First Watch Restaurant Group, Inc.

Hello, and welcome to the First Watch Restaurant Group First Quarter 2023 Conference. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchtone phone. To withdraw your question, please press star, then two. Please note, today's event is being recorded. Now I'd like to turn the conference over to your host today, Steve Marotta. Mr. Marotta, please go ahead.

Good morning, everyone, and welcome. I'm joined here today by First Watch's Chief Executive Officer and President Chris Tommaso and Chief Financial Officer Mel Holt. This morning, First Watch issued its earnings release for the first quarter of 2023 on Globe Newswire and filed its quarterly report on Form 10-Q with the SEC. These documents can be found at investors.firstwatch.com. Let me first cover a few housekeeping issues before introducing Chris. This conference call will include forward-looking statements that are subject to various risks and uncertainties that could cause the company's actual results to differ materially from these statements. Such statements include, without limitation, statements concerning the conditions of the company's industry and its operations, performance and financial condition, growth strategies, and future expenses. Any such statements should be considered in conjunction with cautionary statements in the company's earnings release, and the risk factor disclosure in our filings with the SEC, including quarterly report on Form 10-Q. First Watch assumes no obligation to update these forward-looking statements, whether as a result of new information, future developments, or otherwise, except as may be required by law. Lastly, management's remarks today will include references to various non-GAAP measures, including restaurant-level operating profit, restaurant-level operating profit margin, adjusted EBITDA, and adjusted EBITDA margins. Investors should review the reconciliation of these non-GAAP measures to the comparable GAAP results contained in the company's earnings release filed this morning. And with that, I would like to turn it over to Chris.

Thanks, Steve. Good morning, everyone. I'd like to start by addressing yesterday's announcement that we acquired six franchise restaurants in the Omaha market. As we speak, we have a team of First Watch leaders on the ground, ensuring a seamless transition as we onboard more than 200 new team members. We've previously shared our interest in and intent to acquire franchise-owned restaurants as an element of our long-term growth strategy. As of today, we have 14 franchisees who operate 109 restaurants, and of those, 60 are subject to purchase options. Our franchise-operated restaurants perform in line with our company-owned units, and these six are no exception. We expect this accretive acquisition to deliver roughly $1 million in adjusted EBITDA for the balance of the year. Now I'd like to shift to our great first quarter results, which reflect our focus on serving more demand. To start, in the first quarter, we opened 10 new First Watch restaurants in seven states, from Florida to Arizona. System-wide sales were $264.7 million, up 24% versus prior year, and total revenues were $211.4 million, up 22% versus prior year. Our restaurant-level operating profit was $44.1 million, resulting in a margin of 21.2%, and adjusted EBITDA was $27.4 million, up 42% versus last year. I could not be prouder of our teams and their delivery of one of the best quarters I remember over my time here at First Watch. We achieved same restaurant traffic growth of 5.1%, which once again outpaced our competitive set. This traffic growth helped drive same-restaurant sales growth of 12.9%. As a reminder, our same-restaurant traffic growth in Q1 2022 was a strong 21.9%. We delivered an exceptional quarter despite the difficult March comparison we alluded to on our previous call. When we look at March and that tougher comp, I think it's important to note that we did not see a deceleration, and our average weekly traffic counts actually held steady throughout the quarter. Compared to pandemic highs, we did experience a softening of off-prem, similar to others in the industry. However, this was offset by growing dining room traffic, as more and more people see us as a place to gather and connect with others. You've heard us talk often about our focus on growing traffic share, which has been a hallmark of our growth for decades. Our teams across the system are continually focused on strengthening our operational acumen to help serve our consumer-led demand. Their focus on controllable and predictable restaurant-level operations helps us leverage increased sales. And while the macro backdrop may be changing and potentially become more challenging, we continue to be highly confident in our long-term outlook based upon steps we've taken and decisions we've made leading up to this point. As a reminder, while others were aggressively taking price in 2021, we maintained our pricing structure through the entire year with a focus on increasing customer counts. which resulted in us earning incremental market share. Our development pipeline is robust, with high-quality sites in new, emerging, and mature markets. Our customer satisfaction scores remain strong, and our value scores continue to show that the customer is recognizing our outstanding dining experience. In short, the future is bright. And finally, I'd like to end by proudly sharing two impressive recognitions from independent third parties that we recently received related to the FirstWatch experience and brand. In March, we were named by Forbes as one of its 2023 Customer Experience All-Stars, joining some remarkable brands that were highly ranked by consumers for loyalty and customer experience. What made me proud is that First Watch was chosen, completely unaided, from more than 2,000 unique brands, making the recognition that much more special. Then in April, we were also recognized by Yelp in its inaugural Most Loved Brands in the U.S., coming in as the number one restaurant brand and the number four overall brand. After four decades of being the best-kept secret in the restaurant industry, it's exciting for me to see others begin to take notice of the experience that our teams are delivering every day. And now I'll turn it over to Mel to discuss our first quarter financial performance in greater detail. Thanks, Chris.