FWRG

First Watch’s second quarter results drew a positive reaction from the market, reflecting solid progress across several key business drivers. Management pointed to sequential improvements in guest traffic, with positive momentum culminating in June, and credited targeted marketing investments and continued menu innovation as primary contributors. CEO Chris Tomasso emphasized the impact of new seasonal offerings and enhanced brand visibility, noting that the company’s expanded marketing strategy has led to higher customer return rates and broadened appeal. Tomasso highlighted: “We just continue to up the ante on ourselves, frankly, from a culinary innovation standpoint, from a unit development standpoint and from a marketing standpoint.” Is now the time to buy FWRG? Find out in our full research report (it’s free). Revenue: $354.7 million vs analyst estimates of $351.4 million (15.2% year-on-year growth, 0.9% beat) Adjusted EPS: $0.05 vs analyst estimates of $0.05 (in line) Adjusted EBITDA: $34.47 million vs analyst estimates of $34.57 million (9.7% margin, in line) EBITDA guidance for the full year is $134.5 million at the midpoint, below analyst estimates of $136.6 million Operating Margin: 2.3%, in line with the same quarter last year Locations: 665 at quarter end, up from 600 in the same quarter last year Same-Store Sales rose 3.4% year on year, in line with the same quarter last year Market Capitalization: $742.4 million While we enjoy listening to the management’s commentary, our favorite part of earnings calls is the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention. Todd Brooks (Benchmark StoneX) asked about drivers of the sequential traffic gains and the sustainability of positive same-restaurant sales in the challenging third quarter. CEO Chris Tomasso cited a combination of menu, marketing, and operational improvements as key factors. Brian Vaccaro (Raymond James) pressed for details on the magnitude and duration of beef-related food cost pressures. CFO Ashlee Weisser detailed that the impact should moderate as the limited-time offer ends and commodity inflation remains below historical trends for now. James Salera (Stephens Inc.) inquired about the frequency of returning new customers and the broader impact on sales mix. Tomasso explained that both new and existing customers are engaging with premium menu items, not just infrequent visitors. Allison Arfstrom (Piper Sandler) sought clarity on the contribution of marketing efficiency to traffic growth. Weisser noted that while precise attribution is difficult, brand-building marketing efforts are designed for long-term, sustained impact rather than immediate call-to-action results. Gregory Francfort (Guggenheim Partners) questioned the rationale for moderating unit growth targets and changes to labor scheduling. Tomasso described the decision as a balance between maintaining high opening standards and supporting free cash flow, while Weisser noted small adjustments to manager headcount were made to improve efficiency. In the coming quarters, the StockStory team will closely monitor (1) the ongoing impact of new menu innovation and the effectiveness of seasonal limited-time offers on sustained guest traffic, (2) how management balances higher marketing spend with margin pressures stemming from premium product mix, and (3) the pace and performance of new restaurant openings, especially as unit growth moderates. Execution on capital allocation priorities and further details at the upcoming Investor Day will also be key signposts for progress. First Watch currently trades at $12.04, down from $12.50 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free for active Edge members). ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI is taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies. Our AI system flagged Palantir before it ran 1,662% between October 2022 and February 2026. AppLovin before it ran 753% between February 2024 and February 2026. Nvidia before it ran 1,178% between January 2023 and February 2026. Each week it produces 6 new names that pass the same tests. Get Our Top 6 Stocks for Free HERE. Stocks that have made our list include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.

Image source: The Motley Fool. Tuesday, Aug. 4, 2026 at 8:00 a.m. ET Vice President of Investor Relations - Steven Marotta Chief Executive Officer and President - Christopher Tomasso Chief Financial Officer - Ashlee Weisser Chief Brand Officer - Matt Eisenacher Operator: Thank you for standing by, and welcome to First Watch Restaurant Group, Incorporated Second Quarter Earnings Conference Call occurring today on August 4, 2026, at 8:00 a.m. Eastern Time. [Operator Instructions] 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 call over to Steven Marotta, Vice President of Investor Relations for First Watch, to begin. Steven Marotta: Hello, everyone. I am joined by First Watch's Chief Executive Officer and President, Chris Tomasso; and Chief Financial Officer, Ashlee Weisser. This morning, First Watch issued its earnings release for the second quarter of fiscal year 2026 on GlobeNewswire and filed its quarterly report on Form 10-Q with the SEC. These documents can be found at investors.firstwatch.com. 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 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 disclosures in the company's filings with the SEC, including our 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 the comparable GAAP results contained in the company's earnings release filed this morning. Any references to percentage growth when discussing the second quarter performance is a comparison to the second quarter of 2025, unless otherwise indicated. The format for today's call will begin with Chris, our Chief Executive Officer, who will provide a review of our operational highlights from the second quarter as well as an overall overview of the business. Ashlee, our Chief Financial Officer, will then discuss our financial results for the quarter and provide the outlook for the balance of 2026. Following these remarks, Chris and Ashlee will jointly provide an update on our long-term targets before we open the call for questions. And with that, I will turn the call over to Chris. Christopher Tomasso: Thanks, Steve. Good morning, and thank you for joining our second quarter earnings call. Before I begin, I'd like to express our gratitude to our team of more than 18,000 employees for bringing our "You First" culture to each of our 665 restaurants across 33 states. We're pleased to report another strong quarter of growth for First Watch, led by a total revenue increase of 15.2%, supported by positive same-restaurant sales growth of 3.4% and the continued strong performance from our new restaurant openings. Our comparable restaurant traffic improved sequentially through the quarter, culminating with positive traffic for the month of June. For the quarter, same-restaurant traffic growth was essentially flat, but represented a 160-basis-point improvement versus the first quarter. We outperformed both the casual dining segment and the industry overall according to Black Box. Benefits from our marketing investments were a significant contributor to our Q2 performance. Since implementing an expanded marketing strategy early last year, brand awareness has been building and, we believe, contributing to our improved same-restaurant traffic trends and overall same-restaurant sales growth. Our marketing objectives are focused on driving at least one more visit from existing customers while also positioning First Watch squarely in the consideration set for new customers. That focus is showing up in customer behavior. In targeted acquisition campaigns run this year, 17% of new customers have already returned for a second visit, which is tracking higher than average. We're not just reaching new customers, we're bringing them back. To do that effectively, we are leaning into targeted data-informed marketing tactics that allow us to reach consumers where they are, speak to them with greater relevance and evaluate the return on that spend with more precision than traditional broad-based marketing alone. We have built a foundational capability that will continue to serve us well as we grow. A key aspect of our brand-building strategy is the expanded use of video, including YouTube and connected television. These channels enhance our ability to target specific demographic groups within markets, tailoring the message at a more localized level and tracking response with better visibility down to the restaurant level. Utilizing this test, learn and act model, we have richness of data to analyze, allowing us to evaluate the performance of each tactic. With this knowledge, we're able to shift dollars toward the channels, markets and messages that are demonstrating the highest levels of performance. Finally, we are continuing to enhance our capabilities when using influencer and social media tactics, allowing us to showcase the brand in a more authentic and customer-centric way. We view these efforts as important building blocks to create awareness, deepen engagement and, ultimately, to convert that into restaurant traffic over time. First Watch continues to rank among the top-tier customer favorites, placing in the top decile for future purchase intent among well-recognized national and regional breakfast competitors. These results demonstrate that our marketing investments are not only increasing awareness of the First Watch brand, but also strengthening occasion consideration and supporting conversion of potential customers into regular customers. We're encouraged by the performance as indicated by unaided brand awareness increasing more than 50% and aided brand awareness increasing 15% since early last year. This remains a very large opportunity for First Watch as overall awareness of our brand is relatively low from an industry standpoint. We will continue to monitor our suite of metrics, including ROI, to determine the effectiveness of our spend. Our new core menu, launched in February 2026, is contributing to positive sales mix, validating the work we've done to evolve and optimize the menu. From improving navigation to enhancing offerings, we are giving our customers even more reasons to visit. The new menu delivers precisely the kind of meaningful contribution we anticipated. We find customers engage more broadly across our offerings with increased participation in add-on items and a higher propensity to select more premium options throughout the meal occasion. As a result, we experienced positive menu mix with per person check average growth outpacing carried pricing in the second quarter as it did in the first quarter. Layered on top of a highly productive and optimized core menu is our seasonal menu strategy, which gives us a fresh platform multiple times per year. This allows us to tell a highly relevant and engaging brand story by highlighting the flavors of the season and presenting compelling limited time-only offerings that create menu news and excitement while driving mix. Culinary innovation remains a significant competitive advantage at First Watch, and we believe this helps keep the brand fresh and relevant and differentiates us from others in our category. Our seasonal Jumpstart menu, which ran from early January to late May, featured our best-selling LTO entree of all time, the Chimichurri Steak & Eggs Hash, and contributed to our positive mix of 50 basis points in the second quarter. We are now in the final weeks of our summer menu and our data shows that the Chipotle Steak and Queso Hash will be our second best-selling LTO item of all time when this menu concludes in mid-August. It also features our newest shareable, Honey Butter Biscuit Bites, which is trending to be our highest mixing shareable since Million Dollar Bacon. These are great examples of our culinary team's ability to create menu excitement that our customers love. It also provides compelling content for our marketing team to leverage across all channels. Looking ahead, and if you follow our social channels, you'll see our customers are eagerly awaiting the return of our fall seasonal hit, Pumpkin Pancakes. Behind the scenes, innovation remains an important driver of growth and differentiation for First Watch. Our culinary operations and marketing teams collaborate to develop, test and refine ideas that are both compelling for our customers and practical for our restaurants. We are particularly excited about a handful of innovative tests focused on higher capacity dayparts currently in the works. Now I'd like to shift to new restaurant growth. First Watch remains America's fastest-growing full-service restaurant brand. Our real estate pipeline is as robust as ever with more than 100 projects in various stages of development. In the second quarter, we opened a total of 18 new systemwide restaurants across 15 states, reaching new, emerging and core markets. We also continue to expand our geographic footprint during the quarter. We opened in Nashua, New Hampshire, which not only marks our initial entry into the Granite State, but also represents our third restaurant in the Boston DMA since we entered the market in January 2025. This restaurant has generated weekly sales volumes materially above our expectations since opening. First Watch's growth in infrastructure remains strong, and I'm particularly pleased with the performance of our newest restaurants. The sales volumes of our 2025 and 2026 restaurant classes continue to outperform both the comp restaurant base and, importantly, their underwriting targets. We have the people pipeline to support our real estate pipeline and the right formula to execute our strategy at the restaurant level to reach our total addressable market of more than 2,200 locations. We believe First Watch occupies a truly distinctive place in casual dining. We're the leader in daytime dining, a category that has disrupted a large segment within casual dining and is expected to continue to experience substantial growth according to Technomic, Inc. Our unique position continues to strengthen as more customers discover the brand and we capture additional market share. Importantly, there is no other concept in daytime dining that brings together our level of national scale, innovation, operational consistency, proven unit growth capability and meaningful long-term development opportunity. Before I close, I'd like to again thank Mel for his leadership as CFO over the past 8 years. His contributions are too numerous to list, and we look forward to leveraging his experience as he continues to serve in an advisory role in the months ahead. I also welcome Ashlee to her first quarterly conference call as CFO. Since joining First Watch, Ashlee has made a tremendous impact throughout the entire organization through her disciplined financial leadership, sound strategic judgment and clear focus on execution. We're delighted to have her lead our value creation strategy during our next phase of growth. Ashlee? Ashlee Weisser: Thank you, Chris, for the warm welcome, and thank you, Mel, for your mentorship, partnership and friendship. I'm honored to take the baton from Mel, build upon the exceptional foundation he helped create and partner with our talented teams across the organization to drive the next chapter of this brand. As I step into this role, I remain focused on disciplined and profitable growth, operational excellence and allocating capital to the highest return opportunities across the business with the goal of creating sustainable long-term shareholder value for all owners of the business, including our investors and employees who share in our success. Our second quarter reflects the strength of that foundation, highlighted by strong revenue growth, positive same-restaurant sales growth, improving trends in same-restaurant traffic and restaurant level profitability as well as continued momentum across our development pipeline. Total second quarter revenues increased 15.2% to $354.7 million, with same-restaurant sales growing 3.4%. Our top line growth was driven by the positive same-restaurant sales growth, contributions from 132 non-comp restaurants, including 57 company-owned new restaurant openings since the second quarter of 2025 and the 19 franchise locations acquired in the second quarter of 2025. While same-restaurant traffic growth was negative 0.4%, it does include the impact of planned sales transfer as we continue to make First Watch more accessible and convenient to more customers and increase overall market share. The level of sales transfer we are experiencing is well within our expectations and underwriting standards. Food and beverage expense was 23.5% of sales and improved 10 basis points when compared to the second quarter of 2025. We benefited from carried pricing of around 3.7% and commodity deflation of approximately 1.6%. Commodity deflation was driven primarily by eggs, avocados and bacon, partially offset by an increase in coffee prices. I want to spend a few more moments providing detail around our food and beverage costs as a percent of sales since the modest improvement we experienced in the quarter masked some notable moving parts. Some good news is that commodity inflation remains below historical trends. The new news is that beef, which was not part of our core menu in the prior year, has become a more meaningful factor in our food and beverage cost performance this year since the introduction of our Barbacoa Breakfast Tacos and Barbacoa Chilaquiles Breakfast Bowl, along with seasonal offerings, which feature premium steak. While our beef costs were in line with our expectations, stronger-than-anticipated demand for our featured beef offerings increased overall COGS by just under 100 basis points year-over-year. Our current steak LTO has materially outperformed test results, resulting in a larger mix shift than originally planned. We view this as evidence of the appeal of our product innovation and the potential pricing power of highly differentiated offering. This impact is temporary, and we expect it to moderate substantially as the current LTO concludes. Our approach, as always, remains a focus on balancing value, innovation and profitability. Shifting to labor. Labor and other related expenses were 32.9% of sales in the second quarter, a 30-basis-point improvement from the second quarter of 2025. This favorability was primarily driven by positive changes we implemented in our staffing model, along with leverage from higher sales, partially offset by 4.1% wage inflation. All of this resulted in restaurant level operating profit margin of 18.8% in the second quarter of 2026, a 20-basis-point improvement over last year. Our income from operations margin was 2.3% in the second quarter. General and administrative expenses were $38.7 million, or 10.9% of total revenue. The increase compared to last year was largely due to timing of marketing spend as well as increased headcount to support our growth objectives. Adjusted EBITDA increased 13.5% to $34.5 million, a $4.1 million increase versus the $30.4 million reported last year. Adjusted EBITDA margin was 9.7% in the second quarter of 2026. Net income was $2.3 million. We opened 18 new systemwide restaurants during the second quarter, with 14 company-owned, 4 franchise-owned and 1 franchise closure and concluded the quarter with 665 restaurants operating in 33 states. The net effect of acquisitions in the quarter, which includes only the impact of purchases made within the last 12 months, was an increase in revenue of about $2.4 million and an adjusted EBITDA of $0.4 million. For further details on the second quarter, please review our supplemental materials deck on our Investor Relations website beneath the webcast link. A key priority for me as we share guidance is a disciplined, transparent and accountable approach to how we communicate our outlook and execute against it. This means clarity around the assumptions supporting our guidance, directness about the associated risks, balanced realism regarding the opportunities ahead and consistency in how we measure progress. We recognize that credibility is earned through performance, not promises, and our entire team is focused on delivering those results. Based on what we know today, we believe our plan is achievable, and we are committed to demonstrating that through consistent execution and clear communication each quarter. Now I'll provide our updated outlook for 2026. Our updated outlook reflects continued same-restaurant sales resilience, strong execution across our restaurants, disciplined cost management and confidence in the opportunities we see for the balance of the year, including a high-quality pipeline of new restaurant openings. With that in mind, we are increasing the low end of our same-restaurant sales growth range to 1.5% to 3% from 1% to 3% previously. Given our second quarter results, combined with the sales trends quarter-to-date, we continue to expect positive same-restaurant sales growth in each quarter of 2026. However, as a reminder, the third quarter does offer by far the most challenging year-over-year comparison of any quarter this year. So while we continue to expect positive same-restaurant sales growth in Q3, we continue to anticipate it to be at or below the low end of our 2026 range. Our guidance includes a price action of 2.9% taken at the beginning of the third quarter and as a result, carried pricing of around 3.6% for the full year. We are increasing total revenue growth to a range of 12.5% to 14% from 12% to 14% with around 100 net basis points of impact coming from previously completed acquisitions. We are narrowing the range of net new systemwide restaurants to 60 to 62 with 53 to 54 coming from company-owned restaurants and 9 to 10 franchise-owned restaurant openings. 1 company-owned restaurant and 1 franchise restaurant have closed this year. Based on successfully pulling forward a handful of openings into the second quarter, our NRO schedule this year is fairly balanced between the first half of the year and the second half of the year, though our remaining company-owned new restaurant openings remain weighted towards Q4. We now expect full year commodity inflation at flat to up 1.5%, down from up 1% to 3% in our prior guidance. This is primarily driven by reduced inflation expectations, which will be fully offset in food and beverage expense as a percent of sales by the temporary impact of beef-based menu offerings that I mentioned earlier. Restaurant-level labor cost inflation is now expected to be in the range of 3.5% to 4.5%. We are also adjusting our 2026 adjusted EBITDA guidance to $133 million to $136 million. The guidance revision to adjusted EBITDA is entirely the result of stronger-than-anticipated customer demand for our new premium protein beef-based offerings, which carry a higher cost of goods profile than our broader menu mix. While heightened demand is creating some near-term margin pressure relative to our original expectations, we view the response as a positive indicator of the strength of our innovation pipeline, the appeal of the product and the perceived value customers experience at First Watch. Moving forward, we will remain disciplined in evaluating margin mitigation opportunities while making decisions that support the long-term health of the brand. Lastly, as a result of the pull forward of marketing dollars into the third quarter from the fourth quarter, combined with the timing of corporate spend, third quarter G&A is expected to be about $1 million less than Q2. For those that model marketing expense, we are modestly investing around 2% of total revenue this year, up approximately 40 basis points from last year. Due mostly to the timing of certain development spend falling into next year, we are lowering our expectation for capital expenditures to a range of $145 million to $150 million, down from our prior guidance of $150 million to $160 million. I am incredibly excited about the opportunities ahead. We have a differentiated brand, attractive unit economics, a substantial runway for growth and a team that consistently delivers results. Those strengths give me confidence in our ability to create meaningful long-term value for our customers, team members, franchisees and shareholders. With that, I'll turn the call back over to Chris before we move to Q&A. Christopher Tomasso: Thank you, Ashlee. Inasmuch as we are sharing our current thinking about 2026, Ashlee and I would like to spend a few additional minutes on how we are evolving our optimal long-term growth strategy and targets. Since our IPO in 2021, we have exceeded our annual long-term growth targets of low double-digit percentage unit growth, same-restaurant sales growth of approximately 3.5% and mid-teens percentage growth for both revenues and adjusted EBITDA. Historically, achieving those targets provided a solid strategic foundation for us to fund our organic growth and maintain our existing asset base, utilizing cash flow from operations. That industry-leading growth and focus on ensuring our long-term relevance resulted in First Watch capturing substantial market share within our segment and expanding our brand. As we have often shared, our new restaurants continue to perform exceptionally well across diverse geographies, which now span 33 states. Recent classes have exceeded sales volumes of the current comp group and are also on track to meet or exceed our underwriting return metrics. And while it's early, our class of 2026 is performing even better. As a reminder, our class of 2026 third-year sales target is $2.8 million with $1.8 million in net build-out costs, and our current actualized 3-year cash-on-cash return is around 35%. This consistent ongoing success validates that investing in new restaurant growth remains a highly attractive use of capital. In recent years, however, maintaining these long-term unit growth targets has required us to access our credit facility in order to fund a portion of our capital expenditures. As we look toward the future, our management team and Board evaluated how best to adapt and optimize capital allocation to current conditions. In framing our approach, we prioritized 2 planning principles: first, to extend our leadership position within the growing daytime dining segment, a category we believe we've come to define. Anchored on the success of new restaurant classes and our proven portability, we are as confident as ever in our ability to achieve our total addressable market of more than 2,200 restaurants in the continental U.S. And second, to self-fund all organic growth and maintenance CapEx from the robust underlying cash flow from our highly productive base while generating excess free cash to strengthen the balance sheet. To that end, we are modestly revising our long-term targets, reflecting an optimized balance between new unit growth and free cash flow. Our plan to open between 53 and 54 new company-operated restaurants in 2026 remains unchanged, and we are on pace to do so. Beginning in 2027 and for the foreseeable future, our target will be to open 50 company-operated new restaurants annually. Ashlee Weisser: This modest change to development achieves the principles Chris just outlined, builds on the already strong foundation of our business, supports positive free cash flow, reinforces our balance sheet and provides greater flexibility in how we deploy capital over time. The change will have little impact on adjusted EBITDA in either the short or long term as our plan moderates G&A investment that a more aggressive growth rate would have necessitated and reallocate certain resources to accelerate margin-enhancing initiatives. In line with the preceding, we are amending our annual long-term targets to be as follows: around 55 new systemwide restaurant openings with around 50 of those company-owned and around 5 franchise-owned; same-restaurant sales growth of 2% to 4%, including positive underlying traffic net of planned sales transfer from new restaurant growth; total revenue growth of 10% to 13%; G&A expense growth lower than total revenue growth; adjusted EBITDA growth of 11% to 14%; positive free cash flow beginning in 2027 and increasing each year thereafter. Relatedly, we are pleased to announce that we are hosting an Investor Day in Boston on November 12, where we will provide a comprehensive overview of our new long-term strategic plan and the key drivers supporting sustainable growth and long-term value creation. For further details on long-term targets, please review the investor deck on our Investor Relations website, which will be posted following our conference call. Operator, we would like to now open the line for questions. Operator: [Operator Instructions] Our first question is from Todd Brooks with Benchmark StoneX. Todd Brooks: Ashlee, welcome to the CFO seat. Good to have you here. Ashlee Weisser: Thanks, Todd. Todd Brooks: A couple of questions, if I may. Chris, it was highlighted in the release about the momentum building across the quarter, positive traffic in June. Can you talk about drivers and then continuation? Because I do think -- and it was good to hear the reiteration of the positive same-store sales in each quarter of the year, but I think investors have been worried about the ability to deliver that in Q3. So any talk about exit rate and same-store sales or quarter-to-date trends relative to the exit rate would be helpful. Christopher Tomasso: Yes. Thanks, Todd. I think I'd start by reiterating what Ashlee said that we feel confident in our statement that we should experience positive sales in every quarter, including the challenging comp quarter of Q3. We did see sequential improvement through Q2 that culminated with positive traffic in June. So we were pleased with that, but we know what we're heading into Q3, but still feel good about it. As far as drivers go, I mean, you heard us talk a lot about the menu, the LTO, the marketing. I think really, it's the combination and the cocktail of all those things kind of working together for us. We just continue to up the ante on ourselves, frankly, from a culinary innovation standpoint, from a unit development standpoint and from a marketing standpoint. So just feeling really good that we have a lot of things going the right way. Todd Brooks: Okay. Great. And just my follow-up, and I'll jump back in. You talked about traffic, and you talked about sales transfer being a drag. I know a lot of people focus on in-restaurant traffic. Is there any way to frame up for us what the delta is? If you don't have the -- or if you adjust for the impact of sales transfer, what type of traffic growth you're generating in the restaurants? Ashlee Weisser: Todd, we're not sharing the exact sales transfer yet. We're going to give a little bit more color at our Investor Day on the 12th of November. But what we can say is that it would have been positive. Operator: Our next question is from Brian Vaccaro with Raymond James. Brian Vaccaro: Mel, congratulations on the retirement. And Ashlee, huge congrats on your new role. Look forward to working with you more. On the store margin dynamics, I just had 2 quick ones on that, if I could. So the COGS line, Q2 came in above our expectations, and you highlighted the beef impact there. As we think about the second half COGS outlook, can you help us sort through how much the beef headwind should moderate? I think the LTO ends on August 10, if I'm not mistaken, correct me if that's wrong. But kind of help us sort through the second half beef headwind, but also your commodity guide, I think the inflation, you're still assuming a return to slight inflation in the back half. Maybe you could just parse through some of those second half dynamics for us. Ashlee Weisser: Yes, absolutely. So I'll start with inflation first. You're correct, we are anticipating a return to some inflation in the second half. If you'll recall, last year, we experienced the really high egg inflation only for the first half of the year. So that's a key driver of the deflation in the first half that we will not experience in the second half. So that's the main driver of the inflation piece. From a mix shift perspective, you're right, it's largely driven by the LTO. And one way to think about it is we had the LTO for about a month in Q2, so about 1/3 of the quarter. And we'll have it for about 2 months of the second half, so about 1/3 of the second half. I don't know if that gives you enough color to frame up how you might want to model that. Brian Vaccaro: Yes. No, that's very helpful. And then I guess as a follow-up, just shifting back to some of the marketing efforts and the new digital local, a lot of good, I guess, incremental color on that. I appreciate that. But can you talk about the influencer side of things? Specifically, it seems like some brands have had quite a bit of success there in recent years within the full-service space. So can you help frame to what degree you are engaging and seeing some traction on that specifically versus plans to maybe dial that up moving through the next 6 to 12 months? Matt Eisenacher: Brian, it's Matt Eisenacher, Chief Brand Officer. I'll speak to that. I think that this was a meaningful step forward this year in influencers and organic being a larger part of our paid media mix. I would anticipate that continuing to increase into next year, but we've seen a lot of traction with that, and so much so that because of the paid efforts, we've actually seen more organic UGC contribution as well. The more people see our brand and see the items on their feeds, they also want to start posting about it as well. So it's been one of the bright spots of our paid media mix. Operator: Our next question is from Jim Salera with Stephens Inc. James Salera: Chris, I wanted to start off and just ask a little bit about the first-time customers and the frequency of returning for a second visit. Just give us some detail around -- are those solo occasions? Do they bring someone with them? And then if I can squeeze one other question into my question. Are they one of the primary drivers of that mix uplift because there's such a strong pull from some of the seasonal offerings? Christopher Tomasso: I don't think we have the data to answer the first part of your question right here. But I would say the second part, in order to have the mix benefit that we saw, I think it comes across the entire customer base, minus our heaviest users who typically tend to order the same thing every time. But I think the appeal, if you will, of the seasonal menus and of the items on the new menu for that matter, I think, is much more broad, and we're seeing that across the user base. James Salera: And Ashlee, I wanted to ask, given the updated long-term guidance, particularly, encouraging to hear the positive free cash flow in FY '27. Have you given any thoughts to what that -- what your capital allocation priorities are going to be as you start to free up more and more resources? Should we expect to see incremental investments on the marketing side given the success you guys have seen in the near term? Does that help support more menu innovation? Can you just kind of walk us through -- or maybe share repurchases, just how you're thinking about allocating that incremental capital you have available? Ashlee Weisser: Yes. I think everything is on the table. When we think about marketing, we're looking at a lot of different metrics, and we know that marketing, our key area for improvement is awareness. So as we continue to see that improve and we see results and we measure it, it's definitely a conversation we'll have around investing more there. And then when it comes to larger capital allocation decisions, we -- nothing is off the table. We can have conversations with the Board as appropriate next year. But some things in the consideration set, obviously, are debt paydown, investments in the business, share repurchases could be on the table. Operator: Our next question is from Brian Mullan with Piper Sandler. Allison Arfstrom: This is Allison Arfstrom on for Brian. Just curious if you could parse out how much of the traffic strength was attributed to the marketing efficiency and spend changes and how we should think about that impact on traffic going forward? Ashlee Weisser: Yes, that's a great question. We're not able to parse it out totally in a way that I think would be helpful to your modeling. We do measure it, and we look at it across a variety of things, but I don't think we could give you an answer that would help you to go forward. What we can say that I think might be helpful is our marketing is not call-to-action-based marketing. It's more of a brand awareness, brand building, getting to know the brand kind of approach to the messaging. And so that takes a little bit longer to build, and we expect it to last a little longer as well. Operator: Our next question is from Sara Senatore with Bank of America. Unknown Analyst: This is [ Grace ] on for Sara. You mentioned that marketing objectives are focused on driving at least one more visit from existing customers while also bringing in new customers. And I know you said that 17% of new customers have already returned for a second visit. So does that mean that more of your traffic growth in June came from new customers rather than increased frequency among existing customers? Or is that traffic growth evenly split? And then can you remind us what your average customer frequency looks like? And then I have one follow-up question. Christopher Tomasso: Yes, I'll take the first part. I think, here, again, we're seeing the benefits across those user groups, both existing customers and first-time customers. We have a really good trial-to-conversion ratio. And so we work really hard to get that first-time visit. We feel like we can -- once we get them in the door and wow them with our experience and our food and our atmosphere that they'll fall into some kind of frequency bucket. So -- but we actually -- in both of those areas, we've seen positive returns on, again, first-time customers and frequency. So we're not discussing the percentages of each one and what the makeup is, but suffice it to say, both those areas are responding well to our efforts. What was the second question? Ashlee Weisser: I think your second question, [ Grace ], was around frequency. Matt, do you want to? Matt Eisenacher: Yes, sure. I can take that. Yes. On customer frequency, our studies show that casual dining is somewhere in the range of 2 to 3 times per year, and our frequency is well within that range as well. Unknown Analyst: Okay. And then my follow-up question is, you mentioned relatively low brand awareness is an opportunity. Would you be willing to share what brand awareness is? And then what does industry average look like? Because you said that aided brand awareness increased by more than 50%, but the gap is still wide. Matt Eisenacher: Yes. This is Matt again. We're going to spend a lot of time on that at our Investor Day on November 12. As we said, we saw the unaided grow 50%, which was, as you know, unaided brand awareness is a tough thing to grow. So seeing that grow by 50% is a big deal, and we'll dimensionalize that more on November 12. Operator: [Operator Instructions] Our next question is from Gregory Francfort with Guggenheim Partners. Gregory Francfort: I had 2 questions. The first was, I think you alluded to some changes you recently made to labor scheduling that have been helping on the margins. What were the big changes that you made there? Ashlee Weisser: Yes. And I wouldn't say it's a huge change in labor scheduling. It was really more around rightsizing the number of managers in our restaurants. So we're still averaging just under 3. I think it moved by a fraction of 1 point, but that fraction of 1 point makes a really big difference on our restaurant base. So just going through and adjusting the par based on what was appropriate on volume. Gregory Francfort: Okay. Got it. And then maybe, Chris, one for you. Just the 50 stores and kind of having that number flatlined, how did you come up with that as the right level kind of as you look at the pushes and pulls and going higher or lower than that? Christopher Tomasso: Yes. I think that's exactly right. We looked at the pushes and the pulls and looked at all kinds of factors related to what the -- maintaining that 10% unit growth rate meant for us. And at some point, we would have had this conversation about kind of level setting on the unit growth. So we ran a bunch of models, as you can imagine, and really felt like this was a really good mix of -- first of all, we're doing this from a position of strength, right? We opened restaurants really, really well. But we wanted to look at that balance and drive the free cash flow and give us some balance sheet strength and some optionality down the road. And of all the models we looked at, we just felt like this worked the best for us. And we even looked at things, Gregory, like what additional G&A would be needed to maintain that growth rate. I mean when you're opening at our rate, when the percent stays the same and the number of restaurants goes up 10 or 12 per year, you have to start looking at additional folks in development and training and the NRO teams and all those things. And so we considered that as well. So -- and again, I know we keep saying this, but we're going to provide a lot more color on that at Investor Day because I know these are kind of top line philosophies, and we want to really share the thinking behind all of these things because we feel really good about it. Operator: There are no further questions at this time. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation. Before you buy stock in First Watch Restaurant Group, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and First Watch Restaurant Group wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $411,427!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,335,252!* Now, it’s worth noting Stock Advisor’s total average return is 965% — a market-crushing outperformance compared to 215% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors. 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Interested in First Watch Restaurant Group, Inc.? Here are five stocks we like better. Strong second-quarter growth: Revenue rose 15.2% to $354.7 million, driven by 3.4% same-restaurant sales growth, marketing initiatives and 18 new restaurant openings. Adjusted EBITDA increased 13.5% to $34.5 million, while restaurant-level margins improved to 18.8%. 2026 outlook raised for sales but lowered for EBITDA: First Watch lifted its same-restaurant sales outlook to 1.5%-3% and revenue growth forecast to 12.5%-14%, but cut adjusted EBITDA guidance to $133 million-$136 million because strong demand for premium beef offerings increased food costs. Expansion continues at a measured pace: The company ended the quarter with 665 restaurants across 33 states and now expects 60-62 net new openings in 2026. Beginning in 2027, it plans roughly 50 company-owned openings annually while targeting positive free cash flow and a stronger balance sheet. First Watch Restaurant Group: A First-Rate Small-Cap Growth Stock First Watch Restaurant Group (NASDAQ:FWRG) reported second-quarter revenue growth of 15.2% as positive same-restaurant sales, marketing initiatives and new restaurant openings supported results. The daytime dining chain also raised the low end of its full-year same-restaurant sales and revenue growth outlook, while lowering its adjusted EBITDA forecast due to higher costs associated with strong demand for premium beef menu items. Chief Executive Officer and President Chris Tomasso said the company generated 3.4% same-restaurant sales growth during the quarter. Comparable traffic improved sequentially and turned positive in June, although same-restaurant traffic for the full quarter was essentially flat. The company said quarterly same-restaurant traffic improved 160 basis points from the first quarter and outperformed casual dining and the broader restaurant industry, according to Black Box. → SpaceX’s First Earnings Report Could Decide Whether Shorts or Bulls Have Control “We are pleased to report another strong quarter of growth,” Tomasso said, citing sales gains from both comparable restaurants and new unit openings. First Watch ended the quarter with 665 restaurants in 33 states and said it opened 18 new system-wide locations during the period. Management attributed part of its traffic and sales momentum to expanded marketing efforts initiated early last year. The company has focused on targeted, data-informed campaigns designed to encourage repeat visits among existing guests and bring new consumers into the brand. → Financials Hit Record Highs as the AI Trade Unravels—Can They Keep Leading? Tomasso said 17% of new customers acquired through targeted campaigns this year had already returned for a second visit, a result he said was tracking above average. First Watch has expanded its use of video advertising, including YouTube and connected television, as well as influencer and social-media marketing. These channels allow the company to target demographic groups within specific markets and assess performance at the restaurant level, management said. The company said unaided brand awareness has increased by more than 50% and aided awareness has risen 15% since early last year, though management described overall awareness as relatively low compared with the industry. Chief Brand Officer Matt Eisenacher said influencer and organic social-media efforts represented a meaningful step forward during the year and are expected to become a larger component of the paid-media mix next year. → Why Rare Earth Processing Could Be the Real 2027 Opportunity First Watch’s core menu, launched in February, also supported sales mix, with per-person check growth exceeding carried pricing in both the first and second quarters. Tomasso said guests have been ordering more add-on items and selecting more premium offerings. The company’s seasonal menu strategy contributed to a 50-basis-point positive menu-mix benefit in the second quarter. Management said the Chimichurri Steak & Eggs Hash, available on the seasonal menu from January through late May, was its best-selling limited-time entree to date. The current summer menu’s Chipotle Steak and Queso Hash is expected to become the company’s second-best-selling limited-time item when the menu concludes in mid-August, while Honey Butter Biscuit Bites are on track to become its highest-mixing shareable item since Million Dollar Bacon. Total revenue rose to $354.7 million during the second quarter. Chief Financial Officer Ashlee Weisser said growth reflected comparable sales gains, contributions from 132 non-comparable restaurants, including 57 company-owned openings since the second quarter of 2025, and 19 franchise locations acquired in the prior-year quarter. Same-restaurant traffic declined 0.4% in the quarter when including planned sales transfers associated with expanding the restaurant base. Weisser said the transfers were within underwriting expectations. Responding to an analyst question, she said traffic would have been positive excluding the sales-transfer effect, though the company did not quantify that impact. Food and beverage costs were 23.5% of sales, improving 10 basis points from a year earlier. The company benefited from approximately 3.7% of carried pricing and commodity deflation of about 1.6%, led by eggs, avocados and bacon, partially offset by higher coffee costs. However, Weisser said demand for beef-based menu products raised food costs by just under 100 basis points year over year. Beef became a more meaningful input following the addition of Barbacoa Breakfast Tacos, the Barbacoa Chilaquiles Breakfast Bowl and steak-based seasonal offerings. The company said the cost impact should moderate substantially following the conclusion of its current steak limited-time offer. Labor and related expenses were 32.9% of sales, improving 30 basis points from the prior-year period, despite 4.1% wage inflation. Weisser said the improvement reflected sales leverage and changes to the staffing model. In response to an analyst question, she said the company had adjusted manager staffing levels based on restaurant volume. Restaurant-level operating profit margin increased 20 basis points to 18.8%. Income from operations margin was 2.3%. Adjusted EBITDA increased 13.5% to $34.5 million. Adjusted EBITDA margin was 9.7%. Net income totaled $2.3 million. Of the 18 system-wide restaurant openings, 14 were company-owned and four were franchise-owned. The quarter also included one franchise closure. First Watch entered New Hampshire with an opening in Nashua, its third restaurant in the Boston designated market area since entering that market in January 2025. Tomasso said the Nashua restaurant’s weekly sales have been materially above expectations since opening. First Watch increased the low end of its 2026 same-restaurant sales outlook to a range of 1.5% to 3%, from a prior range of 1% to 3%. Management continues to expect positive same-restaurant sales in every quarter of 2026, though Weisser said the third quarter faces the company’s most difficult year-over-year comparison and is expected to be at or below the low end of the annual range. The company now expects total revenue growth of 12.5% to 14%, compared with prior guidance of 12% to 14%. Its outlook includes a 2.9% price action implemented at the beginning of the third quarter and projected full-year carried pricing of approximately 3.6%. First Watch narrowed expected net new system-wide openings to 60 to 62, including 53 to 54 company-owned restaurants and nine to 10 franchise-owned locations. It lowered projected capital expenditures to $145 million to $150 million from $150 million to $160 million, largely due to development spending shifting into next year. The company reduced its commodity inflation expectation to flat to up 1.5%, from prior guidance of 1% to 3%, but said the benefit will be offset in food and beverage costs as a percentage of sales by the temporary premium-beef mix. Adjusted EBITDA guidance was set at $133 million to $136 million, with Weisser saying the revision was entirely attributable to unexpectedly strong demand for higher-cost beef offerings. Looking beyond 2026, First Watch said it plans to target 50 company-operated restaurant openings annually beginning in 2027, compared with 53 to 54 planned for 2026. The company updated its long-term targets to include roughly 55 system-wide annual openings, same-restaurant sales growth of 2% to 4%, total revenue growth of 10% to 13%, adjusted EBITDA growth of 11% to 14%, and positive free cash flow beginning in 2027. Tomasso said the more moderate development pace is intended to allow the company to self-fund organic growth and maintenance capital expenditures while strengthening the balance sheet. First Watch plans to provide additional details on its strategy during an Investor Day in Boston on Nov. 12. First Watch Restaurant Group, Inc (NASDAQ: FWRG) operates a specialty daytime dining concept focused on breakfast, brunch and lunch. The company's casual, full-service cafés emphasize fresh ingredients, made-to-order entrées and a seasonally driven menu that ranges from omelets and Benedicts to salads, skillets and afternoon sandwiches. First Watch positions itself as a daytime-only destination, with most locations opening early morning and closing by mid-afternoon. Founded in 1983 by Ken Pendery and John Sullivan in Pacific Grove, California, First Watch began as a single café and gradually expanded through company-owned and select franchised locations. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "First Watch Restaurant Group Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

Same-Restaurant Sales Growth of 3.4%Total revenues increased 15.2%Net income of $2.3 million and Adjusted EBITDA of $34.5 million18 new System-wide restaurants opened in 15 states BRADENTON, Fla., Aug. 04, 2026 (GLOBE NEWSWIRE) -- First Watch Restaurant Group, Inc. (NASDAQ: FWRG) (“First Watch” or the “Company”), the leading Daytime Dining concept serving breakfast, brunch and lunch, today reported financial results for the thirteen weeks ended June 28, 2026 (“Q2 2026”). “We delivered a strong second quarter, highlighted by Same-Restaurant Sales Growth of 3.4% driven by sequentially improving Same-Restaurant Traffic Growth, which turned positive in June,” stated Chris Tomasso, CEO and President of First Watch. “This momentum underscores the enduring appeal of our differentiated brand, the discipline of our operating model and the outstanding performance of our teams across the system. I am grateful to our teams for their continued execution as we expand upon our position as the leading Daytime Dining concept.” Second Quarter 2026 Highlights: Total revenues increased 15.2% to $354.7 million as compared to $307.9 million in the same period of 2025 System-wide sales increased 14.7% to $397.0 million as compared to $346.2 million in the same period of 2025 Same-Restaurant Sales Growth of 3.4% Same-Restaurant Traffic Growth of negative 0.4% Income from operations margin decreased to 2.3% as compared to 2.4% in the same period of 2025 Restaurant Level Operating Profit Margin* increased to 18.8% as compared to 18.6% in the same period of 2025 Net income increased to $2.3 million, or $0.04 per diluted share, from net income of $2.1 million, or $0.03 per diluted share, in the same period of 2025 Adjusted EBITDA* increased to $34.5 million as compared to $30.4 million in the same period of 2025 Opened 18 system-wide restaurants in 15 states, with 1 planned closure, resulting in a total of 665 system-wide restaurants (586 company-owned and 79 franchise-owned) across 33 states ___________________* See Non-GAAP Financial Measures Reconciliations section below. For additional financial information related to Q2 2026, refer to the Company’s quarterly report on Form 10-Q filed with the Securities and Exchange Commission on August 4, 2026, which can be accessed at https://investors.firstwatch.com in the Financials & Filings section. Updated Outlook Fiscal Year 2026 Based upon second quarter results and current trends, the Company updated the following guidance metrics for the 52-week fiscal year ending December 27, 2026: Same-Restaurant Sales Growth of 1.5% to 3.0% Total revenue growth of 12.5% to 14.0%(1) Adjusted EBITDA(2) of $133.0 million to $136.0 million(1) 60 to 62 net new System-wide restaurants, including 2 company-owned restaurant closures (53 to 54 new company-owned restaurants and 9 to 10 new franchise-owned restaurants) Capital expenditures of $145.0 million to $150.0 million invested primarily in new restaurant projects and planned remodels(3) ______________________(1) Includes net impact of approximately 1% in total revenue growth and approximately $2 million in Adjusted EBITDA associated with completed acquisitions.(2) 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. (3) Does not include the capital outlays associated with the acquisition of franchise-owned restaurants. Conference Call and Webcast Chris Tomasso, Chief Executive Officer and President, and Ashlee Weisser, Chief Financial Officer, will host a conference call and webcast to discuss these financial results for Q2 2026 on August 4, 2026 at 8:00 AM ET. Interested parties may listen to the conference call via any one of two options: Dial 201-389-0914, which will be answered by an operator 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 we define 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 and twenty-six weeks ended June 28, 2026 and June 29, 2025, there were 454 restaurants and 382 restaurants, respectively, in our Comparable Restaurant Base. Measuring our same-restaurant sales growth allows management to evaluate the performance of our existing restaurant base. We believe this measure is useful for investors to provide a consistent comparison of restaurant sales results and trends across periods within our core, established restaurant base, unaffected by results of store openings, closings, and other transitional changes. Same-restaurant traffic growth: the percentage change in year-over-year traffic counts using the Comparable Restaurant Base. Measuring our same-restaurant traffic growth allows management to evaluate the performance of our existing restaurant base. We believe this measure is useful for investors because same-restaurant traffic provides an indicator as to the development of our brand and the effectiveness of our marketing strategy. Adjusted EBITDA: a non-GAAP measure, represents Net income (loss) before depreciation and amortization, interest expense, income taxes and items that we do not consider in our evaluation of ongoing core operating performance. Adjusted EBITDA margin: a non-GAAP measure, represents Adjusted EBITDA as a percentage of total revenues. Restaurant level operating profit: a non-GAAP measure, represents 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. Restaurant level operating profit excludes corporate-level expenses and other items that we do not consider in the evaluation of the ongoing core operating performance of our restaurants. Restaurant level operating profit margin: a non-GAAP measure, represents Restaurant level operating profit as a percentage of restaurant sales. About First Watch First Watch is the leading Daytime Dining concept serving made-to-order breakfast, brunch and lunch using the freshest ingredients available. Guided by its “Follow the Sun” culinary philosophy, First Watch's chef-driven menu rotates multiple times per year to feature the highest-quality flavors at their peak, offering elevated executions of classic favorites, fresh juices like the Kale Tonic, and fan favorites such as the Lemon Ricotta Pancakes, Quinoa Power Bowl and signature Million Dollar Bacon. For every kid’s meal served, First Watch proudly donates a portion to organizations and causes making a positive impact in our communities – raising approximately $2.3 million to date. A recipient of many “Best Breakfast” and “Best Brunch” awards, First Watch was voted #1 Best Breakfast by Newsweek’s Readers’ Choice Awards 2025, and also named 2025 and 2024’s #1 Most Loved Workplace® in America by the Best Practice Institute - an accolade most recently featured in The Wall Street Journal - after appearing on the list in 2022 and 2023, as well. With a commitment to quality, hospitality and community, First Watch is redefining Daytime Dining across more than 660 restaurants in 33 states. For more information, visit www.firstwatch.com. 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 can be identified by 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. Examples of forward-looking statements include, but are not limited to, statements we make regarding the outlook for our future business and financial performance and statements discussing our current expectations and projections relating to our financial position, results of operations, plans, objectives, future performance and business. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, our actual results may differ materially from those contemplated by the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include: our vulnerability to changes in consumer preferences and economic conditions such as inflation and recession; our inability to successfully open new restaurants or establish new markets; our inability to effectively manage our growth; potential negative impacts on sales at our and our franchisees’ restaurants as a result of our opening new restaurants in existing markets; a decline in visitors to any of the retail centers, lifestyle centers, or entertainment centers where our restaurants are located; lower than expected same-restaurant sales growth; unsuccessful marketing programs and limited time new offerings; changes in the cost of food; unprofitability or closure of new restaurants or lower than previously experienced performance in existing restaurants; our inability to compete effectively for customers; our vulnerability to food safety and food-borne illness concerns; unsuccessful financial performance of our franchisees; our limited control over our franchisees’ operations; our inability to maintain good relationships with our franchisees and conflicts of interest with our franchisees; the geographic concentration of our system-wide restaurant base in the southeast portion of the United States; damage to our reputation and negative publicity; our inability or failure to recognize, respond to and effectively manage the accelerated impact of social media and artificial intelligence; our limited number of suppliers and distributors for several of our frequently used ingredients and shortages or disruptions in the supply or delivery of such ingredients; information technology system failures or breaches of our network security; our failure to comply with federal and state laws and regulations relating to privacy, data protection, advertising and consumer protection, or the expansion of current or the enactment of new laws or regulations relating to privacy, data protection, advertising and consumer protection; our potential liability with our gift cards under the property laws of some states; our failure to enforce and maintain our trademarks and protect our other intellectual property; litigation with respect to intellectual property assets; our dependence on our executive officers and certain other key employees; our inability to identify, hire, train and retain qualified individuals for our workforce; our failure to obtain or to properly verify the employment eligibility of our employees; our failure to maintain our corporate culture as we grow; unionization activities among our employees; employment and labor law proceedings; labor shortages or increased labor costs or health care costs; risks associated with leasing property subject to long-term and non-cancelable leases; risks related to our sale of alcoholic beverages; costly and complex compliance with federal, state and local laws, including trade and tax policies; changes in accounting principles applicable to us; our vulnerability to natural disasters, unusual weather conditions, pandemic outbreaks, political events, war and terrorism; our inability to secure additional capital to support business growth; our level of indebtedness; failure to comply with covenants under our credit facility; and uncertainty regarding the Russia and Ukraine war, war and unrest in the Middle East and the related impact on macroeconomic conditions, including inflation, as a result of such conflicts or other related events. See Part I. Item 1A. “Risk Factors” in our Annual Report on Form 10-K as of and for the year ended December 28, 2025 (“2025 Form 10-K”) for a further description of these and other factors. For the reasons described above, we caution you against relying on any forward-looking statements, which should also be read in conjunction with the other cautionary statements that are included elsewhere in this press release and in our filings with the Securities and Exchange Commission (the “SEC”). Any forward-looking statement made by us in this press release speaks only as of the date hereof and is expressly qualified in its entirety by these cautionary statements. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law. Investor Relations Contact Steven L. Marotta941-500-1918 [email protected] Media Relations Contact Jenni [email protected] Non-GAAP Financial Measures (Unaudited) To supplement the consolidated financial statements, which are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), we use the following non-GAAP measures, which present operating results on an adjusted basis: (i) Adjusted EBITDA, (ii) Adjusted EBITDA margin, (iii) Restaurant level operating profit and (iv) Restaurant level operating profit margin. Our presentation of these non-GAAP measures includes isolating the effects of some items that are either nonrecurring in nature or have no meaningful correlation to our ongoing core operating performance. These supplemental measures of performance are not required by or presented in accordance with GAAP. Management believes these non-GAAP measures provide investors with additional visibility into our operations, facilitate analysis and comparisons of our ongoing business operations because they exclude items that may not be indicative of our ongoing operating performance, help to identify operational trends and allow for greater transparency with respect to key metrics used by Management in our financial and operational decision making. Our non-GAAP measures may not be comparable to similarly titled measures used by other companies and have important limitations as analytical tools. These non-GAAP measures should not be considered in isolation or as substitutes for analysis of our results as reported under GAAP as they may not provide a complete understanding of our performance. These non-GAAP measures should be reviewed in conjunction with our consolidated financial statements prepared in accordance with GAAP. 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 (loss) and Net income (loss) margin, the most directly comparable GAAP measures to Adjusted EBITDA and Adjusted EBITDA margin, for the periods indicated: ___________________________(1) 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.(2) Represents non-cash, stock-based compensation expense, net of amounts capitalized, which is recorded within General and administrative expenses on the Consolidated Statements of Operations and Comprehensive Income.(3) 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.(4) Represents severance costs resulting from organizational optimization, costs incurred in connection with the acquisition of franchise-owned restaurants, secondary equity offering costs and costs related to restaurant closures.(5) Represents impairment charges and costs related to the disposal of assets due to retirements, replacements, and restaurant closures. (6) Represents the non-cash portion of straight-line rent 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: ____________________________(1) Represents severance costs resulting from organizational optimization, costs incurred in connection with the acquisition of franchise-owned restaurants, secondary equity offering costs and costs related to restaurant closures.(2) Represents impairment charges and costs related to the disposal of assets due to retirements, replacements, and restaurant closures. (3) Represents the non-cash portion of straight-line rent recorded within Occupancy expenses on the Consolidated Statements of Operations and Comprehensive Income.

First Watch Restaurant Group, Inc. (FWRG) came out with quarterly earnings of $0.04 per share, missing the Zacks Consensus Estimate of $0.06 per share. This compares to earnings of $0.03 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of -33.33%. A quarter ago, it was expected that this company would post a loss of $0.02 per share when it actually produced a loss of $0.04, delivering a surprise of -100%. Over the last four quarters, the company has surpassed consensus EPS estimates just once. First Watch Restaurant Group, which belongs to the Zacks Retail - Restaurants industry, posted revenues of $354.67 million for the quarter ended June 2026, surpassing the Zacks Consensus Estimate by 1.04%. This compares to year-ago revenues of $307.89 million. The company has topped consensus revenue estimates four times over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. First Watch Restaurant Group shares have lost about 17.1% since the beginning of the year versus the S&P 500's gain of 11%. While First Watch Restaurant Group has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for First Watch Restaurant Group was mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $0.04 on $345.32 million in revenues for the coming quarter and $0.20 on $1.38 billion in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Retail - Restaurants is currently in the bottom 34% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. Another stock from the same industry, Dine Brands (DIN), has yet to report results for the quarter ended June 2026. The results are expected to be released on August 5. This parent company of Applebee's and IHOP restaurants is expected to post quarterly earnings of $1.04 per share in its upcoming report, which represents a year-over-year change of -11.1%. The consensus EPS estimate for the quarter has been revised 19.1% lower over the last 30 days to the current level. Dine Brands' revenues are expected to be $240.88 million, up 4.4% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report First Watch Restaurant Group, Inc. (FWRG) : Free Stock Analysis Report DINE BRANDS GLOBAL, INC. (DIN) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

This article first appeared on GuruFocus. Release Date: August 04, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Total revenue increased 15.2% in Q2 2026, driven by positive same-restaurant sales growth of 3.4% and strong new restaurant performance. Same-restaurant traffic improved sequentially through the quarter, turning positive in June, and outperformed the casual dining segment and industry overall. Marketing investments are driving brand awareness, with unaided awareness up over 50% and aided awareness up 15% since early last year, and 17% of new customers are returning for a second visit. The new core menu and seasonal LTOs (e.g., Chimichurri Steak & Egg Hash, Chipotle Steak and Queso Hash) are driving positive sales mix and higher check averages, with per-person check growth outpacing pricing. New restaurant openings are performing well, with 2025 and 2026 classes exceeding sales volumes and underwriting targets, and the company is on track to open 60-62 net new restaurants in 2026. Restaurant-level operating profit margin improved 20 basis points to 18.8%, driven by labor efficiencies and sales leverage. Commodity deflation of 1.6% in Q2, driven by eggs, avocados, and bacon, helped offset some cost pressures. The company is revising long-term targets to generate positive free cash flow starting in 2027, with a more balanced growth strategy. Adjusted EBITDA grew 13.5% to $34.5 million in Q2, and the company raised its full-year same-restaurant sales growth guidance to 1.5%-3.0%. The company is expanding its geographic footprint, with successful entries into new markets like New Hampshire, and has a robust pipeline of over 100 projects. Same-restaurant traffic was slightly negative at -0.4% in Q2, impacted by planned sales transfer from new restaurant openings. Stronger-than-anticipated demand for premium beef-based menu items increased COGS by nearly 100 basis points year-over-year, pressuring margins. Full-year Adjusted EBITDA guidance was lowered to $133-$136 million due to the higher cost of beef offerings, despite strong demand. Commodity inflation is expected to return in the second half of 2026, with full-year inflation now projected at flat to up 1.5%. Labor costs remain elevated with 4.1% wage inflation in Q2, partially offsetting operational efficiencies. G&A expenses increased due to higher marketing spend and headcount to support growth, impacting overall profitability. The company faces a challenging Q3 comparison, with same-restaurant sales growth expected to be at or below the low end of the annual range. The company is reducing its long-term unit growth target to 50 company-owned openings annually, which may slow revenue growth momentum. Capital expenditures are expected to be lower at $145-$150 million, reflecting timing delays in development spend. The company's marketing spend is increasing to about 2% of revenue, up 40 basis points, which could pressure near-term margins. Warning! GuruFocus has detected 5 Warning Signs with FWRG. Is FWRG fairly valued? Test your thesis with our free DCF calculator. Q: Can you provide more detail on the momentum building across the quarter, including the positive traffic in June, and the drivers behind it? Also, can you discuss the confidence in delivering positive same-store sales in Q3 given the challenging comparison?A: Chris Tomasso (CEO) confirmed the company's confidence in achieving positive sales in every quarter of 2026, including the challenging Q3. He attributed the sequential improvement in Q2, which culminated in positive traffic in June, to a combination of factors working together: culinary innovation, menu LTOs, and marketing investments. He emphasized that the company is "upping the ante" on itself across these areas, which is driving the positive momentum. Q: Can you help us sort through the second-half COGS outlook, specifically how much the beef headwind should moderate and the dynamics around the commodity guide returning to slight inflation?A: Ashlee Weisser (CFO) explained that the return to inflation in the second half is primarily due to the high egg inflation experienced in the first half of the prior year, which will not repeat. Regarding the beef mix shift, she noted that the current steak LTO was on the menu for about a third of Q2 and will be present for about a third of the second half, providing a framework for modeling the impact. The beef impact is considered temporary and will moderate as the LTO concludes. Q: Given the updated long-term guidance and the expectation of positive free cash flow in 2027, what are the capital allocation priorities for the incremental capital?A: Ashlee Weisser (CFO) stated that "everything is on the table" for capital allocation. She highlighted that marketing is a key area for potential incremental investment, given its success in improving brand awareness. Other considerations include debt paydown, investments in the business, and share repurchases, with conversations to be held with the board as appropriate next year. Q: Can you parse out how much of the traffic strength was attributed to marketing efficiency and spend changes, and how we should think about that impact going forward?A: Ashlee Weisser (CFO) said the company cannot fully parse out the exact contribution of marketing to traffic, as it wouldn't be helpful for modeling. However, she clarified that the marketing strategy is not call-to-action based but rather focused on brand awareness and building a connection with the brand. This approach takes longer to build but is expected to have a longer-lasting impact on traffic. Q: Does the traffic growth in June come more from new customers or increased frequency among existing customers, and what is the average customer frequency?A: Chris Tomasso (CEO) stated that the company is seeing positive returns in both areasfirst-time customers and frequencybut did not disclose the specific percentage makeup. A company representative added that casual dining frequency is typically 2-3 times per year, and First Watch's frequency is well within that range. Q: Can you share what the current brand awareness is and what the industry average looks like, given the significant increase in aided brand awareness?A: A company representative (Chief Brand Officer) declined to provide specific numbers but stated that the company will spend a lot of time on this topic at its investor day on November 12th. He reiterated that the 50% growth in unaided brand awareness is a significant achievement, as it is a difficult metric to grow, and more details will be provided then. Q: What were the big changes made to labor scheduling that have been helping with margins?A: Ashlee Weisser (CFO) clarified that the change was not a huge shift in scheduling but rather a right-sizing of the number of managers in restaurants. The company adjusted the manager par levels based on appropriate volume, moving by a fraction of a point, which makes a significant difference across the large restaurant base. Q: How did you come up with 50 company-operated new restaurant openings as the right level for the long-term target, and what were the pushes and pulls?A: Chris Tomasso (CEO) explained that the decision was based on a thorough analysis of the pushes and pulls, including the G&A investment required to maintain a 10% unit growth rate as the base grows. The company ran various models and determined that 50 openings annually provides the optimal balance between new unit growth, generating positive free cash flow, and strengthening the balance sheet, while also providing optionality for the future. Q: Can you provide more detail on the success of the influencer and social media tactics, and the traction seen there?A: A company representative (Chief Brand Officer) stated that influencers and organic content have become a larger part of the paid media mix this year, and this is expected to continue increasing into next year. The paid efforts have also led to more organic user-generated content, as increased brand visibility encourages customers to post about the brand, making it one of the bright spots of their media strategy. Q: Regarding the first-time customers and the 17% return rate, are these customers a primary driver of the mix uplift from seasonal offerings?A: Chris Tomasso (CEO) stated that the mix benefit is seen across the entire customer base, with the exception of the heaviest users who tend to order the same items. The appeal of the seasonal menus and new menu items is broad, and the company is seeing the positive mix impact across the user base, not just from new customers. For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Sequential traffic improvement throughout Q2 culminated in positive traffic for June, outperforming the casual dining segment and broader industry benchmarks. Marketing investments in video and connected TV drove a 50% increase in unaided brand awareness, successfully converting 17% of new customers into repeat visitors. The new core menu launched in February is driving positive sales mix as customers engage with premium options and add-on items more frequently. Culinary innovation remains a primary differentiator, with the Chimichurri Steak & Eggs Hash becoming the best-selling limited-time offering (LTO) in company history. New restaurant classes from 2025 and 2026 are outperforming both the comparable restaurant base and original underwriting sales targets. Management attributes the brand's resilience to its leadership in the 'daytime dining' category, which continues to disrupt traditional casual dining segments. Management is pivoting to a self-funded organic growth model beginning in 2027, targeting 50 new company-operated restaurant openings annually to prioritize free cash flow. The 2026 revenue growth outlook was raised to 12.5% to 14%, supported by a robust pipeline of over 100 projects in various development stages. Q3 same-restaurant sales are expected to be positive but likely at or below the low end of the annual range due to challenging year-over-year comparisons. Long-term targets have been adjusted to prioritize balance sheet strength, aiming for positive free cash flow and a total addressable market of 2,200 locations. Guidance assumes a 2.9% price action taken at the start of Q3, resulting in approximately 3.6% carried pricing for the full year. Stronger-than-anticipated demand for premium beef LTOs increased cost of goods sold (COGS) by nearly 100 basis points, leading to a slight adjustment in EBITDA guidance. Labor expenses improved by 30 basis points due to staffing model optimizations, specifically rightsizing manager counts per restaurant to match volume. Commodity deflation in eggs, avocados, and bacon was partially offset by rising coffee prices and the temporary impact of high-cost beef offerings. Capital expenditure guidance was lowered to $145 million to $150 million as certain development spending shifted into the following fiscal year. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Management expressed confidence in maintaining positive sales through Q3 despite difficult comparisons, citing a 'cocktail' of marketing, culinary innovation, and sequential improvement. Confirmed that June traffic was positive and that underlying traffic would have been positive for the quarter if adjusted for planned sales transfer to new units. The current steak LTO materially outperformed test results, creating temporary margin pressure that is expected to moderate once the promotion concludes in mid-August. Management views the high demand as a positive indicator of pricing power and the appeal of product innovation despite the short-term COGS headwind. The shift to 50 new company-owned units annually (down from low double-digit percentage growth) is designed to eliminate the need for credit facility draws to fund CapEx. This moderation reduces the need for aggressive G&A expansion in development and training teams, allowing resources to be reallocated to margin-enhancing initiatives.