Sweetgreen (SG) 2 Nov 232023 Q3 Earnings call transcript

Good afternoon. My name is Jeannie, and I will be your conference operator today. At this time, I would like to welcome everyone to Sweetgreen, Inc. Q3 2023 Earnings Call. All lines have been background noise. there a remarks, session. speakers the will question-and-answer be After [Operator Instructions]Thank you. of Head may Investor begin Nounou, your you Relations, Rebecca conference.

Thank you, and good afternoon, everyone.

today Mitch Officer.Before me Executive a with are Co-Founder reminders. Neman, Here and couple Officer; of and begin, Reback, we Financial Chief we have Jonathan Chief

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

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

accordance for review on afternoon's of update about the section filed information will U.S. that, of a can to we filing non-GAAP XX-Q. some available statements financial based no performance certain to Form Jonathan including and to in found risks, please These to and on statements.Additionally, SEC more we revise the and are GAAP discussing company's not over assume obligation For call on in titled our GAAP. or IR kick our my these measures, off. on things turn addition release filings, it's financial measures forward-looking this pleasure the latest in nearest be of in Form be subsequently Factors our as Risk information items report to to today, publicly forward-looking Annual are quarterly with Report XX-K A substitute press measure which website.With prepared the these reconciliation of

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throughput, we've focusing as on We as the peak tremendous on where well will at front deployment line reexamining growth periods. seen labor be

to the investing experience.Our been the remain attract. hospitality of we are high expense restaurants speed caliber that talent at and does come able with we've in customer staffed, of great training, a fully pleased we not Additionally, are so

small.In member and consecutive year, As and we of customer and to big decline quarter over through improve seen both third experience, significantly improve member XX% ways our experience find restaurant XX team over XXth the we team to continue our the expanded margins we've the work year-over-year. quarter, we'll the our sales delivered start from to growth, of level and points initiatives, both turnover

continue to Our raise to bar. goal from the here is

mentioned an at I the in of the have things beginning great face the we unprecedented I environment. As believe call, of achieved

become that We scale. have obvious as used this should business, we ways in a more time better to build

to innovation is the just have brand known We what Kitchens me new amount And of excited X gets options turn ahead.Now you company.The and the when walk financials over the and the our through massive shareholder Infinite mission-driven in powerful we coupled potential in I'll to the with have have to unlock in company made are today, quality that seeing from examples, category-defining, menu the further for significant transparency. value operations, to it detail. our a are years the Mitch, quarter's significant improvements

QX consisted year-over-year. good growing and negative afternoon, X%. traffic, of XX% last million, was pickup native largely to the delivery. into call, Jonathan, digital you, X% the coming Same-store offset up offset revenue frontline mix our sales third from with and our Total XXXX, the represented of be in Total everyone. approximately Thank $XXX from third the price, the quarter to million by attributable grew digital continues $XXX.X sales movement those of owned XX% for revenue, on channel This shared sales in from of X% X/X mix.As channels. quarter flat

volume million.In adjusted we average third $X.X basis, $X.X Our million unit third EBITDA $X.X an quarter delivered an million. the $X.X in on the profit quarter, third loss improvement quarter of XXXX was of million from the of

The our a fourth our projected million point of performing to new a total hit net line in financial of pre-pandemic are of of and revenue over line for should a AUV XXXX of new AUV third of the of restaurants. from meet year XX%, tracking I in to X for million XXX $X from year in up third planned markets new restaurants X. on We $XX are significant Our Island; increase have was restaurants basis our target third third such in XXXX. XXX Tampa, a to are as driver this XX% improvement. ago. of openings and was margin a million fiscal guidance level targets. X to class opened million, now based we've Currently, year quarter with underwritten ramp. is we The year-to-date, of XXXX for Cranston, to this of the million Milwaukee, continues point top it's end in This new this achieve quarter quarter the XX goal.The nearly XXXX opened class reminder, out XX year to was class year XX X quarter $X.X quarter for $XX.X year-over-year improvement track Rhode restaurants. this new quarter Restaurant of Florida.Restaurant-level class Wisconsin year, restaurants.As restaurants profit the net a target $X the meet

due we to improvement For comparable beverage XXXX. This the we basis period revenue attributable a refer the and in for were price are earnings of both the third third This to the quarter, basis down a coach margin of points comparable of chicken and optimization improvement was restaurants from a restaurant-level XXX are from staffed, able XXXX. pleased reconciliation head please increases, implemented costs quarter of attract. figures, menu to the revenue Labor-related decrease spring.Our release.Food, packaging the costs of quarter, for GAAP primarily XXX and to in costs. XX% improvement primarily XX% talent in with fully are the to and fish is schedule point we remain quality

revenue period.The third $X administrative decrease expense was stock-based revenue, of was in we've wage were the General prior easing year Occupancy due the revenue compared a of of related pressures. Additionally, seen the of XXXX. third million general and million quarter X% an compensation. expenses XX% administrative in decrease consistent to XX% with expense million of primarily or and XXXX, quarter for generally of or with as in $XX and $XX

and $XX financial restaurant margins $X holiday XX.X% light reflects which quarter Thanksgiving, X weeks. extremely The million Year's, the million.This second the million described level in $X.X quarter and G&A improvement and loss cash contains administrative million million positive between we've X%; generated XXX prior charges, million New in we in guidance a to level calculation.I of previously.We is fiscal improvement with decrease stock-based with to excludes points for loss certain income, in revenue between to to and due million, increase EBITDA year increase third in $X.X and the the turning of restructuring a same flow, week, of related versus Spyce, XX accounting finishing down a previously in compensation net over between of These basis as $XXX stock-based XX compared This from margins same-store and million G&A, in $XX interest balance was which quarter an strengthening a the same-store XXrd We in from weeks period. fair In volume and million our loss general restaurant low in in as to period $X the operating $X million to fourth $XX primarily adjusted as in acquisition pre-IPO-related quarter. was reduction our in XX.X%; million million due be model. a associated as by and our and profit openings, for XXXX. anticipate impairment were and the points. $X guidance; significant our a expect was of a treatment net XXXX growth XXXX compensation decreases XXXX, related X% decrease sales revenue partially decreased a range, ended XXXX the amortization, restaurant level restaurant as are offset loss and excluded period. EBITDA, pleased for mid-$XX increase as which for $XX a expenses quarter the fourth new year in XXXX.Now year, value primarily is and from restaurants.Adjusted primarily $XXX prior also mid-teens to additional improvement with our consideration, non-cash Christmas grants.Our million $X.X million; to of an The is million Year-to-date, in decrease expenses loss increase quarter and X million we've percent contingent the expenses a million declining The of with in in other other our well to $XX million $XX the $XX net compared adjustments, range of grew sales an progress ranging $XXX discussed. depreciation in change our cash level the $X million to year am made the of profit, in increase restaurant

As EBITDA loss result, less our adjusted million than year-to-date. a is $X

the back generated start sweeping flow.We in whitespace.With positive meaningful cash capture of call generating positive the to reinvest company, flow adjusted the are ability and business into Additionally, for more the to flywheel a goal million cash operating to full This we've the operator milestone turn be that, the I'll unlocking on set of basis reach XXXX. will our to $XX to Q&A. a EBITDA year

question Mullan with line [Operator Instructions] Piper the of Your Sandler. from Brian comes first

for partner on gave. the Infinite sounds like of that Just If Kitchen. a question be And goes well? time maybe mix plan just XX Kitchens or going at well, those have the will development guidance over in you in Infinite are to would open might be to And you XXXX? increase any year next next the would About midpoint, It of able X/X the year. your terms XX you're to restaurants so, manufacturing if deliver? of reaccelerate what as openings to expect the there constraints

Hey Brian, question. for thanks the

reason better The into to slight is the the Kitchen for correct. integrate slowdown Infinite you're technology pipeline. the So

the and we a go deploy and don't wanted expect Infinite that, greater have XXXX in in integrate to comments, in to have do base the as and of speed and pipeline. the off Kitchens Kitchen we of XXXX share success in begin that of retrofits.We to the back hope in half up deployment, so of year based mentioned do we will many Infinite of development the we pipeline, As to to the the back the better

those million to the million units And $X.X just way and maybe just X give a XX% you to to store, AUV restaurant what those margin? I targeting next share what margin then compare of great. That's an XX% an it or Kitchen and Infinite $X AUV for X for might related, to what sense unit you're and for a X for that you And maybe cost Okay. range... believe is a follow-up, just could any X traditional units on perhaps a year, initial level per could first a to as

really pleased, I in. well. just more less able our X see tell with customer cleanliness, we're love to experience, We first And restaurant.As They seeing margin people love so the the bring we you. the hospitality course, it and and results foremost, guided and get experience They lot seeing. we pleased leverage of the a is far, lower members love We've we're in we're So the all as We're we've with speed. see team significantly a customers, really enjoyable we're here's It's love the turnover. of what to feedback that can experience unit work before, it. opened labor.

the to about we're going the number And margin margin Naperville quarter, I return will to leverage that quarter. to significant accretive on so our Infinite we Kitchen say a is We're exact deployment report on well.While going cost, talk last as gave it on not every of capital. not the but be what can the

with the expect whatever gains a incremental So phase. where still unit.In the we capital in terms going the leverage very on from on cost accretive to and we're be, what will learning much be will we're return in that a the labor them, of classic

while So first in trying Huntington second -- suburban opened we opening we're we -- we're opening a one, Beach. here restaurant, one to a the

pipeline of of we bunch trying next we're at As restaurants. different look year, types the for a

market an deployments, a real how suburban it with goes, that couple a that estate. seeing whether really understanding deployments, new a how of of types be in Kitchen different and Infinite of opening works urban other So couple

does have know so future.Obviously, better higher volumes it us. higher like into with where slightly target it the to Infinite it we So the we Kitchen would go generally that with we in for volumes, stores

your I all there. covered of questions I think

from Your the of question comes Brian line with Oppenheimer. Bittner next

insert dynamic perhaps popular, pretty but successful relates been big opportunity? on what I help existing maybe even given Infinite Kitchens maybe to question. units? Just even Infinite unit dynamic been only your opportunity understand or in new a early able it's a as know unit. pipeline, opportunities there's are this the follow-up us longer-term legacy to in how you it's into though one being think on, restrictions to I Can retrofit mean the Kitchen the it main just is that I

you Thank the question, for Brian.

remarks, on to a X new few a We different from mentioned do in store. a we We're things we're that's prepared retrofit looking that I and to we're see next be learn retro opportunity, huge as looking think planning a year. again learn. So something to the will X retrofits

what throughput does so Infinite that in our before, max bowls hour, the we XXX to can restaurant? do Specifically, AUV As fast that do really production. about Kitchens mentioned per

so in a to And leverage, a really high of margin high-demand course, we has want understand that capture you store better think more store, not only put we we and consistent those really get about experience. demand. in but like CBD demand Can a peak high have, restaurants, could the

will up down modular can -- of see be the what restaurants or also linear, on to we to layout, thinking of modular, we'll it's a have. components in eventually be with scale want a do us still of year.In go the we're and technologies, in lot I So just it, for can that's lot of square can retrofit quite retrofitted. of the flexibility learnings machine terms and both where costs The next terms way learnings be terms with of can depending the to be be it that caveat, lot about is AUV.So

Infinite of down, us.And scale cost interesting we'll to to still last continue as the next provide what's lot to on go as more learn. happy We about about, I'll have scale, is, a more will And down, started Kitchen start year, learnings say, we of one the thing that we Infinite we'll think really we've to for a those I Kitchen but scale to see see we're and already the economies lot that. the start

we've as inflationary. the is side, On flip seen labor all

cost have down. cost X significantly side, curves So will one, going; the while the labor on the we technology inflationary of come

for this over we -- can see become wage increases around powerful as So tool really very significant country. the us, especially a time,

is couple hundred into drivers have dynamic labor little but wage increases, a quarter, you off? line, Is of this getting you know maybe the understand you're but stores is seen -- the that on the third of unpack on to the new the one pulling basis I drivers much of that, anything you leverage quarter, built just you've operations, you're of with points there but very there. better how know on help the a labor on else are dive deeper the to year-over-year us slightly tighter line? leverage labor? getting that And can some there touched doing this positive some of you're better I

Absolutely.

as business is ]. all know, you So seconds and [ cents our about

So all the have. levers we've towards been really working pulling we

In around been gains the better have it. labor the terms specifically, of deploying

having it working consistent on of with the of the Some been has industry. coaches our head more time the rest floor,

deployment turnover turnover down continue XX teams on is improve, been in to mentioned more the significant also And a points.So and seen to getting indicator it's we seen labor increase team a biggest more Although come tighter with pretty and coach our our we've we've [indiscernible] expect head stability. tenured. are models, call, as productivity stable that I on the

our get not productive, a that time of touch only we to lot more Sweetgreen, invest as our at And a part providing a more huge better our provide we customers. experience, our they're more teams culture. in So It's training, teams, experience. in do but what our to in enrolled, profitable a in

strong So stable teams gains the a just really coach coach better strong head And and we really leadership been -- expect performance. have to just and continue. lot head of that more

results. the stabilization.And I'll really thing we've market, that lot this seen As COVID on seen introduced the a positive you noise and say brought we then is labor some around the of quarter, now last tipping know, and we've

turnover it, loving continue to to bring another members that Our see we to and team are start as accelerant down.

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

dayparts about market has on Khadijah here. around specific menu into, to current your your the about relates question brand is share when it and This first priorities the different Chris the dayparts? just can innovation, talk at lean is, you thinking opportunities for My to as

Sure.

we the things biggest So plate. last launched in long a we've been we've protein time, years, what the launch exciting done in one had most with menu has Tuesday of

the that salad a love to marketing So the it, as we person be person.And there is people goal a you the which tagline, not but a eat call, mentioned to it's to want be I delicious to I category. the consumer. have tagline have a don't all with food, the may Sweetgreen is that new on things. salad healthy, a want many few the craveable to time. One There's real, eat broaden is

with And which on kids meals. So It about vote that capture cases, it us veto broader about consumer. does really that, help our the removes the that is this today. fact dinner well.We've of XX% we're many to in our business starts really really dinner driving, as talked on focused

So growing actually protein of exceeded been it. that plates. expected. we markets, really at But and days, really what the can should dinner opportunity the accretive to in People that and balancing our and One, product over-indexed the It's in be launch level unit huge share but just early has mix the -- economics.What we're from X that is, share phenomenal. we Southeastern by seeing some has really guests doubling been see craveable. only it's by out, I of a our really expectations, it and encouraged feedback are our loving delicious almost

receptivity to the certain and category. strong the it beginning like really building just seeing out is this we're last thing markets on of I'll is So Southeast, Texas this say it.The

X launched week. protein we plates last So

to continue quarters us of years expect over build to could on top coming this. You and the

TAM proteins us really And think will build and options, unique other to time, dinner about over on the increase I broadening see that different us the plates it. win protein the helping of company. really helping consumer, So base

Any more next for bit you're the non-loyalty And spend on versus Sweetpass? one be can regarding customers thinking around about would you base? the Sweetpass next great? detail frequency how a or user And expand is, Great. me steps the

Absolutely.

So mentioned, just we We launched focused It's tiers, the months tier. Sweetpass both launch. been launched, in the the Sweetpass enrollment tier, in and ability free We've earlier very this use stores. on I tier approximately the been membership paid X both year. to since as

month in for about ago, so large targets just really is, learn starting most perspective an you we're expect to beat us.So Sweetpass, a and history weeks points nice the a say and few earn can important to first which lot was we So in out rewards restaurants, it program, can Sweetpass, do. internal use could our on a starting now I scan we is and -- more are the it very to enrollment a channel what of a it can use it. from some for What digital-only store, you seeing about of loyalty for incrementality of

comp leverage minor believe and However, high different that.So the us, lot was forward optimize of journeys, see leverage the incrementality to for list. very for drivers, I us on the we CRM continuing how Sweetpass a opportunity around focused of customer and as more comp to drivers do the we to there's and the make tweaks XXXX look out to

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

we more headwinds you that sentiment First, to can I it a And what forward, and ethos on it that's discounting. think that? increase just if of discounting quarter just I to seeing response going about Is is customer terms the acquisition a with the I'm And terms why little seeing of of in about quarter-to-date what speak maybe component with more the a about right if ask or this bit to mix of loyalty? now, in in should sort bit sort customer from think you're discounting? trends? just of little you're wanted sort curious

Hi Katherine, it's Mitch.

line in say of of what showing we're of read, kind and that watching change we our the future. concern on sentiment, really think real although very some I would are customer closely in with we degree is kind everything no seeing we

quarter, Plus, the Sweetpass of more due the Our by increased the to than company. largely discounting launch discounting in up slightly is

Okay.

loyalty? you the start question So plan sort for mean, of loyalty And return guess before I of you yes, see is, how do to we should the in how extent sort that think think of incorporate you expectations then I the I guess, terms to discounting? what program, to just your that iterating kind of as headwind about exists, about on long

I a don't need time, say, point in Sweetpass would discounting we Plus. this No. for to at see increase

Curtis Your line next Matt William the from of comes Blair. with question

was mean comps I what the to had is understand early driver an discussion, Sweetpass say? of follow to the the just be -- I up going I it on it's if future. important you impact to you or But Just in for about so comps impact has on too talk what Sweetpass far, wondering could

marginal so say very I'd far.

into As I we it. as mentioned earlier, ], acquisition [ and period, leveraging And enrollment we're very membership that base much in period. the an we'll more of build move investment

in to pleased things And a some not and do -- do changes, optimizations comp in we start, terms huge ahead there's we're a upfront.So on journey that happy do think enrollment said, focus drive in minor for terms we the But driving frequency there's you pretty overall, So can underlying expect far. works. will see that with guests. with a less better framework, work some make of to years some to the and how the of this like CRM, big can and us probably of has been leverage us thus the be I huge on for driver think few minor I how but a the impact it's

it. were Got Can more It just pretty just looks on than OpEx other significantly, expecting. one other that? Okay. like least was what you question quarter. we the describe at And drove then restaurants

Can you again? say that

if just on significantly, sorry. were wondering It's operating Yes, we was more projecting. third least the It at pretty costs. a I drove quarter, other could that? question restaurant was what up say just you than

planning. what me was versus for to it numbers difficult in We inside it's why expected. saw explain no Actually, significant up or was our change

the line with of last Cowen. comes Andrew TD And from your Charles question

Ogden for This Andrew. Zach is

at the and at of are midpoint the looking openings start sales high the updated year. to same-store guidance The the Just sales midpoint. of the same-store are relative the the unchanged. end, The at store was

So the that revenue lower half guidance to was the range. updated of

you of --at leading everything is what's if high else that, at or the the talk about range? the can end high midpoint So

the for question. Thanks Yes.

the as quarter, into fourth kind and the as all heading into head consumer of all about hear of that can softest really I about. our of uncertainty contains and year, weeks. I we we're that we know, holiday think X the And it say you cognizant quarter seasonally, is we're read of kind

of all number. think kind play us lead together to to guidance factors those I the

quarter; And so just Okay. had seemed same-store Got quarter the you to what then question full the disclosed it. exceed sales the for for a third on the period. July

and was quarter you there So the throughout to? that acceleration what that do attribute

We each Thank quarter. our Yes. third you. sales same-store the month saw in grow

was than September and bigger is August So than August. better July

of saw quarter. period all growth a sequential So we

question Piper Mullan from with Sandler. We do another have Brian

lot question good a restaurant Just you level and this If a the year-on-year. of the take progress to margins. end on XX.X%, year say upper that's we were really of the guide to got

margins year? do you expand a still aside for I ask there's the level next Kitchen path could believe think of, time, the put think over context within that Kitchen. If you second, Infinite a Infinite the restaurant you to And without XX% I

kind you just I'm curious on give thoughts So you next of them could if year? some early could -- if expand

clearly year-over-year. for that will next do in believe year expand see benchmark And path exceed We our a kind level restaurant they XX%. question. to continue We the of XXXX, see Thanks margins to to XXXX. we

next ran look of Sweetpass we've XX% a and any on transformational see the year. growth the coming the margin which, XX% both and of drivers as years. know third out discussed on kind down, benefit could Plus, But things and think in from term, that a this path quite around earlier, actually quarter menus, to frankly, on without Sweetpass, clearly and that's second costs IK, around You structure in cost We the we optimization, we side the near think increase be we over we few revenue side, it's that quarter. to the XX% we the had labor

today's call. This concludes

now may disconnect. You