First Watch Restaurant Group Reports 16.4% Revenue Growth but Faces Net Loss in Q1 2025

First Watch Restaurant Group, Inc. reported its financial results for the first quarter of 2025, revealing a total revenue of $282.2 million, a 16.4% increase from $242.4 million in the same period last year. The growth was primarily driven by a rise in restaurant sales, which reached $279.6 million, up from $239.3 million in the prior year. However, the company experienced a net loss of $0.8 million, or $(0.01) per diluted share, compared to a net income of $7.2 million, or $0.12 per diluted share, in the first quarter of 2024. The decline in profitability was attributed to rising operating costs, including food and beverage expenses, labor costs, and other operational expenditures.

In terms of operational performance, First Watch opened 13 new restaurants across 10 states, bringing the total to 584 system-wide restaurants, which includes 498 company-owned and 86 franchise-owned locations. Despite the increase in total revenues, the company reported a same-restaurant sales growth of only 0.7% and a slight decline in same-restaurant traffic of 0.7%. The restaurant-level operating profit margin decreased to 16.5% from 20.8% in the previous year, reflecting the impact of inflation on commodity prices and increased labor costs.

The company’s financial position showed a decrease in cash and cash equivalents, which fell to $18.6 million from $33.3 million at the end of the previous fiscal year. Total liabilities increased to $947.8 million, up from $919.0 million, largely due to higher debt levels associated with acquisitions and operational expenses. First Watch's long-term debt stood at $191.5 million, with a current portion of $10.3 million. The company also reported an increase in interest expense, which rose to $3.3 million from $2.6 million, reflecting higher borrowings and interest rates.

Looking ahead, First Watch anticipates continued challenges in the macroeconomic environment, including commodity inflation projected to remain in the high single-digit percentage range for the remainder of the year. The company plans to focus on enhancing its marketing initiatives to drive traffic and improve sales in the second half of 2025. Additionally, First Watch is committed to expanding its footprint and investing in new restaurant projects, with estimated capital expenditures of approximately $150 million to $160 million for the year, funded primarily through operational cash flow and borrowings under its credit facility.

Overall, while First Watch Restaurant Group, Inc. has demonstrated revenue growth and expansion, it faces significant challenges in maintaining profitability amid rising costs and a competitive market landscape. The company remains focused on strategic initiatives to enhance operational efficiency and drive future growth.