Core Insights - First Watch Restaurant Group, Inc. plans to release its second quarter 2025 financial results on August 5, 2025, before the market opens [1] - A conference call and webcast will be held on the same day at 8:00 AM ET, hosted by the CEO and CFO [2] Company Overview - First Watch is a leading Daytime Dining concept specializing in made-to-order breakfast, brunch, and lunch using 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 [3] - First Watch has raised over $1.7 million for community causes through its donations for every kid's meal served [3] - The company operates more than 580 restaurants across 31 states and has received numerous awards for its breakfast and brunch offerings [3]

Summary of First Watch Restaurant Group (FWRG) FY Conference Call Company Overview - First Watch Restaurant Group is a leader in the breakfast and brunch segment, operating nearly 600 locations in the US with plans to expand to at least 2,200 locations, indicating significant growth potential [3][5][34]. Core Insights and Arguments - **Sales Guidance and Traffic Trends**: The company anticipates flat to slightly positive traffic in 2025, a performance not commonly expected among peers. This confidence stems from improved in-restaurant dining and a successful third-party delivery channel [5][6]. - **Marketing Strategy**: First Watch has enhanced its marketing efforts by utilizing a robust customer data warehouse, allowing for targeted advertising and direct customer engagement. This includes social media and geographic marketing strategies [9][10][14]. - **Margin Pressures**: The company has faced margin pressures due to inflation in key commodities such as eggs, avocados, bacon, and coffee. The management believes that most of this inflation is transitory and expects a return to normalcy in commodity prices [8][17][21][26]. - **New Store Performance**: New stores are performing approximately 10% above the system average, with expectations of achieving $2.6 million in annual unit volumes (AUVs) by their third year of operation [38][39]. Additional Important Points - **Third-Party Delivery Partnerships**: The company has optimized its relationships with third-party delivery platforms, which has contributed to a rebound in traffic after initial challenges [15][16]. - **Customer Loyalty Initiatives**: First Watch has implemented a "Surprise and Delight" program to enhance customer loyalty, which includes complimentary offerings to regular customers [28][29][32]. - **Operational Efficiency**: The introduction of Key Data Systems (KDS) has improved operational efficiency by aligning service and production timelines, contributing to better speed of service [45][46]. - **Consumer Sentiment**: The current consumer environment is described as fragile, with customers seeking more certainty and comfort in their dining experiences [51][52]. Conclusion First Watch Restaurant Group is positioned for growth with a strong marketing strategy, effective management of commodity costs, and a focus on enhancing customer loyalty and operational efficiency. The company remains optimistic about its future despite current market challenges.

Group 1 - The company specializes in analyzing restaurant stocks in the U.S. market, covering various segments such as QSR, fast casual, casual dining, fine dining, and family dining [1] - Advanced analytical models and specialized valuation techniques are employed to provide detailed insights and actionable strategies for investors [1] - The founder actively engages in academic and journalistic initiatives, contributing to institutions that promote individual and economic freedom [1] Group 2 - The company has no stock, option, or similar derivative position in any of the companies mentioned, nor plans to initiate any such positions within the next 72 hours [2] - The article expresses the author's own opinions and is not receiving compensation from any company mentioned [2] - Seeking Alpha clarifies that past performance is not a guarantee of future results and that no investment recommendations are being made [3]

Core Insights - First Watch Restaurant Group, Inc. (FWRG) reported revenue of $282.24 million for the quarter ended March 2025, reflecting a year-over-year increase of 16.4% [1] - The company's EPS was -$0.01, a decline from $0.12 in the same quarter last year, indicating a significant EPS surprise of -125.00% against the consensus estimate of $0.04 [1] - The reported revenue was slightly below the Zacks Consensus Estimate of $282.33 million, resulting in a surprise of -0.03% [1] Financial Performance Metrics - Same-restaurant sales growth was reported at 0.7%, which fell short of the average estimate of 1.4% by four analysts [4] - Total system-wide restaurants stood at 584, matching the average estimate from four analysts [4] - Franchise-owned restaurants totaled 86, slightly above the average estimate of 85 based on three analysts [4] - Company-owned restaurants numbered 498, just below the average estimate of 499 from three analysts [4] - Franchise revenues were reported at $2.65 million, below the average estimate of $2.74 million, representing a year-over-year decline of 15.7% [4] - Restaurant sales revenue was $279.59 million, aligning with the average estimate from four analysts, and showing a year-over-year increase of 16.8% [4] Stock Performance - Shares of First Watch Restaurant Group have returned +15.3% over the past month, outperforming the Zacks S&P 500 composite's +11.5% change [3] - The stock currently holds a Zacks Rank 3 (Hold), suggesting it may perform in line with the broader market in the near term [3]

Financial Performance - First Watch Restaurant Group reported a quarterly loss of $0.01 per share, missing the Zacks Consensus Estimate of $0.04, and down from earnings of $0.12 per share a year ago, representing an earnings surprise of -125% [1] - The company posted revenues of $282.24 million for the quarter ended March 2025, which was a 0.03% miss against the Zacks Consensus Estimate, compared to year-ago revenues of $242.45 million [2] - Over the last four quarters, the company has surpassed consensus EPS estimates just once and topped consensus revenue estimates two times [2] Market Performance - First Watch Restaurant Group shares have remained flat since the beginning of the year, contrasting with the S&P 500's decline of -3.9% [3] - The current consensus EPS estimate for the coming quarter is $0.16 on revenues of $304.63 million, and for the current fiscal year, it is $0.36 on revenues of $1.21 billion [7] Industry Outlook - The Retail - Restaurants industry, to which First Watch belongs, is currently ranked in the bottom 23% of over 250 Zacks industries, indicating potential challenges ahead [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact First Watch's stock performance [5]

Financial Data and Key Metrics Changes - Total first quarter revenues were $282.2 million, an increase of 16.4% compared to the previous year [23] - Same restaurant sales growth was positive at 0.7%, while same restaurant traffic was down 0.7% [23] - Adjusted EBITDA was $22.8 million, with adjusted EBITDA margins slipping to 8.1% from 11.8% [27][28] Business Line Data and Key Metrics Changes - The company opened 13 new system-wide restaurants during the quarter, including 10 company-owned and 3 franchise-owned [28] - New restaurants contributed significantly to revenue, with 33 new company-owned restaurants opened in the last two quarters [25][28] - Restaurant level operating profit margin was 16.5%, down from 20.8% in the same quarter last year [26] Market Data and Key Metrics Changes - The company experienced a return to positive traffic in January and March, with April showing the best monthly same restaurant traffic result in over two years [10][11] - The New England market is highlighted as a significant opportunity for expansion, with new locations performing above expectations [14] Company Strategy and Development Direction - The company is focused on growth through new restaurant openings and enhanced marketing efforts to drive brand awareness [9][12] - Strategic acquisitions of franchise restaurants in North and South Carolina and Missouri were completed to bolster presence in key states [15][16] - The company aims for double-digit percentage unit growth targets and a capital allocation strategy targeting cash on cash returns of around 35% [15] Management's Comments on Operating Environment and Future Outlook - Management noted that the macro environment remains volatile, with shifting expectations for consumer demand and input costs [9][10] - Despite current margin pressures from inflation and commodity costs, management believes these challenges are transitory [20][28] - The company maintains a positive outlook for the second half of 2025, expecting to sustain positive same restaurant traffic [33] Other Important Information - The company reported a net loss of $829,000 for the quarter [28] - Commodity inflation is expected to peak in the second quarter, with full-year expectations remaining in the high single digits [29][30] Q&A Session Summary Question: Can you expand on the comment that sales turned positive in March and then traffic turned positive in April? - Management noted that traffic trends improved sequentially, with positive dine-in traffic improvement for all four quarters last year [36][39] Question: What gives you confidence in driving traffic through third-party actions at a lower margin? - Management expressed confidence in the effectiveness of their strategies to drive traffic, despite cost pressures [40][41] Question: Can you discuss the learnings from increased media spend and engagement? - Management highlighted improved traffic trends as a result of their marketing efforts, with ongoing adjustments based on data [48][50] Question: What are your thoughts on commodity costs peaking in Q2? - Management explained that crop-related factors and the rebuilding of egg flocks contribute to the expectation of peaking commodity costs [51][52] Question: Can you elaborate on the marketing support across the system? - Almost the entire system is receiving marketing support, with elevated levels in certain markets [55][56] Question: How is the Florida market performing relative to the system? - Florida has outperformed the rest of the country, with continued new restaurant openings [96][97]

Financial Data and Key Metrics Changes - Total first quarter revenues were $282.2 million, an increase of 16.4% compared to the previous year [21] - Same restaurant sales growth was positive at 0.7%, while same restaurant traffic was down by 0.7% [21] - Adjusted EBITDA was $22.8 million, with adjusted EBITDA margins slipping to 8.1% from 11.8% [26][27] Business Line Data and Key Metrics Changes - The company opened 13 new system-wide restaurants during the quarter, including 10 company-owned and 3 franchise-owned [27] - Restaurant level operating profit margin decreased to 16.5% from 20.8% year-over-year [25] - Food and beverage expenses rose to 23.8% of sales compared to 21.8% in the same quarter last year, driven by commodity inflation [24] Market Data and Key Metrics Changes - The company reported a significant opportunity for expansion in the New England market, with successful openings in Massachusetts and plans for further locations in New Hampshire and Tennessee [12][13] - The Florida market has outperformed the rest of the country, with continued new restaurant openings [92] Company Strategy and Development Direction - The company is focused on growth through new restaurant openings and enhancing customer experiences, with a target of 59 to 64 net new system-wide restaurants for the year [30] - Strategic marketing efforts have been enhanced to drive brand awareness and customer engagement, particularly through digital and social media [10][11] - The company aims to maintain a long-term target of 18-20% on restaurant level operating profit margins [110] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the volatile macro environment affecting consumer demand and input costs, but expressed optimism about achieving positive traffic growth for the year [6][19] - The company expects commodity inflation to peak in the second quarter, with a forecast of high single-digit inflation for the full year [28][30] - Management remains confident in the brand's competitive positioning and customer service experience despite current margin pressures [19][90] Other Important Information - The company completed the acquisition of 16 restaurants in North and South Carolina and three in Missouri, enhancing its presence in key states [13] - The company is implementing a "surprise and delight" initiative to enhance customer loyalty, which has had a short-term impact on margins [17][74] Q&A Session Summary Question: Can you expand on the comment that sales turned positive in March and then traffic turned positive in April? - Management noted that traffic trends improved sequentially, with positive dine-in traffic improvement for all four quarters last year [36] Question: Can you talk more about the trade-off between driving traffic through third-party actions and other initiatives at a lower margin? - Management expressed confidence in the effectiveness of their strategies to drive traffic, despite cost pressures [38] Question: What are the learnings from the increased media spend and engagement following new media efforts? - Management reported positive results from the new media efforts, contributing to improved traffic trends [44] Question: Can you comment on the peak of commodity costs in Q2? - Management indicated that the peak is expected due to crop-related issues and rebuilding of egg flocks, but does not foresee this as a permanent issue [46] Question: How is the Florida market performing relative to the system? - Management stated that Florida has been performing well and continues to open new restaurants there [92]

Financial Performance - Total revenues increased by 164% to $28224 million in Q1 2025 from $242449 million in Q1 2024[23] - System-wide sales increased 115% to $3230 million in Q1 2025 from $289581 million in Q1 2024[23] - Same-restaurant sales growth was 07%[23] - Restaurant level operating profit margin decreased to 165% in Q1 2025 from 208% in Q1 2024[23] - Adjusted EBITDA decreased to $22753 million in Q1 2025 from $28590 million in Q1 2024[23] - Net loss was $(08) million in Q1 2025, compared to a net income of $7214 million in Q1 2024[23] Expansion and Outlook - The company opened 13 system-wide restaurants and closed 1, resulting in 584 system-wide restaurants across 30 states[23] - The company projects total revenue growth of approximately 200% for fiscal year 2025[51] - The company anticipates opening 59 to 64 new system-wide restaurants, net of 3 company-owned closures[51] - Adjusted EBITDA is projected to be in the range of $1140 million to $1190 million[51]

Financial Performance - Total revenues for the thirteen weeks ended March 30, 2025, were $282.24 million, an increase of 16.5% compared to $242.45 million for the same period in 2024[13] - Restaurant sales reached $279.59 million, up from $239.31 million, reflecting a growth of 16.8% year-over-year[13] - Net loss for the period was $829,000, compared to a net income of $7.21 million in the prior year, indicating a significant decline in profitability[13] - The company reported a comprehensive loss of $1.49 million for the quarter, compared to a comprehensive income of $8.14 million in the prior year[13] - The net cash provided by operating activities was $20.14 million, a decrease from $24.98 million in the same period last year[18] - The effective income tax rate for the thirteen weeks ended March 30, 2025, was 46.1%, significantly higher than the 28.0% for the same period in 2024[62] - Stock-based compensation expense for the thirteen weeks ended March 30, 2025, was $2.3 million, compared to $1.9 million for the same period in 2024[60] Assets and Liabilities - Total assets increased to $1.54 billion as of March 30, 2025, compared to $1.51 billion at the end of December 2024, representing a growth of 2.5%[11] - Total liabilities rose to $947.85 million, up from $918.97 million, marking an increase of 3.2%[11] - Cash and cash equivalents decreased to $18.61 million from $33.31 million, a decline of 44.6%[11] - The total accounts receivable decreased to $5.96 million from $7.24 million at the end of the previous year[34] - As of March 30, 2025, the total net long-term debt was $191.5 million, an increase from $189.0 million as of December 29, 2024[36] - The estimated fair value of the outstanding debt as of March 30, 2025, was $201.8 million, compared to $198.3 million as of December 29, 2024[41] Capital Expenditures and Investments - Capital expenditures for the period were $36.56 million, compared to $28.58 million in the prior year, indicating an increase of 28%[18] - The Company drew $7.0 million and $20.5 million from the Delayed Draw Term Facility on April 11 and April 25, 2025, respectively, to fund acquisitions[40] - The company acquired 16 restaurants for approximately $49.0 million and three restaurants for approximately $7.0 million in April 2025[71] Operational Metrics - The company operated 498 company-owned restaurants and 86 franchise-owned restaurants as of March 30, 2025[24] - In-restaurant dining sales reached $226.73 million, a rise of 16.2% compared to $195.20 million in the prior year[33] - The total lease expense for the thirteen weeks ended March 30, 2025, was $25.1 million, compared to $20.4 million for the same period in 2024[50] Debt and Interest Management - Cash paid for interest was $3.07 million, up from $2.77 million in the previous year[20] - The Company has a $100.0 million Term Facility, a $125.0 million Revolving Credit Facility, and a $125.0 million Delayed Draw Term Facility under its Credit Facility[37] - The Company utilized interest rate swaps with an aggregate notional amount of $150.0 million to hedge cash flows of variable rate debt[45][46] - The company entered into variable-to-fixed interest rate swap agreements to hedge $150.0 million of outstanding variable rate debt, with fixed rates of 4.16% and 4.42%[154] Shareholder Information - The weighted average number of common shares outstanding increased to 60.77 million from 60.01 million, reflecting a rise of 1.3%[13] - The weighted average common shares outstanding for basic net loss per share was 60,767,401 for the thirteen weeks ended March 30, 2025[70] Compliance and Valuation - The Company was in compliance with all covenants under the credit agreement as of March 30, 2025[43] - The company has established a valuation allowance on deferred tax assets deemed not realizable as of March 30, 2025, due to insufficient earnings history[64] - The company continues to assess the need for a valuation allowance for deferred tax assets, which may change with future taxable earnings[65] - Unrecognized stock-based compensation expense as of March 30, 2025, included $19,000 for stock options and $18.634 million for restricted stock units[61] Deferred Revenue - Deferred gift card revenue at the end of the period was $3.15 million, down from $5.39 million at the beginning of the period[33]

[Financial & Operational Highlights](index=1&type=section&id=Highlights) In Q1 2025, First Watch achieved a 16.4% increase in total revenues to $282.2 million, though profitability declined with a net loss of $(0.8) million and Adjusted EBITDA decreasing to $22.8 million Q1 2025 Key Financial Metrics (vs. Q1 2024) | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Total Revenues | $282.2M | $242.4M | +16.4% | | System-wide Sales | $323.0M | $289.6M | +11.5% | | Same-Restaurant Sales Growth | 0.7% | N/A | - | | Same-Restaurant Traffic Growth | -0.7% | N/A | - | | Income from Operations Margin | 0.4% | 5.1% | -4.7 p.p. | | Restaurant Level Operating Profit Margin* | 16.5% | 20.8% | -4.3 p.p. | | Net (Loss) Income | $(0.8)M | $7.2M | -111.1% | | Diluted EPS | $(0.01) | $0.12 | -108.3% | | Adjusted EBITDA* | $22.8M | $28.6M | -20.3% | - The company opened **13 new system-wide restaurants** and had **1 closure**, bringing the total to **584 restaurants** (**498 company-owned**, **86 franchise-owned**) across **30 states**[6](index=6&type=chunk) - CEO Chris Tomasso noted that Q1 same-restaurant traffic results were encouraging and continued positive trends from late 2024, with new restaurant openings in 2024 and 2025 exceeding expectations[3](index=3&type=chunk) [Fiscal Year 2025 Outlook](index=2&type=section&id=Updated%20Outlook%20Fiscal%20Year%202025) The company updated its full-year 2025 guidance, projecting total revenue growth of approximately 20% and an Adjusted EBITDA between $114.0 million and $119.0 million, alongside plans to open 59 to 64 new system-wide restaurants Updated Fiscal Year 2025 Guidance | Metric | Guidance Range/Value | | :--- | :--- | | Total Revenue Growth | ~20.0% (includes ~4% from acquisitions) | | Same-Restaurant Sales Growth | Positive low-single digits | | Same-Restaurant Traffic Growth | Flat-to-slightly positive | | Adjusted EBITDA | $114.0M - $119.0M | | New System-Wide Restaurants | 59 to 64 (net of 3 closures) | | Capital Expenditures | $150.0M - $160.0M | | Blended Tax Rate | 45.0% - 50.0% | [Financial Statements and Reconciliations](index=5&type=section&id=Financial%20Statements%20and%20Reconciliations) This section provides detailed financial statements and non-GAAP reconciliations, highlighting a year-over-year revenue increase but a decline into a net loss due to rising operating costs, and a decrease in key non-GAAP metrics [Consolidated Statements of Operations and Comprehensive Income (Loss)](index=8&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS%20AND%20COMPREHENSIVE%20INCOME%20%28LOSS%29) For Q1 2025, total revenues grew to $282.2 million, but significant increases in operating expenses, particularly food and beverage and labor costs, led to a net loss of $(0.8) million, a stark contrast to the prior-year's net income Consolidated Statement of Operations Highlights (in thousands) | Account | Q1 2025 (ended Mar 30) | Q1 2024 (ended Mar 31) | | :--- | :--- | :--- | | **Total Revenues** | **$282,240** | **$242,449** | | Food and beverage costs | $66,647 | $52,184 | | Labor and other related expenses | $96,754 | $79,735 | | Total operating costs and expenses | $281,127 | $230,163 | | **Income from operations** | **$1,113** | **$12,286** | | **Net (loss) income** | **$(829)** | **$7,214** | | Net (loss) income per share - diluted | $(0.01) | $0.12 | [Non-GAAP Financial Measures Reconciliations](index=6&type=section&id=Non-GAAP%20Financial%20Measures%20Reconciliations) This section details the reconciliation of GAAP measures to the company's preferred non-GAAP metrics, showing that Adjusted EBITDA for Q1 2025 was $22.8 million, down from $28.6 million, and Restaurant Level Operating Profit fell to $46.1 million from $49.9 million Reconciliation of Net (Loss) Income to Adjusted EBITDA (in thousands) | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net (loss) income | $(829) | $7,214 | | Depreciation and amortization | 16,557 | 12,271 | | Interest expense | 3,334 | 2,599 | | Income tax (benefit) expense | (708) | 2,799 | | Other adjustments (Stock-based comp, etc.) | 4,399 | 3,382 | | **Adjusted EBITDA** | **$22,753** | **$28,590** | | **Adjusted EBITDA margin** | **8.1%** | **11.8%** | Reconciliation of Income from Operations to Restaurant Level Operating Profit (in thousands) | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Income from operations | $1,113 | $12,286 | | Less: Franchise revenues | (2,649) | (3,141) | | Add: General and administrative expenses | 30,219 | 27,658 | | Add: Depreciation and amortization | 16,557 | 12,271 | | Add: Other adjustments | 882 | 788 | | **Restaurant level operating profit** | **$46,122** | **$49,862** | | **Restaurant level operating profit margin** | **16.5%** | **20.8%** | [Supplementary Information](index=3&type=section&id=Supplementary%20Information) This section provides context for the financial report, including definitions of key operational and non-GAAP metrics, a standard forward-looking statements disclaimer outlining potential business risks, and a corporate overview describing First Watch's market position [Definitions of Key Metrics](index=3&type=section&id=Definitions) The report defines key terms for clarity, including 'Same-restaurant sales growth' for year-over-year sales changes and non-GAAP measures like 'Adjusted EBITDA' and 'Restaurant level operating profit' which exclude specific corporate-level expenses - **Same-restaurant sales growth:** Defined as the percentage change in year-over-year sales for company-owned restaurants open for **18 months or longer**, based on **383 restaurants** for Q1 2025[13](index=13&type=chunk) - **Adjusted EBITDA:** A non-GAAP measure defined as net income (loss) before depreciation and amortization, interest expense, income taxes, and other items not considered part of ongoing core operating performance[15](index=15&type=chunk) - **Restaurant level operating profit:** A non-GAAP measure defined as restaurant sales less direct restaurant operating expenses (e.g., food, labor, occupancy), excluding corporate-level expenses[17](index=17&type=chunk) [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) This section serves as a legal safe harbor, cautioning that the report's projections are subject to significant risks and uncertainties, including changes in consumer preferences, economic conditions, and operational challenges - The press release contains forward-looking statements that are not guarantees of future performance and are subject to risks and uncertainties[20](index=20&type=chunk) - Important risk factors include: changes in consumer preferences and economic conditions (inflation, recession), challenges in opening new restaurants, supply chain disruptions, competition, and labor shortages[20](index=20&type=chunk) [About First Watch](index=3&type=section&id=About%20First%20Watch) First Watch is a leading 'Daytime Dining' restaurant concept focused on made-to-order breakfast, brunch, and lunch, operating over 580 restaurants in 31 states and recognized for its fresh ingredients and workplace culture - First Watch is positioned as the leading Daytime Dining concept serving made-to-order breakfast, brunch, and lunch with fresh ingredients[19](index=19&type=chunk) - The company operates more than **580 restaurants** in **31 states**[19](index=19&type=chunk) - Recent awards include being named **2024's 1 Most Loved Workplace® in America** by Newsweek and the **top restaurant brand in Yelp's 2023 list of most-loved brands**[19](index=19&type=chunk)