First Watch Restaurant Group FY Conference Summary Company Overview - **Company**: First Watch Restaurant Group (NasdaqGS: FWRG) - **Date of Conference**: November 18, 2025 Key Industry Insights - **Industry Context**: The restaurant industry has faced significant commodity inflation, particularly in 2025, impacting pricing strategies across the sector [3][5][6] - **Focus on Value**: The company has maintained a disciplined pricing strategy, emphasizing value to drive customer traffic [4][6][8] Core Company Insights - **Pricing Strategy**: - Average check per person is below $18, which is considered a strong value given the quality of ingredients [4] - The company has implemented a conservative pricing approach, resulting in a 3.5% price increase for the year, which is below the expected inflation rate of 6% [6][12] - **Traffic and Sales Growth**: - The company reported a 4% same-store sales growth and 1% traffic growth for the remainder of the year [22] - Positive traffic trends are attributed to effective marketing strategies and improved hospitality [23][52] - **Off-Premises Sales**: - Off-premises business accounts for about 20% of total sales, with more than half coming from third-party delivery services [18][20] - The company believes off-premises orders are incremental rather than cannibalizing dine-in traffic [20] Financial Performance - **Margins**: - The company aims to maintain restaurant-level margins between 18%-20% [12][57] - Recent commodity pressures have impacted margins, but the company is optimistic about stabilization in labor costs [12][13] - **New Restaurant Openings**: - The company opened 21 new restaurants in Q3 2025, with plans for continued growth [37][40] - Approximately 50% of new units are second-generation conversions, which are expected to yield higher sales volumes [44][49] Market Positioning - **Competitive Landscape**: - First Watch differentiates itself from legacy family diners and focuses on high-quality, regional competitors [10][61] - The brand positions itself as approachable and offers a balance between indulgent and value-oriented dining experiences [61][62] - **Brand Awareness**: - The company acknowledges low brand awareness but sees it as an opportunity for growth through targeted marketing efforts [28][29] Consumer Behavior Insights - **Demographics**: - The customer base skews towards higher-income households, with a significant shift in average age from 57 to below 50 over the past seven years [35][36] - **Traffic Trends**: - The company has not observed significant declines in customer spending or traffic, indicating resilience in consumer behavior despite economic pressures [51][52] Future Outlook - **2026 Expectations**: - The company is optimistic about maintaining momentum into 2026, with expectations for continued growth in both sales and new restaurant openings [74] - Key focus areas include managing commodity costs, enhancing operational efficiency, and expanding into new markets [74] Additional Considerations - **Commodity Risks**: - Potential risks for 2026 include ongoing volatility in egg and bacon prices due to external factors [73] - **Marketing Strategies**: - The company is refining its marketing efforts to increase brand awareness while maintaining its image as a neighborhood restaurant [28][29] This summary encapsulates the key points discussed during the First Watch Restaurant Group FY Conference, highlighting the company's strategies, market positioning, and future outlook in the context of the restaurant industry.

Core Insights - First Watch Restaurant Group, Inc. will participate in the Stephens Annual Investment Conference on November 18, 2025, to engage with institutional investors and host a fireside chat [1] - The fireside chat will be available for live streaming and will be archived on the company's investor relations website [2] Company Overview - First Watch is recognized as the leading Daytime Dining concept, specializing in made-to-order breakfast, brunch, and lunch with a focus on fresh ingredients [3] - The company follows a "Follow the Sun" culinary philosophy, rotating its chef-driven menu five times a year to highlight seasonal flavors and offering popular dishes such as Lemon Ricotta Pancakes and Million Dollar Bacon [3] - First Watch has raised over $1.7 million through donations linked to children's meals served, supporting various community organizations [3] - The company has received numerous accolades, including being voted 2025's 1 Best Breakfast by Newsweek's Readers' Choice Awards and recognized as the 1 Most Loved Workplace in America for 2024 and 2025 [3] - First Watch operates more than 620 restaurants across 32 states, emphasizing quality, hospitality, and community engagement [3]

Core Insights - First Watch Restaurant Group, Inc. (FWRG) reported revenue of $316.02 million for the quarter ended September 2025, marking a year-over-year increase of 25.6% [1] - The company's EPS for the same period was $0.05, up from $0.03 a year ago, but fell short of the consensus estimate of $0.08, resulting in an EPS surprise of -37.5% [1] - The reported revenue exceeded the Zacks Consensus Estimate of $306.95 million, resulting in a positive surprise of +2.96% [1] Financial Performance Metrics - Same-restaurant sales growth was reported at 7.1%, surpassing the average estimate of 4.5% based on three analysts [4] - Total system-wide restaurants reached 620, exceeding the average estimate of 611 by three analysts [4] - Franchise-owned restaurants totaled 72, slightly above the average estimate of 71 based on two analysts [4] - Company-owned restaurants numbered 548, compared to the average estimate of 540 based on two analysts [4] - Franchise revenues were reported at $2.39 million, below the average estimate of $2.49 million, representing a year-over-year decline of -9.8% [4] - Restaurant sales revenues were $313.64 million, exceeding the average estimate of $304.07 million, reflecting a year-over-year increase of +26% [4] Stock Performance - Shares of First Watch Restaurant Group have returned +0.1% over the past month, while the Zacks S&P 500 composite increased by +2.1% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Core Insights - First Watch Restaurant Group, Inc. (FWRG) reported quarterly earnings of $0.05 per share, missing the Zacks Consensus Estimate of $0.08 per share, representing an earnings surprise of -37.50% [1] - The company posted revenues of $316.02 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 2.96%, compared to year-ago revenues of $251.61 million [2] - The stock has underperformed the market, losing about 14.8% since the beginning of the year, while the S&P 500 gained 16.5% [3] Earnings Performance - Over the last four quarters, the company has not surpassed consensus EPS estimates [2] - The current consensus EPS estimate for the coming quarter is $0.09 on revenues of $316.84 million, and $0.21 on revenues of $1.21 billion for the current fiscal year [7] Market Outlook - The company's earnings outlook and estimate revisions will be crucial for future stock performance [4] - The Zacks Rank for First Watch Restaurant Group is currently 3 (Hold), indicating expected performance in line with the market [6] - The Retail - Restaurants industry is currently in the bottom 14% of Zacks industries, which may impact stock performance [8]

Financial Data and Key Metrics Changes - Total revenue increased by 25.6% year-over-year, reaching $316 million in Q3 2025, driven by strong same-restaurant sales growth of 7.1% and positive traffic growth of 2.6% [20][21] - Restaurant-level operating profit margin improved to 19.7%, an increase of 80 basis points compared to the same quarter last year [23] - Adjusted EBITDA rose to $34.1 million, up $8.5 million from the previous year, with an adjusted EBITDA margin of 10.8% [23][24] Business Line Data and Key Metrics Changes - The company opened 21 new system-wide restaurants in Q3 2025, with 18 being company-owned and 3 franchise-owned, bringing the total to 620 system-wide restaurants [24] - Newly opened restaurants performed exceptionally well, with some locations achieving opening week sales exceeding 185% of the average [10][24] Market Data and Key Metrics Changes - Traffic growth in the third-party delivery channel increased significantly, contributing over 3% to same-restaurant sales in the quarter [55] - The month of September marked the highest rate of same-restaurant sales growth for the year, coinciding with the launch of the fall seasonal menu [22] Company Strategy and Development Direction - The company aims to open 63-64 new restaurants in 2025, representing nearly 11% system-wide growth, with a focus on maintaining a strong market position in daytime dining [5][12] - A strategic emphasis on second-generation sites has been noted, with about 50% of new openings in 2025 being second-generation locations [39] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate a challenging environment while maintaining strong growth, emphasizing a long-term focus on market position and traffic growth over short-term margin protection [6][19] - The company updated its guidance for same-restaurant sales growth to approximately 4% and total revenue growth to 20-21% for the remainder of the year [25] Other Important Information - The company has been recognized as America's number one most loved workplace for two consecutive years, highlighting its commitment to employee satisfaction and culture [15] - Enhanced marketing investments have shown positive results, with plans to expand marketing efforts in 2026 based on insights gained from current campaigns [16][34] Q&A Session Summary Question: Can you help us deconstruct the traffic results? - Management noted that both in-restaurant and off-premise channels contributed to traffic growth, with improvements in restaurant dining observed [30] Question: What is helping bolster results at new openings? - The success of new openings is attributed to prime locations, effective marketing strategies, and operational excellence [31][32] Question: What are your plans to expand marketing efforts in 2026? - While specific plans for 2026 were not disclosed, management expressed optimism about expanding marketing initiatives based on successful campaigns in 2025 [34] Question: Can you elaborate on the impact of marketing on sales trends? - Management indicated that awareness has increased steadily, contributing to consistent results across geographies [46] Question: What is the outlook for commodity and labor inflation? - Management expects commodity inflation to be approximately 6% and labor inflation to be around 4% for the upcoming year [25][57]

CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS AND NON-GAAP FINANCIAL MEASURES Q3 2025 SUPPLEMENTAL INFORMATION November 4, 2025 The forward-looking statements included in this presentation are made only as of the date hereof and are expressly qualified in their entirety by these cautionary statements. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law. NON-GAAP FINANCIAL MEASURE ...

Financial Performance - Total revenues for the thirteen weeks ended September 28, 2025, were $316.022 million, a 25.6% increase from $251.609 million for the same period in 2024[13] - Restaurant sales reached $313.636 million for the thirteen weeks ended September 28, 2025, compared to $248.965 million in the prior year, reflecting a 26.0% growth[13] - Net income for the thirteen weeks ended September 28, 2025, was $2.991 million, up from $2.112 million in the same quarter of 2024, representing a 41.5% increase[13] - Operating income for the thirteen weeks ended September 28, 2025, was $10.050 million, compared to $6.313 million in the prior year, marking a 59.5% increase[13] - The company reported a comprehensive income of $3.057 million for the thirteen weeks ended September 28, 2025, compared to a loss of $560,000 in the same period of 2024[13] - For the thirty-nine weeks ended September 28, 2025, net income was $4,268,000, a decrease from $18,226,000 for the same period in 2024[17] - Basic net income per common share increased to $0.05 for the thirteen weeks ended September 28, 2025, up from $0.03 in the same period of 2024[78] Assets and Liabilities - Total assets as of September 28, 2025, were $1.720 billion, an increase from $1.514 billion as of December 29, 2024[11] - Total liabilities increased to $1.113 billion as of September 28, 2025, compared to $918.967 million at the end of the previous fiscal year[11] - The company’s accumulated deficit decreased to $49.554 million as of September 28, 2025, from $53.822 million at the end of the previous fiscal year[11] - As of September 28, 2025, total debt, net was $264.1 million, an increase from $198.3 million as of December 29, 2024[40] - Total accrued liabilities increased to $49.8 million as of September 28, 2025, compared to $39.6 million as of December 29, 2024[39] Cash Flow and Investments - Net cash provided by operating activities was $107,452,000 for the thirty-nine weeks ended September 28, 2025, compared to $92,749,000 in 2024, indicating a 15.8% increase[17] - Capital expenditures for the same period were $120,108,000, up from $87,272,000 in 2024, marking a 37.7% increase[17] - The company reported a net cash used in investing activities of $175,771,000 for the thirty-nine weeks ended September 28, 2025, compared to $165,919,000 in 2024[17] - Proceeds from borrowings on the revolving credit facility amounted to $261,500,000 in 2025, significantly higher than $22,500,000 in 2024[17] - The ending cash and cash equivalents balance was $20,714,000 as of September 28, 2025, down from $51,129,000 in 2024[17] Expenses - Labor and related expenses for the thirteen weeks ended September 28, 2025, were $102,387,000, a 22.2% increase from $83,756,000 in the same period of 2024[76] - Occupancy expenses increased to $25,891,000 for the thirteen weeks ended September 28, 2025, compared to $21,075,000 in the same period of 2024, representing a 22.9% increase[76] - General and administrative expenses for the thirteen weeks ended September 28, 2025, were $30,869,000, up from $25,604,000 in the same period of 2024, indicating a 20.5% increase[76] - Depreciation and amortization for the same period was $54,355,000, compared to $41,960,000 in 2024, reflecting a 29.5% increase[17] - Stock-based compensation increased to $7,926,000 in 2025 from $6,394,000 in 2024, representing an increase of 24%[17] Acquisitions and Growth - The company acquired 19 franchise-operated First Watch restaurants in two transactions during the second quarter of 2025, with a total purchase price of $56.2 million[33][34] - Goodwill recognized from the acquisitions amounted to $21.6 million, reflecting expected synergies and an assembled workforce[34] - The company expects to finalize the valuations of acquired assets within one year from the acquisition dates[33] - The weighted average estimated useful life of reacquired rights from the acquisitions is 6.1 years[35] Lease and Debt Management - Total lease assets increased to $622.1 million as of September 28, 2025, compared to $530.4 million as of December 29, 2024[52] - Total lease liabilities increased to $731.2 million as of September 28, 2025, from $614.0 million as of December 29, 2024[52] - Operating lease expense for the thirteen weeks ended September 28, 2025, was $21.9 million, up from $18.3 million for the same period in 2024[54] - The company entered into two variable-to-fixed interest rate swaps with an aggregate notional amount of $90.0 million, paying a fixed rate of 4.16% and maturing on October 6, 2026[48] - An additional two variable-to-fixed interest rate swaps were entered into with a notional amount of $60.0 million, paying a fixed rate of 4.42% and maturing on June 30, 2027[49] Tax and Market Risks - The effective income tax rate for the thirteen weeks ended September 28, 2025, was 47.3%, an increase from 39.6% in the prior year[66] - The company has established a valuation allowance for deferred tax assets deemed not realizable as of September 28, 2025[71] - The company does not anticipate any material changes to its exposure to market risks as disclosed in the 2024 Form 10-K[169] Shareholder Information - The weighted average number of common shares outstanding was 61,027,278 for the thirteen weeks ended September 28, 2025, compared to 60,428,016 in the same period of 2024[13] - The company granted a total of 1,028,509 restricted stock units during the thirty-nine weeks ended September 28, 2025[62]

Revenue Growth - Total revenues increased by 25.6% to $316.0 million compared to $251.6 million in Q3 2024[6] - System-wide sales increased by 20.9% to $352.7 million compared to $291.8 million in Q3 2024[6] - Total revenues for the thirty-nine weeks ended September 28, 2025, reached $906,149,000, up from $752,619,000 in 2024, reflecting a growth of 20.4%[36] Same-Restaurant Performance - Same-restaurant sales growth was 7.1%, with same-restaurant traffic growth of 2.6%[6] - Restaurant sales for the thirteen weeks ended September 28, 2025, were $313,636,000, compared to $248,965,000 in 2024, representing a 26.0% increase[37] Profitability Metrics - Net income rose to $3.0 million, or $0.05 per diluted share, compared to $2.1 million, or $0.03 per diluted share in Q3 2024[6] - Adjusted EBITDA increased to $34.1 million from $25.6 million in the same period of 2024[6] - Adjusted EBITDA for the thirteen weeks ended September 28, 2025, was $34,099,000, compared to $25,624,000 in 2024, marking a 33.2% increase[25] - Restaurant level operating profit for the thirty-nine weeks ended September 28, 2025, was $164,573,000, up from $152,799,000 in 2024, indicating a growth of 7.7%[33] - Restaurant-level operating profit margin improved to 19.7% from 18.9% in the same period of 2024[6] - Adjusted EBITDA margin for the thirteen weeks ended September 28, 2025, was 10.8%, compared to 10.2% in 2024, showing an improvement of 0.6 percentage points[25] - The company reported a net income margin of 0.9% for the thirteen weeks ended September 28, 2025, compared to 0.8% in 2024, reflecting a slight improvement[36] Expenses and Costs - General and administrative expenses for the thirteen weeks ended September 28, 2025, totaled $33,746,000, compared to $27,680,000 in 2024, an increase of 22.0%[37] - The company incurred transaction expenses of $428,000 for the thirteen weeks ended September 28, 2025, compared to $375,000 in 2024, an increase of 14.1%[37] Expansion Plans - The company opened 21 new system-wide restaurants in 14 states, bringing the total to 620 restaurants across 32 states[6] - The company plans to open 60 to 61 new system-wide restaurants in FY25, net of closures[11] - Capital expenditures are projected to be approximately $150.0 million, primarily for new restaurant projects and remodels[11] Guidance - The updated guidance for FY25 includes an adjusted EBITDA of approximately $123 million[3][7] Income from Operations - Income from operations margin for the thirty-nine weeks ended September 28, 2025, was 2.1%, down from 4.7% in 2024, indicating a decline of 2.6 percentage points[33]

Core Insights - First Watch Restaurant Group reported a same-restaurant sales growth of 7.1% and total revenues increased by 25.6% to $316.0 million for Q3 2025 compared to $251.6 million in the same period of 2024 [1][7] - The company opened 21 new system-wide restaurants across 14 states, bringing the total to 620 restaurants [1][7] - Net income for the quarter was $3.0 million, or $0.05 per diluted share, compared to $2.1 million, or $0.03 per diluted share, in Q3 2024 [1][7] Financial Performance - Adjusted EBITDA for Q3 2025 was $34.1 million, up from $25.6 million in Q3 2024 [1][7] - System-wide sales increased by 20.9% to $352.7 million compared to $291.8 million in the same period of 2024 [7] - Restaurant-level operating profit margin improved to 19.7% from 18.9% in the same period of 2024 [7] Operational Highlights - Same-restaurant traffic growth was recorded at 2.6% [7] - The company plans to guide to the high end of its previous range for FY25 adjusted EBITDA at approximately $123 million [3][6] - Capital expenditures for the fiscal year are projected to be around $150 million, primarily for new restaurant projects and remodels [8] Future Outlook - The company anticipates opening 60 to 61 new system-wide restaurants in FY25, net of closures [8] - The updated guidance for total revenue growth is approximately 20.0%-21.0% for FY25 [8] - The company remains confident in achieving a robust finish to the year with continued aggressive growth [3]

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