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First Watch Restaurant Group, Inc. (FWRG)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 revenue grew 7.6% to $263.3M, with Adjusted EBITDA essentially flat at $24.3M; comps were -0.3% and traffic -3.0% (13-week vs 13-week), as growth was driven by new units and acquisitions while underlying demand remained soft .
  • 2025 outlook targets ~20% total revenue growth and $124–$130M Adjusted EBITDA, with low-single-digit positive comps and flat-to-slightly positive traffic; guidance embeds ~4% revenue growth and ~$8M EBITDA from completed/announced franchise acquisitions .
  • Key operational levers: scaled marketing in 2025 (after positive 2024 tests), enhanced guest-facing tech, and third-party delivery visibility changes that turned YTD delivery traffic positive early in 2025 .
  • Cost headwinds: high-single-digit commodity inflation (eggs, pork, coffee, avocados) and tariffs expected to persist through 2025; management chose modest 1.3% price in Jan and will reassess mid-year (prioritizing value and long-term brand health) .
  • Near-term setup: 1Q25 Adjusted EBITDA expected to be ~$4M below 1Q24 given record 4Q openings and early 2025 openings (new unit ramp inefficiency), with 50–55% of 2025 EBITDA weighted to 2H; catalysts include traffic stabilization from marketing and delivery channel improvements vs. risk from sustained commodity/tariff pressure .

What Went Well and What Went Wrong

  • What Went Well
    • Reached structural milestones in 2024: $1.0B in total revenues and >$100M Adjusted EBITDA for the first time; improved labor efficiency, ticket times, and customer experience scores .
    • Development engine strong: 25 openings in Q4 (record), 50 system-wide openings in 2024; new restaurants on pace for Year-3 sales of ~$2.6M, >35% cash-on-cash returns and >22% IRR (management commentary) .
    • Strategic marketing/tech pivot: meaningfully scaling 2025 marketing following positive 2024 tests; enhanced consumer data/targeting and planned customer-facing tech (waitlist, menu tools, offer wallet) to drive frequency and new guest acquisition .
  • What Went Wrong
    • Traffic remained negative (-3.0% in Q4) and comps slightly negative (-0.3%); off-prem/delivery had been a drag before visibility improvements; in-restaurant traffic was stronger than off-prem in Q4 .
    • Food and beverage costs rose to 22.7% of sales (vs. 22.5% LY), pressured by commodity inflation; income from operations margin compressed to 1.5% (vs. 2.8% LY) .
    • Elevated commodity/tariff outlook: high single-digit commodity inflation YTD (eggs, avocados, bacon, coffee), with avian influenza forcing some spot egg purchases above contracted pricing; 2025 guidance contemplates these pressures .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Revenue ($M)$258.6 $251.6 $263.3
Diluted EPS ($)$0.14 $0.03 $0.01
Income from Operations Margin (%)6.4% 2.5% 1.5%
Net Income Margin (%)3.4% 0.8% 0.3%
Restaurant-Level Operating Profit (RLOP) Margin (%)21.9% 18.9% 18.8%
Adjusted EBITDA ($M)$35.3 $25.6 $24.3
KPIQ2 2024Q3 2024Q4 2024
Same-Restaurant Sales Growth (%)(0.3%) (1.9%) (0.3%)*
Same-Restaurant Traffic Growth (%)(4.0%) (4.4%) (3.0%)*
System-Wide Sales ($M)$299.0 $291.8 $304.1
New System-Wide Openings (Units)7 9 25
Q4 Mix DetailQ4 2023Q4 2024
Restaurant Sales ($M)$241.0 $260.6
Franchise Revenues ($M)$3.6 $2.7
Total Revenues ($M)$244.6 $263.3

Notes: Q4 2024 and Q4 2023 are 13-week vs. 14-week periods; comparable metrics in the release adjust Q4 2023 to 13 weeks for SSS/traffic . *Q4 SSS/traffic compare 13 weeks vs. 13 weeks for enhanced comparability .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Same-Restaurant Sales GrowthFY2025N/A (Initial)Low-single-digit positive; traffic flat to slightly positiveNew
Total Revenue GrowthFY2025N/A (Initial)~20% (incl. ~4% from completed/announced acquisitions)New
Adjusted EBITDAFY2025N/A (Initial)$124–$130M (incl. ~$8M from completed/announced acquisitions)New
Blended Tax RateFY2025N/A (Initial)31–33%New
Net New System-Wide RestaurantsFY2025N/A (Initial)59–64 (net of 3 closures; 55–58 company, 7–9 franchise)New
Capital ExpendituresFY2025N/A (Initial)$150–$160M (excl. franchise acquisition capex)New
EBITDA CadenceFY2025N/A (Initial)50–55% of EBITDA in 2H25New
1Q25 Adj. EBITDA (color)1Q25N/A≈$4M below 1Q24New

Long-term targets reiterated: low double-digit unit growth, ~3.5% SSS growth, mid-teens restaurant sales and Adjusted EBITDA growth .

Earnings Call Themes & Trends

TopicQ2 2024 (Prior-2)Q3 2024 (Prior-1)Q4 2024 (Current)Trend
Marketing StrategyEmphasized operational efficiency; no major marketing scale announced .Tests underway; marketing campaigns had small impact on net per person average; traffic picked up through the quarter .Meaningfully scaling 2025 spend; data-driven targeting; focus on frequency and new guests; results from 2024 tests drove plan .Scaling from test to roll-out.
Third-Party DeliveryNot highlighted.Off-prem drag noted previously .Early-2025 visibility changes made delivery traffic positive YTD; in-restaurant traffic stronger than off-prem in Q4 .Improving channel.
Commodity InflationNoted industry cost backdrop .Hurricane Milton timing-related adjustments; no material Q4 SSS impact .High-single-digit inflation YTD; eggs needing spot buys; avocados/bacon/coffee elevated; tariffs contemplated in outlook .Inflation worsened; embedded in guide.
Pricing Philosophy——1.3% price in Jan; mid-year review; won’t fully price transitory spikes (avian flu analogy); protect value perception .Modest, disciplined.
Labor/OperationsEfficiency, ticket times improved; EBITDA +37% .Restaurant-level margin +20 bps YoY; turnover improvements .Labor inflation ~4.3%; RLOP margin 18.8%; continued efficiency focus .Sustained discipline.
Development7 openings; 21 franchise acquisitions (Q2) .9 openings; 547 total; acquisition program ongoing .25 openings Q4; 50 FY; new unit economics strong; 2025 pipeline 2H-weighted .Accelerating.

Management Commentary

  • “2024 was a pivotal year… we surpassed $1 billion in total revenues and $100 million in adjusted EBITDA for the first time… increased labor efficiency, improved restaurant level operating profit margins, reduced ticket times, improved employee turnover and raised our already exceptional customer experience scores.” — CEO Chris Tomasso .
  • “We are meaningfully scaling our marketing spend in 2025… not a reaction to the more recent challenging industry traffic.” — CEO .
  • “We also plan to launch enhanced customer-facing technologies… a custom-built wait list… dynamic nutrition and allergen tools… new ordering capabilities and a personalized offer wallet.” — CEO .
  • “Changes to our delivery program… immediately improved our visibility within the delivery apps and subsequently reversed our trend… traffic is now positive in this channel year-to-date.” — CEO .
  • “Year-to-date, our commodity inflation is tracking at high single-digit percent… eggs… avocados, bacon and coffee beans are elevated as well… guidance… contemplated these higher costs, as well as the recently announced tariffs.” — CFO Mel Hope .
  • “We expect adjusted EBITDA in the first quarter of 2025 to be around $4 million below the first quarter of 2024… expect 50% to 55% of our adjusted EBITDA for the year will be generated in the second half of 2025.” — CFO .

Q&A Highlights

  • Comp trend cadence: Q4 traffic better than Q3; Q1-to-date traffic better than Q4; Feb challenged by weather/industry; guidance assumes positive traffic for balance of 2025 .
  • Marketing: Big step-up in 2025 spend, below industry average as % of sales; tests showed ROI; plan targets both frequency and new guests; densest markets prioritized for efficiency .
  • Pricing and inflation: 1.3% price in January; mid-year review possible; preference not to fully price transitory spikes (e.g., avian flu) to protect long-term health/value .
  • Eggs/commodities: Annual contract secures supply, but flock issues require some spot purchases; eggs+potatoes ~15% of basket; elevated costs likely much of year .
  • Margin/Spend mapping: Marketing flows through G&A; any margin pressure likely in F&B due to commodities; focus on growing margin dollars even if % compresses .

Estimates Context

  • S&P Global consensus (EPS, revenue, EBITDA) for Q4 2024 could not be retrieved at this time due to a temporary data limit error; therefore, explicit “vs. consensus” comparisons are unavailable. Values would normally be sourced from S&P Global.

Key Takeaways for Investors

  • 2025 setup is a classic “investment year”: scaled marketing and tech aimed at returning to positive traffic, while commodity/tariff headwinds and new-unit ramp weigh on early-year profitability; H2 weighting is pronounced (50–55% of EBITDA) .
  • Unit growth engine remains intact with strong new-unit economics; 59–64 net openings planned in 2025 and ongoing franchise acquisitions embed ~4% revenue and ~$8M EBITDA uplift in guidance .
  • Pricing remains modest (1.3% in Jan) despite inflation, reflecting a value-first strategy; watch for a potential mid-year price action if cost pressures persist .
  • Delivery channel trend is improving after visibility changes; watch for sustained positive traffic and impact on mix as marketing scales .
  • Near-term model notes: expect 1Q25 EBITDA ≈$4M below 1Q24, commodity pressure (eggs, bacon, avocados, coffee) throughout 2025, and G&A uptick from marketing; monitor flow-through to restaurant-level margins and corporate cost discipline .
  • Strategic acquisitions continue to consolidate franchised units and expand white space; Nov-2024 agreement to acquire 16 NC/SC franchise assets supports 2025 guide (closing expected by mid-April 2025) .

Appendices

Selected Q4 2024 P&L detail (13 weeks vs 14 weeks LY): total revenues $263.3M, restaurant sales $260.6M, franchise revenues $2.7M; food & beverage 22.7% of sales; labor 33.7%; G&A 11.7%; operating income $3.9M; net income $0.7M; Adjusted EBITDA $24.3M (9.2% margin) .

Company 2025 outlook reiteration: low-single-digit positive comps; ~20% revenue growth; Adjusted EBITDA $124–$130M; 59–64 net openings; capex $150–$160M; long-term targets: low double-digit unit growth, ~3.5% SSS, mid-teens restaurant sales and Adjusted EBITDA growth .