Sweetgreen (SG) 27 Jul 232023 Q2 Earnings call transcript

Good day, everyone, and welcome to the Sweetgreen Second Quarter 2023 Earnings Call. Today's call is being recorded. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions].

to Investor conference Relations. like Nounou, to now of Head would turn over the Rebecca I Please ahead. go

Thank you, and good afternoon, everyone.

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

we begin, we of reminders. have Before couple a

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

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

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

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

With it's off. Jonathan things to my over turn pleasure kick call that, the to to

good and you, Thank Rebecca, afternoon, everyone.

these that customers. addressable create before times growth brands, profitability. to balancing and businesses for I shared be great believe have markets companies with I've Great opportunities loyal like large and and companies,

restaurant margin we words profit million. action revenue into a $X.X quarter, delivering generating EBITDA our second put year-over-year the XX.X% level and of In growth, of adjusted XX%

I team delivering and their extend gratitude in as work these Our efficient commitment company. disciplined This to first public dedication results. milestone my a growth. our EBITDA Sweetgreen to hard member adjusted every positive demonstrates capital to for quarter of want

revenue of year-over-year million, of We X%. growth and reported XX% same-store sales growth second representing quarter $XXX.X

mix. those coming with driven our own increase from two-thirds an of digital channels. represented digital partial with traffic, a was price sales offset approximately sales of QX same-store in revenue, and Total growth from sales Our by XX% our

XX.X% second identify work execution We was in This as result the as continue of the a day operations. to deployment in to our chain to cross-functional labor improvements sourcing, operational supply range better which we quarters. wide improve of optimization. quarter process focus strong margin includes continuing every well and our into level see Restaurant of future

compared We to committed year. revenue relative remain growth opportunities in and We performance additional prior restaurant that reduction a when absolute a enhance balance discipline level and margins. the to focus on restaurant both our to identifying with cost profit yielded expenses G&A strong

million million quarter second G&A $XX.X or expense Our ago. down is the million $XX.X $XX.X year XX% a from

allocation We leverage as to gain our sharpen each flow operating of dollar continue through framework revenue we the we of generate. to increase incremental

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

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

quarter, on the restaurants. update total of quarter Now we priorities. ending restaurants a XX of an with each second provide me let these new opened In the XXX

quarter Antonio, additional restaurants, our we Cranston, opened quarter, Orange the including Since our and Island seven an Milwaukee the we've opened ended, and first restaurants Texas. During Rhode restaurants in first in San County.

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

May throughput, we've performance the in making consistent customer touch. We've innovator and the been XX, how latest seen we enhanced our in faster Infinite sweet first the and restaurant call launching team more Illinois, the experience a the more of pleased while production line with jobs automated and all always easier a industry, is Sweetgreen dynamic. the of on it's members' launch been and significant Naperville, has Kitchen Sweetgreen the example. our Since

the represented first June month full of operation.

Kitchen several model. our Infinite the significant early, has While to demonstrated benefits operating

First, has a we XXX Today, make throughput. restaurant's line [ph] the digital plates, between and in front saw size XXX more bowls, faster combined. capability Sweetgreen significantly produce than narrowed to Kitchen Infinite the and XX%

and when Second, service our to on consistent will this Infinite customers with in-store five that top it's the and contributing it get is the in We of they Kitchen's they line. order us meal; know better experience. believe speed their minutes portioning tell performance both a consistency Customers under accuracy. bottom and over

less in Another more congestion to noticeably restaurant, faster spend benefit throughput members team allowing time the with is customers. of

been with members. members turnover. Third, it volume, hire and easier team a retain new restaurant similar hired We has Naperville typical fewer to team than has experienced less one-third considerably and

June this in Naperville XX% higher quarterly, first level any restaurant its disclose restaurant metric in While margin we to than do the not was opening new month. significantly plan for

additional the significantly continues margin. to ramp, improve we the to As opportunities restaurant see

second in end Huntington be this California. expect Kitchen of will our Beach, year We Infinite live the at

optimistic are as into pipeline. format the Infinite of our We integrate about Kitchen future we the this

experiences. unit in will customers steadily time, program we on Over and our of end growing brand We impact loyalty that launched a our membership through economics. to have the our incrementality. driving moments that digital significant continue Sweetpass connect at believe is April with and Sweetpass

us. to developing for creating We channels, also moments strength our see brand continue more in

Our catering doubled than BXB quarter. channel, the in more and outposts second consisting year-over-year of

new incremental provide to opportunities continue significant orders channels because We invest in customers. they from and existing these for

food. to craveable with are fresh, and menu evolving always, committed our delicious, healthy, As we

our Our and and to occasions. loyal day guests, additional menu parts attract drive customers, strives strategy new engage

teriyaki backed On of Tuesday, June barbecue early on twist Peach summer salad, the popular chicken also teriyaki adding bowl, as tahini. as our XX, the flavor demand, we a + by includes starring early summer creamy by menu menu nutty the favorite Salad with released Goat Cheese chicken addition a well fan the our

and barbecue refined no barbecue teamed we barbecue time sugar So Sweetgreen McKenna or two up our preservatives. barbecue contains sauce world Charlie salad, champion sauce chicken style, the in true with our

the success Bowl, menu to our Pepper Following our add order are to our we the heartier Chicken strategy to continuing offering. + in flavorful broaden Chipotle options of

to drinks incredibly customer happy some and launching and desserts year. are additional with our reception this have We new products later

by foundational creating to Running thrive. customers is continue day several we months parts, months. the over experiences margin for past have efficient in focus have evolving restaurants The warm and our our be making changes improvement. element for made more we members. new our is This some to As restaurants, on evidenced menu great both in our the winter launching resulted business time items team great the we'll

regional field of At the customers, and reduce to support general new model the related more introduced empowerment structure at with manager operating a the level, expenses beginning our to to restaurant center get our oversight. create year, teams our we closer

Subsequently, in and to our our engaging the spring, coaching with on our head we customers. time spend teams coaches more empowered the floor

show Our and retention across improvement improve lower turnover, XX-day frontline KPIs metrics. throughput, continue to

first As a in result, improvement we've the seen a XXX quarter. basis labor point from

their continue development benefits, and attractive value clear which to skills careers. includes advance foster offer and to proposition, We a a employee lifelong training wages path and to great

launch our turn trial By a will of we a of across in tipping In experience. the California improve starting and customer restaurants. team Northern and we'll believe overall we which few digital across end the in-store turnover weeks, member tipping the will fleet, be create our year, better

around Sweetgreen category very continuous the on is to challenge. the relentlessly quickly, When and food, at the of journey. at while customers to remain forefront focused us strength. a improvement, growth are fast changed world exceptional beginning leader our rose only redefining the we all ongoing to delivering service operational we drive our of We

by the EBITDA was aim treat profitability a Sweetgreen the we we food. the As as and our build My Co-Founders to our we're dollar connecting people real and quarter collectively to mission as every on of we largest we move seminal shareholder delivered what adjusted continue healthier though I forward, building further of company, own. remain for we to in communities

These our this I'm approach of members and crucial team results today been paying in delivered. we off. our the and not disciplined proud would investments and Our our our strategy, to center. possible been team approach dedicated and the we has restaurants toward results talented incredibly in see support without have

I'll walk quarter's it to the financials to over through Now, Mitch in turn further detail.

Thank you, and Jonathan, everyone. afternoon, good

attributable was second mix. from in delivery. Same-store from sales channel million, in $XXX.X in $XXX.X quarter frontline of mix a traffic, in largely consisted the made up Total price, of quarter second the XX% by The growing well as X% Sweetpass revenue million early of is This X% the grew native for and pickup as X% the movement investments year-over-year. to into offset XXXX, offset X%. increase

was $X.X quarter volume average in Our second the unit million.

second $XX.X million an million. second an EBITDA of from million In $X.X adjusted on basis of the we delivered of $X.X quarter quarter, the improvement XXXX loss profit

the second guidance quarter net a year. XXXX. was Our XX adjusted bottom remain increase to of restaurants restaurants with the half new this $XX $XX.X least net XX% achieve in to total of to of EBITDA, on flow We XX for of million XX XX in at million new quarter first quarter a significant ended XXX through our restaurants line. driver this increase We We track opened of revenue year-over-year the a restaurants. new the

a from the ago. the quarter second a with margin for year of was second margin old. XX% XX.X% our under point million, million up profit We was the quarter $X.X quarter fleet basis in two second XXXX. profit level level delivered Restaurant Restaurant years $XX.X XXX from improvement of XX.X%,

figures, For a margin the GAAP earnings comparable reconciliation to restaurant please of refer level to release.

of quarter improvement and packaging Food, basis QX. costs the and beverage, since showing with quarter, points second XXX for approximately revenue of XXXX, sequential consistent are the of XX%

revenue QX. and quarter XXX improvement head points to optimization the is of basis the in XX% coach points schedule sequential implemented the were This in comparable we showing XXX second since costs basis period from attributable XXXX, primarily related and spring. Labor improvement for down of

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

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

were of the revenue with and quarter XXXX. consistent X% related second Occupancy expenses of

in quarter $XX.X year a spend to the $X.X decrease due of a was decrease administrative expenses reduction general the million administrative compared million stock-based $XX.X as the primarily XX% for second center. as across XX% in an revenue and and as expense support expense, million General prior or in in XXXX to compensation or The of well of revenue period.

During the X% G&A XXXX. the stock-based quarter, comp second lower second expense quarter than of our was excluding

Support was million a in Sweetgreen income, were The increase for is due a million non-cash Our quarter increase to decreases $XX.X former the in These by restructuring improvement in interest discussed. a $X.X and million well million, of restaurant loss level additional profit, Center as to period. our previously loss associated associated in an net expense $X.X compared the net with primarily in year G&A decrease and a million prior in amortization $XX.X loss in depreciation offset as with increase restaurants. charge as a partially our $XX.X

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

be we a Last remain year in these profitable pursuit basis, would commitment on in relentless very goals. breakeven XXXX close We we basis. made full-year achieve on to adjusted an year, XXXX adjusted in a be EBITDA to a that and EBITDA

million, year-over-year. last the $XX.X We and $X.X year, is of loss at cash of through quarter the a positive over $XX.X balance second flow time cash during loss quarter. to generated $XXX million a a Halfway the with of adjusted ended just improvement compared million our operating year million, EBITDA this a

revenue adjusted $XXX our of XX level X%, adjusted quarter same-store a XXXX restaurant now EBITDA light million $XXX million between restaurant openings, level between XX% margin an new reflects higher $XX a loss. from and our second net XX million, to In zero. and loss results, and margins sales guidance growth EBITDA between XX%, restaurant and fiscal lower X% to ranging and

find to pathways for are and search in see margin We in unrelenting G&A. efficiencies expansion further our

focused keenly and growth flow a company continuing We both profitable becoming revenue cash on positive. to are high be and

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

Thank you. [Operator Instructions].

William We'll Blair. Sharon take our Zackfia with first question from

to looks your also in Naperville, think development to runway Hi, you more you more how having if impressive. were and need to plans have? just in out extend and to the adjust based good for costs the it the the you then you margins ROI on I Infinite order that there, look I because about I'm as those curious you assuming expect kitchens, kind so level touch they warrants development how of how on of afternoon. kind rolling restaurant to do pretty build, want assume of the cost kind been Kitchen it cost or of

from you're hear glad Kitchen and Infinite out I'm Sharon, check good person. in to you able to the

is, we're I'd what really seeing. so with we're pleased So the we're say -- far, results

in the of the and customers. As really -- and foremost, the about first lot we're from scratch theater on delivering positive of the the prepared I and the I on everything accuracy. mentioned food, hospitality, speed the really remarks, experience a of We're getting cooking, feedback to showing the excited portioning service, the think

So experience in the customer challenges restaurant of does a solve exist lot that industry.

point think a huge And for that that was proof I so it.

on capital. financial of also gain we in expansion terms overall returns improving and an course, have to our margin Of expect economic it

around how to but they much an investment, where believe will given know will anywhere we -- the on return incremental not the guiding yes, see results. return of put only We're incremental deploying deliver these but we early today cost, them. we To they capital your them that expect machines an will which we an accretive see do actually have we on actually capital, we point, accretive course, be

what as ramping we reminder, period. was saw restaurants, a a it Naperville, expect most just month, first in just in we And our expect you'd

margin its north of it So stabilized was we expect in be to first do the where month.

Bank our Griffin Katherine take next America. from We'll question with of

of in you. you Hi, saw quarter. could in That thanks taking quarter, to sort terms Jon, question. the second monthly if cadence or speak either hoping Thank I of would trends what the was traffic in you the for helpful. be the just Mitch

during second really Hey quarter. somewhat Katherine, just quarter observation. back we picked an third as it up fleet slowdown thank more saw and saw consistent We What during be into the consistent weekend, X you came for the question. July quarter, the the across a were the we make to traffic patterns the then I'll with

John from And our take next we'll JPMorgan. question Ivankoe with

partially you. within In was that hoping the means kind bringing leaning of mentioned to thank terms you're that distribution, could supply improvement some was physical that you're of sourcing. are that we a you products little how or to if margin more your some each embarking I just of I I in I elaborate some to think efficient allocating the you're supply store make them mean, handling or topic specifically run? to prepared suppliers on on and least consolidating is second more at potentially bit remarks, Hi, just in quarter what down you in you're in considering on costs fact broadly. the how into wrote chain due how currently and chain that store using duplicating your of terms value-added some easier

much pretty it pretty hit you John, -- accurately.

-- supply savings. saw and combination the leverage margin we COGS So so labor of that the was a

and economies as labor. chain actually On mentioned, contract able as, helps your it side, the we you to scales of the well lock lot content -- around help COG to really was supply it of that a as were COGS, upstreaming, in it upstreaming due doesn't sourcing your pricing

spend restaurant. more a a on bringing run the to easier things labor inside actually of higher different bit certain the the in You a is to way restaurants. load reduce balance But margin, little

It well so. of consolidation So doing as was quality logistics in food any we the not do the of of reduce certain distribution as pricing. just more contract

prepared continue. huge expect the on we shout remarks, savings on procurement mentioned our we to chain quarter. just delivering do so team these an And awesome And to -- and supply out as the

more what may specific you an forward, of like going into put big And a the already bit might how elaborate and you've upstreaming, what opportunity see stores be? maybe could on that you little

Yes, absolutely.

ourselves our know, you as on model. scratch Sweetgreen As cooking sourcing really prides our as well

labor However, taking do simplify the can we them. that certain think restaurants upstreaming consistency the see opportunities and we we by and inside to improve quality model items

doing number years we've example. as in we're a year the -- what dressings. in So of this you've our doing, is begun doing like seen Parmesan Crisps past What things an upstreaming

But so stores. our -- our dressings, do in same-store, number come in long to don't to broaden that ones to need We the you that flavor want it, took have the fresh really what out. a number herbs restaurants that we us a have ones of are quality, the want that to that same we want of the a -- not don't still It's any it of do them. of have are but upstream, with use do now that fresh ones removes quality ability the in herbs the we the do all not -- we So still ingredients. restaurants, but to dressings same because think

very food before, what As talked ethos. touch our around we've careful about we're on we

very And We're about careful things. quality us what things about change we -- know so we test what what we this that love we because bring. is the people

And we will expect time. carefully do them do over things, we to but very more do so

next our Markets. from with RBC Carril Chris question take We'll Capital

taking Hi, thanks question. the for

can going respect So here? Thanks. with walk guidance just there's I year? forward, the think your the here But a on level you bit balance us the maybe good the and through inflation some including how margin and more you we to puts updated of typically should bit cost margins. expand the restaurant restaurant could of and takes outlook maybe about know for a of top-line the around margins margins seasonality here from

for the question. Hey thank you Chris,

to little sourcing. of cost made rest from of in increased the through in year. the and the goods about saw the saw reflective becoming in quarter second That of talked throughout And a current changes labor of the XX%. the in bit permanent XX% in Jon actions you margin the we was our to some really guidance, As we XX% restaurant level XX%

in What very, back no trends continue second out seeing factors through in was we're to and And into very expect the on in inflation the of we the see much little that the sustained both in in improvement future. to commodities half year. these being that essentially and quarter inflation we are margin, the of the Those really led the to largely labor.

from with Tower Citi. We'll next question take our Jon

Karen this evening. on Hey, it's actually for Jon

a where the think in of we're of like Sweetpass mix your maybe giving or in bit was little frequency about at the a point, of second or like at sounds it seeing price coming least terms dynamics net-net I comp comment So quarter the quarter, the not into full new brand. benefit potential the increases discount of but in the net headwind even people the

could So becomes it the underlying else of of sales membership, of those terms percent frame dynamics like of anything of when there's on you the accretive at are, think point kind scope this and comment you kind to or that? in if what help anything program

Yes, absolutely.

got Sweetpass parts pretty So launch three a of we you've it of ago line discount and of the about launched the was the terms of the kind really in about of the lot around right, and launch program. months launch was the early cost there

program, pretty that the group. the the low that pleased the success both seeing users a parts joining Sweetpass We with really piece, are really Sweetpass Plus healthy seeing really on incrementality mix of we're out program and early of on seeing specifically the Sweetpass frequency are healthy the Plus of on and and piece the membership

given thing bit time to of a launched we digital was fact launch it's build in the I'd And a Sweetpass What it launched a and the takes that program it to we only a say base. first we be is is build the -- was pilot some was as ways the we today. when while that program last to going launches membership guided

fastest the the customers in in-store stores program, accretive channel the super our So restaurants, -- to to few today unlocking and to we use Really consider our not of of it think which redeem our channel months is new if the does be next -- most growing in business the right going be the we fact value Sweetpass and report work earn of both in-store. to happy doesn't now our through and biggest all that start. you will is come in functionality especially of our that through ability terms Sweetpass

a guests we customers new frequency if to really think and frequency of is hold lower channel well that in-store acquire about as So drive as unlock our important. Sweetpass as

we our So have little look we forward on launched to belts. and time the set once have feature under full bit sharing more more a that

We'll take Charles our next question Andrew with TD Cowen. from

an was what XX Great. appreciate earlier relative but And to you of margin of separate margins restaurant's XX, normal understand first questions. could I store then Thank month all question, a I'm once development new of Kitchen, guidance details what's guidance, inefficiencies the be you. operation? Two during Mitch, the opened following-up aside. my second normalized question on and inefficiencies to better level IK year-to-date level Infinite to just around trying XX. on guys from just have for just

of just kind in Just it's with curious unless the development, so usually XXXX it's dynamic that changing conservatism. what's XQA

on Thank month assume on they're new be would it to safe you, questions. typically given but Andrew company below margin really the really that for average. the stores, our never We've first

but a considerably the store's below Naperville Naperville well a would first compare differently XX% operation. any So to really than quarter number month for higher number that's and the a was that in be XX,

on guide we're it. a degree with sticking of XX you was development is The The our new had of there second restaurants. question conservatism and net XX was to whether that in

very We of as pleased we're the of with our restaurants fast XXXX. can trying are we best and class to open the as results

Brian with And our question next we'll Mullan take Sandler. from Piper

Hey, thanks.

it longer year, more the that broadly? if or or you're could of around functions Naperville new think how the it think you part I be it? could that than bit on the more of just investors you the take at there as next it's just before that deployed point a store want like that you'd -- be deploy broadly trying material cost want Infinite Kitchen. Really is just fixed willing do it a be it to before see where whether understand you'd in unit early or follow-up pipeline to anything improved deploying to to Just as

I'd pleased. really we're overall say

lot time. As for I we very a a order in order of what mentioned itself running both the with understanding been -- in that technology are really second a confidence the see in previous lab long had first as setting calls, experience we've that we were of A and experience. were was lot improvements the what very we'd we overall within it and

pipeline we unit just to XXXX I'd about second more But see open, say be for It's feel is to today, -- at months what the how of how only as being we'd really customers to members couple so for can be we're how do feel a about of looking time. year. deploy been more expect it, it of bit like development we team a best it, a will time we little we and -- mentioned, and to opening end continue part our it. you this in how

participation may disconnect. you today's Thank conclude now you and does your for that presentation. And