First Watch Restaurant Group, Inc. Q4 FY2024 earnings call

• 2024 was pivotal with total revenue over $1 billion and adjusted EBITDA over $100 million for the first time. Opened 50 new restaurants in 2024, including 25 in Q4. New restaurants opened in 2024 on pace for $2.6M third year sales, 20% above system average, cash on cash return >35%, IRR >22%. • Scaling marketing spend in 2025 using data from technology investments and tests, aiming for greater per dollar return. • Implemented changes to delivery program driving improvement in third party delivery sales channel. • Menu innovations like seasonal menus, expanded beverages, increased portions, premium fruits, and brought back complimentary coffee. • Scale advantage in daytime dining segment, including site selection, unit growth, menu offerings, and supply chain.

Total fourth quarter revenues were $263.3 million, an increase of 16.8% excluding the impact of the 53rd week in 2023. Same restaurant sales were down 0.3% including a 3% same restaurant traffic decline. Food and beverage expense was 22.7% of sales compared to 22.5% in the same period last year. Labor and other related expenses were 33.7% of sales in the fourth quarter, a 20 basis point improvement from the prior year. Restaurant level operating profit margin was 18.8% in the fourth quarter of 2024. Adjusted EBITDA was $24.3 million, a nearly $5 million increase versus the prior year excluding the contribution of the 53rd week.

• Same restaurant sales growth expected to be positive low single digits with flat to slightly positive same restaurant traffic. • Total revenue growth expected around 20% with net 400 basis point impact from acquisitions. • Expect 59 to 64 net new system wide restaurants, including 55 to 58 company owned and 7 to 9 franchise owned, with 3 company owned closures. • Adjusted EBITDA guidance range $124 million to $130 million. • Capital expenditures $150 million to $160 million. • First quarter 2025 adjusted EBITDA expected ~$4M below first quarter 2024 due to new restaurants and commodity prices. • 50%-55% of adjusted EBITDA for year expected in second half of 2025.

• Commodity inflation in high single digits driven by eggs, pork, coffee, avocados, and tariffs. Avian influenza impacting egg supply. • Macro economic factors potentially affecting consumer behavior beneath transitory headwinds. • Uncertainty around marketing investment effectiveness in driving traffic and margin.

Q: Two questions. First on current comp trends and concern about slowing macro beneath transitory headwinds. Second on 2025 marketing spend difference from 2024.

A: Chris Tomasso said they see positive trend in traffic with Q4 better than Q3 and Q1 to date better than Q4. On marketing, they're scaling best of 2024 tests into 2025 plan with increased spend.

Q: On egg inflation, specific color and egg-potato basket update.

A: Mel Hope said eggs are contracted annually but supplementing with spot market due to avian influenza, eggs and potatoes ~15% of market basket.

Q: On value communication, customer recognition and value gap vs competitors.

A: Chris Tomasso said messaging focusing on core menu and top sellers resonated, Mel Hope said egg contract secures supply but paying premium like others.

Q: On marketing cost impact and labor efficiencies.

A: Mel Hope said marketing in G&A, focused on growing margin dollars despite potential pressure. Mel Hope said labor efficiencies from last year had low hanging fruit, more to come but smaller volume now.