CAVA Group, Inc.

Good afternoon, ladies and gentlemen, and welcome to the CAVA Q3 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 need assistance, please press star zero for the operator. This call is being recorded on Tuesday, November 7, 2023. I would now like to turn the conference over to Matt Milanovich. Please go ahead.

Good afternoon and welcome to CAVA's third quarter 2023 financial results conference call. Before we begin, if you do not already have a copy, the earnings release and related 8K furnished 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 provide a general update on the company's progress. You will find reconciliations of any non-GAAP financial measure discussed on today's call for the most directly comparable financial measure calculated in accordance with GAAP to the extent available without unreasonable efforts in today's earnings release and supplemental deck, each of which is posted on the company's website. Before we begin, let me remind everyone that this call will 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. 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 and 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, and welcome to the call, everyone. Our results in the third quarter of 2023 clearly demonstrate the continued strength of our business, TABA's broad appeal, and the proven portability of our innovative Mediterranean concept. In the face of consumer headwinds, we once again delivered strong top-line growth and impressive unit economics while successfully opening new restaurants across the country. While we're taking a measured approach in this environment, we remain confident in our long-term strategy and growth targets. CAVA is creating and defining the next major cultural cuisine category with substantial white space opportunity. We have a powerful unit economic engine and we've invested in building an efficient, scalable operation, putting us in a strong position to gain share and deliver on our extraordinary potential, regardless of economic conditions. In the third quarter of 2023, we delivered a 49.5% increase in CAVA revenue, 14.1% CAVA same restaurant sales growth, including a 7.6% increase in traffic, 11 net new restaurants, ending the quarter with 290 restaurants, a 35.5% increase year over year, adjusted EBITDA of $19.8 million, a $15 million increase over the third quarter of 2022, and net income of $6.8 million. Our strong Q3 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. We opened 11 net new CAVA restaurants during the quarter, with continued expansion across Alabama, Arizona, California, Florida, Georgia, the Carolinas, and Texas. In the fourth quarter so far, we've opened 12 additional restaurants, putting us on track for 70 to 73 net new CAVA restaurant openings in 2023. With our last Zoe's restaurant conversion completed, we are now operating under a single powerful Cava brand. This important milestone has energized the team and we're seeing that in our results. As we share our craveable food and Mediterranean hospitality across the country, we continue to expect annual unit count growth of at least 15%. We're excited to enter Chicago in 2024 with at least three new restaurant openings expected in that market. Like others in the sector, we are seeing changes in the real estate market. However, the pipeline we've built is diverse and not dependent on a small number of markets or landlords. In addition, our real estate team has been building increased buffer into our pipeline over the past year to ensure we are insulated from potential delays in equipment availability, permitting, and inspections. Our second strategic pillar is developing a modern, best-in-class organization. As we scale, we continue to invest in team members and equip them with the tools and training to deliver strong, consistent results and run great restaurants every shift, every day. We're committed to being the employer of choice by creating an exceptional culture and from a compensation perspective, ensuring we're positioned competitively among leading brands and markets across the country. To support sustainable growth, we're building a pipeline of qualified, highly engaged leaders with the skills to run great operations and provide fantastic guest experiences. In 2023, our target is to internally place 75% of our new restaurant GMs, and we remain on track to achieve that goal. Our Academy GM network supports this pipeline and serves as a farm system for future leaders. At the end of Q3, We had 45 Academy GMs, including seven recently promoted to the multi-unit leader position. We plan to have 50 by the end of the year, enabling localized training in existing markets across the country. In September, we held Cava Connect, a conference that brings all of our restaurant GMs together for education, recognition, and celebration. In addition to celebrating our mission and recognizing team members for exhibiting our values and competencies, The conference was rooted in education on our Guests, People, and Standards Initiative, what we call GPS. This initiative focuses the team on seven foundational metrics and standards for operational execution. Over three days, leaders participated in robust training sessions on team member development, P&L management, food safety standards, and the guest experience. Our third strategic pillar is building the infrastructure to successfully scale and grow the business. We've made investments to support the growth we know this concept can deliver. These investments, which will create leverage over time, are thoughtful and strategic with an emphasis on operational excellence, efficiency, and creating an exceptional experience for our guests. Among these investments is our vertically integrated production model. By producing our own dips and spreads, we're taking complexity out of our restaurants, improving costs overall, and maintaining the quality and integrity of our unique recipes. Across more than 300 locations, Cava's Crazy Feta is as delicious today as it was when guests of our first full-service Cava Meze restaurant fell in love with it. Our new facility in Verona, Virginia, which further builds out these capabilities, is on pace to commence operations in Q1 2024. The envelope is complete The management team has been hired and equipment is being delivered and set in place. Verona, along with our current 30,000 square foot facility in Laurel, Maryland, will be able to support at least 750 restaurants, as well as our CPG business. Shifting to loyalty, Cava has a diverse, passionate customer base, and we are in the early stages of launching a new loyalty program aimed at developing deeper connections with our guests, creating more frequent, relevant experiences, and further driving traffic, mix, and check. In the next couple of weeks, we will transition all loyalty members to a bankable points model, and in December, we will pilot new rewards and engagement tactics in the Houston market. The pilot will inform the rollout of a new loyalty program nationwide expected in late 2024. Our best-in-class culinary team continues to innovate inside a robust stage-gate process that validates new offerings and ensures efficient, successful launches. We recently brought back two limited time only fan favorites, the balsamic date chicken bowl and our sweet and spicy chicken pita. And soon we'll be market testing an exciting new Maine item, steak. Steak is a highly requested item and brings a complimentary offering to our existing portfolio of Maine. Our Mediterranean steak is inspired by flavors from the Aegean Sea including sun-dried tomato, coriander, and Aleppo pepper, showcasing what makes Cava special and giving us an opportunity to delight existing guests, attract new ones, and re-engage those who haven't visited in a while. Stake has performed well at each stage, gate to date, and our operational tests have been successful. The next stage is a market test in Dallas and Boston, which is scheduled to begin next month. And if the positive results continue, We expect to launch steak nationwide later in 2024. Before I turn the call over to Tricia, I'd like to wrap up with Q3 highlights and reiterate the opportunity in front of us. This quarter's results continue to show the strength of our brand. We have the same restaurant sales growth as 14.1%, driven by 7.6% traffic growth. Our powerful unit economics continue to build with a $2.6 million AUV and 25.1% CAVA restaurant-level profit margin during Q3, resulting in nearly $20 million of adjusted EBITDA and $7 million of net income. Finally, I want to express my gratitude to our team members for their generosity and commitment to bringing heart, health, and humanity to food. We're living in a world that's more fluid and challenging than ever. Online life has failed to replace the real-life emotional connections humans crave. And consumers now say they are looking for restaurants that make them feel welcomed, warm, and cared for. Restaurants like Cava. It is that exceptional hospitality combined with our unique cuisine, we're tasting healthy nights that embodies our Mediterranean way. At Cava, everyone is welcome at our table. With that, I'll let Tricia walk you through the financials.