Sweetgreen, Inc.

one again. I would now like to turn the call over to Rebecca Nunu, Head of Investor Relations. You may begin.

Thank you, and good afternoon, everyone. Speaking on today's call will be Jonathan Neiman, Co-Founder and Chief Executive Officer, and Jamie McConnell, Chief Financial Officer. Both will be available for questions during the Q&A session following the prepared remarks. Today's call is being webcast live and recorded for replay. The earnings release and today's announcement regarding the sale of Spice are available on the Investor Relations section of Sweetgreen's website at investor.sweetgreen.com. I'd like to remind everyone that the information under the heading Forward-Looking Statements included in our earnings release and SPICE announcement also applies to our comments made during the call. 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. We also direct you to our earnings release. for additional information regarding our use of non-GAAP financial measures, including reconciliations of non-GAAP financial measures mentioned on the call with their corresponding GAAP measures. Our earnings release can be found on our investor website. And now, I'll turn the call over to Jonathan to kick things off.

Thank you, Rebecca, and thank you all for joining us this afternoon. We are addressing the headwinds from the current operating environment with agility and focus. We are tightening operations accelerating menu innovation, and deepening guest engagement. The team is focused on delivering an exceptional guest experience, improving operational execution, and serving delicious, high-quality food in every restaurant. The actions we're taking are designed to expand our value proposition, strengthen transactions, enhance restaurant performance, and position Sweetgreen for a return to profitable growth. For the third quarter, we reported sales of $172.4 million and the same-store sales declined of 9.5%. Restaurant-level margin was 13.1%, and adjusted EBITDA was a loss of $4.4 million. Performance was impacted by softer sales trends in our Northeast and Los Angeles markets, which together represent about 60% of our comp base. This was coupled with lighter spending among younger guests, particularly the 25 to 35 year old age group where we over index. As we look to Q4 and beyond, our new leadership team has taken the learnings from this year and focused our actions around five key strategies to transform our business. We're calling it the Sweet Growth Transformation Plan. Our strategies are, one, operational excellence, two, brand relevance, three, food quality and menu innovation, four, personalized digital experience, and five, disciplined profitable investment. Now, let me share some of the work being done under each of these strategic priorities, starting with operational excellence. Since joining earlier this year, our COO, Jason Cochran, has been instrumental in leading the work to strengthen operational execution. He's brought greater accountability and a new culture to how we run our restaurants. Building on the foundation we introduced last quarter, Jason and his team are continuing to deploy Project One Best Way, our system-wide effort to elevate operational excellence through clear operating standards, performance-based leadership, and measured execution. As part of this project, we launched Sweet Path, a framework that helps every team member understand what running a great restaurant looks like at Sweetgreen. The Sweetpath breaks each restaurant into clear zones, from the front line to the back of house, with simple, consistent behaviors and standards for how we show up every day. Jason also introduced a new restaurant scorecard this quarter. It gives our teams greater visibility into performance across a streamlined set of metrics. Sales, throughput, customer satisfaction, food quality, and labor performance. It helps our team celebrate wins, spot opportunities, and focus on what drives results. In mid-September, we kicked off a new throughput initiative that defines what it means to be ready for peak lunch and ties progress directly to the scorecard. Early results are encouraging, showing improved peak hour throughput and building momentum for the operational excellence we expect from ourselves. To improve throughput further, our technology team has begun rolling out Scan2Pay for a faster and simpler frontline checkout experience. With a single app scan, guests can pay, earn, and redeem rewards instantly using saved payment methods, including credit cards, tweaking credits, and gift cards. These disciplined, system-level changes under Project One Best Way will take time to mature, but they're already building the structure and habits that will define how we operate going forward. As we shared last quarter, about one-third of our restaurants met or exceeded our internal operational standards. Today, that number is approximately 60%, an important step forward. Additionally, turnover and retention continue to improve, and we expect this progress to translate into stronger restaurant-level performance over the year ahead. Now turning to brand relevance. I'm excited to welcome Zipporah Allen, our Chief Commercial Officer, who leads marketing, menu innovation, and the overall customer experience. In her first two months, Zipporah has brought new energy and focus to our marketing team. shaping a strategy that positions Sweetgreen as a lifestyle brand, with a focus on acquiring and inviting more customers to live the sweet life. In the near term, we have redirected marketing to support New York, our most challenged market. We are optimizing our media investments to drive new guest acquisition and expand our share of voice. In the long term, we are focused on creating culture through distinct brand moments. This will include a more structured approach to engagement with content creators that have an authentic connection with Sweetgreen, as well as brand partnerships that will broaden awareness with new audiences. For our food quality and menu innovation pillar, we are focusing our attention on driving awareness around the quality of our ingredients. Next week, we're launching a protein-focused campaign, highlighting the real fuel that our customers get when they choose one of our nine chef-curated menu items with more than 30 grams of protein. We are also introducing a new macros calculator in our digital experience. This protein campaign gives us a great opportunity to educate customers about our larger protein portions and is the first step to broadly communicating the key differentiators that make our menu distinct in the market. You'll see us continue to message our high quality ingredients into next year. Claims that differentiate us from our competition, such as made from scratch, chicken, steak, and salmon raised responsibly with no antibiotics ever, feed oil-free proteins, grains, and roasted vegetables, no artificial flavors, colors, or dyes, and sourcing organic and local produce from farmers and partners we know and trust. These will take a more prominent role in our messaging going forward. Additionally, in two weeks, we will launch a new steak bowl and steak plate to strengthen variety and value. We continue to strengthen our menu innovation muscle with a pipeline of menu items entering our new stage gate process in Q4. This is a cross-functional testing process that we will use for every menu item going forward. This will give us more precision and predictability in the results that we can expect from our menu development efforts. We continue to leverage seasonal menus to drive frequency with our existing customers, and we have right-sized our marketing investment to reflect the role that these menu items play on our menu. At the same time, we are expanding our core menu offering to be relevant for more occasions and consumer needs through our pipeline test. Our new handheld product will go into market test in early 2026. In Q4 and heading into Q1, we are also reviewing our menu and pricing architecture as we continue to strengthen our value proposition. We know that we can do a better job of creating clear entry prices and logical trade-up opportunities across our create-your-own and Chef-curated menu options so that our customers understand the value across every menu tier. When guests know what they're getting and feel good about it, it builds trust and drives loyalty over time. Now turning to personalized digital experience. Earlier this year, we launched S3 Rewards to create a platform for a more personalized experience powered by enhanced customer data. We just reached the six-month mark of this program and are continuing to see positive trends on frequency among our most loyal guests. The program unlocks the ability to leverage the data to drive frequency and retention through our CRM efforts. And during the fourth quarter, you will see us leverage this channel to invest more in targeted discounts and promotions to improve value perceptions and drive increased frequency with lighter users. Shifting to our last pillar, which is disciplined profitable investment. In the third quarter, we opened eight restaurants, including six infinite kitchens. We also entered a new market, Arizona, with our Scottsdale location, delivering the second strongest opening of the year. Following the quarter, we added a second Arizona location, further deepening our presence. The continued success of these openings reinforces our confidence in the white space opportunity ahead. In the fourth quarter, we will open 17 new restaurants and enter three new markets, Sacramento, Cincinnati, and Northwest Arkansas. Our Q4 openings include our first suite lane featuring the Infinite Kitchen and Costa Mesa. Altogether, we expect to complete construction of 40 new restaurants this year, ending 2025 with 37 net openings. This reflects the closures of our Bleecker and Astor Place restaurants in the third quarter. It also includes shifting two restaurant openings into early 2026 to ensure the best possible experience for our guests and team members, though construction will be completed this year. We expect to open our relocated Nomad restaurant in December and Union Square in January. Both locations are being relocated to stronger sites and will include infinite kitchens. We're prioritizing the strength of our financial position by improving cash flow and maintaining greater discipline in how we invest, which will include a slowdown of new restaurant openings. Looking ahead to 2026, we plan to open 15 to 20 net new restaurants with about half featuring Infinite Kitchen technology and enter two to three new markets, including Salt Lake City. We believe this strikes the right balance between growth and financial discipline as we focus on lowering capital expenditures and driving strong returns. We remain focused on quality growth and continue to target cash on cash returns above 40%. As announced today, we've made the strategic decision to sell Spice, our business unit responsible for developing the Infinite Kitchen, to Wonder. This will allow us to unlock greater scale, lower operating costs, and strengthen our financial foundation for the future. First and foremost, the Infinite Kitchen remains central to Sweetgreen's future. The technology has consistently proven its ability to deliver faster throughput, improve accuracy and consistency, and elevated food quality. In the third quarter, the Infinite Kitchen restaurants continue to realize approximately 700 basis points of labor savings and nearly 100 basis points of COGS improvement compared to restaurants of similar age and volume. Under our agreement with Wunder, Tweegren will continue to utilize and expand Infinite Kitchen technology across our restaurants. Partnering with Wonder enables us to leverage their manufacturing scale, R&D investments, and shared innovation, accelerating the refinement and rollout of additional IK units. This transaction also allows us to sharpen our focus on our core restaurant business, allocating more of our talent and financial resources toward accelerating growth and achieving profitability. The $186.4 million sale is expected to infuse our balance sheet with approximately $100 million in liquidity, strengthening our financial position and enhancing our flexibility to fund future growth initiatives. We're incredibly proud of the work the Spice team has done to develop, scale, and commercialize one of the world's most advanced food automation technologies under Sweetgreen. I want to especially thank Spice co-founders Michael Farid, Cale Rogers, Brady Knight, and Luke Schluter for their vision and phenomenal technical execution. We look forward to partnering with you and the Wonder team as we enter this next chapter of innovation together. From menu development to our app to the Infinite Kitchen, we've always been pioneers in reimagining how real food is sourced, prepared, and served. That spirit of innovation is core to our DNA and will continue to guide us. Before I conclude my prepared remarks, I want to take a moment to recognize Mitch Reback, who retired in September as our CFO and express my deep gratitude for everything he's done for Sweetgreen. Mitch joined us when we were still a small regional brand over 10 years ago and has been a driving force behind our growth ever since. He built the financial foundation that supports our business today, guided us through our IPO, and has been a true partner, mentor, and friend. His impact on Sweetgreen and on all of us personally can't be overstated. We're deeply grateful for his leadership and wish him all the best in his retirement. We are also excited to welcome Jamie McConnell as our new Chief Financial Officer. In her short time, she's already brought a sharp focus on financial discipline, returns, and efficiency. Her background and experience in high-growth, operationally-disciplined businesses will be instrumental as we strengthen our operating model and position Sweetgreen for long-term success. Over the years, Sweetgreen has navigated some of the toughest moments, from going through the Great Recession to leading through COVID. Through it all, I've never wavered in my belief in our vision or the impact we can make. We've proven that our brand resonates across markets and demographics, and the opportunity ahead remains significant. Our focus now is combining the creativity and cultural relevance that makes Sweetgreen unique with greater discipline and a continued focus on the guests. The Sweetgreen brand remains strong and continues to deeply resonate with our guests. We know the work we need to do to raise our execution and reignite our flywheel to drive traffic and set the stage for long-term profitable growth. We are taking the steps needed to get back on track and position Sweetgreen for long-term success. I want to thank every Sweetgreen team member for their focus, resilience, and commitment to excellence. Together, we're positioning Sweetgreen to reach its full potential, all while staying true to our purpose of connecting people to real food. Now we'll turn over the call to Jamie to review our financial results in detail.