Portillo's Inc.

11/05/2026 | Press release | Distributed by Public on 11/05/2026 07:03

Quarterly Report for Quarter Ending September 27, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations.
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 Note Regarding Forward-Looking Information" in this report and under the heading "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 28, 2025 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 28, 2025 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 a menu of iconic Chicago-style favorites in high-energy, multichannel restaurants designed to create joy for our guests. Since our founding in 1963 in a small trailer that Dick Portillo called "The Dog House," we have grown into a brand with a passionate (some might say obsessed) nationwide following. Our diverse menu features craveable favorites such as Chicago-style hot dogs and sausages, Italian beef sandwiches, char-broiled burgers, fresh chopped salads, crinkle-cut fries, homemade chocolate cake and our signature chocolate cake shake. Beyond the menu, our restaurants combine the best attributes of fast-casual and quick-service concepts with an exciting energy-filled atmosphere in a restaurant model capable of generating tremendous volumes. Nearly all of our restaurants were built with double lane drive-thrus and have been thoughtfully designed to quickly and efficiently serve our guests any way they want to enjoy their Portillo's, including dine-in, carryout, delivery and catering. We believe the combination of our craveable food, multichannel sales model, dedication to operational excellence, and team member-driven culture gives us a competitive advantage.
As of September 27, 2026, we owned and operated 109 Portillo's restaurants across 11 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 27, 2026 vs. Quarter Ended September 28, 2025:
•Total revenue of $194.1 million, an increase of 7.0% or $12.6 million
•Same-restaurant sales increase of 1.4%
•Operating income of $11.8 million, an increase of $6.3 million
•Net income of $4.8 million, an increase of $4.0 million
•Restaurant-Level Adjusted EBITDA* of $40.1 million, an increase of $3.4 million
•Adjusted EBITDA* of $26.5 million, an increase of $5.1 million
Financial Highlights for the Three Quarters Ended September 27, 2026 vs. Three Quarters Ended September 28, 2025:
•Total revenue of $575.7 million, an increase of 5.4% or $29.3 million
•Same-restaurant sales were flat
•Operating income of $30.0 million, a decrease of $3.3 million
•Net income of $11.4 million, a decrease of $3.4 million
•Restaurant-Level Adjusted EBITDA* of $118.2 million, an increase of $0.4 million
•Adjusted EBITDA* of $74.7 million, an increase of $2.1 million
* Restaurant-Level Adjusted EBITDA and Adjusted EBITDA are non-GAAP measures. Definitions and reconciliations of Adjusted EBITDA to net income 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
During the third quarter of 2026, Kevin Kalicak joined the Company as Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer), effective September 7, 2026. Mr. Kalicak succeeded Pamela Smith, who served as the Company's Interim Chief Financial Officer from May 20, 2026 to September 7, 2026.
The Company completed its previously announced assessment of its brand strategy and market positioning. The Company's strategy is centered on three strategic priorities, underpinned by a commitment to financial discipline:
•Operational Excellence
•Integrated Marketing
•Disciplined Development
Together, these priorities are intended to strengthen the guest experience, improve operational and financial performance, and position the Company for sustainable, long-term growth.
In the third quarter of 2026, the Company implemented a reduction in force impacting approximately 17% of the Company's Restaurant Support Center. The Company recognized restructuring charges, including severance, paid time off payouts, bonus and other costs. In the quarter and three quarters ended September 27, 2026, the Company incurred $1.4 million in restructuring charges, included in general and administrative expenses.
In the quarter and three quarters ended September 27, 2026, total revenue grew 7.0% or $12.6 million and 5.4% or $29.3 million, respectively, primarily due to new restaurant openings in 2025 and 2026. Same-restaurant sales increased 1.4% during the quarter ended September 27, 2026, compared to a 0.8% decrease during the quarter ended September 28, 2025. Same-restaurant sales were flat during the three quarters ended September 27, 2026, compared to an increase of 0.5% during the three quarters ended September 28, 2025. Refer to "Selected Operating Data" section below for definition of Same-Restaurant Sales.
In the quarter and three quarters ended September 27, 2026, commodity inflation was 2.2% and 3.7%, respectively, compared to 6.3% and 3.9% for the quarter and three quarters ended September 28, 2025. Labor, as a percentage of revenue, net, decreased 0.6% and 0.1% during the quarter and three quarters ended September 27, 2026, respectively, compared to the quarter and three quarters ended September 28, 2025. The decrease in labor as a percentage of revenue for the quarter and three quarters ended September 27, 2026 was primarily driven by labor efficiencies and an increase in our average check.
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Development Highlights
During the three quarters ended September 27, 2026, we opened seven new restaurants for a total of 109 restaurants, including a restaurant owned by C&O, of which Portillo's owns 50% of the equity. We plan to open one additional restaurant in the fourth quarter of 2026, which will be our second in-line location and will be located in Chicago, Illinois.
Below are the restaurants opened thus far in fiscal 2026:
Location
Opening Month
Fiscal Quarter Opened
Fort Worth, Texas
January 2026
Q1 2026
Humble, Texas
February 2026
Q1 2026
Dallas, Texas
March 2026
Q1 2026
El Paso, Texas
March 2026
Q1 2026
Frisco, Texas
April 2026
Q2 2026
Schertz, Texas May 2026 Q2 2026
Dallas-Fort Worth International Airport May 2026 Q2 2026
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Consolidated Results of Operations
The following table summarizes our results of operations for the quarter and three quarters ended September 27, 2026 and September 28, 2025 (in thousands):
Quarter Ended Three Quarters Ended
September 27, 2026 September 28, 2025 September 27, 2026 September 28, 2025
REVENUES, NET $ 194,074 100.0 % $ 181,428 100.0 % $ 575,651 100.0 % $ 546,321 100.0 %
COST AND EXPENSES:
Restaurant operating expenses:
Food, beverage and packaging costs 66,831 34.4 % 62,619 34.5 % 199,696 34.7 % 187,471 34.3 %
Labor 50,447 26.0 % 48,263 26.6 % 150,736 26.2 % 143,471 26.3 %
Occupancy 11,670 6.0 % 10,524 5.8 % 34,546 6.0 % 30,511 5.6 %
Other operating expenses 25,039 12.9 % 23,331 12.9 % 72,495 12.6 % 67,040 12.3 %
Total restaurant operating expenses 153,987 79.3 % 144,737 79.8 % 457,473 79.5 % 428,493 78.4 %
General and administrative expenses 19,754 10.2 % 20,025 11.0 % 59,676 10.4 % 57,726 10.6 %
Pre-opening expenses 614 0.3 % 3,260 1.8 % 4,102 0.7 % 5,465 1.0 %
Depreciation and amortization 8,338 4.3 % 7,312 4.0 % 24,528 4.3 % 21,489 3.9 %
Net income attributable to equity method investment (393) (0.2) % (452) (0.2) % (1,003) (0.2) % (998) (0.2) %
Other (income) loss, net (5) - % 1,112 0.6 % 828 0.1 % 800 0.1 %
OPERATING INCOME 11,779 6.1 % 5,434 3.0 % 30,047 5.2 % 33,346 6.1 %
Interest expense 5,512 2.8 % 5,664 3.1 % 16,811 2.9 % 17,139 3.1 %
Interest income
(77) - % (118) (0.1) % (187) - % (268) - %
Tax Receivable Agreement liability adjustment (209) (0.1) % 353 0.2 % (1,381) (0.2) % (2,132) (0.4) %
INCOME (LOSS) BEFORE INCOME TAXES 6,553 3.4 % (465) (0.3) % 14,804 2.6 % 18,607 3.4 %
Income tax expense (benefit) 1,797 0.9 % (1,247) (0.7) % 3,402 0.6 % 3,792 0.7 %
NET INCOME 4,756 2.5 % 782 0.4 % 11,402 2.0 % 14,815 2.7 %
Net income (loss) attributable to non-controlling interests 251 0.1 % (432) (0.2) % 355 0.1 % 1,584 0.3 %
NET INCOME ATTRIBUTABLE TO PORTILLO'S INC. $ 4,505 2.3 % $ 1,214 0.7 % $ 11,047 1.9 % $ 13,231 2.4 %
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 27, 2026 were $194.1 million compared to $181.4 million for the quarter ended September 28, 2025, an increase of $12.6 million or 7.0%. The increase in revenues was primarily attributed to the opening of eight restaurants in fiscal 2025 and seven restaurants during the three quarters ended September 27, 2026 and an increase in our same-restaurant sales. Restaurants not in our Comparable Restaurant Base (as defined in "Selected Operating Data" below) contributed $10.3 million of the total year-over-year increase. Same-restaurant sales increased 1.4%, or $2.4 million in the quarter. The same-restaurant sales increase was attributable to an increase in average check of 2.1%, partially offset by a decrease in transactions of 0.7%. The higher average check was driven by an approximate 2.1% increase in certain menu prices. For the purpose of calculating same-restaurant sales for the quarter ended September 27, 2026, sales for 87 restaurants that were open for at least 24 full fiscal periods were included in the Comparable Restaurant Base.
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The following table summarizes the Company's revenue for the quarter ended September 27, 2026 and September 28, 2025 (in thousands):
Quarter Ended
September 27, 2026 September 28, 2025 $ Change % Change
Same-restaurant sales (87 restaurants) (1)
$ 173,606 $ 171,188 $ 2,418 1.4 %
Restaurants not yet in comparable base opened in fiscal 2026 (7 restaurants) (1)
6,273 - 6,273 nm
Restaurants not yet in comparable base opened in fiscal 2025 (8 restaurants) (1)
7,660 2,445 5,215 213.3 %
Restaurants not yet in comparable base opened in fiscal 2024 (6 restaurants) (1)
5,196 6,364 (1,168) (18.4) %
Other (2)
1,339 1,431 (92) (6.4) %
Revenues, net $ 194,074 $ 181,428 $ 12,646 7.0 %
(1) Total restaurants indicated are as of September 27, 2026. Excludes a restaurant that is owned by C&O of which Portillo's owns 50% of the equity.
(2) Includes revenue from direct shipping sales and non-traditional locations.
*nm - not meaningful
Revenues for the three quarters ended September 27, 2026 were $575.7 million compared to $546.3 million for the three quarters ended September 28, 2025, an increase of $29.3 million or 5.4%. The increase in revenues was primarily attributed to the opening of eight restaurants in fiscal 2025 and seven restaurants during the three quarters ended September 27, 2026. Restaurants not in our Comparable Restaurant Base contributed $31.3 million of the total year-over-year increase. Same-restaurant sales were flat. Flat same-restaurant sales were attributable to a 1.1% increase in average check, offset by a decrease in transactions of 1.1%. The increase in average check was driven by an approximate 1.6% increase in certain menu prices, partially offset by a 0.5% decrease in product mix. To address inflationary cost pressures, we increased select menu prices by approximately 2.0% in April 2026. For the purpose of calculating same-restaurant sales for the three quarters ended September 27, 2026, sales for 87 restaurants that were open for at least 24 full fiscal periods were included in the Comparable Restaurant Base.
Three Quarters Ended
September 27, 2026 September 28, 2025 $ Change % Change
Same-restaurant sales (87 restaurants) (1)
$ 510,277 $ 510,211 $ 66 - %
Restaurants not yet in comparable base opened in fiscal 2026 (7 restaurants) (1)
14,221 - 14,221 nm
Restaurants not yet in comparable base opened in fiscal 2025 (8 restaurants) (1)
26,119 2,445 23,674 968.3 %
Restaurants not yet in comparable base opened in fiscal 2024 (6 restaurants) (1)
20,469 27,019 (6,550) (24.2) %
Other (2)
4,565 6,646 (2,081) (31.3) %
Revenues, net $ 575,651 $ 546,321 $ 29,330 5.4 %
(1) Total restaurants indicated are as of September 27, 2026. Excludes a restaurant that is owned by C&O of which Portillo's owns 50% of the equity.
(2) Includes revenue from direct shipping sales and non-traditional locations.
*nm - not meaningful
Food, Beverage and Packaging Costs
Food, beverage and packaging costs include the direct costs associated with food, beverage and packaging of our menu items 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 and channel mix and are subject to increases or decreases in commodity costs, as well as geographic scale and proximity.
Food, beverage and packaging costs for the quarter ended September 27, 2026 were $66.8 million compared to $62.6 million for the quarter ended September 28, 2025, an increase of $4.2 million or 6.7%. This increase was primarily driven by a 2.2% increase in commodity prices and the opening of eight restaurants in fiscal 2025 and seven restaurants during the three quarters ended September 27, 2026. As a percentage of revenues, net, food, beverage and packaging costs decreased 0.1% during the quarter ended September 27, 2026. The decrease was primarily due to an increase in average check, partially offset by an increase in certain commodity prices.
Food, beverage and packaging costs for the three quarters ended September 27, 2026 were $199.7 million compared to $187.5 million for the three quarters ended September 28, 2025, an increase of $12.2 million or 6.5%. This increase was primarily driven by a 3.7% increase in
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commodity prices and the opening of eight restaurants in fiscal 2025 and seven restaurants during the three quarters ended September 27, 2026. As a percentage of revenues, net, food, beverage and packaging costs increased 0.4% during the three quarters ended September 27, 2026. The increase was primarily due to an increase in certain commodity prices, partially offset by an increase in average check.
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 and minimum wage legislation, health care costs and the staffing needs of our restaurants.
Labor expenses for the quarter ended September 27, 2026 were $50.4 million compared to $48.3 million for the quarter ended September 28, 2025, an increase of $2.2 million or 4.5%. This increase was primarily driven by the opening of eight restaurants in fiscal 2025 and seven restaurants during the three quarters ended September 27, 2026. As a percentage of revenues, net, labor decreased 0.6% during the quarter ended September 27, 2026. The decrease was primarily due to labor efficiencies and an increase in our average check, partially offset by higher benefit costs, lower transactions, and revenue deleverage from new restaurants.
Labor expenses for the three quarters ended September 27, 2026 were $150.7 million compared to $143.5 million for the three quarters ended September 28, 2025, an increase of $7.3 million or 5.1%. This increase was primarily driven by the opening of eight restaurants in fiscal 2025 and seven restaurants during the three quarters ended September 27, 2026, and higher benefit costs. As a percentage of revenues, net, labor decreased 0.1% during the three quarters ended September 27, 2026. The decrease was primarily driven by labor efficiencies and an increase in our average check, partially offset by lower transactions, revenue deleverage from new restaurants, and higher benefit costs.
Occupancy Expenses
Occupancy expenses primarily consist of rent, property insurance and property taxes, and exclude occupancy expenses associated with unopened restaurants, which are recorded separately in pre-opening expenses.
Occupancy expenses for the quarter ended September 27, 2026 were $11.7 million compared to $10.5 million for the quarter ended September 28, 2025, an increase of $1.1 million or 10.9%, primarily driven by the opening of eight restaurants in fiscal 2025 and seven restaurants during the three quarters ended September 27, 2026. As a percentage of revenues, net, occupancy expenses increased 0.2% primarily driven by revenue deleverage at new restaurants.
Occupancy expenses for the three quarters ended September 27, 2026 were $34.5 million compared to $30.5 million for the three quarters ended September 28, 2025, an increase of $4.0 million or 13.2%, primarily driven by the opening of eight restaurants in fiscal 2025 and seven restaurants during the three quarters ended September 27, 2026. As a percentage of revenues, net, occupancy expenses increased 0.4% primarily driven by higher lease expense and revenue deleverage at new restaurants.
Other Operating Expenses
Other operating expenses consist of direct marketing expenses, utilities and other expenses incidental to operating our restaurants, such as credit card fees and repairs and maintenance.
Other operating expenses for the quarter ended September 27, 2026 were $25.0 million compared to $23.3 million for the quarter ended September 28, 2025, an increase of $1.7 million or 7.3%, primarily due to the opening of eight restaurants in fiscal 2025 and seven restaurants during the three quarters ended September 27, 2026 as well as higher utilities and insurance expenses, partially offset by lower cleaning and advertising expenses. As a percentage of revenues, net, other operating expenses remained flat.
Other operating expenses for the three quarters ended September 27, 2026 were $72.5 million compared to $67.0 million for the three quarters ended September 28, 2025, an increase of $5.5 million or 8.1%, primarily due to the opening of eight restaurants in fiscal 2025 and seven restaurants during the three quarters ended September 27, 2026 as well as higher insurance and building repair and maintenance expenses, partially offset by lower cleaning expenses. As a percentage of revenues, net, other operating expenses increased 0.3% due primarily to the aforementioned increases in expenses.
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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 27, 2026 were $19.8 million compared to $20.0 million for the quarter ended September 28, 2025, a decrease of $0.3 million or 1.4%. This decrease was primarily attributable to $3.3 million of lower dead site costs resulting from our 2025 strategic reset. This was partially offset by $1.4 million of restructuring charges related to a workforce reduction at the Restaurant Support Center and by the absence of a $1.1 million net benefit recognized in the prior year in connection with the Chief Executive Officer transition. The prior year benefit was driven by the forfeiture of equity awards, partially offset by severance and other transition-related expenses.
General and administrative expenses for the three quarters ended September 27, 2026 were $59.7 million compared to $57.7 million for the three quarters ended September 28, 2025, an increase of $2.0 million or 3.4%. This increase was primarily driven by higher equity-based and variable compensation, increased professional fees related to the assessment of the Company's brand strategy, market positioning, and spend optimization initiatives, $1.4 million of restructuring charges related to a workforce reduction at the Restaurant Support Center, and the absence of a $1.1 million net benefit recognized in the prior year in connection with the Chief Executive Officer transition. The prior year benefit was driven by the forfeiture of equity awards, partially offset by severance and other transition-related expenses. These increases were partially offset by $2.3 million of lower dead site costs compared to the prior year due to the 2025 strategic reset.
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 and the restaurant opening date, travel for the opening team and other supporting team members, food, beverage, the initial stocking of operating supplies and legal fees. 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 27, 2026 were $0.6 million compared to $3.3 million for the quarter ended September 28, 2025, a decrease of $2.6 million or 81.2%. The decrease was due to the number and timing of activities related to our planned restaurant openings for the quarter ended September 27, 2026 as compared to the quarter ended September 28, 2025.
Pre-opening expenses for the three quarters ended September 27, 2026 were $4.1 million compared to $5.5 million for the three quarters ended September 28, 2025, a decrease of $1.4 million or 24.9%. This decrease was due to the number and timing of planned restaurant openings, for the three quarters ended September 27, 2026 as compared to the three quarters ended September 28, 2025.
Depreciation and Amortization
Depreciation and amortization expenses consist of the depreciation of fixed assets, including land improvements, buildings and improvements, fixtures and equipment, leasehold improvements, and the amortization of definite-lived intangible assets, which are primarily comprised of recipes.
Depreciation and amortization expense for the quarter ended September 27, 2026 was $8.3 million compared to $7.3 million for the quarter ended September 28, 2025, an increase of $1.0 million or 14.0%. This increase was primarily attributable to incremental depreciation of capital expenditures related to the opening of eight restaurants in fiscal 2025 and seven restaurants during the three quarters ended September 27, 2026, partially offset by a reduction in depreciation expense due to fully depreciated assets and disposals.
Depreciation and amortization expense for the three quarters ended September 27, 2026 was $24.5 million compared to $21.5 million for the three quarters ended September 28, 2025, an increase of $3.0 million or 14.1%. This increase was primarily attributable to incremental depreciation of capital expenditures related to the opening of eight restaurants in fiscal 2025 and seven restaurants during the three quarters ended September 27, 2026, partially offset by a reduction in depreciation expense due to fully depreciated assets and disposals.
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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 for the quarter ended September 27, 2026 was $0.4 million compared to $0.5 million for the quarter ended September 28, 2025, a decrease of $0.1 million or 13.1%. This decrease was primarily driven by a decrease in sales.
Net income attributable to equity method investment for both the three quarters ended September 27, 2026 and three quarters ended September 28, 2025 was $1.0 million.
Other (Income) Loss, Net
Other (income) loss, net, includes among other items, certain legal contingencies, management fee income associated with our investment in C&O, trading gains or losses on our deferred compensation plan, gains or losses on asset disposals, and income resulting from discounts received for timely filing of sales tax returns.
Other (income) loss, net for the quarter ended September 27, 2026 was nominal compared to a loss of $1.1 million for the quarter ended September 28, 2025. The prior year loss primarily reflected a trade name impairment charge, partially offset by a settlement received from a service provider.
Other loss, net for both the three quarters ended September 27, 2026 and the three quarters ended September 28, 2025 was a loss of $0.8 million.
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 27, 2026 was $5.5 million compared to $5.7 million for the quarter ended September 28, 2025, a decrease of $0.2 million or 2.7%. This decrease was primarily driven by a lower effective interest rate.
Interest expense for the three quarters ended September 27, 2026 was $16.8 million compared to $17.1 million for the three quarters ended September 28, 2025, a decrease of $0.3 million or 1.9%. This decrease was primarily driven by a lower effective interest rate.
Our effective interest rate was 6.53% as of September 27, 2026 and 6.90% as of September 28, 2025.
Interest Income
Interest income primarily consists of interest earned on our cash, cash equivalents and restricted cash.
Interest income for both the quarters ended September 27, 2026 and September 28, 2025 was $0.1 million.
Interest income for the three quarters ended September 27, 2026 was $0.2 million compared to $0.3 million for the three quarters ended September 28, 2025, a decrease of $0.1 million or 30.2%.
Tax Receivable Agreement Liability Adjustment
We are party to a Tax Receivable Agreement 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.
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The Tax Receivable Agreement liability adjustment for the quarter ended September 27, 2026 was a benefit of $0.2 million compared to an expense of $0.4 million for the quarter ended September 28, 2025. The change was related to a remeasurement primarily due to activity under equity-based compensation plans and prior year impacts from Public Law 119-21, popularly known as the "One Big Beautiful Bill Act".
The Tax Receivable Agreement liability adjustment was $1.4 million for the three quarters ended September 27, 2026 and $2.1 million for the three quarters ended September 28, 2025 related to a remeasurement primarily due to activity under equity-based compensation plans.
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 27, 2026 was $1.8 million compared to income tax benefit of $1.2 million for the quarter ended September 28, 2025, an increase of $3.0 million or 244.1%. Our effective income tax rate for the quarter ended September 27, 2026 was 27.4%, compared to 268.2% for the quarter ended September 28, 2025. The decrease in our effective income tax rate for the quarter ended September 27, 2026 compared to the quarter ended September 28, 2025 was primarily driven by prior year valuation allowance movement related to the separation of our former Chief Executive Officer. This decrease is 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 27, 2026 was $3.4 million compared to income tax expense of $3.8 million for the three quarters ended September 28, 2025, a decrease of $0.4 million or 10.3%. Our effective income tax rate for the three quarters ended September 27, 2026 was 23.0%, compared to 20.4% for the three quarters ended September 28, 2025. The increase in our effective income tax rate for the three quarters ended September 27, 2026 compared to the three quarters ended September 28, 2025 was primarily driven 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").
We also consolidate AP Dogs, LLC, which operates our restaurant at Dallas-Fort Worth International Airport, and recognize a non-controlling interest representing the ownership interest held by our joint venture partner. The weighted average ownership percentages for the applicable reporting periods are used to attribute net income to Portillo's Inc. and the non-controlling interest holders.
Net income attributable to non-controlling interests for the quarter ended September 27, 2026 was $0.3 million, compared to net loss attributable to non-controlling interests of $0.4 million for the quarter ended September 28, 2025, an increase of $0.7 million or 158.1%. The increase in net income attributable to non-controlling interests for the quarter ended September 27, 2026 was primarily due to an increase in net income for the quarter ended September 27, 2026, partially offset by the decrease in the pre-IPO LLC Members non-controlling interest holders' weighted average ownership to 4.5% for the quarter ended September 27, 2026 from 4.6% for the quarter ended September 28, 2025.
Net income attributable to non-controlling interests for the three quarters ended September 27, 2026 was $0.4 million, compared to net income attributable to non-controlling interest of $1.6 million for the three quarters ended September 28, 2025, a decrease of $1.2 million or 77.6%. The decrease in net income attributable to non-controlling interests for the three quarters ended September 27, 2026 was primarily due to a decrease in the pre-IPO LLC Members non-controlling interest holders' weighted average ownership to 4.5% for the three quarters ended September 27, 2026 from 9.6% for the three quarters ended September 28, 2025 and a decrease in net income for the three quarters ended September 27, 2026.
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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 Ended Three Quarters Ended
September 27, 2026 September 28, 2025 September 27, 2026 September 28, 2025
Total Restaurants (a) 109 98 109 98
AUV (in millions) (a) N/A N/A $ 8.2 $ 8.6
Change in same-restaurant sales (b)
1.4 % (0.8) % - % 0.5 %
Adjusted EBITDA (in thousands) (b) $ 26,457 $ 21,387 $ 74,728 $ 72,662
Adjusted EBITDA Margin (b) 13.6 % 11.8 % 13.0 % 13.3 %
Restaurant-Level Adjusted EBITDA (in thousands) (b) $ 40,087 $ 36,691 $ 118,178 $ 117,828
Restaurant-Level Adjusted EBITDA Margin (b) 20.7 % 20.2 % 20.5 % 21.6 %
(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 27, 2026 and September 28, 2025 represent AUVs for the twelve months ended September 27, 2026 and September 28, 2025, respectively. Total restaurants indicated are as of September 27, 2026 and September 28, 2025, respectively.
(b) Excludes C&O.
Change in Same-Restaurant Sales
The change in same-restaurant sales is the percentage change in year-over-year revenue 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"). As of September 27, 2026 and September 28, 2025, there were 87 and 76 restaurants in our Comparable Restaurant Base, respectively. The Comparable Restaurant Base excludes C&O.
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, 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 and Perks 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.
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
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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.
The following table reconciles net income to Adjusted EBITDA and Adjusted EBITDA margin (in thousands):
Quarter Ended Three Quarters Ended
September 27, 2026 September 28, 2025 September 27, 2026 September 28, 2025
Net income $ 4,756 $ 782 $ 11,402 $ 14,815
Net income margin 2.5 % 0.4 % 2.0 % 2.7 %
Depreciation and amortization 8,338 7,312 24,528 21,489
Interest expense 5,512 5,664 16,811 17,139
Interest income (77) (118) (187) (268)
Income tax expense (benefit) 1,797 (1,247) 3,402 3,792
EBITDA $ 20,326 $ 12,393 $ 55,956 $ 56,967
Deferred rent (1) 1,557 1,952 4,788 4,870
Equity-based compensation 2,271 (320) 8,105 4,288
Cloud-based software implementation costs (2) - - - 267
Amortization of cloud-based software implementation costs (3) 280 292 837 806
Other loss (4) 216 2,305 425 2,448
Transaction-related fees and expenses (5) - 6 - 742
Legal contingency (6) - - 1,700 -
Strategic realignment costs (7) 38 4,406 1,654 4,406
Consulting fees (8) 597 - 1,263 -
Restructuring costs (9) 1,381 - 1,381 -
Tax Receivable Agreement liability adjustment (10) (209) 353 (1,381) (2,132)
Adjusted EBITDA $ 26,457 $ 21,387 $ 74,728 $ 72,662
Adjusted EBITDA Margin (11) 13.6 % 11.8 % 13.0 % 13.3 %
(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 a new Human Capital Management (" HCM") system which are included within general and administrative expenses.
(3) Represents amortization of capitalized cloud-based Enterprise Resource Planning and HCM system implementation costs that are included within general
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and administrative expenses.
(4) Represents loss on disposal of property and equipment included within other (income) loss, net. The prior-year periods also include a legacy Barnelli's trade name impairment charge, included within other (income) loss, 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 a legal contingency recorded in connection with the Maverick arbitration as discussed in Note 13. Contingencies, included within other (income) loss, net.
(7) Represents costs related to the Company's strategic reset of its development and growth plans and CEO transition and replacement costs. These costs are included within general and administrative expenses.
(8) Represents fees incurred for discrete, project-based strategic initiatives that are not part of the Company's ongoing operations and are included within general and administrative expense. These costs consist primarily of third-party consulting fees related to a brand study and a spend optimization study. Given the magnitude and scope of these initiatives and that they are not expected to recur in the foreseeable future, the Company considers the associated consulting fees not reflective of the ongoing costs to operate its business.
(9) Represents restructuring charges associated with the Company's reduction in force, including severance, paid time off payouts, bonus and other costs, which are included within general and administrative expenses.
(10) Represents remeasurement of the Tax Receivable Agreement liability.
(11) 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.
The following table reconciles operating income to Restaurant-Level Adjusted EBITDA and Restaurant-Level Adjusted EBITDA Margin (in thousands):
Quarter Ended Three Quarters Ended
September 27, 2026 September 28, 2025 September 27, 2026 September 28, 2025
Operating income $ 11,779 $ 5,434 $ 30,047 $ 33,346
Operating income margin 6.1 % 3.0 % 5.2 % 6.1 %
Plus:
General and administrative expenses 19,754 20,025 59,676 57,726
Pre-opening expenses 614 3,260 4,102 5,465
Depreciation and amortization 8,338 7,312 24,528 21,489
Net income attributable to equity method investment (393) (452) (1,003) (998)
Other (income) loss, net (5) 1,112 828 800
Restaurant-Level Adjusted EBITDA $ 40,087 $ 36,691 $ 118,178 $ 117,828
Restaurant-Level Adjusted EBITDA Margin (1) 20.7 % 20.2 % 20.5 % 21.6 %
(1) Restaurant-Level Adjusted EBITDA Margin is defined as Restaurant-Level Adjusted EBITDA divided by Revenues, net.
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Liquidity and Capital Resources
Our primary sources of liquidity are cash from operations, cash and cash equivalents on hand, and availability under our 2025 Revolver Facility. As of September 27, 2026, we maintained a cash and cash equivalents and restricted cash balance of $24.8 million and had $60.8 million of availability under our 2025 Revolver Facility, after giving effect to $4.2 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 27, 2026, we estimate that our obligation for future payments under the TRA totaled $343.2 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 $403.8 million as of September 27, 2026. Under this scenario, we would be required to pay the TRA Parties approximately 85% of such amount, or $343.2 million, primarily over the next 15 years, substantially declining in year 16 through year 47. In the three quarters ended September 27, 2026 and September 28, 2025, we made TRA payments of $7.9 million relating to tax year 2024 and $7.7 million relating to tax year 2023, respectively. We expect a payment of $2.3 million relating to tax year 2025 to be paid within the next 12 months.
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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 27, 2026 September 28, 2025
Net cash provided by operating activities $ 61,823 $ 48,741
Net cash used in investing activities (39,902) (58,079)
Net cash (used in) provided by financing activities (17,037) 3,696
Net increase (decrease) in cash and cash equivalents and restricted cash
4,884 (5,642)
Cash and cash equivalents and restricted cash at beginning of period 19,963 22,876
Cash and cash equivalents and restricted cash at end of period $ 24,847 $ 17,234
Operating Activities
Net cash provided by operating activities for the three quarters ended September 27, 2026 was $61.8 million compared to net cash provided by operating activities of $48.7 million for the three quarters ended September 28, 2025, an increase of $13.1 million or 26.8%. This increase was primarily driven by the change in operating assets and liabilities of $11.4 million and the change in non-cash items of $5.1 million, partially offset by a decrease in net income of $3.4 million.
The $11.4 million change in our operating assets and liabilities balances was primarily driven by operating assets and liabilities being a source of net cash of $15.5 million in the three quarters ended September 27, 2026, compared to a source of net cash of $4.2 million in the three quarters ended September 28, 2025 driven by the change in deferred lease incentives, accounts payable, and accrued expenses and other liabilities in the three quarters ended September 27, 2026. The $5.1 million change in the three quarters ended September 27, 2026 in non-cash charges is primarily driven by higher equity-based compensation expense and an increase in depreciation and amortization expense, partially offset by asset impairment charges in the prior year. The change in net income for the three quarters ended September 27, 2026 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 27, 2026 compared to the three quarters ended September 28, 2025.
Investing Activities
Net cash used in investing activities was $39.9 million for the three quarters ended September 27, 2026 compared to $58.1 million for the three quarters ended September 28, 2025, a decrease of $18.2 million or 31.3%. This decrease was primarily due to the number, format and timing of restaurant builds in process.
Financing Activities
Net cash used in financing activities was $17.0 million for the three quarters ended September 27, 2026 compared to net cash provided by financing activities of $3.7 million for the three quarters ended September 28, 2025, a decrease of $20.7 million. This decrease was primarily driven by repayments of borrowings under the 2025 Credit Agreement and reduced proceeds from equity-based compensation plan activity. These decreases were partially offset by the absence of deferred financing costs incurred in connection with the 2025 Credit Agreement, lower distributions to non-controlling interest holders, and higher contributions from non-controlling interest holders.
2025 Revolver Facility and Liens
On January 27, 2025, PHD Intermediate LLC, Portillo's Holdings LLC, the other Guarantors party thereto, the Lenders from time to time party thereto and Fifth Third Bank, National Association, as Administrative Agent, the L/C Issuer and the Swing Line Lender entered into an amendment (the "Amendment") to the 2023 Credit Agreement (as amended by the Amendment and as may be amended, restated, supplemented or otherwise modified from time to time thereafter, the "2025 Credit Agreement").
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The Amendment provides for, among other things, (i) a $250 million term loan A facility (the "2025 Term Loan Facility") and (ii) revolving credit commitments in an initial aggregate principal amount of $150 million (the "2025 Revolver Facility" and, together with the Term Loan Facility, the "2025 Facilities"), the proceeds of which will be used to refinance indebtedness under the 2023 Credit Agreement, for general corporate purposes and working capital needs and for other activities permitted under the 2025 Credit Agreement. The loans under each of the 2025 Facilities mature on January 27, 2030.
As of September 27, 2026, we had $85.0 million of borrowings under the 2025 Revolver Facility, and letters of credit issued under the 2025 Revolver Facility totaled $4.2 million. As a result, as of September 27, 2026, the Company had $60.8 million available under the 2025 Revolver Facility.
The 2025 Credit Agreement contains customary representations and warranties, events of default, reporting and other affirmative covenants and negative covenants, including limitations on indebtedness, liens, investments, negative pledges, dividends, junior financings and other fundamental changes. As of September 27, 2026, the Company was in compliance with financial covenants in the 2025 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 28, 2025, other than those payments made in the ordinary course of business.
Refer to Note 8. Debt for further information on or about our obligations and the timing of expected payments.
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 28, 2025.
Refer to Note 2. Summary Of Significant Accounting Policies for the Company's assessment of all other recently issued accounting pronouncements.
Portillo's Inc. published this content on November 05, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on November 05, 2026 at 13:10 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]