pbpb-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

______________________________________________

FORM 10-Q

______________________________________________


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2024


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from ____to ____

Commission File Number: 001-36104

______________________________________________

Potbelly Corporation

(Exact name of registrant as specified in its charter)

______________________________________________


Delaware						36-4466837
(State or Other Jurisdiction of Incorporation)						(IRS Employer Identification Number)
111 N. Canal Street, Suite 325 Chicago, Illinois						60606
(Address of Principal Executive Offices)						(Zip Code)

Registrant’s Telephone Number, Including Area Code: (312) 951-0600

______________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value

PBPB

The NASDAQ Stock Market LLC

(Nasdaq Global Select Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

As of July 28, 2024, the registrant had 29,945,387 shares of common stock, $0.01 par value per share, outstanding.

Table of Contents

Potbelly Corporation and Subsidiaries

Table of Contents


		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets (Unaudited)	3
	Condensed Consolidated Statements of Operations (Unaudited)	4
	Condensed Consolidated Statements of Equity (Unaudited)	5
	Condensed Consolidated Statements of Cash Flows (Unaudited)	6
	Notes to Condensed Consolidated Financial Statements (Unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	33
PART II.	OTHER INFORMATION	34
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sale of Equity Securities and Use of Proceeds	34
Item 3.	Defaults Upon Senior Securities	34
Item 4.	Mine Safety Disclosures	34
Item 5.	Other Information	34
Item 6.	Exhibits	35
	Signature	36

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Potbelly Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

(amounts in thousands, except par value data, unaudited)


	June 30, 2024		December 31, 2023
Assets
Current assets
Cash and cash equivalents	$	8,322	$	33,788
Accounts receivable, net of allowances of $20 and $26 as of June 30, 2024 and December 31, 2023, respectively	8,973		7,960
Inventories	3,353		3,516
Prepaid expenses and other current assets	7,445		7,828
Total current assets	28,093		53,092

Property and equipment, net	46,730		45,087
Right-of-use assets for operating leases	137,199		144,390
Indefinite-lived intangible assets	3,404		3,404
Goodwill	2,053		2,056
Restricted cash	749		749
Deferred tax assets	30,976		—
Deferred expenses, net and other assets	5,406		3,681
Total assets	$	254,610	$	252,460

Liabilities and equity
Current liabilities
Accounts payable	$	9,216	$	9,927
Accrued expenses	30,149		35,377
Short-term operating lease liabilities	23,539		24,525
Current portion of long-term debt	—		1,250
Total current liabilities	62,904		71,078

Long-term debt, net of current portion	4,000		19,168
Long-term operating lease liabilities	133,222		142,050
Other long-term liabilities	6,782		6,070
Total liabilities	206,908		238,367

Commitments and contingencies (Note 12)

Equity
Common stock, $0.01 par value—authorized 200,000 shares; outstanding 29,944 and 29,364 shares as of June 30, 2024 and December 31, 2023, respectively	397		389
Warrants	1,745		2,219
Additional paid-in-capital	467,550		462,583
Treasury stock, held at cost, 10,354 and 10,077 shares as of June 30, 2024, and December 31, 2023, respectively	(119,538)		(116,701)
Accumulated deficit	(301,852)		(333,797)
Total stockholders’ equity	48,302		14,693
Non-controlling interest	(600)		(600)
Total equity	47,702		14,093

Total liabilities and equity	$	254,610	$	252,460

See accompanying notes to the unaudited condensed consolidated financial statements.

Table of Contents

Potbelly Corporation and Subsidiaries

Condensed Consolidated Statements of Operations

(amounts in thousands, except per share data, unaudited)


	For the Quarter Ended				For the Year to Date Ended
	June 30, 2024		June 25, 2023		June 30, 2024		June 25, 2023
Revenues
Sandwich shop sales, net	$	115,536	$	124,709	$	223,113	$	241,656
Franchise royalties, fees and rent income	4,161		1,914		7,737		3,237
Total revenues	119,697		126,623		230,850		244,893

Expenses
Sandwich shop operating expenses, excluding depreciation
Food, beverage and packaging costs	31,306		34,903		60,576		67,523
Labor and related expenses	32,313		37,866		64,566		74,368
Occupancy expenses	12,543		13,083		24,257		26,393
Other operating expenses	21,264		20,925		41,093		41,409
Franchise support, rent and marketing expenses	3,001		1,215		5,538		1,806
General and administrative expenses	11,866		11,695		23,413		21,664
Depreciation expense	3,016		2,887		6,027		5,857
Pre-opening costs	96		33		96		55
Loss on Franchise Growth Acceleration Initiative activities	28		14		161		963
Impairment, loss on disposal of property and equipment and shop closures	145		658		886		1,703
Total operating expenses	115,578		123,279		226,613		241,741
Income from operations	4,119		3,344		4,237		3,152

Interest expense, net	181		1,011		545		1,678
Loss on extinguishment of debt	—		—		2,376		239
Income before income taxes	3,938		2,333		1,316		1,235
Income tax expense (benefit)	(30,982)		(48)		(30,931)		57
Net income	34,920		2,381		32,247		1,178
Net income attributable to non-controlling interest	208		165		302		288
Net income attributable to Potbelly Corporation	$	34,712	$	2,216	$	31,945	$	890

Net income per common share attributable to common stockholders:
Basic	$	1.16	$	0.08	$	1.07	$	0.03
Diluted	$	1.13	$	0.07	$	1.04	$	0.03
Weighted average shares outstanding:
Basic	29,926		29,199		29,903		29,053
Diluted	30,714		30,088		30,842		29,776

See accompanying notes to the unaudited condensed consolidated financial statements.

Table of Contents

Potbelly Corporation and Subsidiaries

Condensed Consolidated Statements of Equity

(amounts and shares in thousands, unaudited)


	Common Stock			Treasury Stock		Warrants		Additional Paid-In- Capital		Accumulated Deficit		Non- Controlling Interest		Total Equity
	Shares	Amount
Balance at December 25, 2022	28,819	$	384	$	(115,388)	$	2,566	$	455,831	$	(338,916)	$	(204)	$	4,273
Net income (loss)	—	—		—		—		—		(1,327)		123		(1,204)
Shares issued under equity compensation plan	70	1		(337)		—		(1)		—		—		(337)
Proceeds from exercise of warrants	159	1		—		(313)		1,177		—		—		865
Distributions to non-controlling interest	—	—		—		—		—		—		(152)		(152)
Stock-based compensation expense	—	—		—		—		911		—		—		911
Balance at March 26, 2023	29,048	$	386	$	(115,725)	$	2,253	$	457,918	$	(340,243)	$	(233)	$	4,356
Net income	—	—		—		—		—		2,216		165		2,381
Shares issued under equity compensation plan	243	3		(772)		—		(2)		—		—		(771)
Proceeds from exercise of warrants

SEC Form 10-Q filed by Potbelly Corporation