Sweetgreen, Inc.

Good afternoon. My name is Emma and I will 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. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star one. We ask today that you limit yourself to one question. Thank you. Rebecca Nunu, head of investor relations. You may begin your conference.

Thank you and good afternoon, everyone. Here with me today are Jonathan Neiman, co-founder and CEO, and Mitch Reback, chief financial officer. Before we begin, we have a couple of reminders. Our earnings release is available on our website at investor.sweetgreen.com. During this call, we will be making comments of a forward-looking nature. Actual results may differ materially from those expressed or implied as a result of various risks and uncertainties. For more information about some of these risks, please review the company's SEC filings, including the section titled Risk Factors in our latest annual report on Form 10-K filing and subsequently filed quarterly report on Form 10-Q. These forward-looking statements are based on information as of today, and we assume no obligation to publicly update or revise our forward-looking statements. Additionally, we will be discussing certain non-GAAP financial measures, which are in addition to and not a substitute for measures of financial performance prepared in accordance with GAAP. A reconciliation of these items to the nearest U.S. GAAP measure can be found in this afternoon's press release available on our IR website. And with that, it's my pleasure to turn the call over to Jonathan to kick things off.

Thank you, Rebecca, and good afternoon, everyone. This is a really exciting time for Sweetgreen, and I am energized by all the strategic updates we will share with you today. We believe times like these create opportunities for companies with great brands, large addressable markets, and loyal customers, and we expect to look back on this period as a moment that catalyzed our next phase of durable growth. We recognize that great businesses have to be and companies, balancing growth and profitability, and I am confident that the actions we have taken over the last few quarters put us squarely on the path to grow shareholder value in the years ahead. Becoming a large, profitable company starts with providing exceptional guest experiences. Our team has done a tremendous job thinking through how we can better serve all our guests. From our new loyalty program, SweetPass, to new menu items like the chicken and chipotle pepper bowl, to driving top quality execution in our restaurants, I am pleased with our performance. I want to extend my gratitude to every Sweetgreen team member for their dedication to our mission of building healthier communities by connecting people to real food. My co-founders and I collectively remain the largest shareholder of the company, and we treat every dollar as though it were our own. As we transition to operating in an environment defined by uncertainty and an increased cost of capital, we are incredibly focused on driving high returns within our existing fleet and across new projects we undertake. The head start we have in building the category allows us to be disciplined during this period while remaining nimble enough to take advantage of the opportunities that will undoubtedly arise. We see our approach paying off as we reported first quarter sales of $125.1 million, representing 22% year-over-year growth and same-store sales growth of 5%. Our same-store sales growth was driven by 2% growth in traffic and 3% of price taken in January. Total digital sales represented 61% of our Q1 revenue, with approximately two-thirds of those sales coming via our own digital channels. AUVs were $2.9 million, and restaurant-level margin in the quarter was 14%. Our adjusted EBITDA loss for the quarter was $6.7 million, down from a 2022 first quarter adjusted EBITDA loss of $17 million. Excluding the impact of the Employee Retention Tax Credit related to the CARES Act, Restaurant-level margin would have been 12%, and adjusted EBITDA loss would have been $13.6 million, at the top end of our Q1 guidance range. Our support center spend continues to track $98 million for 2023. I'm pleased that during the first quarter, sales grew 22% year-over-year, while we operated the support center 8% lower than Q1 2022. We remain incredibly focused on driving substantial operating leverage out of our support center in the coming years. In 2019, our support center costs were 30% of net revenue. Today, we expect that our support center costs, which now include public company and SPICE-related costs, will be in the 16% to 17% range of net revenue. We will grow the support center only to the extent that further investments drive tangible returns on capital. We are committed to continuously re-underwriting how we steward and allocate capital to deliver returns and shareholder value creation. Make no mistake, continuing to drive operating leverage at the support center is a top priority for our management team. As we have discussed in the past, we operate with four strategic priorities, which are the basis for driving strong top-line growth, customer acquisition and loyalty, and profitability. This is our flywheel. As a reminder, our strategic priorities are, one, expand and evolve our footprint in new and existing markets to connect more communities to real food. Two, build our brand and digital experience as the industry leader, allowing us to add new customer channels, thrive frequency, and increase restaurant volume and margins. Three, reinforce our commitment to craveability and inspire consumers to live healthier lives through reimagining fast food. And four, run great restaurants. with a people-first culture focused on developing talent for our future growth. Now let me provide an update on each of these priorities. In Q1, we opened a total of 12 new restaurants, ending the quarter with 195 restaurants. Since the quarter ended, we've opened an additional five restaurants, including our first in Cranston, Rhode Island. We remain on pace to open between 30 and 35 net new restaurants this year, with plans to enter three additional new markets, Seattle, San Antonio, and Milwaukee. While early, we are pleased with the class of 2023 openings. As we discussed on our last call, our unit strategy is focused on disciplined, capital-efficient growth. We want to make sure that we're choosing great sites with the right leaders and executing our proven playbook in a thoughtful way that protects our brand. As we shared on our last call, this year we will be introducing two restaurants powered by our automated production line we call the Sweetgreen Infinite Kitchen. We're excited to share that next week, on May 10th, we will be opening our first Infinite Kitchen in Naperville, Illinois. Later this year, we will open a second Infinite Kitchen, retrofitting an existing restaurant, so that we can learn how best to integrate the Infinite Kitchen in an existing site. From these pilots, we hope to learn how we can create a more consistent customer experience, faster throughput, and make our team members' jobs easier and more dynamic. We believe this new concept powered by automation unlocks efficiency that will enable us to grow more quickly and at higher profit margins. While we're still testing and learning, we expect that Infinite Kitchen will be increasingly integrated into our pipeline. We look forward to sharing more of our learnings with you in future calls. We continue to build our brand and digital experience. Last week, we launched our loyalty program, SweetPass, nationwide, which we believe over time should drive significantly higher frequency in our customer base. Members of SweetPass receive curated rewards and challenges, menu exclusives, special birthday gifts, and more. With a SweetPass Plus membership, members pay a $10 per month subscription to access a daily $3 off perk and other benefits like free delivery, limited edition merch shops, and more. We had a very smooth launch with great buzz. We believe the program will drive margin improvements not only from the underlying membership fees, which come at limited cost, but also through incrementality across our customer base. Through our seasonal offerings, digital exclusive, chef collaborations, and signature core menu, we continue to reinforce our commitment to our customer value proposition of making healthy, delicious food craveable and convenient. In March, we launched the Chicken and Chipotle Pepper Bowl. This craveable, approachable, and hearty bowl is our take on the beloved burrito bowl, made the sweet green way, featuring a roasted chipotle salsa, lime cilantro black beans, blackened chickens, and a double rice base. Our customers love it. The bowl is outperforming our targets as well as exceeding our goals for new customer acquisition. As part of the launch, we offered a promo for National Burrito Day to celebrate the new offering, exposing the brand to both new and existing customers. Beyond innovating on new limited time menu items, we're also continuing to evolve our signature menu with new flavors that are highly requested by our customers. We brought back hummus in both a new signature salad, the hummus crunch salad, and for the first time as a side of hummus and focaccia. We continue to broaden our beverage offering and recently introduced several healthy soda options as well as chocolate treats. While still early, we've seen attachment dollars grow nearly 25% in the first three weeks of launch. We believe the margin opportunity with attachments presents another significant opportunity for sweet green in the coming years. an easy way to satisfy customer requests and drive sales efficiently through our footprint. Part of what makes Sweetgreen special are the partnerships that we believe we can uniquely create given the strength of our brand. For example, in mid-April, we launched our Boya Day Bowl, a collaboration with Michelin-starred Miami restaurant Boya Day. The bowl is bright and briny, Italian-inspired creation with thoughtfully sourced ingredients and craveable stracciatella cheese on top. It's available to order from all seven South Florida locations through June 12th. We are incredibly happy with customer reception to our innovation, and customers should expect more from us in the coming quarters. Our robust menu roadmap includes continuing to test into additional, heartier, and more craveable grains and proteins, more collaborations with influential chefs, and expanding savory and sweet attachments, including expanding our dessert offering. Running great restaurants is the foundational element to making our business thrive. We continue to see executional improvements in our business as a result of our regional general manager model we implemented at the beginning of the year. Our metrics are showing an improvement in throughput, notably during peak period times. During the first quarter, we increased our digital throttle levels 20% across the fleet, and we continue to see improved front of house throughput across trade areas. Our restaurants are fully staffed, and we continue to focus on hiring and retaining those that work full-time. Our data shows those who are scheduled to work full-time call out less and have higher tenure. In the first quarter, we saw lower turnover attributable to these scheduling practices. By the end of the year, we will launch tipping across the fleet, which we believe will improve team member turnover and, in turn, create a better overall customer experience. We also recently adjusted head coach's schedules to give them more time on the floor to engage with our guests and team members, ensuring that we are delivering on our customer promise of fresh, fast, and friendly. This goes back to our Intimacy at Scale playbook and specifically one of our core values of adding the sweet touch. I'm excited for the continued impact these initiatives will have on our ability to drive better business results and create a win-win-win for the customer, the company, and for you, our shareholders. Before I conclude, I want to take a moment and extend my gratitude to our chief marketing officer, Daniel Schlossman, who after five years at Sweetgreen will be leaving the company. Daniel played key roles in the launch of new channels and most recently crafting our loyalty program. Nathaniel Rue, my co-founder and chief brand officer, will be absorbing Daniel's duties. Sweetgreen is playing to win. Our customers remain core to everything we do as we focus on disciplined, capital-efficient growth and our path to profitability. We have a powerful brand with a massive market opportunity, and I am confident the steps we are taking will ensure our ability to sustainably further our mission of connecting people to real food. And now, I'll turn it over to Mitch to walk through the quarter's financials.