First Watch Restaurant (US:FWRG)2023-08-01 18:46Financial Data and Key Metrics Changes - Total revenues for Q2 2023 were $216.3 million, representing a 17.3% increase compared to Q2 2022 [13] - Restaurant level operating profit was $44.4 million with a margin of 20.9%, an improvement from 18.2% in the same period last year [14] - Adjusted EBITDA was $25.8 million with a margin of 11.9%, up from 9.6% in Q2 2022 [29] Business Line Data and Key Metrics Changes - Same-restaurant sales growth was 7.8%, driven by price increases and favorable menu mix, partially offset by a traffic decline of 1.2% [27][28] - The company opened nine system-wide restaurants in Q2, including six company-owned locations [25] Market Data and Key Metrics Changes - In-restaurant traffic increased low single digits, while overall traffic declined by 1.2% [9] - Off-premise occasions represented about 18% of overall sales, up from 5% pre-COVID [35] Company Strategy and Development Direction - The company is focused on two growth pipelines: people and restaurants, with over 100 new restaurants in various stages of development [5] - The strategy includes acquiring franchise-owned restaurants, with six acquired in Omaha and five in Milwaukee [11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in long-term growth potential, citing historical cash-on-cash returns and a strong pipeline of new restaurant openings [5] - The company expects total revenue growth for the year to be in the range of 18% to 21%, up from a previous estimate of 16% to 20% [17] Other Important Information - The company has implemented a new labor scheduling tool to improve operational efficiency, although quantifying its benefits remains challenging [100] - The average menu price increase in the third quarter was 1%, with an expected overall price increase of 6% for the second half of the year [15] Q&A Session Summary Question: Can you explain the decline in off-premise occasions? - Management noted that off-premise occasions are the most expensive dining option, and while there is some pressure, off-premise still represents 18% of sales, up from 5% pre-COVID [35] Question: How many of the 100 restaurants in development are under construction? - Approximately 20 of the 100 restaurants are currently under construction, with the rest in various stages of lease negotiation or permitting [38] Question: What is the current state of the labor market? - The company has not experienced labor shortages and turnover is returning to pre-pandemic levels, with improved statistics compared to the industry average [42][44] Question: How is the company managing pricing in light of inflation? - The company has taken price increases primarily in markets affected by minimum wage increases, with a philosophy of offsetting inflation through pricing [110] Question: What are the expectations for restaurant openings in the third quarter? - The company expects third quarter openings to be similar to last year, with a focus on maintaining a steady pace of development [58]