Portillo's Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34 ) 37 Consolidated Balance Sheets 40 Consolidated Statements of Operations 41 Consolidated Statements of Stockholders' Equity 42 Consolidated Statements of Cash Flows 44 Notes to Consolidated Financial Statements 46 Note 1. Description Of Business 46 Note 2. Summary Of Significant Accounting Policies 46 Note 3. Revenue Recognition 54 Note 4. Inventories 54 Note 5. Property & Equipment, Net 55 Note 6. Goodwill & Intangible Assets 55 Note 7. Fair Value Of Financial Instruments 56 Note 8. Supplemental Balance Sheet Information 57 Note 9. Debt 58 Note 10. Leases 60 Note 11. Stockholders' Equity 61 Note 12. Non-Controlling Interests 62 Note 13. Equity-Based Compensation 63 Note 14. Income Taxes 68 Note 15. Earnings Per Share 70 Note 16. Contingencies 71 Note 17. Segment Information 72 Note 18. Related Party Transactions 72 Note 19. Subsequent Events 73 Portillo's Inc. Form 10-K | 36 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and the Board of Directors of Portillo’s Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Portillo's Inc. and subsidiaries (the "Company") as of December 28, 2025 and December 29, 2024, the related consolidated statements of operations, stockholders' equity, and cash flows, for each of the three years in the period ended December 28, 2025, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 28, 2025 and December 29, 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 28, 2025, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 28, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 24, 2026, expressed an unqualified opinion on the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Income Taxes – Tax Receivable Agreement—Refer to Note 2 and 14 to the financial statements Critical Audit Matter Description On October 20, 2021, the Company completed its initial public offering in a series of transaction steps, which resulted in the Company owning a majority of PHD Group Holdings, LLC. The Company is a C-corporation holding company owning a partnership interest in PHD Group Holdings, LLC, commonly referred to as an Up-C structure. In connection with the initial public offering, the Company entered into a Tax Receivable Agreement ("TRA") and recorded a liability under the TRA. Under the TRA, the Company will be required to pay certain pre-IPO owners 85% of the amount of cash savings, if any, in U.S. federal, state, or local tax that the Company actually realizes. The payments related to the initial and subsequent exchanges are treated as additional consideration paid, which in turn increases the tax basis of the Company’s investment in the Partnership. Most of this tax basis is amortizable under requisite sections of the Internal Revenue Code. Portillo's Inc. Form 10-K | 37 Table of Contents The amounts payable, as well as the timing of such payments, under the TRA are dependent upon significant future events and assumptions, including among others: (i) the amount and timing of exchanges, (ii) the characterization of the tax basis step-up, (iii) the depreciation and amortization periods that apply to the increase in tax basis, (iv) the amount and timing of taxable income the Company generates in the future and (v) the U.S. federal, state, and local income tax rates then applicable. Given the complexity of the calculation and high volume of inputs used to estimate the TRA liability, performing audit procedures to evaluate the accuracy of the calculation and appropriateness of the inputs required a high degree of auditor judgment and an increased extent of effort, including the need to involve our income tax specialists. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the TRA liability included the following, among others: • We tested the effectiveness of controls over management’s determination of the TRA liability, including controls over significant tax judgments and estimates. • With the assistance of our income tax specialists, our audit procedures related to the TRA liability included evaluating and assessing the following, among others: ◦ We evaluated the appropriateness of management’s application of the accounting for the TRA liability, and the reasonableness of the methods, inputs, and assumptions used by management to determine the TRA liability. ◦ We evaluated the impact of partnership exchange transactions on the computation of the TRA liability by performing testing, on a sample basis, of exchanges, tax basis amounts and calculations related to the step-up in basis. ◦ For each tax basis step-up captured by the TRA, we evaluated the characterization of the step-up for appropriateness and consistency with the TRA. ◦ We tested the appropriateness of the tax rates and tax amortization utilized in the determination of the TRA liability, by agreeing to the terms in the TRA and applicable federal and state tax laws ◦ We evaluated the Company’s taxable income forecast as it relates to the estimated timing and amount of utilization of the tax basis step-up captured by the TRA. ◦ We tested the mathematical accuracy of the TRA liability calculation by recomputing the liability. Goodwill - Refer to Notes 2 and 6 to the Financial Statements Critical Audit Matter Description As discussed in Notes 2 and 6 to the financial statements, the Company has one reporting unit which is evaluated for impairment annually. The Company's evaluation of its goodwill for impairment involves the comparison of the fair value of the reporting unit to its carrying value. The Company engaged an independent valuation specialist to assist in the Company's determination of the estimated fair value of the reporting unit. This determination includes estimating the fair value of the reporting unit using the income approach, guideline public company method, and comparable transactions method. The income approach requires management to estimate internally forecasted future cash flows, and to discount the cash flows using a weighted average cost of capital (discount rate). The guideline public company method is determined by applying market multiples for comparable public companies to the reporting unit’s financial results. The comparable transaction method utilizes exchange prices in actual transactions and asking prices for controlling interests in public or private companies to apply multiples to the reporting unit’s financial results. Changes in these assumptions could have a significant impact on either the fair value, the amount of any goodwill impairment charge, or both. In addition to the annual evaluation of the reporting unit’s recoverability, when events and circumstances indicate it is more likely than not that the fair value of the reporting unit is less than the carrying value, the Company will perform a quantitative test of impairment. During the quarter ended September 28, 2025, the Company identified impairment indicators that required a quantitative assessment of goodwill outside of the Company's annual impairment test. These indicators included the announcement of a strategic reset of the Company’s development and growth plan, which resulted in revised financial targets for fiscal year 2025 and the announced departure of the Company’s President and Chief Executive Officer, effective September 21, 2025. Based on these factors and information available, the Company determined that an interim quantitative test of goodwill for impairment should be performed as of September 28, 2025. After completing the evaluation, the Company concluded that no impairment of goodwill existed as of September 28, 2025 as the fair value of the Company’s goodwill balance was greater than its carrying value as of the measurement date. Portillo's Inc. Form 10-K | 38 Table of Contents We identified the Company’s impairment evaluation of goodwill as a critical audit matter because of the significant judgments made by management to estimate the fair value of the reporting unit, specifically in forecasting future revenues and determining the discount rate. This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management's estimates and assumptions related to the selection of the discount rate and forecasts of future revenue growth. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the fair value of the goodwill discussed above included the following, among others: • We tested the effectiveness of controls over the goodwill impairment valuation, including appropriateness of the valuation methodology, forecasting of revenue growth, and selection of discount rate. • With the assistance of our fair value specialists, we evaluated the reasonableness of the valuation methodology and the valuation inputs to that methodology, such as discount rate by: ◦ Testing the mathematical accuracy of the calculations. ◦ Testing the source information underlying the determination of the discount rate and guideline company market multiples. ◦ Developing ranges of independent estimates and comparing those to the rates selected by management. ◦ Performing sensitivity analysis for the discount rate utilized. • We evaluated the reasonableness of management’s forecast of future revenue growth by: ◦ Comparing the forecasts to historical results, third-party economic research, and industry performance; ◦ Performing sensitivity analyses for the forecasts utilized; ◦ Comparing the forecasts to internal communications to management and the Board of Directors; ◦ Evaluating the impact of changes in the business environment on management’s forecasts; ◦ Conducting inquiries with management; and ◦ Evaluating whether the forecasts were consistent with evidence obtained in other areas of the audit. /s/ Deloitte & Touche LLP Chicago, Illinois February 24, 2026 We have served as the Company's auditor since 2014. Portillo's Inc. Form 10-K | 39 PORTILLO'S INC. CONSOLIDATED BALANCE SHEETS (In thousands, except per share data) December 28, 2025 December 29, 2024 ASSETS CURRENT ASSETS: Cash and cash equivalents and restricted cash $ 19,963 $ 22,876 Accounts and tenant improvement receivables 16,502 14,794 Inventories 8,207 7,915 Prepaid expenses and other 6,844 7,066 Total current assets 51,516 52,651 Property and equipment, net 420,263 358,975 Operating lease assets 261,086 222,390 Goodwill 394,298 394,298 Trade names 221,725 223,925 Other intangible assets, net 23,391 26,098 Equity method investment 15,696 16,056 Deferred tax assets 211,267 197,409 Other assets 7,292 8,284 Total other assets 873,669 866,070 TOTAL ASSETS $ 1,606,534 $ 1,500,086 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 43,210 $ 45,516 Current portion of long-term debt 6,250 11,250 Short-term debt 90,000 25,000 Current portion of Tax Receivable Agreement liability 7,910 7,686 Deferred revenue 7,472 7,032 Short-term operating lease liabilities 6,878 6,013 Accrued expenses 32,236 33,072 Total current liabilities 193,956 135,569 LONG-TERM LIABILITIES: Long-term debt, net of current portion 237,977 275,422 Tax Receivable Agreement liability 344,524 316,893 Long-term operating lease liabilities 329,190 278,540 Other long-term liabilities 3,614 3,559 Total long-term liabilities 915,305 874,414 Total liabilities 1,109,261 1,009,983 COMMITMENTS AND CONTINGENCIES (NOTE 16) STOCKHOLDERS' EQUITY: Preferred stock, $ 0.01 par value per share, 10,000,000 shares authorized, none issued and outstanding — — Class A common stock, $ 0.01 par value per share, 380,000,000 shares authorized, and 71,971,736 and 63,674,579 shares issued and outstanding as of December 28, 2025 and December 29, 2024, respectively 720 637 Class B common stock, $ 0.00001 par value per share, 50,000,000 shares authorized, and 3,442,335 and 10,732,800 shares issued and outstanding as of December 28, 2025 and December 29, 2024, respectively — — Additional paid-in-capital 404,603 357,295 Retained earnings 62,474 43,129 Total stockholders' equity attributable to Portillo's Inc. 467,797 401,061 Non-controlling interest 29,476 89,042 Total stockholders' equity 497,273 490,103 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,606,534 $ 1,500,086 See accompanying notes to consolidated financial statements. Portillo's Inc. Form 10-K | 40 PORTILLO'S INC CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands) Fiscal Years Ended December 28, 2025 December 29, 2024 December 31, 2023 REVENUES, NET $ 732,066 $ 710,554 $ 679,905 COST AND EXPENSES: Restaurant operating expenses: Food, beverage and packaging costs 251,705 241,679 230,869 Labor 191,691 181,091 173,868 Occupancy 40,631 36,632 33,358 Other operating expenses 89,637 83,038 76,639 Total restaurant operating expenses 573,664 542,440 514,734 General and administrative expenses 77,140 75,089 78,835 Pre-opening expenses 8,802 9,236 9,019 Depreciation and amortization 29,112 27,297 24,313 Net income attributable to equity method investment ( 1,275 ) ( 1,229 ) ( 1,401 ) Other loss (income), net 946 ( 312 ) ( 1,035 ) OPERATING INCOME 43,677 58,033 55,440 Interest expense 22,808 25,616 27,470 Interest income ( 275 ) ( 309 ) ( 212 ) Tax Receivable Agreement liability adjustment ( 2,945 ) ( 9,149 ) ( 3,349 ) Loss on debt extinguishment — — 3,465 INCOME BEFORE INCOME TAXES 24,089 41,875 28,066 Income tax expense 2,997 6,799 3,248 NET INCOME 21,092 35,076 24,818 Net income attributable to non-controlling interests 1,747 5,559 6,394 NET INCOME ATTRIBUTABLE TO PORTILLO'S INC. $ 19,345 $ 29,517 $ 18,424 Income per common share attributable to Portillo's Inc.: Basic $ 0.28 $ 0.48 $ 0.34 Diluted $ 0.27 $ 0.46 $ 0.32 Weighted-average common shares outstanding: Basic 68,821,447 61,050,437 53,806,570 Diluted 71,086,762 63,982,643 57,307,784 See accompanying notes to consolidated financial statements. Portillo's Inc. Form 10-K | 41 PORTILLO'S INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (In thousands, except share data) FISCAL YEARS ENDED DECEMBER 29, 2024 and DECEMBER 31, 2023 Class A Common Stock Class B Common Stock Shares Amount Shares Amount Additional Paid-In Capital (Accumulated Deficit) Retained Earnings Non-controlling interest Total Equity Balance, as of December 25, 2022 48,420,723 $ 484 23,837,162 $ — $ 260,664 $ ( 4,812 ) $ 176,565 $ 432,901 Net income — — — — — 18,424 6,394 24,818 Equity-based compensation expense — — — — 11,522 — 4,020 15,542 Activity under equity-based compensation plans 717,416 7 — — 953 — — 960 Redemption of LLC Units 6,364,236 64 ( 6,364,236 ) — ( 64 ) — — — Non-controlling interest adjustment — — — — 48,849 — ( 48,849 ) — Distributions paid to non-controlling interest holders — — — — — — ( 399 ) ( 399 ) Establishment of liabilities under Tax Receivable Agreement and related changes to deferred tax assets associated with increases in tax basis — — — ( 13,712 ) — — ( 13,712 ) Balance, as of December 31, 2023 55,502,375 $ 555 17,472,926 $ — $ 308,212 $ 13,612 $ 137,731 $ 460,110 Net income — — — — — 29,517 5,559 35,076 Equity-based compensation expense — — — — 9,257 — 1,894 11,151 Activity under equity-based compensation plans 1,432,078 15 — — 3,452 — — 3,467 Redemption of LLC Interests 6,740,126 67 ( 6,740,126 ) — ( 67 ) — — — Non-controlling interest adjustment — — — — 55,304 — ( 55,304 ) — Distributions paid to non-controlling interest holders — — — — — — ( 838 ) ( 838 ) Establishment of liabilities under Tax Receivable Agreement and related changes to deferred tax assets associated with increases in tax basis — — — — ( 18,863 ) — — ( 18,863 ) Balance, as of December 29, 2024 63,674,579 $ 637 10,732,800 $ — $ 357,295 $ 43,129 $ 89,042 $ 490,103 See accompanying notes to consolidated financial statements. Portillo's Inc. Form 10-K | 42 PORTILLO'S INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (In thousands, except share data) FISCAL YEAR ENDED DECEMBER 28, 2025 Class A Common Stock Class B Common Stock Shares Amount Shares Amount Additional Paid-In Capital Retained Earnings Non-controlling interest Total Equity Balance, as of December 29, 2024 63,674,579 $ 637 10,732,800 $ — $ 357,295 $ 43,129 $ 89,042 $ 490,103 Net income — — — — — 19,345 1,747 21,092 Equity-based compensation expense — — — — 5,951 — 542 6,493 Activity under equity-based compensation plans 1,006,692 10 — — 2,177 — — 2,187 Redemption of LLC interests 7,290,465 73 ( 7,290,465 ) — ( 73 ) — — — Non-controlling interest adjustment — — — — 60,914 — ( 60,914 ) — Distributions paid to non-controlling interest holders — — — — — — ( 1,291 ) ( 1,291 ) Establishment of liabilities under Tax Receivable Agreement and related changes to deferred tax assets associated with increases in tax basis — — — — ( 21,661 ) — — ( 21,661 ) Contributions from non-controlling interests — — — — — — 350 350 Balance, as of December 28, 2025 71,971,736 $ 720 3,442,335 $ — $ 404,603 $ 62,474 $ 29,476 $ 497,273 See accompanying notes to consolidated financial statements. Portillo's Inc. Form 10-K | 43 PORTILLO'S INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Fiscal Years Ended December 28, 2025 December 29, 2024 December 31, 2023 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 21,092 $ 35,076 $ 24,818 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 29,112 27,297 24,313 Amortization of debt issuance costs and discount 692 873 1,001 Loss on sales of assets 434 528 592 Equity-based compensation 6,493 11,151 15,542 Deferred income tax expense 2,997 6,771 3,249 Tax Receivable Agreement liability adjustment ( 2,945 ) ( 9,149 ) ( 3,349 ) Gift card breakage ( 857 ) ( 852 ) ( 917 ) Asset impairment 2,200 657 — Loss on debt extinguishment — — 3,465 Changes in operating assets and liabilities: Accounts receivables ( 1,537 ) 862 ( 679 ) Receivables from related parties 25 ( 46 ) ( 82 ) Inventories ( 292 ) 818 ( 1,346 ) Other current assets 221 357 ( 3,643 ) Operating lease assets 9,699 8,469 7,402 Accounts payable 316 11,284 209 Accrued expenses and other liabilities 310 1,827 3,021 Operating lease liabilities ( 2,920 ) ( 3,178 ) ( 2,033 ) Deferred lease incentives 5,282 5,553 1,501 Other assets and liabilities 1,589 ( 258 ) ( 2,283 ) NET CASH PROVIDED BY OPERATING ACTIVITIES 71,911 98,040 70,781 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment ( 90,435 ) ( 88,191 ) ( 87,918 ) Other 242 77 81 NET CASH USED IN INVESTING ACTIVITIES ( 90,193 ) ( 88,114 ) ( 87,837 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from short-term debt, net 65,000 10,000 15,000 Proceeds from long-term debt — — 300,000 Payments of long-term debt ( 41,875 ) ( 5,625 ) ( 328,053 ) Proceeds from equity offering, net of underwriting discounts — 114,960 179,306 Repurchase of outstanding equity / Portillo's OpCo units — ( 114,960 ) ( 179,306 ) Distributions paid to non-controlling interest holders ( 1,291 ) ( 838 ) ( 399 ) Proceeds from stock option exercises 2,727 4,332 1,879 Employee withholding taxes related to net settled equity awards ( 1,046 ) ( 1,433 ) ( 1,505 ) Proceeds from Employee Stock Purchase Plan purchases 453 508 527 Payments of Tax Receivable Agreement liability ( 7,686 ) ( 4,432 ) ( 813 ) Payment of deferred financing costs ( 1,263 ) — ( 3,569 ) Contributions from non-controlling interests 350 — — NET CASH PROVIDED BY (USED) IN FINANCING ACTIVITIES 15,369 2,512 ( 16,933 ) NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH ( 2,913 ) 12,438 ( 33,989 ) CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF THE PERIOD 22,876 10,438 44,427 CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF THE PERIOD $ 19,963 $ 22,876 $ 10,438 See accompanying notes to consolidated financial statements. Portillo's Inc. Form 10-K | 44 PORTILLO'S INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Fiscal Years Ended December 28, 2025 December 29, 2024 December 31, 2023 SUPPLEMENTAL CASH FLOW INFORMATION Interest paid $ 22,922 $ 19,445 $ 28,282 Income tax paid — — — NON-CASH INVESTING AND FINANCING ACTIVITIES: Accrued capital expenditures $ 11,207 $ 13,466 $ 12,729 Establishment of liabilities under Tax Receivable Agreement 38,485 38,342 51,165 See accompanying notes to consolidated financial statements. Portillo's Inc. Form 10-K | 45 PORTILLO'S INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. DESCRIPTION OF BUSINESS Portillo’s Inc. (the “Company") was incorporated as a Delaware corporation on June 8, 2021, for the purpose of facilitating an initial public offering ("IPO") and other related transactions in order to carry on the business of PHD Group Holdings LLC and its subsidiaries (“Portillo’s OpCo” . Portillo's Inc. is the sole managing member of Portillo’s OpCo, and a s sole managing member and operates and controls all of the business and affairs of Portillo's OpCo and reports a non-controlling interest representing the economic interest in Portillo's OpCo held by the other members of Portillo's OpCo (the "pre-IPO LLC Members"). Unless the context otherwise requires, references to "we," "us," "our," "Portillo's," and the "Company" refer to Portillo's Inc. and its subsidiaries, including Portillo's OpCo. The Company operates restaurants in 11 states that serve Chicago-style hot dogs and sausages, Italian beef sandwiches, char-grilled burgers, chopped salads, crinkle-cut fries, homemade chocolate cake and more, along with two food production commissaries in Illinois. As of December 28, 2025 and December 29, 2024, the Company had 101 and 93 restaurants in operation, respectively. The Company also had one non-traditional location in operation, a food truck. The Company, additionally has a 50 % interest in a single restaurant owned by C&O Chicago, L.L.C. ("C&O"), which is excluded from the Company's restaurant count noted above. The Company’s principal corporate offices are located in Oak Brook, Illinois. The Company entered into a joint venture agreement to develop and operate a restaurant at the Dallas-Fort Worth International Airport ("DFW") which is expected to commence operations in 2026. The Company holds a 65 % ownership interest in AP Dogs, LLC ("AP Dogs") and has day-to-day operational and managerial control over its business and affairs. Accordingly, the Company consolidates the joint venture and reports a noncontrolling interest representing the economic interest in AP Dogs held by the other partner. NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The Company does not have any components of other comprehensive income (loss) recorded within its consolidated financial statements, and therefore, does not separately present a statement of comprehensive income (loss). Fiscal Year The Company operates on 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 in a 53-week fiscal year is added to the fourth quarter. Fiscal 2025 and 2024 each consisted of 52 weeks. Fiscal 2023 consisted of 53 weeks. The 53rd week in fiscal 2023 coincided with Christmas, resulting in six additional operating days. The fiscal periods presented in this report are fiscal years ended December 28, 2025 ("fiscal 2025"), December 29, 2024 ("fiscal 2024") and December 31, 2023 ("fiscal 2023"), respectively. Unless otherwise stated, references to years in this report relate to fiscal years. Use of Estimates The preparation of these 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. Portillo's Inc. Form 10-K | 46 PORTILLO'S INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Cash and Cash Equivalents and Restricted Cash Cash includes amounts that are either held in the Company’s bank accounts or represent deposits in transit. Amounts receivable from credit card processors are considered cash equivalents because they are both short in term and highly liquid in nature and are typically converted to cash within three business days of the sales transactions. Restricted cash includes amounts that are held in the Company’s bank accounts subject to minimum balance requirements for medical claim disbursements. Accounts and Tenant Improvement Receivables Accounts and tenant improvement receivables consist primarily of vendor rebates, tenant improvement receivables, and delivery receivables as well as receivables from related parties (Note 18. Related Party Transactions). The Company evaluates the collectability of its Accounts and tenant improvement receivables based on a variety of factors, including historical experience, current and future economic and market conditions and other factors. Based on these factors, no allowance for uncollectible accounts was recorded at December 28, 2025 or December 29, 2024. Inventories Inventories, which consists mainly of food products, is valued at the lower of cost or net realizable value, with cost determined on the first-in, first-out (FIFO) method. No other adjustment is deemed necessary to reduce inventory to lower of cost or net realizable value due to the rapid turnover and high utilization of inventory. The Company operates two commissaries to supply the Company's restaurants with several products and ensures product consistency and quality. The commissaries derive revenue principally from the sale and distribution of food to our distributors, who, in turn, sell the food to the restaurants. This is considered under ASC 845, Non-Monetary Transactions, and the impact on the statement of operations is not material. These products are held as inventory at distributors on a short-term consignment basis. Inventories subject to these consignment arrangements are recorded on the Company’s consolidated balance sheet and were $ 0.8 million as of December 28, 2025 and December 29, 2024. Equity Method Investment The Company has a 50 % interest in C&O. The Company accounts for the investment and financial results in the consolidated financial statements under the equity method of accounting as the Company has significant influence but does not have control. The investment is adjusted to reflect the Company’s share of C&O’s earnings and losses to date and any distributions received. Long-Lived Assets and Valuation The Company’s long-lived assets include property and equipment and definite-lived intangible assets. Property and equipment are recorded at cost. Internal costs directly associated with the acquisition, development and construction of a restaurant are capitalized. Expenditures for refurbishments and improvements that significantly add to the productivity capacity or extend the useful life are capitalized, while expenditures for maintenance and repairs are expensed as incurred. Leasehold improvements are amortized over the shorter of the lease term, which generally includes option periods that are reasonably certain, or the estimated useful lives of the assets. For buildings and equipment, depreciation is computed over the estimated useful lives of the assets (generally ranging from three to 39 years). Upon disposal of assets, the accounts are relieved of cost and accumulated depreciation and any related gain or loss is reflected in other income, net in the Company's consolidated statements of operations. Portillo's Inc. Form 10-K | 47 PORTILLO'S INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The Company reviews its long-lived assets, including property and equipment and construction-in-progress, definite-lived intangible assets and operating lease assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group might not be recoverable. Recoverability is measured by a comparison of the carrying amount to future undiscounted cash flows that are expected to be generated by the asset or asset group. If the carrying amount exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying value exceeds the estimated fair value. Restaurant-level assets are grouped by restaurant for the purpose of the impairment assessment because a restaurant represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities . During fiscal 2024, the Company recorded a technology asset impairment charge of $ 0.7 million that was included within other income , net in the Company's consolidated statements of operations. There were no long-lived asset impairment charges recorded in fiscal 2025 and fiscal 2023. Goodwill and Indefinite-Lived Intangible Assets Goodwill and indefinite-lived intangible assets are assessed for impairment annually in the fourth quarter or more frequently if events and circumstances indicate that it is more likely than not that the fair value of a reporting unit or an intangible asset is less than its carrying value. The Company has one reporting unit and the fair value of the reporting unit was estimated using a weighted combination of the income and market approaches. Under the income approach, the Company uses a discounted cash flow methodology, which requires management to make significant estimates and assumptions related to forecasted revenues, EBITDA margins, capital expenditures, perpetual growth rates, and long-term discount rates, among others. The market approach incorporated both the guideline public company method and the guideline transaction method. The guideline public company method involves analyzing valuation multiples of comparable publicly traded companies with similar operating and investment characteristics, while the guideline transaction method considers transaction multiples observed for comparable businesses. The Company also reconciles the fair value of its reporting unit to its current market capitalization to assess reasonableness. If the fair value of the reporting unit is less than its carrying value, an impairment loss is recorded for the difference between the fair value of the reporting unit and the carrying value of the reporting unit. In the third quarter of 2025, management identified impairment indicators that required a quantitative assessment of goodwill outside of the Company's annual impairment test. These indicators included the announcement of a strategic reset of the Company’s development and growth plan, which resulted in revised financial targets for fiscal year 2025 and the announced departure of the Company’s President and Chief Executive Officer, effective September 21, 2025. Upon completion of the quantitative impairment test and review of the related results, the Company concluded that no impairment of goodwill existed. The Company's annual impairment test in the fourth quarter of 2025 reaffirmed that goodwill was not impaired. The Company’s indefinite-lived intangible assets consist of trade names and trademarks (collectively the “trade names”). The Company estimates the fair value of its trade names using a relief-from-royalty income approach. If the fair value of the trade name is less than its carrying value, an impairment loss is recorded for the difference between the estimated fair value and carrying value of the intangible assets. The Company also tested its trade names for impairment in the third quarter of 2025. As a result, during fiscal 2025, the Company recorded a non-cash impairment charge of $ 2.2 million related to its legacy Barnelli's trade name, a pasta concept available at nine co-branded restaurants. Significant changes in economic and market conditions could result in changes to expectations of future financial results and key valuation assumptions. Such changes could result in revisions of our estimates of the fair value of our reporting unit and could result in an impairment of goodwill or intangibles in a future interim period or as of September 28, 2026, our next annual measurement date. As of December 28, 2025, we had approximately $ 394.3 million of goodwill and $ 221.7 million of indefinite-lived intangible assets. There were no goodwill nor indefinite-lived intangible asset impairment charges recorded in fiscal 2024 and fiscal 2023. Fair Value of Financial Instruments The Company discloses and recognizes the fair value of its assets and liabilities using a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The guidance establishes three levels of the fair value hierarchy as follows: Level 1 - Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date; Portillo's Inc. Form 10-K | 48 PORTILLO'S INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Level 2 - Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and Level 3 - Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market data. 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 until the taxes are remitted to the appropriate taxing authorities. The Company also offers delivery services to its customers. 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). During the fourth quarter of 2025, the Company completed its annual assessment of expected gift card breakage based on historical redemption patterns to determine the amount of gift card sales that will not be redeemed and will be retained by the Company. As a result of this analysis, the estimated breakage rate was updated to 12 %, compared to the prior rate of 11 %. This update represents a change in accounting estimate and has been applied prospectively. Gift card breakage is recognized within revenues, net in the consolidated statements of operations. In March 2025, the Company launched Portillo's Perks TM , an app-less loyalty program that lives in guests' digital wallets. The loyalty program ("Perks") is a visit-based program, and guests earn rewards based on qualified visits. The Company defers revenue based on the average selling price of food, beverages, or retail merchandise earned through qualifying visits, establishing a corresponding Perks liability within Deferred Revenue. Currently, the Company does not record breakage due to the short expiration period of 14 to 30 days after the reward is issued. Upon redemption of Perks, revenue is recognized for redeemed food, beverage, or retail merchandise, and the Perks liability is reduced accordingly. Refer to Note 3. Revenue Recognition for additional detail on the Perks liability. Generally, revenue is recognized as promised goods or services transfer to the guest or customer in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Revenues are recognized when payment is tendered at the point of sale as the performance obligation has been satisfied. Refer to Note 3. Revenue Recognition for additional detail. Contingencies We recognize liabilities for contingencies when we have an exposure that indicates it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Our ultimate legal and financial liability with respect to such matters cannot be estimated with certainty and requires the use of estimates. When the reasonable estimate is a range, the recorded loss will be the best estimate within the range. We record legal settlement costs when those costs are probable and reasonably estimable. Refer to Note 16. Contingencies for additional detail. Commitments The majority of the food products the Company purchases are subject to changes in price primarily due to the effect of supply and demand of the commodities, in particular, proteins, dairy, produce and grains. Overall pricing agreements are established in an effort to maintain a more consistent food cost without creating long-term purchase commitments. Portillo's Inc. Form 10-K | 49 PORTILLO'S INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Employee Benefits The Company sponsors a 401(k) plan for all employees that are eligible based upon age and length of service. The expenses incurred for Company matching contributions to the plan were approximately $ 0.7 million, $ 0.6 million and $ 0.4 million for the years ended December 28, 2025, December 29, 2024 and December 31, 2023, respectively. The Company offers a non-qualified deferred compensation plan to certain officers and other members of management. Under the plan, eligible employees may defer up to 80 % of their annual salary and annual bonus. The Company has elected to fund its deferred compensation obligations through a rabbi trust. The rabbi trust is subject to creditor claims in the event of insolvency, but such assets are not available for general corporate purposes. Assets held in the rabbi trust are invested in mutual funds, which are purchased and held principally for the purpose of selling them in the near term, and are classified as trading securities and carried at fair value. Equity-Based Compensation The Company has issued non-qualified stock options, performance-based stock options, performance stock units, restricted stock units and restricted stock awards. Equity-based compensation expense is generally measured based on the grant-date fair value of those awards and is recognized on a straight-line basis over the vesting period. Equity-based compensation expense is based on 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. We have also granted equity awards with performance vesting conditions. Equity awards with performance or market vesting conditions generally vest based on our attainment versus stated targets or criteria over a three-year performance and service period. Performance goals are determined by the Board and include measures such as revenue and adjusted EBITDA growth. Compensation expense on stock awards subject to performance conditions, which is based on the quantity of awards we have determined are probable of vesting, is recognized over the longer of the estimated performance goal attainment period or time vesting period. Equity-based compensation expense is included within general and administrative expenses and labor in the consolidated statements of operations. Refer to Note 13. Equity-Based Compensation for additional detail. The Company adopted an Employee Share Purchase Plan (“ESPP”) in June 2022 under which qualifying employees may be granted purchase rights to the Company’s common shares at not less than 85 % of the market price on the purchase date, subject to Company discretion. The ESPP has a maximum of 250,000 shares of the Company's Class A common stock available for issuance. Eligible employees are able to contribute up to 15 % of their gross base earnings for purchases under the ESPP through regular payroll deductions, subject to an annual maximum dollar amount. The expense incurred under the ESPP for the year ended December 28, 2025 was $ 0.1 million, and immaterial for the years ended December 29, 2024 and December 31, 2023. The expense is included within general and administrative expenses and labor in the consolidated statement of operations. Advertising and Marketing Expenses Advertising costs are expensed the first-time advertising takes place, while the costs of producing advertising are expensed during production and the costs of communicating advertising are expensed as services are received. Advertising and marketing expenses totaled $ 9.4 million, $ 8.0 million and $ 5.9 million for the years ended December 28, 2025, December 29, 2024 and December 31, 2023, respectively. Advertising and marketing expenses included in other operating expenses in the consolidated statements of operations primarily relate to sponsorships, restaurant merchandising and charitable giving; and those expenses included in general and administrative expenses in the consolidated statements of operations primarily consist of regional advertising and branding initiatives. Portillo's Inc. Form 10-K | 50 PORTILLO'S INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Cloud-Based Software Implementation Costs The Company has entered into cloud-based software hosting arrangements for which it incurs implementation costs. Certain costs incurred during the application development stage are capitalized and included within prepaid expenses or other assets, depending on the long or short-term nature of such costs, in line with the Company's policy on the accounting for prepaid software hosting arrangements. Costs incurred during the preliminary project stage and post-implementation stage are expensed as incurred. Capitalized cloud-based software implementation costs are amortized, beginning on the date the related software or module is ready for its intended use, on a straight-line basis over the remaining term of the hosting arrangement as a component of general and administrative expenses, the same line item as the expense for the associated hosting arrangement. As of December 28, 2025, the Company had $ 3.2 million of capitalized cloud-based software implementation costs made up of $ 1.0 million recorded within prepaid expenses and other and $ 2.2 million recorded within other assets. As of December 29, 2024, the Company had $ 3.4 million of capitalized cloud-based software implementation costs made up of $ 0.9 million recorded within prepaid expenses and other and $ 2.5 million recorded within other assets . The capitalized cloud-based costs primarily relate to the Company's enterprise resource planning ("ERP") and human capital management ("HCM") systems. Leases The Company currently leases land for its retail restaurants and commissaries, and office space under various long-term operating lease agreements that expire on various dates through 2068. We also lease equipment, which primarily consists of restaurant equipment and copiers. We have immaterial short-term operating leases, such as those for seasonal rentals and training spaces. We evaluate the contracts to determine whether the contract involves the use of property or equipment, which is either explicitly or implicitly identified. We evaluate whether we control the use of the asset, which is determined by assessing whether we obtain substantially all economic benefits from the use of the asset, and whether we have the right to direct the use of the asset. If these criteria are met and we have identified a lease, we account for the contract under the requirements of ASC 842. Upon the possession of a leased asset, we determine its classification as an operating or finance lease. As of December 28, 2025, all of our leases are classified as operating leases. Operating lease assets and liabilities are recognized at the lease commencement date. We make judgments regarding the probable term for each lease, which can impact the classification and accounting for a lease as operating or financing, as well as the amount of straight-line rent expense in a particular period. Generally, the leases for the Company's restaurant locations have an initial term of 10 years to 20 years and typically provide for renewal options in five-year increments, as well as rent escalations. Renewal options are generally recognized as part of the right-of-use assets and lease liabilities as it is reasonably certain at commencement date that we would exercise the options to extend the lease. Some of our real estate leases provide for base rent, plus if applicable, additional rent based on gross sales, as defined in each lease agreement, which is considered to be variable rent. When the achievement of such sales thresholds are deemed to be probable, contingent rent is accrued in proportion to the sales recognized during the period. For operating leases that include rent holidays and rent escalation clauses, we recognize lease expense on a straight-line basis over the lease term from the date we take possession of the leased property. Lease expense incurred before a restaurant opens is recorded in pre-opening expenses in the consolidated statements of operations. Once a restaurant opens, we record the straight-line lease expense and any contingent rent, if applicable, in occupancy on the consolidated statements of operations. Many of our leases also require us to pay real estate taxes, common area maintenance costs and other occupancy costs which are included in occupancy, other operating expenses, or pre-opening expenses on the consolidated statements of operations, which are generally considered to be variable rent. For leases with a lease term of 12 months or less ("short-term operating lease"), any fixed lease payments are recognized on a straight-line basis over such term, and are not recognized on the consolidated balance sheets. Per the ASC 842 requirements, a lessee is required to use the rate implicit in the lease when readily determinable; alternatively, it would use the incremental borrowing rate in determining the present value of future lease payments. We estimate our incremental borrowing rates corresponding to the maturities of our leases. We estimate this rate based on prevailing financial market conditions, indications for the Company's credit rating, and other benchmarks related to the Company's outstanding secured borrowings. We expend cash for leasehold improvements to build out our leased premises. Generally, a portion of the leasehold improvements and building costs are reimbursed by our landlords as landlord incentives pursuant to agreed-upon terms in our lease agreements. If obtained, landlord incentives usually take the form of cash, full or partial credits against our future minimum or contingent rents otherwise payable by us, or a combination thereof. In most cases, the tenant improvement allowances are received after we take possession of the property, as we meet required milestones during the construction of the property. We include these amounts in the measurement of the initial operating lease liability, which are also reflected as a reduction to the initial measurement of the right-of-use asset. Portillo's Inc. Form 10-K | 51 PORTILLO'S INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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, food, beverage, and the initial stocking of operating supplies. These are expensed as incurred prior to the restaurant opening for business. Self-Insurance Programs The Company self-insures for health, workers’ compensation, general liability and property damage. Predetermined loss limits have been arranged with insurance companies to limit the Company’s per occurrence cash outlay. Estimated costs to settle reported claims and incurred but unreported claims are recorded in in accrued expenses in the consolidated balance sheets. Income and Other Taxes We account for income taxes pursuant to the asset and liability method which requires the recognition of deferred income tax assets and liabilities related to the expected future tax consequences arising from temporary differences between the carrying amounts and tax bases of assets and liabilities based on enacted statutory tax rates applicable to the periods in which the temporary differences are expected to reverse. Any effects of changes in income tax rates or laws are included in income tax expense in the period of enactment. A valuation allowance is recognized if we determine it is more likely than not that all or a portion of a deferred tax asset will not be recognized. In making such determination, the Company considers all available evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, prudent and feasible tax planning strategies and recent and expected future results of operations. The assumptions utilized in determining future taxable income require significant judgment and are consistent with the plans and estimates we use to manage our business. Actual operating results in future years could differ from our current assumptions, judgments and estimates, which could have a material impact on the amount of deferred tax assets we ultimately realize. Tax Receivable Agreement The Company is party to a Tax Receivable Agreement ("TRA") with certain pre-IPO LLC Members that provides for the payment by the Company 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. We account for the TRA liability in accordance with ASC 450 - Contingencies. 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. Therefore, we would only recognize a liability for TRA payments if we determine it is probable that we will generate sufficient future taxable income over the term of the TRA to utilize the related tax benefits. The timing and amount of aggregate payments due under the TRA may vary based on a number of factors, including the amount and timing of taxable income generated by Portillo's OpCo each year and the applicable tax rates. The amounts recorded for both the deferred tax assets and the liability for the Company's obligations under the TRA will be estimated at the time of any purchase or exchange as a reduction to stockholders' equity, and the effects of changes in any of the Company's estimates after this date will be included in net income or loss. Similarly, the effect of subsequent changes in the enacted tax rates will be included in net income or loss. Earnings (Loss) Per Share Basic earnings (loss) per share is calculated by dividing the net income (loss) attributable to common shareholders by the weighted-average number of shares outstanding. Diluted earnings (loss) per share adjusts the basic earnings (loss) per unit attributable to shareholders and the weighted-average number of units of shares outstanding for the potential dilutive impact of shares, using the treasury-stock method. Diluted earnings (loss) per share considers the impact of potentially dilutive securities except in periods in which there is a loss because the inclusion of the potential common units would have an anti-dilutive effect. Portillo's Inc. Form 10-K | 52 PORTILLO'S INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. In January 2025, the FASB issued ASU 2025-01 "Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures-Clarifying the Effective Date", which amends the effective date of ASU 2024-03 to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the effect of adopting this ASU. In September 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which updates the cost capitalization threshold for internal-use software development costs by removing all references to software project development stages and providing new guidance on how to evaluate whether the probable-to-complete recognition threshold has been met. ASU 2025-06 is effective for fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the effect of adopting this ASU. In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270), which clarifies existing interim reporting guidance under U.S. GAAP. The ASU clarifies the scope and application of interim reporting requirements, the form and content of interim financial statements and disclosures, and consolidates required interim disclosures within Topic 270. The ASU also introduces a principle requiring disclosure of material events occurring after annual reporting period but before the issuance of interim financial statements. The amendments do not change underlying interim reporting requirements but improve clarity and consistency. ASU 2025-11 is effective for fiscal years beginning after December 15, 2028, with early adoption permitted. The Company is currently evaluating the effect of adopting this ASU. In December 2025, the FASB issued ASU 2025-12, Codification Improvements, which makes technical corrections and clarifications for a broad range of topics within the FASB Accounting Standards Codification to improve clarity and consistency in the application of existing guidance. The improvements are not expected to have a significant effect on current accounting practice or result in significant costs to most entities. ASU 2025-12 is effective for fiscal years beginning after December 15, 2026, with early adoption permitted. The Company is currently evaluating the effect of adopting this ASU. Recently Adopted Accounting Standards 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 adopted this standard during the year ended December 29, 2024. See Note 17. Segment Information in the accompanying notes to the consolidated financial statements for further detail. 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 adopted this standard during the year ended December 28, 2025. See Note 14. Income Taxes in the accompanying notes to the consolidated financial statements for further detail. 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 consolidated financial statements. Portillo's Inc. Form 10-K | 53 PORTILLO'S INC. NOTES TO THE 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 until the taxes are remitted to the appropriate taxing authorities. The Company also offers delivery services to customers which are generally classified as either Dispatch Sales or Marketplace Sales. Refer to Note 2. Summary Of Significant Accounting Policies for additional information regarding revenue recognition for Dispatch Sales and Marketplace Sales. The Company sells gift cards which do not have expiration dates. Refer to Note 2. Summary Of Significant Accounting Policies for additional information regarding gift card sales. The Company recognized gift card breakage of $ 0.9 million for the years ended December 28, 2025, December 29, 2024 and December 31, 2023. 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 is included in deferred revenue on the consolidated balance sheets as follows (in thousands): December 28, 2025 December 29, 2024 Gift card liability $ 6,965 $ 6,875 Revenue recognized in the consolidated statements of operations for the redemption of gift cards that were included in their respective liability balances at the beginning of the year is as follows (in thousands): Fiscal Years Ended December 28, 2025 December 29, 2024 December 31, 2023 Revenue recognized from gift card liability balance at the beginning of the year $ 3,980 $ 3,972 $ 3,822 In March 2025, the Company launched Perks, an app-less loyalty program that lives in guests' digital wallets. Perks is a visit-based program, and guests earn rewards based on qualified visits. Refer to Note 2. Summary Of Significant Accounting Policies for additional information. As of December 28, 2025, the Perks liability was $ 0.2 million . NOTE 4. INVENTORIES Inventories consisted of the following (in thousands): December 28, 2025 December 29, 2024 Raw materials $ 5,408 $ 5,756 Work in progress 156 168 Finished goods 1,827 1,216 Consigned inventory 816 775 $ 8,207 $ 7,915 Portillo's Inc. Form 10-K | 54 PORTILLO'S INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 5. PROPERTY & EQUIPMENT, NET Property and equipment, net consisted of the following (in thousands): December 28, 2025 December 29, 2024 Land and land improvements $ 26,944 $ 24,100 Buildings and improvements 5,790 5,084 Furniture, fixtures, and equipment 195,341 177,443 Leasehold improvements 327,138 286,003 Transportation equipment 1,956 2,042 Construction-in-progress 34,384 12,348 591,553 507,020 Less: accumulated depreciation ( 171,290 ) ( 148,045 ) $ 420,263 $ 358,975 Depreciation expense was $ 26.4 million, $ 24.5 million, and $ 21.4 million for the years ended December 28, 2025, December 29, 2024 and December 31, 2023, respectively, and was included in depreciation and amortization in the consolidated statements of operations. 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, along with indefinite-lived intangibles, or more frequently when impairment indicators are present. During the third quarter of 2025, the Company completed a quantitative impairment test of both goodwill and trade names. After completing the evaluation, the Company concluded that no impairment of goodwill existed as of the end of the third quarter. The Company's annual impairment test in the fourth quarter of 2025 reaffirmed that goodwill was not impaired. During the third quarter of 2025, the Company recognized trade name impairment charges of $ 2.2 million, included within other loss (income), net in the consolidated statement of operations. Refer to Note 2. Summary Of Significant Accounting Policies for further information. No impairment charges were recognized for goodwill or indefinite-lived intangible assets for the years ended December 29, 2024 and December 31, 2023 . Intangibles, net consisted of the following (in thousands): As of December 28, 2025 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Indefinite-lived intangible assets: Trade names $ 221,725 $ — $ 221,725 Intangibles subject to amortization: Recipes 56,117 ( 32,726 ) 23,391 $ 277,842 $ ( 32,726 ) $ 245,116 Portillo's Inc. Form 10-K | 55 PORTILLO'S INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of December 29, 2024 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Indefinite-lived intangible assets: Trade names $ 223,925 $ — $ 223,925 Intangibles subject to amortization: Recipes 56,117 ( 30,019 ) 26,098 $ 280,042 $ ( 30,019 ) $ 250,023 Amortization expense was $ 2.7 million, $ 2.8 million, and $ 2.9 million for the years December 28, 2025, December 29, 2024 and December 31, 2023 respectively, and was included in depreciation and amortization in the consolidated statements of operations. The estimated aggregate amortization expense related to intangible assets held at December 28, 2025 for the next five years and thereafter is as follows (in thousands): Estimated Amortization 2026 $ 2,707 2027 2,707 2028 2,707 2029 2,150 2030 1,369 2031 and thereafter 11,751 $ 23,391 NOTE 7. FAIR VALUE OF FINANCIAL INSTRUMENTS Assets and Liabilities Measured at Fair Value on a Recurring Basis The carrying value of the Company's cash and cash equivalents and restricted cash, accounts and tenant improvement receivables, accounts payable and all other current assets and liabilities, approximate fair values due to the short-term nature of these financial instruments. Other assets consists of long-term prepaid expenses and a deferred compensation plan with related assets held in a rabbi trust. Other long-term liabilities consist of a deferred gain on a supplier arrangement. Long-term prepaid expenses and other long-term liabilities approximate fair values due to the nature of these financial instruments. Deferred Compensation Plan - The Company maintains a rabbi trust to fund obligations under a deferred compensation plan. Amounts in the rabbi trust are invested in mutual funds, which are designated as trading securities carried at fair value. The fair value measurement of these trading securities is considered Level 1 of the fair value hierarchy as they are measured using quoted market prices. As of December 28, 2025 and December 29, 2024, the fair value of the mutual fund investments and deferred compensation obligations were as follows (in thousands): December 28, 2025 December 29, 2024 Level 1 Assets - Investments designated for deferred compensation plan Cash/money accounts $ 881 $ 988 Mutual Funds 2,219 2,208 Total assets $ 3,100 $ 3,196 Portillo's Inc. Form 10-K | 56 PORTILLO'S INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of December 28, 2025 and December 29, 2024 we had no Level 2 or Level 3 assets. The deferred compensation investments and obligations are included in other assets, accrued expenses and other long-term liabilities in the consolidated balance sheets. Changes in the fair value of securities held in the rabbi trust are recognized as trading gains and losses and included in other income in the consolidated statements of operations and offsetting increases or decreases in the deferred compensation obligation are recorded in other long-term liabilities in the consolidated balance sheets. Refer to Note 9. Debt for additional information relating to the fair value of the Company's outstanding debt instruments. Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis Assets and liabilities that are measured at fair value on a non-recurring basis include property and equipment, net, operating lease assets, equity-method investment, goodwill and indefinite-lived intangible assets. These assets are measured at fair value whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. During fiscal 2025, the Company recognized trade name impairment charges of $ 2.2 million, included within other loss (income), net in the consolidated statement of operations. During fiscal 2024, the Company recognized an impairment charge of $ 0.7 million related to a technology asset that is included within other loss (income), net in the consolidated statement of operations. No asset impairment charges were recorded in fiscal 2023. NOTE 8. SUPPLEMENTAL BALANCE SHEET INFORMATION Accounts and tenant improvement receivables consisted of the following (in thousands): December 28, 2025 December 29, 2024 Tenant improvement receivable $ 9,264 $ 8,868 Accounts receivable 7,238 5,926 Total $ 16,502 $ 14,794 Accrued expenses consisted of the following (in thousands): December 28, 2025 December 29, 2024 Salaries, wages, and other compensation $ 14,717 $ 14,382 Insurance 3,884 3,634 Interest 4,610 5,471 Rent and real estate taxes 5,588 5,784 Sales and use tax 3,039 3,351 Other accrued expenses 398 450 Total $ 32,236 $ 33,072 Portillo's Inc. Form 10-K | 57 PORTILLO'S INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 9. DEBT Debt consisted of the following (in thousands): December 28, 2025 December 29, 2024 Term Loan $ 246,875 $ 288,750 Revolver Facility 90,000 25,000 Unamortized discount and debt issuance costs ( 2,648 ) ( 2,078 ) Total debt, net 334,227 311,672 Less: Short-term debt ( 90,000 ) ( 25,000 ) Less: Current portion of long-term debt ( 6,250 ) ( 11,250 ) Long-term debt, net $ 237,977 $ 275,422 2025 Credit Agreement On January 27, 2025 (the "2025 Credit Agreement Closing Date"), PHD Intermediate LLC ("Holdings"), Portillo's Holdings LLC ("the Borrower"), the other Guarantors party thereto, the Lenders from time to time party thereto and Fifth Third Bank, National Association, as Administrative Agent (in such capacities, the "Administrative Agent"), the L/C Issuer and the Swing Line Lender entered into an amendment (the "Amendment") to the credit agreement, dated as of February 2, 2023 (the "Existing Credit Agreement" and the Existing 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"), by and among Holdings, the Borrower, the other Guarantors from time to time party thereto, the Lenders from time to time party thereto and the Administrative Agent. The arrangement was accounted for as a debt modification . The Existing Credit Agreement provided for a term A loan (the "2023 Term Loan Facility") 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 Amendment provides for, among other things, (i) a $ 250.0 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 loans under each of the 2025 Facilities mature on January 27, 2030. The proceeds of the 2025 Term Loan Facility were used to pay off in full amounts outstanding under the 2023 Term Loan Facility outstanding on the 2025 Credit Agreement Closing Date. The 2023 Term Loan Facility and 2023 Revolver Facility accrued, and the 2025 Term Loan Facility and 2025 Revolver Facility 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, in each case subject to a 0.00 % floor. As of December 28, 2025, the interest rate on the 2025 Term Loan Facility and 2025 Revolver Facility was 6.50 % and 6.42 %, respectively. Pursuant to the 2025 Credit Agreement, as of December 28, 2025, the commitment fees to maintain the 2025 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 consolidated statements of operations. As of December 28, 2025, the effective interest rate was 6.73 %. As of December 29, 2024, the interest rate on the 2023 Term Loan Facility and 2023 Revolver Facility was 7.25 % and 7.17 %, respectively. Pursuant to the 2023 Credit Agreement, as of December 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 consolidated statements of operations. As of December 29, 2024, the effective interest rate was 7.53 %. As of the 2025 Credit Agreement Closing Date, the interest rates and commitment fees applicable to the 2023 Term Loan Facility and 2023 Revolving Facility were subsequently refinanced in accordance with the Amendment and the 2025 Credit Agreement. The 2025 Term Loan Facility will amortize in quarterly installments, commencing on the last day of the first full fiscal quarter ended after the 2025 Credit Agreement Closing Date, equaling an aggregate amount of $ 6.3 million for the first 2 years following the 2025 Credit Agreement Closing Date, (ii) $ 12.5 million for the third and fourth years following the 2025 Credit Agreement Closing Date, and (iii) $ 25.0 million for the fifth year following the 2025 Credit Agreement Closing Date, with the balance payable on the final maturity date. As of December 28, 2025, outstanding borrowings under the 2025 Credit Agreement totaled $ 336.9 million, comprised of $ 246.9 million under the 2025 Term Loan, and $ 90.0 million under the 2025 Revolver Facility. Letters of credit issued under the 2025 Revolver Facility totaled $ 4.4 million. As a result, as of December 28, 2025, the Company had $ 55.6 million available under the 2025 Revolver Facility. Portillo's Inc. Form 10-K | 58 PORTILLO'S INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of December 29, 2024, outstanding borrowings under the Existing Credit Agreement totaled $ 313.8 million, comprised of $ 288.8 million under the 2023 Term Loan, and $ 25.0 million under the 2023 Revolver Facility. Letters of credit issued under the 2023 Revolver Facility totaled $ 5.3 million. As a result, as of December 29, 2024, the Company had $ 69.7 million available under the 2023 Revolver Facility. On the 2025 Credit Agreement Closing Date, outstanding borrowings under the 2023 Term Loan Facility and 2023 Revolving Facility were refinanced and became outstanding under the 2025 Term Loan Facility and 2025 Revolving Facility, as applicable. 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 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 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. Maturities of long-term debt Principal payments on long-term debt (excluding the Revolving Facility) outstanding at December 28, 2025 for each year through maturity are as follows (in thousands): 2026 $ 6,250 2027 9,375 2028 15,625 2029 15,625 2030 200,000 $ 246,875 Discount and Debt Issuance Costs Pursuant to the 2025 Credit Agreement, the Company capitalized deferred financing costs and issuance discounts of $ 1.3 million. The remaining unamortized costs under the 2023 Credit Agreement were $ 2.0 million. The total deferred financing costs and issuance discounts of $ 3.3 million will be amortized over the term of the 2025 Credit Agreement. In connection with the repayment of the 2014 Credit Agreement as described above, deferred financing costs and original issuance discount of $ 3.5 million was recorded as a loss on debt extinguishment during the year ended December 31, 2023 in the consolidated statement of operations. There were no debt extinguishments during the years ended December 28, 2025 and December 29, 2024. The Company amortized $ 0.1 million, $ 0.2 million and $ 0.4 million of deferred financing costs during the years ended December 28, 2025, December 29, 2024 and December 31, 2023, respectively, which was included in interest expense in the consolidated statements of operations. In addition, the Company also amortized $ 0.6 million, $ 0.7 million and $ 0.6 million in original issue discount related to the long-term debt during the years ended December 28, 2025, December 29, 2024 and December 31, 2023, respectively, which was included in interest expense in the consolidated statements of operations. Portillo's Inc. Form 10-K | 59 PORTILLO'S INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Total interest costs incurred were $ 22.8 million, $ 25.6 million and $ 27.5 million for the years ended December 28, 2025, December 29, 2024 and December 31, 2023, respectively. Fair Value of Debt As of December 28, 2025 and December 29, 2024, 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 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. The 2025 Facilities are guaranteed, subject to customary exceptions, by all of the Borrower's wholly-owned domestic restricted subsidiaries and Holdings, and are secured by a lien on substantially all of the Borrower's assets, including fixed assets and intangibles, and the assets of the Guarantors, in each case, subject to customary exceptions. Failure to comply with these covenants and restrictions could result in an event of default under the 2025 Credit Agreement. In such an event, all amounts outstanding under the 2025 Credit Agreement, together with any accrued interest, could then be declared immediately due and payable. As of December 28, 2025, the Company was in compliance with the financial covenants in the 2025 Credit Agreement. NOTE 10. LEASES A summary of operating lease right-of-use assets and liabilities is as follows (in thousands): Operating leases Classification December 28, 2025 December 29, 2024 Right-of-use assets Operating lease assets $ 261,086 $ 222,390 261,086 222,390 Current lease liabilities Short-term operating lease liabilities 6,878 6,013 Non-current lease liabilities Long-term operating lease liabilities 329,190 278,540 $ 336,068 $ 284,553 The components of lease expense were as follows (in thousands): Fiscal Years Ended Operating leases Classification December 28, 2025 December 29, 2024 December 31, 2023 Operating lease cost Occupancy Other operating expenses General and administrative expenses Pre-opening expenses $ 37,305 $ 32,542 $ 28,861 Short-term operating lease cost Occupancy Other operating expenses General and administrative expenses Pre-opening expenses 2,015 1,813 1,069 Variable lease cost Occupancy Other operating expenses General and administrative expenses 4,228 3,894 3,714 $ 43,548 $ 38,249 $ 33,644 Portillo's Inc. Form 10-K | 60 PORTILLO'S INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS A summary of lease terms and discount rates for operating leases is as follows: Operating leases December 28, 2025 December 29, 2024 Weighted-average remaining lease term (years): 25.6 25.6 Weighted-average discount rate: 9.0 % 9.2 % Supplemental cash flow information related to leases is as follows (in thousands): Fiscal Years Ended December 28, 2025 December 29, 2024 December 31, 2023 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows for operating leases $ 30,555 $ 27,223 $ 23,478 Operating lease assets obtained in exchange for lease liabilities: Operating leases 48,172 39,650 33,176 As of December 28, 2025, the maturity analysis of the lease liabilities consisted of the following (in thousands): Year Ending Operating Leases 2026 $ 33,666 2027 33,255 2028 33,325 2029 33,537 2030 33,006 Thereafter 782,208 Total lease payments 948,997 Less: imputed interest ( 612,929 ) Total operating lease liabilities $ 336,068 As of December 28, 2025, operating lease payments exclude $ 86.1 million of legally binding minimum payments for leases signed but not yet commenced. NOTE 11. STOCKHOLDERS' EQUITY Amended and Restated Certificate of Incorporation In connection with the IPO, we amended and restated our certificate of incorporation to, among other things, provide for the (i) authorization of 380,000,000 shares of Class A common stock, par value $ 0.01 per share; (ii) authorization of 50,000,000 shares of Class B common stock, par value $ 0.00001 ; (iii) authorization of 10,000,000 shares of preferred stock, par value $ 0.01 per share; and (iv) provides that our Board will be elected annually to serve until the next annual meeting of shareholders or until their successors are duly elected and qualified. Holders of shares of our Class A common stock are entitled to one vote for each share held of record on all matters on which shareholders are entitled to vote generally, including the election or removal of directors. Holders of shares of our Class A common stock are entitled to receive dividends when and if declared by our Board out of funds legally available therefor, subject to any statutory or contractual restrictions on the payment of dividends and to any restrictions on the payment of dividends imposed by the terms of any outstanding preferred stock. Each share of Class B common stock will entitle its holder to one vote per share on all matters submitted to a vote of our shareholders. The Class B common stock is not entitled to economic interests in Portillo’s Inc. Holders of our Class B common stock do not have any right to receive dividends. Portillo's Inc. Form 10-K | 61 PORTILLO'S INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Amended and Restated LLC Agreement In connection with the IPO, we amended and restated the limited liability company agreement of Portillo’s OpCo ("LLC Agreement") to, among other things, convert all outstanding equity interests into LLC Units. The LLC Agreement also provides that holders of LLC Units may, from time to time, redeem all or a portion of their LLC Units for newly-issued shares of Class A common stock on a one -for-one basis. Upon receipt of a redemption request, we may, instead, elect to effect a direct exchange of LLC Units directly with the holder. In connection with any redemption or exchange, we will receive a corresponding number of LLC Units, increasing our total ownership interest. Additionally, an equivalent number of shares of Class B common stock will be surrendered and canceled. The LLC Agreement also requires that Portillo's OpCo, at all times, maintain (i) a one -to-one ratio between the number of outstanding shares of Class A common stock and the number of LLC Units owned by us and (ii) a one -to-one ratio between the number of shares of Class B common stock owned by the pre-IPO LLC Members and the number of LLC Units owned by the pre-IPO LLC Members. Redemption of LLC Units In the second quarter of 2025, certain pre-IPO LLC Members affiliated with Berkshire Partners LLC redeemed 7,290,465 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. In 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. In addition, in 2024, the Company completed a secondary offering of 8,000,000 shares of the Company's Class A common stock at an offering price of $ 14.37 per share. In 2023, the Company completed a secondary offering of 8,000,000 shares of the Company's Class A common stock at an offering price of $ 21.05 per share. On April 5, 2023, the Underwriter exercised its overallotment option in part, to purchase an additional 620,493 shares of the Company's Class A common stock at an offering price of $ 21.05 per share. As of December 28, 2025, the Company owned 95.4 % of Portillo's OpCo and the pre-IPO LLC Members owned the remaining 4.6 % of Portillo's OpCo. As of December 28, 2025, shareholders of the Blocker Companies and pre-IPO LLC Members owned 1,045,630 shares of Class A common stock and 3,442,335 shares of Class B common stock, respectively . Equity-Based Compensation Plan Activity We received an aggregate of 1,006,692 , 1,432,078 , and 717,416 LLC Units in connection with the activity under our equity-based compensation plans during the years ended December 28, 2025, December 29, 2024, and December 31, 2023, respectively, related to the exercise of stock options, vested restricted stock awards and restricted stock units, and employee stock purchase plan purchases. See Note 13. Equity-Based Compensation for additional information. NOTE 12. 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. Form 10-K | 62 PORTILLO'S INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The following table summarizes the LLC interest ownership by Portillo's Inc. and pre-IPO LLC members: December 28, 2025 December 29, 2024 LLC Units Ownership % LLC Units Ownership % Portillo's Inc. 71,971,736 95.4 % 63,674,579 85.6 % pre-IPO LLC Members 3,442,335 4.6 % 10,732,800 14.4 % Total 75,414,071 100.0 % 74,407,379 100.0 % 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 years ended December 28, 2025, December 29, 2024 and December 31, 2023 was 8.3 %, 17.0 % and 25.9 % respectively. The following table summarizes the effects of changes in ownership in Portillo's OpCo on the Company’s equity (in thousands): Fiscal Years Ended December 28, 2025 December 29, 2024 December 31, 2023 Net income attributable to Portillo's Inc. $ 19,345 $ 29,517 $ 18,424 Activity under equity-based compensation plans 2,177 3,452 953 Non-controlling interest adjustment 60,914 55,304 48,849 Redemption of LLC Units ( 73 ) ( 67 ) ( 64 ) Establishment of liabilities under Tax Receivable Agreement and related changes to deferred tax assets associated with increases in tax basis ( 21,661 ) ( 18,863 ) ( 13,712 ) Total effect of changes in ownership interest on equity attributable to Portillo's Inc. $ 60,702 $ 69,343 $ 54,450 The Company entered into a joint venture agreement to develop and operate a restaurant at DFW airport, which is expected to commence operations in 2026. The Company holds a 65 % ownership interest in AP Dogs. In the year ended December 28, 2025, $ 0.4 million of contributions from non-controlling interests were received. NOTE 13. EQUITY-BASED COMPENSATION 2021 Equity Incentive Plan In connection with the IPO, the Company adopted the 2021 Equity Incentive Plan (the "2021 Plan"). The 2021 Plan is administered and interpreted by the Company's Board, including the authority to select participants in the 2021 Plan, determine the form and substance of awards under the 2021 Plan, determine the conditions and restrictions, if any, subject to which such awards will be made, modify the terms of awards, accelerate the vesting of awards, and make determinations regarding a participant’s termination of employment or service for purposes of an award. The types of awards available under the 2021 Plan include stock options (both incentive and non-qualified), stock appreciation rights ("SARs"), restricted stock awards ("RSAs"), restricted stock units ("RSUs"), and stock-based awards. Employees, officers, non-employee directors or any natural person who is a consultant or other personal service provider to the Company or any of its subsidiaries or affiliates are eligible to participate in the 2021 Plan. All awards granted to participants under the 2021 Plan will be represented by an award agreement. Approximately 7.1 million shares of Class A common stock were authorized for awards under the 2021 Plan. Restricted Stock Units An RSU granted under the 2021 Plan will give the participant a right to receive, upon vesting and settlement of the RSUs, one share per vested unit or an amount per vested unit equal to the fair market value of one share as of the date of determination. The fair value of RSUs is determined using the Company's closing stock price on the date of grant. Outstanding time-based RSUs generally vest equally over periods ranging from one to three years on each of the anniversaries of the date of grant subject to continued service on such date. Portillo's Inc. Form 10-K | 63 PORTILLO'S INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Activity for the Company's RSUs was as follows: Restricted Stock Units (in thousands) Weighted-average grant date fair value per share Non-vested, December 29, 2024 804 $ 13.55 Granted 1,321 9.12 Vested ( 377 ) 13.73 Forfeited ( 99 ) 12.70 Non-vested, December 28, 2025 1,649 $ 10.01 As of December 28, 2025, there was $ 10.8 million of total unrecognized compensation cost related to unvested restricted stock units, which is expected to vest over a weighted-average period of 1.8 years. Performance Stock Options The Company has granted performance stock options ("PSOs") to certain executive officers that will be 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 of the IPO; (ii) one-third (1/3rd) 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 (1/3rd) 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 IPO. All PSOs are subject to continued service at 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. The awards granted are exercisable within a 10-year period from the date of grant. The first and second tranches of PSOs were forfeited in fiscal 2024 and fiscal 2025, respectively, as the performance conditions were not satisfied by the third and fourth anniversary of the IPO, respectively. The grant date fair value of these awards was determined using a Monte-Carlo simulation model. The fair value and weighted average assumptions used to estimate the fair value of these PSOs were as follows: 2024 2023 Fair value $ 0.12 $ 2.30 Stock price $ 12.17 $ 17.86 Risk-free interest rate 5.10 % 4.96 % Expected life (years) 1.5 2.1 Annualized equity volatility 33.4 % 37.7 % Portillo's Inc. Form 10-K | 64 PORTILLO'S INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Activity for the Company's PSOs was as follows: PSOs (in thousands) Weighted Average Exercise Price Weighted Average Remaining Term (Years) Aggregate Intrinsic Value Outstanding-December 29, 2024 1,377 $ 17.65 Granted — — Exercised — — Forfeited ( 1,032 ) 18.48 Expired — — Outstanding-December 28, 2025 345 15.16 7.4 — Exercisable-December 28, 2025 — — — — Vested and expected to vest-December 28, 2025 330 $ 15.16 7.4 $ — As of December 28, 2025, there was $ 0.2 million of total unrecognized compensation cost related to unvested PSOs, which is expected to be recognized over a weighted average period of 0.8 years. Stock Options The stock options vest on the four th anniversary of the award and are exercisable within a 10-year period from the date of grant. Stock options under the 2021 Plan were granted to the Company's former Chief Executive Officer ("CEO"), Mr. Osanloo, who departed from his role, effective September 21, 2025. Activity for the Stock Options was as follows: Stock Options (in thousands) Weighted Average Exercise Price Weighted Average Remaining Term (Years) Aggregate Intrinsic Value Outstanding-December 29, 2024 311 $ 11.94 Granted 308 12.08 Exercised — — Forfeited ( 619 ) 12.01 Expired — — Outstanding-December 28, 2025 — — 0 — Exercisable-December 28, 2025 — — — — Expected to vest-December 28, 2025 — $ — 0 $ — The Company estimates the fair value of stock options on the date of grant using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires estimates of highly subjective assumptions, which greatly affect the fair value of each stock option. The assumptions used to estimate the fair value of stock options granted during the year ended December 28, 2025 were as follows: 2025 2024 Fair value of stock option $ 6.50 $ 6.43 Stock Price $ 12.08 $ 11.94 Risk-free interest rate 4.29 % 4.58 % Expected life (years) 6.3 6.3 Volatility 50.0 % 49.4 % As of December 28, 2025, there was no unrecognized compensation cost related to unvested Stock Options. Portillo's Inc. Form 10-K | 65 PORTILLO'S INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Performance Stock Units The Company has granted performance stock units ("PSUs") to its executive officers under the 2021 Plan. The fair value of these awards was determined using the Company's closing stock price on the date of the grants. The PSUs will vest after the fiscal year ending December 26, 2027, and December 27, 2026, for PSUs granted during the years ended December 28, 2025 and December 29, 2024, respectively, based on continued service and the achievement of performance metrics. The amount of awards that can be earned ranges from 0 % to 200 % of the number of performance stock units granted, based on the achievement of approved financial goals tied to the cumulative growth of revenue and Adjusted EBITDA over the fiscal years 2025 to 2027 for PSUs granted during the year ended December 28, 2025 and over the fiscal years 2024 to 2026 for PSUs granted during the year ending December 29, 2024. Compensation expense related to the performance equity units is recognized using a straight-line method over the vesting period based on the most probable outcome of the performance conditions. 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. As of December 28, 2025, management calculated an attainment rate for both PSUs granted during the year ended December 28, 2025 and December 29, 2024 equal to 0 % of the number of target shares granted based on actual attainment of the internal metrics. Activity for the Company's PSUs was as follows: PSUs (in thousands) Weighted Average Grant Date Fair Value Non-vested, December 29, 2024 291 $ 11.81 Granted 301 12.08 Exercised — Forfeited ( 370 ) 12.01 Vested — Non-vested, December 28, 2025 222 $ 11.84 Expected to vest-December 28, 2025* — $ — *The expected to vest total above represents outstanding base PSUs, adjusted for expected attainment amounts in line with current and future estimated performance levels as described above. As of December 28, 2025, there was no unrecognized compensation cost related to unvested PSUs based on the aforementioned attainment rate, the PSUs have a weighted average remaining period of 1.4 years. 2014 Equity Incentive Plan Prior to the IPO, the Company had granted stock options under its 2014 Equity Incentive Plan, as amended (the “2014 Plan”). The 2014 Plan permitted the granting of awards to employees, officers, directors and consultants of the Company and affiliates in the form of options, unit appreciation rights, Restricted Class A Units, unrestricted Class A Units, Performance Awards and awards convertible into or otherwise based on Class A Units. Prior to the IPO, the 2014 Plan gave broad powers to the Company’s board of managers for its administration and interpretation, including the authority to select the individuals to be granted awards and rights to prescribe the particular form and conditions of each award to be granted. Under the 2014 Plan, the number of shares and exercise price of each option were determined by the board of managers, or a committee designated by the board of managers. The awards granted were generally exercisable within a 10-year period from the date of grant. The unit option grants were equally divided between (i) options subject to time-based vesting, and (ii) options subject to both time-based and performance-based vesting. The time-based vesting options vest, in general, in equal annual installments over a 5-year period and have a 10-year term from the date of the grant. The options subject to both time-based and performance-based vesting have a ten-year term from the date of the grant and vest, in general, in equal annual installments over a 5-year period from the date of grant, subject to acceleration in the event of a sale transaction, and have a performance condition that is satisfied upon achievement of a specified internal rate of return and a minimum multiple of invested capital. In connection with the IPO, the performance condition was waived and all such options became subject to time-based vesting only. Following the IPO, no further options will be granted under the 2014 Plan. Portillo's Inc. Form 10-K | 66 PORTILLO'S INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Activity under the 2014 Plan was as follows: Options (in thousands) Weighted Average Exercise Price Weighted Average Remaining Term (Years) Aggregate Intrinsic Value Outstanding-December 29, 2024 4,118 $ 4.87 Granted — — Exercised ( 658 ) 4.14 Forfeited — — Expired — — Outstanding-December 28, 2025 3,460 $ 5.01 2.8 $ 252 Exercisable-December 28, 2025 3,428 $ 5.01 2.7 $ 252 Vested and expected to vest-December 28, 2025 3,460 $ 5.01 2.8 $ 252 As of December 28, 2025, there was $ 0.1 million of total unrecognized compensation cost related to unvested options under the 2014 plan, which is expected to be recognized over a weighted average period o f 0.3 years. Equity-Based Compensation Expense 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 was as follows (in thousands): Fiscal Years Ended December 28, 2025 December 29, 2024 December 31, 2023 Labor $ 1,766 $ 1,902 $ 1,647 General and administrative expenses 4,727 9,249 13,895 Total equity-based compensation expense $ 6,493 $ 11,151 $ 15,542 In connection with the aforementioned departure of the Company's CEO, Mr. Osanloo and the Company entered into a Separation Agreement and Release (the “Separation Agreement”). In accordance with the Separation Agreement, Mr. Osanloo's outstanding stock option awards granted to him on October 1, 2018 under the 2014 Equity Incentive Plan will remain exercisable through the 10 th anniversary of the original grant date. The modification was to extend the permitted time for which the options could be exercised subsequent to termination, from 90 days to October 1, 2028. The Company recorded a $ 2.4 million charge to equity-based compensation expense during fiscal 2025, to reflect the incremental value related to the modification described herein. The incremental modification expense is included within general and administrative expenses in the consolidated statement of operations. All other equity grants were forfeited, resulting in a credit of previously-recognized equity-based compensation expense of $ 5.0 million. Employee Stock Purchase Plan During the fiscal year ended December 28, 2025, the Company issued 54,985 shares under the Employee Stock Purchase Plan ("ESPP"). The shares issued under the ESPP are net of shares withheld for taxes. As of December 28, 2025, 107,025 shares remained available for issuance under the ESPP. The expense incurred under the ESPP for the fiscal year ended December 28, 2025 was $ 0.1 million, and immaterial for the fiscal years ended December 29, 2024 and December 31, 2023, respectively. The expense is included within general and administrative expenses and labor in the consolidated statement of operations. Portillo's Inc. Form 10-K | 67 PORTILLO'S INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 14. 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 components of income tax expense are as follows (in thousands): Fiscal Years Ended December 28, 2025 December 29, 2024 December 31, 2023 Current income taxes: Federal $ — $ — $ — State and local 29 28 ( 1 ) Total current income taxes 29 28 ( 1 ) Deferred income taxes: Federal 1,838 3,767 3,750 State and local 1,130 3,004 ( 501 ) Total deferred income taxes 2,968 6,771 3,249 Income tax expense $ 2,997 $ 6,799 $ 3,248 Reconciliations of income tax expense computed at the U.S. federal statutory income tax rate to the recognized income tax expense and the U.S. statutory income tax rate to our effective tax rates are as follows (in thousands): Fiscal Years Ended December 28, 2025 December 29, 2024 December 31, 2023 Expected U.S. federal income taxes at statutory rate $ 5,059 21.0 % $ 8,794 21.0 % $ 5,894 21.0 % State and local income taxes, net of federal benefit (1) 1,153 4.8 % 3,026 7.2 % ( 502 ) ( 1.8 ) % Changes in valuation allowances ( 114 ) ( 0.5 ) % ( 1,478 ) ( 3.5 ) % ( 1,610 ) ( 5.7 ) % Nontaxable or nondeductible items: Sec. 162(m) disallowance 140 0.6 % 919 2.2 % 578 2.1 % Non-controlling interest ( 371 ) ( 1.6 ) % ( 1,167 ) ( 2.8 ) % ( 1,343 ) ( 4.8 ) % Other ( 68 ) ( 0.3 ) % ( 262 ) ( 0.6 ) % ( 146 ) ( 0.5 ) % Other adjustments: LLC flow-through structure ( 2,802 ) ( 11.6 ) % ( 3,033 ) ( 7.3 ) % 377 1.2 % Income tax expense $ 2,997 12.4 % $ 6,799 16.2 % $ 3,248 11.5 % (1) State taxes in Illinois made up the majority (greater than 50 percent) of the tax effect in this category. Portillo's Inc. Form 10-K | 68 PORTILLO'S INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Our effective income tax rates for the years ended December 28, 2025, December 29, 2024 and December 31, 2023 were 12.4 %, 16.2 % and 11.5 %, respectively. The decrease in our effective income tax rate from the year ended December 28, 2025 to the year ended December 29, 2024 was primarily driven by a decrease in the valuation allowance related to the separation of Mr. Osanloo and year-over-year impact of deferred tax asset remeasurement due to effective state tax rate changes, 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 for the year ended December 28, 2025, December 29, 2024 and December 31, 2023 differs from the statutory rate of 21% primarily because the Company is not liable for income taxes on the portion of OpCo’s earnings that are attributable to non-controlling interests, deferred tax adjustments, impacts from equity-based award activity and the change in valuation allowance. Deferred Tax Assets The components of deferred tax assets and liabilities are as follows (in thousands): December 28, 2025 December 29, 2024 Deferred tax assets: Investment in partnership $ 41,532 $ 63,906 Tax Receivable Agreement 86,600 78,462 Net operating loss carryforwards 74,433 47,005 Interest limitation carryforwards 14,994 14,557 Other assets 682 629 Total gross deferred tax assets 218,241 204,559 Valuation allowance ( 6,975 ) ( 7,150 ) Net deferred tax assets $ 211,266 $ 197,409 As described in Note 11. Stockholders' Equity, we acquired LLC Units in connection with the IPO and Transactions and Secondary Offerings. During the years ended December 28, 2025 and December 29, 2024, we recognized a deferred tax asset in the amount of $ 41.5 million and $ 63.9 million, respectively, associated with the basis difference in our investment in Portillo's OpCo from acquiring these LLC Units. During the years ended December 28, 2025 and December 29, 2024, we also recognized deferred tax assets in the amount of $ 86.6 million and $ 78.5 million, respectively, related to additional tax basis increases generated from expected future payments under the TRA and related deductions for imputed interest on such payments. 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. During the years ended December 28, 2025 and December 29, 2024, the Company recognized deferred tax assets of $ 41.5 million and $ 63.9 million, respectively, associated with the basis difference in its investment in Portillo's OpCo from acquiring these LLC Units. However, a portion of the total basis difference will 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. As of December 28, 2025 and December 29, 2024, the Company recorded a valuation allowance in the amount of $ 7.0 million and $ 7.2 million, respectively, against the deferred tax asset. As of December 28, 2025 and December 29, 2024, the Company had federal and state net operating loss carry forwards of $ 74.4 million and $ 47.0 million, respectively, available to reduce future taxable income, if any. Federal losses that arose prior to 2018 will begin to expire in 2034. Federal losses generated after 2017 will be carried forward indefinitely. The majority of state losses will begin to expire in 2034 and future periods. As of December 28, 2025 and December 29, 2024, the Company had interest limitation carry forwards of $ 15.0 million and $ 14.6 million, respectively, as a result of the Company's ownership interest in Portillo's OpCo. Unrecognized Tax Benefits The Company recorded no unrecognized tax benefits as of December 28, 2025 and December 29, 2024. Portillo's Inc. was formed in June 2021 and did not engage in any operations prior to the IPO and Transactions. Portillo's has filed all income tax returns for tax years through Portillo's Inc. Form 10-K | 69 PORTILLO'S INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 2024. These returns are subject to examination by taxing authorities for U.S. federal and state income tax purposes. Additionally, although Portillo's OpCo is treated as a partnership for U.S. federal and state income taxes purposes, it is still required to file an annual U.S. Return of Partnership Income, which is subject to examination by the Internal Revenue Service ("IRS"). As of December 28, 2025, there are no ongoing U.S. federal, state or local income tax return examinations. Tax Receivable Agreement Pursuant to the Company's election under section 754 of the Internal Revenue Code (the "Code"), the Company expects to obtain an increase in its share of the tax basis in the net assets of Portillo's OpCo when LLC Units are exchanged by other members. The Company intends to treat any exchanges of LLC Units as direct purchases of LLC Units for U.S. federal income tax purposes. These increases in tax basis may reduce the amounts that would otherwise be paid in the future to the U.S. federal, state and local authorities. These increases may also decrease gains (or increase losses) on future dispositions of certain assets to the extent tax basis is allocated to those assets. In the second quarter of 2025, in connection with the pre-IPO LLC Members unit redemption previously discussed in Note 11. Stockholders' Equity, 7,290,465 LLC Units were redeemed for newly-issued shares of Class A common stock. As a result, an increase in the tax basis of net assets of Portillo's OpCo subject to the provisions of the TRA was recorded. The Company recorded a deferred tax asset of $ 16.8 million and an additional TRA liability of $ 38.5 million. In 2024, in connection with the pre-IPO LLC Members unit redemption previously discussed in Note 11. Stockholders' Equity, 840,992 LLC Units were redeemed for newly-issued shares of Class A common stock. As a result, an increase in the tax basis of net assets of Portillo's OpCo subject to the provisions of the TRA was recorded. The Company recorded a deferred tax asset of $ 1.7 million and an additional TRA liability of $ 4.3 million. In 2024, in connection with the Q1 2024 Secondary Offering previously discussed in Note 11. Stockholders' Equity, 5,832,371 LLC Units were redeemed by the pre-IPO LLC Members for newly-issued shares of Class A common stock. As a result, an increase in the tax basis of net assets of Portillo's OpCo subject to the provisions of the TRA was recorded. The Company recorded a deferred tax asset of $ 17.8 million and an additional TRA liability of $ 33.7 million. As of December 28, 2025, we estimate that our obligation for future payments under the TRA totaled $ 352.4 million. The Company made payments of $ 7.7 million under the TRA during the year ended December 28, 2025 relating to tax year 2023 and we expect a payment of $ 7.9 million relating to tax year 2024 to be made within the next 12 months. Refer to Note 2. Summary Of Significant Accounting Policies for additional information on the TRA. One Big Beautiful Bill Act On July 4, 2025, the One Big Beautiful Bill Act (the "Act") was signed into law. The Act includes significant provisions, such as the permanent extension of certain expiring provision of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and other implemented through 2027. We have evaluated the potential effects of the relevant provisions of the Act and do not expect a significant financial statement impact as a result of the Act. NOTE 15. 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 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. The computations of basic and diluted earnings per share for the years ended December 28, 2025, December 29, 2024 and December 31, 2023 are as follows (in thousands): Portillo's Inc. Form 10-K | 70 PORTILLO'S INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Fiscal Years Ended December 28, 2025 December 29, 2024 December 31, 2023 Net income $ 21,092 $ 35,076 $ 24,818 Net income attributable to non-controlling interests 1,747 5,559 6,394 Net income attributable to Portillo's Inc. $ 19,345 $ 29,517 $ 18,424 Shares: Weighted-average number of common shares outstanding-basic 68,821 61,050 53,807 Dilutive unit awards 2,266 2,932 3,501 Weighted-average number of common shares outstanding-diluted 71,087 63,983 57,308 Basic net income per share $ 0.28 $ 0.48 $ 0.34 Diluted net income per share $ 0.27 $ 0.46 $ 0.32 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 outstanding shares were excluded from the calculation of diluted earnings per share because they would be antidilutive or subject to performance conditions which have not been satisfied by the end of the reporting period (in thousands) : Fiscal Years Ended December 28, 2025 December 29, 2024 December 31, 2023 Performance Stock Options 344 1,377 1,812 Performance Stock Units 222 291 — Restricted Stock Units 599 137 5 Stock Options — 315 — Total shares excluded from diluted earnings per share 1,165 2,120 1,817 NOTE 16. 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. We maintain insurance coverage with third-party insurers to limit our total exposure. The likelihood of loss for these legal proceedings, based on definitions within contingency accounting literature, ranges from remote to reasonably possible to probable. When probable and reasonably estimable, the losses are accrued. 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 consolidated financial statements. During 2024, a former team member from one of the Company's two California restaurants filed a class action lawsuit alleging wage and hour violations and unfair competition, as well as claims under the California Private Attorneys General Act (“PAGA”). As of December 28, 2025, a $ 0.8 million litigation reserve has been recorded in accounts payable on our consolidated balance sheet. On August 19, 2025, plaintiffs filed a wrongful death and survival action in Cook County, Illinois, arising out of a vehicle accident that occurred at a Portillo’s location in Oswego, Illinois. Discovery is expected to continue in the coming months. At this time a loss is reasonably possible but not estimable, and as a result, no litigation reserve has been recorded on our consolidated balance sheet as of December 28, 2025. As of December 29, 2024, the Company recorded no loss contingencies. Portillo's Inc. Form 10-K | 71 PORTILLO'S INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 17. SEGMENT INFORMATION The Company’s chief operating decision maker (the “CODM”) is its Interim Chief Executive Officer. As the CODM reviews financial performance and allocates resources at a consolidated level on a recurring basis, the Company has one operating segment and one reportable segment. The CODM allocates resources and assesses performance of the Company based on net income (loss), as reported on the consolidated statement of operations, which as the segment measure of profit and loss that is closest to GAAP, is the required segment measure. Net income was $ 21.1 million, $ 35.1 million, and $ 24.8 million for the fiscal years ended December 28, 2025, December 29, 2024, and December 31, 2023, respectively. In addition to net income (loss), the CODM also reviews revenue, operating income (loss), restaurant-level adjusted EBITDA and adjusted EBITDA. The CODM reviews these measures (i) to evaluate the Company's operating results and the effectiveness of business strategies, (ii) internally as benchmarks to compare the Company's performance to its competitors and (iii) as factors in evaluating management’s performance when determining incentive compensation. Additionally, the Company believes these measures are important to evaluate the performance and profitability of our restaurants, individually and in the aggregate. The CODM does not review segment assets and segment expenses at a level different than what is reported in the Company's consolidated balance sheet and consolidated statement of operations. Additionally, the CODM regularly receives information about the Company's capital expenditures which are reported in the Company's consolidated statement of cash flows as purchase of property and equipment under investing activities. No guest accounts for 10% or more of our revenues. NOTE 18. RELATED PARTY TRANSACTIONS As of both December 28, 2025 and December 29, 2024, the related parties’ receivables balance consisted of $ 0.3 million, due from C&O, which is included in accounts and tenant improvement receivables in the consolidated balance sheet. 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. The Company incurred the following Olo-related costs for th e fiscal years ended December 28, 2025, December 29, 2024, and December 31, 2023 (in thousands): Fiscal Years Ended December 28, 2025 December 29, 2024 December 31, 2023 Food, beverage and packaging costs $ 1,932 $ 1,996 $ 2,236 Other operating expenses 580 477 423 Total Olo-related costs $ 2,512 $ 2,473 $ 2,659 As of December 28, 2025 and December 29, 2024, $ 0.3 million and $ 0.4 million, respectively, were payable to Olo and were included in accounts payable in the 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 fiscal year ended December 28, 2025 and fiscal year ended December 29, 2024, the Company made TRA payments of $ 7.7 million relating to tax year 2023 and $ 4.4 million relating to tax year 2022. We expect a payment of $ 7.9 million relating to tax year 2024 to be paid within the next 12 months. Portillo's Inc. Form 10-K | 72 PORTILLO'S INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Fiscal Years Ended (in thousands) December 28, 2025 December 29, 2024 Current portion of Tax Receivable Agreement liability $ 7,910 $ 7,686 Tax Receivable Agreement liability 344,524 316,893 Redemption of LLC Units In connection with the redemption of LLC units previously discussed in Note 11. Stockholders' Equity, Berkshire partners and its affiliates beneficially own approximately 5.2 % of the Company as of December 28, 2025. Transactions with Non-Controlling Interest Holders Fiscal Years Ended (in thousands) December 28, 2025 December 29, 2024 Distributions paid to non-controlling interest holders $ 1,291 $ 838 Contributions from non-controlling interest holders $ 350 $ — NOTE 19. SUBSEQUENT EVENTS On February 11, 2026, we announced that Brett Patterson, 57, who most recently served as Chief Executive Officer of Miller’s Ale House, Inc., will join the Company, serving as the Company’s President and Chief Executive Officer and a member of the Company’s Board of Directors, effective February 23, 2026, and as principal executive officer, effective February 25, 2026. Mr. Patterson will succeed Mr. Michael A. Miles, Jr., who has served as Interim President and Chief Executive Officer since September 21, 2025. Mr. Miles will continue to serve as Chairman of the Board of Directors of the Company (the “Board”). Upon concluding his tenure as Interim President and Chief Executive Officer, Mr. Miles is expected to resume his status as an independent director on the Board. Portillo's Inc. Form 10-K | 73 Table of Contents Schedule II: Valuation and Qualifying Accounts Additions Deferred tax asset valuation allowance (in thousands): Balance at beginning of period Charged to costs and expenses Charged to other accounts Reductions Balance at end of period Fiscal year ended December 28, 2025 $ 7,150 $ 346 $ — $ 521 $ 6,975 Fiscal year ended December 29, 2024 $ 9,200 $ 1,190 $ — $ 3,240 $ 7,150 Fiscal year ended December 31, 2023 $ 11,349 $ 1,239 $ — $ 3,388 $ 9,200 Portillo's Inc. Form 10-K | 74 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES None.