First Watch Restaurant Group, Inc. (FWRG) - Q1 2026 Filing Summary
Business Context and Reporting Period
This Form 10-Q covers the thirteen-week period ended March 29, 2026. First Watch Restaurant Group, Inc. operates and franchises made-to-order breakfast, brunch, and lunch restaurants. As of the period end, the company operated 572 company-owned and 76 franchise-owned locations across 32 states, totaling 648 system-wide restaurants. The company is classified as a large accelerated filer.
Key Financial Metrics
| Metric | Q1 2026 | Q1 2025 |
|---|---|---|
| Total Revenues | $330.96 million | $282.24 million |
| Restaurant Sales | $328.15 million | $279.59 million |
| Income from Operations | $0.999 million | $1.113 million |
| Net Loss | $(2.69) million | $(0.83) million |
| Adjusted EBITDA | $27.80 million | $22.75 million |
| Operating Cash Flow | $34.46 million | $20.14 million |
| Cash and Equivalents | $23.57 million | $18.61 million |
| Total Debt (Net) | $282.10 million | $282.38 million |
| Restaurant Level Operating Profit Margin | 18.5% | 16.5% |
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased 17.3% year-over-year, driven by a 17.4% increase in restaurant sales. This growth was fueled by 16 new system-wide openings and 2.8% same-restaurant sales growth.
- Profitability: While Income from Operations decreased slightly to $0.999 million (0.3% margin) from $1.113 million (0.4% margin), Restaurant Level Operating Profit Margin improved significantly to 18.5% from 16.5%.
- Net Loss: Net loss widened to $2.69 million from $0.83 million, primarily due to increased interest expense ($4.78 million vs. $3.33 million) and higher General and Administrative (G&A) expenses.
- Cost Management: Food and beverage costs as a percentage of sales decreased to 22.6% from 23.8% due to commodity deflation (lower egg, avocado, and bacon costs) and menu price increases. Labor costs as a percentage of sales decreased to 33.7% from 34.6%.
- Cash Flow: Operating cash flow improved substantially to $34.46 million from $20.14 million, despite the higher net loss, due to non-cash adjustments and working capital timing.
Guidance, Outlook, and Risks
- Outlook: Management expects full-year same-restaurant sales growth between 1% and 3%. Full-year commodity inflation is projected at 1% to 3%, and restaurant-level wage inflation is expected to be 3% to 5%.
- Capital Expenditures: Estimated at $150.0 million to $160.0 million for 2026, primarily for new restaurant development and remodels.
- Liquidity: The company maintains $66.0 million in availability under its $125.0 million revolving credit facility. Management believes current cash flows and credit availability are sufficient for the next 12 months.
- Risks: Key risks include vulnerability to economic conditions and inflation, labor shortages, supply chain disruptions, and the impact of geopolitical conflicts (Russia/Ukraine, Middle East) on macroeconomic conditions.
- Unusual Items: G&A expenses increased by $9.7 million, largely due to a $4.0 million leadership conference expense and $3.5 million in increased compensation and stock-based compensation.
Investor Verification Checklist
- Verify the sustainability of the 2.8% same-restaurant sales growth against the backdrop of negative 2.0% same-restaurant traffic growth.
- Monitor the trajectory of General and Administrative expenses, specifically the one-time leadership conference costs, to assess future operating leverage.
- Review the impact of rising interest rates on the $265.3 million outstanding debt balance and future interest expense.
- Assess the company's ability to maintain commodity deflation trends given the volatility in food costs.
- Confirm the execution of the $150-$160 million capital expenditure plan and its impact on future cash flows.