First Watch Restaurant Group Inc
For the period ended Jun 30, 2024. Filed Aug 6, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 6, 2024
FWRG$12.86-2.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-07.
0001789940-24-000090
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsQuantitative and Qualitative Disclosures About Market RiskCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-06.
0001789940-24-000117
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 132 previous paragraphs and 131 current paragraphs.
79 unchanged; 33 reworded; 19 added; 20 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 22 previous and 22 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (19)
Current report
•Total revenues increased 19.5% to $258.6 million in the second quarter of 2024 from $216.3 million in the second quarter of 2023
Current report
•Income from operations margin increased to 6.4% during the second quarter of 2024 from 5.3% in the second quarter of 2023
Current report
•Restaurant level operating profit margin** increased to 21.9% in the second quarter of 2024 from 20.9% in the second quarter of 2023
Current report
Our same restaurant sales growth was negative 0.3% for the quarter due principally to continuing pressure on traffic. Our same restaurant traffic growth was negative 4.0% in the second quarter which was up from negative 4.5% reported in the first quarter.
Current report
During the second quarter, restaurant-level wage inflation was approximately 5.0%. For the full year, management expects restaurant-level wage inflation in the range of 5.0% to 7.0%.
Current report
The increase in total restaurant sales as compared to the same periods in the prior year was due principally to restaurant sales of (i) $20.9 million and $36.8 million for the thirteen and twenty-six weeks ended June 30, 2024, respectively, from 40 NROs opened between June 25, 2023 and June 30, 2024, (ii) $19.3 million and $28.4 million for the thirteen and twenty-six weeks ended June 30, 2024, respectively, from 39 restaurants acquired from franchisees between June 25, 2023 and June 30, 2024 and (iii) menu price increases.
Current report
Labor and other related expenses as a percentage of restaurant sales decreased during the thirteen weeks ended June 30, 2024 as compared to the same period in the prior year primarily as a result of (i) the leverage of menu price increases, and (ii) hourly labor efficiency. These increases were partially offset by wage increases.
Current report
For the thirteen and twenty-six weeks ended June 30, 2024, other restaurant operating expenses as a percentage of restaurant sales was lower than the same periods in the prior year primarily due to (i) decrease in smallwares expense, (ii) deflation in to-go supplies costs, and (iii) decrease in general liability insurance premiums, partially offset by increases in credit card fees attributable to our pay-at-table program rolled out in the first quarter of 2024.
Current report
The increase in other restaurant operating expenses during the thirteen and twenty-six weeks ended June 30, 2024 as compared to the same periods in the prior year was mainly due to the increase in the number of restaurants.
Current report
The increase in general and administrative expenses during the twenty-six weeks ended June 30, 2024 as compared to the same period in the prior year was mainly due to (i) $4.3 million in compensation expense from wage increases and additional employee headcount to support growth and (ii) $2.6 million increase in consulting and professional services, information technology, licenses, travel and other miscellaneous expenses.
Current report
The decrease in Transaction expenses, net during the thirteen-week period ended June 30, 2024 as compared to the same period in the prior year was primarily due to (i) $0.7 million decrease in costs incurred by us in connection with the secondary public offerings of the Company’s common stock by entities affiliated with Advent and (ii) $0.3 million decrease in costs incurred in connection with the acquisition of certain franchise-owned restaurants.
Current report
The decrease in Transaction expenses, net during the twenty-six weeks ended June 30, 2024 as compared to the same period in the prior year was primarily due to a contingent consideration liability reduction recognized as a reduction in transaction expenses in the first quarter of 2024.
Current report
Income from operations margin increased during the thirteen weeks ended June 30, 2024 as compared to the same period in the prior year primarily due to (i) leveraging increase in sales from menu price increases and (ii) improved labor efficiency. This was partially offset by increases in occupancy expense and depreciation and amortization increasing as a percent of sales.
Current report
The twenty-six week period ended June 30, 2024 includes $0.4 million of debt refinancing charges. Differences in Other income for the comparative periods presented are related to expected fluctuations in insurance recoveries and interest income.
Current report
The increase in net income during the thirteen weeks ended June 30, 2024 as compared to the same period in the prior year was primarily due to the increase in income from operations. This was partially offset by (i) the increase in interest expense and (ii) the increase in income tax expense. Net income margin during the thirteen weeks ended June 30, 2024 decreased compared to the same period in the prior year primarily due to the increase in interest expense and income tax expense, partially offset by the increase in income from operations.
Current report
Adjusted EBITDA margin increased during the thirteen and twenty-six week periods ended June 30, 2024 compared to the same periods in the prior year primarily due to an increase in (i) restaurant level operating profit margin and (ii) general and administrative expenses growing at a slower rate than total revenue.
Current report
Cash provided by operations is our typical source of liquidity used (i) to fund capital expenditures for new restaurants, (ii) to maintain and remodel existing restaurants and (iii) for debt service. Cash provided by operations increased during the twenty-six week period ended June 30, 2024 as compared to the twenty-six week period ended June 25, 2023 is primarily due to the increase in the number of restaurants.
Current report
Cash used in investing activities increased during the twenty-six weeks ended June 30, 2024 from the twenty-six weeks ended June 25, 2023 due principally to (i) increases in the number of new restaurants and capital projects into which the Company is investing and (ii) the acquisitions of 22 franchise-operated restaurants versus 6 in the same period last year.
Current report
Cash from financing activities reflects borrowings from the Company’s Credit Facility to fund strategic acquisitions of franchise-operated restaurants.
Removed paragraphs (20)
Previous report
•Total revenues increased 14.7% to $242.4 million in the first quarter of 2024 from $211.4 million in the first quarter of 2023
Previous report
•Income from operations margin decreased to 5.1% during the first quarter of 2024 from 7.4% in the first quarter of 2023
Previous report
•Restaurant level operating profit margin** decreased to 20.8% in the first quarter of 2024 from 21.2% in the first quarter of 2023
Previous report
The restaurant industry’s casual dining segment experienced a traffic decline of 6.0% in the first calendar quarter this year (as measured by Black Box Intelligence) versus the first quarter of the previous year as many national full-service restaurant systems were met with unexpectedly harsh weather in January 2024 combined with sustained consumer pull-back that ran throughout the quarter. Despite the conditions, the Company’s same-restaurant sales growth was 0.5% due primarily to carried price of 4.4% and positive mix, partially offset by negative same-restaurant traffic growth of 4.5%.
Previous report
During the first quarter of 2024, restaurant-level labor experienced approximately 5.0% inflation. In 2024, we currently expect restaurant-level labor inflation of 5.0% to 7.0%.
Previous report
The increase in total restaurant sales during the thirteen weeks ended March 31, 2024 as compared to the same period in the prior year was primarily due to $30.7 million from our NROs and acquired restaurants between March 26, 2023 and March 31, 2024, and $1.6 million from restaurants not in the comparable restaurant base, partially offset by the negative impact from the one week shift in the fiscal calendar associated with same-restaurant sales.
Previous report
Labor and other related expenses as a percentage of restaurant sales increased during the thirteen weeks ended March 31, 2024 as compared to the same period in the prior year primarily as a result of average hourly labor wage increases and carrying more managers to staff NROs. This was partially offset by more efficient hourly labor and by the increase in menu prices.
Previous report
Other restaurant operating expenses as a percentage of restaurant sales during the thirteen weeks ended March 31, 2024 was higher than the same period in the prior year primarily due to higher repair and maintenance expense partially offset by favorable to-go supplies costs.
Previous report
The increase in other restaurant operating expenses during the thirteen weeks ended March 31, 2024 as compared to the same period in the prior year was mainly due to the increase in restaurant sales and restaurant growth, including restaurants we acquired from our franchisees, driving increases of (i) $2.1 million related to repairs and maintenance, utilities, licensing/permits, marketing and other operating expenses, (ii) $1.2 million in credit card fees, (iii) $1.0 million in operating supplies expense and (iv) $0.8 million in third-party delivery service fees.
Previous report
During the thirteen weeks ended March 31, 2024, Transaction expenses, net included increases of (i) $0.5 million on costs incurred in connection with a secondary equity offering and (ii) $0.3 million on costs incurred in connection with acquisitions. This increase was partially offset by a $0.6 million contingent consideration liability release.
Previous report
Income from operations margin decreased during the thirteen weeks ended March 31, 2024 as compared to the same period in the prior year primarily due to (i) the increase in general and administrative expenses mainly due to wage increases and additional employee headcount to support growth, (ii) the increase in depreciation and amortization as a percent of sales and (iii) the increase in restaurant-level wages and staffing. This decrease was partially offset by menu price increases.
Previous report
The decrease in Other income, net during the thirteen weeks ended March 31, 2024 as compared to the same period in the prior year was primarily due to a debt refinancing loss partially offset by higher interest income.
Previous report
Adjusted EBITDA margin declined primarily due to an increase in general and administrative expenses, occupancy and preopening expenses increasing as a percent of sales, partially offset by food and beverage costs decreasing as a percent of sales.
Previous report
Liquidity
Previous report
Cash provided by operating activities during the thirteen weeks ended March 31, 2024 increased to $25.0 million from $21.1 million during the thirteen weeks ended March 26, 2023 primarily due to (i) the decrease in net income of $(2.1) million, (ii) the impact of non-cash charges of $3.6 million and (iii) the net change in operating assets and liabilities of $2.4 million. The increase in the non-cash charges was primarily driven by (i) the change in depreciation and amortization and (ii) the change in operating lease costs. This increase was partially offset by the change in deferred income taxes. The net change in operating assets and liabilities of $2.4 million was primarily driven by the timing of operational payments.
Previous report
Cash used in investing activities increased to $(32.0) million during the thirteen weeks ended March 31, 2024 from $(14.4) million during the thirteen weeks ended March 26, 2023 primarily as a result of (i) the increase in capital expenditures of $(14.1) million, (ii) amounts paid during the thirteen weeks ended March 31, 2024 for acquisitions, including contingent consideration payments, of $(3.4) million.
Previous report
Cash provided by financing activities of $0.6 million during the thirteen weeks ended March 31, 2024 increased from the $(2.0) million cash used during the thirteen weeks ended March 26, 2023 as a result of (i) proceeds from the exercise of stock options, net of employee taxes paid, of $2.6 million, (ii) proceeds from long-term debt, net of payments made, of $1.9 million, (iii) no payments on the note payable during the thirteen weeks ended March 31, 2024 versus $0.5 million payments made during the thirteen weeks ended March 26, 2023, offset by (iv) $(2.4) million payments of debt discount and deferred issuance costs during the thirteen weeks ended March 31, 2024.
Previous report
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Previous report
We are exposed to interest rate risk through fluctuations in interest rates on our debt obligations. On June 23, 2023, we entered into a variable-to-fixed interest rate swap agreement with two financial institutions to hedge $90.0 million of the $122.5 million outstanding variable rate debt. Under the terms of the interest rate swap agreement, the Company will pay a weighted average fixed rate of 4.16% on the notional amount and will receive payments from the counterparties based on the three-month secured overnight financing rate. Refer to Note 8, Interest Rate Swaps, in the accompanying notes to the unaudited interim consolidated financial statements.
Previous report
Except as described above, there have been no material changes to our exposure to market risks as disclosed in the 2023 Form 10-K.
Reworded paragraphs (33)
Previous wording
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited interim consolidated financial statements and notes thereto included in Part I, Item 1 of this Form 10-Q and our audited consolidated financial statements and notes included in our 2023 Form 10-K. As discussed in “Cautionary Note Regarding Forward-Looking Statements,” the following discussion and analysis contains forward-looking statements that involve risks and uncertainties. Our actual results may materially differ from those discussed in such forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those identified in our 2023 Form 10-K, including under “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in “Part II, Item 1A. Risk Factors” of this Form 10-Q.
Current wording
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited interim consolidated financial statements and notes thereto included in Part I, Item 1 of this Form 10-Q and our audited consolidated financial statements and notes included in our 2023 Form 10-K. As discussed in “Cautionary Note Regarding Forward-Looking Statements,” the following discussion and analysis contains forward-looking statements that involve risks and uncertainties. Our actual results may materially differ from those discussed in such forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those identified in our 2023 Form 10-K, including under “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in “Part II, Item 1A. Risk Factors” of our Form 10-Q for the quarter ended March 31, 2024.
Previous wording
The Company operates and franchises restaurants in 29 states under the “First Watch” trade name and as of March 31, 2024, the Company had 432 company-owned restaurants and 99 franchise-owned restaurants.
Current wording
The Company operates and franchises restaurants in 29 states under the “First Watch” trade name and as of June 30, 2024, the Company had 459 company-owned restaurants and 79 franchise-owned restaurants.
Previous wording
Financial highlights for the thirteen weeks ended March 31, 2024 (“first quarter of 2024”) as compared, unless otherwise indicated below, to the thirteen weeks ended March 26, 2023 (“first quarter of 2023”), reflected the continued momentum of our strong operating performance and include the following:
Current wording
Financial highlights for the thirteen weeks ended June 30, 2024 (“second quarter of 2024”) as compared, unless otherwise indicated below, to the thirteen weeks ended June 25, 2023 (“second quarter of 2023”), reflected the continued momentum of our strong operating performance and include the following:
Previous wording
•System-wide sales increased 9.4% to $289.6 million in the first quarter of 2024 from $264.7 million in the first quarter of 2023
Current wording
•System-wide sales increased 10.1% to $299.0 million in the second quarter of 2024 from $271.5 million in the second quarter of 2023
Previous wording
•Same-restaurant sales growth of 0.5%*
Current wording
•Same-restaurant sales growth of negative 0.3%*
Previous wording
•Same-restaurant traffic growth of (4.5)%*
Current wording
•Same-restaurant traffic growth of negative of 4.0%*
Previous wording
•Net income decreased to $7.2 million, or $0.12 per diluted share, in the first quarter of 2024 from $9.4 million, or $0.15 per diluted share in the first quarter of 2023
Current wording
•Net income increased to $8.9 million, or $0.14 per diluted share, in the second quarter of 2024 from $8.0 million, or $0.13 per diluted share in the second quarter of 2023
Previous wording
•Adjusted EBITDA** increased to $28.6 million in the first quarter of 2024 from $27.4 million in the first quarter of 2023
Current wording
•Adjusted EBITDA** increased to $35.3 million in the second quarter of 2024 from $25.8 million in the second quarter of 2023
Previous wording
•Opened 9 system-wide restaurants in 8 states resulting in a total of 531 system-wide restaurants (432 company-owned and 99 franchise-owned) across 29 states
Current wording
•Opened 7 system-wide restaurants in 6 states and acquired 21 franchise-owned restaurants resulting in a total of 538 system-wide restaurants (459 company-owned and 79 franchise-owned) across 29 states
Previous wording
Commodity inflation of 2.9% in the first quarter of 2024 was due principally to increases in our cost of eggs, avocados and blueberries and partially offset by a decline in the cost of coffee. Management estimates 2024 commodity inflation will range between 2.0% to 4.0%.
Current wording
Commodity inflation of 4.2% in the second quarter was due principally to increases in our cost of avocados and bacon and partially offset by a decline in the cost of coffee, shell eggs and bread. Management estimates 2024 commodity inflation will range between 2.0% to 4.0%.
Previous wording
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 first quarter of 2024, this operating metric compares the first fiscal quarter ended March 31, 2024 with the thirteen-week period ended April 2, 2023, versus the fiscal quarter ended March 26, 2023, in order to compare like-for-like periods. For the thirteen weeks ended March 31, 2024 and April 2, 2023, there were 344 restaurants and 328 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.
Current wording
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 second quarter of 2024, this operating metric compares the thirteen and twenty-six-week periods ended June 30, 2024 with the thirteen and twenty-six-week periods ended July 2, 2023, versus the thirteen and twenty-six-week periods ended June 25, 2023, in order to compare like-for-like periods. For the thirteen and twenty-six weeks ended June 30, 2024 and July 2, 2023, there were 344 restaurants and 327 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.
Previous wording
Same-Restaurant Traffic Growth: the percentage change in traffic counts for the thirteen weeks ended March 31, 2024 as compared to the thirteen-week period ended April 2, 2023 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 an increase in same-restaurant traffic provides an indicator as to the development of our brand and the effectiveness of our marketing strategy.
Current wording
Same-Restaurant Traffic Growth: the percentage change in traffic counts for the thirteen and twenty-six week periods ended June 30, 2024 as compared to the thirteen and twenty-six-week periods ended July 2, 2023 using the Comparable Restaurant Base, in order to compare like-for-like periods. 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 an increase in same-restaurant traffic provides an indicator as to the development of our brand and the effectiveness of our marketing strategy.
Previous wording
(1) Comparing the thirteen-week period ended March 31, 2024 with the thirteen-week period ended April 2, 2023 in order to compare like-for-like periods. See “Key Performance Indicators” for additional information.
Current wording
(1) Comparing the thirteen and twenty-six-week periods ended June 30, 2024 with the thirteen and twenty-six-week periods ended July 2, 2023 in order to compare like-for-like periods. See “Key Performance Indicators” for additional information.
Previous wording
The following table summarizes our results of operations and the percentages of certain items in relation to Total revenues or, where indicated, Restaurant sales for the thirteen weeks ended March 31, 2024 and March 26, 2023:
Current wording
The following table summarizes our results of operations and the percentages of certain items in relation to Total revenues or, where indicated, Restaurant sales for the thirteen and twenty-six weeks ended June 30, 2024 and June 25, 2023:
Previous wording
The decrease in franchise revenues during the thirteen weeks ended March 31, 2024 as compared to the same period in the prior year was primarily due to the acquisition of 24 franchise-owned restaurants over the past year, partially offset by franchise revenues from the 10 franchise-owned NROs between March 26, 2023 and March 31, 2024.
Current wording
The decrease in franchise revenues during the thirteen and twenty-six weeks ended June 30, 2024 as compared to the same periods in the prior year was primarily driven by the acquisition of 39 franchise-owned restaurants, partially offset by franchise revenues from the 8 franchise-owned NROs between June 25, 2023 and June 30, 2024.
Previous wording
Food and beverage costs as a percent of restaurant sales decreased during the thirteen weeks ended March 31, 2024 as compared to the same period in the prior year primarily due to carried pricing in excess of commodity inflation.
Current wording
Food and beverage costs as a percent of restaurant sales decreased during the thirteen and twenty-six weeks ended June 30, 2024 as compared to the same periods in the prior year primarily due to the leverage of menu price increases partially offset by commodity inflation.
Previous wording
Food and beverage costs increased during the thirteen weeks ended March 31, 2024 as compared to the same period in the prior year primarily as a result of (i) the increase in restaurant sales and (ii) 40 NROs between March 26, 2023 and March 31, 2024.
Current wording
Food and beverage costs increased during the thirteen and twenty-six weeks ended June 30, 2024 as compared to the same periods in the prior year primarily as a result of the 40 NROs and 39 restaurants acquired from franchisees between June 25, 2023 and June 30, 2024.
Previous wording
The increase in labor and other related expenses during the thirteen weeks ended March 31, 2024 as compared to the same period in the prior year was primarily due to (i) average hourly labor wage increases, (ii) 40 NROs between March 26, 2023 and March 31, 2024 and (iii) carrying more managers to staff NROs.
Current wording
The increase in labor and other related expenses during the thirteen and twenty-six weeks ended June 30, 2024 as compared to the same periods in the prior year was primarily due to (i) the increase in the number of restaurants (ii) wage increases and (iii) carrying more managers to staff new restaurants.
Previous wording
As a percentage of restaurant sales, the increase in occupancy expenses for the thirteen weeks ended March 31, 2024 as compared to the same period in the prior year was primarily due to higher cash rent expense.
Current wording
As a percentage of restaurant sales, the increase in occupancy expenses for the thirteen and twenty-six weeks ended June 30, 2024 as compared to the same periods in the prior year was primarily due to higher rent expense and the deleverage associated with negative same restaurant sales growth.
Previous wording
The increase in occupancy expenses during the thirteen weeks ended March 31, 2024 as compared to the same period in the prior year was primarily due to the increase in the number of company-owned restaurants.
Current wording
The increase in occupancy expenses during the thirteen weeks and twenty-six weeks ended June 30, 2024 as compared to the same periods in the prior year was primarily due to the increase in the number of company-owned restaurants.
Previous wording
The increase in pre-opening expenses during the thirteen weeks ended March 31, 2024 as compared to the same period in the prior year was primarily due to pre-opening rent expense related to the increase in the number of restaurants opened and under construction.
Current wording
The increase in pre-opening expenses during the thirteen and twenty-six weeks ended June 30, 2024 as compared to the same periods in the prior year was primarily from increases in (i) rent, (ii) travel expenses and (iii) the number of restaurants opened and under construction.
Previous wording
The increase in general and administrative expenses during the thirteen weeks ended March 31, 2024 as compared to the same period in the prior year was mainly due to (i) $2.8 million in compensation expense from wage increases and additional employee headcount to support growth and (ii) $2.1 million increase in consulting, information technology, marketing and other miscellaneous expenses.
Current wording
The increase in general and administrative expenses during the thirteen weeks ended June 30, 2024 as compared to the same period in the prior year was mainly due to (i) $1.2 million in compensation expense from wage increases and additional employee headcount to support growth and (ii) $0.7 million increase in consulting and professional services, information technology, licenses, travel and other miscellaneous expenses.
Previous wording
The increase in depreciation and amortization during the thirteen weeks ended March 31, 2024 as compared to the same period in the prior year was primarily due to incremental depreciation of capital expenditures associated with NROs.
Current wording
The increase in depreciation and amortization during the thirteen and twenty-six weeks ended June 30, 2024 as compared to the same periods in the prior year was due to (i) additional NRO assets and restaurants acquired from franchisees and (ii) reacquired rights.
Previous wording
Income from operations decreased during the thirteen weeks ended March 31, 2024 as compared to the same period in the prior year primarily due to (i) the increase in restaurant-level wages and staffing, (ii) higher general and administrative expenses mainly attributable to wage increases and additional employee headcount to support growth and (iii) higher depreciation and amortization expense driven by our restaurant growth and acquisitions of certain franchise-owned restaurants, partially offset by an increase in restaurant sales.
Current wording
Income from operations margin decreased during the twenty-six weeks ended June 30, 2024 as compared to the same period in the prior year primarily due to (i) the increase in occupancy expenses and (ii) higher depreciation and amortization expense driven by our restaurant growth and acquisition of certain franchise-owned restaurants, partially offset by the increase in restaurant sales.
Previous wording
The increase in interest expense during the thirteen weeks ended March 31, 2024 as compared to the same period in the prior year was primarily due to (i) increased borrowings and (ii) higher interest rates.
Current wording
The increase in interest expense during the thirteen and twenty-six weeks ended June 30, 2024 as compared to the same periods in the prior year was due to (i) increased borrowings associated with franchise acquisitions and (ii) higher interest rates.
Previous wording
The decrease in Income tax expense is primarily due to (i) lower pre-tax income and (ii) a change to the effective income tax rate for the thirteen weeks ended March 31, 2024 as compared to the same period in the prior year. The change in effective income tax rate for the thirteen weeks ended March 31, 2024 as compared to the same period in the prior year was primarily due to (i) the change in valuation allowance on deferred tax assets, (ii) the benefit of tax credits for FICA taxes on certain employees’ tips and (iii) the impacts of executive stock-based compensation.
Current wording
The change in the effective income tax rates for the thirteen and twenty-six weeks ended June 30, 2024 as compared to the same periods in the prior year was primarily due to (i) the change in the valuation allowance on deferred tax assets, (ii) the benefit of tax credits for FICA taxes on certain employees’ tips and (iii) the impacts of executive stock-based compensation.
Previous wording
Net income and Net income margin during the thirteen weeks ended March 31, 2024 decreased as compared to the same period in the prior year primarily due to the decrease in income from operations and increase in interest expense. This was partially offset by the decrease in income tax expense.
Current wording
Net income and net income margin during the twenty-six weeks ended June 30, 2024 decreased as compared to the same period in the prior year primarily due to the (i) increase in interest expense, (ii) the increase in income tax expense and (iii) the decrease in income from operations margin.
Previous wording
Restaurant level operating profit margin during the thirteen weeks ended March 31, 2024 decreased as compared to the same period in the prior year primarily due to sales growth associated with NROs and restaurants acquired between March 26, 2023 and March 31, 2024. This was partially offset by the increase in wages and staffing levels.
Current wording
Restaurant level operating profit margin during the thirteen weeks ended June 30, 2024 increased as compared to the same period in the prior year primarily due to (i) additional restaurant sales contributed by NROs and restaurants acquired between June 25, 2023 and June 30, 2024, (ii) favorable food and beverage costs as a percent of sales and (iii) labor efficiencies. This was partially offset by the increase in (i) wages and (ii) the deleverage of occupancy expenses.
Previous wording
Restaurant level operating profit for the thirteen weeks ended March 31, 2024 increased as compared to the same period in the prior year primarily due to (i) sales growth driven by the increase in menu prices, as well as (ii) 40 NROs between March 26, 2023 and March 31, 2024. This was partially offset by an increase in wages and staffing levels.
Current wording
Restaurant level operating profit for the twenty-six weeks ended June 30, 2024 increased as compared to the same period in the prior year primarily due to (i) sales growth driven by the increase in menu prices, as well as (ii) restaurant sales contributed by 40 NROs and 39 restaurants acquired from franchisees between June 25, 2023 and June 30, 2024. This was partially offset by an increase in (i) wages and (ii) deleverage of occupancy expenses.
Previous wording
Adjusted EBITDA increased during the thirteen weeks ended March 31, 2024 as compared to the same period in the prior year primarily due to the increase in restaurant level operating profit. This was partially offset by the increase in general and administrative expenses mainly due to wage increases and additional employee headcount to support our growth.
Current wording
Adjusted EBITDA increased during the thirteen and twenty-six week periods ended June 30, 2024 as compared to the same periods in the prior year primarily due to the increase in restaurant level operating profit. This was partially offset by general and administrative expenses mainly due to wage increases and additional employee headcount to support growth..
Previous wording
As of March 31, 2024, we had cash and cash equivalents of $43.2 million and outstanding borrowings under the Credit Facility of $122.5 million, excluding unamortized debt issuance costs and deferred issuance costs. We had availability under our undrawn revolving credit facility of $102.5 million, of which $1.7 million is reserved under letters of credit, and availability of $125.0 million under our undrawn delayed draw term loan pursuant to our credit agreement, as amended (“Credit Agreement”). Our principal uses of cash include capital expenditures for the development, acquisition or remodeling of restaurants, lease obligations, debt service payments and strategic infrastructure investments. Our working capital requirements are low because our restaurants store very little inventory and our customers pay for their purchases at the time of the sale which frequently precedes our payment terms with suppliers.
Current wording
As of June 30, 2024, we had cash and cash equivalents of $45.1 million and outstanding borrowings under the Credit Facility of $196.3 million, excluding unamortized debt discount and deferred issuance costs. We had availability of $123.3 million under our revolving credit facility of $125.0 million, of which $1.7 million is reserved under letters of credit, and availability of $27.5 million under our delayed draw term loan pursuant to our credit agreement, as amended (“Credit Agreement”). Our principal uses of cash include capital expenditures for the development, acquisition or remodeling of restaurants, lease obligations, debt service payments and strategic infrastructure investments. Our working capital requirements are low due to our restaurants storing minimal inventory and customers pay for their purchases at the time of the sale, which frequently precedes our payment terms with suppliers.
Previous wording
We believe that our cash flow from operations, availability under our Credit Agreement and available cash and cash equivalents will be sufficient to meet our liquidity needs for at least the next 12 months. We anticipate that to the extent that we require additional liquidity, or should we decide to pursue one or more significant acquisitions, it will be funded first through additional indebtedness and thereafter through the issuance of equity. Although we believe that our current level of total available liquidity is sufficient to meet our short-term and long-term liquidity requirements, we regularly evaluate opportunities to improve our liquidity position in order to enhance financial flexibility.
Current wording
We believe that our cash flow from operations, availability under our Credit Facility and available cash and cash equivalents will be sufficient to meet our liquidity needs for at least the next 12 months. We anticipate that to the extent that we require additional liquidity, or should we decide to pursue one or more significant acquisitions, it will be funded first through additional indebtedness and thereafter through the issuance of equity. Although we believe that our current level of total available liquidity is sufficient to meet our short-term and long-term liquidity requirements, we regularly evaluate opportunities to improve our liquidity position in order to enhance financial flexibility.
Previous wording
The following table presents a summary of our cash provided by (used in) operating, investing and financing activities for the thirteen weeks ended March 31, 2024 and March 26, 2023:
Current wording
The following table presents a summary of our cash provided by (used in) operating, investing and financing activities for the twenty-six weeks ended June 30, 2024 and June 25, 2023: