First Watch Restaurant Group, Inc. reported its financial results for the third quarter and the thirty-nine weeks ended September 29, 2024, showing notable changes in revenue and profitability compared to the previous fiscal period. Total revenues for the third quarter reached $251.6 million, a 14.8% increase from $219.2 million in the same period of 2023. However, net income for the quarter decreased significantly to $2.1 million, or $0.03 per diluted share, down from $5.4 million, or $0.09 per diluted share, in the prior year. For the thirty-nine weeks, net income was $18.2 million, a decline of 19.8% from $22.7 million in 2023.

Restaurant sales for the third quarter were $249.0 million, up from $215.5 million in the previous year, while same-restaurant sales growth was negative 1.9%, reflecting a decline in customer traffic. The company opened nine new restaurants during the quarter, bringing the total to 547 system-wide locations, including 466 company-owned and 81 franchise-owned restaurants.

Operating costs and expenses for the third quarter increased to $245.3 million from $211.5 million in the prior year, leading to a decrease in income from operations to $6.3 million, down from $7.7 million. The income from operations margin fell to 2.5% from 3.6% in the previous year, attributed to higher depreciation and amortization expenses, despite improvements in labor efficiency and food costs as a percentage of sales.

General and administrative expenses rose significantly, increasing by $2.5 million in the third quarter compared to the same period in 2023, driven by higher compensation costs and consulting services. For the thirty-nine weeks, these expenses increased by $9.4 million, reflecting similar trends.

The company also engaged in strategic acquisitions, acquiring 22 franchise-operated restaurants during the first half of 2024, with transaction costs amounting to $1.5 million. The acquisitions contributed to an increase in goodwill and intangible assets on the balance sheet, with goodwill rising to $398.6 million as of September 29, 2024, from $359.9 million at the end of 2023.

Cash provided by operating activities for the thirty-nine weeks increased to $92.7 million from $73.0 million in the prior year, while cash used in investing activities rose significantly due to capital expenditures and acquisitions. The company’s long-term debt increased to $189.7 million, reflecting borrowings to fund these acquisitions.

Despite these challenges, adjusted EBITDA for the third quarter improved to $25.6 million, up from $21.6 million in the previous year, indicating operational resilience amid fluctuating market conditions. The company continues to focus on enhancing its financial reporting and internal controls, addressing previously identified weaknesses in its financial processes.