Earnings call: First Watch announces Q1 growth amid market headwinds

First Watch Restaurant Group, Inc. (NASDAQ: FWRG) announced its first-quarter earnings for the fiscal year 2024, revealing a mix of growth and caution amid challenging market conditions. The company reported system-wide sales of $289.6 million, total revenues of $242.4 million, and an adjusted EBITDA of $28.6 million.

Despite the headwinds, First Watch achieved positive same-restaurant sales and improved labor management. The company's focus on long-term growth is supported by the opening of nine new restaurants, the acquisition of 21 franchise-owned restaurants, and the implementation of in-restaurant technology enhancements.

Key Takeaways

• First Watch reported $289.6 million in system-wide sales and $242.4 million in total revenues.
• Adjusted EBITDA for the quarter was $28.6 million.
• Nine new restaurants were opened in eight states, and 21 franchise-owned restaurants were acquired.
• The company experienced positive same-restaurant sales and market share gains.
• First Watch remains focused on long-term growth and is enhancing the customer experience with tech advancements.

Company Outlook

• First Watch has adjusted its full-year outlook, with total revenue growth expected to be 17%-19%.
• Same-restaurant sales growth is projected to be flat to up 2%.
• The company plans to open 51 to 57 net new system-wide restaurants.
• Commodity inflation is anticipated to be 2%-4%, with restaurant-level labor cost inflation projected at 5%-7%.
• Adjusted EBITDA guidance remains unchanged at $106 million to $112 million, and capital expenditures are expected to be $125 million to $135 million.

Bearish Highlights

• The company has lowered its revenue growth and same-restaurant sales growth projections.
• General and administrative expenses increased to $27.7 million, mainly due to additional headcount.
• Two restaurants were closed, bringing the total to 531 system-wide.

Bullish Highlights

• The acquisition of franchise-owned restaurants contributed positively to revenue and adjusted EBITDA.
• First Watch reported a restaurant-level operating profit of $49.9 million, with a margin of 20.8%.
• Employee turnover has declined, resulting in improved labor cost management.

Misses

• Despite the positive financials, First Watch has revised its outlook due to expected market challenges.

Q&A Highlights

• CEO Christopher Tomasso expects comps to flatten out in the second half of the year.
• The company has pricing power but is taking a conservative approach, focusing on value and traffic.
• Digital and social media are the primary channels for advertising, aligning with the brand's strategy.
• First Watch is exploring customer segmentation for more efficient targeting.
• Traffic projections for the second quarter remain uncertain, but gradual improvement is anticipated.

First Watch's first-quarter earnings reflect a company navigating a complex market landscape with strategic growth initiatives and operational improvements. By focusing on enhancing the guest experience and leveraging technological advancements, First Watch is positioning itself to maintain a steady course through industry fluctuations. The company's leadership has expressed optimism about its ability to continue profitable growth while adapting to changing market dynamics.

InvestingPro Insights

First Watch Restaurant Group (NASDAQ: FWRG) has shown a blend of resilience and ambition in its latest earnings report, with a clear focus on growth and operational efficiency. To provide additional context to the company's financial health and market position, here are some insights based on real-time data and InvestingPro Tips.

InvestingPro Data:

• The company's market capitalization stands at $1.52 billion, reflecting investor confidence in its business model and growth trajectory.

• With a P/E ratio of 60.94, and an adjusted P/E ratio for the last twelve months as of Q4 2023 at 54.02, the valuation indicates that investors are willing to pay a premium for the company's earnings potential.

• Revenue growth remains strong, with a 22.1% increase for the last twelve months as of Q4 2023, showcasing First Watch's ability to expand its revenue streams effectively.

InvestingPro Tips:

• Despite some analysts revising their earnings downwards for the upcoming period, First Watch is trading at a low P/E ratio relative to near-term earnings growth, which could signal an attractive entry point for investors seeking growth at a reasonable price.

• The company has experienced a strong return over the last three months, with a price total return of 16.07%, highlighting the positive market sentiment towards First Watch's recent performance and future prospects.

For readers looking to delve deeper into First Watch's potential and gain more InvestingPro Tips, they can explore further at https://www.investing.com/pro/FWRG. Currently, there are additional tips available, providing a comprehensive analysis of the company's financials and market position. Interested investors can also use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking even more valuable insights to inform their investment decisions.

Full transcript - First Watch Restaurant Group Inc (FWRG) Q1 2024:

Operator: Thank you for standing by, and welcome to the First Watch Restaurant Group, Inc. First Quarter Earnings Conference Call occurring today, May 7th, 2024, at 8:00 AM Eastern Time. Please note that all participants are in a listen-only mode. Following the presentation, the conference call will be open for analyst questions and instructions on how to ask a question will be given at that time. This call will be archived and available for replay at investors.firstwatch.com under the News & Events section. I would now like to turn the conference over to Steven Marotta, Vice President of Investor Relations at First Watch to begin. Go ahead sir.

Steve Marotta: Hello everyone. I am joined by First Watch's Chief Executive Officer and President, Chris Tomasso; and Chief Financial Officer, Mel Hope. This morning, First Watch issued its earnings release for the first quarter and fiscal 2024 on Globe Newswire and filed its quarterly report on Form 10-Q with the SEC. These documents can be found at investors.firstwatch.com. Let me first cover a few housekeeping matters before introducing Chris. 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 limitations, statements concerning the condition of the company's industry and its operations, performance and financial condition, 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 disclosure in the company's filings with the SEC, including our annual report on Form 10-K. 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 margins, 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. During today's call, references to same-restaurants sales and traffic growth compares the 13-week periods ended March 31st 2024 and April 2nd 2023 in order to compare like-for-like periods. Otherwise, any reference to percentage growth when discussing first quarter performance is a comparison to the first quarter of 2023 unless otherwise indicated. And with that, I will turn the call over to Chris.

Christopher Tomasso: Good morning. Thanks to the hard work of our entire team. I am pleased to report that First Watch delivered another solid quarter. We generated $289.6 million in system-wide sales, $242.4 million in total revenues and $28.6 million in adjusted EBITDA, driven by our comp restaurant performance, strong results by our non-comp restaurants, new unit growth, solid operations execution that drove improved profitability and contributions from our strategic franchisee acquisitions completed over the past year. We opened nine new restaurants in eight states during the quarter and on April 15th completed the acquisition of 21 franchise-owned restaurants and associated development rights in the Raleigh North Carolina market. I'm especially proud that we delivered positive same-restaurants sales, continue to grow share, and drove strong operating results, despite well-documented headwinds in a particularly difficult start to the year, namely harsh weather in January. Encouragingly, our trends improved sequentially throughout the quarter. Although they were a bit choppy as we were up against the strongest quarterly sales and traffic comparison of the year, as well as Spring break and Easter weekend timing shifts. Despite the volatility in the quarter, our team produced strong operating results across multiple key performance indicators. Labor management efficiencies once again were driven by process improvements and the continual refinements of recently deployed Labor and Analytics tools that allow our operators a more real-time view into their business. With more robust information and enhanced visibility, our leaders are better equipped to manage their business. This improved efficiency contributed to both our top and bottom-line, with KPIs once again improving and remaining very strong. In the quarter, we saw the highest customer experience scores we've recorded to-date, another sequential improvement in employee turnover, the fast food ticket times we've recorded to-date and continued market share gains with our same-restaurant traffic exceeding the Black Box (NYSE:BOX) Casual Dining segment by more than 100 basis points. These accomplishments were achieved during a quarter that typically includes some of the busiest months of the year for us. Our first quarter results give us confidence that we are focused on the right things and delivering the best possible experience for both our employees and our customers. Turning to the consumer, its evidence that after several quarters of macro pressure, there appears to be clear signs of a slowdown. The reality is that consumers are being more cautious and more discerning resulting in fewer dining out occasions across the industry. This trend began last summer as several large factors converged, inflation pressures peaked, the gap between food at home and food away from home widened and student loan payments resumed. Macroeconomic environment are transitory but proven business models endure. Our operating model allows us to remain nimble, so that we can flex labor as business dictates, introduce elevated appeal on higher value items on our LTOs and lean into and out of G&A projects as the environment evolves. However, we draw a hard line at reacting hastily to short-term dynamics with potentially brand-damaging tactics such as discounting or matching the promotional activity, which has begun to spike across the industry. In our view, broad discounting is a short-term fix with potentially negative long-term implications. Instead, we will continue to focus on profitable growth over the long-term. We've noted discussion about the challenging consumer environment facing restaurants in the State of Florida validated by Placer.ai reporting that restaurant business actually contracted over the last several quarters throughout the state. We believe that the traffic benefit the state enjoyed in the several years following the initial outbreak of COVID is now normalizing. At First Watch, I am proud of our clear leadership in our home state where our aggressive expansion strategy is critical to our long-term growth. With 30% of our system in Florida, we are perhaps more tuned to the current environment here than most and our bullish outlook hasn't changed. Our development in Florida has seen us grow to 123 restaurants in the state, a 48% increase over the past five years. And over that period, we've gained significant market share, while keeping competitive intrusion at Bay by adhering to our disciplined site selection criteria as we have grown. The bottom-line is we're serving a lot more customers in Florida than we ever have and it will continue to be a material component of our growth strategy. No matter the market dynamics we’re operating in, we continue to be focused on our long-term opportunity. It's something we've done throughout our 40 year history. As it relates to long-term strategic initiatives, we continue to focus on in-restaurant tech enablement with the ultimate goal of elevating both our customer and our employee experiences. In most instances, these enhancements are tucked behind the scenes, which is by design and our primary focus remains on delivering memorable hospitality and removing bottlenecks. The launch of systems such as KDS, pay-at-the-table and Waitlist Management, all serve a particular role in enhancing the First Watch experience. Now, there's a greater opportunity for those systems to begin communicating with one another with the purpose of digitizing the end-to-end customer experience. Doing so creates a broader platform to measure our performance more accurately in a variety of ways paving the road for further improvements. For instance, prior to the launch of KDS, we had little insight into our food ticket times. We completed the installation over a year ago and with comparative information now available in real time, we are seeing tangible improvement. We'll continue to analyze that data to refine and evolve a system in an effort to optimize its benefits. Along with improved customer interactions, there is also a benefit in the acquisition of customer data and insights into their behavior. As we stated in the past, upwards of 50% of our weekend traffic originates on our waitlist. We're excited to see that our latest installation pay-at-the-table is experiencing 35% adoption during peak periods as well. The data generated from these two tech enhancements alone are offering rich insight into visit and ordering behavior. We're beginning to pilot processes where these systems are joined in real time and customer identification can be connected to the POS where check information resides. The result is a more enriched view of our customers and the growing opportunity to target them with relevant communications through an enhanced marketing tech stack. We believe this creates a more focused approach to creating and serving more demand versus resorting to broader, inefficient and brand diluting action. We are in the very early stages of these initiatives and we'll have more to share in the coming quarters. I am as excited about the future of First Watch as I have ever been. We are the market leader in daytime dining with unmatched scale, proven affordability and a high ceiling with a total addressable market more than three times our current size. And in the aggregate, our recent NRO vintages are all performing at or above their underwriting targets. In closing, while we feel the headwinds affecting us and many others, we're confident that we're simply far better equipped to withstand them than our competitive sets. And with that, I'll turn it over to Mel.

Mel Hope: Thanks, and good morning. Overall, as Chris mentioned, we're proud to have delivered strong first quarter operating results. Total revenues were $242.4 million, an increase of 14.7%. Our total revenue growth in the first quarter was driven primarily by our new restaurant openings and the 24 franchise restaurants we acquired over the past year. First quarter same-restaurant sales grew 0.5% on negative traffic of 4.5%, compared to last year's strong positive traffic of 5.1%. Our food and beverage costs were 21.8% of sales in the first quarter, compared to 22.4% in the same period last year. Cost as a percent of sales benefited from carried pricing of 4.4%, positive mix and were partially offset by commodity inflation of 2.9%. Labor and other related expenses were 33.3% of sales in the first quarter, an increase from 33% in the first quarter of 2023. We’re fully staffed to support longer term growth with an average of three managers per restaurant, compared with 2.9 managers in the same period one year ago. Hourly labor efficiency improved in the first quarter and we're pleased to call out that our employee turnover again declined. Restaurant-level operating profit was $49.9 million for the first quarter reflecting a margin of 20.8%. The 40 basis point decline versus last year was due to an increase in the average number of managers per restaurant, deleveraging of fixed expenses, partially offset by favorable food and beverage costs, as a percent of sales. General and administrative expenses were $27.7 million, approximately $5 million higher than in the prior year, primarily due to additional headcount. Adjusted EBITDA was $28.6 million, an increase versus the $27.4 million reported last year. Given the headwinds to the same-restaurant sales and traffic during the period, we’re pleased to report this year-over-year increase in adjusted EBITDA. Adjusted EBITDA margin was 11.8%, versus the 13% margin we realized in the first quarter of 2023. The difference was primarily attributable to the decline in restaurant-level operating profit margin and higher general administrative expenses. We opened nine system-wide restaurants during the quarter, of which seven are company-owned and two are franchise-owned and we closed two, including one company-owned and one franchise restaurant, resulting in $531 system-wide restaurants at the end of the quarter. In an effort to help you model our performance, acquisitions favorably impacted first quarter revenue by $12 million and adjusted EBITDA by about $2 million. For further details on the first quarter, please review our supplemental materials deck on our Investor Relations website beneath the Webcast link. To provide some color on how we're planning the balance of the year, while our same-restaurant traffic trend improved each month during the first quarter, it remains negative mid-single-digit quarter-to-date, a trend we expect to continue for the remainder of the second quarter at the same time, based primarily on easing comparisons, we’re expecting same-restaurant traffic in the second half of 2024 to be relatively flat. Now I'd like to update our full year outlook for 2024. We're adjusting our total revenue growth to a range of 17% to 19% from 18% to 20% previously, excluding the impact of the 53rd week last year. Of the 17% to 19% range, approximately 7% of the growth is expected to be contributed from the 23 restaurants we acquired in 2023 and the 22 restaurants we've acquired in 2024. We’re adjusting same-restaurant sales growth to a range of flat to up 2% with a low-single-digit decline in same-restaurant traffic from a range of 1% to 3% with flat to negative same-restaurant traffic previously. Our same-restaurant sales growth guidance includes a 2% price action implemented in the last week of January, which implies carried pricing of around 3.5% in the second quarter and just under 3% for the year. We continue to expect a total of 51 to 57 net new system-wide restaurants, updated to reflect 44 to 48 company-owned restaurants, 9 to 11 franchise-owned restaurants and the two aforementioned system-wide closures. Our 2024 development pipeline remains heavily weighted in the second half of the year, Q4 in particular, similar to our cadence in 2023. Our expectation of commodity inflation for the year remains unchanged at 2% to 4%, as does our expected restaurant-level labor cost inflation in the range of 5% to 7%. Also unchanged is our adjusted EBITDA guidance range of $106 million to $112 million with the impact of acquisitions expected to contribute about $12 million. The overall adjusted EBITDA range implies growth of 12% to 18% over 2023 after adjusting for the 53rd week. We expect a blended tax rate in the range of 27% to 29%. Finally, we continue to plan capital expenditures of $125 million to $135 million not including the capital invested in franchise acquisitions. Even though traffic has been challenging this year, our restaurant teams are operating at a high level. Our new restaurant development is on pace, our double-digit percentage unit growth and all departments are engaged in the successful execution of our franchise acquisition strategy. I commend all our teams for their commitment and excellence. And operator, if we could please open the line for the questions?

Operator: Thank you. [Operator Instructions] Our first question comes from Sara Senatore with Bank of America (NYSE:BAC). Please proceed with your question.

Katherine Griffin: Hi, thanks for the question. This is Katherine Griffin on for Sarah. First question, I wanted to ask about the same-restaurant sales growth guidance. Could you just clarify why lower the guidance by a point at the midpoint? What exactly are you seeing that's different from what you had expected previously?

Christopher Tomasso: It's really just the performance in the second - in the first quarter, which started out of the box a little slower than we had seen when we were guiding for the full year originally.

Katherine Griffin: Okay. Thank you. So is it - I guess, just to clarify though, so is it more on traffic then came in lower than expected?

Christopher Tomasso: Traffic has been lower and we are balancing that from it slower.

Katherine Griffin: Okay. Thank you. And then, just on EBITDA came in certainly better than we had expected. Possibly you know better than internal expectations. So, we're wondering if there's any consideration of reinvesting some of that margin into value? And how that might look at First Watch, given the brand’s every day value approach?

Christopher Tomasso: Yeah, I think the second part of your question is the answer to your question, which is we're focused on the everyday value piece. And as I said in my prepared remarks, we're - it's - we're not a discounting brand. We haven't been for our 40 year history and we've been through all kinds of economic environments and have stayed true of who we are and what we are and that's our plan for, right now, we really want to focus on profitable growth and focusing on the guest experience.

Katherine Griffin: Great. Thank you.

Operator: Our next question comes from Jeffrey Bernstein with Barclays (LON:BARC). Please proceed with your question.

Anisha Datt: Hi, this is Anisha Datt on for Jeff Bernstein. And I wanted to ask about restaurant margins. Are you comfortable over time in the 19% o 20% range? And is there any potential upside in 2024 with the strong start to the year and seeming a real easing of commodities and labor versus the prior year?

Christopher Tomasso: Yeah, I think over the years we've been pretty consistent about the - communicating that we're comfortable in that 19% to 20% range. And that, generally that margin fluctuates in short-term periods, but it also helps us guide how we price. So, if we stay within that range, we feel pretty comfortable with that.

Anisha Datt: Got it. Thank you.

Christopher Tomasso: Yes.

Operator: Our next question comes from Andy Barish with Jefferies. Please proceed with your question.

Andy Barish: Hey guys. Just a couple of clarifications. Can you give us dine and traffic in the quarter? And then, maybe just some color on how the Easter shift impacted 1Q and the start to 2Q?

Christopher Tomasso: So, I heard, dine in traffic and what was the other, Andy, if you could just say again what the second half was?

Andy Barish: The impact of the Easter shift in 1Q and to the start of the 2Q?

Christopher Tomasso: Yeah, I'm not sure I know the answer off hand to the second part of the question. On the first part, dine and traffic, overall was down roughly to similar to the rest of the overall number. I think it's down like 4% something like that.

Andy Barish: Okay. And, Chris, on your opening comments, I mean, there was - I think the subtle commentary around the seasonals and the LTOs, I mean, are you thinking about any kind of shifting? I know those are planned pretty far out, but it's been an area where you guys have gotten check ropes from premium items. Is there a way to balance that maybe with some more items that are intended to drive traffic potentially?

Christopher Tomasso: Yeah, as you know our seasonal menus have been a strength of ours and they continue to be. And one of the greatest benefits of it frankly is the information that we have and the database of items that we've done. So, my with my subtle comment really had to do was more around our flexibility. So for example, and maybe de-risking it a little bit, Andy and putting in - bringing back, I should say some of our guests’ favorites which is exactly what you're talking about with driving traffic. So, for example, we pivoted in and brought back Shrimp and grits, which is a big customer favorite. And it also happens to be a high margin item for us. And ironically, the items that we brought back may not have a top-line impact from a PPA standpoint. But the higher appeal de-risking, trying something new during these times and then also the higher margin elements of them is really what led us to do that. So, we look at it as kind of a win-win-win in a situation like this. It's something that the customers love. They're high margin items for us and it reduces the risk of anything not performing as it did in test once we go nationally.

Andy Barish: Awesome. Thank you, for the color.

Christopher Tomasso: You're welcome.

Operator: Our next question comes from Jon Tower with Citi. Please proceed with your question.

Jon Tower: Great. Thanks for taking the question. I was just curious maybe you could start off, obviously you touched on the State of Florida has been a soft spot for the overall industry. Just curious if maybe you can call out the discrepancy between that part of your business and the rest of the country. Was there a real wide gap between the state and the rest of the country?

Christopher Tomasso: Yeah, there was a difference between Florida and the rest of the state. I think you're we're not the only one you're hearing that from. What we like to do is, when we're given questions about things like that - that's why we bring it forth here. And so, we're not quantifying the specific impacts of Florida on our overall traffic in sales but wanted to provide a little bit of color. Florida was up huge first quarter last year. So, that was an exceptional comp for us. And that's the impact that we're seeing in the in the top-line now.

Jon Tower: Okay. And just going back to the guidance for the year, I think now you'd mentioned the idea that you’re anticipating what, kinds trends hold that you will see flattish traffic by the back half of the year. One, is that a correct assumption? And then two, what gives you confidence that this is going to kind of hold as it is, what are you seeing in your own dining behaviors in consumers to suggest that this trend is going to remain rather than weaken going forward?

Christopher Tomasso: Yeah, I think our focus is on the - first of all, we're rolling over some softer comps in the back half of the year. So I still remain confident that our original expectation that things would begin to flatten out with that softer comp as it gets pretty reliable, plus we have a good program plan for the year in terms of our offerings and performance. So it's - we're - part of this is depending on 40 years of experience of recovering short term with the company's typical history of long term growth.

Jon Tower: Got it. And then, just lastly, I believe you had mentioned earlier in the call, Chris, something about flexing not just LTOs and labor with demand, but also some G&A projects and later on in the conversations, you’ve talked about some - doing some stuff on the marketing side, very early stages. Can you elaborate a little bit on perhaps what projects you're going after right now?

Christopher Tomasso: Yeah. So, when I talked about the flexibility, we're - what we're doing I believe is a thoughtful balance of near term solutions and long-term brand implication type initiatives. And from a long-term perspective, it really is starting to leverage the data that we've been collecting now for a while with some of the new platforms and tools that we've done. So it's not any different than what I've talked about before, Jon it’s just that we're really starting to get voluminous data that we're tying together to get more insights into consumer behavior in our restaurants. Everything from operational KPIs to seek to eat times to actual visit times, the pay-at-the-table is a big part of that for us. And we've been really pleased with how that's gone. So, it's really just starting to dig in and leverage all that data.

Jon Tower: Got it. Thanks for taking the questions.

Christopher Tomasso: You are welcome.

Operator: Our next question comes from Brian Vaccaro with Raymond James. Please proceed with your question.

Brian Vaccaro: Hi, thanks and good morning. Just given the current environment, you noted rather consumer obviously seeking value. I thought maybe if you could elaborate on how First Watch’s value proposition stacks up to peers and sort of positions you for the current environment. I think you've taken around 20% pricing cumulative during the pandemic. Is that about right? Maybe you could tighten up for us? And maybe just speak to or provide any metrics on sort of on how your average menu price is compared to your direct peers in most markets? Any color there would be great.

Christopher Tomasso: Yeah, we have quite a bit of pricing power. You're right on how much we taken since the pandemic has been about 3.5% a year. But when we look at our per person average versus our competitive set, we are believe it or not, actually at the low end of that and while we realize and that we have pricing power, we're sticking to our philosophy of pricing to cover inflation. So, I think, if you look at that 3.5% a year and look at it comparatively, you'll see that we’ve been quite conservative and we'll continue to be that way. Our focus has always even in times like this incredible relative to value, really want to focus on traffic. I think our numbers here and how we're beating the industry versus Black Box kind of a test to that. And we think that's the right approach for us. It's what we've done for years and we're going to continue to do that.

Brian Vaccaro: All right, thank you for that. And one follow-up, just on the operational improvements that you're seeing, you mentioned ticket times. Could you provide any more color or quantification on the year-on-year improvement you're seeing there? And on labor, it looks like the cost per week as we look at it was about flat year-on-year, despite wage inflation. Obviously, traffic was lower but. Is there any way to parse out sort of the level of efficiencies being generated by some of the new tools you've deployed in recent quarters? Thank you.

Christopher Tomasso: Sure. I'll speak to the ticket times. I'm not sure how Mel have the answer for your labor piece. But on ticket times, we're seeing what we consider to be significant improvements. Keep in mind we're just at the point now where we're comping over the installation and the full rollout. As I always caution, just because it was rolled out doesn't mean it was optimized at that point. So, even with that as we can continue to optimize the KDS system to, based on the information that we get, I mean, we're seeing early on 10% to 20% improvements in ticket times, which - excuse me, which is most impactful during the peak sales hours obviously.

Mel Hope: It’s Mel. Brian, in terms of the labor, really a couple of things are going on. One is that our operators are doing a very, very good job of managing that and managing the crews. But I think one of the things that's really been successful with that and maybe gets some underappreciated is that our turnover has gone way down. And so - when - and that's been deliberate. It's been part of their process. But that helps us lower overall cost. They become more efficient when you have when you have tenured employees. And that that low turnover is also part of the lowering just over time charges. So, we've been delighted to see the improvements that the operators and our people services folks have made in terms of the crews and they’re interested in creating careers with the company, because it's really paid off a great deal on a much, much lower turnover over the course of the last several years. It's been taken down to a great degree. It's been it's been fun to watch.

Brian Vaccaro: All right. That's helpful color. I'll pass it along. Thank you.

Operator: [Operator Instructions] Our next question comes from Gregory Francfort with Guggenheim Securities. Please proceed with your question.

Gregory Francfort: Hey. Thanks guys. I had a couple questions. The first is, it looks like you may have a stronger mix from the fourth quarter to the first quarter. I'm curious, one, is that right and what's maybe driving that?

Christopher Tomasso: So, I think that goes back to our LTOs and we don't - as you know, we don't consider mix in our plans. But we have experienced it in the past. And I think our decision to select high appeal items that are proven and that the consumer is - it looks forward from us I think help with that mix in Q1.

Gregory Francfort: Got it. And then, maybe just to level for expectations that the commentary on the traffic throughout the year is helpful, but do you expect comps in 2Q to be better or worse than comps in the first quarter?

Christopher Tomasso: Better.

Gregory Francfort: Okay. And then just maybe on I think some of the commentary on the tech platforms and how long that's been in the system now you're getting better insights on the customer across a few different platforms. Can you maybe give us some examples of what - is that giving you changes you can make from an operational perspective? Is that helping you change out the menu? I'm just curious kind of what the learnings are and what that's kind of tangibly giving you feedback on? Thanks.

Matt Eisenacher: Hey Greg, it's Matt Eisenacher. I'll chime in on that one. Similar to what you've seen from us and KDS and back half of ticket times, it’s a similar long-term perspective there. The data informs us to make better decisions overall. It enables better insights to efficiency in the front house. So just as Chris and Mel talked about ticket times, we have that same opportunity over the long term to get more efficient in the front of house. And then, of course, if you look even further out, it's already telling us more about our customers and visit frequency. And then that will allow us to segment, talk to our customers in a more targeted, more efficient way. So, again, it's a long-term perspective. One, it's really the forefront of how we looked at to drive demand.

Gregory Francfort: Cool. Thank you guys. Appreciated.

Matt Eisenacher: Thanks, Greg.

Operator: Our next question comes from Chris O'Cull with Stifel. Please proceed with your question.

Chris O'Cull: Yeah, thanks guys. I had a follow-up question to that last one, Mel. Can you expand on your comments about comps expected to be better in the second quarter than in the first quarter? Because, I believe you said you expect traffic to be down mid-single-digits and pricing to be up 3.5% in the second quarter, I wanted to confirm that. Because I think that's less pricing in the second than in the first with similar traffic performance. So I'm just curious is mix expected to be the sequential improvement in the second that you're looking for?

Mel Hope: Again, when we project, we don't we don't project mix in terms of our projections very much. So, really it's - while we're still choppy on the traffic side, which we feel optimistic about it gradually improving.

Chris O'Cull: Okay. It's fair. And then, Chris, another company hasn't used paid advertising in a big way in the past, but have you considered making more meaningful investments in that medium and just to address the recent traffic weakness especially in Florida?

Christopher Tomasso: Well, paid media, specifically our focus has been on digital and social. So we do spend in channels. Just not what I would call traditional media of television, radio, perhaps but and we have spent and invested into those channels more for us. We think they're a better fit for our brand. Again, we don't - we're not going to have a discounting platform. But it isn’t a way for us to increase awareness. And as Matt talked about, understanding customer visitation helps us be more targeted, especially with digital when you think about timing of messages, the messaging itself. So Matt and his team have done a good job of segmenting better. And I think that's been helpful for us as we'll continue to do that.

Chris O'Cull: Yeah, I was thinking more traditional like billboards and radio and that's not something you which guys are considering.

Christopher Tomasso: You know what Chris, we don't really have the scale in to be media-efficient even despite some of these markets where we're pretty well-penetrated. When you start getting into traditional media, it's very difficult to get media-efficient as you know.

Chris O'Cull: Okay. Fair enough. Thanks guys.

Operator: There are no further questions at this time. I would now like to turn the floor back over to Chris Tomasso for closing comments.

Christopher Tomasso: Thank you. I want to once again thank our teams for their dedication and commitment to making days brighter for our customers and each other. Our success and growth opportunities are due in large part to their efforts, which in turn creates growth opportunities for them as we march toward 2200 restaurants. Thank you all for your time today.

Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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