Start Time: 17:00 January 1, 0000 5:54 PM ET CAVA Group, Inc. (NYSE:CAVA) Q4 2024 Earnings Conference Call February 25, 2025, 17:00 PM ET Company Participants Brett Schulman - Co-Founder and CEO Tricia Tolivar - CFO Matt Milanovich - IR Conference Call Participants Brian Harbour - Morgan Stanley Andrew Charles - TD Cowen Chris O'Cull - Stifel David Tarantino - Baird Sharon Zackfia - William Blair Jon Tower - Citi Ivan Yu - Jefferies Brian Mullan - Piper Sandler Jeffrey Bernstein - Barclays Danilo Gargiulo - ...

Core Insights - Cava Group (CAVA) reported a revenue of $227.4 million for the quarter ended December 2024, reflecting a year-over-year increase of 28.4% [1] - The earnings per share (EPS) for the quarter was $0.05, up from $0.02 in the same quarter last year, although it fell short of the consensus estimate of $0.06 by 16.67% [1] - The revenue exceeded the Zacks Consensus Estimate of $225.54 million by 0.82% [1] Financial Performance - Same Restaurant Sales Growth was reported at 21.2%, surpassing the estimated 18.3% by analysts [4] - The total number of CAVA restaurants at the end of the period was 367, slightly above the average estimate of 366 [4] - CAVA opened 15 new restaurants, including converted Zoes Kitchen locations, matching the average estimate [4] - Revenue from CAVA restaurants was $225.10 million, exceeding the average estimate of $223.32 million, representing a year-over-year change of 28.3% [4] - Restaurant-Level profit was reported at $50.41 million, which was below the estimated $55.16 million [4] Stock Performance - Cava's shares have declined by 15.3% over the past month, compared to a 1.8% decline in the Zacks S&P 500 composite [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the broader market [3]

Core Viewpoint - Cava Group reported quarterly earnings of $0.05 per share, missing the Zacks Consensus Estimate of $0.06 per share, but showing improvement from $0.02 per share a year ago, indicating a -16.67% earnings surprise [1] Financial Performance - Cava's revenues for the quarter ended December 2024 were $227.4 million, surpassing the Zacks Consensus Estimate by 0.82%, and up from $177.17 million year-over-year [2] - Over the last four quarters, the company has exceeded consensus EPS estimates three times and topped revenue estimates four times [2] Stock Performance - Cava shares have declined approximately 7.6% since the beginning of the year, contrasting with the S&P 500's gain of 1.7% [3] - The current Zacks Rank for Cava is 3 (Hold), suggesting the stock is expected to perform in line with the market in the near future [6] Earnings Outlook - The consensus EPS estimate for the upcoming quarter is $0.18 on revenues of $339.56 million, and for the current fiscal year, it is $0.61 on revenues of $1.2 billion [7] - The estimate revisions trend for Cava is mixed, which could change following the recent earnings report [6] Industry Context - The Retail - Restaurants industry, to which Cava belongs, is currently ranked in the top 26% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% [8]

Financial Performance - Total revenue for the fiscal year ended December 29, 2024, was $963,713,000, representing a 32.2% increase from $728,700,000 in the previous year [374]. - Net income for the fiscal year ended December 29, 2024, was $130,319,000, a significant increase from $13,280,000 in the prior year [374]. - Basic earnings per share for the fiscal year ended December 29, 2024, was $1.14, compared to $0.22 in the previous year [374]. - Total operating expenses for the fiscal year were $920,595,000, an increase from $723,975,000, reflecting a rise of 27.1% [374]. - The Company’s total revenue for fiscal 2024 was $963.7 million, a 32.2% increase from $728.7 million in fiscal 2023 and a 70.8% increase from $564.1 million in fiscal 2022 [429]. - Restaurant revenue reached $954.3 million in fiscal 2024, up 32.3% from $720.9 million in fiscal 2023 and up 71.3% from $557.0 million in fiscal 2022 [429]. - CAVA segment revenue increased to $954,273, up 33% from $717,060 in 2023 [474]. - Total consolidated revenue reached $963,713, a 32% increase compared to $728,700 in 2023 [474]. - CAVA segment restaurant-level profit rose to $238,113, reflecting a 34% increase from $177,488 in 2023 [474]. - Income before taxes for the company was $59,910, compared to $14,048 in 2023, showing significant improvement [474]. Assets and Equity - Total assets increased to $1,169,669,000 as of December 29, 2024, compared to $983,757,000 at the end of the previous year, reflecting a growth of 19% [371]. - Total stockholders' equity rose to $695,566,000, up from $570,802,000, indicating a 21.9% increase year-over-year [371]. - Cash and cash equivalents increased to $366,120,000 from $332,428,000, showing a growth of 10.1% [371]. - Trade accounts receivable increased to $4,799,000 from $3,662,000, a rise of 31% [371]. - The net property and equipment increased to $372.902 million as of December 29, 2024, from $330.730 million as of December 31, 2023, reflecting growth in leasehold improvements and equipment [434]. Cash Flow - Net cash provided by operating activities reached $161.0 million, compared to $97.1 million in 2023 and $6.0 million in 2022, indicating strong operational cash flow growth [380]. - The company reported a net cash used in investing activities of $108.1 million in 2024, compared to $138.8 million in 2023 [380]. Tax and Valuation - The company fully released the valuation allowance against deferred tax assets of $83.7 million in the fiscal year ended December 29, 2024, with deferred tax assets amounting to $71.5 million [358]. - The total net deferred tax assets as of December 29, 2024, amounted to $71.537 million, compared to a net liability of $79,000 in 2023 [445]. - The Company recorded a full valuation against its deferred tax assets as of December 31, 2023, which was released in fiscal 2024 [411]. Expenses and Costs - General and administrative expenses increased to $120,500, up 19% from $101,491 in 2023 [474]. - Advertising and marketing costs totaled $8.8 million in fiscal 2024, an increase from $6.1 million in fiscal 2023 and $7.1 million in fiscal 2022 [408]. - Operating lease costs for fiscal 2024 were $59.090 million, an increase from $50.361 million in fiscal 2023 [447]. - Total impairment and asset disposal costs for fiscal 2024 were $5.055 million, compared to $4.899 million in fiscal 2023 and $19.753 million in fiscal 2022 [433]. Market Presence and Expansion - The company operated 367 CAVA Restaurants across 25 states and Washington, D.C. as of December 29, 2024, reflecting continued expansion in the fast-casual dining sector [384]. - The Company plans to continue expanding its market presence and investing in new product development to sustain growth [374]. - The Company completed the conversion of all Zoes Kitchen restaurants to CAVA restaurants, totaling 153 conversions, with the last conversion opening on October 20, 2023 [471]. Employee Compensation - The company’s equity-based compensation increased to $13.6 million in 2024 from $9.4 million in 2023, reflecting growth in employee incentives [380]. - The Company recognized equity-based compensation expenses of $17.1 million in fiscal 2024, up from $9.6 million in fiscal 2023 and $4.0 million in fiscal 2022 [461]. Legal and Regulatory - The Company is involved in various legal claims but does not expect any material impact on its financial condition from these proceedings [452]. - The Company is evaluating the impact of recently issued accounting standards on its financial statements and disclosures, including ASU 2023-09 and ASU 2024-03 [426][427]. Risk Factors - CAVA is exposed to interest rate risk, with a hypothetical decrease of 100 basis points potentially resulting in a decrease of $3.6 million in investment income over a twelve-month period [350]. - Labor costs are influenced by changes in federal and state minimum wage rates, with the company currently paying all team members above the applicable minimum wage [345]. - The company aims to offset wage increases through operational efficiencies and leveraging same restaurant sales growth, but these measures may not fully mitigate wage inflation [346]. - CAVA's restaurant leases include contingent rent obligations based on a percentage of sales, which may limit the effectiveness of menu price increases [348].

Revenue Growth - CAVA revenue grew 33.1% to $954.3 million compared to $717.1 million in the prior year, with a 35.1% increase excluding the 53rd week of fiscal 2023[10] - Revenue for the twelve weeks ended December 29, 2024, was $227,395,000, a 28.4% increase from $177,170,000 for the same period in 2023[27] - The company opened 15 new CAVA restaurants in the thirteen weeks ended December 29, 2024, compared to 19 in the same period of 2023[32] Same Restaurant Sales - CAVA same restaurant sales growth was 13.4%, driven by 8.7% from guest traffic and 4.7% from menu price and product mix[11] - CAVA's same restaurant sales growth for Q4 2024 was 21.2%, up from 11.4% in Q4 2023[29] Restaurant Openings - CAVA opened 58 net new restaurants during fiscal 2024, bringing the total to 367, an 18.8% year-over-year increase[5] - CAVA anticipates 62 to 66 net new restaurant openings for fiscal 2025, with same restaurant sales growth projected at 6.0% to 8.0%[15] - CAVA opened 15 new restaurants in Q4 2024, bringing the total to 367 locations[29] Profitability and Margins - CAVA restaurant-level profit margin was 25.0%, a 20 basis point increase over the prior year, attributed to higher sales and increased input costs[12] - The restaurant-level profit margin for CAVA in Q4 2024 was 22.4%, consistent with the previous year[29] Income and Earnings - CAVA group net income reached $130.3 million, compared to $13.3 million in the prior year, with adjusted net income of $50.2 million excluding the VA release[13] - CAVA's net income for the twelve weeks ended December 29, 2024, was $78,619,000, compared to $2,049,000 for the same period in 2023[27] - Adjusted Diluted Earnings Per Share for the fiscal year ended December 29, 2024, was $0.42, compared to $0.11 in 2023, representing a 281.8% increase[35] EBITDA - CAVA adjusted EBITDA was $126.2 million, a 71.0% increase compared to the prior year, representing 13.1% of revenue[13] - Adjusted EBITDA for the fiscal year ended December 29, 2024, was $130,319,000, compared to $13,280,000 for the fiscal year ended December 31, 2023[27] - Adjusted EBITDA for the fiscal year ended December 29, 2024, reached $126,248 thousand, compared to $73,825 thousand in 2023, marking a 71.2% increase[33] Expenses - General and administrative expenses were $120.5 million, or 12.5% of revenue, down from 13.9% in the prior year, reflecting operational leverage[13] - General and administrative expenses for the fiscal year ended December 29, 2024, were $120,500,000, compared to $101,491,000 in the prior year, representing an increase of 18.8%[27] - General and administrative expenses as a percentage of revenue decreased to 12.6% for the twelve weeks ended December 29, 2024, from 13.9% in 2023[34] Cash Flow and Assets - Cash and cash equivalents increased to $366,120 thousand in 2024 from $332,428 thousand in 2023, representing a growth of 10.1%[32] - Total assets grew to $1,169,669 thousand in 2024, up from $983,757 thousand in 2023, indicating a 19.0% increase[32] - Free Cash Flow for the fiscal year ended December 29, 2024, was $52,896 thousand, a turnaround from a negative $41,705 thousand in 2023[38] Other Highlights - The company highlighted the successful conversion and winding down of Zoes Kitchen operations, with the last conversion restaurant opening on October 20, 2023[27] - The total stockholders' equity increased to $695,566 thousand in 2024 from $570,802 thousand in 2023, showing a growth of 21.9%[32]

Group 1: CAVA Group Inc - CAVA is currently trading at $104.37, down 3.3%, marking its lowest level since December and on track for a fourth consecutive loss [2] - The stock experienced a significant weekly drawdown of 17.5%, the worst performance of the year, but still shows a year-over-year gain of 105.2% [2] - Historically, CAVA has a positive post-earnings reaction, with four out of five sessions finishing higher, averaging a move of 7.4%, while options are pricing in a larger swing of 20.6% for the upcoming earnings report [2] Group 2: Sweetgreen Inc - Sweetgreen is trading at $23.22, up 6.4%, indicating its best single-day percentage gain since November [3] - The shares are recovering from a pullback to their lowest level since May, maintaining a year-over-year lead of 103.8% [3] - Sweetgreen typically performs well after earnings, with five out of the last eight quarters seeing higher settlement, averaging a move of 24.3% over the past two years, while options are pricing in a smaller move of 17.4% this time [3] Group 3: Chipotle Mexican Grill, Inc. - Chipotle is trading at $51.41, down 0.2%, and has dropped 18.5% over the last nine months [4] - The stock is on track for a sixth consecutive loss, following a third straight weekly drop, and is currently at its lowest level since August [4] - Chipotle has struggled to overcome resistance at the $60 level, which has been in place since January [4]

Company Overview - Cava Group has seen significant stock performance since its public debut in early 2023, with a 122% increase over the past year, although it may be losing momentum as it approaches its earnings report on February 25 [1] - The company operates in the fast-casual restaurant sector, aiming to replicate the success of Chipotle Mexican Grill, focusing on fresh, premium Mediterranean fare with customizable options [2] Growth Potential - As of the end of Q3, Cava operated 352 stores and plans to open approximately 57 new stores in 2024, with a long-term goal of reaching about 1,000 stores by 2030, indicating steady growth potential [3] - The company has reported impressive comparable sales growth, with total revenue increasing by 39% year over year and comparable sales up by 18% in Q3 [5] Financial Performance - Cava has shown positive net income since its first quarter as a public company, with net income rising from $6.8 million to $18 million in Q3 [4][5] - The restaurant-level profit margin improved from 25.1% to 25.6%, and management has raised its outlook for Q4 to approximately 12.5% comparable sales growth and a profit margin of 24.5% to 25% [5] Market Valuation - Cava's stock trades at a forward price-to-earnings (P/E) ratio of 134, which is considered high for a non-tech company, suggesting limited near-term upside potential [8] - The stock has experienced a decline in the weeks leading up to the earnings report, reflecting investor caution regarding high expectations built into the current valuation [6][9] Future Outlook - If Cava delivers strong earnings on February 25, the stock is likely to rise, but any disappointing results could lead to a decline, highlighting the risks associated with its high valuation [9] - The company is expected to maintain steady and strong growth over the next five to ten years, making it a potential long-term investment despite current high prices [10]

Core Viewpoint - CAVA Group, Inc. is expected to report strong fourth-quarter 2024 results, driven by expansion efforts and innovative menu offerings, despite facing valuation concerns and a recent stock decline [1][16][17]. Financial Performance - CAVA's fourth-quarter earnings per share (EPS) estimate remains at 6 cents, reflecting a 200% increase from the previous year's EPS of 2 cents [2]. - Revenue consensus for the quarter is projected at $225.5 million, indicating a year-over-year growth of 27.3% [2]. - Same-restaurant sales are estimated to grow by 18.3%, with total restaurant sales expected to reach $223 million, representing a 27.4% increase year-over-year [10]. Growth Drivers - The company's ongoing expansion into new markets, including South Florida and additional Midwest regions, is expected to enhance its growth trajectory [5]. - CAVA's average unit volumes (AUV) are on the rise, showcasing the effectiveness of its expansion strategy [6]. - Culinary innovation, including successful new menu items, has contributed to increased sales and customer engagement [7]. - The nationwide rollout of a loyalty program has positively impacted sales by enhancing customer relationships and increasing visit frequency [8]. Operational Efficiency - CAVA is focusing on operational efficiency through technology and modern labor models, which have improved restaurant performance and guest experience [9]. - Early testing of AI-powered kitchen tools indicates potential for improved productivity and faster service times [9]. Stock Performance and Valuation - CAVA's stock has increased by 137.2% over the past year, outperforming industry peers and the broader market [11]. - However, the stock has declined by 18.2% in the last three months, contrasting with a 2% rise in the industry [14]. - CAVA's forward 12-month price-to-sales ratio is 10.98, significantly higher than the industry average and the S&P 500's 5.39, raising concerns about overvaluation [14][17].

Group 1 - Cava Group (CAVA) is expected to report quarterly earnings of $0.06 per share, reflecting a year-over-year increase of 200% [1] - Anticipated revenues for Cava are projected to be $225.54 million, which represents a 27.3% increase compared to the same quarter last year [1] - The consensus EPS estimate has remained unchanged over the last 30 days, indicating analysts have reassessed their initial estimates [1] Group 2 - Analysts predict that 'Revenue- CAVA Restaurant' will reach $223.32 million, showing a year-over-year change of +27.3% [4] - 'CAVA Same Restaurant Sales Growth' is expected to be 18.3%, up from 11.4% reported in the same quarter last year [4] - The estimated number of 'End of period CAVA Restaurants' is projected to be 366, compared to 309 a year ago [4] Group 3 - 'Occupancy as a percentage of CAVA Revenue' is forecasted to be 7.2%, down from 8.3% in the same quarter of the previous year [5] - Analysts estimate 'Restaurant-Level profit- CAVA' at $55.16 million, an increase from $39.31 million reported in the same quarter last year [5] - Cava shares have shown a return of -3.2% over the past month, contrasting with the Zacks S&P 500 composite's +2.6% change [5]

Core Viewpoint - Cava Group's stock has surged 160% over the past year, significantly outperforming the S&P 500's 20% increase, raising questions about its valuation and future growth potential [1]. Group 1: Company Overview - Cava is a Mediterranean-themed restaurant utilizing an assembly line-style preparation system, allowing customers to customize their meals [2]. - The company operated around 350 restaurants by the end of Q3 2024, indicating substantial room for growth compared to Chipotle's 3,700 locations [4]. Group 2: Growth Potential - Cava's same-store sales increased by 18% in Q3 2024, suggesting strong consumer interest and potential for continued expansion [5]. - Investors are optimistic that Cava could replicate Chipotle's success, which has seen a 340% increase in shares over the past decade [4]. Group 3: Valuation Concerns - Cava's price-to-earnings (P/E) ratio exceeds 300x, significantly higher than Chipotle's 50x and the S&P 500's average of 23, indicating that much of the good news is already priced in [7][9]. - The high valuation raises concerns that any signs of weakness could lead to a sharp decline in stock price, despite the company's strong performance [8]. Group 4: Investment Sentiment - Cava is primarily suited for aggressive growth investors, as value and income investors may be deterred by its high valuation and lack of dividends [13][14]. - While the stock is expensive, management's effective execution and expansion strategy could justify holding the stock if growth continues [10].