Earning Date, Transcript Summary & Report

Record Revenue Milestone: Total revenue exceeded $1 billion for the first time in company history, reaching over $263 million in Q4 2024, a 16.8% increase year-over-year.

Record Adjusted EBITDA Achievement: Achieved adjusted EBITDA of over $100 million for the first time, with Q4 adjusted EBITDA growing to $24.3 million, a nearly $5 million increase from the previous year.

Restaurant Expansion Success: Opened 50 new restaurants in 2024, including a record 25 in Q4, contributing to a robust growth engine and brand awareness.

Projected Restaurant Sales Growth: New restaurants are projected to generate third-year sales of $2.6 million, about 20% above the current system average unit volumes, with strong cash on cash returns.

Labor Efficiency and Customer Service: Improved labor efficiency and reduced employee turnover, leading to better customer service scores compared to the prior year.

Third-Party Delivery Recovery: Successfully reversed negative trends in third-party delivery sales, resulting in positive traffic year-to-date in this channel.

Strategic Marketing Initiative: Implemented a strategic marketing plan to increase brand awareness and customer engagement, funded by reallocating existing dollars and increased investment.

Customer Experience Enhancement: Launched enhanced customer-facing technologies aimed at improving customer and employee experiences, including a custom-built waitlist and new menu features.

Disciplined Pricing Strategy: Maintained a disciplined pricing strategy, focusing on long-term inflationary trends rather than short-term commodity spikes, which has historically led to market share gains.

Restaurant Expansion Plans: Confident in growth prospects with a robust real estate and people pipeline, targeting 59 to 64 net new system-wide restaurants in 2025.

Earnings Miss Report: First Watch Restaurant Group missed earnings expectations, reporting an EPS of $0.01 compared to the expected $0.02.

Decline in Restaurant Sales: The company experienced negative same restaurant sales of 0.3% in the fourth quarter, with a decline in same restaurant traffic of 3%.

Revenue Growth from New Openings: Despite an increase in total revenues to $263.3 million, the growth was primarily driven by new restaurant openings rather than existing locations performing well.

Rising Food Costs: Food and beverage expenses increased to 22.7% of sales, up from 22.5% in the same period last year, indicating rising costs.

Labor Cost Pressures: Labor inflation was reported at 4.3%, contributing to overall labor and related expenses being 33.7% of sales, which, although improved slightly, still reflects ongoing cost pressures.

Commodity Inflation Outlook: The company anticipates high single-digit commodity inflation for the year, which includes increased prices for key ingredients like eggs, avocados, bacon, and coffee beans.

Adjusted EBITDA Decline: Adjusted EBITDA for the first quarter of 2025 is expected to be around $4 million lower than the first quarter of 2024 due to the impact of new restaurant openings and rising commodity prices.

Restaurant Traffic Outlook: The company expects same restaurant traffic to be slightly negative for the first quarter, with February showing a more challenging environment compared to January.