First Watch Restaurant (US:FWRG)2023-03-07 18:44Financial Data and Key Metrics Changes - System-wide sales increased by 21.9% year-over-year, reaching $914.8 million compared to $750.7 million [44] - Total revenues rose by 21.5% year-over-year, while adjusted EBITDA increased by 4.5% [44] - Same-restaurant sales growth was 14.5% compared to 2021 and 29.6% compared to 2019, with a traffic growth of 7.7% versus 2021 [20][21] Business Line Data and Key Metrics Changes - The company opened 43 new restaurants in 2022, with 29 company-owned locations achieving annualized average unit volumes (AUVs) about 7% above the comp group AUV of $2 million [22] - Adjusted EBITDA for the fourth quarter was $15.1 million, with a margin of 8.1% [33] - Restaurant-level operating profit was $30.5 million for the quarter, with a margin of 16.7% [77] Market Data and Key Metrics Changes - The company experienced a 3% year-over-year decline in same-restaurant traffic across the industry, contrasting with its own growth metrics [21] - Labor and related expenses were 34.5% of sales in the fourth quarter, up from 33.3% in the third quarter [32] Company Strategy and Development Direction - The company is focused on five primary strategic initiatives to enhance both front and back of house operations, including evolving real estate strategy and kitchen equipment upgrades [49][50] - The goal is to reach 2,200 domestic locations, with capital expenditures expected between $100 million and $110 million for 2023 [36] - The company aims for same-restaurant sales growth of 6% to 8% in 2023, with total revenue growth projected between 15% and 19% [80] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by macroeconomic conditions but expressed confidence in the company's growth trajectory and ability to meet evolving consumer preferences [30][54] - The company is prepared for potential inflationary pressures and plans to adjust pricing as necessary to protect margins [66][80] Other Important Information - The company has implemented a market revitalization program to remodel restaurants and enhance customer experience [3] - The company has secured fixed price agreements for eggs and potatoes to mitigate volatility in food costs [56] Q&A Session Summary Question: What is the outlook for restaurant margins and pricing strategies? - Management indicated a target of 18% to 20% for restaurant-level operating profit and plans to evaluate pricing adjustments mid-year if necessary [66] Question: Can you clarify the labor inflation expectations? - Labor inflation is expected to be 9% to 11%, primarily due to increases in minimum wage regulations in certain states [68] Question: How is the rollout of alcohol sales progressing? - Alcohol is now available in about 85% of restaurants, contributing to approximately 6.1% of sales mix in those locations [95] Question: What are the expectations for commodity inflation? - Commodity inflation is projected to be between 4% and 6% for the year, with expectations of stability throughout [80][138] Question: How does the company plan to optimize restaurant operations? - The company is focusing on role specialization and process improvements to enhance efficiency and customer satisfaction [51][144]