Earnings call transcript Q1 2023

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Operator

Good afternoon. My name is Emma and I'll be your conference operator today. At this time, I would like to welcome everyone to the Sweetgreen First Quarter 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. [Operator Instructions]

Investor may of your Head Nounou, Relations, begin you conference. Rebecca

Rebecca Nounou

and good you, afternoon, Thank everyone.

today Neman, are and me with Here Jonathan Chief Officer. Mitch Co-Founder Financial Reback, CEO; and

a Before we couple of we have reminders. begin,

available Our on earnings release our at investor.sweetgreen.com. website is

making various During of nature. risks materially those and a differ as implied comments expressed this uncertainties. may will or results a forward-looking we from call, be Actual result of

or Factors the report in subsequently our please statements. information latest review these the as section and assume about titled revise statements filings, SEC filed XX-Q. of more on Risk For Report we information forward-looking forward-looking risks, no including our and Annual based update Form on some company’s filing to on obligation are today, These of XX-K Form quarterly publicly

be GAAP. financial financial website. these measures reconciliation for press are Additionally, measures, a and this our in with certain of items release to can the we U.S. non-GAAP available afternoon’s accordance IR which A not on in will GAAP addition in measure nearest be substitute found to of performance prepared discussing

that, things with my And call turn off. to Jonathan pleasure over to the it’s kick to

Jonathan Neman

the squarely grow Becoming the and providing companies a put ahead. And company and with next last And great taken businesses that really And that durable to large experiences. with years energized in will Rebecca. catalyzed period I'm opportunities as actions you, today. shareholder be exceptional on great share it over expect have is brands, and moment for exciting look updates we a profitability. phase customers. afternoon, a I'm to the quarters the companies everyone. We Sweetgreen, recognize you and Thank addressable times by profitable to time strategic like This growth believe guest the we We large back all few good of on we create path for with loyal starts value our confident that growth. this balancing these markets have

our better like tremendous Our to Chipotle the our team a items has top From guests. want done the driving my with can every new their am pleased dedication people programs in new job through our to to past menu team execution our building by to restaurants. extend member chicken I Sweetgreen to gratitude in healthier how food. performance. connecting serve our bowl pepper quality to real to all we mission of communities I thinking for loyalty

our dollar the and I were though shareholder of are largest as we the My own. collectively treat co-founders remain every company and

in As cost uncertainty environment we to by transition operating an defined and of increased an capital.

focused the building are projects arise. disciplined fleet this returns on We category headstart new we existing across The to nimble opportunities remaining will take advantage while period within enough to we incredibly of the undertake. during allows and our have us high driving that be in undoubtedly

approach million store our off see of first growth year-over-year we as sales reported sales X%. paying and same representing We XX% growth quarter $XXX.X

XX% of and in of represented QX with thirds channels. digital Total by Our our X% sales of was those in driven same X% digital via growth two price our sales growth revenue approximately taken January. coming traffic own sales store

restaurant were was XX%. and quarter margin AUVs the in level billion $X.X

from a the quarter loss EBITDA million million. adjusted Our was loss quarter $X.X of EBITDA for down $XX adjusted XXXX first

level the restaurant guidance loss at million credit have been adjusted XX% tax range. retention employee of would impact related end margin of and the been would the EBITDA have to our Excluding Cares top Act, QX $XX.X

support than million to year-over-year continues spend for QX, center lower we XXXX. during first I'm Our track pleased the XXXX. support that while XX% quarter the sales $XX center grew operated X%

that XX% of our costs XX% in of leverage our net operating support costs to In years. XXXX we costs coming center be substantial driving support on focused center XX% our now related expect the spice includes support the public and range incredibly company remain center revenue. out for net will We of revenue. which in Today,

returns We capital. will further grow the support center tangible investments the extent only on to that drive

to capital how creation. top allocate to leverage we committed and center and continuing is shareholder the drive value reunderwriting returns continuously are deliver mistake, to management our at support steward Make We for priority operating a no team.

our are discussed for basis growth, and and operate customer strategic past, This acquisition flywheel. line As we have four we the strong profitability. the top in with driving priorities, is loyalty which

digital are; industry increase new and and As frequency inspire markets our one, a our a evolve us for build in channels, consumers footprint as volume through our to run customer food; priorities fast to two, credibility existing commitment people and culture great and with and expand three, our food; and allowing future more lives healthier the reinforce and leader to to thrive focused restaurants real reminder, our live four restaurant new on reimagining talent margins; add developing first growth. experience connect brand strategic communities to

restaurants. enter me let a Cranston, of XX restaurants pace Seattle, We San new quarter three update and remain provide additional ended, an we five on in opened priorities. Milwaukee. each our net XX with Rhode to In this with restaurants XX and year Island. quarter plans of the opened Antonio new the including we've Now, open ending first between Since to XXX additional these QX, total restaurants new on an markets,

with class are early of the While XXXX openings. pleased we

protects As way sites call, that growth. disciplined to and efficient we unit sure a executing want is our our discussed make on the right great playbook capital brand. our choosing We last on leaders proven we're with our thoughtful focused that strategy in

Infinite by this in year, existing next opening so a week restaurant that by share Kitchen to be production we pilots, the Kitchen. Infinite introducing how be we call more From we and throughput learn Sweetgreen Infinite to faster a we create customer powered concept will year, to our grow share we higher powered unlocks it in more We're line restaurants Infinite margins. our two more experience on believe can will learn how easier second jobs retrofitting the profit Kitchen can have new best consistent Later to will existing hope automated that XX integrate As automation an make excited site. May call we this these team We our members first we will and Illinois. quickly Naperville, we open us our this efficiency that last Kitchen and enable on dynamic. an

increasingly into While will we're the still integrated expect Kitchen testing and pipeline. Infinite learning we our be

learnings We look in our with calls. future more sharing forward you to of

believe digital launched Members curated of to limited with our $XX very Sweetpass margin rewards subscription higher more. base. and significantly a With receive like time We offer to fees, great customer $X we other buzz. had We costs, brand our which should believe the smooth in access edition gifts improvements program our a per menu continue only [indiscernible] Sweetpass challenges, month membership We special base. birthday we membership will drive benefits members Last pay delivery, build incrementality over experience. and nationwide, free daily more. program but through Sweetpass drive also exclusive launch and week which Plus loyalty and frequency not shops come a a at the limited customer and across underlying from our

commitment hearty beloved our approachable bowl roasted March black we collaborations on salsa, and craveable convenient. Bowl. Chipotle way the rice and featuring Through bowl our made making digital and significant Burrito lime, beans, is Chipotle and a delicious Sweetgreen Burrito our cilantro, double black the take a This chickens base. the proposition of reinforce food craveable value core launched Chicken continue customer In exclusive, offerings, chef healthy our to menu to we seasonal and

customer Our it. for acquisition. as customers love The well goals is our outperforming new targets bowl as exceeding our

the of launch, to promo for and celebrate burrito offering the day new customers. existing national the new brand part offered As to a we exposing both

also to new salad, new time flavors We humus both evolve our on items, are menu salads signature back time new hummus side Beyond that requested and with of the signature focaccia. by and the continuing as in brought a our we're innovating for first limited highly crunchy hummus a customers. menu

our well chocolate soda broaden and recently options beverage healthy to several offering continue introduced as as treats. We

three the way still satisfy We requests our dollars attachments the weeks years; efficiently we've significant the Sweetgreen easy opportunity seen and margin coming attachment of XX% to through grow presents nearly While customer launch. footprints. for believe sales first early, drive in opportunity an in another with

what the create partnerships uniquely are the can believe special Sweetgreen given of we we brand. makes strength Part of our

bowl ingredients from It's XX. available example, we De launched locations Miami For Michelin De. The a Boia stracciatella South with Florida on all with briny collaboration June Boia thoughtfully cheese mid bright is Italian inspired order and in top. and craveable to restaurant through starred April, bowl seven creation sourced

from with are our We should in and expect innovation to us reception more customers incredibly the coming quarters. happy customer

chefs, influential heartier additional grains including includes dessert sweet collaborations expanding to craveable roadmap with and and more continuing into menu and robust expanding Our our offering. and attachments, proteins, more savory test

element foundational thrive. to the our is restaurants making business great [indiscernible]

continue executional result improvements implemented at our regional We the the see year. of to manager of a our as in general model business beginning we

are metrics showing period during throughput, times. improvement notably an Our peak in

we the quarter, improved across Front digital to areas. During and trade throttle we continue across first fleet, House levels increase the see XX% of our throughput

to are restaurants we retaining continue time. Our and those fully on staffed focus work full that hiring and

team who By out which quarter launch the first turnover we to attributable fleet, across create will saw member time and the full turn have we these of the scheduling less work experience. higher those believe end call turnover are overall scheduled improve a will practices. the Our tenure. customer to data In shows we lower year, and in better tipping

ensuring schedules more of time and with our fresh, members, team floor adjusted delivering customer to also that friendly. guests our give promise to coaches head on and we are We engage them the recently on fast

back company of and sweet initiatives our for drive intimacy for of playbook values ability continued to adding have and scale create and our shareholders. on you, This a these our business the to excited impact one touch. goes the our win-win-win the better the customer, will results for I'm specifically at core

Daniel and the I Schlossman, Before take and the Chief channels, leaving will Sweetgreen Daniel is and Daniels to duties, I my will be my crafting most key want Sweetgreen a our who to gratitude moment our five played loyalty absorbing recently be extend Officer Brand at years company. roles launch after Marketing to Officer new in Ru win. playing Nathaniel of program. co-founder Chief conclude,

as capital growth efficient profitability. and core Our on do everything disciplined focus path our we customers we to to remain

taking were ensure confident steps market sustainably connecting We have a further mission to and brand a I'm food. ability powerful our our real people will to massive with the of opportunity

to through the And to turn quarters now over financials. I'll walk it Mitch

Mitch Reback

And afternoon, you, good everyone. Thank Jonathan.

a results finishing X% to sales for growing grew increase We and of are XXX.X XX% in X% the financial range. the was quarter to expected quarter Total XXXX March first million subsequent million, for transactions. tokens quarter first pleased reflecting XXX.X with store price increase in revenue a up Same our from the with first our year-over-year. revenue within X% XXXX

average Our up unit AUVs. this restaurants was XXXX quarter. volume XX new in X.X our from QX, million opened million nearing pre-COVID X.X We

the closes and As team shared on of that in in earnings in customer one our one had in neighboring we experience. Angeles, three last three New one had Los All better first quarter, Boston York. restaurants call member restaurants and these restaurants

incremental the a total Restaurant of one Additionally, be employee able volume with Cares benefit includes we the million tax was XX%. the to ended We in new X.X issued will credits related quarter drive XXX profitability part a restaurants. the to store from margin by and Act. nine net level of another. first moving retention quarter This to as restaurants

due guidance. This which our our at end sales improvement was leverage. to credit, is XX% margin this the Excluding primarily of was top

margin For the beverage higher XXX are figures and GAAP basis earnings reconciliation points to than packaging level of Food, comparable which XX% the release. restaurant costs for refer quarter, please is revenue a XXXX. of to

experienced the We for Labor the revenue packaging starting we earnings January, part last in comparable the Act. retention As resulted to basis and recognize elevated our related were X.X mentioned related throughout XX% disruption call, quarter. of benefit a XXXX. tax costs first quarter, on down which million in packaging the costs from credits as Cares points the in of employee XXX period

to attract. restaurants and we Our of we quality are talent with staffed able pleased fully are the are

pressures. Additionally, an of easing seen we've wage

million decrease and expenses tax salaries related and quarter employee to with XX.X million the first X.X XX% and in of is management G&A XX.X was based XXXX. primarily in retention revenue compared to for Occupancy related XX.X decrease The quarter compensation to X.X a benefit decrease stock attributable million in the million million were QX, credit of consistent benefits. expense the a a XXXX. expense,

first stock quarter G&A than comp the based our credit and retention During X% expense XXXX. was excluding lower

expense primarily period. a XX.X loss prior previously to million year due well increase decrease and The in a loss depreciation restaurant These income G&A an additional of net an compared as discussed offset for Our was with X.X restaurants costs decreases our XX.X were openings. due profit. pre-opening in restaurant amortization net level the as quarter timing as million is loss and in the to in the in to the in in of partially increase associated by decreases in and increase an interest increase new

Adjusted increase which of administrative of compensation as based general in million as improvement decrease stock of was in a XXXX loss quarter other X.X compared was EBITDA excludes and a first certain level profit due primarily the loss restaurant and period. to the prior described and year expenses adjustments to an This for XX million a above. in

of than year-over-year loss. improvement tax was retention Excluding XX.X credit, the adjusted compared the of the to quarterly a of loss and million X quarterly EBITDA million benefit more employee

cash with just under balance We ended first the of XXX quarter million. a

strong to us expand disciplined costs. our am profitability growth to fiercely mission We're us restaurant and capital We path center the level support our that our to to efficient than with position balance on continue making continue we protecting higher and sheet. capital margins with allows committed progress strong provides have flexibility. delivered and expected as a to we I are lower pleased

Our adjusted become as on basis an in profitable EBITDA XXXX. narrow significantly in EBITDA will XXXX adjusted losses we

to turning Now our outlook.

credits, fiscal the exception employee to X.X year our we full of includes benefit which million EBITDA net adjusted loss, XX reiterate now guidance with new For the from retention the XXX the million, same XXXX restaurant and to XXX XX% XX% year million margin X%, and sales from of to to loss X million. adjusted store openings, of ranging EBITDA X% million revenue between restaurant XX level XX between

scalable massive a passionate brand supply to a we a taste, steps designed localized a durable positions following for making and taking valuable market to we leadership our highly with further capture us team category. as The opportunity competitive advantage Our will extend model. for and propelled loyal chain the combined us and are freshness allow build by

operator turn I'll to the that, to With start the back call Q&A.

Operator

Instructions] line JPMorgan. [Operator Your John you. Thank comes first the Ivankoe from of with question

is line open. Your

John Ivankoe

you in market or competitive is may of whether urban more XX who over compete go about some that the about better count as also that's how signs hoping talk you, you running define more landscape? I set about what thank I can minutes the you could urban few competitive into talking of that might And just extent 'XX about be lesser maybe and say evolving, point defined greater in you're might you at suburban as lack count, a and or whatever the your just the recovery, how Hi, be either competitive that as in you the new type to adjusting business ways worse May some we what suppose can talk was of into 'XX of thereof you. the model stores to this normal Thank spend expected be locations against. to or you elaborating kind areas on those different

Jonathan Neman

double came terms for back this first out and off We're volume really central district basis. day particularly Mondays thanks same Tuesday rate of to at John, are the on stores come a I level strongly starting today in through point range say in back we business in Thursday. the stores in and comp see growth a digit could Hi, four just, the kind fairly the quarter, a starting the time. And really come week question. of at it's to urban see the

in actually pretty stores. seeing what urban the we've with pleased So we're been

may been now. that a There seeing have talked independence, our frequency program, what New we're that kind loyalty really weekends right of drive as these pretty All capture York. on is we're around mainly call things has of to off bit and Friday number see to we we're pre-COVID. coming missed pleased boot large broadening a competition what markets on designed in little menu, compared lessening we earlier volume doing ways like In any channel, we from which our the catering we we and considered, with terms particularly actually of and the a see and

Operator

Your Chris of the Markets. Carril comes next Capital from RBC question line with

Your line open. is

Chris Carril

Jonathan, in prepared remarks. highlighted afternoon, and good Hi, you your in turnover throughput improvement

going think extent the these back see in a what positive labor do to improvement helped throughput to areas XQ? to you So forward Thanks. how in you traffic much and of improvements do flip And ongoing providing just efficiency tailwind here? in

Jonathan Neman

question. for thanks the Chris, Hey, Yes.

a been important as for to us speed over guests. important just always the I of huge past So it's throughput very our us has six service focus months. for something is mean,

and staffing to throttles our which able our we the urban growth. our our throttles digital to XX%, labor the lines. shared more environments focused in we're and means contributor was make make were increasing really our on on We lines, XX% we fleet both digital stat. And As better, increased a that by serving on gotten ability the cross serve people

and districts Mitch expansion of the urban, were As our was business strong part and mentioned, central specifically, that. throttle

valuable Secondly we have is we're which opening dining our lines traffic a as world into our much huge growth customers is are the rooms, start typically lines. more us for the for front and dining those as that encouraging seeing move expect in driver you'd on customers Front lines, up, with our ecosystem digital in for very focused front become rooms, very been us. that well, us

well. on and on the a throughputs big growth lines huge increasing front focus So as front on the our lines

So I do think there. there's more to

kitchen format line are we've details some throughput. shared before. stores, which faster We are seeing on optimized testing, been with formats played that in which We've different some our different

with seeing faster so this productivity. even we and throughputs better new are And stores as format, open we

our continue lines to both lines of speed continue So service. push the to on and to here, drive to digital front expected

Operator

line question William Sharon next comes with Your Blair. from the Zackfia of

Your line is open.

Sharon Zackfia

I good base Hi, afternoon. on wanted touch to pricing.

quarter. have how Can may you the if the of drivers commodity mentioned a you consumer that. reacted increase? in And you ongoing seeing you're think taken talk not I increase of earlier this kind price inflation? price sure kind increase to what of the price I'm about has that

Jonathan Neman

you just approximately at which beginning the We targeted thank a X% a the the a we beginning don't not the really increase really Sharon. quarter, of year. we was from very remainder of the price is took Well, in very select X%, found And of stores. took strong around at second customer handful for increases or price price the have really have of taken. we resistance the lot And actions we've of softness What from a year. and/ the plan

Mitch Reback

did. Sharon anything to taken our on just has this three took quarter, And we encouraged price rest of add so kind to relative if I the compared competition. we're know our few price past value competitors much the that industry what points we of years. could actually The the over

And continue feel opportunity value pretty big to so and us as a going about good we to relative be think grow. for our that's we

Operator

of Your with next Cowen. TD Andrew question from the Charles line comes

is open. line Your

Andrew Charles

Great. while high guidance the Mitch, Thank of revenue reported end end was low of of store which near saw near XQ sales same guidance. you, you X%, came the in

that to And about so with what store sales volumes? you're dichotomy, seeing speak think we new as you can

Mitch Reback

Andrew. you, thank Yes,

class Other volume. spoke happy have calls, about getting in longer which in we the little that's a say stores acceleration they've that little of seeing gone me gates, XXXX intimacy sales scale taken Let the them. bit and this certain markets we've I'm encouraged in term. The seen you're some kind as bit we're I and think playbook. And previous with change a of by small XXXX or where out class back we're very and very of

Operator

of line question next Stanley. the Morgan with Your Brian Harbour comes from

is line open. Your

Unidentified Analyst

onto Brian Harbour. Hey, great. Matt is This

hearty Can notable beyond impact? the the more part you to efforts make coming options. into You the this any maybe broaden Thanks. to the menu talk about changing? How's Who's And day guests brand? response recent salads, this?

Jonathan Neman

Yes.

and where are on with occasions a really are into a different about they So bringing meeting customers focused really customer broader driving this we've talked base broader menu for different Sweetgreen. while

sweet Greenway. crave this and of really So ability a idea

customers. And it of been It's a of top bowl know, for one us very but was top still As acquiring early, five lot received Chipotle five from other Pepper items, a well. our Chicken a launched you catalysts lot is menu perspective a launch really and ton we new of this we of enroute. brand Bowl top quarter. It's five our have buzz,

more pushing different hearty few launches and year, really that more a this into expect in making sort Sweetgreen So different a hot of desirable, parts throughout food, day consumers.

expect overall, the with encouraged more lot and work very So come. to menu a

Operator

comes Tower question of next Citi. from Your with the Jon line

is open. line Your

Unidentified Analyst

for a but to program? days, built [indiscernible] This Thanks. good seeing I your have same how maybe in explicitly know about you're thinking you on the guidance that afternoon. into kind Jon. of it's you a year? can store loyalty relaunch expected? relative Hey, the Karen speak is Your to contribution sale early from what you're And you for what

Jonathan Neman

Yes.

So But start it little I'll it Monday. It's off. pilot a last only been on Overall launched in bit. really since days nine was overall, [indiscernible] for encouraged. and

and expectations our of our exceeding key metrics. far, So all

Customers So it. loving free feel as paid well the very version, the excited both here. subscription about we as are

for. think something will come it's details with performing. this consumers having We think But program I I on was were asking that in loyalty a overall, more not environment, how back

and we're a out there And it it Sweetgreen excited way. so built to in have have very really uniquely be

is thing around levers built, we I would say it personalization Sweetpass. way gives a this of us So around lot one the

how we all actually increase a size the So marketing we our get fits of approach. promo can be and and spend frequency efficient without very in one

Mitch Reback

your have Just how in early commenting sales explicitly not our of guidance any for. upside into we built given on the question, program, second same the we store are part

Operator

Bank Griffin Katherine Your question of the with comes of from America. next line

line open. is Your

Katherine Griffin

you. thank Hi,

wanted the about just actually revised ask So guidance. I to

at range. EBITDA think the the adjusted I the fact given of came top that excluding the So QX credit, in

G&A well, able USDA you line have whether fees a cost control side, or the generally. you're seems place, drivers your it top on do number like to of are very low control know in just it's in You that, what's

the what's to very guidance of this sort environment. I point otherwise end what in embedded revised a like offsets, operating what of at are wondering of I'm low guess, be kind to so good the some range I'm And seems

Jonathan Neman

Katherine of thank loyalty we with menu 'XX, in the place. happy for really about We're the the question. you our program, items control. putting feel positive the We things very class were

development at bit really our environment What about think the the it's looking a was channel catering. I in what's little and very that confident next that concerned we're feel going control. what wondering of outside guidance, Some the And we the just end is and it's world the you But external at to through have go don't we if ask we about really deliver months. programs to as bottom of the us initiatives place. we nine

Operator

today's This concludes call. conference

You may disconnect. now

Sweetgreen (SG) 4 May 232023 Q1 Earnings call transcript