Same-restaurant sales growth of 13.4% driven by same-restaurant traffic growth of 8.1%
Income from operations margin of 2.8% and restaurant level operating profit margin of 18.2%
9 system-wide restaurants opened across 7 states
“Our second quarter performance reaffirms First Watch as one of the most consistent, best-performing concepts in the restaurant industry. We once again achieved impressive results, with system-wide sales increasing 20.0% and same-restaurant sales increasing 13.4%, inclusive of an 8.1% increase in same-restaurant traffic year-over-year,” said
Highlights for Q2 2022 compared to Q2 2021*:
- System-wide sales increased 20.0% to
$231.2 million in Q2 2022 from$192.6 million in Q2 2021 - Total revenues increased 19.8% to
$184.5 million in Q2 2022 from$154.0 million in Q2 2021 - Same-restaurant sales growth of 13.4% (30.2% relative to Q2 2019**)
- Same-restaurant traffic growth of 8.1% (7.4% relative to Q2 2019**)
- Income from operations margin of 2.8% in Q2 2022 compared to 8.1% in Q2 2021
- Restaurant level operating profit margin*** of 18.2% in Q2 2022 compared to 22.5% in Q2 2021
- Net income of
$2.7 million , or$0.05 per diluted share, in Q2 2022 compared to Net income of$3.8 million , or$0.08 per diluted share in Q2 2021 - Adjusted EBITDA*** of
$17.8 million in Q2 2022 compared to$22.2 million in Q2 2021 - Opened 9 system-wide restaurants (5 company-owned and 4 franchise-owned) across 7 states, resulting in a total of 449 system-wide restaurants (350 company-owned and 99 franchise-owned) across 28 states
______________
* Thirteen weeks ended
** Comparison to the thirteen weeks ended
*** See “Non-GAAP Financial Measures” below
Outlook Fiscal Year 2022
As a result of our continued strong financial results, the Company raises certain of its fiscal year 2022 guidance:
- Total revenue growth of approximately 20.0% relative to 2021
- Adjusted EBITDA* in the range of
$70.0 million to$72.0 million - Same-restaurant sales growth in the range of 13.0% to 15.0% with continued positive traffic
The Company confirms certain of its previous fiscal year 2022 guidance:
- Capital expenditures in the range of
$60.0 million to$70.0 million invested primarily in new restaurant projects, planned remodels and new in-restaurant technology - 30 to 35 new company-owned restaurants and 8 to 13 new franchise-owned restaurants for fiscal year 2022
- Blended tax rate of 33.0% to 34.0%
* We have not reconciled guidance for Adjusted EBITDA to the corresponding GAAP financial measure because we do not provide guidance for the various reconciling items. We are unable to provide guidance for these reconciling items because we cannot determine their probable significance, as certain items are outside of our control and cannot be reasonably predicted due to the fact that these items could vary significantly from period to period. Accordingly, a reconciliation to the corresponding GAAP financial measure is not available without unreasonable effort.
Q2 2022 Financial Results
Total revenues increased 19.8% to
Income from operations decreased to
Income from operations margin decreased to 2.8% in Q2 2022 from 8.1% in Q2 2021 primarily due to (i) inflation across commodities and supplies, (ii) the increase in restaurant-level wages and staffing and (iii) higher general and administrative expenses mainly due to stock-based compensation expense, marketing and insurance expense. This decrease was partially offset by menu price increases.
Restaurant level operating profit decreased to
Restaurant level operating profit margin decreased to 18.2% in Q2 2022 from 22.5% in Q2 2021 primarily due to (i) inflation across commodities and supplies and (ii) the increase restaurant-level wages and staffing. This decrease was partially offset by menu price increases.
Net income decreased to
Adjusted EBITDA decreased to
New Restaurant Openings in Q2 2022 included 5 company-owned and 4 franchise-owned restaurants resulting in a total of 16 system-wide new restaurant openings during the twenty-six weeks ended
For additional financial information related to the thirteen and twenty-six weeks ended
Conference Call and Webcast
Interested parties may listen to the conference call via telephone by dialing 412-317-5208. The webcast will be available at https://investors.firstwatch.com in the News & Events section and will be archived on the site shortly after the call has concluded.
Definitions
The following definitions apply to these terms as used in this release:
System-wide restaurants: the total number of restaurants, including all company-owned and franchise- owned restaurants.
System-wide sales: consists of restaurant sales from our company-owned restaurants and franchise-owned restaurants. We do not recognize the restaurant sales from our franchise-owned restaurants as revenue.
Same-restaurant sales growth: the percentage change in year-over-year restaurant sales (excluding gift card breakage) for the comparable restaurant base, which is defined as the number of company-owned First Watch branded restaurants open for 18 months or longer as of the beginning of the fiscal year (“Comparable Restaurant Base”). For the thirteen weeks ended
Same-restaurant traffic growth: the percentage change in traffic counts as compared to the same period in the prior year using the Comparable Restaurant Base. For the thirteen weeks ended
Adjusted EBITDA: a non-GAAP measure, is defined as net income (loss) before depreciation and amortization, interest expense, income taxes and items that the Company does not consider in the evaluation of its ongoing core operating performance.
Adjusted EBITDA margin: a non-GAAP measure, is defined as Adjusted EBITDA as a percentage of total revenues.
Restaurant level operating profit: a non-GAAP measure, is defined as restaurant sales, less restaurant operating expenses, which include food and beverage costs, labor and other related expenses, other restaurant operating expenses, pre-opening expenses and occupancy expenses. In addition, Restaurant level operating profit excludes corporate-level expenses and items that are not considered in the Company’s evaluation of its ongoing core operating performance.
Restaurant level operating profit margin: a non-GAAP measure, is defined as Restaurant level operating profit as a percentage of restaurant sales.
About First Watch
First Watch is an award-winning Daytime Dining concept serving made-to-order breakfast, brunch and lunch using fresh ingredients. A recipient of hundreds of local “Best Breakfast” and “Best Brunch” accolades, First Watch’s chef-driven menu includes elevated executions of classic favorites along with First Watch specialties such as the protein-packed Quinoa Power Bowl®, Farmstand Breakfast Tacos, Avocado Toast, Chickichanga, Morning Meditation (juiced in-house daily), Vodka Kale Tonic and its famous
Forward-Looking Statements
In addition to historical information, this release may contain a number of “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, information concerning First Watch’s possible or assumed future results of operations, new restaurant openings, business strategies, competitive position, industry environment, potential growth opportunities and the effects of regulation. These statements are based on First Watch’s current expectations and beliefs, as well as a number of assumptions concerning future events. When used in this press release, the words “estimates,” “projected,” “expects,” “anticipates,” “forecasts,” “plans,” “intends,” “believes,” “seeks,” “target,” “may,” “will,” “should,” “future,” “propose,” “preliminary,” “outlook,” “guidance,” “on track” and variations of these words or similar expressions (or the negative versions of such words or expressions) are intended to identify forward-looking statements. Forward-looking statements in this press release are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, our actual results may differ materially from those contemplated by the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include the following: adverse effects of the COVID-19 pandemic or other infectious diseases; uncertainty regarding ongoing hostility between
Investor Relations Contact
203.682.8253
investors@firstwatch.com
Media Relations Contact
FirstWatch@icrinc.com
Non-GAAP Financial Measures (Unaudited)
To supplement the consolidated financial statements, which are prepared in accordance with
Adjusted EBITDA and Adjusted EBITDA Margin
Management uses Adjusted EBITDA and Adjusted EBITDA margin (i) as factors in evaluating management’s performance when determining incentive compensation, (ii) to evaluate the Company’s operating results and the effectiveness of our business strategies, (iii) internally as benchmarks to compare the Company’s performance to that of its competitors and (iv) to provide investors with additional transparency of the Company’s operations. The use of Adjusted EBITDA and Adjusted EBITDA margin as performance measures permit a comparative assessment of the Company’s operating performance relative to the Company’s performance based on the Company’s GAAP results, while isolating the effects of some items that are either nonrecurring in nature or vary from period to period without any correlation to the Company’s ongoing core operating performance.
The following tables reconcile Net income and Net income margin, the most directly comparable GAAP measures, to Adjusted EBITDA and Adjusted EBITDA margin for the periods indicated:
THIRTEEN WEEKS ENDED | TWENTY-SIX WEEKS ENDED | ||||||||||||||
(in thousands) | |||||||||||||||
Net income | $ | 2,707 | $ | 3,805 | $ | 7,347 | $ | 1,763 | |||||||
Depreciation and amortization | 8,400 | 7,976 | 16,623 | 15,762 | |||||||||||
Interest expense | 1,126 | 6,289 | 2,132 | 12,605 | |||||||||||
Income taxes | 1,336 | 2,285 | 3,613 | 2,110 | |||||||||||
EBITDA | 13,569 | 20,355 | 29,715 | 32,240 | |||||||||||
IPO-readiness and strategic transition costs(1) | 721 | 700 | 1,171 | 1,179 | |||||||||||
Stock-based compensation(2) | 2,808 | 187 | 5,102 | 316 | |||||||||||
Transaction expenses, net(3) | 300 | 615 | 557 | 626 | |||||||||||
Impairments and loss on disposal of assets(4) | 155 | 39 | 234 | 163 | |||||||||||
Recruiting and relocation costs(5) | 143 | 141 | 219 | 182 | |||||||||||
Severance costs | 93 | — | 155 | 265 | |||||||||||
COVID-19 related charges(6) | — | 163 | — | 211 | |||||||||||
Adjusted EBITDA | $ | 17,789 | $ | 22,200 | $ | 37,153 | $ | 35,182 | |||||||
Total revenues | $ | 184,453 | $ | 153,963 | $ | 357,565 | $ | 281,132 | |||||||
Net income margin | 1.5 | % | 2.5 | % | 2.1 | % | 0.6 | % | |||||||
Adjusted EBITDA margin | 9.6 | % | 14.4 | % | 10.4 | % | 12.5 | % | |||||||
Additional information | |||||||||||||||
Deferred rent expense (income)(7) | $ | 651 | $ | (808 | ) | $ | 1,231 | $ | (1,807 | ) |
(1) Represents costs related to the assessment and redesign of our systems and processes. In 2021, the costs also include information technology support and external professional service costs incurred in connection with IPO-readiness efforts.
(2) Represents non-cash, stock-based compensation expense.
(3) Represents (i) revaluations of contingent consideration payable to previous stockholders for tax savings generated through the use of federal and state loss carryforwards and general business credits that had been accumulated from operations prior to
(4) Represents costs related to the disposal of assets due to retirements, replacements or certain restaurant closures. There were no impairments recognized during the periods presented.
(5) Represents costs incurred for hiring qualified individuals as we assessed the redesign of our systems and processes.
(6) Represents costs incurred in connection with the economic impact of the COVID-19 pandemic.
(7) Represents the non-cash portion of straight-line rent expense recorded within both Occupancy expenses and General and administrative expenses.
Restaurant level operating profit and Restaurant level operating profit margin
Restaurant level operating profit and Restaurant level operating profit margin are not indicative of our overall results, and because they exclude corporate-level expenses, do not accrue directly to the benefit of our stockholders. We will continue to incur such expenses in the future. Restaurant level operating profit and Restaurant level operating profit margin are important measures we use to evaluate the performance and profitability of each operating restaurant, individually and in the aggregate and to make decisions regarding future spending and other operational decisions. We believe that Restaurant level operating profit and Restaurant level operating profit margin provide useful information about our operating results, identify operational trends and allow for transparency with respect to key metrics used by us in our financial and operational decision-making.
The following tables reconcile Income from operations and Income from operations margin, the most directly comparable GAAP financial measures, to Restaurant level operating profit and Restaurant level operating profit margin for the periods indicated:
THIRTEEN WEEKS ENDED | TWENTY-SIX WEEKS ENDED | ||||||||||||||
(in thousands) | |||||||||||||||
Income from operations | $ | 5,053 | $ | 12,312 | $ | 12,813 | $ | 16,157 | |||||||
Less: Franchise revenues | (2,771 | ) | (2,275 | ) | (5,214 | ) | (4,078 | ) | |||||||
Add: | |||||||||||||||
General and administrative expenses | 21,942 | 15,388 | 41,505 | 27,341 | |||||||||||
Depreciation and amortization | 8,400 | 7,976 | 16,623 | 15,762 | |||||||||||
Transaction expenses, net(1) | 300 | 615 | 557 | 626 | |||||||||||
Impairments and loss on disposal of assets(2) | 155 | 39 | 234 | 163 | |||||||||||
COVID-19 related charges(3) | — | 11 | — | 19 | |||||||||||
Restaurant level operating profit | $ | 33,079 | $ | 34,066 | $ | 66,518 | $ | 55,990 | |||||||
Restaurant sales | $ | 181,682 | $ | 151,688 | $ | 352,351 | $ | 277,054 | |||||||
Income from operations margin | 2.8 | % | 8.1 | % | 3.6 | % | 5.8 | % | |||||||
Restaurant level operating profit margin | 18.2 | % | 22.5 | % | 18.9 | % | 20.2 | % | |||||||
Additional information | |||||||||||||||
Deferred rent expense (income)(4) | $ | 601 | $ | (796 | ) | $ | 1,131 | $ | (1,734 | ) |
(1) Represents (i) revaluations of contingent consideration payable to previous stockholders for tax savings generated through the use of federal and state loss carryforwards and general business credits that had been accumulated from operations prior to
(2) Represents costs related to the disposal of assets due to retirements, replacements or certain restaurant closures. There were no impairments recognized during the periods presented.
(3) Represents costs incurred in connection with the economic impact of the COVID-19 pandemic.
(4) Represents the non-cash portion of straight-line rent expense recorded within Occupancy expenses.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(Unaudited)
THIRTEEN WEEKS ENDED | TWENTY-SIX WEEKS ENDED | ||||||||||||||
Revenues: | |||||||||||||||
Restaurant sales | $ | 181,682 | $ | 151,688 | $ | 352,351 | $ | 277,054 | |||||||
Franchise revenues | 2,771 | 2,275 | 5,214 | 4,078 | |||||||||||
Total revenues | 184,453 | 153,963 | 357,565 | 281,132 | |||||||||||
Operating costs and expenses: | |||||||||||||||
Restaurant operating expenses (exclusive of depreciation and amortization shown below): | |||||||||||||||
Food and beverage costs | 45,219 | 33,596 | 84,622 | 60,512 | |||||||||||
Labor and other related expenses | 58,687 | 45,950 | 113,829 | 85,999 | |||||||||||
Other restaurant operating expenses | 28,759 | 23,423 | 56,076 | 45,443 | |||||||||||
Occupancy expenses | 14,844 | 13,765 | 29,227 | 27,066 | |||||||||||
Pre-opening expenses | 1,094 | 899 | 2,079 | 2,063 | |||||||||||
General and administrative expenses | 21,942 | 15,388 | 41,505 | 27,341 | |||||||||||
Depreciation and amortization | 8,400 | 7,976 | 16,623 | 15,762 | |||||||||||
Impairments and loss on disposal of assets | 155 | 39 | 234 | 163 | |||||||||||
Transaction expenses, net | 300 | 615 | 557 | 626 | |||||||||||
Total operating costs and expenses | 179,400 | 141,651 | 344,752 | 264,975 | |||||||||||
Income from operations | 5,053 | 12,312 | 12,813 | 16,157 | |||||||||||
Interest expense | (1,126 | ) | (6,289 | ) | (2,132 | ) | (12,605 | ) | |||||||
Other income, net | 116 | 67 | 279 | 321 | |||||||||||
Income before income taxes | 4,043 | 6,090 | 10,960 | 3,873 | |||||||||||
Income tax expense | (1,336 | ) | (2,285 | ) | (3,613 | ) | (2,110 | ) | |||||||
Net income and total comprehensive income | $ | 2,707 | $ | 3,805 | $ | 7,347 | $ | 1,763 | |||||||
Net income per common share - basic | $ | 0.05 | $ | 0.08 | $ | 0.12 | $ | 0.04 | |||||||
Net income per common share - diluted | $ | 0.05 | $ | 0.08 | $ | 0.12 | $ | 0.04 | |||||||
Weighted average number of common shares outstanding - basic | 59,057,991 | 45,013,784 | 59,053,219 | 45,013,784 | |||||||||||
Weighted average number of common shares outstanding - diluted | 59,888,029 | 45,562,703 | 59,933,003 | 45,560,575 |
Same-Restaurant Sales Growth and Same-Restaurant Traffic Growth
THIRTEEN WEEKS ENDED | SAME-RESTAURANT SALES GROWTH | SAME-RESTAURANT TRAFFIC GROWTH | COMPARABLE RESTAURANT BASE | ||||
13.4 | % | 8.1 | % | 304 | |||
403.5 | % | 360.9 | % | 270 | |||
(75.9) | % | (77.2) | % | 212 | |||
6.2 | % | 2.4 | % | 168 |
Source:
2022 GlobeNewswire, Inc., source