Portillo's Inc. (PTLO)

Item 2. 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 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 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 iconic Chicago street food in high-energy, multichannel restaurants designed to ignite the senses and create memorable dining experiences. Since our founding in 1963 in a small trailer that 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, fresh 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 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 with a layout that accommodates a variety of access modes including dine-in, carryout, delivery and catering to quickly and efficiently serve our guests. We believe the combination of our craveable food, multichannel sales model, dedication to operational excellence, and distinctive team member-driven culture gives us a competitive advantage.

As of June 28, 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 June 28, 2026 vs. Quarter Ended June 29, 2025:

•Total revenue of $199.0 million, an increase of 5.6% or $10.5 million

•Same-restaurant sales decrease of 1.2%

•Operating income of $13.8 million, a decrease of $3.8 million

•Net income of $7.2 million, a decrease of $2.9 million

•Restaurant-Level Adjusted EBITDA* of $43.2 million, a decrease of $1.2 million

•Adjusted EBITDA* of $29.8 million, a decrease of $0.2 million

Financial Highlights for the Two Quarters Ended June 28, 2026 vs. Two Quarters Ended June 29, 2025:

•Total revenue of $381.6 million, an increase of 4.6% or $16.7 million

•Same-restaurant sales decrease of 0.7%

•Operating income of $18.3 million, a decrease of $9.6 million

•Net income of $6.6 million, a decrease of $7.4 million

•Restaurant-Level Adjusted EBITDA* of $78.1 million, a decrease of $3.0 million

•Adjusted EBITDA* of $48.3 million, a decrease of $3.0 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 second quarter of 2026, Michelle Hook departed from her role as Chief Financial Officer, effective May 5, 2026. The Board of Directors engaged a leading executive search firm to assist in the identification and recruitment of a permanent Chief Financial Officer. The Company appointed Pamela Smith to serve as Interim Chief Financial Officer, effective May 20, 2026. On August 4, 2026, the Company announced that Kevin Kalicak, 53, who most recently served as an Officer of Darden Restaurants and Senior Vice President of Finance for Olive Garden, will join the Company and serve as the Company’s Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer), effective September 7, 2026.

From a development perspective, the Company opened its first airport location in Dallas-Fort Worth International Airport (DFW) during the quarter, utilizing a smaller-format kitchen and equipment enhancements. The Company also announced plans to expand within its home market of Chicago, including the opening of its first in-line restaurant in downtown Chicago later in 2026 and its first Wrigleyville location in 2027.

In addition, the Company commenced a project-based spend optimization initiative. Also, our previously announced assessment of our brand strategy and market positioning remains ongoing. The Company expects the results of these initiatives to help inform future operational and investment decisions. Subsequent to the quarter-end, the Company implemented a reduction in force affecting employees at its corporate headquarters and a limited number of field management roles. See "Restructuring Plan" in Part II Item 5. Other Information.

In the quarter and two quarters ended June 28, 2026, total revenue grew 5.6% or $10.5 million and 4.6% or $16.7 million, respectively, primarily due to new restaurant openings in 2025 and 2026, partially offset by a decline in same-restaurant sales. Same-restaurant sales declined 1.2% during the quarter ended June 28, 2026, compared to a 0.7% increase during the quarter ended June 29, 2025. Same-restaurant sales declined 0.7% during the two quarters ended June 28, 2026, compared to a 1.2% increase during the two quarters ended June 29, 2025. Refer to "Selected Operating Data" section below for definition of Same-Restaurant Sales.

In the quarter and two quarters ended June 28, 2026, commodity inflation was 7.0% and 4.5%, respectively, compared to 1.9% and 2.6% for the quarter and two quarters ended June 29, 2025. Labor, as a percentage of revenue, net, remained flat and increased 0.2% during the quarter and two quarters ended June 28, 2026, respectively, compared to the quarter and two quarters ended June 29, 2025. The increase in labor as a percentage of revenue for the two quarters ended June 28, 2026 was primarily driven by revenue deleverage from new restaurants and incremental wage rate increases, partially offset by labor efficiencies.

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Development Highlights

During the quarter ended June 28, 2026, we opened three 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:

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Table of Contents

Consolidated Results of Operations

The following table summarizes our results of operations for the quarter and two quarters ended June 28, 2026 and June 29, 2025 (in thousands):

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ITEM 7.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This section and other parts of this Annual Report on Form 10-K (“Form 10-K”) contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995 ("PSLRA"), which are subject to known and unknown risks, uncertainties and other important factors that may cause actual results to be materially different from the statements made herein. All statements other than statements of historical fact are forward-looking statements. Forward-looking statements discuss our current expectations and projections relating to our financial position, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as "aim," "anticipate," "believe," "estimate," "expect," "forecast," "future," "intend," "outlook," "potential," "project," "projection," "plan," "seek," "may," "could," "would," "will," "should," "can," "can have," "likely," the negatives thereof and other similar expressions.

All forward-looking statements are expressly qualified in their entirety by these cautionary statements. You should evaluate all forward-looking statements made in this Form 10-K in the context of the risks and uncertainties disclosed in Part I, Item 1A "Risk Factors" and in this Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations."

The forward-looking statements included in this Form 10-K are made only as of the date hereof. We undertake no obligation to publicly update any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law. If we do update one or more forward-looking statements, no inference should be made that we will make additional updates with respect to those or other forward-looking statements.

For a comparison of results of operations and financial condition for fiscal years 2024 and 2023, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Form 10-K for the fiscal year ended December 29, 2024, filed February 25, 2025.

We use a 52- or 53-week fiscal year ending on the Sunday on or prior to December 31. In a 52-week fiscal year, each quarterly period is comprised of 13 weeks. The additional week (the "53rd week") in a 53-week fiscal year is added to the fourth quarter. The fiscal years ended December 28, 2025 ("fiscal 2025") and December 29, 2024 ("fiscal 2024") both consisted of 52 weeks.

Overview

Portillo’s serves iconic Chicago street food through high-energy, multichannel restaurants designed to ignite the senses and create a memorable dining experience. Refer to Part I, Item 1, "Business" of this document for additional information about our business.

Recent Developments and Trends

Financial Highlights for Fiscal 2025 vs. Fiscal 2024:

•Total revenue increased 3.0% or $21.5 million to $732.1 million

•Same-restaurant sales decreased -0.5%

•Operating income decreased $14.4 million to $43.7 million

•Net income decreased $14.0 million to $21.1 million

•Restaurant-Level Adjusted EBITDA* decreased $9.7 million to $158.4 million

•Adjusted EBITDA* decreased $7.4 million to $97.3 million

* 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".

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In fiscal 2025, we continued to make progress against our long-term strategic priorities while managing significant operational and leadership transitions. As further discussed in Part I, Item 1. Business, we launched our loyalty program, Portillo’s Perks™ ("Perks"), and opened eight new restaurants, including our first location in Georgia and our first in-line restaurant.

In September 2025, the Company announced a strategic reset to its development strategy, following disappointing results from new market expansion, particularly in Texas. Going forward, we plan to enter new markets more gradually, tapping into the pent up demand from Portillo's fans across the country, but recognizing that it takes time to build awareness and adoption among consumers who are not yet familiar with the brand. Instead of rapidly building out markets, as we did in Dallas-Ft. Worth and Houston, we will take a more measured approach with new restaurants separated by more time and distance. We have implemented this roadmap to our entry into the Atlanta, Georgia market. The first Portillo's opened in Kennesaw, Georgia in November of 2025 and the next restaurant will not open until 2027.

We also continue to refine our prototype to improve the unit economics while also maximizing the guest and team member experience. In 2025, with the exception of one in-line restaurant and one Portillo's pickup restaurant, all new restaurant openings were our Restaurant of the Future ("RoTF 1.0") design, a 6,250 square foot restaurant. All of the free standing restaurants scheduled to open in 2026 will follow that prototype. In 2027, we plan to debut our Restaurant of the Future 2.0 design.

In fiscal 2025, total revenue grew 3.0%, primarily due to new restaurant openings in 2025 and 2024. Same-restaurant sales declined 0.5% during fiscal 2025, compared to a decline of 0.6% during fiscal 2024.

Commodity inflation was 3.9% in fiscal 2025 compared to 4.2% in fiscal 2024. In fiscal 2025, we experienced an increase of 0.7% in labor expenses, as a percentage of revenue, compared to fiscal 2024 primarily due to lower transactions, incremental wage rate increases, deleverage from our newer restaurant openings, and higher benefit costs, partially offset by labor efficiencies and a higher average check.

In 2026, we will focus on executing strategies that strengthen transaction growth across our restaurants while optimizing returns on our new restaurants. We will leverage our Perks platform to drive trial and frequency, prioritize operational excellence, and invest in our team members. These priorities support our commitment to positive free cash flow and delivering long-term value.

Development Highlights

During fiscal 2025, we opened eight new restaurants in five markets, for a total of 102 restaurants, including a restaurant owned by C&O. With the exception of one in-line restaurant and one Portillo's pickup restaurant, all new restaurant openings in 2025 were our RoTF 1.0 design, which is a smaller square footage prototype featuring a shorter, more efficient production line designed to reduce costs and provide excellent service to our guests.

Below are the restaurants opened in fiscal 2025:

In fiscal 2026, we plan to open eight new restaurants. These openings will include our first airport location at Dallas–Fort Worth International Airport and our second in-line location. Subsequent to December 28, 2025, we opened two of the eight planned restaurants for fiscal 2026, bringing our total restaurant count to 104, as of the filing of this Form 10-K, including a restaurant owned by C&O of which Portillo’s owns 50% of the equity.

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Table of Contents

Consolidated Results of Operations

The following table summarizes our results of operations for fiscal 2025 and fiscal 2024 (in thousands).

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 fiscal 2025 were $732.1 million compared to $710.6 million for fiscal 2024, an increase of $21.5 million or 3.0%. The increase in total revenue was primarily attributed to the opening of eight restaurants during fiscal 2025 and ten restaurants in fiscal 2024. This increase in revenues was partially offset by a same-restaurant sales decrease of 0.5%, or $2.9 million. The same-restaurant sales decline was attributable to a 2.5% decrease in transactions, partially offset by an increase in average check of 2.0%. The higher average check was primarily driven by an approximate 3.2% increase in menu prices, partially offset by a 1.2% decrease in product mix. To mitigate inflationary cost pressures, we implemented targeted menu price adjustments in 2025, including a 1.5% increase in January 2025, a 1.0% increase in April 2025, and a 0.7% increase in June 2025. Restaurants not in our Comparable Restaurant Base contributed $27.4 million of the total year-over-year increase. For the purpose of calculating same-restaurant sales fo

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