Portillo's Inc.PTLO
Portillo's Inc. Stock Compensation Disclosure
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 to three years on each of the anniversaries of the date of grant subject to continued service on such date.
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% | ||||||||||||
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 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.
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.
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 of 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 10th 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.About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.