First Watch Restaurant (US:FWRG)2022-08-09 17:15Financial Data and Key Metrics Changes - System-wide sales for Q2 2022 reached $231.2 million, an increase of $17.1 million from Q1 2022 and $30.5 million from Q2 2021 [38] - Total revenues were $184.5 million, up $11.3 million from Q1 2022 and $30.5 million from Q2 2021 [38] - Net income for the quarter was $2.7 million, with adjusted EBITDA at $17.8 million and a restaurant level operating profit margin of 18.2% [45] Business Line Data and Key Metrics Changes - Same restaurant sales growth was 13.4% year-over-year and 30.2% compared to 2019, driven primarily by increased customer counts [12] - Same restaurant traffic growth was 8.1% year-over-year and 7.4% compared to 2019 [40] - Franchise revenues grew to $2.8 million due to increased sales from franchise-owned restaurants and the addition of 11 new franchise restaurants [41] Market Data and Key Metrics Changes - Dining room recovery reached 93% compared to 2019, with consistent off-premise sales volumes [40] - Average weekly traffic remained consistent throughout the quarter, with June achieving 4.2% traffic growth year-over-year [14] Company Strategy and Development Direction - The company plans to open between 30 and 35 new company-owned restaurants and 8 to 13 new franchise-owned restaurants in 2022 [50] - The alcohol program rollout is on track, now available in over 75% of the system [29] - The company is focused on enhancing customer experience and operational efficiency through technology, including the kitchen display system (KDS) [30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the brand's resilience amid economic uncertainty, citing a history of strong performance during downturns [80] - The company raised its guidance for same restaurant sales growth to 13% to 15% for the year, driven by continued positive traffic [49] - Management believes that commodity inflation has peaked and expects costs to normalize moving forward [17][42] Other Important Information - The company has donated $300,000 to pediatric cancer research through a partnership with the V Foundation [32] - Staffing levels are at 93%, with a slight improvement in manager levels to 2.8 managers per restaurant [25] Q&A Session Summary Question: What drove the acceleration in traffic and sales? - Management noted that traffic and sales growth has been consistent across all markets, supported by menu innovation and service focus [56][57] Question: How does the company gauge the durability of current performance? - Management highlighted a long history of traffic growth and consumer demand, indicating confidence in sustaining performance [56] Question: What gives confidence in taking price increases amid macro pressures? - Management believes the pricing power is supported by the brand's value proposition and consumer willingness to spend [70] Question: How is the labor environment affecting operations? - Management indicated that while staffing levels are lower, efficiencies gained through technology and training are helping maintain performance [71][73] Question: What is the outlook for commodity inflation? - Management expects commodity inflation to remain in double digits for the remainder of the year but believes it will not reach the highs seen in Q2 [89]