美元2.2 分別爲截至2024年9月29日的季度和三個季度各約 萬美元，以及$0.7 百萬美元和美元2.2 分別爲截至2023年9月24日的季度和三個季度各約 萬美元我們的綜合資產負債表中分別記載了$38,305或$38,305的其他長期資產。並已包含在簡明合併利潤表的折舊和攤銷費用中。

截至2024年9月29日，相關無形資產的預計總攤銷費用爲 剩餘的該年度和隨後的 五年 以及之後的費用如下（單位：千）：
預計攤銷
2024年（不包括截至2024年9月29日的三個季度）$647 
20252,707 
20262,707 
20272,707 
20282,707 
20292,150 
2030年及以後13,120 
$26,745 


Portillo's Inc. circle.jpg 表格10-Q | 12
波蒂洛斯公司
未經審計的摘要合併財務報表註釋

注意事項 7。金融工具的公允價值

以公允價值計量的資產和負債的重複計量

由於這些金融工具的短期性質，公司的現金及現金等價物、受限現金、應收賬款和租戶改進應收款、應付賬款及所有其他流動資產和負債的賬面價值接近公允價值。

其他資產包括一個遞延補償計劃，相關資產保存在一個rabbi信託中。

延期報酬計劃 - 公司設立了一項rabbi信託來爲延期報酬計劃下的義務提供資金支持。rabbi信託中的資金投資於互惠基金，這些基金被指定爲按公允價值計量的交易證券。這些交易證券的公允價值衡量被視爲公允價值層次結構的第一層，因爲它們是使用報價市場價格進行衡量的。

截至2024年9月29日和2023年12月31日，基金投資和遞延補償義務的公允價值如下（單位：千元）：

2024年9月29日2023年12月31日
一級一級
資產 - 用於遞延薪酬計劃的投資
現金帳戶
$1,011 $1,083 
共同基金2,678 2,181 
總資產$3,689 $3,264 
截至2024年9月29日和2023年12月31日，我們沒有二級或三級資產。
遞延薪酬投資和義務包括在其他資產、應計費用和長期負債中的合併資產負債表中。託師信託中持有的證券公允價值的變動被確認爲交易收益和損失，幷包括在合併利潤表中的其他收入中，抵銷遞延薪酬義務增加或減少記錄在合併資產負債表中的其他長期負債中。
請參閱註釋8。有關公司未償債務工具公允價值的更多信息，請參考債務部分。

非退市公允價值計量的資產

按公允價值進行非經常性計量的資產包括淨值的物業和設備、經營租賃資產、權益法投資、商譽和無限壽命的無形資產。這些資產在事件或情況的變化表明資產的賬面價值可能無法收回時，按公允價值計量。 沒有 在截至2024年9月29日和2023年9月24日的季度以及三個季度中，確認了減損費用。


Portillo's Inc. circle.jpg 表格10-Q | 13
波蒂洛斯公司
未經審計的摘要合併財務報表註釋

注意：8。債務

負債包括以下（以千爲單位）：
2024年9月29日2023年12月31日
2023年期貸款$290,625 $294,375 
2023年循環信用額度14,000 15,000 
未攤銷貼現和債券發行成本(2,383)(2,952)
總負債淨額302,242 306,423 
減去：開空債務(14,000)(15,000)
減：長期債務的流動部分(9,375)(7,500)
長期負債淨額$278,867 $283,923 
2023 Credit Agreement

On February 2, 2023 (the "Closing Date"), PHD Intermediate LLC (“Holdings”), Portillo’s Holdings LLC (the “Borrower”), the other Guarantors party thereto from time to time, each lender party thereto from time to time and Fifth Third Bank, National Association, as Administrative Agent, L/C Issuer and Swing Line Lender entered into a credit agreement (“2023 Credit Agreement”) which provides for a term A loan (the "2023 Term Loan") in an initial aggregate principal amount of $300.0 million and revolving credit commitments in an initial aggregate principal amount of $100.0 million (the “2023 Revolver Facility”). The 2023 Term Loan and 2023 Revolver Facility are scheduled to mature on February 2, 2028.

The 2023 Term Loan and the 2023 Revolver Facility will accrue interest at the forward-looking secured overnight financing rate (“SOFR”) plus an applicable rate determined upon the consolidated total net rent adjusted leverage ratio, subject to a floor of 0.00% (plus a credit spread adjustment of 0.10% per annum for 1-month interest periods and 0.15% for 3-month interest periods).

As of September 29, 2024, the interest rates on the 2023 Term Loan and 2023 Revolver Facility were 7.98% and 7.85%, respectively. Pursuant to the 2023 Credit Agreement, as of September 29, 2024, the commitment fees to maintain the 2023 Revolver Facility were 0.20% and letter of credit fees were 2.50%. Commitment fees and letter of credit fees are recorded as interest expense in the condensed consolidated statements of operations. As of September 29, 2024, the effective interest rate was 8.32%.

As of September 24, 2023, the interest rate on the 2023 Term Loan was 8.14%. There were no outstanding borrowings on the 2023 Revolver Facility as of September 24, 2023. Pursuant to the 2023 Credit Agreement, as of September 24, 2023, the commitment fees to maintain the 2023 Revolver Facility were 0.25%, letter of credit fees were 2.75%, and letter of credit fronting fees were 0.125%. As of September 24, 2023, the effective interest rate was 8.50%.

The 2023 Term Loan will amortize in quarterly installments equaling an aggregate annual amount of $7.5 million for the first two (2) years following the Closing Date, (b) $15.0 million for the third (3rd) and fourth (4th) years following the Closing Date, and (c) $30.0 million for the fifth (5th) year following the Closing Date, commencing on the last day of the first full fiscal quarter ended after the Closing Date, with the balance payable on the final maturity date.

As of September 29, 2024, outstanding borrowings under the 2023 Credit Agreement totaled $304.6 million, comprised of $290.6 million under the 2023 Term Loan, and $14.0 million under the 2023 Revolver Facility. Letters of credit issued under the 2023 Revolver Facility totaled $5.3 million. As a result, as of September 29, 2024, the Company had $80.7 million available under the 2023 Revolver Facility.

As of December 31, 2023, outstanding borrowings under the 2023 Credit Agreement totaled $309.4 million, comprised of $294.4 million under the 2023 Term Loan, and $15.0 million under the 2023 Revolver Facility. Letters of credit issued under the 2023 Revolver Facility totaled $4.3 million. As a result, as of December 31, 2023, the Company had $80.7 million available under the 2023 Revolver Facility.

2014 Credit Agreement

Holdings, the Borrower and certain of its subsidiaries entered into a credit agreement ("2014 Credit Agreement"), dated as of August 1, 2014 and as amended October 25, 2016, May 18, 2018 and December 6, 2019, with UBS AG, Stamford Branch, as the administrative agent and collateral agent, and other lenders from time to time party thereto (the “2014 Lenders”). The 2014 Lenders extended credit in the form of (i) first

Portillo's Inc. circle.jpg Form 10-Q | 14
PORTILLO'S INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

lien initial term loans in an initial aggregate principal amount of $335.0 million and (ii) a revolving credit facility in an original principal amount equal to $30.0 million, including a letter of credit sub-facility with a $7.5 million sublimit (the “2014 Revolving Facility” and the loans thereunder, the “2014 Revolving Loans”).

On December 6, 2019, the Borrower entered into a third amendment to the 2014 Credit Agreement (the “Third Amendment to 2014 Credit Agreement”) whereby the aggregate principal amount of the term loans as of the effective date of the Third Amendment to 2014 Credit Agreement was $332.4 million (the “2014 Term B-3 Loans”), and the 2014 Revolving Facility was increased to $50.0 million. The maturity date with respect to the 2014 Term B-3 Loans was extended to September 6, 2024, and the maturity date with respect to the 2014 Revolving Loans was extended to June 6, 2024.

On February 2, 2023, the Company used proceeds from the 2023 Term Loan and 2023 Revolver Facility, along with cash on hand, to pay off the 2014 Credit Agreement in full in the amount of $321.8 million. The 2023 Revolver Facility under the 2023 Credit Agreement replaces the $50.0 million 2014 Revolving Facility under the 2014 Credit Agreement.

Discount, Debt Issuance Costs and Interest Expense

Pursuant to the 2023 Credit Agreement, the Company capitalized deferred financing costs and issuance discounts of $3.6 million which will be amortized over the term of the 2023 Credit Agreement.

The Company amortized an immaterial amount and $0.1 million of deferred financing costs during the quarter and three quarters ended September 29, 2024, respectively, and an immaterial amount and $0.3 million for the quarter and three quarters ended September 24, 2023, respectively, which is included in interest expense in the condensed consolidated statements of operations. In addition, the Company amortized $0.2 million and $0.5 million in original issue discount related to the long-term debt during the quarter and three quarters ended September 29, 2024, respectively, and $0.2 million and $0.5 million in the quarter and three quarters ended September 24, 2023, respectively, which is included in interest expense in the condensed consolidated statements of operations.

Total interest expense was $6.5 million and $19.6 million for the quarter and three quarters ended September 29, 2024, respectively, and $6.6 million and $20.5 million for the quarter and three quarters ended September 24, 2023, respectively.

Fair Value of Debt

As of September 29, 2024 and December 31, 2023, the fair value of long-term debt approximates the carrying value as it is variable rate debt. The fair value measurement of this debt is considered Level 2 of the fair value hierarchy as inputs to interest are observable, unadjusted quoted prices in active markets for similar assets or liabilities.

Guarantees and Covenants

The 2023 Credit Agreement is guaranteed by all domestic subsidiaries of the Borrower (subject to customary exceptions) and secured by liens on substantially all of the assets of Holdings, the Borrower and the subsidiary guarantors (subject to customary exceptions).

The 2023 Credit Agreement also includes certain financial covenants with respect to cash interest coverage and total net rent adjusted leverage. As of September 29, 2024, the Company was in compliance with financial covenants in the 2023 Credit Agreement.

NOTE 9.     NON-CONTROLLING INTERESTS

We are the sole managing member of Portillo's OpCo, and as a result, consolidate the financial results of Portillo's OpCo. We report a non-controlling interest to reflect the entitlement of the pre-IPO LLC Members who retained their equity ownership in Portillo's OpCo (the "pre-IPO LLC Members"). Changes in our ownership interest in Portillo's OpCo while we retain our controlling interest in Portillo's OpCo will be accounted for as equity transactions. As such, future redemptions or direct exchanges of LLC Units in Portillo's OpCo by the pre-IPO LLC members will result in a change in ownership and reduce the amount recorded as non-controlling interest and increase additional paid-in capital.

Portillo's Inc. circle.jpg Form 10-Q | 15
PORTILLO'S INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the LLC interest ownership by Portillo's Inc. and pre-IPO LLC members:
September 29, 2024December 31, 2023
LLC UnitsOwnership %LLC UnitsOwnership %
Portillo's Inc.62,223,289 84.3 %55,502,375 76.1 %
pre-IPO LLC Members
11,573,792 15.7 %17,472,926 23.9 %
Total73,797,081 100.0 %72,975,301 100.0 %

The weighted average ownership percentages for the applicable reporting periods are used to attribute net income to Portillo's Inc. and the pre-IPO LLC Members. The pre-IPO LLC Members' weighted average ownership percentage for the quarter and three quarters ended September 29, 2024 was 15.8% and 17.7%, respectively. The pre-IPO LLC Members' weighted average ownership percentage for the quarter and three quarters ended September 24, 2023 was 24.1% and 26.6%, respectively.

The following table summarizes the effects of changes in ownership in Portillo's OpCo on the Company’s equity (in thousands):

Quarter EndedThree Quarters Ended
September 29, 2024September 24, 2023September 29, 2024September 24, 2023
Net income attributable to Portillo's Inc.
$7,220 $4,361 $18,252 $10,635 
Activity under equity-based compensation plans1,522 400 2,690 1,688 
Non-controlling interest adjustment892 218 47,770 48,063 
Redemption of LLC Units(1)— (59)(64)
Establishment of liabilities under Tax Receivable Agreement and related changes to deferred tax assets associated with increases in tax basis(335)— (16,248)(13,682)
Total effect of changes in ownership interest on equity attributable to Portillo's Inc. $9,298 $4,979 $52,405 $46,640 

NOTE 10.    EQUITY-BASED COMPENSATION
Equity-based compensation expense is calculated based on equity awards ultimately expected to vest and is reduced for estimated forfeitures. Forfeitures are revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates and an adjustment to equity-based compensation expense will be recognized at that time.

Equity-based compensation expense included in the Company’s consolidated statements of operations is as follows (in thousands):
Quarter EndedThree Quarters Ended
September 29, 2024September 24, 2023September 29, 2024September 24, 2023
Labor$568 $379 $1,522 $1,164 
General and administrative expenses2,938 3,945 7,701 10,880 
Total equity-based compensation expense$3,506 $4,324 $9,223 $12,044 

The Company's Chief Operating Officer, Mr. Pratt, departed from his role, effective June 30, 2024. In accordance with the Company’s Senior Executive Severance Plan, Mr. Pratt’s pre-IPO nonqualified stock options and his Restricted Stock Units (“RSUs”), both of which were scheduled to vest later in 2024, vested on June 30, 2024. The pre-IPO Options will remain exercisable through the 10th anniversary of the original grant date of September 14, 2020, which reflects a modification to extend the exercisability from 90 days post-termination to the 10th anniversary of the original grant date. All other equity grants were forfeited. The Company recorded a $0.2 million charge to equity-based compensation expense during the second quarter of 2024, to reflect the incremental value related to the modifications described herein.



Portillo's Inc. circle.jpg Form 10-Q | 16
PORTILLO'S INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Restricted Stock Units

During the three quarters ended September 29, 2024, we granted 646,649 RSUs, under the Portillo's Inc. 2021 Equity Incentive Plan (the "2021 Plan") to certain employees. During the three quarters ended September 29, 2024, we also granted 54,856 RSUs to non-employee directors under the 2021 Plan. The weighted average fair value of these awards was determined using the Company's closing stock price on the applicable grant dates, which was $12.29. The RSUs granted to employees will generally vest one-third on each of the first three anniversaries of the date of grant subject to continued service on such date. The RSUs granted to non-employee directors will vest at the end of this fiscal year.

Stock Options

During the three quarters ended September 29, 2024, the Company granted 311,042 stock options under the 2021 Plan, to its President and Chief Executive Officer. The stock options vest on the fourth anniversary of the award and are exercisable within a 10-year period from the date of grant. The Company estimated the fair value of stock options on the date of grant using the Black-Scholes option-pricing model. The grant date fair value of stock options granted during the three quarters ended September 29, 2024 was $6.43.

Performance Stock Units

During the three quarters ended September 29, 2024, the Company granted 322,443 performance stock units ("PSUs") to its executive officers under the 2021 Plan. These PSUs will vest after the fiscal year ending December 27, 2026 based on continued service and the achievement of performance metrics tied to the cumulative growth of revenue and Adjusted EBITDA over the fiscal years 2024 to 2026. The fair value of these awards was determined using the Company's closing stock price on the date of grant of $11.94. Equity-based compensation costs associated with these PSUs are reassessed each reporting period based on estimated performance achievement. The cumulative effect on current and prior periods of a change in attainment is recognized in general and administrative expenses in the consolidated statements of operations in the period of change.

Performance Stock Options

During the three quarters ended September 29, 2024, the Company granted 625,000 performance stock options ("PSOs") under the 2021 Plan to a certain executive officer. The grant date fair value of these awards of $0.12 was determined using a Monte Carlo simulation model. The awards are eligible to vest in three (3) tranches based on stock performance conditions: (i) one-third (1/3rd) of the PSOs will vest on the third anniversary of the IPO if the 20-day volume-weighted average price ("VWAP") for a share of common stock is $30.00 per share (1.5 times the IPO price) measured over any twenty (20) consecutive trading day period commencing on the second anniversary of the IPO and ending on the last trading day immediately preceding the third anniversary IPO; (ii) one-third (1/3) of the PSOs will vest on the fourth anniversary of the IPO if the 20-day VWAP for a share of common stock is $40.00 per share (2 times the IPO price) measured over any twenty (20) consecutive trading day period commencing on the third anniversary of the IPO and ending on the last trading day immediately preceding the fourth anniversary of the IPO; and (iii) one-third (1/3) of the PSOs will vest on the fifth anniversary of the IPO if the 20-day VWAP for a share of common stock is $50.00 per share (2.5 times the IPO price) measured over any twenty (20) consecutive trading day period commencing on the fourth anniversary of the IPO and ending on the last trading day immediately preceding the fifth anniversary of the IPO. All PSOs are subject to continued service on the vesting date of each tranche date and if any tranches fail to vest, the unvested portion of such PSOs will be forfeited and will not be eligible to vest in subsequent years. Once vested, the PSOs are exercisable within a 10-year period from the date of grant.





Portillo's Inc. circle.jpg Form 10-Q | 17
PORTILLO'S INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11.    INCOME TAXES

We are the sole managing member of Portillo's OpCo, and as a result, consolidate the financial results of Portillo's OpCo. Portillo's OpCo is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, Portillo's OpCo is generally not subject to U.S. federal and state and local income taxes. Any taxable income or loss generated by Portillo's OpCo is passed through to and included in the taxable income or loss of its members, including us, based upon the respective member's ownership percentage in Portillo's OpCo. We are subject to U.S. federal income taxes, in addition to state and local income taxes with respect to our allocable share of any taxable income or loss of Portillo's OpCo, as well as any stand-alone income or loss generated by Portillo's Inc.

Income Tax Expense

The effective income tax rate for the quarter and three quarters ended September 29, 2024 was 22.4% and 17.8%, respectively, and 28.6% and 19.2% for the quarter and three quarters ended September 24, 2023, respectively. The decrease in our effective income tax rate for the quarter and three quarters ended September 29, 2024 compared to the quarter and three quarters ended September 24, 2023 was primarily driven by a decrease in the valuation allowance recorded against a portion of the Company's deferred tax assets as a result of the secondary offering in Q1 2024 and return to provision adjustments, partially offset by an increase in the Company's ownership interest in Portillo's OpCo, which increases its share of taxable income (loss) of Portillo's OpCo. The Company’s annual effective tax rate differs from the statutory rate of 21% primarily because the Company is not liable for federal or state income taxes on the portion of Portillo's OpCo’s earnings that are attributable to non-controlling interests, deferred tax adjustments and impacts from equity-based award activity.

We evaluate the realizability of our deferred tax assets on a quarterly basis and establish valuation allowances when it is more likely than not that all or a portion of a deferred tax asset may not be realized. As of September 29, 2024, the Company concluded, based on the weight of all available positive and negative evidence, that all of its deferred tax assets (except for those deferred tax assets relating to the basis difference in its investment in Portillo's OpCo that will never be realizable or only reverse upon the eventual sale of its interest in Portillo's OpCo, which we expect would result in a capital loss which we do not expect to be able to utilize) are more likely than not to be realized.

Tax Receivable Agreement

As of September 29, 2024, we estimated that our obligation for future payments under the TRA liability totaled $326.7 million. For the three quarters ended September 29, 2024 and September 24, 2023, the Company made TRA payments of $4.4 million relating to tax year 2022 and $0.8 million relating to tax year 2021, respectively. There were no amounts paid under the TRA during the quarters ended September 29, 2024 and September 24, 2023. We expect a payment of $7.7 million relating to tax year 2023 to be paid within the next 12 months.

NOTE 12.    EARNINGS PER SHARE

Basic net earnings per share of Class A common stock is computed by dividing net income attributable to Portillo's Inc. by the weighted-average number of Class A common stock outstanding.

Diluted net earnings per share is computed by dividing net income attributable to Portillo's Inc. by the weighted-average number of dilutive securities, using the treasury stock method.


Portillo's Inc. circle.jpg Form 10-Q | 18
PORTILLO'S INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The computations of basic and diluted earnings per share for the quarter and three quarters ended September 29, 2024 and September 24, 2023 are as follows (in thousands):
Quarter EndedThree Quarters Ended
September 29, 2024September 24, 2023September 29, 2024September 24, 2023
Net income
$8,773 $6,546 $22,647 $15,171 
Net income attributable to non-controlling interests
1,553 2,185 4,395 4,536 
Net income attributable to Portillo's Inc.
$7,220 $4,361 $18,252 $10,635 
Shares:
Weighted-average number of common shares outstanding-basic61,922 55,127 60,336 53,231 
Dilutive share awards2,973 3,641 3,011 3,583 
Weighted-average number of common shares outstanding-diluted64,895 58,768 63,348 56,814 
Basic net income per share
$0.12 $0.08 $0.30 $0.20 
Diluted net income per share
$0.11 $0.07 $0.29 $0.19 

Shares of the Company’s Class B Common Stock do not participate in the earnings or losses of Portillo's Inc. and are therefore not participating securities. As such, separate presentation of basic and diluted earnings per share of Class B Common Stock under the two-class method has not been presented.

The following shares were excluded from the calculation of diluted earnings per share because they would be antidilutive (in thousands):
Quarter EndedThree Quarters Ended
September 29, 2024September 24, 2023September 29, 2024September 24, 2023
Shares subject to market performance conditions
2,109 1,860 2,109 1,860 
Shares that were antidilutive747 5 754 5 
Total shares excluded from diluted net income per share2,856 1,865 2,864 1,865 

NOTE 13.    CONTINGENCIES

The Company is party to legal proceedings and potential claims arising in the normal conduct of business, including claims related to employment matters, contractual disputes, customer injuries, and property damage. Although the ultimate outcome of these claims and lawsuits cannot be predicted with certainty, management believes that the resulting liability, if any, will not have a material effect on the Company’s condensed consolidated financial statements.

NOTE 14.    RELATED PARTY TRANSACTIONS

As of September 29, 2024 and December 31, 2023 the related parties’ receivables balance consisted of $0.2 million and $0.3 million, respectively, due from C&O, which is included in accounts and tenant improvement receivables in the condensed consolidated balance sheets.

Olo, Inc.

Noah Glass, a member of the Company's Board, is the founder and CEO of Olo, Inc. ("Olo"), a platform the Company uses in connection with our mobile ordering application and delivery.

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PORTILLO'S INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company incurred the following Olo-related costs for the quarter and three quarters ended September 29, 2024 and September 24, 2023 (in thousands):

Quarter EndedThree Quarters Ended
September 29, 2024September 24, 2023September 29, 2024September 24, 2023
Food, beverage and packaging costs$481 $462 $1,495 $1,525 
Other operating expenses107 101 347 327 
Net Olo-related costs$588 $563 $1,842 $1,852 

As of September 29, 2024 and December 31, 2023, $0.3 million and $0.4 million, respectively, were payable to Olo and were included in accounts payable in the condensed consolidated balance sheets.

Tax Receivable Agreement

We are party to a TRA with certain members of Portillo's OpCo that provides for the payment by us of 85% of the amount of tax benefits, if any, that Portillo's Inc. actually realizes or in some cases is deemed to realize as a result of certain transactions. For the three quarters ended September 29, 2024 and September 24, 2023, the Company made TRA payments of $4.4 million relating to tax year 2022 and $0.8 million relating to tax year 2021, respectively. There were no amounts paid under the TRA during the quarters ended September 29, 2024 and September 24, 2023. We expect a payment of $7.7 million relating to tax year 2023 to be paid within the next 12 months.

(in thousands)September 29, 2024December 31, 2023
Current portion of Tax Receivable Agreement liability$7,723 $4,428 
Tax receivable agreement liability318,967 295,390 

NOTE 15.    SUBSEQUENT EVENTS

The Company opened one new restaurant subsequent to September 29, 2024 in Richmond, Texas for a total of 88 restaurants, excluding a restaurant owned by C&O, of which Portillo's owns 50% of the equity, as of the date of this Quarterly Report on Form 10-Q.

On October 31, 2024, certain pre-IPO LLC Members redeemed 840,992 LLC Units in the aggregate for newly-issued shares of Class A common stock on a one-for-one basis, in accordance with the terms of the Second Amended and Restated LLC Agreement of Portillo’s OpCo, dated as of October 20, 2021.





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Table of Contents
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
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The following discussion contains, in addition to historical information, forward-looking statements that include risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under the heading “Cautionary Statements Concerning Forward-Looking Statements” in this report and under the heading “Risk Factors” in Part I, Item IA of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 and Part II, Item 1A of this Form 10-Q. The following discussion should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 and the condensed consolidated financial statements and notes thereto included in Part I, Item 1 of this Form 10-Q. All information presented herein is based on our fiscal calendar. Unless otherwise stated, references to particular years, quarters, months or periods refer to our fiscal years and the associated quarters, months and periods of those fiscal years.

Although we believe that the expectations reflected in the forward-looking statements are reasonable based on our current knowledge of our business and operations, we cannot guarantee future results, levels of activity, performance or achievements. We assume no obligation to provide revisions to any forward-looking statements should circumstances change.

The following discussion summarizes the significant factors affecting the condensed consolidated operating results, financial condition, liquidity and cash flows of our Company as of and for the periods presented below.

We have prepared the unaudited condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial statements and pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC").

Overview

Portillo’s serves iconic Chicago street food through high-energy, multichannel restaurants designed to ignite the senses and create a memorable dining experience. Since our founding in 1963 in a small trailer which Dick Portillo called “The Dog House,” we have grown to become a treasured brand with a passionate (some might say obsessed) nationwide following. Our diverse menu features all-American favorites such as Chicago-style hot dogs and sausages, Italian beef sandwiches, char-broiled burgers, chopped salads, crinkle-cut fries, homemade chocolate cake and our signature chocolate cake shake. We create a consumer experience like no other by combining the best attributes of fast casual and quick service concepts with an exciting, energy-filled atmosphere and restaurant model capable of generating tremendous volumes. Nearly all of our restaurants were built with double lane drive-thrus and have been thoughtfully designed with a layout that accommodates a variety of access modes including dine-in, carryout, delivery, and catering in order to quickly and efficiently serve our guests. No matter how our guests order from us, our highly productive kitchens and team members consistently serve high quality food and deliver a memorable guest experience. We believe the combination of our craveable food, multichannel sales model, dedication to operational excellence, and distinctive culture driven by our team members gives us a competitive advantage.

As of September 29, 2024, we owned and operated 88 Portillo’s restaurants across ten states, including a restaurant owned by C&O Chicago, L.L.C. ("C&O") of which Portillo’s owns 50% of the equity.


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Financial Highlights for the Quarter Ended September 29, 2024 vs. Quarter Ended September 24, 2023:

•Total revenue increased 6.9% or $11.4 million to $178.3 million;
•Same restaurant sales* decreased 0.9%;
•Operating income increased $0.9 million to $16.0 million;
•Net income increased $2.2 million to $8.8 million;
•Restaurant-Level Adjusted EBITDA** increased $0.1 million to $41.9 million; and
•Adjusted EBITDA** increased $0.6 million to $27.9 million.

Financial Highlights for the Three Quarters Ended September 29, 2024 vs. Three Quarters Ended September 24, 2023:

•Total revenue increased 6.9% or $33.9 million to $525.9 million;
•Same restaurant sales* decreased 0.9%;
•Operating income increased $3.2 million to $44.2 million;
•Net income increased $7.5 million to $22.6 million;
•Restaurant-Level Adjusted EBITDA** increased $3.5 million to $122.9 million; and
•Adjusted EBITDA** increased $3.4 million to $79.6 million.

* For the quarter ended September 29, 2024, same-restaurant sales compares the 13 weeks from July 1, 2024 through September 29, 2024 to the 13 weeks from July 3, 2023 through October 1, 2023. For the three quarters ended September 29, 2024, same-restaurant sales compares the 39 weeks from January 1, 2024 through September 29, 2024 to the 39 weeks from January 2, 2023 through October 1, 2023.
** Adjusted EBITDA and Restaurant-Level Adjusted EBITDA are non-GAAP measures. Definitions and reconciliations of Adjusted EBITDA to net income (loss) and Restaurant-Level Adjusted EBITDA to operating income the most directly comparable financial measures presented in accordance with GAAP, are set forth under the section "Key Performance Indicators and Non-GAAP Financial Measures".

Recent Developments and Trends

In the quarter and three quarters ended September 29, 2024, total revenue grew 6.9% or $11.4 million and 6.9% or $33.9 million, respectively, primarily due to new restaurant openings in 2023 and 2024. Same-restaurant sales declined 0.9% during the quarter ended September 29, 2024, compared to 3.9% same-restaurant sales growth during the same quarter in 2023. Same-restaurant sales declined 0.9% during the three quarters ended September 29, 2024, compared to 6.1% same-restaurant sales growth during the three quarters ended September 24, 2023. Refer to "Selected Operating Data" section below for definition of Same-Restaurant Sales.

In the quarter and three quarters ended September 29, 2024, commodity inflation was 3.6% and 5.1%, respectively, compared to 3.5% and 5.8% for the quarter and three quarters ended September 24, 2023, respectively. Labor, as a percentage of revenue, net increased 0.3% and 0.2% during the quarter and three quarters ended September 29, 2024, respectively, compared to the quarter and three quarters ended September 24, 2023, primarily due to lower transactions and incremental wage rate increases, partially offset by an increase in our average check. For the full year 2024, we expect to achieve negative comparable sales of approximately 1.0% and restaurant-level margins between 23% and 24%.

In the quarter and three quarters ended September 29, 2024, total revenue, operating income, net income, Restaurant-Level Adjusted EBITDA, and Adjusted EBITDA all improved versus the prior year. We believe this improvement stemmed from maintaining concentration on our four strategic pillars, which guide our short-term objectives and form the basis for long-term growth:

•Running world class operations: In the third quarter, we continued to focus on enhancing our guest experience. We redirected our general managers' efforts toward the key factors that drive transactions and sales growth, placing renewed emphasis on training our Team Members to improve speed and cultivate a sense of urgency.

•Innovating and amplifying the Portillo's experience: In the third quarter, we introduced self-service kiosks at select locations, enhancing guest convenience and providing an additional ordering channel. We also re-launched our advertising in the Chicagoland market, consisting of TV commercials, billboards, and more. Our comprehensive advertising campaign coincided with the start of the NFL season. In late August, we also launched our first new cake flavor in 20 years: the Salted Caramel Spice Cake.


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•Building restaurants with industry leading returns: We continued our progress on our Restaurant of the Future concept, a 6,200 square foot prototype restaurant. We will have two Texas restaurants with this footprint by the end of 2024.

•Taking great care of our teams: In the third quarter, we hosted our annual General Manager Summit to motivate, inspire, and celebrate our team members.


Development Highlights
During the three quarters ended September 29, 2024, we opened four new restaurants. Subsequent to September 29, 2024, we opened one additional restaurant, bringing our total restaurant count to 89, as of the filing of this Quarterly Report on Form 10-Q, including a restaurant owned by C&O of which Portillo’s owns 50% of the equity. We plan to open five more restaurants, all in December, for a total of 10 new restaurants opened in the fiscal year 2024, including further expansion into the Houston and Dallas-Fort Worth markets in Texas.

Below are the restaurants opened since the beginning of fiscal 2024:
Location
Opening Month
Fiscal Quarter Opened
Denton, Texas
March 2024
Q1 2024
Surprise, Arizona
May 2024
Q2 2024
Livonia, Michigan
July 2024
Q3 2024
Mansfield, Texas
August 2024
Q3 2024
Richmond, Texas
October 2024
Q4 2024

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Consolidated Results of Operations
The following table summarizes our results of operations for the quarter and three quarters ended September 29, 2024 and September 24, 2023 (in thousands):
Quarter EndedThree Quarters Ended
September 29, 2024September 24, 2023September 29, 2024September 24, 2023
REVENUES, NET$178,252 100.0 %$166,805 100.0 %$525,945 100.0 %$492,047 100.0 %
COST AND EXPENSES:
Restaurant operating expenses:
Food, beverage and packaging costs60,136 33.7 %55,551 33.3 %178,809 34.0 %165,407 33.6 %
Labor45,945 25.8 %42,588 25.5 %135,659 25.8 %126,200 25.6 %
Occupancy9,172 5.1 %8,210 4.9 %27,723 5.3 %24,898 5.1 %
Other operating expenses21,053 11.8 %18,571 11.1 %60,868 11.6 %56,107 11.4 %
Total restaurant operating expenses136,306 76.5 %124,920 74.9 %403,059 76.6 %372,612 75.7 %
General and administrative expenses18,305 10.3 %18,898 11.3 %54,786 10.4 %57,285 11.6 %
Pre-opening expenses1,747 1.0 %2,410 1.4 %5,270 1.0 %5,029 1.0 %
Depreciation and amortization6,679 3.7 %6,178 3.7 %20,729 3.9 %17,788 3.6 %
Net income attributable to equity method investment(383)(0.2)%(422)(0.3)%(923)(0.2)%(1,010)(0.2)%
Other income, net
(390)(0.2)%(276)(0.2)%(1,176)(0.2)%(630)(0.1)%
OPERATING INCOME15,988 9.0 %15,097 9.1 %44,200 8.4 %40,973 8.3 %
Interest expense6,450 3.6 %6,573 3.9 %19,583 3.7 %20,539 4.2 %
Interest income
(50)— %(116)(0.1)%(204)— %(116)— %
Tax Receivable Agreement liability adjustment(1,724)(1.0)%(528)(0.3)%(2,724)(0.5)%(1,691)(0.3)%
Loss on debt extinguishment— — %— — %— — %3,465 0.7 %
INCOME BEFORE INCOME TAXES
11,312 6.3 %9,168 5.5 %27,545 5.2 %18,776 3.8 %
Income tax expense
2,539 1.4 %2,622 1.6 %4,898 0.9 %3,605 0.7 %
NET INCOME
8,773 4.9 %6,546 3.9 %22,647 4.3 %15,171 3.1 %
Net income attributable to non-controlling interests
1,553 0.9 %2,185 1.3 %4,395 0.8 %4,536 0.9 %
NET INCOME ATTRIBUTABLE TO PORTILLO'S INC.
$7,220 4.1 %$4,361 2.6 %$18,252 3.5 %$10,635 2.2 %
Revenues, Net
Revenues primarily represent the aggregate sales of food and beverages, net of discounts. Sales taxes collected from customers are excluded from revenues. Revenues in any period are directly influenced by, among other factors, the number of operating weeks in the period, the number of open restaurants, restaurant traffic, our menu prices, third-party delivery platform prices and product mix.

Revenues for the quarter ended September 29, 2024 were $178.3 million compared to $166.8 million for the quarter ended September 24, 2023, an increase of $11.4 million or 6.9%. The increase in revenues was primarily attributed to the opening of eight restaurants in the third and fourth quarters of 2023 and four restaurants during the three quarters ended September 29, 2024, partially offset by a decrease in our same-restaurant sales. Restaurants not in our Comparable Restaurant Base contributed $13.6 million of the total year-over-year increase. This increase in revenues was offset by a same-restaurant sales decrease of 0.9%, or $1.4 million in the quarter. The same-restaurant sales decline was attributable to a 3.5% decrease in transactions, partially offset by an increase in average check of 2.6%. The higher average check was driven by an approximate 4.4% increase in certain menu prices partially offset by product mix. To address inflationary cost pressures, we increased select menu prices by approximately 1.5% in January 2024 and again at the end of March 2024. In June 2024, we implemented a 1% price increase primarily by re-tiering some of our restaurants in higher-cost areas. Revenue was negatively impacted by $1.0 million in the third quarter due to the shifting of comparable weeks. For the purpose of calculating same-restaurant sales for the quarter ended September 29, 2024, sales for 70 restaurants that were open for at least 24 full fiscal periods were included in the Comparable Restaurant Base (as defined in "Selected Operating Data" below).

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The following table summarizes the Company's revenue for the quarter ended September 29, 2024 and September 24, 2023 (in thousands):
Quarter Ended
September 29, 2024September 24, 2023$ Change% Change
Same-restaurant sales (70 restaurants) (1) (3)
$150,854 $152,212 $(1,358)(0.9)%
Same-restaurant sales comparable week shift impact (2)
— 1,001 (1,001)nm
Restaurants not yet in comparable base opened in fiscal 2024 (4 restaurants) (3)
5,370 — 5,370 nm
Restaurants not yet in comparable base opened in fiscal 2023 (12 restaurants) (3)
17,311 8,988 8,323 92.6 %
Restaurants not yet in comparable base opened in fiscal 2022 (1 restaurant) (3)
2,049 2,094 (45)(2.1)%
Other (4)
2,668 2,510 158 6.3 %
Revenues, net$178,252 $166,805 $11,447 6.9 %
(1) We use a 52- or 53-week fiscal year ending on the Sunday on or prior to December 31. Fiscal 2024 consists of 52 weeks and fiscal 2023 consisted of 53 weeks. In order to compare like-for-like periods for the quarter ended September 29, 2024, same-restaurant sales compares the 13 weeks from July 1, 2024 through September 29, 2024 to the 13 weeks from July 3, 2023 through October 1, 2023.
(2) Represents the impact from shifting comparable weeks for all periods in fiscal 2023 to compare like-for-like periods. For the quarter ended September 24, 2023, same-restaurant sales includes sales from the 13 weeks from July 3, 2023 through October 1, 2023 rather than the 13 weeks from June 26, 2023 through September 24, 2023.
(3) Total restaurants indicated are as of September 29, 2024. Excludes a restaurant that is owned by C&O of which Portillo’s owns 50% of the equity.
(4) Includes revenue from direct shipping sales and non-traditional locations.
*nm - not meaningful

Revenues for the three quarters ended September 29, 2024 were $525.9 million compared to $492.0 million for the three quarters ended September 24, 2023, an increase of $33.9 million or 6.9%. The increase in revenues was primarily attributed to the opening of twelve restaurants in 2023 and four restaurants during the three quarters ended September 29, 2024, partially offset by a decrease in our same-restaurant sales. Restaurants not in our Comparable Restaurant Base contributed $40.2 million of the total year-over-year increase. This increase in revenues was offset by a same-restaurant sales decrease of 0.9%, or $4.0 million. The same-restaurant sales decline was attributable to a 3.0% decrease in transactions, partially offset by an increase in average check of 2.1%. The higher average check was primarily driven by an approximate 4.6% increase in menu prices partially offset by product mix. To address inflationary cost pressures, we increased select menu prices by approximately 1.5% in January 2024 and again at the end of March 2024. In June 2024, we implemented a 1% price increase primarily by re-tiering some of our restaurants in higher-cost areas. Revenue was negatively impacted by $1.8 million in the third quarter due to the shifting of comparable weeks. For the purpose of calculating same-restaurant sales for the three quarters ended September 29, 2024, sales for 70 restaurants that were open for at least 24 full fiscal periods were included in the Comparable Restaurant Base.

The following table summarizes the Company's revenue for the three quarters ended September 29, 2024 and September 24, 2023 (in thousands):
Three Quarters Ended
September 29, 2024September 24, 2023$ Change% Change
Same-restaurant sales (70 restaurants) (1) (3)
$443,666 $447,618 $(3,952)(0.9)%
Same-restaurant sales comparable week shift Impact (2)
— 1,830 (1,830)nm
Restaurants not yet in comparable base opened in fiscal 2024 (4 restaurants) (3)
8,782 — 8,782 nm
Restaurants not yet in comparable base opened in fiscal 2023 (12 restaurants) (3)
56,793 24,707 32,086 129.9 %
Restaurants not yet in comparable base opened in fiscal 2022 (1 restaurant) (3)
8,341 9,049 (708)(7.8)%
Other (4)
8,363 8,843 (480)(5.4)%
Revenues, net$525,945 $492,047 $33,898 6.9 %
(1) We use a 52- or 53-week fiscal year ending on the Sunday on or prior to December 31. Fiscal 2024 consists of 52 weeks and fiscal 2023 consisted of 53 weeks. In order to compare like-for-like periods for the three quarters ended September 29, 2024, same-restaurant sales compares the 39 weeks from January 1, 2024 through September 29, 2024 to the 39 weeks from January 2, 2023 through October 1, 2023.
(2) Represents the impact from shifting comparable weeks for all periods in fiscal 2023 to compare like-for-like periods. For the three quarters ended September 24, 2023, same-restaurant sales includes sales from the 39 weeks from January 2, 2023 through October 1, 2023 rather than the 39 weeks from December 26, 2022 through September 24, 2023.
(3) Total restaurants indicated are as of September 29, 2024. Excludes a restaurant that is owned by C&O of which Portillo’s owns 50% of the equity.
(4) Includes revenue from direct shipping sales and non-traditional locations.
*nm - not meaningful

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Food, Beverage and Packaging Costs

Food, beverage and packaging costs include the direct costs associated with food and beverages, including paper products and third-party delivery commissions. The components of food, beverage and packaging costs are variable by nature, change with sales volume, are impacted by product mix and are subject to increases or decreases in commodity costs.

Food, beverage and packaging costs for the quarter ended September 29, 2024 were $60.1 million compared to $55.6 million for the quarter ended September 24, 2023, an increase of $4.6 million or 8.3%. This increase was primarily driven by the opening of eight restaurants in the third and fourth quarters of 2023 and four restaurants during the three quarters ended September 29, 2024 and a 3.6% increase in commodity prices. As a percentage of revenues, net, food, beverage and packaging costs increased 0.4% during the quarter ended September 29, 2024. The increase was primarily due to an increase in certain commodity prices, partially offset by an increase in average check.

Food, beverage and packaging costs for the three quarters ended September 29, 2024 was $178.8 million compared to $165.4 million for the three quarters ended September 24, 2023, an increase of $13.4 million or 8.1%. This increase was primarily driven by the opening of twelve restaurants in 2023 and four restaurants during the three quarters ended September 29, 2024 and a 5.1% increase in commodity prices, partially offset by lower third-party delivery commissions. As a percentage of revenues, net, food, beverage and packaging costs increased 0.4% during the three quarters ended September 29, 2024. The increase was primarily due to an increase in certain commodity prices, partially offset by an increase in average check and lower third-party delivery commissions.

Labor Expenses

Labor expenses include hourly and management wages, bonuses and equity-based compensation, payroll taxes, workers’ compensation expense, and team member benefits. Factors that influence labor costs include wage inflation and payroll tax legislation, health care costs and the staffing needs of our restaurants.

Labor expenses for the quarter ended September 29, 2024 were $45.9 million compared to $42.6 million for the quarter ended September 24, 2023, an increase of $3.4 million or 7.9%. This increase was primarily driven by the opening of eight restaurants in the third and fourth quarters of 2023 and four restaurants during the three quarters ended September 29, 2024 and incremental investments to support our team members, partially offset by lower variable-based compensation. As a percentage of revenues, net, labor increased 0.3% primarily due to lower transactions, incremental wage rate investments and an increase in benefit expenses, partially offset by an increase in our average check.

Labor expenses for the three quarters ended September 29, 2024 were $135.7 million compared to $126.2 million for the three quarters ended September 24, 2023, an increase of $9.5 million or 7.5%. This increase was primarily driven by the opening of twelve restaurants in 2023 and four restaurants during the three quarters ended September 29, 2024 and incremental investments to support our team members, partially offset by lower variable-based compensation. As a percentage of revenues, net, labor increased 0.2% primarily due to lower transactions and incremental wage rate investments, partially offset by an increase in our average check and lower variable-based compensation.

Occupancy Expenses

Occupancy expenses primarily consist of rent, property insurance and property taxes.

Occupancy expenses for the quarter ended September 29, 2024 were $9.2 million compared to $8.2 million for the quarter ended September 24, 2023, an increase of $1.0 million or 11.7%, primarily driven by the opening of eight restaurants in the third and fourth quarters of 2023 and four restaurants during the three quarters ended September 29, 2024. As a percentage of revenues, net, occupancy expenses increased 0.2%.

Occupancy expenses for the three quarters ended September 29, 2024 were $27.7 million compared to $24.9 million for the three quarters ended September 24, 2023, an increase of $2.8 million or 11.3%, primarily driven by the opening of twelve restaurants in 2023 and four restaurants during the three quarters ended September 29, 2024. As a percentage of revenues, net, occupancy expenses increased 0.2%.

Other Operating Expenses

Other operating expenses consist of direct marketing expenses, utilities and other operating expenses incidental to operating our restaurants, such as credit card fees and repairs and maintenance.

Other operating expenses for the quarter ended September 29, 2024 were $21.1 million compared to $18.6 million for the quarter ended

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September 24, 2023, an increase of $2.5 million or 13.4%, primarily due to the opening of eight restaurants in the third and fourth quarters of 2023 and four restaurants during the three quarters ended September 29, 2024, and an increase in repairs and maintenance, partially offset by a decrease in insurance expenses. As a percentage of revenues, net, operating expenses increased 0.7%.

Other operating expenses for the three quarters ended September 29, 2024 were $60.9 million compared to $56.1 million for the three quarters ended September 24, 2023, an increase of $4.8 million or 8.5%, primarily due to the opening of twelve restaurants in 2023 and four restaurants during the three quarters ended September 29, 2024, and an increase in repairs and maintenance and credit card fees, partially offset by a decrease in operating supplies, and other miscellaneous expenses. As a percentage of revenues, net, operating expenses increased 0.2%.

General and Administrative Expenses

General and administrative expenses primarily consist of costs associated with our corporate and administrative functions that support restaurant development and operations, including marketing and advertising costs incurred as well as legal and professional fees. General and administrative expenses also include equity-based compensation expense. General and administrative expenses are impacted by changes in our team member count and costs related to strategic and growth initiatives.

General and administrative expenses for the quarter ended September 29, 2024 were $18.3 million compared to $18.9 million for the quarter ended September 24, 2023, a decrease of $0.6 million or 3.1%. This decrease was primarily driven by lower variable-based and equity compensation, partially offset by an increase in advertising expenses and software license expenses related to our enterprise resource planning system ("ERP") implementation.

General and administrative expenses for the three quarters ended September 29, 2024 were $54.8 million compared to $57.3 million for the three quarters ended September 24, 2023, a decrease of $2.5 million or 4.4%. This decrease was primarily driven by lower equity and variable-based compensation and insurance expenses, partially offset by an increase in advertising expenses, professional fees and software license fees related to our ERP implementation and travel.

Pre-Opening Expenses

Pre-opening expenses consist primarily of wages, occupancy expenses, which represent rent expense recognized during the period between the date of possession of the restaurant facility and the restaurant opening date, travel for the opening team and other supporting team members, food, beverage, and the initial stocking of operating supplies. All such costs incurred prior to the opening are expensed in the period in which the expense was incurred. Pre-opening expenses can fluctuate significantly from period to period, based on the number and timing of openings and the specific pre-opening expenses incurred for each restaurant. Additionally, restaurant openings in new geographic market areas will experience higher pre-opening expenses than our established geographic market areas, such as the Chicagoland area, where we have greater economies of scale and incur lower travel and lodging costs for our training team.

Pre-opening expenses for the quarter ended September 29, 2024 were $1.7 million compared to $2.4 million for the quarter ended September 24, 2023, an decrease of $0.7 million or 27.5%. The decrease was due to the number and timing of activities related to our planned restaurant openings for the quarter ended September 29, 2024 as compared to the quarter ended September 24, 2023.

Pre-opening expenses for the three quarters ended September 29, 2024 were $5.3 million compared to $5.0 million for the three quarters ended September 24, 2023, an increase of $0.2 million or 4.8%. This increase was due to the number and timing of activities related to our planned restaurant openings for the three quarters ended September 29, 2024 as compared to the three quarters ended September 24, 2023.

Depreciation and Amortization

Depreciation and amortization expenses consist of the depreciation of fixed assets, including leasehold improvements, fixtures and equipment and the amortization of definite-lived intangible assets, which are primarily comprised of recipes.

Depreciation and amortization expense for the quarter ended September 29, 2024 was $6.7 million compared to $6.2 million for the quarter ended September 24, 2023, an increase of $0.5 million or 8.1%. This increase was primarily attributable to incremental depreciation of capital expenditures related to the opening of eight restaurants in the third and fourth quarters of 2023 and four restaurants during the three quarters ended September 29, 2024.

Depreciation and amortization expense for the three quarters ended September 29, 2024 was $20.7 million compared to $17.8 million for the

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three quarters ended September 24, 2023, an increase of $2.9 million or 16.5%. This increase was primarily attributable to incremental depreciation of capital expenditures related to the opening of twelve restaurants in 2023 and four restaurants during the three quarters ended September 29, 2024.

Net Income Attributable to Equity Method Investment

Net income attributable to equity method investment consists of a 50% interest in C&O, which runs a single restaurant located within the Chicagoland market. We account for the investment and financial results in the condensed consolidated financial statements under the equity method of accounting as we have significant influence but do not have control.

Net income attributable to equity method investment was $0.4 million for both the quarter ended September 29, 2024 and September 24, 2023.

Net income attributable to equity method investment for the three quarters ended September 29, 2024 was $0.9 million compared to $1.0 million for the three quarters ended September 24, 2023, a decrease of $0.1 million or 8.6%. This decrease was primarily driven by an increase in restaurant-level operating expenses, partially offset by an increase in sales.

Other Income, Net

Other income, net, includes among other items, income resulting from discounts received for timely filing of sales tax returns, management fee income associated with our investment in C&O, trading gains or losses on our deferred compensation plan and gains or losses on asset disposals.

Other income, net, for the quarter ended September 29, 2024 was $0.4 million compared to $0.3 million for the quarter ended September 24, 2023, an increase of $0.1 million or 41.3%. This increase was primarily due to higher trading gains in the rabbi trust used to fund our deferred compensation plan.

Other income, net, for the three quarters ended September 29, 2024 was $1.2 million compared to $0.6 million for the three quarters ended September 24, 2023, an increase of $0.5 million or 86.7%. This increase was primarily due to a decrease in loss on sale of assets and higher trading gains in the rabbi trust used to fund our deferred compensation plan.

Interest Expense

Interest expense primarily consists of interest and fees on our credit facilities and the amortization expense for debt discount and deferred issuance costs.

Interest expense for the quarter ended September 29, 2024 was $6.5 million compared to $6.6 million for the quarter ended September 24, 2023, a decrease of $0.1 million or 1.9%. This decrease was primarily driven by a lower effective interest rate.

Interest expense for the three quarters ended September 29, 2024 was $19.6 million compared to $20.5 million for the three quarters ended September 24, 2023, a decrease of $1.0 million or 4.7%. This decrease was primarily driven by a lower effective interest rate and the improved lending terms associated with our 2023 Term Loan and 2023 Revolver Facility.

Our effective interest rate on the 2023 Term Loan and 2023 Revolver Facility was 8.32% and 8.50% as of September 29, 2024 and September 24, 2023, respectively.

Interest Income

Interest income primarily consists of interest earned on our cash and cash equivalents.

Interest income for both the quarters ended September 29, 2024 and September 24, 2023 was $0.1 million.

Interest income for the three quarters ended September 29, 2024 was $0.2 million compared to $0.1 million for the three quarters ended September 24, 2023, an increase of $0.1 million or 75.9%. This increase was primarily driven by converting our bank accounts to interest bearing during the three quarters ended September 24, 2023.

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Tax Receivable Agreement Liability Adjustment

We are party to a Tax Receivable Agreement liability with certain members of PHD Group Holdings LLC and its subsidiaries ("Portillo's OpCo”) that provides for the payment by us of 85% of the amount of tax benefits, if any, that Portillo's Inc. actually realizes or in some cases is deemed to realize as a result of certain transactions.

The Tax Receivable Agreement liability adjustment was $1.7 million for the quarter ended September 29, 2024 and $2.7 million for the three quarters ended September 29, 2024 related to a remeasurement primarily due to activity under equity-based compensation plans. The Tax Receivable Agreement liability adjustment was $0.5 million and $1.7 million for the quarter and three quarters ended September 24, 2023, respectively.

Loss on Debt Extinguishment

There was no loss on debt extinguishment for the quarter and three quarters ended September 29, 2024 and quarter ended September 24, 2023. Loss on debt extinguishment for the three quarters ended September 24, 2023 was $3.5 million due to the write-off of debt discount and deferred issuance costs associated with the payoff of the 2014 Credit Agreement as described in Note 8. Debt.

Income Tax Expense

Portillo's OpCo is treated as a partnership for U.S. federal, as well as state and local income tax purposes and is not subject to taxes. Rather, any taxable income or loss generated by Portillo's OpCo is allocated to its members in relation to their respective ownership percentage of Portillo's OpCo. We are subject to U.S. federal, as well as state and local, income taxes with respect to our allocable share of any taxable income or loss of Portillo's OpCo, as well as any stand-alone income or loss generated by Portillo's Inc.

Income tax expense for the quarter ended September 29, 2024 was $2.5 million compared to $2.6 million for the quarter ended September 24, 2023, a decrease of $0.1 million or 3.2%. Our effective income tax rate for the quarter ended September 29, 2024 was 22.4%, compared to 28.6% for the quarter ended September 24, 2023. The decrease in our effective income tax rate for the quarter ended September 29, 2024 compared to the quarter ended September 24, 2023 was primarily driven by return to provision adjustments, partially offset by an increase in the company's ownership interest in Portillo's OpCo, which increases its share of taxable income (loss) of Portillo's OpCo.

Income tax expense for the three quarters ended September 29, 2024 was $4.9 million compared to income tax expense of $3.6 million for the three quarters ended September 24, 2023, an increase of $1.3 million or 35.9%. Our effective income tax rate for the three quarters ended September 29, 2024 was 17.8%, compared to 19.2% for the three quarters ended September 24, 2023. The decrease in our effective income tax rate for the three quarters ended September 29, 2024 compared to the three quarters ended September 24, 2023 was primarily driven by a decrease in the valuation allowance recorded against a portion of the Company's deferred tax assets as a result of the secondary offering in Q1 2024 and return to provision adjustments, partially offset by an increase in the Company's ownership interest in Portillo's OpCo, which increases its share of taxable income (loss) of Portillo's OpCo.

Net Income Attributable to Non-controlling Interests

We are the sole managing member of Portillo's OpCo. We manage and operate the business and control the strategic decisions and day-to-day operations of Portillo’s OpCo and we also have a substantial financial interest in Portillo’s OpCo. Accordingly, we consolidate the financial results of Portillo’s OpCo, and a portion of our net income is allocated to non-controlling interests to reflect the entitlement of the pre-IPO LLC Members who retained their equity ownership in Portillo's OpCo (the "pre-IPO LLC Members"). The weighted average ownership percentages for the applicable reporting periods are used to attribute net income (loss) to Portillo's Inc. and the non-controlling interest holders.

Net income attributable to non-controlling interests for the quarter ended September 29, 2024 was $1.6 million, compared to net income attributable to non-controlling interests of $2.2 million for the quarter ended September 24, 2023, a decrease of $0.6 million or 28.9%. The decrease in net income attributable to non-controlling interests for the quarter ended September 29, 2024 was primarily due to a decrease in the non-controlling interest holders' weighted average ownership from 24.1% for the quarter ended September 24, 2023 to 15.8% for the quarter ended September 29, 2024, partially offset by an increase in net income for the quarter ended September 29, 2024 compared to the quarter ended September 24, 2023.

Net income attributable to non-controlling interests for the three quarters ended September 29, 2024 was $4.4 million, compared to net income attributable to non-controlling interest of $4.5 million for the three quarters ended September 24, 2023, a decrease of $0.1 million or 3.1%. The

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decrease in net income attributable to non-controlling interests for the three quarters ended September 29, 2024 was primarily due to a decrease in the non-controlling interest holders' weighted average ownership, from 26.6% for the three quarters ended September 24, 2023 to 17.7% for the three quarters ended September 29, 2024, partially offset by an increase in net income for the three quarters ended September 29, 2024 compared to the three quarters ended September 24, 2023.

Selected Operating Data and Non-GAAP Financial Measures

In addition to the GAAP measures presented in our financial statements, we use the following selected operating data and non-GAAP financial measures to evaluate our business, measure our performance, develop financial forecasts and make strategic decisions. These key measures include restaurant openings, average unit volume ("AUV"), same-restaurant sales, Adjusted EBITDA, Adjusted EBITDA Margin, Restaurant-Level Adjusted EBITDA and Restaurant-Level Adjusted EBITDA Margin. The Company includes these measures because management believes that they are important to day-to-day operations and overall strategy and 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.
Quarter EndedThree Quarters Ended
September 29, 2024September 24, 2023September 29, 2024September 24, 2023
Total Restaurants (a)88788878
AUV (in millions) (a)N/AN/A$8.9 $8.9 
Change in same-restaurant sales (b) (c)
(0.9)%3.9 %(0.9)%6.1%
Adjusted EBITDA (in thousands) (b)$27,911 $27,285 $79,554 $76,140 
Adjusted EBITDA Margin (b)15.7 %16.4 %15.1%15.5%
Restaurant-Level Adjusted EBITDA (in thousands) (b)$41,946 $41,885 $122,886 $119,435 
Restaurant-Level Adjusted EBITDA Margin (b)23.5 %25.1 %23.4%24.3%
(a) Includes a restaurant that is owned by C&O, of which Portillo’s owns 50% of the equity. AUVs for the quarters ended September 29, 2024 and September 24, 2023 represent AUVs for the twelve months ended September 29, 2024 and September 24, 2023, respectively. Total restaurants indicated are as of September 29, 2024.
(b) Excludes a restaurant that is owned by C&O of which Portillo’s owns 50% of the equity.
(c) For the quarter ended September 29, 2024, same-restaurant sales compares the 13 weeks from July 1, 2024 through September 29, 2024 to the 13 weeks from July 3, 2023 through October 1, 2023. For the three quarters ended September 29, 2024, same-restaurant sales compares the 39 weeks from January 1, 2024 through September 29, 2024 to the 39 weeks from January 2, 2023 through October 1, 2023.

Change in Same-Restaurant Sales

The change in same-restaurant sales is the percentage change in year-over-year revenue (excluding gift card breakage) for the comparable restaurant base, which is defined as the number of restaurants open for at least 24 full fiscal periods (the “Comparable Restaurant Base”). For the three quarters ended September 29, 2024 and September 24, 2023, there were 70 and 66 restaurants in our Comparable Restaurant Base, respectively. The Comparable Restaurant Base excludes a restaurant that is owned by C&O, of which Portillo’s owns 50% of the equity.

A change in same-restaurant sales is the result of a change in restaurant transactions, average guest check, or a combination of the two. We gather daily sales data and regularly analyze the guest transaction counts and the mix of menu items sold to strategically evaluate menu pricing and demand. Measuring our change in same-restaurant sales allows management to evaluate the performance of our existing restaurant base. We believe this measure provides a consistent comparison of restaurant sales results and trends across periods within our core, established restaurant base, unaffected by results of restaurant openings and enables investors to better understand and evaluate the Company’s historical and prospective operating performance.

Average Unit Volume ("AUV")

AUV is the total revenue (excluding gift card breakage) recognized in the Comparable Restaurant Base, including C&O, divided by the number of restaurants in the Comparable Restaurant Base, including C&O, by period.

This key performance indicator allows management to assess changes in consumer spending patterns at our restaurants and the overall performance of our restaurant base.


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Non-GAAP Financial Measures

To supplement the condensed consolidated financial statements, which are prepared and presented in accordance with GAAP, we use the following non-GAAP financial measures: Adjusted EBITDA and Adjusted EBITDA Margin, and Restaurant-Level Adjusted EBITDA and Restaurant-Level Adjusted EBITDA Margin. Accordingly, these measures are not required by, nor presented in accordance with, GAAP, but rather are supplemental measures of operating performance of our restaurants. You should be aware that these measures are not indicative of overall results for the Company and that Restaurant-Level Adjusted EBITDA and Restaurant-Level Adjusted EBITDA Margin do not accrue directly to the benefit of stockholders because of corporate-level expenses excluded from such measures. These measures are supplemental measures of operating performance and our calculations thereof may not be comparable to similar measures reported by other companies. These measures are important measures to evaluate the performance and profitability of our restaurants, individually and in the aggregate, but also have important limitations as analytical tools and should not be considered in isolation as substitutes for analysis of our results as reported under GAAP.

Adjusted EBITDA and Adjusted EBITDA Margin

Adjusted EBITDA represents net income before depreciation and amortization, interest expense, interest income and income taxes, adjusted for the impact of certain non-cash and other items that we do not consider in our evaluation of ongoing core operating performance as identified in the reconciliation of net income, the most directly comparable GAAP measure to Adjusted EBITDA. Adjusted EBITDA Margin represents Adjusted EBITDA as a percentage of revenues, net.

We use Adjusted EBITDA and Adjusted EBITDA Margin (i) to evaluate our operating results and the effectiveness of our business strategies, (ii) internally as benchmarks to compare our performance to that of our competitors and (iii) as factors in evaluating management’s performance when determining incentive compensation.

We believe that Adjusted EBITDA and Adjusted EBITDA Margin are important measures of operating performance because they eliminate the impact of expenses that do not relate to our core operating performance.


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The following table reconciles net income to Adjusted EBITDA and Adjusted EBITDA margin (in thousands):

Quarter EndedThree Quarters Ended
September 29, 2024September 24, 2023September 29, 2024September 24, 2023
Net income
$8,773 $6,546 $22,647 $15,171 
Net income margin
4.9 %3.9 %4.3 %3.1 %
Depreciation and amortization6,679 6,178 20,729 17,788 
Interest expense6,450 6,573 19,583 20,539 
Interest income
(50)(116)(204)(116)
Loss on debt extinguishment— — — 3,465 
Income tax expense
2,539 2,622 4,898 3,605 
EBITDA24,391 21,803 67,653 60,452 
Deferred rent (1)1,391 1,388 3,857 3,781 
Equity-based compensation3,506 4,324 9,223 12,044 
Cloud-based software implementation costs (2)64 149 514 149 
Amortization of cloud-based software implementation costs (3)220 — 366 — 
Other loss (4)63 16 129 511 
Transaction-related fees and expenses (5)— 133 536 894 
Tax Receivable Agreement liability adjustment (6)(1,724)(528)(2,724)(1,691)
Adjusted EBITDA$27,911 $27,285 $79,554 $76,140 
Adjusted EBITDA Margin (7)15.7 %16.4 %15.1 %15.5 %
(1) Represents the difference between cash rent payments and the recognition of straight-line rent expense recognized over the lease term.
(2) Represents non-capitalized third party consulting and software licensing costs incurred in connection with the implementation of new enterprise resource planning ("ERP") and human capital management ("HCM") systems which are included within general and administrative expenses.
(3) Represents amortization of capitalized cloud-based ERP system implementation costs that are included within general and administrative expenses.
(4) Represents (gain) loss on disposal of property and equipment included within other income, net.
(5) Represents certain expenses that management believes are not indicative of ongoing operations, consisting primarily of certain professional fees included within general and administrative expenses.
(6) Represents remeasurement of the Tax Receivable Agreement liability.
(7) Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by Revenues, net.

Restaurant-Level Adjusted EBITDA and Restaurant-Level Adjusted EBITDA Margin
Restaurant-Level Adjusted EBITDA is defined as revenue, less restaurant operating expenses, which include food, beverage and packaging costs, labor expenses, occupancy expenses and other operating expenses. Restaurant-Level Adjusted EBITDA excludes corporate level expenses and depreciation and amortization on restaurant property and equipment. Restaurant-Level Adjusted EBITDA Margin represents Restaurant-Level Adjusted EBITDA as a percentage of revenues, net.

We believe that Restaurant-Level Adjusted EBITDA and Restaurant-Level Adjusted EBITDA Margin are important measures to evaluate the performance and profitability of our restaurants, individually and in the aggregate.


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The following table reconciles operating income to Restaurant-Level Adjusted EBITDA and Restaurant-Level Adjusted EBITDA Margin (in thousands):
Quarter EndedThree Quarters Ended
September 29, 2024September 24, 2023September 29, 2024September 24, 2023
Operating income$15,988 $15,097 $44,200 $40,973 
Operating income margin
9.0 %9.1 %8.4 %8.3 %
Plus:
General and administrative expenses18,305 18,898 54,786 57,285 
Pre-opening expenses1,747 2,410 5,270 5,029 
Depreciation and amortization6,679 6,178 20,729 17,788 
Net income attributable to equity method investment(383)(422)(923)(1,010)
Other income, net
(390)(276)(1,176)(630)
Restaurant-Level Adjusted EBITDA$41,946 $41,885 $122,886 $119,435 
Restaurant-Level Adjusted EBITDA Margin (1)23.5 %25.1 %23.4 %24.3 %
(1) Restaurant-Level Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by Revenues, net.

Liquidity and Capital Resources

Our primary sources of liquidity are cash from operations, cash and cash equivalents on hand, and availability under our 2023 Revolver Facility. As of September 29, 2024, we maintained a cash and cash equivalents and restricted cash balance of $18.5 million and had $80.7 million of availability under our 2023 Revolver Facility, after giving effect to $5.3 million in outstanding letters of credit.

Our primary requirements for liquidity are to fund our working capital needs, operating lease obligations, capital expenditures, and general restaurant support center needs. Our requirements for working capital are not significant because our guests pay for their food and beverage purchases in cash or on debit or credit cards at the time of the sale and we are able to sell many of our inventory items before payment is due to the supplier of such items. Our ongoing capital expenditures are principally related to opening of new restaurants, existing capital investments (both for remodels and maintenance), as well as investments in our restaurant support center infrastructure.

Based upon current levels of operations and anticipated growth, we expect that cash flows from operations will be sufficient to meet our needs for at least the next twelve months, and the foreseeable future.

Tax Receivable Agreement

In connection with the IPO, we entered into a Tax Receivable Agreement ("TRA") with certain of our pre-IPO LLC Members, pursuant to which we will generally be required to pay 85% of the amount of cash savings, if any, in U.S. federal, state, and local income tax that we actually realize or are deemed to realize, as a result of (i) our allocable share of existing tax basis in depreciable or amortizable assets relating to LLC Units acquired in the IPO, (ii) certain favorable tax attributes acquired by the Company from entities treated as corporations for U.S. tax purposes that held LLC Units prior to the Transactions ("Blocker Companies") (including net operating losses and the Blocker Companies' allocable share of existing tax basis), (iii) increases in our allocable share of then existing tax basis in depreciable or amortizable assets, and adjustments to the tax basis of the tangible and intangible assets, of Portillo’s OpCo and its subsidiaries, as a result of (x) sales or exchanges of interests in Portillo’s OpCo (including the repayment of the redeemable preferred units) in connection with the IPO and (y) future redemptions or exchanges of LLC Units by pre-IPO LLC Members for Class A common stock and (iv) certain other tax benefits related to entering into the TRA, including payments made under the TRA.

As of September 29, 2024, we estimate that our obligation for future payments under the TRA totaled $326.7 million. Amounts payable under the TRA are contingent upon, among other things, (i) generation of future taxable income over the term of the TRA and (ii) future changes in tax laws. If we do not generate sufficient taxable income in the aggregate over the term of the TRA to utilize the tax benefits, then we would not be required to make the related TRA payments. The payments that we are required to make will generally reduce the amount of overall cash flow that might have otherwise been available to us, but we expect the cash tax savings we will realize to fund the required payments. Assuming no material changes in relevant tax law and that we earn sufficient taxable income to realize all tax benefits that are subject to the TRA, we estimate that the tax savings associated with all tax attributes described above would aggregate to approximately $384.3 million as of September 29, 2024. Under this scenario, we would be required to pay the TRA Parties approximately 85% of such amount, or $326.7 million, primarily over the next 15 years, substantially declining in year 16 through year 47. In the three quarters ended September 29, 2024 and

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September 24, 2023, we made TRA payments of $4.4 million relating to tax year 2022 and $0.8 million relating to tax year 2021, respectively. We expect a payment of $7.7 million relating to tax year 2023 to be paid within the next 12 months.

Summary of Cash Flows

The following table presents a summary of our cash flows from operating, investing and financing activities (in thousands):
Three Quarters Ended
September 29, 2024September 24, 2023
Net cash provided by operating activities$71,954 $53,570 
Net cash used in investing activities(56,437)(57,579)
Net cash used in financing activities
(7,435)(27,471)
Net increase (decrease) in cash and cash equivalents and restricted cash
8,082 (31,480)
Cash and cash equivalents and restricted cash at beginning of period10,438 44,427 
Cash and cash equivalents and restricted cash at end of period$18,520 $12,947 
Operating Activities

Net cash provided by operating activities for the three quarters ended September 29, 2024 was $72.0 million compared to net cash provided by operating activities of $53.6 million for the three quarters ended September 24, 2023, an increase of $18.4 million or 34.3%. This increase was primarily driven by the change in operating assets and liabilities of $14.6 million and an increase in net income of $7.5 million, partially offset by the change in non-cash items of $3.7 million.

The $14.6 million change in our operating assets and liabilities balances was primarily driven by operating assets and liabilities being a source of net cash of $17.1 million in the three quarters ended September 29, 2024, compared to a source of net cash of $2.6 million in three quarters ended September 24, 2023 driven by the change in accounts payable, deferred lease incentives, other current assets, and accounts receivable in the three quarters ended September 29, 2024. The increase in net income for the three quarters ended September 29, 2024 was primarily due to the factors driving the aforementioned change in revenues and expenses as described in the condensed consolidated results of operations in the three quarters ended September 29, 2024 compared to the three quarters ended September 24, 2023. The $3.7 million change from the three quarters ended September 29, 2024 in non-cash charges is primarily driven by the loss on debt extinguishment in the prior year, lower equity-based compensation expense, and lower income tax expense, partially offset by higher depreciation and amortization in the current year.

Investing Activities

Net cash used in investing activities was $56.4 million for the three quarters ended September 29, 2024 compared to $57.6 million for the three quarters ended September 24, 2023, a decrease of $1.1 million or 2.0%. This decrease was primarily due to adopting a more cost effective restaurant format, number and timing of restaurant openings, and buildings in process during the three quarters ended September 29, 2024 compared to the three quarters ended September 24, 2023.

Financing Activities

Net cash used in financing activities was $7.4 million for the three quarters ended September 29, 2024 compared to net cash used in financing activities of $27.5 million for the three quarters ended September 24, 2023, a decrease of $20.0 million or 72.9%. This decrease is primarily due to the payment and borrowing of long-term debt in connection with our refinancing during the three quarters ended September 24, 2023, as described in Note 8. Debt. The decrease was partially offset by an increase in payments related to the Tax Receivable Agreement liability of 3.6 million for the three quarters ended September 29, 2024 as compared to the three quarters ended September 24, 2023.

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2023 Revolver Facility and Liens

On February 2, 2023, Holdings, the Borrower, the other Guarantors party thereto from time to time, each lender party thereto from time to time and Fifth Third Bank, National Association, as Administrative Agent, L/C Issuer and Swing Line Lender entered into the 2023 Credit Agreement which provides for the 2023 Term Loan in an initial aggregate principal amount of $300.0 million and the 2023 Revolver Facility in an initial aggregate principal amount of $100.0 million. The proceeds under the 2023 Term Loan and 2023 Revolver Facility, along with cash on hand, were used to repay outstanding indebtedness under the 2014 Credit Agreement and to pay related transaction expenses. The 2023 Term Loan and 2023 Revolver Facility are scheduled to mature on February 2, 2028.

As of September 29, 2024, we had $14.0 million of borrowings under the 2023 Revolver Facility, and letters of credit issued under the 2023 Revolver Facility totaled $5.3 million. As a result, as of September 29, 2024, the Company had $80.7 million available under the 2023 Revolver Facility.

The 2023 Credit Agreement also includes certain financial covenants with respect to cash interest coverage and total net rent adjusted leverage. As of September 29, 2024, the Company was in compliance with financial covenants in the 2023 Credit Agreement.

Material Cash Requirements

There have been no material changes to the material cash requirements as disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, other than those payments made in the ordinary course of business.

Refer to Note 8. Debt for a description of a Credit Agreement and the repayment of borrowings.

Critical Accounting Estimates

This discussion and analysis of financial condition and results of operations is based upon the Company's condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires the Company to make estimates, judgments, and assumptions that can have a meaningful effect on the reporting of condensed consolidated financial statements. There have been no significant changes to our critical accounting estimates or significant accounting policies as disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Refer to Note 2. Summary Of Significant Accounting Policies for the Company's assessment of all other recently issued accounting pronouncements.


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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

There have been no material changes to our exposure to market risks as described in Part II, Item 7A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Item 4. Controls and Procedures.

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of such date. Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There were no changes in our internal control over financial reporting during the quarter ended September 29, 2024 identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION
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Item 1. Legal Proceedings.

Information regarding certain legal proceedings to which the Company is a party are discussed in Note 13. Contingencies in the notes to the unaudited condensed consolidated financial statements and is incorporated herein by reference.

Item 1A. Risk Factors.

There have been no material changes to the risk factors disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2023, except as updated in the Company's last Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, and as set forth below.

Matters relating to employment and labor law could have a material adverse effect, result in litigation or union activities, add significant costs and divert management attention.

Various federal and state labor laws govern our relationships with our team members and affect our operating costs, including the U.S. Occupational Safety and Health Act, which governs worker health and safety, the U.S. Fair Labor Standards Act, which governs such matters as minimum wages and overtime, and a variety of federal, state and local laws that govern employment law matters like employee classifications, unemployment tax rates, workers’ compensation rates, family leave, working conditions, safety standards, immigration status, payroll taxes, discrimination, and citizenship requirements. In addition, under the U.S. Patient Protection and Affordable Care Act (“ACA”), we must provide affordable coverage, as defined in ACA, to eligible team members, or make a payment per team member based on ACA's affordability criteria. Additionally, some state and local laws mandate certain levels of health benefits by some employers. Significant additional government regulations and new laws, including mandated increases in minimum wages, changes in exempt and non-exempt status, paid leave, or increased mandated benefits such as health care and insurance costs could have a material adverse effect on our business, financial condition and results of operations. In addition, changes in federal or state workplace regulations could adversely affect our ability to meet our financial targets.

Federal law requires that we verify that our team members have the proper documentation and authorization to work in the U.S. Although we require all workers to provide us with government-specified documentation evidencing their employment eligibility, some of our team members may, without our knowledge, be unauthorized workers. We currently participate in the “E-Verify” program, an Internet-based, free program run by the U.S. government to verify employment eligibility, in Arizona and Florida, which are the only states in which we operate where participation is required. However, use of the “E-Verify” program does not guarantee that we will properly identify all applicants who are ineligible for employment. Unauthorized workers are subject to deportation and we may be subject to fines or penalties if any of our workers are found to be unauthorized. Termination of a significant number of team members who lack work authorization may disrupt our operations, cause temporary increases in our labor costs as we train new team members and result in adverse publicity. We could also become subject to fines, penalties and other costs related to claims that we did not fully comply with all recordkeeping obligations of federal and state immigration compliance laws. As a result of such events, we could experience adverse publicity that may negatively impact our brand and may make it more difficult to hire and keep qualified team members. These factors could materially adversely affect our our business, financial condition and results of operations (collectively, "our Results").

Our business is subject to the risk of litigation by team members, consumers, suppliers, shareholders or others through private actions, class actions, administrative proceedings, regulatory actions or other litigation. The outcome of litigation, particularly class action and regulatory actions, is difficult to assess or quantify. In recent years, restaurant companies, including us, have been subject to lawsuits, including class actions, alleging violations of federal and state laws regarding workplace and employment conditions, discrimination and similar matters. Some lawsuits have resulted in substantial damage awards. Similar lawsuits have been instituted from time to time alleging violations of various federal and state wage and hour laws regarding, among other things, employee meal deductions, overtime eligibility of managers and failure to pay for all hours worked. Whether or not claims against us are valid or whether we are found liable, claims may be expensive to defend and may divert time and money away from our operations and result in increases in our insurance premiums. In addition, they may generate negative publicity, which could reduce guest traffic and sales. Although we believe we maintain adequate levels of insurance, insurance may not be available at all or in sufficient amounts to cover all potential liabilities with respect to these or other matters. A judgment or other liability in excess of our insurance coverage or any adverse publicity resulting from claims could have a material adverse effect on our Results.

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Certain of our team members at our commissaries in Addison, IL and Aurora, IL voted on April 13, 2023 and April 30, 2024, respectively, in favor of being represented by a union. We filed objections to the 2023 election with the National Labor Relations Board ("NLRB") on April 19, 2023, asserting that the promises made by the union and its agent prevented a free and fair election. We have appealed to the NLRB to set aside the election results. We filed an objection to the 2024 election with the NLRB on May 7, 2024, asserting that the promises made by the union and its agents prevented a free and fair election. Although we have not received other petitions to unionize, it is possible that additional team members may seek to be represented by labor unions in the future. If a significant number of our team members were to become unionized and collective bargaining agreement terms were significantly different from our current compensation arrangements, it could have a material adverse effect on our Results. In addition, a labor dispute involving some or all our team members may harm our reputation, disrupt our operations and reduce our revenues, and resolution of labor disputes could increase our costs. Further, if we enter into a new market with unionized construction companies, or the construction companies in our current markets become unionized, construction and build-out costs for new restaurants in such markets could materially increase.

Security breaches, system interruptions, material failure of our system, or complications with the implementation or usage of our new enterprise resource planning system could disrupt our operations, compromise confidential personally identifying information, subject us to loss, harm our business, and have a material adverse impact on our business, financial condition and results of operations.

Our information technology systems, which in some cases rely on third-party providers, have in the past, and may in the future experience service interruptions, degradation or other performance problems because of hardware and software defects or malfunctions, distributed denial-of-service and other cyberattacks, infrastructure changes, human error, earthquakes, hurricanes, floods, fires, natural disasters, power losses, disruptions in telecommunications services, fraud, military or political conflicts, terrorist attacks, computer viruses, ransomware, malware, or other events. Our systems also may be subject to break-ins, sabotage, theft, and intentional acts of vandalism perpetrated by criminal third parties, third parties we do business with, or team members. Our reliance on third parties increases our exposure to such risks as we exercise less control over such persons.

While we endeavor to keep all systems current, there can be no guarantee that we can update and maintain our systems at all times. In instances where we are unable to do so, our risk mitigation efforts may fail. Any such failure could lead to website downtime, disruptions to our information technology systems, or malicious behavior by threat actors. In Q2 2024, we completed the implementation of our new ERP system, designed to accurately maintain the Company’s financial records, enhance operational functionality, and provide timely information to the Company’s management team related to the operation of the business. The ERP system implementation process has required, and will continue to require, the investment of personnel and financial resources as we support post-implementation efforts and system functionality. These post-implementation efforts could result in delays, increased costs, and other difficulties, and disruptions or difficulties in using our ERP system could result in harm to our business. Additionally, if the ERP system does not operate as intended, the effectiveness of our internal controls over financial reporting could be adversely affected or our ability to adequately assess those controls could be further delayed.

Our business requires the collection, transmission, and retention of large volumes of guest and team member data, including personally identifiable information, through information technology systems maintained by us or vendors retained by us. In particular, our omni-channel approach relies in large part on our information technology systems to operate successfully and allow for capabilities like mobile order and pay, third-party delivery, and digital menu boards. Like many other companies, we have experienced, and will continue to experience, attempts to compromise our information technology systems. As we expand our business channels, our risk exposure will increase proportionately. The techniques and sophistication used to conduct cyberattacks, as well as the sources and targets of these attacks, change frequently and are often not recognized until such attacks have occurred. While we continue to make significant investment in physical and technological security measures, team member training, and third-party services to anticipate cyberattacks and prevent breaches, protect our information technology networks and infrastructure, and to identify vendors and service providers that could be vulnerable to damage, disruptions, shutdowns, data loss, or breaches due to criminal conduct, team member error, negligence or malfeasance, utility failures, natural disasters or other catastrophic events, we cannot guarantee that we will be successful in preventing every possible instance of cyberattacks, breach, or data loss, any of which could disrupt our operations, resulting in inefficiencies and a loss of profits.

Additionally, the cybersecurity and privacy requirements imposed by governmental regulations are evolving. Our systems may not be able to immediately satisfy applicable requirements, and may require significant additional investment and time to do so. A significant theft, loss or misappropriation of, or unauthorized access to, our guests’ data or other proprietary data could result in fines, legal claims or proceedings, regulatory investigations and actions, or liability for failure to comply with privacy and information security laws, which could disrupt our operations, damage our reputation and expose us to claims from guests and team members, any of which could have a material adverse effect on our Results. Our cyber insurance and business interruption insurance may not be sufficient to cover all losses that may result from a cybersecurity incident. As a result, if we experience any outsized material impacts from a failure of our systems, our Results could be materially

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and adversely affected. Our reputation as a brand or as an employer could be adversely affected, which could impair our ability to attract and retain guests and qualified employees.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Under the Second Amended and Restated LLC Agreement of Portillo’s OpCo dated as of October 20, 2021 (the “OpCo LLCA”), the holders of LLC Units (other than the Company) may from time to time require Portillo’s OpCo to redeem all or a portion of their LLC Units for newly-issued shares of Class A common stock on a one-for-one basis in accordance with the terms of the OpCo LLCA.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

(c) Rule 10b5-1 and non-Rule 10b5-1 Trading Arrangements

During the quarter ended September 29, 2024, no director or officer (as defined in Rule 16a-1(f) under the Exchange Act) of the Company adopted, modified, or terminated a "Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement” as each term is defined in Item 408 of Regulation S-K, except as follows:
Name/ TitleType of Plan
Original Adoption Date
Termination Date
Aggregate Number of Securities to be SoldPlan Description
Nicholas Scarpino, Chief Marketing Officer
10b5-1 Trading PlanSeptember 7, 2022August 15, 2024
(a)
Up to 96,722
Exercise of Options and Sale of Shares
(a) On August 15, 2024, Nicholas Scarpino, Chief Marketing Officer, terminated a Rule 10b5-1 trading arrangement, originally adopted on September 7, 2022 and modified on August 7, 2023 and on March 7, 2024.

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Table of Contents
Item 6. Exhibits.

Exhibit NumberDescriptionFiled Herewith
*
*
#
101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document*
101.SCHXBRL Taxonomy Extension Schema Document*
101.CALXBRL Taxonomy Extension Calculation Linkbase Document*
101.DEFXBRL Taxonomy Extension Definition Linkbase Document*
101.LABXBRL Taxonomy Extension Label Linkbase Document*
101.PREXBRL Taxonomy Extension Presentation Linkbase Document*
104Cover page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document*
*    Filed Herewith
#     Furnished Herewith
†    Indicates a management contract or compensatory plan or agreement


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Table of Contents
SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 
  Portillo's Inc.
(Registrant)
   
Date: November 5, 2024
By:/s/ Michael Osanloo
  Michael Osanloo
  President, Chief Executive Officer and Director
(Principal Executive Officer)
 
Date: November 5, 2024By:/s/ Michelle Hook
  Michelle Hook
  Chief Financial Officer and Treasurer
(Principal Financial Officer and Principal Accounting Officer)


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