Sweetgreen, Inc.

Thank you for standing by. My name is Kathleen and I will be your conference operator today. At this time, I would like to welcome everyone to the Sweetgreen Incorporated first quarter 2024 earnings 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. To ensure that we can accommodate as many participants as possible, We kindly request that each participant limit themselves to one question and one follow-up question. 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, press the star one again. Thank you. I would now like to turn the call over to Rebecca Nonu, VP, Head of Investor Relations. Please go ahead.

Thank you, and good afternoon, everyone. Here with me today are Jonathan Neiman, co-founder and chief executive officer, 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 US GAAP measure can be found in this afternoon's press release, available on our IR website. With that, it's my pleasure to turn the call over to Jonathan to kick things off.

The momentum Sweetgreen had at the end of 2023 is continuing to build as we begin 2024. With a focus on guest experience, we are driving growth and adjusted EBITDA profitability, exceeding the high end of our first quarter guidance. Our strategy is working. We have a strong foundation to build on and multiple levers to drive long-term, capital-efficient growth. The results today wouldn't be possible without the hard work of our team members. I want to take a moment to extend my gratitude to each of them for their unrelenting passion to further our mission of connecting people to real food. We reported sales of $157.9 million, representing 26% year-over-year growth. Same-source sales were 5%. Total digital sales represented 59% of our total first quarter revenue, with 56% of those sales coming via our own digital channels. Restaurant level margin for the first quarter was 18.1%, expanding over 400 basis points year over year, making this one of the highest first quarter restaurant level margin performances in the company's history. Restaurant level profit for the first quarter was $28.5 million, a nearly 70% increase from a year ago. Additionally, we generated positive adjusted EBITDA for the quarter. As I shared on our last call, our strategies are simple. One, continue building our brand by creating great products and guest experiences. And two, expand our connection to guests by building and operating great restaurants. Over the past year and a half, we've been focused on these strategic priorities to improve our financial model with the goal of driving both revenue growth and profitability. Our Q1 results demonstrated revenue growth, expanded margins and adjusted EBITDA profitable growth. Let me share some of the highlights from this quarter. During the first quarter, we opened six new restaurants, including two of these in a new market, Seattle. We also opened restaurants in San Francisco, Miami, Denver and Austin. Our Q1 2024 cohort of new restaurant openings have an average weekly revenue already outpacing the existing fleet average. Building on the momentum of the Totem Lake opening, which has quickly become one of our top performing restaurants, the South Lake Union location in Seattle had one of the strongest opening weeks in the company's recent history. Both restaurants are operating at volumes akin to our large urban restaurants. Openings like these demonstrate that our brand has significantly greater reach than our current physical footprint. and that there is massive white space for our category-defining concept. We remain pleased with the performance of our two infinite kitchens. At the end of the first quarter, the two infinite kitchens located in suburban trade areas are tracking to an average year one average unit volume of $2.6 million, and they delivered an average first quarter margin of 28%, 10 points above the fleet average, giving us confidence in our go-forward deployment strategy. They also continue to demonstrate additional benefits to our operating model, such as faster throughput, better order accuracy, portioning consistency, and substantially lower team member turnover. Additionally, we continue to see higher average checks than the markets they operate in. In 2024, we remain on track to open approximately seven new Infinite Kitchen restaurants, as well as retrofit three to four large urban restaurants with the Infinite Kitchen. Our first retrofit will be in New York City this summer. In 2025, we plan to deploy an increasing number of new restaurants powered by the Infinite Kitchen. As we build our future real estate pipeline, we see tremendous white space opportunities across the United States in both new and existing markets. Starting next year, we plan to return to a growth rate of 15 to 20% new unit growth per year, with 2025 being at the lower end of this range and 2026 and beyond targeting the upper end of the range. We continue to execute our culinary roadmap to broaden our menu, drive menu innovation, traffic, mix, and check. Protein plates continue to over-index at dinner and as well in the Southeast and Texas markets. In February, we launched a test of our caramelized garlic steak across the Boston market. Our caramelized garlic steak features tender cuts of grass-fed steak seasoned with a garlic spice blend, expertly roasted and finished in a blend of olive oil and herbs, Guests can order steak in any of our chef-crafted entrees, including the steakhouse chopped and caramelized garlic steak plate, as well as have the option to add the new protein on any existing or custom item. During our testing phase in Boston, we saw caramelized garlic steak become a dinnertime favorite, with steak included in nearly one in five dinner orders. Having successfully completed our market test process and exceeding our internal expectations, we launched steak fleet-wide this past Tuesday. As we innovate our menu, we've always believed in listening to our customers to deliver more of what our guests want. Incorporating steak into our menu provides customers with something they've been seeking for years. With a deep commitment to sustainable practices, finding the sweet green way to source steak in our restaurants took time. We're proud to introduce our 100% grass-fed, pasture-raised steak from ranchers who align with our commitment to high-quality, nourishing ingredients and high-sourcing standards. Turning to operations. At Sweetgreen, our people are the most important ingredient to running great restaurants. They are on the front lines connecting guests to our mission by serving real food sourced from local farmers and prepared in-house daily. Our organization is rallied around prioritizing the guest experience and driving throughput. We've aligned our incentives around these priorities, including bonuses for our head coaches and tipping for our team members. As a result of the investments we are making in our talent and culture, our turnover is 19 points lower than it was in the first quarter of 2023 and has stabilized at the lowest levels we've seen since prior to COVID. Our 90-day retention is 10 points higher compared to the first quarter of 2023. Over 50% of our head coaches are internal promotions, and as we move forward, our goal is to increase this percentage. As we plan to ramp our restaurant openings in the years to come, we have a strong pipeline of future head coaches and are excited about the growth opportunities for all of our team members. We remain focused on capturing additional urban lunchtime demand where we know we have a walkaway factor. We've made meaningful progress over the last few quarters with improvements in labor scheduling and having head coaches spend more time on the floor with customers. Over the coming quarters, there are opportunities for further labor deployment improvements by reducing time on routine in-restaurant tasks and improving deployment across all day parts. Across the organization, we remain focused on hospitality and operating great restaurants, leading to growth and expanding margins. Today's consumer is increasingly selective with how they spend their discretionary income. Customers are choosing Sweetgreen given our mission-driven brand, unparalleled quality of our product, and the value we offer with our menu innovation. Our commitment to sourcing permeates every aspect of our menu. We partner with farmers we know and trust, ensuring the highest quality ingredients and scratch cook every day in each of our restaurants. This dedication is our promise to guests. The positive results both on the top line and our restaurant level profitability is evidence that the investments we are making in our people, our operations, and financial model are the right ones. I'm very proud of what our team has accomplished together. You see their accomplishments in the financial results today and also in the experience in our restaurants through their exceptional hospitality and high-quality food we serve. Looking ahead, we have a massive opportunity to bring real food to more communities and disrupt the industry with the rollout of the Infinite Kitchen. We are building a durable business and shaping a healthier future for the next generation. Now, I will turn over the call to Mitch to review our financial results in further detail.