UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 29, 2024 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______ to _____ Commission file number 001-40866 First Watch Restaurant Group, Inc. (Exact name of registrant as specified in its charter) Delaware 82-427 ...

Core Insights - First Watch Restaurant Group, Inc. reported a total revenue increase of 14.8% to $251.6 million for Q3 2024 compared to $219.2 million in Q3 2023 [3] - The company opened 9 new system-wide restaurants across 8 states, bringing the total to 547 restaurants [3][6] - Adjusted EBITDA grew by 18% to $25.6 million in Q3 2024 from $21.6 million in Q3 2023 [3][6] Financial Performance - Net income decreased to $2.1 million, or $0.03 per diluted share, down from $5.4 million, or $0.09 per diluted share, in Q3 2023 [3][24] - System-wide sales increased by 8.0% to $291.8 million in Q3 2024 from $270.3 million in Q3 2023 [3] - Same-restaurant sales growth was negative 1.9%, with same-restaurant traffic growth at negative 4.4% [3] Operational Highlights - The income from operations margin decreased to 2.5% in Q3 2024 from 3.6% in Q3 2023, while the restaurant level operating profit margin increased to 18.9% from 18.7% [3][24] - The company experienced no check management in Q3 2024, although planned marketing campaigns had a minor impact on net per person average [3] - All company-owned restaurants were fully operational shortly after Hurricane Milton, with no expected material impact on same-restaurant sales for Q4 [3][6] Updated Outlook - For the fiscal year ending December 29, 2024, the company anticipates same-restaurant sales growth of around negative 1.0% and total revenue growth in the range of 16.5% to 17.0% [6] - Adjusted EBITDA is projected to be between $110.0 million and $112.0 million, with 47 new system-wide restaurant openings expected [6][7] - Capital expenditures are estimated at around $130.0 million, primarily for new restaurant projects and remodels [6]

Group 1 - First Watch Restaurant Group, Inc. plans to release its third quarter 2024 financial results on November 7, 2024, before the market opens [1] - A conference call and webcast will be held at 8:00 AM ET, hosted by the CEO Chris Tomasso and CFO Mel Hope [1] - Interested parties can access the conference call through dial-in, pre-registration, or webcast options [1] Group 2 - The conference call will be archived shortly after its conclusion for later access [1] - Investor relations contact is Steven L. Marotta, and media relations contact is Jenni Glester [2]

Core Viewpoint - First Watch Restaurant Group, Inc. has provided updates regarding the impact of Hurricane Milton on its operations, highlighting the temporary closure of restaurants and the ongoing assessment of storm damage and insurance coverage [1][2][4]. Group 1: Hurricane Impact - From October 8 to October 13, 2024, 85 company-owned restaurants were closed for at least one business day due to Hurricane Milton, with 77 reopening by October 14 [2]. - The company is currently determining the reopening timetable for the remaining 8 affected restaurants [2]. - CEO Chris Tomasso expressed gratitude for the safety of team members and their families, noting that nearly all restaurants have resumed operations [3]. Group 2: Insurance and Damage Assessment - First Watch maintains comprehensive insurance coverage, including property, flood, and business interruption, and is working with insurance providers to assess the overall impact from the storms [4]. - The assessment process is expected to take several weeks to complete, determining the extent of applicable coverages [4]. Group 3: Company Overview - First Watch is a leading Daytime Dining concept, operating over 535 restaurants across 29 states, with a focus on made-to-order breakfast, brunch, and lunch [5]. - The company has received numerous accolades, including being named 2024's 1 Most Loved Workplace in America and the top restaurant brand in Yelp's inaugural list of the top 50 most-loved brands in the U.S. [5].

Company Overview - First Watch Restaurant Group, Inc. (FWRG) is currently experiencing significant activity in the options market, particularly with the Nov 15, 2024 $30 Call option showing high implied volatility, indicating potential for a major price movement [1] Implied Volatility Insights - Implied volatility reflects market expectations for future price movements, suggesting that investors anticipate a significant change in First Watch's stock price, possibly due to an upcoming event [2] Analyst Sentiment - First Watch holds a Zacks Rank of 4 (Sell) within the Retail - Restaurants industry, which is positioned in the bottom 31% of the Zacks Industry Rank. Over the past 60 days, one analyst has raised the earnings estimate for the current quarter, while three have lowered theirs, resulting in a decrease in the Zacks Consensus Estimate from 7 cents to 5 cents per share [3] Trading Strategy Implications - The high implied volatility surrounding First Watch may indicate a developing trading opportunity. Options traders often seek to sell premium on options with high implied volatility, aiming to benefit from the decay of the option's value if the stock does not move as much as anticipated [4]

Group 1 - First Watch Restaurant Group Inc (FWRG) shares fell 4.33% to $14.37, down from a previous close of $15.02, marking a 44.69% decline from its 52-week high of $25.98 [1] - The stock's trading volume was 105,360 shares, which is 18.4% of its average daily volume of 571,325 [1] Group 2 - Analysts project an average target price of $22.05 for FWRG, indicating a potential upside of 53.44% from the current price [2] - The consensus recommendation from 10 brokerage firms is an average rating of 1.7, suggesting an "Outperform" status [2] - GuruFocus estimates the fair value of FWRG at $25.33, implying a potential upside of 76.27% from the current price [2]

Core Insights - First Watch has been named the 1 Most Loved Workplace® in America for the third consecutive year, highlighting its commitment to a "You First" culture for over 14,000 employees [1][6]. Employee Benefits and Engagement - The company offers various benefits, including backup child and elder care, free Calm app memberships, telemedicine services, and tuition reimbursement programs [2][3]. - Leadership engages with employees through W.H.Y. (We Hear You) Tours, resulting in meaningful enhancements to employee compensation and benefits [2][4]. Company Culture and Operations - First Watch operates on a "No Nights Ever" model across more than 535 restaurants in 29 states, allowing employees to build connections and enjoy personal time [4][6]. - The company has established the First Watch Academy of Restaurant Management (F.A.R.M.) for training new leaders, focusing on the company's history and management tools [3]. Recognition and Achievements - First Watch has received numerous accolades, including being named the top restaurant brand in Yelp's inaugural list of the top 50 most-loved brands in the U.S. in 2023 [6]. - The Most Loved Workplaces® list is based on employee satisfaction and sentiment, with over 2.6 million employees surveyed [5][8].

Core Viewpoint - First Watch Restaurant Group, Inc. reported a significant decline in consumer traffic in Q2, leading to a revised 2024 guidance that reflects continued weakness in the second half of the year, although the overall growth story remains intact unless the traffic decline becomes a long-term trend [1][5][10] Financial Performance - Q2 revenues reached $258.6 million, a 19.5% year-on-year increase, driven by a 10.1% growth in system-wide sales and prior franchised restaurant acquisitions, slightly exceeding Wall Street's expectations by $0.9 million [2] - Same-restaurant sales declined by -0.3%, primarily due to a -4.0% drop in traffic, as First Watch maintained higher pricing, impacting visitor numbers [2][3] - The adjusted EPS for Q2 was $0.18, surpassing Wall Street's consensus by $0.04, with gross margins increasing by 1.0 percentage points to 21.9% [4] Industry Context - The sales weakness experienced by First Watch is consistent with broader trends in the restaurant industry, where peers like Dine Brands and Cheesecake Factory also reported declines in same-restaurant sales [4] - The weak consumer sentiment has particularly affected weekday breakfast and daytime lunch segments, which are critical for First Watch's business model [2][5] Guidance and Future Outlook - The 2024 guidance was revised to expect comparable sales to decline between -2% to 0%, a notable shift from previous expectations of 0% to 2% growth [5] - Despite the lower comparable growth outlook, First Watch maintains a total revenue growth forecast of 17-19% and an adjusted EBITDA range of $106-112 million, supported by plans for 51-57 net restaurant openings in 2024 [5] Valuation and Investment Case - The updated discounted cash flow (DCF) model estimates a fair value for First Watch's stock at $21.38, representing a 42% upside from the current stock price [7] - The weighted average cost of capital (WACC) has been adjusted to 8.00%, down from 9.57%, reflecting changes in the company's capital structure and interest expenses [8] Conclusion - Despite recent traffic declines and a challenging industry backdrop, First Watch's pricing strategy and expansion plans are expected to drive long-term earnings growth, leading to an upgraded investment rating to Buy [10]

Tom Werner/DigitalVision via Getty Images Dealing with Slow Traffic: An Inescapable Reality I recently started my 'Goulart's Restaurant Stocks' follow-up on the family restaurant company First Watch (NASDAQ:FWRG) with the article entitled "First Watch Restaurant: The Price For Maintaining Pricing". I highly recommend reading it, where I dissected the financial, operational and strategy structure used for the current restaurant industry environment. That said, I also recommend checking out my other articles ...

Core Insights - First Watch Restaurant Group, Inc. has promoted Rob Conti to Chief Information Officer, who has over 25 years of experience in technology solutions for hospitality brands [1][2] - Conti has been instrumental in scaling the IT function at First Watch since joining in 2019, enhancing systems and processes to support the company's growth [2] - First Watch operates more than 535 restaurants across 29 states, focusing on made-to-order breakfast, brunch, and lunch with fresh ingredients [4] Company Overview - First Watch is recognized for its chef-driven menu, which includes popular items like the Quinoa Power Bowl®, Farm Stand Breakfast Tacos, and Million Dollar Bacon [4] - The company has received numerous accolades, including being named the top restaurant brand in Yelp's 2023 list of the top 50 most-loved brands in the U.S. [4] - First Watch has been recognized as a Top 100 Most Loved Workplace® in 2022 and 2023 by Newsweek [4] Leadership and Achievements - Rob Conti previously held leadership roles at Hard Rock International and The Walt Disney Company, contributing to his extensive background in IT [3] - Under Conti's leadership, First Watch has implemented key systems such as a business intelligence platform and a cyber security program [2] - Conti was named one of the most influential restaurant executives by Nation's Restaurant News in 2021 [2]