And importantly, we grew operating cash flow by 24.4% to a record level for Portillo's. Let's dive into the factors that drove the success. First, we were operationally on-point. We believe the best way to drive revenue and traffic in a sustainable fashion is to give our guests the outstanding experience we're known for and they've come to expect. In the fourth quarter, we did just that. The result was strong revenue and margin performance, multiyear highs in overall guest satisfaction, and a current Net Promoter Score of nearly 70, outperforming most of our peers. We know the play, we serve abundant, delicious food at a fantastic price in an engaging environment. This is the number one way we create value for our guests and keep them coming back.

In Q4, we flexed our multichannel muscle extremely well. We excelled in dine-in, our drive thrus were hummin, pickup and delivery orders were flying off the shelves, and we did a great job growing our catering business. For example, in 2023, we invested in dedicated catering resources such as a new concierge service to provide our guests with a high-touch ordering experience. We also strengthened our ability to handle large-scale catering events. For example, we serve holiday meals to the frontline workers of a major airline in both Chicago and Arizona. The overarching theme there is that these investments are driving strong catering sales and will help us to continue to grow this channel. Today, catering represents only about 5% of our overall revenue.

We know it can be more. We're excited about the opportunities to grow this channel, by marketing additional catering occasions and expanding this channel across our new markets. So speaking of marketing, in the lead-up to the holiday season we ran an advertising campaign in Chicago that brought the sites, smells and sounds of Portillo's to the forefront. Instead of using discounting to drive traffic, we simply reminded fans in our largest market why they love Portillo's. If you haven't seen our ads, we have one linked on our Investor Relations website and you can see for yourself how a simple message like this can work as a traffic driver. And as we move forward in the New Year, we're going to continue to leverage traffic driving tools and initiatives.

One that I'm excited to share is that we'll be adding two new salads to our permanent menu soon. As you know we take menu innovation very seriously at Portillo's. We don't just add items to add. They have to fill a gap in the menu, makes sense operationally and most importantly, be Utterly Craveable. Portillo's already generates more than $650,000 in salad sales per restaurant, per year, with our beloved Chopped Salad is the best seller. Based on consumer and competitive data, we know we've got space to add more variety to this already Craveable Menu category. So we created a Spicy Chicken version of our signature Chopped Salad. We've also tested a Chicken Pecan Salad with a new Honey Peppercorn dressing! Like all of our salads, these are also made fresh to order and you can customize all the ingredients, however you want.

Both test salads are selling really well. And we look forward to rolling them out system-wide soon. Now let's pivot to development. In 2023, we opened 12 restaurants including six in the fourth quarter. That 12 includes, eight planned 2023 restaurants as well as the four carryovers from the prior year. This is the most we've opened in a single year. And I'm excited for what this means. And what we can do in the future. We've already got a lot of momentum heading into 2024. And you can expect it to be another strong year of growth for us. We've committed to at least nine new restaurants in 2024 pipelines, five of which are already under construction. And by the way, we self-fund all of this growth. Our new restaurants generate cash flow immediately.

And we put all that cash right back into the business, to fund further expansion. Now as for unit economics, I've been told that everyone is sick of me bragging about the Colony restaurant in Texas. So let's talk about some of the other stars of the class of 2023. I'm extremely happy with the results coming out of our growth markets in particular. Fort Worth, Texas! and Claremont Florida have both opened strong out of the gate and especially impressive with our new efficient kitchen layout. We also opened our second pickup location in Rosemont Illinois. We continue to learn a lot from this model. And we were and we're excited about its potential for Portillo's, as we continue to grow. Remember that, this model has everything except a dine-in capability.

So it's essentially a drive-through. We delivered a strong finish for the class of 2023. And we're looking forward to entering the Houston market in 2024. All told, we're really happy with the quarter and how the year ended. We executed on the fundamentals of our business and invested incrementally to drive brand awareness. In 2024, we will continue to flex drive, traffic driving tools, driving success first and foremost by being operationally sound and protecting our value proposition. We're just building on the factors that have made Portillo's great for 60 years. We continue to execute against our playbook, providing a great experience and great food, at a great price point is not ours -- are not our -- not so secret-sauce. It's how we drive the kind of financial results you saw from us in 2023.

With that let me hand it over to Michelle.

Michelle Hook: Great. Thank you, Michael and good morning everyone. In Q4, we saw strong top line revenue growth. During the fourth quarter, revenues were up $187.9 million, reflecting an increase of $37 million or 24.5% compared to last year, driven by a 4.4% increase in same-restaurant sales combined with the opening of new restaurants. The same-restaurant sales increase of 4.4% was primarily driven by an increase in average check of 3.1% and a 1.3% increase in transactions. The higher average check was driven by an approximate 6% increase in certain menu prices, partially offset by product mix. We had 14 weeks this fiscal quarter versus 13 weeks last year. Excluding the 14th week, revenue in the fourth quarter increased approximately 15.3%.

The 14th week and fiscal 2023 included Christmas Day resulting in six operating days. You have all seen choppy performance during the first quarter due to winter weather and consumer headwinds in our industry. We are not immune to that, but we don't expect that to derail the rest of our year. Our long-term growth algorithm reflects low single digit comps. Now there will be years when unexpected things happen in any given quarter and years when we outperform. But on average, we have confidence we can hit that target on an annual basis. And we feel no different as we sit here today. On the development front, we expect to open at least nine new restaurants in the class of 2024. We currently expect one new opening later in the first quarter of this year with two to three openings in each of the subsequent quarters.

We remain committed to delivering on our long-term mid-teens revenue growth target, primarily through new restaurant growth while continuing to deliver positive comp growth. We updated our long-term outlook in September at our development day increasing our restaurant growth and revenue targets. These are also outlined in our earnings release issued this morning. Moving on to our costs, food beverage and packaging costs as a percentage of revenues decreased to 34.8% in the fourth quarter of 2023 from 35% in the fourth quarter of 2022. This decrease was primarily due to an increase in our revenue and lower third-party delivery commissions, partially offset by 4.4% increase in commodity prices. We estimate overall commodity inflation to stay consistent with recent trends and are currently estimating commodity inflation in the mid-single digits in 2024.

Labor as a percentage of revenues decreased to 25.4% in the fourth quarter of 2023 from 26.5% in the fourth quarter of 2022. The decrease was primarily driven by an increase in our revenue partially offset by higher labor utilization and incremental investments in our team members, including hourly rate increases and variable based compensation. Hourly labor rates were up 2.4% in the fourth quarter of 2023, and up 4.3% year-to-date versus the prior periods. We are currently estimating labor inflation in the mid-single digits in 2024. Other operating expenses increased $2.4 million or 13.5% in the fourth quarter of 2023 compared to the fourth quarter of 2022, which was primarily driven by the opening of new restaurants, as well as higher credit card fees, utilities and repair and maintenance expenses.

Occupancy expenses increased $0.6 million or 7.4% in the fourth quarter of 2023 compared to the fourth quarter of 2022, primarily driven by the opening of new restaurants. As a percentage of revenues, occupancy expenses decreased 0.7% compared to prior year driven by an increase in our revenue. Restaurant-level adjusted EBITDA increased 42.7% to $45.7 million in the fourth quarter of 2023. Restaurant level adjusted EBITDA includes an impact of approximately $3.5 million due to the 14th week. Restaurant-level adjusted EBITDA margins were 24.3% in the fourth quarter of 2023 versus 21.2% in the fourth quarter of 2022, a strong improvement of 310 basis points quarter-over-quarter. For the full year 2023, our restaurant-level adjusted EBITDA margins were also 24.3%, which was an improvement of 170 basis points versus fiscal year 2022.

As we said at the beginning of the year, increasing our margins was a focus in 2023 and we delivered. Our improvement in restaurant-level adjusted EBITDA margins is on top of opening a record level of new restaurants in 2023, which all have a lower margin profile to starts. This improvement was the result of our ongoing efforts to deploy strategic pricing actions, elevate guest experiences and implement operational efficiencies. We will continue to focus on driving long-term shareholder value by focusing on our operational execution and a disciplined development strategy on pricing. On pricing. As a reminder, in 2023, we took two pricing actions in January in May. We recently announced an additional pricing action in January of 2024 of approximately 1.5% we will continue to monitor our cost pressures the competitive landscape as well as consumer sentiment to inform our pricing decisions in the coming quarters.

This recent action puts us as an effective price increase of nearly 5% in the first quarter of 2024. Our general and administrative expenses increased by $3.8 million to 11.5% of revenue in the fourth quarter of 2023 from 11.7% in the fourth quarter of 2022. The increase was primarily driven by higher variable-based compensation, higher advertising expenses due to our Chicago land ad campaign, increased wages and benefits attributable to annual rate increases and the filling of open positions to execute our growth plans, partially offset by a decrease in equity-based compensation expense and insurance. In 2024, we currently expect general and administrative expenses to be between $85 million to $87 million. Pre-opening expenses increased $1 million to 2.1% in the fourth quarter of 2023 from 2% in the fourth quarter of 2022.

The increase was due to the number and timing of executed and planned new restaurant openings. We expect pre-opening expenses to be between $8 million to $9 million in 2024. Please keep in mind that our reported pre-opening expenses as well as our estimate for 2024 includes deferred or non-cash rent expense as well as actual costs incurred prior to the restaurants opening. All this led to adjusted EBITDA of $26.1 million in the fourth quarter of 2023 versus $18.1 million in the fourth quarter of 2022, an increase of 44.5%. Adjusted EBITDA includes an impact of approximately $2.4 million due to the 14th week for the full year 2023. Our adjusted EBITDA margins were 15% compared to 14.5% for 2020 to below the EBITDA line. Interest expense was $6.9 million in the fourth quarter of 2023 a decrease of $1.4 million from the fourth quarter of 2022.

This decrease was primarily driven by improved lending terms associated with our 2023 term loan and revolver facility. As of today, our outstanding borrowings under the revolver are $13 million. Our effective interest rate was 8.4% for 2023 versus 10.4% for 2022. Income tax benefit was $0.4 million in the fourth quarter of 2023, and we had an income tax expense of $3.2 million for the year. Our effective tax rate for the fourth quarter of 2023 was negative 3.8% driven by a change in our valuation allowance. Our effective tax rate for the year was 11.5% versus 9.6% in 2022. The increase in our effective income tax rate was primarily driven by an increase in the company's ownership interest in Portillo OpCo partially offset by a decrease in the valuation allowance and the recording of net operating loss carryforwards.

Our future effective tax rate will fluctuate as Class A equity ownership increases and as equity-based awards are exercised and best. As a reminder, we invest our strong operating cash flows into our future by self-funding our new restaurant growth. Cash from operations increased by 24.4% year-over-year to $70.8 million for the year. This was primarily driven by solid revenue growth across the existing base of restaurants, the record number of new restaurant openings in 2023 and margin expansion. Note that in the fourth quarter of 2023. We pulled forward some capital expenditures to support activity for the 2024 pipeline, were motivated to capture as many operating weeks as possible from our new restaurant openings in any year. You may see quarterly CapEx spend flex based on timing of new restaurant openings.

Having said that, we are committed to staying within the $6.2 million to $6.5 million average build cost range for the class of 2024. We previous previously shared that we have accelerated our time line to bring restaurant of the future into Q4 of this year. And remember, these are expected to carry an even lower build costs. In 2024, we estimate the CapEx range to be $90 million to $93 million, which will fund our 2024 openings and the first wave of our 2025 pipeline in addition to other operational CapEx needs. We are currently estimating that 85% of our 2024 projected CapEx will be spent on new restaurant builds, including early 2025 builds, 10% on investments in existing restaurants and 5% on other discretionary capital, including investments in our commissaries.

We are confident in the strength of our brand, our operational execution and look forward to continuing to deliver on our long-term outlook that was provided in our earnings release this morning. Thank you for your time. And with that, I'll turn it back to Michael.

Michael Osanloo: Thanks, Michelle. Before we open for questions, I want to reiterate how pleased we are with the progress our teams made in 2023. We grew revenue and adjusted EBITDA by double digits. We generated record operating cash flow. We opened 12 new restaurants. We ended the year with positive traffic and multiyear highs in guest satisfaction. None of this is possible without our great team members. I'm extremely proud of them and thankful to our frontline folks who delight our guests every single day. Feel great about these results, and I've never been more confident about our future. Thank you.

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