Sweetgreen(SG) - 2024 Q3 - Quarterly Report

Glossary Key Definitions This section defines key terms, sales channels, and performance metrics including AUV, Same-Store Sales Change, Restaurant-Level Profit, and Adjusted EBITDA - The company defines its 'Comparable Restaurant Base' as all restaurants that have operated for at least twelve full months, excluding those with material temporary closures (no operations for a consecutive 30-day period)[10] - Sales channels are categorized into five types: In-Store, Marketplace (third-party), Native Delivery (own app/website), Outpost and Catering, and Pick-Up. 'Owned Digital Channels' include Pick-Up, Native Delivery, and Outpost/Catering[11][15] - Key performance metrics include Net New Restaurant Openings, Average Unit Volume (AUV), Same-Store Sales Change, Total Digital Revenue Percentage, and Owned Digital Revenue Percentage. Non-GAAP measures used are Restaurant-Level Profit, Restaurant-Level Profit Margin, Adjusted EBITDA, and Adjusted EBITDA Margin[17] Part I Financial Information Financial Statements This section presents Sweetgreen, Inc.'s unaudited condensed consolidated financial statements, including balance sheets, statements of operations, and cash flows, for the periods ended September 29, 2024 Condensed Consolidated Balance Sheets Total assets slightly increased to $858.0 million, while total liabilities rose to $394.7 million, and stockholders' equity decreased to $463.3 million due to accumulated deficit Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sept 29, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $234,623 | $257,230 | | Total current assets | $255,304 | $276,111 | | Property and equipment, net | $285,279 | $266,902 | | Total assets | $857,981 | $856,557 | | Liabilities & Equity | | | | Total current liabilities | $98,522 | $91,579 | | Total liabilities | $394,677 | $373,960 | | Accumulated deficit | ($846,328) | ($784,985) | | Total stockholders' equity | $463,304 | $482,597 | | Total liabilities and stockholders' equity | $857,981 | $856,557 | Condensed Consolidated Statements of Operations Revenue grew 20% to $515.9 million for the thirty-nine weeks ended September 29, 2024, with net loss improving to $(61.3) million or $(0.54) per share Statement of Operations Summary (in thousands, except per share data) | Metric | Thirty-nine weeks ended Sep 29, 2024 | Thirty-nine weeks ended Sep 24, 2023 | | :--- | :--- | :--- | | Revenue | $515,922 | $431,015 | | Total restaurant operating costs | $410,925 | $353,876 | | Loss from operations | $(64,274) | $(93,055) | | Net loss | $(61,343) | $(85,970) | | Net loss per share | $(0.54) | $(0.77) | Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities significantly improved to $37.3 million, while net cash used in investing activities decreased to $(63.2) million, resulting in a $20.1 million decrease in cash and cash equivalents Cash Flow Summary (in thousands) | Activity | Thirty-nine weeks ended Sep 29, 2024 | Thirty-nine weeks ended Sep 24, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $37,271 | $17,556 | | Net cash used in investing activities | $(63,199) | $(79,372) | | Net cash provided by financing activities | $5,836 | $4,945 | | Net decrease in cash | $(20,092) | $(56,871) | Notes to the Condensed Consolidated Financial Statements The notes detail accounting policies, revenue disaggregation, fair value measurements, and lease obligations, noting 236 restaurants operated and 15 Net New Restaurant Openings year-to-date - As of September 29, 2024, the company owned and operated 236 restaurants in 22 states and Washington, D.C. It had 5 Net New Restaurant Openings in Q3 2024 and 15 year-to-date[28] Revenue by Channel (in thousands) | Channel | Thirty-nine weeks ended Sep 29, 2024 | Thirty-nine weeks ended Sep 24, 2023 | | :--- | :--- | :--- | | Owned Digital Channels | $158,727 | $161,347 | | In-Store Channel (Non-Digital) | $224,540 | $177,205 | | Marketplace Channel | $132,655 | $92,463 | | Total Revenue | $515,922 | $431,015 | - The fair value of the contingent consideration liability related to the Spyce acquisition increased to $13.6 million as of September 29, 2024, from $8.4 million at year-end 2023[39][42] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, highlighting revenue growth, a 7% same-store sales increase, improved profitability with narrowed net loss, positive Adjusted EBITDA, and liquidity Factors Affecting Our Business Business performance is influenced by restaurant footprint expansion, macroeconomic conditions, seasonality, and sales channel mix, particularly the impact of delivery fees on margins - Expanding the restaurant footprint is a key driver of revenue growth. The company had 15 Net New Restaurant Openings in the first thirty-nine weeks of 2024, bringing the total to 236 restaurants[91] - Macroeconomic conditions and inflation pose risks, as consumers may reduce spending on premium fast-casual options. While the company has historically offset cost increases with price adjustments, future increases could negatively impact sales[93][94] - Revenue is subject to seasonality, typically lower in Q1 and Q4. The sales channel mix also affects profitability, as delivery channels (Native and Marketplace) incur third-party fees that can negatively impact margins[97][98] Key Performance Metrics and Non-GAAP Financial Measures Key performance metrics include a 7% Same-Store Sales Change and $2.9 million AUV, with non-GAAP measures showing $105.0 million Restaurant-Level Profit and $19.3 million Adjusted EBITDA Key Performance Metrics | Metric | Thirty-nine weeks ended Sep 29, 2024 | Thirty-nine weeks ended Sep 24, 2023 | | :--- | :--- | :--- | | Net New Restaurant Openings | 15 | 34 | | Average Unit Volume (AUV) | $2,907k | $2,905k | | Same-Store Sales Change (%) | 7% | 4% | | Total Digital Revenue Percentage | 56% | 59% | | Owned Digital Revenue Percentage | 31% | 37% | Reconciliation to Restaurant-Level Profit (in thousands) | Metric | Thirty-nine weeks ended Sep 29, 2024 | Thirty-nine weeks ended Sep 24, 2023 | | :--- | :--- | :--- | | Loss from operations | $(64,274) | $(93,055) | | Restaurant-Level Profit | $104,997 | $77,139 | | Restaurant-Level Profit Margin | 20% | 18% | Reconciliation to Adjusted EBITDA (in thousands) | Metric | Thirty-nine weeks ended Sep 29, 2024 | Thirty-nine weeks ended Sep 24, 2023 | | :--- | :--- | :--- | | Net loss | $(61,343) | $(85,970) | | Adjusted EBITDA | $19,281 | $(946) | | Adjusted EBITDA Margin | 4% | 0% | Results of Operations Revenue increased 20% to $515.9 million driven by new restaurants and a 7% same-store sales increase, leading to a narrowed net loss of $(61.3) million Revenue Performance | Metric | Thirty-nine weeks ended Sep 29, 2024 | Thirty-nine weeks ended Sep 24, 2023 | | :--- | :--- | :--- | | Revenue | $515,922k | $431,015k | | Same-Store Sales Change | 7% | 4% | - The increase in revenue for the 39-week period was primarily due to $51.7 million from 50 Net New Restaurant Openings and $28.9 million from a 7% increase in Comparable Restaurant Base revenue[135][136] - Labor and related expenses decreased to 28% of revenue from 29% in the prior year period, driven by higher revenue, improved labor optimization, and a $1.8 million ERC benefit, which offset wage rate increases[140][141][143] - Pre-opening costs decreased by 48% to $4.3 million due to opening only 15 new restaurants in the period compared to 37 in the prior-year period[156][158] Liquidity and Capital Resources The company holds $234.6 million in cash and equivalents and a $43.1 million revolving credit facility, with cash from operations increasing to $37.3 million and investing activities decreasing to $(63.2) million - The company holds $234.6 million in cash and cash equivalents and has access to a $43.1 million revolver, which management believes is sufficient for the next 12 months[170] Cash Flow Summary (in thousands) | Activity | Thirty-nine weeks ended Sep 29, 2024 | Thirty-nine weeks ended Sep 24, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $37,271 | $17,556 | | Net cash used in investing activities | $(63,199) | $(79,372) | | Net cash provided by financing activities | $5,836 | $4,945 | - The $16.2 million decrease in cash used for investing activities was primarily due to lower capital expenditures on property and equipment, reflecting 15 gross new restaurant openings in the period versus 37 in the prior year[180][181] Quantitative and Qualitative Disclosures About Market Risk No material changes to market risk exposure have occurred since December 31, 2023, with primary risks remaining commodity prices, interest rates, inflation, and macroeconomic factors - There have been no material changes to the company's market risk exposure, which includes commodity prices, interest rates, inflation, and macroeconomic risks[185] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 29, 2024, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation, the CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period[186][187] - There were no material changes to the company's internal control over financial reporting during the fiscal quarter ended September 29, 2024[189] Part II Other Information Legal Proceedings The company is subject to ordinary course legal proceedings, which management does not expect to materially affect its financial position or operations - The company does not expect that the resolution of any current legal proceedings will have a material effect on its financial position, operations, or capital resources[191] Risk Factors No material changes have been reported to the risk factors previously disclosed in the 2023 Annual Report on Form 10-K - No material changes have been made to the risk factors disclosed in the 2023 Annual Report on Form 10-K[192] Other Information A director and the CFO adopted Rule 10b5-1 trading plans for the potential sale of Class A common stock during the last fiscal quarter - Director Julie Bornstein and CFO Mitch Reback adopted Rule 10b5-1 trading plans for the sale of company securities[193] Exhibits This section lists exhibits filed with the Form 10-Q, including corporate documents, officer certifications, and XBRL data files - The filing includes officer certifications as required by Sections 302 and 906 of the Sarbanes-Oxley Act and Inline XBRL documents[195]