First Watch Restaurant Group, Inc.

Thank you for standing by, and welcome to the First Watch Restaurant Group, Inc. Fourth Quarter and Fiscal Year 2023 Earnings Conference Call occurring today, March 5, 2024, at 8 a.m. Eastern Time. Please note that all participants are in a listen-only mode. Following the presentation, the conference will be open for analyst questions, and instructions on how to ask a question will be given at that time. This call will be archived and available for replay at investors.firstwatch.com under the News and Events section. I would now like to turn the conference over to Stephen Morata, Vice President of Investor Relations. Please go ahead.

Hello, everyone. I am joined by First Watch's Chief Executive Officer and President, Chris Tommaso, and Chief Financial Officer, Mel Hope. This morning, First Watch issued its earnings release for the fourth quarter in fiscal 2023 on Globe Newswire and filed its annual report on Form 10-K with the SEC. These documents can be found at investors.firstwatch.com. Let me first cover a few housekeeping matters 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 condition of the company's industry and its operations, performance and financial condition, outlook, growth plans and 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 the company's filings with the SEC, including our annual report on Form 10-K. 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 margin. 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 will turn the call over to Chris.

Good morning. I'm pleased to report that we had a very strong finish to 2023, with both fourth quarter same restaurant sales and traffic growth accelerating versus the third quarter, along with improved restaurant-level profitability. 2023 marked the start of our fifth decade as a company and was also a year in which First Watch surpassed several significant milestones. To start, we eclipsed $1 billion in system-wide sales, posted nearly $100 million in adjusted EBITDA, and in August, celebrated the opening of our 500th restaurant. We grew same-restaurant sales by 7.6% with positive traffic for the year. During the year, we opened 51 system-wide restaurants across 19 states and converted 23 restaurants from franchise to company-owned through strategic acquisitions. Our total system-wide restaurant count at year-end was 524, up nearly 11% from prior year. In 2023, total revenues grew by 22% versus 2022, and more than 100% versus 2019. Nothing better illustrates our position as a high-growth brand than doubling our total revenue in a four-year window. Sticking to that four-year look-back, our system-wide restaurant count grew 42%, and same restaurant sales and traffic grew 38.9% and 7.5% respectively. In addition to the top-line results, we saw strengthening in our restaurant operations efficiency, which yielded a restaurant-level operating profit margin of 20% and adjusted EBITDA growth of 44% versus 2022. For the year, we also grew market share and logged our best customer experience scores ever. In short, Firstwatch has diligently and consistently delivered on our goals. We take tremendous pride in that. We realize that as a public company, meeting short-term expectations is important, and we intend to continue to do so. But our primary focus is on creating long-term value for our stakeholders, and we will continue to make decisions that we believe will deliver predictable long-term growth. Having grown to 524 restaurants, we recognize and embrace our leadership position in daytime dining. We were an early pioneer and first mover in this now well established segment. We'll continue to maximize our first mover advantage, leverage our significant scale, and lean on our 40-year operating history of focusing on superior execution and quality strategic growth to widen our competitive moat. These are the foundational pillars that have been critical to our sustained performance and establishing that leadership position, and we see no reason to change course. In short, Scale matters, and we believe that we can and will continue to grow while upholding what has made First Watch such a beloved brand and an employer of choice. In fact, we believe our growth is a force multiplier and creates additional opportunities. From where I stand today, I've never felt better about our culture, our culinary strategy, the quality of our people, and the high level of service they provide. I feel just as good about the pipeline of talent that we've developed and cultivated. For years, we've highlighted employee turnover that sits below the industry average as a key competitive advantage. And even during another high-growth year, this metric improves sequentially throughout each quarter in 2023 for both managers and hourly team members. It is for all these strengths and others that we're confident in our long-term guidance of low double-digit unit growth as we continue on our march towards 2,200 domestic restaurants. As it pertains to that restaurant growth, I'm pleased to announce our two new expansion markets, Las Vegas and New England. We've completed our diligence and identified the long-term unit potential in each of these markets, and it is significant. We are already deep into negotiations for multiple locations in both markets and expect a material percentage of our growth to come from these two areas in the coming years. Considering our proven portability, as evidenced by our top decile restaurants spanning 10 states and 20 DMAs, we are confident that First Watch's differentiated breakfast, brunch, and lunch offering will be just as well received in these two vibrant markets as it has been in so many others around the country. Las Vegas and New England and their abundant trade areas are in addition to the 17 DMAs that accompany the recently completed and announced franchise acquisitions, and we are excited about the new white space in front of us. And finally, I'd also like to share that effective last month, we completed the rollout of pay-at-the-table technology at all company-owned restaurants. Pay-at-the-table streamlines and improves the overall experience for both customers and our team members. Through a simple QR code on our receipts, customers can now seamlessly pay with a few clicks using Apple Pay, Google Pay, or a credit card, thereby reducing bottlenecks frequently encountered at our busy host stands, particularly during peak weekend hours. From our testing, we determined that congestion at the front, especially when we are on a wait, was significantly reduced with no negative impact on table turns. Last week alone, more than 125,000 customers elected to use this new feature. Assuming 30 seconds saved per transaction at the register, we saved over 1,000 customer and employee hours. Pay at the Table is yet another initiative, along with back-of-house technology like KDS, and front of house technology like our weightless functionality that positions us to serve more demand. As I look back on 2023, I'm proud of, but not surprised by, our operational excellence, which delivered more than $1 billion in system-wide sales, nearly $100 million in adjusted EBITDA, organic unit growth approaching 11%, several successful franchise acquisitions, same restaurant sales growth of 7.6%, and positive same restaurant traffic. Given our segment leadership and untapped market potential, the growth we see in front of us is even more exciting than what we've already achieved. And with that, I'll turn it over to Mel. Thanks, Chris, and good morning.