CAVA Group, Inc.

Good afternoon, ladies and gentlemen, and welcome to the CAVA second quarter 2023 earnings conference call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Tuesday, the 15th of August, 2023. I would now like to turn the conference over to Matt Milanovich. Please go ahead.

Good afternoon and welcome to CAVA's second quarter 2023 financial results conference call. Before we begin, if you do not already have a copy, the earnings release and related 8K filed with the SEC are available on our website at investor.cava.com. The purpose of this conference call is to give investors further details regarding the company's financial results, as well as a general update on the company's progress. To the extent any non-GAAP financial measure is discussed in today's call, you will find a reconciliation of that measure to the most directly comparable financial measure calculated in accordance with GAAP in today's earnings release, which is posted on the company's website. Before we begin, let me remind everyone that this call may contain forward-looking statements. For this purpose, any statements made during this call that are not statements of historical fact may be deemed to be forward-looking statements. Investors should be aware that any forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those discussed here today. These risk factors are explained in detail in CABA's filings with the SEC and in today's earnings release. Please refer to these filings for a more detailed discussion of forward-looking statements and the risks and uncertainties of such statements. All forward-looking statements are made as of today and, except as required by law, CABA undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future developments, or otherwise. And now I'll turn the call over to the company's co-founder and CEO, Brett Shulman.

Thanks, Matt. Let me start by welcoming everyone to CABA's first quarterly call as a publicly held company. We're pleased with how the market has received CABA But as you'll hear, our focus is on the long term. That's running a great business and building a durable brand that consistently delivers results. Becoming a public company, while a milestone event, was not the destination, but the beginning of the next chapter of our journey. Kava is creating and defining the next cultural cuisine category, and our results in the second quarter of 2023 demonstrate the broad appeal of our innovative, authentic Mediterranean concept and the significant white space opportunity in front of us. We're successfully opening restaurants in new and established markets. We continue to deliver powerful unit economics, and we've already made significant investments in building an efficient, scalable organization, putting the company in a strong position to deliver on our extraordinary potential for growth. We are proving that bringing heart, health, and humanity to food is a powerful formula for success. In the second quarter of 2023, we delivered CAVA revenue growth of 62%, 18.2% CAVA same restaurant sales growth, including 10.3% traffic growth, 16 net new restaurants ending the quarter with 279 restaurants, a 43.1% increase year over year, adjusted EBITDA of 21.6 million, a $15.7 million increase over the second quarter of 2022, and net income of $6.5 million. Our Q2 results and ability to capitalize on the opportunities ahead are grounded in our three strategic pillars. First, we are solidifying our category-defining Mediterranean brand. Our broad appeal and proven portability support strong restaurant openings in new and existing markets. We opened 16 net new Cava restaurants during the second quarter, including two new states, Missouri and Rhode Island, along with continued expansion in Massachusetts, Texas, Georgia, and Colorado. We now expect 65 to 70 net new Cava restaurant openings this year and have built our 2024 and 2025 pipeline to support annual unit count growth of at least 15%. In 2024, we'll open the first Kava restaurant in the Chicago market, extending our unique brand of hospitality in the Midwest. In addition to our new restaurant growth, we're enhancing the brand experience across our digital properties. Our focus is on meeting our guests where they are, creating personalized hospitality, and making sure they feel the Mediterranean way, regardless of how they engage with us. This spring, we re-skinned our Kava app. creating an updated brand look and feel and, more importantly, a better experience for our guests. Our Refresh app has a warmer, brighter front door and increased functionality to deliver new digital capabilities, including reorders and saved favorites, improved cart and payment functionality, and faster performance. Our new unified e-commerce site launched at the end of last year continues to deliver enhanced capabilities including seamless dynamic content management, driving increased conversion and per person average. Whether starting an order on Unified Web or checking out on the app, your order state will be consistent across either channel with our new cart parity feature. We've also completed our microservices initiative, fully migrating to a platform that supports rapid innovation and scalability. This flexible platform positions us for sustainable growth and our upfront investment in it will create leverage as we scale. We believe it's an in-house digital platform few restaurants our size, much less many larger brands, have. Our second strategic pillar is developing a modern best-in-class organization. As we scale this business, we are focused on delivering strong, consistent results and running great shifts in every restaurant every day. We're building a pipeline of qualified, highly engaged leaders with the skills to run great operations and provide fantastic guest experiences. These are leaders who create high-performing restaurant teams and stay true to our mission, culture, and values. Our 2023 target is to internally place 75% of our GMs, and we are currently on pace to achieve this metric. To support this work, we've developed our Academy GM network. Academy GMs are top performers certified to develop and train new GMs and lead training restaurants. By the end of 2023, we expect to have at least one Academy GM in each of our gardens or groups of eight restaurants. The Academy GM network not only serves as a farm system for new restaurant GMs and future leaders, but also supports our work to minimize pre-opening costs by creating training hubs in growth markets. We currently have 39 Academy GMs, including seven recently promoted to the multi-unit leader position. We plan to add 50 Academy GMs by the end of the year, allowing for localized training for new restaurants in all existing markets. We continue to build pathways and development opportunities for our team members, evidenced by one of our new Academy GMs, Dixon Valdez. Dixon started with us at 17 years old, over six years ago. During that time, he has progressed from team member to guest experience manager to general manager in training and then on to GM. Dixon was then certified as an academy GM, demonstrating the power of our farm system and recently promoted to multi-unit leader, proving that at CABA, you can build a career, not just have a job. Our third strategic pillar is building the infrastructure to successfully scale and grow the business. Knowing what this concept can deliver, we continue to make strategic investments to support our long-term growth. These investments are having a positive impact on our operations, our team, and the guest experience, and we expect them to continue to create leverage over time. Our vertically integrated production capabilities are one example. Construction of our state-of-the-art food production facility in Verona, Virginia is well underway. and we're on pace to commence operations in Q1 2024. We've erected all the steel framing and the exterior envelope is nearly complete. Equipment is arriving and the management team is in place. Verona, in addition to our current 30,000 square foot production facility in Laurel, Maryland, will be able to support at least 750 restaurants as well as our CPG business. This integrated approach centralizes the production of our dips and spreads reduces operational complexity in our restaurants, and supports consistent, superior product quality. Shifting to loyalty, we are in the early phase of relaunching our program, creating the infrastructure to further drive traffic, mix, and check as we scale. Working toward a target launch in late 2024, the team is developing foundational customer segmentation capabilities that will enhance personalization of the guest experience. Late this year, we will begin running test pilots to inform the new program, a program that will be geared toward developing deeper connections with our guests, driving more frequent, relevant experiences that add value for both them and our business. Since our earliest days, our strength in culinary innovation has created craveable food where taste and health unite. We have built a robust stage gate infrastructure for the ideation, development, testing, and launch of new items. Two items have worked their way through the process and launched in Q2. Our new spicy falafel main demonstrates how we use seasonal innovation to create new occasions and drive mix, while our new topping, fiery broccoli, is an example of core innovation that attracts new guests and fuels continuous discovery. We launched spicy falafel in June, and incidence rates are meeting our expectations. And we're seeing strong customer adoption of fiery broccoli, which replaced our lentil tabbouleh topping, optimizing our toppings assortment. These successful launches have expanded our plant-based options and reinforced our Mediterranean culinary leadership. Next, I want to touch on the progress of our catering test. Many businesses, as well as collegiate and professional athletic teams, have embraced our catered products, and we believe catering can be a compelling growth opportunity. We continue to test format variations to understand how to maximize production, seizing the catering opportunity without detracting from existing channels. Today, we have 10 digital kitchens that support centralized catering hub production and digital order pickup, along with five hybrid kitchens that offer standard in-restaurant dining and digital pickup, with expanded kitchens to support centralized catering production. We are also piloting catering in a traditional restaurant format where in-restaurant and digital pickup volumes can accommodate catering production. As we closely monitor the operational and financial performance and progress against our milestones, we'll share updates on the pilot in future quarters. Finally, we're investing in our data infrastructure to drive operating consistency, effectiveness, and scalability. Our proprietary internally developed operations scorecard currently in test, gives our restaurant leaders key operational and financial metrics in a single pane of glass, allowing for efficient real-time actionable data. In Q2, we also launched a new and improved real estate platform with richer analytics and anonymized mobile data that informs psychographic segmentation and impact studies. Another benefit of the new platform is that it significantly reduces the time Real estate managers spend putting together site analysis packages, allowing for greater productivity on the team. Before I turn the call over to Tricia, I would like to wrap up with Q2 highlights and reiterate the opportunity in front of us. This quarter's results continue to show the strength of our unit economic engine. CAVA same restaurant sales growth was 18.2%, driven by 10.3% traffic growth. Our powerful unit economic model is evidenced by our $2.6 million AUV and 26.1% HAVA restaurant-level profit margin during Q2, resulting in over $21 million of adjusted EBITDA and more than $6 billion of net income. Finally, I want to express my gratitude for our team members who are focused, engaged, and deeply committed to our mission of bringing heart, health, and humanity to food. As we create and define a new category, the white space opportunity in front of us, the strength of our concept, and our leadership position is clear. Our job is to make most of these advantages, and we believe we have the right team to do it. And with that, I'll let Tricia walk you through the financials.