First Watch Restaurant Group, Inc.

Thank you for standing by and welcome to the First Watch Restaurant Group Incorporated second quarter earnings conference call occurring today, August 5th, 2025 at 8 a.m. Eastern time. Please note that all participants are currently in a listen-only mode. Following the presentation, the conference call 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 Murata, Vice President of Investor Relations at First Watch, to begin.

Hello, everyone. I am joined by First Watch's Chief Executive Officer and President, Chris Tomasa, and Chief Financial Officer, Mel Holt. This morning, First Watch issued its earnings release for the second quarter of fiscal 2025 on Globe Newswire and filed its quarterly report in Form 10-Q with the SEC. These documents can be found at investors.firstwatch.com. This 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, outlook, growth plans and strategies, and future expenses. Any such statements should be considered in conjunction with cautionary statements from the company's earnings release and the risk factor disclosure in the company's filings with the SEC, including a annual report on Form 10-K and quarterly reports 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 margin. Investors should review the reconciliation of these non-GAAP measures to compare with GAAP results contained in the company's earnings release file this morning. Any reference to percentage growth when discussing the second quarter performance is a comparison to the second quarter of 2024 unless otherwise indicated. And with that, I'll turn the call over to Chris. Good morning, everyone.

We appreciate your joining us to discuss our second quarter performance. We're pleased to report a strong quarter and encouraging underlying trends as Firstwatch's broad brand appeal and unit growth engine were on full display. Equally important, the decisions we've made around pricing, including, for instance, our resistance to passing a long temporary commodity cost inflation are proving to be well-received by our customers. Total revenue increased by more than 19%, led by growth from high-performing new restaurant openings and the strategic acquisitions we completed over the past year. This was underpinned by positive same-restaurant sales growth of 3.5%, driven predominantly by 2% positive same-restaurant traffic growth. We enjoyed sequential improvement in both in-restaurant and consolidated traffic trends, generated growth in everyday parts, and saw and are continuing to see tangible traction from our marketing efforts. We opened 17 new system-wide restaurants across eight states, and these new restaurants are on track to meet or exceed the strong cash-on-cash returns and ROI that we target. We also successfully completed the acquisition and integration of 19 franchise restaurants in North Carolina, South Carolina, and Missouri. Our results illustrate that our growth strategy is working, and before we dive in, I want to thank our teams across the entire enterprise who execute at a very high level every day to deliver these results. As we noted during our first quarter conference call, the second quarter got off to a strong start, with April delivering the best monthly same restaurant traffic growth in more than two years. May was similar to April, and June exhibited even further improvement, delivering sustained traffic momentum across multiple quarters builds our confidence in achieving positive traffic for the balance of 2025 and for the full year as we got it to previously. Mother's Day and Father's Day, our two busiest days of the year, occurred in the second quarter, and our teams operated splendidly on both holidays. These two occasions perfectly illustrate our capacity to achieve even higher unit volumes. Mother's Day was the single busiest day in our 42 plus year history, with record same-restaurant traffic and sales. Just one month later, we locked same-restaurant traffic growth in the mid-single digits on Father's Day. As a reminder, our AUVs have grown from $1.6 million in 2019 to $2.3 million today, and our new restaurants are projected to reach $2.7 million in their third year of operation, with recent classes on track to exceed even that target. First Watch remains America's fastest-growing full-service restaurant brand. averaging more than one new restaurant opening per week, and given the strength of our new openings and the related returns, we're not slowing down. I'm proud of our development team's sharp focus on strategy and their successful results. The NRO pipeline is as strong as ever, with more than 130 new sites approved and in various stages of completion. In fact, our double-digit percentage growth plans for 2026 are already firmly in place, and we are nearly halfway to our target for 2027. In short, we're right where we need to be as it relates to hitting our near and midterm unit growth targets. In effect, each year we are opening the equivalent of an entire regional chain. To better illustrate, our new restaurants opened in the last two years outnumbered the entire system size of the next largest daytime dining concept. First Watch is growing aggressively and doing it with a well-formed playbook in place. For 2025, we are targeting 62 to 67 new locations. The broad geographic diversity of our new restaurant openings can be seen in the first half of this year, where we opened new restaurants in 18 markets across 15 states. Our NROs are positioned in highly visible A locations, providing us with a competitive advantage during our day part. As a group, they continue to outperform our underwriting targets, which include year three average unit volumes of $2.7 million, cash on cash returns of around 35%, and returns on investment of better than 18%. Increasingly, we are taking advantage of more second-generation sites with high visibility, plentiful parking, and the square footage that showcases our larger patios. In the 18-month period between the beginning of Q1 2024 and the midpoint of 2025, nearly 40% of our 80 new restaurants were second-generation restaurant spaces, with about 60% of those in freestanding buildings. Because each one of our restaurants is unique, and not artificially constrained by a cookie-cutter approach to design, we can modify just about any location into a highly efficient first watch. We have successfully converted well-known national full-service burger chains, seafood chains, bar and grills, Italian concepts, bakery cafes, and even national family dining concepts. These locations boast some of our highest AUVs. and 40% of our yet-to-be-built active pipeline sites are previous generation restaurant spaces and all of exceptional site quality. With our top decile restaurants spread across 14 states and 22 DMAs and consistent AUVs across all regions, we remain confident in our ability to reach our stated total addressable market of 2,200 locations within the continental United States. And with over 600 First Watch restaurants in operation today, we have many years of strong in restaurant growth ahead of us. Shifting now to brand and marketing. The investments we are making this year are yielding positive results, contributing to our same restaurant traffic growth and increased brand awareness. For example, in core geographies like the Southeast and the Southwest, we're not only outperforming the system, but also gaining market share. Even in Florida, the state we've called home for nearly 40 years, we still have opportunities to increase brand awareness we remain bullish on the untapped potential across all regions i'm particularly enthusiastic about how nicely the composition of our customer base continues to evolve broadening our demographics beyond what leaned toward the boomer generation just 10 years ago today our customers are skewing more towards the gen z and millennial generations with the majority falling below 50 years old which is a direct result of our marketing culinary, and operational efforts to ensure our ongoing relevance and long-term viability. We are highly attentive to all facets of the customer experience. To that end, in the second half of this year, we'll be relaunching all of our customer-facing digital properties, including a custom-built waitlist experience, streamlined digital ordering, and nutritional filtering tools, further enhancing the FirstWatch customer experience. More to come on all of that in the future. One of the best examples of our commitment to our customers' international experience is by removing needless friction from the waitlist process. For those of you who have visited at FirstWatch, you know that our host area can become quite congested during peak hours. While pay-at-the-table improved the payment process and successfully alleviated a portion of this congestion, our new waitlist experience uses automation to improve the experience even further. Geolocation technology allows customers the option to be automatically checked in and notified as they approach the restaurant, saving them the need to physically check in at the host stand. Culinary innovation has always been a competitive advantage at Firstwatch and is key to our customer experience. With our seasonal menu changing every 10 weeks, we're continuously testing new and innovative offerings while evolving and optimizing the core menu to enhance menu navigation, test new items, and introduce new platforms. Our culinary and menu evolution continues to get better each year as we learn more and more about what resonates with our customers. In the first half of this year, we had several test items exceed expectations and one actually broke a sales mix record, giving us a high degree of confidence in our upcoming seasonal offerings when they go to nationwide rollout. At First Watch, our focus is on our people and our culture of kindness. Some of you may have seen the August cover story that FSR Magazine just released featuring First Watch. Danny Klein and the entire editorial staff did a really nice job capturing the essence of our philosophical approach in these areas and how we bring them to life. The timing of this profile is apropos, as we are in the midst of conducting our annual Y tour, which stands for We Hear You, and comprises nearly two dozen 90-minute virtual town halls with me, our Chief Operations Officer Dan Jones, and our Chief People Officer Laura Sorensen, directly engaging with hourly employees. The feedback gathered during these sessions has proven crucial across enterprise touchpoints, including marketing, generating menu ideas, enhancing processes, developing retention strategies, and identifying countless ways to improve both the employee and customer experiences. It's an important interaction that we look forward to every year. We are, and will remain, an employer of choice, providing a unique combination of quality of life and growth opportunities that are unmatched in our industry. A few examples include the introduction of a certified general management program and expanding the First Watch Academy of Restaurant Management Program, or FARM as we affectionately refer to it, to include a director of operations session for the first time. The certified general management program is a new role that focuses on improving manager training and retention and enables us to build a people pipeline made up of veteran managers who support our aggressive unit growth plans. Since its implementation early last year, we have raised the bar on the rate of internal promotion as well as our execution in the restaurants. This program has been so successful that the vast majority of our multi-unit director of operations promotions were existing certified general managers. Initiatives like this certified general manager program, among others, are improving our turnover at all levels. Our strong employee retention among hourly staff and at the manager level improved again in the second quarter, with turnover for both remaining several hundred basis points below full-service industry averages. In today's dynamic environment, we are seeing growing demand for full-service dining as consumers increasingly gravitate towards more hospitable, casual dining experiences. They're seeking consistency, exceptional service, and innovative menu offerings made with high-quality ingredients that elevate their visit beyond what the fast-casual category can offer. This is an area, frankly, where we shine. The appeal of a full-service casual dining visit to First Watch rests in our ability to offer a memorable experience at an enticing value throughout the entire customer journey. We feel really great about how we are positioned. Our unwavering focus on the customer experience and people development has positioned First Watch as a leader in full-service dining. With our robust people and real estate pipelines, planned operational improvements, menu innovation, and a steadfast commitment to fostering a culture of engagement, we continue to elevate both the employee and customer experience. Our progress is reflected not only in the positive shifts in customer demographics, but also in our industry-leading employee retention and track record of successfully executing our growth strategies. As we move forward, these foundational strengths will remain central to sustaining our momentum and delivering long-term value creation for our investors. And now I'd like to turn it over to Mel.