Same-restaurant sales growth of 4.8% and total revenue growth of 17.3%
Income from operations margin of 3.6% and Restaurant level operating profit margin of 18.7%
Net income of
13 system-wide restaurants opened across 10 states
Raising 2023 same-restaurant sales growth, total revenue growth and Adjusted EBITDA guidance
“First Watch delivered impressive Q3 revenue and earnings results,” said
Highlights for Q3 2023 compared to Q3 2022*:
- Total revenues increased 17.3% to
$219.2 million in Q3 2023 from$186.9 million in Q3 2022 - System-wide sales increased 14.9% to
$270.3 million in Q3 2023 from$235.2 million in Q3 2022 - Same-restaurant sales growth of 4.8% (+38.8% relative to the third quarter of 2019**)
- Same-restaurant traffic decline of 1.9% (+6.5% relative to the third quarter of 2019**)
- Income from operations margin increased to 3.6% during Q3 2023 from 1.4% in Q3 2022
- Restaurant level operating profit margin*** increased to 18.7% in Q3 2023 from 17.3% in Q3 2022
- Net income increased to
$5.4 million , or$0.09 per diluted share, in Q3 2023 from$46.0 thousand in Q3 2022 - Adjusted EBITDA*** increased to
$21.6 million in Q3 2023 from$17.0 million in Q3 2022 - Opened 13 system-wide restaurants (10 company-owned and 3 franchise-owned) across 10 states and acquired 11 operating franchise-owned restaurants, resulting in a total of 505 system-wide restaurants (402 company-owned and 103 franchise-owned) across 29 states
___________________
* Thirteen weeks ended
** Comparison to the thirteen weeks ended
*** See “Non-GAAP Financial Measures Reconciliations” below
For additional financial information related to the thirteen weeks ended
Outlook Fiscal Year 2023
The Company updates its guidance for the 53-week fiscal year ended
- Same-restaurant sales growth in the range of 7.0% to 8.0% with generally flat same-restaurant traffic growth
- Total revenue growth in the range of 20.0% to 21.0%(1)
- Adjusted EBITDA* in the range of
$91.0 million to$92.0 million (1) - Blended tax rate in the range of 26.0% to 28.0%
- Total of 49-52 new system-wide restaurants, net of 1 company-owned restaurant closure (37 to 39 new company-owned restaurants and 13 to 14 new franchise-owned restaurants)
- Capital expenditures in the range of
$85.0 million to$90.0 million invested primarily in new restaurant projects and planned remodels(2)
______________________
(1) Includes approximately 2.5% in total revenue growth and approximately
(2) Does not include the capital outlays associated with the acquisition of franchise-owned restaurants
* 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.
Conference Call and Webcast
Interested parties may listen to the conference call via any one of three options:
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- Join the webcast at https://investors.firstwatch.com/news-and-events/events
The webcast will be archived 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 specialties such as the Quinoa Power Bowl®, Farm Stand Breakfast Tacos, Avocado Toast, Chickichanga, Morning Meditation (juiced in-house daily), Spiked Lavender Lemonade and its signature
Forward-Looking Statements
This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which are subject to known and unknown risks, uncertainties and other important factors that may cause actual results to be materially different from the statements made herein. All statements other than statements of historical fact are forward-looking statements. Forward-looking statements discuss our current expectations and projections relating to our financial position, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to any historical or current facts. These statements may include words such as “aim,” “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “future,” “intend,” “outlook,” “potential,” “project,” “projection,” “plan,” “seek,” “may,” “could,” “would,” “will,” “should,” “can,” “can have,” “likely,” the negatives thereof and other similar expressions. You should evaluate all forward-looking statements made in this press release in the context of the risks and uncertainties disclosed herein, in our Annual Report on Form 10-K as of and for the year ended
The forward-looking statements included in this press release are made only as of the date hereof and are expressly qualified in their entirety by these cautionary statements. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law. All information presented herein is based on our fiscal calendar. Unless otherwise stated, references to particular years, quarters, months or periods refer to our fiscal years and the associated quarters, months and periods of those fiscal years.
Investor Relations Contact
941-500-1918
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 accounting principles generally accepted in
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 and (iii) internally as benchmarks to compare the Company’s performance to that of its competitors.
Non-GAAP Financial Measures Reconciliations
Adjusted EBITDA and Adjusted EBITDA margin - The following table reconciles 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 | THIRTY-NINE WEEKS ENDED | ||||||||||||||
(dollars in thousands) | SEPTEMBER 24, 2023 | SEPTEMBER 25, 2022 | SEPTEMBER 24, 2023 | SEPTEMBER 25, 2022 | |||||||||||
Net income | $ | 5,418 | $ | 46 | $ | 22,737 | $ | 7,393 | |||||||
Depreciation and amortization | 10,434 | 8,679 | 28,992 | 25,302 | |||||||||||
Interest expense | 1,848 | 1,362 | 5,792 | 3,494 | |||||||||||
Income taxes | 1,243 | 1,329 | 7,833 | 4,942 | |||||||||||
EBITDA | 18,943 | 11,416 | 65,354 | 41,131 | |||||||||||
Stock-based compensation(1) | 1,764 | 2,719 | 5,386 | 7,821 | |||||||||||
Transaction expenses, net(2) | 546 | 1,419 | 2,543 | 1,976 | |||||||||||
Strategic transition costs(3) | 168 | 780 | 681 | 1,951 | |||||||||||
Delaware Voluntary Disclosure Agreement Program(4) | 44 | — | 456 | — | |||||||||||
Insurance proceeds in connection with natural disasters, net(5) | (326 | ) | — | (621 | ) | — | |||||||||
Impairments and loss on disposal of assets(6) | 185 | 338 | 618 | 572 | |||||||||||
Recruiting and relocation costs(7) | 305 | 351 | 415 | 570 | |||||||||||
Severance costs(8) | — | — | 26 | 155 | |||||||||||
Adjusted EBITDA | $ | 21,629 | $ | 17,023 | $ | 74,858 | $ | 54,176 | |||||||
Total revenues | $ | 219,212 | $ | 186,852 | $ | 646,918 | $ | 544,417 | |||||||
Net income margin | 2.5 | % | — | % | 3.5 | % | 1.4 | % | |||||||
Adjusted EBITDA margin | 9.9 | % | 9.1 | % | 11.6 | % | 10.0 | % | |||||||
Additional information | |||||||||||||||
Deferred rent expense(9) | $ | 661 | $ | 680 | $ | 1,575 | $ | 1,911 |
___________________________
(1) Represents non-cash, stock-based compensation expense which is recorded within General and administrative expenses on the Consolidated Statements of Operations and Comprehensive Income.
(2) Represents costs incurred in connection with the secondary offerings by
(3) Represents costs related to process improvements and strategic initiatives. These costs are recorded within General and administrative expenses on the Consolidated Statements of Operations and Comprehensive Income.
(4) Represents professional service costs incurred in connection with the Delaware Voluntary Disclosure Agreement Program related to unclaimed or abandoned property. These costs are recorded in General and administrative expenses on the Consolidated Statements of Operations and Comprehensive Income.
(5) Represents insurance recoveries, net of costs incurred, in connection with Hurricane Ian, which were recorded in Other income, net on the Consolidated Statements of Operations and Comprehensive Income.
(6) 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.
(7) Represents costs incurred for hiring qualified individuals. These costs are recorded within General and administrative expenses on the Consolidated Statements of Operations and Comprehensive Income.
(8) Severance costs are recorded in General and administrative expenses on the Consolidated Statements of Operations and Comprehensive Income.
(9) Represents the non-cash portion of straight-line rent expense recorded within both Occupancy expenses and General and administrative expenses on the Consolidated Statements of Operations and Comprehensive Income.
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 | THIRTY-NINE WEEKS ENDED | ||||||||||||||
(dollars in thousands) | SEPTEMBER 24, 2023 | SEPTEMBER 25, 2022 | SEPTEMBER 24, 2023 | SEPTEMBER 25, 2022 | |||||||||||
Income from operations | $ | 7,738 | $ | 2,621 | $ | 34,412 | $ | 15,434 | |||||||
Less: Franchise revenues | (3,717 | ) | (2,874 | ) | (10,868 | ) | (8,088 | ) | |||||||
Add: | |||||||||||||||
General and administrative expenses | 25,179 | 21,689 | 73,168 | 63,194 | |||||||||||
Depreciation and amortization | 10,434 | 8,679 | 28,992 | 25,302 | |||||||||||
Transaction expenses, net(1) | 546 | 1,419 | 2,543 | 1,976 | |||||||||||
Impairments and loss on disposal of assets(2) | 185 | 338 | 618 | 572 | |||||||||||
Restaurant level operating profit | $ | 40,365 | $ | 31,872 | $ | 128,865 | $ | 98,390 | |||||||
Restaurant sales | $ | 215,495 | $ | 183,978 | $ | 636,050 | $ | 536,329 | |||||||
Income from operations margin | 3.6 | % | 1.4 | % | 5.4 | % | 2.9 | % | |||||||
Restaurant level operating profit margin | 18.7 | % | 17.3 | % | 20.3 | % | 18.3 | % | |||||||
Additional information | |||||||||||||||
Deferred rent expense(3) | $ | 611 | $ | 631 | $ | 1,425 | $ | 1,762 |
____________________________
(1) Represents costs incurred in connection with the secondary offerings by
(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 the non-cash portion of straight-line rent expense recorded within Occupancy expenses on the Consolidated Statements of Operations and Comprehensive Income.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) (Unaudited) | |||||||||||||||
THIRTEEN WEEKS ENDED | THIRTY-NINE WEEKS ENDED | ||||||||||||||
SEPTEMBER 24, 2023 | SEPTEMBER 25, 2022 | SEPTEMBER 24, 2023 | SEPTEMBER 25, 2022 | ||||||||||||
Revenues: | |||||||||||||||
Restaurant sales | $ | 215,495 | $ | 183,978 | $ | 636,050 | $ | 536,329 | |||||||
Franchise revenues | 3,717 | 2,874 | 10,868 | 8,088 | |||||||||||
Total revenues | 219,212 | 186,852 | 646,918 | 544,417 | |||||||||||
Operating costs and expenses: | |||||||||||||||
Restaurant operating expenses (exclusive of depreciation and amortization shown below): | |||||||||||||||
Food and beverage costs | 48,709 | 44,578 | 143,028 | 129,200 | |||||||||||
Labor and other related expenses | 73,137 | 61,262 | 212,312 | 175,091 | |||||||||||
Other restaurant operating expenses | 33,694 | 29,685 | 97,572 | 85,761 | |||||||||||
Occupancy expenses | 17,555 | 15,091 | 49,950 | 44,318 | |||||||||||
Pre-opening expenses | 2,035 | 1,490 | 4,323 | 3,569 | |||||||||||
General and administrative expenses | 25,179 | 21,689 | 73,168 | 63,194 | |||||||||||
Depreciation and amortization | 10,434 | 8,679 | 28,992 | 25,302 | |||||||||||
Impairments and loss on disposal of assets | 185 | 338 | 618 | 572 | |||||||||||
Transaction expenses, net | 546 | 1,419 | 2,543 | 1,976 | |||||||||||
Total operating costs and expenses | 211,474 | 184,231 | 612,506 | 528,983 | |||||||||||
Income from operations | 7,738 | 2,621 | 34,412 | 15,434 | |||||||||||
Interest expense | (1,848 | ) | (1,362 | ) | (5,792 | ) | (3,494 | ) | |||||||
Other income, net | 771 | 116 | 1,950 | 395 | |||||||||||
Income before income taxes | 6,661 | 1,375 | 30,570 | 12,335 | |||||||||||
Income tax expense | (1,243 | ) | (1,329 | ) | (7,833 | ) | (4,942 | ) | |||||||
Net income | $ | 5,418 | $ | 46 | $ | 22,737 | $ | 7,393 | |||||||
Net income | $ | 5,418 | $ | 46 | $ | 22,737 | $ | 7,393 | |||||||
Other comprehensive income | |||||||||||||||
Unrealized gain on derivatives | 1,257 | — | 1,097 | — | |||||||||||
Income tax related to other comprehensive income | (272 | ) | — | (272 | ) | — | |||||||||
Other comprehensive income, net of tax | 985 | — | 825 | — | |||||||||||
Comprehensive income | $ | 6,403 | $ | 46 | $ | 23,562 | $ | 7,393 | |||||||
Net income per common share - basic | $ | 0.09 | $ | — | $ | 0.38 | $ | 0.13 | |||||||
Net income per common share - diluted | $ | 0.09 | $ | — | $ | 0.37 | $ | 0.12 | |||||||
Weighted average number of common shares outstanding - basic | 59,646,027 | 59,089,831 | 59,424,989 | 59,065,423 | |||||||||||
Weighted average number of common shares outstanding - diluted | 61,562,524 | 60,464,062 | 61,016,105 | 60,088,622 |
Same-Restaurant Sales Growth and Same-Restaurant Traffic Growth (Decline)
THIRTEEN WEEKS ENDED | SAME-RESTAURANT SALES GROWTH | SAME-RESTAURANT TRAFFIC GROWTH (DECLINE) | COMPARABLE RESTAURANT BASE | |||
4.8% | (1.9)% | 327 | ||||
12.0% | 3.7% | 303 | ||||
46.2% | 40.1% | 270 |
Source:
2023 GlobeNewswire, Inc., source